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Posts Tagged ‘Victor Niederhoffer’

Victor Niederhoffer Thinks He Caused The Stock Market Crash Of 1997

Victor Niederhoffer Thinks He Caused The Stock Market Crash Of 1997

Victor NiederhofferCourtesy of Courtney Comstock at Clusterstock 

Victor Niederhoffer thinks he caused the stock market crash of October 27, 1997, when the DOW dropped over 550 points.

In an interview with Slate Magazine, Nierhoffer explains his theory:

They all knew that if I was hurting in one market, I’d have to liquidate in the other markets.

Whenever someone’s in trouble, it circulates around Wall Street; you’d be amazed how just one small fish is enough to stop the wheels of commerce for long enough to relieve that person of his funds. And then the market goes back to doing exactly what it was going to do beforehand.

I still think that the crash of Oct. 27, 1997, was basically due to brokers running my position against me, knowing that I was on the ropes. The market had its greatest drop in the previous 10 years that day. And then the next day, once they were able to force me out, it went up more than it dropped.

Let’s compare his hypothesis with what some other financial experts think caused the crash.

Bernanke

Bernanke says that October is just a crazy month for the markets.

“Classically, October has always been the month for financial problems,” Mr. Bernanke told the WSJ in 2007

Krugman

The Asian markets were overvalued and the bubble burst - (Urbi Garay’s paper on the crisis)

Malcolm Gladwell

He sold a very large number of options on the S. & P. index, taking millions of dollars from other traders in exchange for promising to buy a basket of stocks from them at current prices, if the market ever fell.

It was an unhedged bet, or what was called on Wall Street a "naked put," meaning that he bet everyone on one outcome: he bet in favor of the large probability of making a small amount of money, and against the small probability of losing a large amount of money-and he lost. On October 27, 1997, the market plummeted eight per cent, and all of the many, many people who had bought those options from Niederhoffer came calling all at once, demanding that he buy back their stocks at pre-crash prices.

He ran through a hundred and thirty million dollars — his cash reserves, his savings, his other stocks — and when his…
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The Art of Being Wrong

The Art of Being Wrong

Courtesy of Bill Luby at Vix & More

Wrong Way

Kathryn Schulz, a self-described ‘wrongologist,’ is the author of Being Wrong: Adventures in the Margin of Error.

I can’t say that I have read her book, but I think her interview with Victor Niederhoffer at Slate, Hoodoos, Hedge Funds, and Alibis: Victor Niederhoffer on Being Wrong should be required reading for all investors. One of the most difficult things to do in life is to learn from the mistakes of other people – and while Niederhoffer is famous mostly for his two large blowups, he is also reflective, insightful and a fun read. Perhaps more importantly, outside of those two blowups, Niederhoffer has a superb track record and is highly regarded for his trading skills. Many think that Niederhoffer’s blowups should negate the value of what Niederhoffer says. I think quite the opposite. Here is a trader we can all learn from, including both his successes and his failures.

For instance: 

“Unfortunately I was so successful for so many years in that particular field that I began to believe in my own success. I thought that because my method worked in markets that I knew about and had quantified, I could apply the same methods to something I didn’t know about.” 

And later:

“I didn’t have the capital to be strong enough to provide a backup in the case of unforeseen events. I didn’t have a proper foundation. I was playing with adversaries who were stronger than me and who actually made the rules. My base of operations was not diversified enough, and I was vulnerable to forces I couldn’t withstand. I was too vainglorious. In my opinion, those are recurring errors behind most disasters.”

But don’t stop at these excerpts. Click through to read the full interview at Slate.

If you are interested in Schulz’s thinking in a broad range of subjects outside of the investment world, Slate has captured a great deal of her content in her column The Wrong Stuff.

Many others have written about Niederhoffer. One of the better pieces I have encountered is John Cassidy’s lengthy feature in The New Yorker from October 2007 (coincidentally, right…
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Lady Gaga: 10 Things We Can Learn [about Apple Inc. and effective branding], from Victor Niederhoffer

Courtesy of Chopshop

As investors of all stripes continue to go gaga for the Cult of Cupertino (snap, crackle, AAPL), what can we actually learn from Apple, Inc.?

Lady Gaga: 10 Things We Can Learn [from Apple Inc. about effective Saatchi-esque Lovemark branding], from Victor Niederhoffer

Click here for the original "Lady Gaga: 10 Things We Can Learn, from Victor Niederhoffer" … reproduced below in its entirety.

The great ascent of Lady Gaga from an also-ran performer in the Lower East Side techno-rock clubs a few years ago to number one selling recording artist in five countries, four million albums sold, and 20 million singles, rivals nothing so much as the ascent of Kilimanjaro in 5½ hours or Apple’s 4000% rise from 5 to 210 and the fourth largest market cap company in four years. Here are some of the things we can learn from her about how to be successful in the markets.

1. The Lady has a core of admirers she can always count on: the gay community. "I’ve got so many gay fans and they’re loyal to me. They’ll always stand by me and I"ll always stand by them." Apple’s loyal fans are those that started out with them making music on their first computers and the minority group that liked the Apple operating system over and above the mainstream Microsoft one.

2. The product must be packaged and designed with great care and verve. Gaga has a special team, the Haus of Gaga, that designs all her clothes and stage performances. "When I’m writing music I’m thinking about what I’m going to wear on stage." Apple’s packaging, its vivid colors, its compactness, directness, ease of use is crucial to its success.

3. You have to be technical to be a success. Gaga was playing by ear at the age of four, planning to go to Julliard at 13. She writes her own music and her voice was good enough to attract Akon to sign her. The companies that have had the highest returns are people by engineers and computer scientists with technical degrees.

4. You need a vision to be successful. Gaga didn’t try to be the world’s #1 singer or its most profitable. But she had a vision to combine glam rock with simple melodies. The best performing companies, Apple or Cisco or Whole Foods, have a product that makes…
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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!

 
 

Zero Hedge

"Why I Will Not Submit To Medical Martial Law"

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Brandon Smith of Alt-Market.com,

One of the most dangerous philosophical contentions even amongst liberty movement activists is the conundrum of government force and prevention during times of imminent pandemic. All of us at one time or another have had this debate. If a legitimate viral threat existed and threatened to infect and kill millions of Americans, is it then acceptable for the government to step in, remove civil liberties, enforce quarantines, and stop people from spreading the disease? After all, during a viral event, the decisions of each in...



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Phil's Favorites

The Death of the Blue Chip

The Death of the Blue Chip

Courtesy of 

My title above is only half-kidding. Because everytime Wall Street pronounces “The Death Of” anything, that’s pretty much when it starts working again. But there is an important point being made in a new article at the Wall Street Journal about the current state of some of our biggest stalwart stocks and their underlying businesses, a point I made two days ago here

Here’s the Journal:

A third of the companies in the Dow Jones Industrial Average have posted shrinking or flat revenue over the past 12 m...



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Chart School

S&P 500 Snapshot: Back in Rally Mode

Courtesy of Doug Short.

After a one-day pause, the S&P 500 returned to rally mode. The index opened at its 0.20% intraday low, vaulted upward and then drifted to its 1.81% mid-afternoon high. It closed ninety minutes later with a trimmed gain of 1.23%. The popular financial press touted strong pre-market earnings (most notably from Caterpillar and 3M) as the rally trigger and blamed the afternoon fade on renewed Ebola worries (a doctor being tested in NY).

Looking ahead ... will Amazon's post-close earnings disappointment trigger a market struggle at tomorrow's open? Stay tuned!

The yield on the 10-year Note closed at 2.29%, up 4 bps from yesterday's close. The weekly average for the 30-year fixed mortgage was announced today at 3.92%, the lowest rate since early June of last year.

Here is a 15-minute chart of the past five sessions.

...

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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Option Review

LUV Options Active Ahead Of Earnings

There is lots of action in Southwest Airlines Co. November expiry call options today ahead of the air carrier’s third-quarter earnings report prior to the opening bell on Thursday. Among the large block trades initiated throughout the trading session, there appears to be at least one options market participant establishing a call spread in far out of the money options. It looks like the trader purchased a 4,000-lot Nov 37/39 call spread at a net premium of $0.40 apiece. The trade makes money if shares in Southwest rally 9.0% over the current price of $34.32 to exceed the effective breakeven point at $37.40, with maximum potential profits of $1.60 per contract available in the event that shares jump more than 13% to $39.00 by expiration. In September, the stock tou...



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Sabrient

Sector Detector: Sharp selloff in stocks sets up long-awaiting buying opportunity

Courtesy of Sabrient Systems and Gradient Analytics

Last week brought even more stock market weakness and volatility as the selloff became self-perpetuating, with nobody mid-day on Wednesday wanting to be the last guy left holding equities. Hedge funds and other weak holders exacerbated the situation. But the extreme volatility and panic selling finally led some bulls (along with many corporate insiders) to summon a little backbone and buy into weakness, and the market finished the week on a high note, with continued momentum likely into the first part of this week.

Despite concerns about global economic growth and a persistent lack of inflation, especially given all the global quantitative easing, fundamentals for U.S. stocks still look good, and I believe this overdue correction ultimately will shape up to be a great buying opportunity -- i.e., th...



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Digital Currencies

Goodbye War On Drugs, Hello Libertarian Utopia. Dominic Frisby's Bitcoin: The Future of Money?

Courtesy of John Rubino.

Now that bitcoin has subsided from speculative bubble to functioning currency (see the price chart below), it’s safe for non-speculators to explore the whole “cryptocurrency” thing. So…is bitcoin or one of its growing list of competitors a useful addition to the average person’s array of bank accounts and credit cards — or is it a replacement for most of those things? And how does one make this transition?

With his usual excellent timing, London-based financial writer/actor/stand-up comic Dominic Frisby has just released Bitcoin: The Future of Money? in which he explains all this in terms most readers will have no tr...



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OpTrader

Swing trading portfolio - week of October 20th, 2014

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Market Shadows

Falling Energy Prices: Sober Look takes a Sober Look

Falling Energy Prices: Sober Look takes a Sober Look

What do falling energy prices mean for the US consumer? Sober Look writes a brief yet thorough overview of the consequences of the correction in the price of crude oil. There are good aspects, particularly for the consumer, bad aspects, and out-right ugly possibilities. For more on this subject, read James Hamilton's How will Saudi Arabia respond to lower oil prices?  In previous eras, Saudi Arabia would tighten the supply to help increase prices, but in this "game of chicken," the rules m...



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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's this week's Stock World Weekly. Just sign in with your PSW user name and password. (Or take a free trial.)

#457319216 / gettyimages.com

 

...

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Pharmboy

Biotechs & Bubbles

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Well PSW Subscribers....I am still here, barely.  From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.

First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices.  Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment.  Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer.  For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...



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