" There I was, short five thousand shares of UP (Union Pacific). on a hunch. That was a much as I sell in Harding's office with the margin I had up. It was too much stock for me to be short of, on vacation; so I gave up the action and returned to New York that very night. There was no telling what might happen and I thought I'd better be Johnny-on-the-stop...
The next day we got news of the San Fransisco earthquake. It was an awful disaster. But the market opened down only a couple of points...
I was short five thousand shares. The blow had fallen, but my stock hadn't...
He told me: "That was some hunch, kid. But, say, when the talent and the money are all on the bull side what's the use of bucking against them? They are bound to win out."
"Give'em time," I said. I wouldn't cover because I knew the damage was enormous and the Union Pacific would be one of the worst suffers. But it was exasperating to see the blindness of the Street...
I wasn't not betting blindly. I wasn't a crazy bear. I wasn't drunk with success or thinking that because Frisco was pretty well wiped off the map of the entire country was headed for the scrap heap. No, Indeed.
They'll tell you that it was because the first dispatches were not so alarming, but I think it was because it took so long to change the point of view of the public towards the securities market. Even the professional traders for the most part were slow and shortsighted.
Livermoore's essential message of “Be right and Sit Tight” as described by the impact San Francisco’s Great 1906 earthquake on his short position in Union Pacific draws a close comparison to that of the Great failure of the OTC derivative market in 2008 and the price of gold. For gold holders, it is exasperating to see the blindness of the Street to the damage incurred. Foreign debt held by foreigners and international investors as a percentage of GDP (national income), shown below, has climbed above 28%. The magnitude and acceleration of this trend is both staggering and dangerous.
The Street, nevertheless, following historical precedence remains largely blind to message contain with the trends. While professional traders for the most part are slow and shortsighted, history suggests that they will react swiftly when blindness transitions to sight. If you thought “Be Right and Sit Tight” is easy, it’s a lesson that many will never learn.
The equilibrium price of gold continues to rise to unbelievable levels.
Federal Debt Held by Foreign & International Investors As a % of GDP (FDHBFINGDPR) and the London P.M. Fixed Price of Gold (GOLD):
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