HISTORY LESSON
We had a history lesson today at our online stock trading club.
Since the markets have been on a roller coaster ride we have been trying to reassure each other that we know what we’re doing. This has met with limited success. When people are down twenty, thirty or forty percent in their hold-ings, it can make for a nervous time.
Online stock trading for me has been very good, but I admit that I’m as confused at the rest in what to do going for-ward.
I will work to hedge my long term holdings some, by buying some puts. And then as additional protection I will look at buying some calls for the same. Yet, I’m not alone in doing this, so rates are not going to be rock bottom for any of these.
So this morning, Mr. Callahan came back to talk to the club. He was brought in by a member who thought that talk-ing to someone who had seen a good deal of trading history might help us find our own individual directions.
Mr. Callahan, was a trader for many years down at the old Chicago Board of Trade. He was actually active trading when Black Tuesday hit, in 1929. He was very young, maybe 21. He is 101 now.
Mr. Callahan apologized when he greeted us. He was still wearing his athletic clothes from his morning routine at Cardinal Fitness. And he was planning on running a few miles after he talked. He declined any offers of food, as he preferred to run on an empty stomach.
Mr. Callahan advice as to watch the fundamentals. If the credit markets loosen, there still has to be demand for credit, like any other product. Watch the earnings reports. Most will not be great. Business of all types will be pull-ing back. Pulling back means less demand for credit to finance expansion.
Examine the consumer, too, he added. Most consumers are leveraged to the maximum. They have very little dispos-able income left. Plus, many have taken a hit in their retirement accounts and their biggest financial asset — their homes– have sunk in value. This does not foretell a rosy future.
Still, he said, there is money to be made. Some investors will be excited by the recent government action and will drive up certain sectors, and then will oversell other sectors reacting to bad but not horrible news.
Be ready then.
He reminded us before he jogged off that he made a tidy fortune during the Panic of 1929. He had been holding short positions in a lot of stocks, and wasn’t suckered back into the market on a “dead cat bounce”.
Tags: online stock trading