Why 12,000?

Because it’s TWELVE-THOUSAND!!!

You know, most people who trade equities or options actively, eventually become Bears — at least sentimentally. There’s lots of reasons for that, but primarily, it’s because markets, when they go down, go down faster and harder than they go up (They take the stairs up, and the elevator — or window — down.). Jesse Livermore, regarded by some to be the greatest stock trader of all time, shorted the market in 1929 and made a $100 million. Adjust that for inflation. it was 1929. Jesse was great because he was the greatest Bear.

But you don’t even need a crash. Corrections of up to 5-10% take a matter of days, while the climb back up can take weeks and months. And if you’re used to the idea of doing best in bear or crashing markets, then crashes don’t scare you. You secretly long for them. Bull markets are effing boring.

The other reason is that Bulls are either making money on the transactions (brokers), or they’re suckers, morons, or ignoramuses when it comes to understanding what’s really going on. At least that’s how the Bears see them. Do they make money? Sure. Buy and hold, and make 10% long term, if you’re lucky. Of course, if you began doing that in 1928, you’d have broken even by about 1950.

There are some smart people who make great returns going long. Warren Buffet, of course, …but then, he doesn’t buy because some CNBC talking-head moron gives the latest 99th "buy signal" to the one token sell they might issue. Buffet and guys like him make their money by scouring for well-run companies that produce objective value and have stock that’s trading at a bargain in comparison to company value and earnings.

The Dow. What a laugh. Do you know how many professional traders even have a chart of the Dow up during the trading day? Zero. In fact, on one of the trading platforms I use, the Dow index isn’t even in the default ticker list. You’ve got to ad it. Thirty stocks. Out of about 12,000. New high. Well, they aren’t even the same companies as they were at the 2000 high, dummy. You didn’t know that, didja? How many morons know that? 12,000. Why? Well, because it’s TWELVE THOUSAND! I guarantee you that there’s not one retail investor (notice I didn’t say "trader") out of 1,000 that has the remotest idea what that number means, how it’s arrived at, or what it really is if you adjust for inflation.

So, the Dow is all the rage. Twelve Thousand. And, granted; if you generally invested in stocks around last August or September, you’ve got more money than you had. I’ll give ya that. You know what? I like to see people make money — and even if they do it blindly by investing in things they don’t understand just because someone with a vested interest says so. Fine. But guess what else? I love justice even more, which is why I’ll savor the delicacy when those who simply buy because, well, it’s TWELVE THOUSAND, take a really big hit to their portfolios at the eventual day of reckoning. Getting smacked for one’s ignorance — though tough, and I always hate being on the receiving end — always ought to be a welcome thing.

Besides, the general stock market is really only one thing. It’s a market whereby money is transfered from the hands of the ignorant masses into the hands of the intelligent few. This process is accomplished by causing the greatest amount of pain to the greatest number.

Which group do you want to be in?

Now, Bears: get with it already. Haul this sucker down. Down big. Way down.


  1. Glenn on October 18, 2006 at 09:44

    Richard, great post! It's so true now that we have insight from professionals (TOS trainers and SPX Credit spreaders) the right way to trade,that "we" would much rather have the market going down or sideways! 2 years ago, I would have been thinking like this.



  2. Aaron on October 19, 2006 at 21:40

    I'm with ya Richard. I don't post personal opinions on the SPX website, but I wish these talking heads would quit f$%^#ing with my mojo and that the big money would snap this trap and take us down like the Titanic!

  3. Richard Nikoley on October 25, 2006 at 13:27


    Yes, I'm aware of dividends (I actually receive some). Nonetheless, the index is basically some measure of market capitalization and it still has a ways to go owing to inflation.

    Regarding Livermore, yea, he was a tortured soul, and though he went bust a few times, it was when he didn't follow his own rules.

    As far as bull vs. bear, obviously, there is always an underlying upward bias, otherwise there would be no point. But if you look at a chart, stocks go up and down, but they tend to go down quicker than they go up, so there is clear reason to prefer trading the bearish side on the swings — or both. As far as investing for the long term, I prefer something like R/E. Buying stocks or funds and watching and waiting for them to appreciate has got to be the most boring thing I can imagine. I'd seriously rather live paycheck to paycheck than build a "retirement nest egg" in that fashion. Yuk. Plus, it would be hard to reconcile having a lot of money in funds when I want to badly to see a 50% correction in the general market.

    I'm actually a market neutral options trader, i.e., lots of iron condors. Sell time, a depreciating asset, and don't care which way the market goes (except in my heart of hearts). It's not great for a parabolic move as we're seeing now, but relief will come soon enough once the big brokers are able to distribute enough of their shares to all the suckers.

    Be lookin' out for those distribution days. The accumulation days seem to have dried up, and we're advancing on lower or average volume. Not a healthy sign, but of course, from here, the market can go up, down, or sideways. Always, always keep that in mind.

  4. Mark Smoler on October 25, 2006 at 12:26

    Interesting. What you are not realizing, however, is that the indexes are really showing lower returns than the market because the index doesn't take dividends into account. If you buy a stock at $50 a share and it pays $5 per share in dividends every year, you have made a 10% return on your money even though the stock is still trading at $50 a share years later.

    I must also note that Jesse Livermore was bankrupt twice in his life, commited suicide and died broke. Much like a stopped clock is right twice a day, so will the bears be right occasionally. Now, if you can correctly pick the point right before the market colapses correctly that would be a different story. However, I have seen bears for the last 3 years saying the sky is going to fall only to have the market keep racheting up. If they have been short the entire time they will have been hurt dearly.

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