Welcome back!
We had a history seminar today at our online 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 holdings, it can make for a nervous time. Even the online options brokers are having a tough time assuaging their clients.
Online stock trading and options trading for me has been very good, but I admit that I’m as confused at the rest in what to do going forward.
I will work to hedge my long term holdings some, by purchasing some puts. And then as addi-tional security 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 talking to someone who had seen a great 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 actively trading when Black Tuesday hit, in 1929. He was very young, maybe 21. He is 101 now.
Mr. Callahan apologized when he met us. He was still wearing his gym 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’s advice was to observe 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 pulling 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 disposable income remaining. Plus, many have taken a hit in their retirement ac-counts 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 gov-ernment action and will drive up certain sectors, and then will oversell other sectors reacting to poor but not horrible news.
Be ready then.
He reminded us before he jogged off that he made a tiny fortune during the Panic of 1929. He had been holding short positions in a lot of stocks, and wasn’t tempted back into the market on a “dead cat bounce”.