After The San Francisco Earthquake, As Recounted By Jesse Livermore, the stock market held up pretty well, and even went a tad higher--all the while the news was rolling in from S.F.
Livermore had gotten short Union Pacific, much to horror of his friends. UP had been a very strong stock, that Winter and Spring. And as the news from S.F. emerged, and UP failed to fall, Livermore got shorter, and shorter, 10's of thousands of shares.
Now, a modern reader of this moment can try to "comfort" themselves with the view that "modern technology" allows news to travel faster, and therefore the NY Stock Market's "delayed" reaction to the SF quake was exacerbated by the telegraph, the distances, and the slower speed of news of that day.
But I disagree. I think the reaction the stock market made in 1906 was the exact same phenomenon referred to today as Cognitive Conservatism. You just have wave after wave of info unfolding, and the market yawns, until it doesn't.
Do "people" today have a greater ability to more quickly analyze all the ramifications of Hurrican Katrina, than "people" did in 1906--trying to figure out the effects of the SF quake? Nope. Not at all. Again, the modern observer sometimes "comforts" himself with the images of "those funny men wearing black, in top hats."
UP finally fell. Hard. Livermore made 250,000.00 on that trade, and repaired for the Summer to Saratoga Springs.
In the past few weeks, we've seen a stock market reaction that's almost the inverse of the post 9/11 reaction. That reaction turned out to be wrong, as the market put on a several year cyclical rally that may have just topped out. And I think this post Katrina reaction is wrong as well, and will be proven so in spectacular fashion.
The gold move says it all. And the market is not listening.
LP |
