Slate Magazine has a great interview with Victor Niederhoffer based on an upcoming book by Kathryn Schultz, titled, Being Wrong: Adventures in the Margin of Error. I have referenced Niederhoffer and his blog, Daily Speculations, once before.
While the entire interview is fascinating, I particularly liked this passage:
…I think a much better view is that the stock market never rises unless there’s a wall of fear it has to climb. When the public is most frightened, only the strong are left, and that’s when the market is in the best possible hands. I call it taking out the canes. Whenever disaster strikes, the very sagacious wealthy people take their canes, and they hobble down from their stately mansions on Fifth Avenue, and they buy stocks to the extent of their bank balances, and then a week or two later, the market rises, they deposit the overplus in their accounts, invest it in blue-chip real estate, and retire back to their stately mansions. That’s probably the best way of making money, to be a specialist in panics. Whenever there’s panic hanging in the air, that’s a great time to invest.
The above reminds me of what I have heard was one of JFK’s favorite sayings:
When written in Chinese, the word “crisis” is composed of two characters. One represents danger and one represents opportunity.
