Lessons From The Past

This day in 1987, I had been working for about a year at Bank Brussels Lambert, in Sydney, after leaving Macquarie Bank.

We were located at 10 Spring Street, and the Australian Stock Exchange was just around the corner. At the bottom of the then Macquarie Bank building, 20 Bond Street.

Currency markets were having huge moves that day, but the stock market was all in a class of its own. A tragic class.

The stock market fell 50% over just two days.

The pain was really all at once that morning. The market hadn't opened yet, but everyone knew what was coming. Wall Street had already crashed.

Personally, this was going to prove one of the best months of my entire trading career. We made an absolute fortune in the foreign exchange market that day, and for the next several weeks following. The interesting thing is, only 40% of my trades were profitable that month, and yet it was still a fantastic month.

Proving once and for all, that trading is about letting your profits run.

In my excitement to see the stock exchange open, this was when it was an open outcry system and a big ticker ran across the top of the bottom floor of 20 Bond Street, I ran downstairs and bought one of those instant cameras and snapped away at the plummeting ticker. We all knew this would be a historic day. A day to remember.

In the moment it escaped me, unfortunately, just how much pain and misery was right at that time being spread throughout the community.

As in all major market meltdowns, there are many participants who, quite frankly, simply deserve their wipeout. They have just been leveraging stupidly in a bull market. Making a fortune, only to inevitably lose it overnight. That's just how things work.

Then, there are the young brokers who really believe it was their ideas, that made their clients money in a raging bull market. When it all falls apart, they blame the market. Market goes up; your profits are because of your clever broker. Market goes down; your losses are due to the market?

Most investors and brokers, however, get, that it is a challenge and requires hard work to succeed. That you are also making a real contribution to your society. In a market crash though, everyone who was "long", suffers.

This is why, if we ever feel there is a chance of a big correction, we will have sell orders as well as buy orders in the market. We did this yesterday with the Dow Jones. We went short for a while, just in case something big was happening!

We didn't think it would, but we respected the price action.

Back to 1987. The photo above is in tribute to all those who either felt like that guy or actually was that guy by the end of the day. A good friend of mine, who was a successful futures trader over many years went to work from his lower North Shore Sydney home, bright and early that day, in his Porsche, as he always did. Mid-afternoon, he was taken off the floor of the exchange. His credit cards were taken. And his Porsche keys were seized. Basically all his assets, in a moment, were his no more. Just like that. He was literally left with no cash at all and had to walk all the way home on his own. Reflecting on events, as he did. Drive to work in a Porsche, walk home without even bus fare at the end of the day! That's quite a day... There are literally a million stories like this. When markets feel easy, its time to be watchful. It's that simple. While some are gloating in today's media about how well they did in 1987, well a lot of people did well, but far too many had their lives changed forever. This is what we must all learn from. With our unique service of both "view" and "trade" signals, we look to invest via our "look out the window economics" approach. Applying common-sense, not mathematic models, to the world. And we do so with our eyes wide open. Good investments in a diversified manner over time, are the recipe for incredible wealth. It is the error of high leverage in one specific product that brings people undone. US Jobless Claims were the lowest since 1973, 222,000. We have continually highlighted how the US is in a state of full employment. This is a very strong economy indeed. A true economic boom environment. No wonder stocks recovered from a bit of a sell-off yesterday, to again be quickly making all-time highs yesterday. We remain extremely, aggressively, bullish the economy, stocks, and property! Just keep buying,

Clifford Bennett