close sounded bearish. If the tobacco stocks go down only modestly tomorrow and then come right back, would you cover your position? I would cover it anyway. I would cover the position on the news. So once the news is out, the game is over
for you. Right. That was the only reason I was short.
OK, that answers the question too simply. Assume you wanted to be short the tobacco stocks as a longer-term position and the market shrugged off today's news and closed higher tomorrow. Would you cover then? It depends on my reasons. If I wanted to be short the tobacco companies because I felt tobacco consumption
was going to decline much more than presently perceived, it wouldn't matter that much. If the market rallied
tomorrow, I would have to take advantage of it and sell some more.
So you wouldn't care if the market didn't react to the news the way it should have, as long as you felt the main reason for being short was still valid. Yes, but if the news was terrible and the stocks were up, I would try to understand why. Sometimes the
market has more information and the variant action is really telling you something.
But haven't there been instances where your analysis was completely wrong? Sure.
And you realized it somewhere down the road? Yes, and not necessarily so quickly.
At this point, Steinhardt gets a phone call in which his side of the conversation is filled with non sequiturs and
deliberate mumbling. He then explains to me his occasional habit of playing practical jokes on callers.
For example, I get a call from a broker who I haven't spoken to for a long time. I swoosh some papers around
and then say, "Buy 30,000 shares of ZCU [mumbles another sentence]." Did you understand what I said?
No [I laugh]. That is exactly right, but it sounded legitimate didn't it? Anyway, he calls me back, and I have my secretary
tell him I'm in the bathroom. He calls back again, frantic because it is five minutes before the close, and I am still
unavailable. Then at 3:58,1 call him back and say, "Haven't you done that order yet? What's the problem? Just do the
damn thing!" Of course, he says, "I didn't catch the name of the stock." So I tell him [he mumbles another sentence]
and hang up before he can say anything else.
