INTERVIEW
It's Sentiment Analysis In Schaeffer City
Bernie Schaeffer
by Jayanthi Gopalakrishnan
Bernie Schaeffer, chairman of Schaeffer's Investment Research, is
also the editor of Bernie Schaeffer's Option Advisor. The Market
Technicians Association awarded him its Best of the Best award in sentiment
and psychological analysis in 1997, and he has written on the subject,
The Option Advisor: Wealth-Building Techniques Using Equity And Index Options,
published by John Wiley & Sons. What's he got to say about the market
these days?
STOCKS & COMMODITIES Editor Jayanthi Gopalakrishnan spoke to
Schaeffer via telephone on August 12, 2002.
Given the scope of this bear market, we might need to
see a VIX in triple digits to get the kind of fear-based bottom that's
really needed.
Bernie, how did you get interested in trading options?
I got interested in the stock market when I was a boy. My father was
interested in the market, and living in New York City afforded us the opportunity
to see the New York Stock Exchange (NYSE) from time to time. One day when
we were there, the post where United Fruit stock was traded was going crazy,
and that just fascinated me.
What was happening?
Apparently there was some kind of political turmoil in Central America
where they produced their bananas - the company's known as Chiquita Brands
these days. That caused the stock to sell off tremendously. I was able
to see on the tape that the stock was actively traded, and actually saw
the human element of trading. Ironically, I later went to work in the mid-1970s
as an actuary for Great American Insurance, a subsidiary of a company called
American Financial Corp. At one point, American Financial acquired Chiquita.
So United Fruit got me interested in the market, and then I ended up working
for a company that owned it - but only briefly.
How did you move from actuarial work to options?
I have a mathematics degree, a necessity for the actuarial career, but
I was also interested in other mathematical-type endeavors, including listed
options when they started trading in 1973. Boy, I used to follow those
prices. I didn't have any real-time prices, so I would look at the prices
in the newspaper, which was a fantasy because they just show the last sale,
whenever that might have occurred. I would find myself noticing that if
you bought this one and sold that one, you would lock in a profit. I knew
somebody at the insurance company who was interested in this stuff as well.
We ended up founding the company that later became Schaeffer's Investment
Research. We started out before the Internet, before fax machines, publishing
the Option Advisor newsletter that is still around today.
What inspired you to start the newsletter?
I was getting bored with insurance. We said, "Well, let's do something
that we really like for a change" - options. Joe Granville and Jim
Dines both had newsletters back then, as did some of the pioneers such
as Stan Weinstein, who had a newsletter called The Professional Tape
Reader. We actually went to an event held by the Newsletter Publishers
Association on how to start a newsletter. Believe it or not, at one point
we were talking about starting a newsletter on insurance. Fortunately,
that idea died quickly.
...Continued in the October 2002 issue of Technical Analysis of STOCKS
& COMMODITIES
Excerpted from an article originally published in the October 2002
issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights
reserved. © Copyright 2002, Technical Analysis, Inc.
