Mamis Last Letter

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June 29, 2014

THE LAST MAMIS LETTER

Stock Market Survival & the Meaning of Life...a retrospective

While browsing around in the barns piles the other day, I came upon an old button which read JustinE. Mamis, Assistant Director, Department of Floor Procedure. That sent my mind off in reminiscing.Working for the New York Stock Exchange was the only real job I ever had, and I was, so to speak, thehelper to the head of the Floor Department, a wonderful fatherly Irish gentleman. One afternoon whilestanding together in the middle of the Exchange floor, looking up at the tape, he turned to me and said,A wonderful day. The Exchange is going to have volume of 10 million shares for the very first time.Imagine how long ago that must have been, how young I must have been.

Instead of staying with the Exchange, however, I had a chance to go to work as a Member-Trader forPhelan, Silver (John Phelan subsequently became head of the NYSE). I sat upstairs next to Lew

Horowitz, a major partner in the firm, leaning over the railing to keep an eye on what was happeningon the Floor below. Lew would tell people that he made money from Justins mumbles and so hedid. He subsequently became Vice Chairman (Grasso became Chair) and prices on the Floor wentfrom eighths and quarters to pennies, and the whole market world became different, and Ive neverforgiven it.

Thats one recollection. Another is earlier. I came back from serving in Korea with $5000 (nothing tospend money on in Pusan except for a wonderful painting that still hangs on our wall). I asked our

prosperous college roommate what to do with that money, and he took me to a brokerage house we

Justin thenBarron's September 13, 1993

Justin nowRETIRED!

JUSTIN [email protected]


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think it was Goodbody. We sat with a partner who explained owning stocks and such andrecommended three stocks: AT&T, GE and DuPont, the three adding up to our military savings.Having little else to do, I began to read the newspapers financial section every day to see how mythree stocks were doing. I remember very clearly: one was going down, one was going up, and thethird was going nowhere, and I said, loudly, to myself: Theres got to be a better way!

Not long after, I discovered Barrons not so much for the texts, which I didnt understand, but forthe various small advertisements recommending this way to get rich, or that way to pick stocks, andsuch, usually charging two bucks for a sample, and among those ads was a $5 one for John Mageesdiscussions. I forget the details but remember that for the same five bucks, I also got several charts ineach issue, so I started learning things Id never heard of before. I found an edition of TechnicalAnalysis of Stock Trends (Edwards and Magee) and still have it on the shelf right in front of me (plus acopy of Magees The General Semantics of Wall Street)and not only that, I have used Magees chart

paper all these decades up to and including the charts I posted for the last time last week. (A big pileof unused, 11x17 chart paper is available cheap!).

So there you have it. After five decades, I cant think of anything else to do in the stock marketbesides sincerely thanking each of you who have been compiling, formatting, editing, fixing,contributing to, following, paying for, inspiring and even criticizing my work over these many years.

And finally, I want to thank the stock market itself. Although it has no more socially redeeming valuethan pornography, it is never boring (even on dull days), often fascinating (even when aggravating),and occasionally challenging enough to redeem it socially. I wish for all of us enough stimulation fromthe market, as our equivalent of Picassos brush and Casalss bow, to keep us going into a similarly,lively old age.

From The Nature of Risk (Stock Market Survival

and the Meaning of Life (1991)

The value of technical analysis in the stock market is to reduce risk. It is especiallyhelpful in guiding you to believe what otherwise seems unacceptable. By extension,therefore, it is most helpfulat identifying significant market turns, both for the market andfor individual stocks. The action of individual stocks cumulatively becomes the mostimportant indicator of market direction, and all our internal indicators are but reliableways of summarizing that individual stock action. (Sentiment indicators are attempts toidentify the consensus so as to be grouchily contrarian). Stock charts and the indicatorsare like doctors advice: exercise, diet, reduce stress, and so on. They are a means ofestablishing imperfect but relatively objective ways to understand market risks and marketchoices.

Id prefer to be a purist shut the door and look only at the charts, using John Magees dictum of reading thenewspaper only when it is yellow but stock market life isnt like that. Decisions real decisions are made bythose who know what they are doing and why, and with the power of money behind those decisions. They arethe lords of the playing field, while the technician is but the observer and reporter of their (collective) behavior.Experience over the years tells me that (1) in a crunch confusion, chaos, crisis being pure helps: (a) putblinders on in trying to understand the markets behavior; (b) try to be on the side of the New York StockExchange (NYSE) specialist; and (c) constantly ask oneself: what is the least expected thing the market coulddo? (Such guidelines would have helped immeasurably at such otherwise bewildering times as October 19 and20, 1987 and January 15 and 16, 1991).

Justin


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At other times, however, (2) recognize that all significant (that is, affecting the price) buying andselling stems from some form or other of fundamentals. Chief among these, perhaps in order ofimportance, are (a) corporate management; (b) the reliability of corporate information; and then (c)whatever information book value, cash flow, even earnings and dividends a particular investorvalues. Fundamentals, therefore, are derived apart from the market, whereas technical factors arerooted in the market itself. We would argue that fundamental forecasts are based on judgments as to

how the company is likely to do in the future applied subjectively to future price in the marketplace,whereas a technical forecast is based on the potential validity of those judgments as revealed byobjective data already in the marketplace.

In both cases, however, the willingness to forecast is vital. Theres really nothing you can do about theinherent risk of being in the stock market at all and little you can do about the ongoing risk that,

because the market is constantly changing, no sooner do we act than we may perceive somethingsignificantly different occurring. The future is not guaranteed. And all choices have a possibility offailure.

But thats as true of daily life as it is of the stock market. Crossing the street symbolizes the sense ofrisk that every little act involves as we cross into the future. It expresses our ability to look both ways,to be careful or careless, to be in control of our own destiny and yet vulnerable to what others,including crazy people, might do.

Snippets from The Nature of Risk

In a simple standard Collegiate Notebook bought in any stationery store or supermarket , eachmorning I record the DJIAs high, low, and closing price, its price change from the previousday, NYSE highs and lows, the advances and declines and the days volume. On thenotebooks facing page, I then record the net differential between advances and declines andcalculate the 10-day moving average of that differential

I make a joke of saying that I dont know whats happening or what is likely to happen nextuntil I put my pencil to the piece of chart paper and sketch in the days price and volumeaction. It sounds silly because there is obviously no artistic leeway to change where I drawthat line; nevertheless, there is a kinship with the artist creating a drawing in that we bothuse the objectivity of our pencilings to take the next step into the future. Our needs forsensitivity are similar. As you can see, now we are talking about a third language: first thescientific; then the markets; now the artists.

Not long ago, aNew York Timesarticle, entitled Forecasters Art in 1929 and Now, notedhow the economists of that earlier day were unable to foresee not only the crash but also the

ensuing depression. Some researchers, using modern techniques, recently went back to thatera and demonstrated that even todays fancy computer-driven approaches would havefailed as miserably. Their conclusion was that there was no way to anticipate such disasters.The scary truth, the author of the article wrote, is that the limits of macroeconomicmodels reflect inherent limits to economic knowledge. Imagine! An entire essay about aserious limitation on the ability to anticipate economic trouble, and not a sentence, not aword, not a phrase, about the economic forecasting tool that works the stock market. Themarket is smarter than you, I, and economists computers.


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Snippets from How to Buy (An insiders guide to making money in

the stock market (1982)

Weve discussed when to buy, and how to buy. But the most importantaspect of all is what to buy. Litany on this subject has already beenrunning through this book: buy strength; dont guess at bottoms; if

there isnt much to buy, dont buy; wait for the stock to prove itself;etc. Overall market action tells us when to buy, but the individualstock can also signal the proper timing. Since we are always lookingfor a betting edge, we want the stock itself, as compared to all otherstocks, to tell us that now is the time to buy it.

What are we looking for in a stock? Thats easy to answer, even ifthere are infinite variations. We are looking for success in holding, to

begin with. A stock that has just made a new low is clearly notsuccessful. A stock that manages to hold above its prior low on thenext sell-off has accomplished something positive. Similarly, a stockthat manages to rise above its previous rally peak has also achieved asuccess. A stock that has higher lows and higher peaks clearly is

trending upward. Simply stated, that is the art of charting.

Let the market tell you. Dont try to tell the market. Why should the market cooperate

with your needs?

Snippets from When to Sell,

(Inside Strategies for Stock Market Profits (1977)

Since, indeed, the stock market is nothing but a game, with players on both sides of

each transaction, with a score in money-points, and with eventual winners andlosers, it is often revealing to compare it to more familiar games. Takebaseball: the manager who orders a sacrifice bunt whenever nobodys out andthe tying run is on first base knows it wont work every time. The batter mightpop it up, a fielder could pull off a brilliant play, or the runner might die onsecond anyhow. But he knows that the law of averages, developed over similarpast situations, is on his side, and he can, based on his own experience andinsight, refine the odds by considering other factors, such as the bunting abilityof the batter, the speed of the base runner, the skill of the next batter, and so on.

Strangely, the same fan who appreciates that the manager is playing percentage baseball is unable totranslate that approach from baseball to the game he is playing the stock market. Instead of looking

back over his own record of success and failure to see which technique worked and which didnt, orwhat frame of mind affected each decision or failure to decide, he tends, in the market, to repeat hiserrors time and again. Next time, he insists, after striking out again with the winning run on third, itwill be different.

Ever since the first corporate share was purchased, it has been a credo of American culture that the road towealth is the patient accumulation of stocks in growing corporations. As the country expanded, steel,oil, mining, and railroad ventures paid off handsomely. For years, railroad shares were considered the


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premier investment for those whod made their pile and wanted to keep it safe and sound. More thanone will of the pre-Depression era specified in unbreakable terms that the heirs were to entrust thefamily fortune only to railroad shares. As it turned out, railroads were safer than buggy-whip orstreetcar companies, but by the time the countrys massive industrial growth began to produce acomparable boom in the stock market, railroads werent the thing to be in. Industry products becamethe fashionable investment; railroads, especially as disaster stuck in the thirties, lost their respectabilityand became speculative. One generations gilt became the dross of the next.

Given ample opportunity to rise during a bull market, the failure of a particular issue to move upward in gearwith the averages can be warning enough in itself that something is wrong. To be sure, speculativeflings in search of something that hasnt moved yet can sometimes sweep up a laggard issue or two,but by and large, the hope is that what did not happen yesterday and today will happen tomorrow, and asthe bull surges on without that stock, the reality becomes progressively more urgent: a stock does nothave to go down first to show that it is becoming weak. Merely not going up is, under most bullishcircumstances, a sign of trouble brewing.

The one thing we can guarantee is that none of it is easy. Just try to walk that fine line between not selling toosoon and not procrastinating one day too long! Any time any one of us, from professional trader to odd-lotter,can boast of taking a profit, we have done something right. Luck is a mere bonus. What was right, simply put,

was that a stock was bought cheap and sold dear. But dont let anyone claim that the two halves of the act areequally easy. Only someone who has never played the market game would believe that.

Snippets from Justins market letters

FIRE THE COMPUTER! (1984)

Which technical indicator do you think is most out of favor nowadays?No, its not the overly arbitraged short interest ratio. Nor is it themoribund odd-lot statistics. And everybody, on the principle of alittle knowledge is a dangerous thing, now knows about divergences.Contrary opinion still works best, with front page articles and magazine covers providing useful

headlines to go contrary to. But what has gone the way of the aardvark is the ticker tape.

The computer is just another tool. It is no more of a magical machine than the Ouija board or the crystalball. It has, unfortunately, caused investors and traders and analysts to lose track of the virtues of usingboth sides of the brain the intuitive and the objective - instead, everyone has become lopsided. The artform of playing the market has been relegated to museums, and the computer has become the newemperor. The result has been the current markets aggravating behavior in which the averages madenew highs yet no one was happy. If you step back from the daily fray, and let everyone else play theirshort-term games, youll do better. And if you find some little old guy in a back room with the blindspulled down, the tape clattering, and his charts posted by hand, ask him how he feels about the market.

The Phil osophy of Tops (Jul y 31, 1987)

Tops are not made in a day. Unlike bottoms, which often can abruptly materialize on a climactic panic, withmany stocks making their lows at the same time (although still requiring ample subsequent base-building), tops form over a much longer period of time. Also unlike bottoms, which form in anticipationof discernible, albeit unbelieved, change, tops seem to come out of nowhere, indeed, out of a glowinggood-news climate. Nevertheless, there are several repeatedly appearing essential ingredients to tops,the chief of which is, of course, how to fool the most number of people into confidently holding (andeven buying) stocks as the bull market ends. The way this is done see the November 1972 upsidebreakout from a big head and shoulders consolidation is often almost by magic: Tops dont look liketops.


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If you look at every top weve lived through, they each have certain ingredients internal marketdeterioration; rationalizations and lulling; using up buying power even though you used to know better;and waiting and waiting for the bell to go off, which proves in hindsight to be rather more of a littletinkle that you thought you heard but werent sure enough of to act upon. The one eternal aspect ofevery market top is that it occurs before were ready for it.

Special Report on th e Phil osophy of B ottomsT he F utur e Based on the Past (Janu ary 11, 1988)

...it is necessary to understand the nature of bottoms. Lows in the averages are not bottoms; bottoms are notmade on a blend of hope and good news; bottoms are formed by basing; basing forms over a period oftime, and in the face of bad news, on pessimism, not optimism..Thus a soothing bear market rally isthe spiritual sire of the second leg downbottoms are made when selling becomes exhausted.

Special Report on Bon ds (Au gust 31, 1988)

Note that in the midst of the October (1987) crash, with the entire trading world in total disarray, bond pricescame down to the support area of that breakout and held almost exactly where they were supposed to!

For those who were able to keep their heads, it proved to be a nice neat fairly obvious buyingopportunity

If few are to be on board when the next important upward drive begins, the current market action becomesall the more intriguing. Pessimism abounds theres far more bearishness towards bonds than towardsstocks.

Similarly, for a longer-term target, one would measure the distance of the entire pullbackIf my math isright this is an equity guy speaking that would translate into a long-bond yield in the neighborhoodof about 6%-6 1/2 % (from 9.85%). What else do you need to know?


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F rom Justin, in a letter to a fri end who is a fin ancial r eporter:

My time at the Exchange in that role (Assistant Director of the FloorDepartment) was during the mid to late 60s ferment time, and I was a

bit too long-haired for some senior executives. I went to the Exchange

because I had three mouths to feed and my hobby of charting the stock

market was all I knew that was employable. I went in with any and allthe suspicions any leftist could have about that den of capitalism, and

was astounded to find the degree of honesty and decency on the floor at

that time. I have to emphasize at that time. These were men who, forthe most part, had never gone to college, and some hadnt even finished

high schoolso there was nothing high falutin about their ethics,

nothing patrician about their background. But they traded on eachothers word, and made million dollar transactions on a hand shake, and

never thought otherwise.

Some fu n titles of past M amis letters:Damaged Goods on Sale

What is the matter with Mary Jane? Were having rice pudding for dinner again.A.A. Milne

40 Points Down, 40 Points Up All in a Days Work

Honey, I Shrunk My Helper or The Demise of the Technician

Tulip Bulbs and the Tooth Fairy

Flushing It Down the Toilet

Dont Confuse Brains With a Bull Market (from a Fraser button)

Stock: a family of languages, tribes, racethe barrel of a gunlifeless, dulla pun-ishment device, used often by the Pilgrimscooking brothrailroad rolling stockLock, stock and barrelput stock in, confidencea theatre company, often travelinglivestocka store or supplystock car racingStockholmstockingstock intradestock pilestock yardstockadestock certificates, stock holders, and stockmarket!

Is Complacency the Opium of the Stock Market?

Is This Stock Market A Form of Three Card Monte?

Leverage is the Markets Form of Infidelity

The Wall St. Two-Step Put your little foot out the doorput your other foot back in

Hello, Everybody, Hello, Hello, HelloWake Up! Theyre Going to Rally!(somewhat, sometime soon, and in some stocks)

Stop Stabbing at that Snooze Button! Get up, get up, you sleepyhead. Theres a rally underway!

Barrons, August 19, 1991.

Dorothy Ahle, Illustrator


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We have to include a chart of The Sentiment Cycle, page 199, in T he Nature of Risk:

A Note fr om Kate Welli ng...

Most investors do not need an introduction to Kate Welling. She spent overtwo decades at Barrons as a featured writer, assistant to the editor (AlanAbelson) and managing editor, and produced virtually all of the magazine'ssignature "Q&A" interviews, including its annual Roundtable issues. Today,

Kate publishes her own journal of research, analysis, opinion andinsight,WellingonWallSt.singular, incisive, thought-provoking.www.wellingonwallst.com.

"Justin Mamis ostensibly employed the tools and language of technicalanalysis to decipher the markets manifold moods over his long and

illustrious Wall Street career. And that he did, with admirable clarity,without the hocus pocus oft resorted to by lesser practitioners, and

always with a self-deprecating sense of humor. But what also can be saidnow, in retrospect, is that Justin, with his keen insights and gut instincts

into what was driving investors not to mention his curmudgeonlycontrary tendencies was actually one of the first, and certainly the

most original, practitioners of whats now called behavioralanalysis. The markets and investors have been immeasurably

enriched by Justins embrace of the risks and opportunities inherent in aless-than-efficient market created by imperfectly rational investors."

A cycle begins with stocksclimbing a wall of worry, andends when there is no worryanymore. Even after the rise topsout, investors continue to believe

that they should buy thedips..Unwillingness to believe inthat change marks the first phasedown: Its just another buyingopportunity. The second,realistic, phase down is the

passage from bullish to bearishsentiment...Selling begins to makesense. It culminates with the third

phase: investors, in disgust, dump right near the eventual low

in the conviction that the bad newsis never going to stop


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A Note fr om Don Preston

Don Preston met Justin in 1984 while they were together at Cowen& Co. After Justin spent some time at Gordon Capital, they met upagain at Hancock Financial/Tucker Anthony. Later, they lefttogether to form the independent advisory firm, Noah Financial.

Thirty years! For a young man like me, thats a long time to have a personaland professional relationship. For Justin, a less young man, maybe it looks likea blip. My reality is that I have had nearly half a lifetime of learning from a manof few (spoken) words but with a strong positive presence. His composure intimes of stress taught me that not every adverse situation calls for panic. His

trust in me has been enduring. His excellent sense of direction has repeatedlysaved me from first exiting the Fidelity building through the wrong doorand

then turning in the wrong direction. Indeed, I have followed his lead in manyways, and I am a better person for it. This attests to the privilege and joy it has

been to know him.

Now, Justin, its your turn to follow me and finally! retire. But

stick around. I can use a good guru. Most of all, be well,Teacher, Leader, Friend.

A Note fr om H elene M eisler

Helene Meisler writes a daily technical analysis column as a Real Money contributor for

TheStreet.com. She met Justin in 1984 at Cowen & Co., rejoined him in 1992 at Gordon Capital,

and then together they left for Hancock Institutional/Tucker Anthony. Not long after, she went

to work for Cargill in Minneapolis where she managed equity money for three years. Then came

a long stay in Singapore.

Justin has described Helene as witty, cheerful, and upon occasion, accurately sharp-tongued.

Its been about thirty years since I first met and began working with Justin. The first day of working

together I was taught how to hand-post the John Magee stock charts. They are on semi-logarithmicscales so it took quite a while to get the hang of it. I was still posting away at 8:30 pm, definitely not

pleased to be working so late.

Keeping in mind these were the days before there was a personal computer on every desk, the nextmorning I said to Justin, "This is ridiculous! There must be a way to computerize this. In typical

Justin fashion, he responded that there was not only a certain feeling you got from putting the pencil to

the paper but from sharpening the pencils themselves.

A little more than ten years later, when internet usage was spreading fast, I tried to give up hand-

posting my charts; I couldnt. I found myself laughing out loud that in fact Justin was right: there is acertain feeling you get from putting that pencil to the paper each night.

Thank you, Justin, for being my mentor and teaching me about the markets. As you always say, the

market teaches us something new every day, even when its dull, just to keep us interested.


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TO MOTHER MARKETwhose rewards when we are right,

stern responses when we are careless,and fickle changes of direction,have kept daily life fascinating

and challenging.

Inside cover of When to Sell, 3rd edition, 1999

Noah Financial Justin Mamis.. [email protected]

Michele Bernstein phone: [email protected]

Justins business card

Painting done by our Swiss son-in-law, Jrg Obrist, in late 1987 .

From our bulletin board

to yours...

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