Excerpt from an 11 page article entitled: "The
Humbling of the DOW" by Virginia Butterfield
This portion of the article dealt with James A. Shepherd's results based
on his model:
BUT NOT EVERYBODY lost. Two young commodity brokers in a San Diego brokerage
house who had developed a "model" - a group of financial indicators
they were confident would predict the market - decided to bet on the downturn -
against the man with the dice, so to speak. Jim Shepherd and David Blanton
watched throughout that critical day as their relatively modest investment in
futures options, pegged to benefit from a dropping Dow, grew into multimillions
- 70 times their original investment.
Earlier in the autumn their model had been flashing sell signals, but
Shepherd and Blanton were waiting for a final indicator to flag an absolute
sell signal before they made a move - which it did on September 7. On September
8 they began to buy positions in the futures market that gave them until
mid-December for the market to reach a certain low.
"I never dreamed it would do it all in one day," said Shepherd.
Did he leap around in celebration? No, he didn't even smile. "I've been in
this business a long time." No one in his brokerage office knew he was
suddenly a multimillionaire. Who did he tell? Nobody. "My wife was out of
town. She knew we were positioned to profit from declines in the market and she
called when the market was down 200 points." By the end of the day, when
he had exited all his positions - meaning cashed in all his options at
unbelievably high figures - he called his wife with the good news.
Shepherd and Blanton are now moving into new quarters in the Hahn Building
in La Jolla, where they will conduct a commodities partnership with pooled
funds from investors. Within a week of the crash, the new firm of J & D
Commodities had clients who had committed in excess of $500,000 to their care.
The same article quotes people like Geraldine
Weiss, Richard Russell, Robert Prector and companies such as Lazard Freres