Minyan Mailbag - Jesse Livermore
Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.
Any of these ring true at the moment? Always instructive to step back and delve into "Reminiscences of a Stock Operator" by Jesse Livermore during some frisky times.
1) On why it's called trading, not winning:
"Everything happened as I had foreseen. I was dead right and - I lost every cent I had! I was wiped out by something that was unusual. If the unusual never happened there would be no difference in people and then there wouldn't be any fun in life. The game would become merely a matter of addition and subtraction. It would make us a race of bookkeepers with plodding minds." - Page 41
2) On "doing less" and perils of A.D.D. overtrading:
"There is a time for all things, but I didn't know it. And that is precisely what beats so many men in Wall Street who are very far from being in the main sucker class. There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. No man can always have adequate reasons for buying and selling stocks daily - or sufficient knowledge to make his play an intelligent play." - Page 21
3) On the current sideways range trading after the Nov. ramp:
"In a narrow market, when prices are not getting anywhere to speak of but move within a narrow range, there is no sense in trying to anticipate what the next big movement is going to be - up or down. The thing to do is watch the market, read the tape to determine the limits of get-nowhere prices, and make up your mind that you will not take an interest until the price breaks through the limit in either direction. A [trader] must concern himself with making money out of the market and not with insisting that the tape must agree with him. Never argue with the market or ask it for reasons or explanations. Stock-market post-mortems don't pay dividends." - Page 125
4) On traders' casting aside their preconceived notions:
"I do not allow my possessions - or my prepossessions either - to do any thinking for me. That is why I repeat that I never argue with the tape. To be angry at the market because it unexpectedly or even illogically goes against you is like getting mad at your lungs because you have pneumonia." - Page 91
5) On what traders on the Street are always battling inside:
"The [trader's] chief enemies are always boring from within. It is inseparable from human nature to hope and to fear . . . Fear keeps you from making as much money as you ought to. The successful trader has to fight these two deep-seated instincts. He has to reverse what you might call his natural impulses. Instead of hoping, he must fear; instead of fearing, he must hope."
6) On IDENTIFYING huge secular trends like metals and energy:
"I can't tell you how it came to take me so many years to learn that instead of placing piking bets on what the next few quotations were going to be, my game was to anticipate what was going to happen in a big way." - Page 43
7) On CAPTURING huge secular trends like metals and energy:
"It was never my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight! It is no trick at all to be right on the market . . . Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after the stock [trader] has firmly grasped this that he can make big money." - Pages 68-69
8) On "It's Different This Time" never being true:
"Another lesson I learned early is that there is nothing new in Wall Street. There can't be because speculation is as old as the hills. Whatever happens in the stock market to-day has happened before and will happen again. I've never forgotten that. I suppose I really manage to remember when and how it happened. The fact that I remember that way is my way of capitalizing on my experience." - Page 10
9) On how the "bullish-at-the-top" public never changes:
"The average American is from Missouri everywhere and at all times except when he goes to the brokers' offices and looks at the tape, whether it is stocks or commodities. The one game of all games that really requires study before making a play is the one game he goes into without his usual highly intelligent preliminary and precautionary doubts. He will risk half his fortune in the stock market with less reflection than he devotes to the selection of a medium- priced automobile." - Page 121
It sure helped me to read these again and I thought my fellow Minyans would enjoy them as well. U da man, bro, thank you for bringing the vision of Minyanville to life!
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at firstname.lastname@example.org.
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