Hi Guys,
I just finished rereading Edwin Lefevre’s book “Reminiscences of a Stock Operator”. It is usually interpreted as a biography of Jesse Livermore. It is a terrific story with countless embedded investment guidelines from the Boy Plunger.
During his long controversial career, Livermore was mostly known for the dark-side of investing: his infamous short positions and market manipulations. From his perspective, he was market directional neutral, making huge commitments in both Bull and Bear markets. Over time, he morphed from a pure short term speculator into a longer time-horizon investor.
Livermore’s most succinct single bit of market wisdom summarizes that transformation nicely; he said “buy right and sit tight”. Simple advice, but hard to execute.
The Lefevre book contains several investment gems in every chapter. After completing the book, I realized that I had not taken any notes, and I wanted to share Livermore’s experience-based insights with you. Fortunately, many excellent reviews of Reminiscences exist. Here is a Link to one such review:
http://www.valuewalk.com/jesse-lauriston-livermore-resource-page/I particularly choose this reference because it provided a 15-item listing of useful Jesse Livermore quotes. I extracted that listing from the Valuewalk.com website and include the list here for your convenience. Jesse Livermore is now speaking to you in a first-person voice.
1. A loss never bothers me after I take it. I forget it overnight. Nevertheless, being wrong– not taking the loss – that is what does damage to the pocketbook and to the soul.
2. One of the most helpful things that anybody can learn is to give up trying to catch the last eighth – or the first. These two are the most expensive eighths in the world. They have cost stock traders, taken together, enough millions of dollars to build a concrete highway across the continent.
3. It is not as important to buy as cheap as possible as it is to buy at the right time.
4. There is only one side of the market and it is not the bull side or the bear side, but the right side.
5. It is what people actually did in the stock market that counted – not what they said they were going to do
6. the only way you get a real education in the market is to invest cash, track your trade, and study your mistakes
7. The examination of a losing trade is tortuous but necessary to ensure that it will not happen again
8. We are the sum total of our experience.
9. Keep the number of stocks you own to a controllable number. It is hard to herd cats, and it is hard to track many securities. Take your losses quickly and do not brood about them. Try to learn from them but mistakes are as inevitable as death.
10. Every once in a while you must go to cash, take a break, takes a vacation. Do not try to play the market all the time. It cannot be done, too tough on the emotions.
11. The stock market is never wrong. Traders are wrong
12. Without specific, clear, and tested rules, speculators do not have any real chance of success
13. I believe that anyone who is intelligent, conscientious, and willing to put in the necessary time can be successful on Wall Street. As long as they realize the market is a business like any other business, they have a good chance to prosper
14. I believe that uncontrolled basic emotions are the true and deadly enemy of the speculator; that hope, fear, and greed are always present, sitting on the edge of the psyche, waiting on the sidelines, waiting to jump into the action, plow into the game.
15. I never try to predict or anticipate. I only try to react to what the market is telling me by its behavior.
Wise words. There is much timeless wisdom in these investment guidelines and rules. Please consider them when making your investment decisions. Recognize that Livermore both made and lost millions of dollars during his enigmatic career. Benefit from his experience and practical learned lessons. Risk always is present in any investment, so good luck to all of us. Livermore’s astute axioms might just tilt the odds a little more in our favor.
Best Regards.
Comments
You might want to read Richard Smitten's book The Amazing Life of Jesse Livermore, albeit a bit biased in favor of the famous speculator.
Hi Junkster,
Thank you for the unexpected and motivational references. I was unfamiliar with either reference. I think I’ll pass on the additional Livermore biography; I’ve had enough of the Boy Plunger. But I am intrigued by your praise for the Nicholas Darvis citation. I inadvertently downloaded a copy of his book for free. I will read it.
Voltaire famously remarked that “Common sense isn’t so common”. That’s as pithy as it gets. I agree that there are likely 50 more investment gems in Lefevre’s classic book that are not included in my summary list. It is really a treasure chest of investing advice.
Applied common sense will make all of us more successful investors. One problem is that under the marketplace’s frequent stressful conditions, we tend to abandon those common sense guiding principles. Even Jesse Livermore fell victim to that psychological trap. He admitted as much in the biographies.
At one time, I too believed that Livermore died a poor man. That is simply not true. Various credible web resources place his end total wealth in the 5 million dollar range. Certainly he was not financially destitute. He committed suicide for other non-financial reasons.
Thank you for expanding this discussion. All MFO members will benefit from your fine contributions.
Best Wishes.
"Never confuse brains with a bull Market."
Ha! Love it.