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Most personal finance books are boring. Most of them have nothing new as such.
Of course, there are the legendary books on investing that make great reading. They are generally written by gurus who have a past investing record, or by academics or a combination. Or they are written by journalists or writers following the lives of these ‘gurus’ and narrating them in an interesting manner. Such books are few and far between. Most others have a kind of sameness.
So when I read ‘The Reminiscences of a Stock Operator’ by Edwin Lefevre, I realised that I was reading a book on stocks that was a rare combination; a book with a fast-moving story, almost novel-type theatrics and some hard-hitting, long-lasting lessons. First published in around 1922, this is a book on the life of Lawrence Livingstone (fictional version of the real life speculator Jesse Livermore), and his stock speculation career.
Starting as a gambler on stock prices, Livingstone develops a sense of timing for stock prices, and goes on to become one of the most celebrated stock traders on Wall Street in the early 1900’s; making and losing millions multiple times in the first three decades of the 20th century. He is a trader, an unabashed one, not an investor. But as he goes through his journey, he learns a lot of lessons, that may be applicable to investing as well.
While I would not recommend this book for taking investing lessons, it is, nevertheless, the most entertaining book that I have read related to the stock markets. And through its pages of fast-moving, nerve-wracking stories and experiences on stock speculation, it contains a lot of wonderful quotes and takeaways for investors too.
Here are some key excerpts:
“It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine–that is, they made no real money out of it. Men who can both be right and sit tight are uncommon.”
“The reason is that a man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do. The market does not beat them. They beat themselves, because though they have brains they cannot sit tight.”
“Nobody can catch all the fluctuations.”
“It took my five years to learn to play the game intelligently enough to make big money when I was right.”
“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 today has happened before and will happen again.”
“The desire for constant action irrespective of underlying conditions is responsible for many losses on Wall Street even among the professionals, who feel that they must take home some money every day, as though they were working for regular wages.”
“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.”
“After the initial transaction, don’t make a second unless the first one shows a profit.”
“If a man is both wise and lucky, he will not make the same mistake twice. But he will make any one of ten thousand brothers or cousins of the original. The Mistake family is so large that there is always one of them around when you want to see what you can do in the fool-play line.”
“He will risk half his fortune in the stock market with less reflection than he devotes to the selection of a medium-priced automobile.”
“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.”
“A man may know what to do and still lose money – if he doesn’t do it quickly enough.”
“They say you never go broke taking profits. No, you don’t. But neither do you grow rich taking a four-point profit in a bull market.”
“The game does not change and neither does human nature.”
“The experience of years as a stock operator has convinced me that no man can consistently and continuously beat the stock market though he may make money in individual stocks on certain occasions.”
And there are many such super lines in this book almost in every chapter.
Of course, a lot of the content is relevant to Wall Street in the early 1900’s, and lots has changed since then due to regulation and overall maturity of the capital markets. But despite that fact, this book is full of entertaining narrations of a full fledged stock operator who risked it all multiple times and learned many lessons on the way.
While the book may not appeal to every one, till I read this book, I could never imagine that writing on stock speculation could be so entertaining, as well as so educative.