Sunday, October 23, 2016

Reminiscences of a Stock Operator by Edwin Lefevre

Nine unwitting investors gathered at the Four Hills home of the original stock operator, Prof. Dick Arms, on the last Thursday evening of the month.  They understood the evening to be BYOB (Bring Your Own Bucket).

Prof. Arms explained in detail how the concepts developed by Livermore relate to the Arms Index (on volume).  For the rest of us, there is also a Wiki article.  Further, we enjoyed the Wiki article on the real Jesse Livermore.  And finally, for you non-capitalist puppets of Putin, here is a one-sentence description:
an unauthorized office operated by bad hombres for speculating in stocks or currency using the funds of unwitting investors.

Bob Simon:  I enjoyed this book - I found it very interesting.  I was a Finance major and I found it fascinating.  Livermore gained an awareness of how to manipulate the market.  It was historically interesting - and it couldn't happen today.  The self-analytic components that he developed on the facts gave rise to the personal question:  can you hold on to your methodology and act on it faithfully?  A-

Rob E:  I must claim an Incomplete - I read some 25% to 30%.  The story was Buy - Sell, Buy - Sell, and I got tired of it.  The Wisdom he dispenses:  Know when to buy, when to sell.  You can't buy unless someone wants to sell.  My grade:  Inc

Bob Woods:  I give it a B-  As literature, it is a total disaster.  An 8th Grade student could have written this.  Historically it was of some interest.  What put me off:  Livermore achieves brilliant success based on his intuition - but gives no indication of how that intuition works.  The book does give some inclination of what the guys in the corner offices do.

Dick J:  I enjoyed reading it.  I was intrigued by that display of intuition.  Myself, I rely on brokers.  The book was not well written, but I enjoyed the old-style language.  B

Keith:  As a top level summary:  the market is driven by fear and greed, with insider trading rampant, and the government does nothing to control or regulate.  Big money talks (e.g., Warren Buffett).  Tape watchers have all this data, yet they had less available to them in the largest brokerage house in 1906 than I have on my iPhone today.  Stock mutual funds average 10%, better than what the brokers could do for you.  Bernie Madoff, hundreds of other such examples - greed drives it all.  The Book:  I felt like I jumped into a huge ocean of decimal points, and I was searching for integers.  C

Kenny G:  The book describes the Wild West days of the market, when there were little or no regulations.  I found that history very interesting.  These issues still exist.  The writing was tedious and repetitious.  B-

Dick Arms:  The market is a delicate balance between fear and greed today, just as it was in the early 1900s.  I thought the most interesting portion of Livermore's life occurred after 1923, after this book ended, and I didn't hear anything about his Life.  I agree with what Jack said.  Good writing, but needs more personal details.  I recommended the book but I give it only a B.

Charlie:  It was a difficult book to start with - highly technical subject, tought to make people like me interested in the subject.  Way too much on trading, I wanted more on how the rest of his Life went.  The book has big limitations - way too long.  Grade:  B- due to these defects.

Ron Bousek:  Too long, but a one-track objective:  tell us all of his trades.  I listed his sayings:  "Follow the path of least resistance."   What does that mean?  "Can't beat the market."  Interesting insight on how the market worked when you could watch shares being traded in real time.  Then there were spots/locations in the city where the traders could gather around to obtain money offered by the customers at high interest rates.  This was very simple writing style that provided a snapshot in time.  B

Mike B:  I have the enviable position of batting clean-up, so I can respond to some of the earlier comments.  I would tell Rob that he does not need to claim incomplete - if he read 20% to 25%, he read it all - the rest of the book repeats the first 1/4, just with different stocks and different prices.  It was highly repetitious, and I would never recommend this book to anyone.  Dick Arms mentions that this is required reading for new brokers - I submit that there are books today that give a much, much better overview of the market processes - and something called investing.  This was not about investing, but gambling, pure and simple.  To say you have intuition, that you knew to short the Western railroads, and then two days later the San Francisco earthquake strikes - that is blind luck.  (But as Ron B. notes, he did follow up after the earthquake when others were slow to respond.)  C

... and from well outside the New York Stock Exchange:

Dear Dick,

I am sorry I won't be able to make it to the LTBC meeting at your house on Thursday.  I am sure I would have gained a better understanding and appreciation of  your selection after hearing the discussion.

I cannot say reading Edwin Lefevre's novel was fun for me.  I found the first part of the book interesting, but then it became too repetitive.  My eyes tend to gloss over anyway whenever economists and financial operatives discuss the market, so an account of Livermore's personal life would have offered more drama (Ran away at age 14; married three times in the course of 33 years (once to an 18-year old Ziegfield Follies showgirl); lost his fortune; fatally shot himself at age 63.) and hence would have been more enjoyable for me.  C

-  Jack

PS  One thing I failed to mention in my comments was the fact that the story did reinforce a point I thought I had learned many years ago from my mother and that was the need to always cover your shorts.