Reminiscences of a Stock Operator
I read a lot of personal finance books. Most possess a certain sameness. They offer good advice, yes, but there's nothing special about them. Perhaps that's why I'm drawn to two specific types of financial books: narratives and histories. If a book can combine both of these elements, it's a good bet I'm going to like it.
Between 10 June 1922 and 26 May 1923, The Saturday Evening Post published a series of twelve articles by journalist Edwin Lefèvre. These stories, collectively entitled “Reminiscences of a Stock Operator”, told the thinly-veiled biography of stock-market speculator Jesse Livermore, and were published as a book by the same name later in 1923.
Reminiscences of a Stock Operator gives the first-person account of the career of “Lawrence Livingston” (a slightly fictionalized Livermore), who, just out of grammar school, goes to work as a quotation-board boy in a stock-brokerage office. (This was during the 1890s, one hundred years before the advent of real-time internet stock quotes. Stock quotes had to be written on a chalkboard!)
Livingston develops a feel for the stock market and, in time, begins to speculate. He's not an investor — he's a speculator. He gambles in stocks. And he does a good job of it, too, building a million-dollar fortune during his twenties. But then he loses everything. In fact, Livingston builds — and loses — several million-dollar fortunes between 1901 and 1921. And each time he makes a mistake, he extracts a lesson.
I never thought stories of stock-market trading could be so entertaining. I was wrong. The book does contain plenty of mumbo-jumbo about stock prices, but most of the time it's entertaining — and educational. Here are just a few of my favorite passages:
After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It was never my thinking that made the big money for me. It was always my sitting. Go that? My sitting tight![…]
Nowhere does history indulge in repetitions so often or so uniformly as in Wall Street. When you read contemporary accounts of booms or panics the one thing that strikes you most forcibly is how little either stock speculation or stock speculators today differ from yesterday. The game does not change and neither does human nature.[…]
Tips! How people want tips! They crave not only to get them but to give them. There is greed involved, and vanity…It has always seemed to me the height of damfoolishness to trade on tips…The belief in miracles that all men cherish is born of immoderate indulgence in hope. There are people who go on hope sprees periodically and we all know the chronic drunkard that is held up before us as an exemplary optimist. Tip-takers are all they really are.[…]
There is profit in studying the human factors — the ease with which human beings believe what it pleases them to believe; and how they allow themselves — indeed urge themselves — to be influenced by their cupidity or by the dollar-cost of the average man's carelessness. Fear and hope remain the same; therefore the study of the psychology of speculators is as valuable as it ever was.[…]
The sucker has always tried to get something for nothing, and the appeal in all booms is frankly to the gambling instinct aroused by cupidity and spurred by a pervasive prosperity. People who look for easy money invariably find that it cannot be found on this sordid earth.
At first, when I listened to the accounts of old-time deals and devices I used to think that people were more gullible in the 1860s and '70s than in the 1900s. But I was sure to read in the newspapers that very day or the next something about the latest Ponzi or the bust-up of some bucketing broker and about the millions of sucker money gone to join the silent majority of vanished savings.
I actually dog-eared more than 20 pages, but don't have room to reproduce all of the good stuff here. If you're interested in an extended glimpse of this book, you can preview the text at Google Book Search.
I loved Reminiscences of a Stock Operator. Though the stock market is a much different place than it was during the early 20th century, most of the principles described here still apply. Plus, it's filled with entertaining anecdotes and practical descriptions of how stock speculators operate. This book won't appeal to everyone. But if, like me, you enjoy inside glimpses of how the stock market operates, try to find a copy at your local library.
Postscript: I've begun to collect old finance books. I would love a 1923 or 1938 edition of this, but I'm not interested in paying hundreds of dollars. If you ever see a beat-up old copy, please let me know.