REMINISCENCES OF A STOCK OPERATOR

by Edwin Lefèvre

What does a man do when he sets out to make the stock market pay for a sudden need? Why, he merely hopes. He gambles. He therefore runs much greater risks than he would if he were speculating intelligently, in accordance with opinions or beliefs logically arrived at after a dispassionate study of underlying conditions.

I was sick, nervous, upset and unable to reason calmly. That is, I was in the frame of mind in which no speculator should be when he is trading.

I had not learned quite so much about the play of human weaknesses. There is no mind so machinelike that you can depend upon it to function with equal efficiency at all times. I now learned that I could not trust myself to remain equally unaffected by men and misfortunes at all times.

A great many smashes by brilliant men can be traced directly to the swelled head an expensive disease everywhere to everybody, but particularly in Wall Street to a speculator.

I had nothing to say and, besides, I always let the other man have his say in full before I do any talking.

made it his practice to listen in silence, with an impassive face, to anybody who brought a proposition to him. After the man got through Mr. Stillman continued to look at him, as though the man had not finished. So the man, feeling urged to say something more, did so. Simply by looking and listening Stillman often made the man offer terms much more advantageous to the bank than he had meant to offer when he began to speak.

I don't keep silent just to induce people to offer a better bargain, but because I like to know all the facts of the case. By letting a man have his say in full you are able to decide at once. It is a great time-saver. It averts debates and prolonged discussions that get nowhere.

I don't like to owe money or favours. I can pay the money back with money, but the favours and kindnesses I must pay back in kind and you are apt to find these moral obligations mighty high priced at times. Moreover there is no statute of limitations.

my feelings again won over my judgment and I gave in. To subordinate my judgment to his desires was the undoing of me. Gratitude is something a decent man can't help feeling, but it is for a fellow to keep it from completely tying him up.

The loss of the money didn't bother me. Whenever I have lost money in the stock market I have always considered that I have learned something; that if I have lost money I have gained experience, so that the money really went for a tuition fee. A man has to have experience and he has to pay for it.

The money a man loses is nothing; he can make it up. But opportunities such as I had then do not come every day.

Altogether it was more unsatisfactory than doing business with a relative. Bad business!

I not only lost all I had but got into debt again more heavily than ever. Those were long lean years, 1911, 1912, 1913 and 1914. There was no money to be made. The opportunity simply wasn't there and so I was worse off than ever.

the weaknesses to which a speculator is prone are almost numberless.

business is business always, and my business as a speculator is to back my own judgment always.

We ran smack into a long moneyless period; four mighty lean years. There was not a penny to be made.

Billy Hen-riquez once said, "It was the kind of market in which not even a skunk could make a scent."

The trouble was not that I had lost my grip but that during those four wretched years the opportunities for making money simply didn't exist. Still I plugged along, trying to make a stake and succeeding only in increasing my indebtedness.

I convinced myself that whatever was wrong was wrong with me and not with the market. Now what could be the trouble with me? I asked myself that question in the same spirit in which I always study the various phases of my trading problems. I thought about it calmly and came to the conclusion that my main trouble came from worrying over the money I owed.

As I studied the problem I saw that it wasn't a case that called for reading the tape but for reading my own self.

I quite cold-bloodedly reached the conclusion that I would never be able to accomplish anything useful so long as I was worried, and it was equally plain that I should be worried so long as I owed money.

"I must go through bankruptcy." What else could relieve my mind? It sounds both easy and sensible, doesn't it? But it was more than unpleasant, I can tell you. I hated to do it. I hated to put myself in a position to be misunderstood or misjudged. I myself never cared much for money. I never thought enough of it to consider it worth while lying for. But I knew that everybody didn't feel that way. Of course I also knew that if I got on my feet again I'd pay everybody off, for the obligation remained. But unless I was able to trade in the old way I'd never be able to pay back that million.

"Livingston," he said, "we understand. We realise your position perfectly. I'll tell you what we'll do: we'll just give you a release. Have your lawyer prepare any kind of paper you wish, and we'll sign it." That was in substance what all my big creditors said. That is one side of Wall Street for you. It wasn't merely careless good nature or sportsmanship. It was also a mighty intelligent decision, for it was clearly good business. I appreciated both the good will and the business gumption.

What happens when you live with integrity and are good to people always. Also when you're so dedicated and good at what you do. Others believe you'll do everything you can to pay them back and that you have what it takes.

a man must give his entire mind to his business if he wishes to succeed in stock speculation.

I intended to trade conservatively at first. It would make my financial recovery easier and quicker if I could begin with a line a little better than five hundred shares. But, anyhow, I realised that, such as it was, there was my chance to come back.

I had no leeway, limited as I was. I couldn't afford even a slight setback at the beginning. I must build up my stake with my very first play. That initial purchase of mine of five hundred shares must be profitable. I had to make real money. I knew that unless I had sufficient trading capital I would not be able to use good judgment.

Without adequate margins it would be impossible to take the cold-blooded, dispassionate attitude toward the game that comes from the ability to afford a few minor losses such as I often incurred in testing the market before putting down the big bet.

I found myself then at the most critical period of my career as a speculator. If I failed this time there was no telling where or when, if ever, I might get another stake for another try. It was very clear tha...

I mean, I purposely kept away from them for six long weeks of steady tape reading. I was afraid that if I went to the office, knowing that I could buy five hundred shares, I might be tempted i...

trader, in addition to studying basic conditions, remembering market precedents and keeping in mind the psychology of the outside public as well as the limitations of his brokers, must also know himself and provide against his own weaknesses. There is no need to feel anger over being human. I have come to feel that it is as necessary to know how to read myself as to know how to read the tape.

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have studied and reckoned on my own reactions to given impulses or to the inevitable temptations of an active market, quite in the same mood and spirit as I have considered crop conditions or analysed reports of earnings.

So day after day, broke and anxious to resume trading, I sat in front of a quotation-board in another broker's office where I couldn't buy or sell as much as one share of stock, studying the market, not missing a single transaction on the tape, watch...

My practice of buying a stock just after it crossed par dated back to my early bucket-shop days. It is an old trading principle.

You can imagine how keen I was to get back to trading on my old scale. I was so eager to begin that I could not think of anything else; but I held myself in leash.

I saw Bethlehem Steel climb, every day, higher and higher, as I was sure it would, and yet there I was checking my impulse to run over to Williamson & Brown's office and buy five hundred shares. I knew I simply had to make my initial operation as nearly a cinch as was humanly possible.

Patience and discipline to wait for confirmation/ a great play/set up are crutial to growing. Specially small accounts.

But I sat tight and instead of listening to my loud- mouthed hopes or to my clamorous beliefs I heeded only the level voice of my experience and the counsel of common sense. Once I got a decent stake together I could afford to take chances. But without a stake, taking chances, even slight chances, was a luxury utterly beyond my reach.

Six weeks of patience but, in the end, a victory for common sense over greed and hope!

Those six weeks of waiting for the right moment were the most strenuous and wearing six weeks I ever put in. But it paid me, for I now had enough capital to trade in fair-sized lots.

There is a great deal in starting right, whatever the enterprise may be,

I wasn't the same man, for where I had been harassed and wrong I was now at ease and right. There were no creditors to annoy and no lack of funds to interfere with my thinking or with my listening to the truthful voice of experience, and so I was winning right along.

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 to-day differ from yesterday. The game does not change and neither does human nature.

I was as bullish as the next man, but of course I kept my eyes open. I knew, as everybody did, that there must be an end, and I was on the watch for warning signals.

I wasn't particularly interested in guessing from which quarter the tip would come and so I didn't stare at just one spot. I was not, and I never have felt that I was, wedded ind...

That a bull market has added to my bank account or a bear market has been particularly generous I do not consider sufficient reason for sticking to the bull or the ...

A man does not swear eternal allegiance to either the bull or the bear side. His conc...

there is another thing to remember, and that is that a market does not culminate in one grand blaze of glory. Neither does it end with a sudden reversal of form. A market can and does often cease to be a b...

long expected warning came to me when I noticed that, one after another, those stocks which had been the leaders of the market reacted several points from the top and for the first time in many months did not come back. Their race evidently was ...

whenever a stock goes against the general trend you are justified in assuming that there is something wrong with that particular stock. It is enough for the experienced trader to perceive that something is wrong. He must not expect the tape to become a lecturer. His job is to listen for it to say "Get out!" and not wait for it to submit a legal brief for approval.

The end of the bull market had not come, though it was within hailing distance. Pending its arrival there was still bull money to be made. Such being the case, I merely turned bearish on the stocks which had stopped advancing and as the rest of the market had rising power behind it I both bought and sold.

While I felt certain that the bear market had really begun before the bull market had really ended, I knew the time for being a rampant bear was not yet. There was no sense in being more royalist than the king; especially in being so too soon. The tape merely said that patrolling parties from the main bear army had dashed by. Time to get ready.