Every new market cycle always brings out new so-called experts who tout new strategies to try to succeed in the battle of the market. New books are written, new newsletters are printed, and new websites tout newfound secrets and supposedly new ways to succeed in the market.
However, few survive very long and are gone before we ever get to see a sustained track record of success. And just like any other field such as sports, music, business, medicine, art, etc., there are the few who excel above all others. It’s no different when it comes to the stock market. Jesse Livermore, in spite of creating multi-million dollar fortunes several times and losing it every time, is known as one of the greatest stock speculator of all times.
By shorting stocks during the 1929 stock market crash, Livermore made so much money that he was worth more than $100 million. Adjusted for inflation that’s more than a billion dollars today.
Edwin Lefèvre’s Reminiscences of a Stock Operator is a brilliant first-person account of the career of “Lawrence Livingston”, who is a slightly fictionalized version of Jesse Livermore. It’s an entertaining book and contains many great lessons based on Livermore’s career.
So why are we talking about a speculator and his riches in a value investing newsletter? That’s because as an investor, it’s more important to know what NOT to do in the stock market than what to do.
After declaring bankruptcy twice in his career, Livermore had this advice: “Being broke is a very efficient educational agency.” You learn little from your winners because they often take care of themselves. It’s the losers that will teach you lessons to last a lifetime. And as long as you don’t make the same mistake twice, you always have the opportunity to try again.
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