Reminiscences of a Stock Operator
(John Wiley & Sons, Inc., New York, First Pub. 1923, this ed. 1994)
This is the story of Jesse Livermore and was first printed in 1923. It is still considered to be a classic and a must read. I find it to be excellent, and I recommend it to all.
In this book Mr. Livermore describes how he anticipated the losses the Union Pacific Railroad would suffer from the destruction of the San Francisco earthquake of 1906. He sold short and made a fortune. The quake occurred on April 18, 1906. But Livermore makes it very clear that the real crises in the markets did not climax until October 27 1907, over a year and a half later. I found this to be significant.
A great quote (pages 288 - 289):
"The turn comes in the line of business the company is engaged in. Who are the first to know it, the insiders or the public? You can bet it isn't the public. What happens next? Why, if the improvement contiues the earnings will increase and the company will bein position to resume dividends on the stock; or, if dividends were not discontinued, to pay a higher tate. That is, the value of the stock will increase.
Say that the improvement keeps up. Does the management make public that glad fact? Does the president tell the stock holders? Does a phianthopic director come out with a signed statement for the benefit of that part of the public that reads the financial page in the newspapers and the lips of the news agencies? Does some modest insider pursuing his unusual policy of anonymity come out with an unsigned statement to the effect that the company's future is most promising? Not this time. Not a word is said by anyone and no statement whatever is printed by newspapers or tickers.
The value-making information is carefully kept from the public while the now taciturn 'prominent insiders' go into the market and buy all the cheap stock they can lay their hands on. As this well-informed buy unostentatious buying keeps on, the stock rises. The financial reporters, knowing that the insiders ought to know the reason for the rise, ask questions. The unanimously anonymous insiders unanimously declare that they have no news to give out. They do not know that there is any warrant for the rise. Sometimes they even state that they are not particularly concerned with the vagaries of the stock market or the actions of stock speculators.
The rise continues and there comes a happy day when those who know ahve all the stock they want or can carry. The Street at once begins to hear all kinds of bullish rumours. The tickers tell the traders 'on good authority' that the company has definitely turned the corner. ..."
If this book is in your local library, do check it out and give it a read. It is delightful.
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