Whenever there is a poll of the greatest books on the stock market, it is a fair bet that Reminiscences of a Stock Operator by Edwin Lefèvre will feature high on the list.

In its centenary year, Shares asks whether the book deserves its reputation and if it offers any useful lessons for investors today.

The ‘Reminiscences’ are the first-hand accounts of a fictional trader called Larry Livingston who began his career as a quotation-board boy in a small broking firm as a teenager.

The subject of the book is famed speculator Jesse Livermore, who allegedly built a $100 million fortune – equivalent to $1.5 billion in today’s money – in the decades before the Great Crash in 1929 and is considered one of the pioneers of day-trading.

In the book, Livingstone recounts how he made $1,000 by the age of 15 and then $10,000 by the age of 20 simply by ‘reading the tape’ and anticipating the market’s next move while trading ‘on margin’.

‘Reminiscences’ is first and foremost a romp down Wall Street as it was over 100 years ago, with bucket shops and broking houses on every corner open six days a week including Saturday. Think ‘The Wolf of Wall Street’ with top hats and frock coats.

As such, there is little in the book for long-term investors, as Livermore is an out-and-out trader, punting in and out of everything from stocks to corn and cotton.

Where the book excels is in its portraits of those who operated in a market which to this day regularly extracts the most money from the least prepared.

There are of tales of old-timers who gave him sage advice, and of those whose advice turned out to be good for nothing, but there is always a valuable lesson, and it is usually that experience comes at a price.

There are also hair-raising experiences – such as when he sells his money-making position in Union Pacific (UNP:NYSE) and takes a sizeable short position the day before the company unexpectedly declares a 10% dividend – and the losses he incurs are still large sums of money even by today’s standards.

Livermore never reveals his system, but for those who love the cut and thrust of trading he has this advice: ‘I have been in the speculative game since I was fourteen. It is all I have ever done, and the conclusion I have reached after nearly thirty years of constant trading, both on a shoestring and with millions of dollars, is this: a man may beat a stock or a group at a certain time, but no living man can beat the stock market.’

‹ Previous2023-04-13Next ›