Bear Market

13 Pages 3127 Words

rades) so he sought his fortune on Wall Street. He grew into one of the most colorful, flamboyant, and respected speculators of the last century, and was eventually known by popular names from “The Wall Street Wonder” to “The Great Bear”.

In three decades of trading Livermore made and lost several fortunes. His reputation became so notorious that he was blamed for the 1929 crash and for most of the big market breaks between 1917 and 1940! Towards the end of his illustrious career in 1940 he wrote a fantastic book, “How to Trade Stocks”, that discusses his philosophy and rules for speculating. He truly was a Wall Street legend and few understood the markets better.

In all the great trading wisdom of Jesse Livermore, I continue to marvel at his thoughts on preserving and enhancing capital. In our opening quote above, Livermore is talking about the paramount importance of both patience and courage of conviction for the professional speculator. He claims it was never his thinking that made him money, but sitting tight when he was right.

Think about that for a second. One of the greatest speculators of all time emphatically believed that being right on the markets was relatively easy, but sitting tight was the great challenge. Re-read Livermore’s opening quote above and digest this crucial speculating wisdom.

Like all timeless market wisdom, Livermore’s thoughts are at least as applicable today as they where when he first learned the hard lessons of the markets and passed them on many decades ago. Investors today are being psychologically buffeted by the current chaotic frenzy in the equity markets. Stock bulls and bears alike are marveling at today’s magnificent rally in US stocks.

The bulls, not surprisingly, claim that the stock market is discounting a future recovery in early 2002 and that the ultimate long-term bottom for US equities was laid-in after the attacks in late September. After periodically u...