Reminiscences of a Stock Operator. Lefèvre Edwin

      Edwin Lefèvre

      Reminiscences of a Stock Operator

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      Copyright © 1993, 1994 by Expert Trading, Ltd.

      Foreword © 2006 by Roger Lowenstein

      Published by John Wiley & Sons, Inc., Hoboken, New Jersey

      Published simultaneously in Canada

      Originally published in 1923 by George H. Doran and Company.

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      Library of Congress Cataloging-in-Publication Data

      Lefèvre, Edwin, 1871–1943.

      Reminiscences of a stock operator / Edwin Lefèvre.

      p. cm. – (Wiley investment classics) Originally published: New York: G.H. Doran, 1923. Includes index.

      ISBN-13: 978-0-471-77088-6 (pbk.) ISBN-10: 0-471-77088-4 (pbk.) 1. New York Stock Exchange. 2. Speculation. I. Title. II. Series.

      HG4572.L4 2006

      332.64′273 – dc22

      2005043672

TO JESSE LAURISTON LIVERMORE

      FOREWORD

      In the late 1970s, when I was thirsting for a job in journalism, The Wall Street Journal hired me to cover the copper market. My assignment was to get to know the traders who bought and sold copper futures and submit a report on the daily fluctuations. It being an era of high inflation, copper was bullishly inclined, and under my untutored but watchful eye its price increased from 80 cents a pound to 90 cents to, eventually, $1. Promptly I reported (after canvassing my newfound sources) that copper was rising on account of there being “more buyers than sellers.”

      “More buyers than sellers!” my editor guffawed. He was a clownish man with a pointed head; he saw humor in everything, in particular his new cub reporter. “Your job is to tell us why there are more buyers than sellers.”

      This seemingly straightforward advice led me into a maze of trader’s lore that came to seem indistinguishable from outright guesswork if not invention. On some days, I was told that the advance (or, as it were, the decline) was triggered by “investors,” and was therefore predictive of the future trend. On other days, the price change was ascribed to “speculators,” evidently a less reliable sort. Most mysteriously of all, the price could move for “technical reasons,” which advances I was urged to dismiss as having no significance whatsoever. Still, it was rising, wasn’t it?

      Copper cracked $1.50 and throughout its run paid not the slightest heed to the “reasons” I was dutifully laying bare. I knew that something in my analyses was deficient, but I didn’t know what. The problem was a lack of preparation. I hadn’t read Edwin Lefèvre’s Reminiscences of a Stock Operator; therefore, I did not know how to write about commodities markets, or stock markets, or any other kind of market.

      If I had read it, I would have understood that “the tape” utters a more powerful argument than any reason or affidavit; you do not argue with the tape, you do not explain it or deconstruct it. And I would have read it on the third page and I would have read it in a single paragraph:

      Of course there is always a reason for fluctuations, but the tape does not concern itself with the why and the wherefore. It doesn’t go into explanations. I didn’t ask the tape why when I was fourteen, and I don’t ask it to-day, when I am forty… What the dickens does that matter?

      The author of these lines, the son of a Union Army officer, had been trained as a mining engineer but followed his heart and, in the 1890s, turned to chronicling the exploits of Wall Street moguls. Though the public was as hungry as today for a glimpse into the inner workings of the stock market, in that era, little hard information was available. But Lefèvre, who wrote novels as well as journalism, had a knack for capturing the smell, and also the sound – the vernacular, that is – of Wall Street. In 1922, he caused a stir with a serialized account of a famous – ”infamous” is also a term that springs to mind – speculator who was willing to spill the secrets of the trade to readers of The Saturday Evening Post. His story was republished between hard covers the following year.

      Though Lefèvre wrote in the first person, Reminiscences is based on several weeks of interviews with a trader whom he calls Larry Livingston. Livingston did not exist; it is a nom de guerre for Jesse Livermore, one of the greatest stock speculators ever.

      Livermore had begun his career just before the turn of the century, making wagers of a few dollars in “bucket” shops-parlors in which people who did not have the means to open a brokerage account made small bets against the house. The bucket shops booted him out for the unpardonable crime of consistently winning. By the end of World War I, Livermore had made, lost, and made millions, and was generally being blamed for any sizable disruption in the stock and commodities markets, not always without reason.

      Though he was destined to play a marquee role in the great crash of 1929, before his untimely and tragic end, Reminiscences is a fictionalized memoir only of Livermore’s early and ascendant years. Do not ask which part exactly is fiction; Livermore was one of those American originals whose amplifications (especially in the hands of a writer as gifted as Lefèvre) merely served to enhance the overall verisimilitude of his story.

      And so we have a tell-all confession of how traders worked in the era predating the federal securities laws: of the tipsters, the manipulations, the brazen efforts by corporate managers to ride their own stocks up and down and always in advance of a hapless public. A modern writer called Reminiscences a portrait of “a period in the stock market that no longer exists.” This is true and yet it is untrue. Human