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- Lessons from an Original Market Wizard
Last week, we shared an excellent presentation from our old friend Phillipe Laffont of Coatue Management. Phillipe has built one of the best GROWTH investment firms in the last fifty years, and it was fantastic to have access to his insights.
Phillipe is one of the best in the modern generation of investors, and we encourage you to follow him and learn more.
In today's issue, we want to introduce you to the wisdom of one of the best investors of a MUCH earlier generation – Wall Street legend Jesse Livermore.
Many of you may not have heard of Livermore, but he was a towering investment figure in the early twentieth century.
He was born into poverty in Massachusetts on July 26, 1877, and ran away from home at just fourteen. He managed to get a job as a “board boy” posting stock quotes at the Boston branch of venerable brokerage PaineWebber.
A funny story was that his first “bet” on a stock was not actually buying a stock. He placed an actual BET at a place that would take wagers on stock prices instead of buying and selling the actual stock.
He moved to New York a decade later (at 23) and very quickly took advantage of the turn of the century BULL MARKET for stocks.
Across the next four decades, he would have one of the most dramatic careers in Wall Street's history. He made himself one of the wealthiest investors on Wall Street multiple times but also filed for bankruptcy three times.
Finally, in November 1940, he took his own life by shooting himself with a Colt automatic pistol in the cloakroom of The Sherry-Netherland Hotel in Manhattan – one of his favorite spots.
We encourage you to read more about him, and below are a handful of great timeless quotes from him about investing…
“Don't trust your own opinion and back your judgment until the action of the market itself confirms your opinion."
This is one of the core tenets of our investing strategy. We are seeking confirmation from the market that it is interested in the stocks we are investing in and trading.
Being right about a company's fundamentals but not having the stock confirm them is just WRONG.
“Never buy a stock because it has had a big decline from its previous highs.”
This is quite a simple rule, but many investors start looking for stocks by looking for the ones that are down the most. Those could be good stocks, but we prefer to start by looking for the ones that are UP the most and have pulled back.
“Big movements take time to develop.”
Another one of our favorites. There is a lot of money to be made in the stock market, money that can change your financial future.
Those kinds of returns, though, rarely happen in a day, a week, or a month. Sometimes, they take YEARS. Patience is your most crucial investment weapon.
“It is not good to be too curious about all the reasons behind price movements.”
THIS is one of his most potent quotes!
It is incredible to us how much time and energy investors waste trying to "explain" price movements instead of just coming up with a plan to handle or harness them.
Stop looking for the reason for the move and figure out how to make money off it!
“It is much easier to watch a few than many.”
Our regular readers know we often return to the SAME STOCKS in our trading.
It is too complicated (and pointless) to have an opinion on EVERY stock out there.
Figure out a group of stocks where you understand the trading sentiment and fundamentals and determine how to make money off those consistently.
“The human side of every person is the greatest enemy of the average investor or speculator.”
We talk about this ALL THE TIME. Your greatest challenge as a trader or investor is your human psychology.
Figure out these biases and how to eliminate them from your process, and you will be more successful!
After learning about Jesse Livermore's impactful yet tumultuous career and his timeless investment wisdom, which of his quotes resonates most with you and why? Let us know [email protected] or in the comments section online.
HX Podcast with JC Parets
On this episode, we're joined by JC Parets of "All Star Charts". JC and Enrique compare histories as children of Latin immigrants, the inevitability of Cubans playing baseball, trading bonds vs bail bonds, technical analysis, and the downsides of predicting the next big crash.
JC explains technical analysis as ignoring opinion and paying attention to what's actually happening, and why past performance IS indicative of future returns! They talk about why you're never right, the importance of finding the pain points, psychology and the three R's of read, read, and read.
Check out Enrique Abeyta’s conversation with JC Parets on the HX Podcast, or watch on YouTube below.
The HX Podcast with Enrique Abeyta brings you up-to-date financial market commentary along with evergreen insights into investing, trading and building your financial future. Enrique has 30+ years experience as a professional investor having managed billions of dollar in his firms. He brings on other world class investors and special guests to discuss investing and trading in a humorous and approachable manner.
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