Review: Reminiscences of a Stock Operator
Edwin Lefevre’s investing classic, Reminiscences of a Stock Operator, is not so much an investment guide as a rip-roaring swashbuckling adventure story. The book is a semi-fictionalized biography of Jessie Livermore, who was a market legend in the ’20s and ’30s. The stock market was the Wild West in those days. There were trading “bucket shops” that allowed 100/1 margin ratios, and operated like casinos. Markets were manipulated by huge investment pools, which ran massive pump and dump operations on some of the biggest companies of the day. The inefficiency of the trading floor system, together with a lack of regulation (compared to today), allowed for all kinds of Machiavellian manoevers, and traders pulled them on each other mercilessly. Enter Livermore, a shrewd self-taught chartist, who cuts his teeth in the bucket shops, then goes on to build up a massive fortune of tens of millions of dollars (in the ’20s!), then lose every dime. Over and over again. A fascinating store about a fascinating time in our history. The book is filled with timeless wisdom for traders. There is no better discussion of crowd psychology, and how to exploit it, available anywhere. Livermore’s particular strategies are largely a thing of the past, due to changes in market efficiency and the law. But his wisdom and insight into the markets and herd psychology are as true and valuable today as in 1920. Reminiscences of a Stock Operator comes with our highest recommendation. Even if you have no interest at all in investing, the larger-than-life story and fascinating history are more than worth your time.
