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Reminiscences of a Stock Operator: With New Commentary and Insights on the Life and Times of Jesse Livermore, Annotated Edition

ISBN: 978-0-470-48159-2
440 pages
December 2009
Reminiscences of a Stock Operator: With New Commentary and Insights on the Life and Times of Jesse Livermore, Annotated Edition (0470481595) cover image
With new commentary and Insights on the life and times of Jesse Livermore

Reminiscences of a Stock Operator is the fictionalized biography of perhaps the most famous financial speculator of all time-Jesse Livermore. This annotated edition bridges the gap between Edwin Lefevre's fictionalized account of Livermore's life and the actual, historical events, places, and people that populate the book. It also describes the variety of trading approaches Livermore used throughout his life and analyzes his psychological development as a trader and the lessons gained through hard experiences.

  • Analyzes legendary trader Jesse Livermore's strategies and explains how they can be used in today's markets
  • Provides factual details regarding the actual companies Livermore traded in and the people who helped/hindered him along the way
  • Explains the structure and mechanics of the Livermore-era markets, including the bucket shops and the commodity exchanges
  • Includes more than 100 pages of new material

Reminiscences of a Stock Operator has endured over 70 years because traders and investors continue to find lessons from Livermore's experiences that they can apply to their own trading. This annotated edition will continue the trend.

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Foreword by Paul Tudor Jones.

Preface.

Chapter I.

Chapter II.

Chapter III.

Chapter IV.

Chapter V.

Chapter VI.

Chapter VII.

Chapter VIII.

Chapter IX.

Chapter X.

Chapter XI.

Chapter XII.

Chapter XIII.

Chapter XIV.

Chapter XV.

Chapter XVI.

Chapter XVII.

Chapter XVIII.

Chapter XIX.

Chapter XX.

Chapter XXI.

Chapter XXII.

Chapter XXIII.

Chapter XXIV.

Appendix: Dow Jones Industrial Average (1985-1929).

Paul Tudor Jones on Reminiscenses.

Selected Quotes.

Credits.

About the Author.

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Edwin LeFèvre was trained as a mining engineer, but became a journalist at age nineteen. He produced eight books, including The Making of a Stockbroker, during his fifty-three-year writing career. He was a celebrated finance author made most famous by his publication of the fictionalized story of Jesse Livermore, which first appeared in the Saturday Evening Post in 1922.

Jon D. Markman is an award-winning journalist, popular market analyst, and veteran fund manager. He was a pioneer in the development of stock-rating systems and screening software; a portfolio manager at a hedge fund; managing editor at CNBC on MSN Money; and an investment columnist and investigative reporter at the Los Angeles Times. Markman provides investment guidance in his daily Strategic Advantage and Trader's Advantage research services, as well as in his weekly MSN Money column and managed accounts. He is also the author of Swing Trading, which is published by Wiley, and two other finance books.

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"...is big and beautiful, cutting across two centuries of booms and busts and market and economic history, with a myriad of vintage historical photos and instructive historical charts throughout." (Barron's, November 1, 2010)

"This is a wonderful classic for any investor or economic historian...the style is pacey, robust and humorous." (Professional Investor, October, 2010)

"A 10 best finance book.
Does the ongoing financial turmoil leave you scratching your head? Worry not, here's our pick of the finest - and most readable - books about Big Money..."
(The Independent)

 

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February 11, 2010
Reminiscences of a Stock Operator, Annotated Edition

“Whatever happens in the stock market today has happened before and will happen again…nothing is new in Wall Street. There can’t be because speculation is as old as the hills.”                      

Originally written in 1923 by journalist Edwin Lefèvre, Reminiscences of a Stock Operator is a fictionalized version of the early years of the life story of market speculator, trader, and manipulator Jesse L. Livermore. Although it was written more than 80 years ago, it remains one of the foremost investment classics of all time, inspiring countless investors and traders with its account of Livermore's legendary trading experiences. According to an award-winning journalist, popular market analyst, and veteran fund manager Jon D. Markman, “technology and regulations have changed drastically since the days of Jessie Livermore, but this book still resonates today because human nature remains the same.”

REMINISCENCES OF A STOCK OPERATOR, ANNOTATED EDITION (Wiley; December 2009; $34.95; 978-0-470-48159-2; Hardcover) brings the story of the great speculator to life like never before. In this meticulously researched ANNOTATED EDITION, Markman reveals the truth about Livermore and provides colorful, historically accurate commentary on the characters, places, and events that have made Reminiscences such an enjoyable and educational read for generations. Characters mentioned in Reminiscences led amazing lives that were well known to Lefèvre’s contemporary readers in the 1920s but have largely lost on modern readers. Events that evoked an emotional response when the book first published have zero resonance for modern readers. The annotations offer biographies, descriptions, history, charts, pictures, and newspaper clippings that bring new insight for today’s audiences.

Although the book is often mentioned by famed traders today as their bible, or the work that inspired them to go into investment business, Lefèvre meant for it to be a cautionary tale more than instruction manual. A tale that allowed him to mix his own views about all that was deceitful, wretched, and corrupt, yet also energizing and transcendent, about Wall Street. With the financial crisis, bailouts, frenzy over bank bonuses, scams and other shady dealings now dominating the news headlines, Lefèvre’s message is just as relevant today as it was in his time.

Reminiscences reaches out through time to remind us that there is never anything new on Wall Street because speculation is as old as the hills; that in a bull market you must trade with the bulls while in a bear market, you must trade with the bears; that anticipation and fast reactions are the trader’s key assets; that you should never argue with the tape, that you do not know until you bet; that the game teaches you the game.

The Annotations

This Annotated Edition bridges the gap between Lefèvre's fictionalized account of Livermore's life and the actual exploits, personalities, and locations that populate the book. Side-by-side with the original text is Markman's commentary about the historical setting and the real companies, individuals, and news events to which Lefèvre alludes, including how the fierce public debates over gold and silver roiled the politics and markets of the time; how presidential candidate William Jennings Bryan incited a financial panic in 1896; how World War I created a boom followed by a harsh recession; and how ambitious tycoons built fortunes from scratch and drove rivals to ruin by cornering stocks and through other now-illegal manipulations.

The annotations also reveals information about important but forgotten figures briefly mentioned or disguised via pseudonyms in the text, such as broker E.F. Hutton, who gave Livermore a $500 loan when the trader was down on his luck, as well as legendary financiers like E.H. Harriman, John Gates, James Hill, James Keene, and Cornelius Vanderbilt as well as daring rogues like Daniel Drew and Jay Gould.

This new edition features an interview and foreword from Paul Tudor, President and Founder of hedge fund manager Tudor Investment Corporation, about how reading Reminiscences impacted him and his career. Having made $750 million in 2006, Tudor is worth an estimated $3.3 billion, and was ranked by Forbes in March 2007 as the 369th richest person in the world.

The Story of Jesse Livermore

After studying stock price fluctuations at his office job in a brokerage firm, Jesse Livermore, or as he was popularly known as “The Boy Plunger,” started trading in 1891 at the tender age of 14 at bucket shops—storefront operations where speculators who could not afford a regular brokerage account could bet on the price movements of stocks and commodities—across New England. Because most bucket shop operators refused to do business with Livermore (he made too much money) and were fading from the scene, Livermore quit day-trading at them for short-term gain and eventually learned how to use his intelligence, intuition, cunning, and agility to make larger, longer-lasting, more lucrative trades at legitimate brokerages.

Livermore’s exploits from the Panic of 1907 netted him more than $3 million over six weeks. He lost most of that wealth in cotton speculation with Theodore Price, a man who convinced Livermore to go long on cotton only to double-cross Livermore later by switching to the short side and trapping Livermore as he was forced to close his large position. In early 1915, Livermore voluntarily filed for bankruptcy but by June, his debts had been discharged. His creditors did not press him for payment of his debts because in most instances he had previously paid many times the sums concerned in commissions. After a long streak of bad luck, Livermore caught a break when the Dow gained 82 percent in 1915. By the following year, he was proudly telling reporters how he “came back.” He immediately returned to his spendthrift ways. Moving from his role as a trader, Livermore took on the role of “operator,” a polite term for “manipulator” later in life.

 Livermore’s Life After the Book

Livermore himself ultimately fell victim to the game, as he was never able to adapt his methods to restrictions put in place by the Securities and Exchange Commission in the 1930s. The trader made a fortune by shorting stocks in the panic of 1907 and in the 1929 crash—at his peak owning mansions, a fleet of limousines, and a massive yacht—but he was plagued by depression and repeatedly lost his amassed fortune with bad plays. After a long series of setbacks, he took his own life in November 1940, with a .32 caliber handgun at the age of 63 in the cloakroom of the Sherry-Netherland Hotel in New York, leaving a rambling suicide note that read in part “Things have been bad with me. I am tired of fighting. Can’t carry on any longer. This is the only way out.”

Livermore’s Trading Philosophy

Livermore’s ideas and keen analyses of market price movements are as useful today as they were when he was first developing them and would be recognized by any technical trader today: “Prices…move along the line of least resistance.” Speculators should not worry whether a stock looks too cheap or too dear but only if it is more likely to go up or down. Stocks should be bought on breakouts and shortened on breakdowns; stocks are never too high to buy or too low to sell; a speculator must keep an open mind on fundamentals and focus primarily on price action; trends appear before news is published; bearish news is ignored in bull cycles and vice versa, losing trades should never be added to, because “there’s no profit in being wrong.” And a speculator’s chief enemies are always the natural impulses of his own human nature.

Livermore offers profound insights into the motivations, attitudes, fears, and aspirations shared by every investor and trader, such as:

  • Traders should never trade to get even or in an effort to buy something in particular because the market tends to punish anger, depression, and naked greed.
  • Big money is not in the individual fluctuations but in the main movements, not in reading the tape but in sizing up the entire market and its trend. “It was never my thinking that made the big money for me. It was always my sitting.”
  • If a man is both wise and lucky, he will not make the same mistake twice. But he will make any one of the ten thousand brothers or cousin of the original. The Mistake family is so large that there is always one of them around when you want to see what you can in the fool-play line.
  • A trader, in addition to studying basic conditions, remembering market precedents and keeping in mind the psychology of the outside public as well as the limitations of his brokers, must also know himself and provide against his own weaknesses.
  • Another dangerous enemy to a trader is his susceptibility to the urgings of a magnetic personality when plausibly expressed by a brilliant mind.
  • No one can consistently and continuously beat the stock market though they may make money in individual stocks on certain occasions. No matter how experienced a trader is the possibility of his making losing plays is always present because speculation cannot be made 100 percent safe.
  • Wall Street professionals know that acting on “inside” tips will break a man more quickly than famine, pestilence, crop failures, political readjustments or what might be called normal accidents.

REMINISCENCES OF A STOCK OPERATOR, ANNOTATED EDITION provides a rich and colorful portrait of a volatile era in U.S. financial markets that in many ways parallels the crisis-prone twenty-first century. Markman extracts the timeless wisdom from one of the world's greatest traders and shows how they can be applied to understand and profit in today's markets.

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Reminiscences of a Stock Operator: With New Commentary and Insights on the Life and Times of Jesse Livermore, Annotated Edition (US $39.95)

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