Friday, 04 May 2007
Reminiscences of a Stock Operator is a great book. Besides owning 2 hardback and 1 paperback, I now enjoy the audiobook version from NetLibrary. Even listening to the first few chapters, ideas and implications emerge.
1. The part where he heard of another operator who had about 30 people go to all the branch offices of the stock shops, and at the same time buy a certain stock, watch it rise, sell it at a high, then short it, to make a double amount as the stock falls back.
We see this type of gaming the market happening a lot, whether via email, chat room, or even the "special investment newsletters", particularly the Jim Cramer or Warren Buffet effect, where people follow the advice of certain public figures.
The whole idea can be seen easily via the spamming of Digg as well, where a group can vote up certain links before its popularity falls back by moderators.
2. The part where he tries to win money from a New Orlean shop: the owner says: look out there at all the suckers who are trying to make a few bucks, but instead are feeding me and my family. Don't you (Livingston) come here.
Just like pool sharks or expert stock operators that comes into a small shop and makes money away, leaving the small time suckers empty handed, so it is that today's hedge funds, or giant corporation like Walmart, are muscling their way around and prevent small guys from the opportunity of making any easy money.
Some nations need to protect their economy in light of this pattern. i.e. allowing foreign "investments" may sound good, but not when they come to use statistical arbitrage and takes your wealth away. Not every foreign investor uses money to invest and build wealth together with you. Some come to purely extract your treasures away.
Even the long term investors may put you at a disadvantage, by using their superior monetary power to claim strategical assets in your nation, and in the long term claims away a significant part of the wealth that really belongs to your people. Only a small fraction are truly helping you build up your wealth, and getting a proportionate share of the bounty. Most likely they take a dis-proportionate amount.
3. Don't focus on the small stuff. Go for the big one.
Dont take daily wage. Ride the trend will generate your biggest success.
Never depend on 2nd hand info. Always will depend. Work for ourself.
Timing and lag are important
Big trend following rather than quick profit such as the pursuit of initial 8th or last 8th.
--------
Union Pacific
when the street is bullish, they ignore bearish news for a few days. Until their sense comes in.
Most are slow to react.
Never trust other's opinion just because they are disinterest.
On a rise, sell some, sell more, to test the water,
then buy lots when the demand is confirmed,
chapter 7 ends.
Timing is critical
Like using a telescope to see the storm, and forgot the distance; he bought too early, so even though he was right, he lost money because the crowd was not there yet.
study general conditions
when money is tight, no more lending, banks over loaned, no one can buy anymore, and need to sell, the entire market is waiting to collapse;
instead of selling more and generate a crash, livingston start buying to ease the market. Willing to get less profit for the sake of the others.
line of resistance
test the line with initial portion; wait for sure signal of trend crossing the line;
asymmetry in buy/sell
Just because strategy works for buying, doesn't mean the opposite works for selling.
11. Cornered in corn.
How to buy lots w/o slippage - know that Straton also has wheat. Feign attack in wheat; people think that corn will be attacked next; thus demand lots of corn;
bearish on the market, got news that j.d.rock is selling stpaul. He bought steadily stpaul. When heard that j.d. Is done, he start selling St Paul to initiate the avalanche of entire bear market .
Fortunate accident
short the entire cottonmarket , how to unload? A news story on his intend drove up the demand to absorb the entire line.
12. Don't be affected by personalities
Amazing salesman. Sell him $500 of books somehow. Then tear up contract, making Livingston obliged to do him a favor.
Similar case of being beguile by personality and follow their thinking end up costing his entire fortune .
Never make the market pay for your needs:
Try to make quick buck, and end up gambling the market. This always ends in huge loss.
---
Dan williamson
influence by others
used
money loss is ok, opportunity loss is not
debts = worry = cant trade
bankrupcy
new focus
single shot, wait for crossing of 100, 200,
bull market, top bulls stopped, but rest still moving, indicting top bulls are over
foul play, coffee laws , came out of nowhere, destroyed all profits
trading /not just facts; experience and memory,
no insider selling; sell steel
cotton first rally; then break
insider trying to keep price high; two prong attack leads to break; false keeping of price would oonly lose on the long run
avoid tips
president try to affect mrs livingston
story of going against tips
people want tips, even after costly instances
example of wasteful president claiming frugality
industry group follows market, the odd guy should be suspected
19 manipulator
+ strategy using human psychology is timeless
+ corner and squeeze short selles who look only at high price rather than vaue
+ Kean. No tips. Dispose large lot
strategy to manipulability when selling;
create demand, drive up price and activities , then announce bull outlook, wait for peak, then sell it on the way down, since short sellers need to cover , and public has appetite .
twochaptersofcocreteexamples.
maycyclesof pumpiga stock. greedy sydicatememberswho buywhe theyaretryigtosell,edupwithbigloss.
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