Jesse Livermore on Shareholder Orientation

"Yes, I know the trick," I said to the chap who was telling me. "Yes," he said. "But the next day they sent telegrams to the same people advising them to close out their interest in everything and buy or sell another stock. I asked the senior partner, who was in the office, 'Why do you do that? The first part I understand. Some of your customers are bound to make money on paper for a while, even if they and the others eventually lose. But by sending out telegrams like this you simply kill them all. What's the big idea?"

"I should say that a chart helps those who can read it or rather who can assimilate what they read. The average chart reader, however, is apt to become obsessed with the notion that the dips and peaks and primary and secondary movements are all there is to stock speculation. If he pushes his confidence to its logical limit he is bound to go broke. There is an extremely able man, a former partner of a well-known Stock Exchange house, who is really a trained mathematician. He is a graduate of a famous technical school. He devised charts based upon a very careful and minute study of the behaviour of prices in many markets stocks, bonds, grain, cotton, money, and so on. He went back years and years and traced the correlations and seasonal movements oh, everything. He used his charts in his stock trading for years. What he really did was to take advantage of some highly intelligent averaging. They tell me he won regularly until the World War knocked all precedents into a cocked hat. I heard that he and his large following lost millions before they desisted. But not even a world war can keep the stock market from being a bull market when conditions are bullish, or a bear market when conditions are bearish. And all a man needs to know to make money is to appraise conditions.

must have been a hundred brokers around the Money Post, each hoping to borrow the money that his firm urgently needed. Without money they must sell what stocks they were carrying on margin sell at any price they could get in a market where buyers were as scarce as money and just then there was not a dollar in sight. My friend's partner was as bearish as I was. The firm therefore did not have to borrow, but my friend, the broker I told you about, fresh from seeing the haggard faces around the Money Post, came to me. He knew I was heavily short of the entire market.

I had always felt a great admiration for him. The first I ever heard of him was through the newspapers at the time of the failure of the Stock Exchange house of Sheldon & Thomas, when Thomas tried to corner cotton. Sheldon, who did not have the vision or the courage of his partner, got cold feet on the very verge of success. At least, so the Street said at the time. At all events, instead of making a killing they made one of the

I discovered for one thing that there was too much stock held by too few people that is, too much for safety and far too much for comfort. Clifton P. Kane & Co., bankers and brokers, members of the New York Stock Exchange, were carrying seventy thousand shares. They were intimate friends of Barnes and had been influential in effecting the consolidation, as they had made a specialty of stove stocks for years. Their customers had been let into the good thing. Ex-Senator Samuel Gordon, who was the special partner in his nephews' firm, Gordon Bros., was the owner of a second block of seventy thousand shares; and the famous Joshua Wolff had sixty thousand shares. This made a total of two hundred thousand shares of Consolidated Stove held by this handful of

I hoped my proposition would appeal to them because they were experienced Wall Street men and had no illusions about the actual demand for Consolidated Stove. Clifton P. Kane was the head of a prosperous commission house with branches in eleven cities and customers by the hundreds. His firm had acted as managers for more than one pool in the past. Senator Gordon, who held seventy thousand shares, was an exceedingly wealthy man. His name was as familiar to the readers of the metropolitan press as though he had been sued for breach of promise by a sixteen-year-old manicurist possessing a five-thousand- dollar mink coat and one hundred and thirty-two letters from the defendant. He had started his nephews in business as brokers and he was a special partner in their firm. He had been in dozens of pools. He had inherited a large interest in the Midland Stove