Severn years before Edwin Lefevre began a series of articles that would become Reminiscences of a Stock Operator, he warned of the perils in speculation. He likened it to gambling on an unbeatable game.

His reason was no different than what’s been repeated millions of times since. Speculators are more likely to beat themselves before they ever beat the market.

What makes the game of stock speculation the most dangerous of all is the variety of pleasing disguises it is able to assume. Being born of greed, it feeds on greed, and thereby waxes greater. If that were all it did, of if it did this openly, it would not be so dangerous; but besides the additional lure of adventure there is the irresistible appeal to vanity, the challenge to pit your wits against other wits, and even against Nature and the vagaries of the weather and the weaknesses of men. It most often masquerades as a legitimate business operation, subject to and governed by the ordinary rules of ordinary business.

Greed, vanity, and ignorance make for a bad combination for speculators. It leads to all the familiar mistakes — chasing “easy money,” over trading, unable to quit while ahead — that inevitably lead to their downfall.

Lefevre warned readers about all of this in 1915, then relayed the 10 Hells: Continue Reading…

Nobody paints a more accurate picture of old-time Wall Street than John Ferguson Hume. In the second, and final chapter, of The Art of Investing, Hume doesn’t hold back. He calls Wall Street by many names — a madhouse, a cuttlefish, a devilfish, a bloodsucker — while asking two questions:

Much graver questions grow out of its existence. Is it a harmless institution? Is it a public blessing? Is it a public curse?

The answers have always varied, depending on who you ask.

The market does have its uses but money always attracts nefarious types. Wall Street is infamous for it. And it will never entirely go away.

Scam artists and schemers will always be around in some form, trying to separate you from your money. That’s just the nature of things.

Then there’s the market itself. People are naturally drawn to it. The nature of people is to “invest” money in ways that run counter to success.

Hume attempts to inject some Street smarts, some timeless wisdom, and some history while painting a colorful picture of the seedier, speculative side of the Street. Continue Reading…