Novel Investor

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The Rise and Downfall of Richard Whitney

by Jon

A syndicate of bankers gathered on October 24th to plan out how to end the panic. As acting president of the New York Stock Exchange, Richard Whitney was the face of the operation. The rest ran the six largest banks in the country.

It was like history repeating itself. J.P. Morgan famously did something similar in 1907 when he summoned the leading bankers to save the financial system from collapse. Only this time things didn’t work out as before.

The day after Black Thursday (October 24, 1929), Whitney strolled up to Post No. 2 on the exchange floor and ordered 10,000 shares of U.S. Steel. “205 for Steel” was the bid. It was over $5 above the current asking price. He did the same for several other blue-chip stocks. In a matter of minutes, he placed $20 million in bids. The market reversed course and rallied into the close. It was enough to turn the tide through the weekend.

The selling resumed on Monday. And on October 29th, forever known as Black Tuesday, the market was in a full-on panic. Continue Reading…

Once in Golconda by John Brooks

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"Once In Golconda" Book CoverBuy the Book: Print | eBook

John Brooks chronicles the 1920s bull market, its key players including Richard Whitney, the aftermath following the Great Crash of 1929, and how the events of that era transformed Wall Street.

The Notes

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Peter Lynch’s Rules Worth Following

by Jon

Many investors, especially when they’re starting out, look for the best stocks, the fastest growers, the highest quality, or the quickest buck. It almost makes sense, at first but doing it that way and making money is harder than it appears.

A simpler, yet important approach, is to focus first on things to avoid.

Avoid the worst. Avoid expensive. Avoid things you don’t understand.

In a dive into Peter Lynch’s writing, I came across an article he wrote where he lays out 14 investing rules. Lynch is most commonly known for his “know what you own” stance. His rules also include some things worth avoiding. Continue Reading…

Wise Words from Edwin Lefevre

by Jon

Edwin Lefevre took an unusual path. He was born in what is now Colon, Panama in 1871, studied mining engineering in the states, and became the Panamian ambassador to Spain and Italy later in life. In between, he was a financial journalist.

In 1915 he wrote a scathing article against speculation. The “Unbeatable Game,” he called. His point was clear. Speculators and gamblers in the market rarely died rich. It’s a loser’s game. It was easily the topic he revisited most and a theme in his classic Reminiscences of Stock Operator.

His talent was turning Wall Street stories and anecdotes he collected over the years into lessons on human nature. He pointed out the errors that plagued investors throughout the market cycle. He covered market history, uncertainty, probability, and he even dabbled in a little value investing.

It turns out, Lefevre had a way with words. Continue Reading…

The 1987 Market Crash

by Jon

Before Oct 19, 1987, few people believed a one-day decline of 10% was possible. The last time it happened was October 29, 1929, Black Tuesday, almost six decades earlier. Before Black Tuesday, the worst day was the day before — October 28, 1929. Those two days were the only days of double-digit losses for the Dow prior to 1987.

Of course, those stats perfectly describe the limits of market history — it can hinder our view of what’s possible. Anyone who woke up that Monday morning believing a 10% loss was impossible was shocked by the closing bell.

The SEC’s report on that day offers some insight into the fear: Continue Reading…

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