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.
All booms are alike. The stage setting varies, but fundamentally they are as drops of water. Customs, like costumes, change from force of environment and economic conditions, but human nature remains the same.1
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The stock ticker knows more than everybody. It deals with results. It satisfies your cravings for action. It makes life worth living. And when it says that you are an ass, it convinces even you of it.1
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A man who has bought a stock against the advice of a conservative broker, and has doubled his money in a fortnight, finds his suspicions turned into convictions by that impartial judge, the stock ticker.1
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Knowledge, indeed, is the enemy of a speculator during a boom.1
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It is one of the maximums of speculation that stocks never go up, but must be put up.1
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After many years of studying Wall Street’s victors and victims, I must conclude that the American public still insists on losing its savings every time the old hook is baited with the immortal easy-money worm. After every smash the blame is laid on the hook and not the hunger. In reality, the fault is seldom with the machinery of speculation and is usually with the psychology of speculators.2
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The higher the price goes, the less desirable the investment becomes as an investment.2
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Buying stocks of prosperous concerns may be good business — but only at a certain price. But if you will make sure you know what you are getting for your money, you will be doing what nobody does in a bull market.5
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You know that nine out of ten people who talk about the market talk about their profits. They crave applause for their cleverness.3
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From hardship to comfort, the gap is a million miles wide. From comfort to luxury, the step is only four inches long. Ask any man who has made easy money.3
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It is not the certainty of disaster ahead but the uncertainty of better days to come that keeps the investor from buying.4
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It is only fair to admit that the commonest and most expensive blunder that all exceptionally brilliant business men make is being right too soon.4
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Within obvious bounds, the average investor’s most valuable adviser is fear; not the panic variety but the kind you call caution or conservatism, for, after all, prudence is a wise and desirable fear if it smothers greed.4
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Consider investments of every period in history and you will find that a great adverse factor has always been change, which is something nobody can prevent.4
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“Easy money” means only one thing when it means money that has come easy: It means money goes even more easily than it came.5
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It is one of the common pieces of Wall Street experience that when the public goes stock mad and the market leaders are filled with the arrogance of prolonged success, such little things as high money rates or decreases in earnings or unraised dividends have no instant effect on the market — that is, on the state of mind of the speculating public. In the end, of course, all violations of the fundamental laws of economic and financial common sense are paid for; but every bull thinks he will unload before the break.6
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In Wall Street, what has happened before will happen again. It must, as you will admit if you stop to think about it.7
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Many things are possible in Wall Street. But neither there nor anywhere else has a man ever prospered by trying to hog it.7
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Fortunes are made and lost by thousands of men in the stock market; they are made and kept by a few dozen.8
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Greed is a bandage which a higher power sometimes binds across the eyes of reason.8
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Wall Street in boom days is an aggregation of madmen. The Stock Exchange becomes Bedlam well dressed.8
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In the history of every great catastrophe, you will find that some masterly bit of stupidity sets fire to the oil-soaked rags.9
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Nobody knows what the stock market is going to do or even what it ought to do. Hence, the most valuable asset in all business, which is knowledge, is necessarily absent.10
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The stock speculator, as a rule, is beaten by himself!10
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You can’t imagine how many shrewd, experienced business men forget in Wall Street what it took them years to learn.11
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It is a curious fact that although all booms are alike, all are different.11
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The human animal never behaves as wisely as he means to, particularly when his counselor is Hope or Fear.11
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Periods of depression invariably follow periods of overoptimism, when fear replaces hope as the controlling emotion.11
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I think I am safe in asserting that the margin trader, speculator, gambler, or whatever you choose to designate the average man who goes to Wall Street after easy money, does not lose money when he sells. He loses it when he buys!11
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Sources:
1 “Going Up!,” Saturday Evening Post (1915)
2 “Speculation,” Saturday Evening Post (1932)
3 “The Little Fellow in Wall Street”, Saturday Evening Post (1930)
4 “When is It Safe to Invest,” Saturday Evening Post (1932)
5 “Bulls on America,” Saturday Evening Post (1929)
6 “Running Past the Signal,” Saturday Evening Post (1929)
7 “With Blue Chips This Time,” Saturday Evening Post (1929)
8 “Boom Days in Wall Street,” Munsey’s Magazine (1901)
9 “The Game Got Them,” Everybody’s Magazine (1908)
10 “The Unbeatable Game of Stock Speculation,” Saturday Evening Post (1915)
11 “Blame the Broker,” Saturday Evening Post (1932)
Last Call
- Memo: Coming Into Focus (pdf) – H. Marks
- There’s More to Value Investing Than Low Prices – Morningstar
- Eugene Fama: Inflation is Totally Out of the Control of Central Banks – The Market
- Warren Buffett Knows These are the Best Investors to Follow with Your Own Money – L. Cunningham
- What Volatility Do Investors Experience? – Klement on Investing
- Who Buys Lottery Stocks? You’ll Be Surprised – L. Swedroe
- Joel Greenblatt on Relative Value Investing (podcast) – Masters in Business
- Applied Value: David Horn on the Columbia Applied Value Course (podcast) – Acquirers Multiple
- A Better Crystal Ball – P. Tetlock
