(Un)Intelligent Speculation
(Un)Intelligent Speculation
"There isn’t a man in Wall Street who has not lost money trying to make the market pay for an automobile..."
For the next few weeks, we will be using quotes from Edwin Lefevre and his masterpiece trading book, “Reminiscences of a Stock Operator.” Enjoy!
Don’t Force It
We all want things. We all need things. However, there is a line. And when desperation, or pride, become our mentality when we enter the market, the market has a way of sniffing this out and making our lives worse.
Our teacher puts it this way:
“There isn’t a man in Wall Street who has not lost money trying to make the market pay for an automobile or a bracelet or a motor boat or a painting… What does a man do when he sets out to make the stock market pay for a sudden need? Why, he merely hopes. He gambles. He therefore runs much greater risks that he would if he were speculating intelligently.”
-Edwin Lefevre
Confidence—Not Cockiness
We hear stories all the time of when someone pushes their luck too far. Archegos capital is one of the most recent stories.
Bill Hwang was on a hot streak, and he almost believed himself infallible. Then he levered up beyond all reason and caused a massive crash in Viacom stock—which completely wiped him out and then some.
We cannot approach the market with this kind of hubris. We can only go double or nothing so many times before the odds take their share of flesh.
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