On Tipsters November 28, 2005

Again, I had no idea that Cramer was alive more than a hundred years ago. Maybe that explains why he doesn’t have any of his hair left.

Another blurb from “Reminiscences of a Stock Operator” by Edwin Lefevre:

Tips! How people want tips! They crave not only to get them but to give them. There is greed involved, and vanity. It is very amusing, at times, to watch really intelligent people fish for them. And the tip-giver need not hesitate about the quality, for the tip-seeker is not really after good tips, but after any tip. If it makes good, fine! If it doesn’t, better luck with the next. I am thinking of the average customer of the average commission house. There is a type of promoter or manipulator that believes in tips first, last and all the time. A good flow of tips is considered by him as a sort of sublimated publicity work, the best merchandising dope in the world, for, since tip-seekers and tip-takers are invariably tip-passers, tip-broadcasting becomes a sort of endless-chain advertising. The tipster-promoter labours under the delusion that no human being breathes who can resist a tip if properly delivered. He studies the art of handing them out artistically.

Ok, so I added the emphasis on the last part. But it fits. Throwing a chair is “artistic”, isn’t it?

On Trading Psychology November 15, 2005

More on the emotions of trading from “Reminiscences of a Stock Operator”:

The speculator’s chief enemies are always boring from within. It is inseparable from human nature to hope and to fear. In speculation when the market goes against you you hope that every day will be the last day — and you lose more than you should had you not listened to hope — to the same ally that is so potent a success-bringer to empire builders and pioneers, big and little. And when the market goes your way you become fearful that the next day will take away your profit, and get out — too soon. Fear keeps you from making as much money as you ought to. The successful trader has to fight these two deep-seated instincts. He has to reverse what you might call his natural impulses. Instead of hoping he must fear; instead of fearing he must hope. He must fear that his loss may develop into a much bigger loss, and hope that his profit may become a big profit. It is absolutely wrong to gamble in stocks the way the average man does.

On Cramer Psychology November 9, 2005

I didn’t realize that there were Cramer groupies a hundred years ago, but I guess I’m not surprised. Another gem from “Reminiscences of a Stock Operator”, by Edwin Lefevre:

I never hesitate to tell a man that I am bullish or bearish. But I do not tell people to buy or sell any particular stock. In a bear market all stocks go down and in a bull market they go up. I don’t mean of course that in a bear market caused by a war, ammunition shares do not go up. I speak in a general sense. But the average man doesn’t wish to be told that it is a bull or a bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He does not wish to work. He doesn’t even wish to have to think. It is too much bother to have to count the money that he picks up from the ground.

I’ve never quite understood why someone would just blindly buy any stocks that someone else tells them to buy — especially a screaming bald man on television that throws things — but I know they’re out there. Plenty of them. And I’m sure there are a lot more of them than there are people willing to do their own homework. If you’re a regular BMB reader, I’m sure you know by now that you aren’t going to find stock tips here. Like Gary Kaltbaum tells his listeners on his radio show: if he were to give individual stock “buy” recommendations out on the show, how does he know that you’ll be listening two months down the road, when he tells you you should sell that stock?

It’s your money, and I’ll bet you care more about that money than anyone else does. Don’t you think you should be the one deciding where it’s invested?

On Trading Psychology November 7, 2005

I’m on my second time through the book “Reminiscences of a Stock Operator”, by Edwin Lefevre. I’ll probably post a review when I’m done with it this time. But there are a lot of good quotes in the book, and I’ll throw them up here as I come across them. Like this one:

There is nothing like losing all you have in the world for teaching you what not to do. And when you know what not to do in order not to lose money, you begin to learn what to do in order to win. Did you get that? You begin to learn!

Knowing When November 1, 2005

BMB has been telling you that he just hasn’t been seeing many opportunities on either the long or the short side lately, and much of that is due to the lack of trends in either the market or the various industry groups.

I guess I’m not the only one. Here’s a blurb from Dave Landry’s column at TradingMarkets.com today:

Some of you may have noticed that I haven’t been writing as much lately. There just hasn’t been much to write about from a momentum trader’s perspective. The market has changed directions 8 times in 12 days. Most sectors have exhibited a similar choppy behavior. As I picked up the phone to cancel my column for today, it hit me–years ago, I wish someone would have told me when to stay out of the market. In fact, the more I thought about it, the more important it became for me to do a column. The “secret” to any methodology is knowing when to back off during less-than-ideal conditions.

I’m having a hard time imagining what type of methodology would work well in this type of environment. Investor or trader, you still need the trend in your favor. If there is one at all.