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Strategies & Market Trends : DAYTRADING Fundamentals

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To: Threei who wrote (7271)	3/12/2000 12:09:00 AM
From: ahhaha	Read Replies (2) of 18137

The $100 million claim was made by Richard Smitten in his recent book. The book has quite a few errors which came from Smitten's making direct contact with Livermore's descendents. Livermore's family painted a picture that doesn't square with other documented facts. Before the crash Livermore got short and anticipated a nasty down side. He made a lot of money. That quantity is unknown but something on the order of $50 million wouldn't be an extreme estimate. What the book doesn't divulge or what the author hadn't discovered was that Livermore went back in and tried to buy what he thought was the bottom. The bottom wasn't the bottom, but Livermore persisted in buying because it was his courage and judgement about value which had earned him so much over the previous decades. He was right. That wasn't good enough. Being right never is. Securities can fall below their intrinsic value. Way below. The farther down stocks went the more Livermore bought and the more he lost. By the Fall of 1932 Livermore was borrowing to speculate. It was around this time that he set up trusts for his family because he didn't trust what he might end up doing with his dwindling fortune. As the cash disappeared he borrowed from loan sharks possibly associated with organized crime and got into the hole with them to the tune of $2 million. Although he made several attempts to make comebacks during the remarkable bull market of '34 - '37, he never repaired his fortune. Livermore was well-known before the crash as a top operator. He had made $250,000 in 1906 by being short when the San Francisco earthquake hit. He was short only because the market had told him that certain stocks were weak. It was only providential that he happened to be short and not long. It was this event and not his fame as the "boy plunger" that launched his career as a stock market operator. Nonetheless, it was the public that learned about his short position gains and then assumed that whenever a stock plunged, it was due to a Livermore manipulation. The consequence of this unwanted visibility was that he, Willie Durant, and other operators were blamed for "pushing" the market down and causing the crash. The public never blames the true culprit: unbridled greed of the wild-eyed public. The result was the public shot itself in the foot by passing a large body of laws which had the intent of protecting the public from itself. Those laws were constructive, but they were also destructive so that recently in an attempt to undo the bad, the genie has been let out of the bottle. The problem isn't the MMs or anything else the public imagines, the problem is that the public believes trading has a positive expected return. This view has been reinforced to such an extent by recent stock market action that an astounding large percentage of the public is whirlin' 'em. Most of them are going to lose every cent. When the stock market has busted the public without any crash or other apocalyptic event, the public is going to shoot itself in the foot again. They will pass laws that will stymie individual trading. At that time you don't want to have visibility like Livermore did so that the public pillories you and makes you the whipping boy for the grievous sin of having taken their money away from them.

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