Reminiscences of a Stock Operator

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Copyright © 1993, 1994 by Expert Trading, Ltd.

Foreword © 2006 by Roger Lowenstein

Published by John Wiley & Sons, Inc., Hoboken, New Jersey

Published simultaneously in Canada

Originally published in 1923 by George H. Doran and Company.

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Library of Congress Cataloging-in-Publication Data

Lefèvre, Edwin, 1871–1943.

Reminiscences of a stock operator / Edwin Lefèvre.

p. cm. – (Wiley investment classics) Originally published: New York: G.H. Doran, 1923. Includes index.

ISBN-13: 978-0-471-77088-6 (pbk.) ISBN-10: 0-471-77088-4 (pbk.) 1. New York Stock Exchange. 2. Speculation. I. Title. II. Series.

HG4572.L4 2006

332.64′273 – dc22

2005043672

In the late 1970s, when I was thirsting for a job in journalism, The Wall Street Journal hired me to cover the copper market. My assignment was to get to know the traders who bought and sold copper futures and submit a report on the daily fluctuations. It being an era of high inflation, copper was bullishly inclined, and under my untutored but watchful eye its price increased from 80 cents a pound to 90 cents to, eventually, $1. Promptly I reported (after canvassing my newfound sources) that copper was rising on account of there being “more buyers than sellers.”

“More buyers than sellers!” my editor guffawed. He was a clownish man with a pointed head; he saw humor in everything, in particular his new cub reporter. “Your job is to tell us why there are more buyers than sellers.”

This seemingly straightforward advice led me into a maze of trader’s lore that came to seem indistinguishable from outright guesswork if not invention. On some days, I was told that the advance (or, as it were, the decline) was triggered by “investors,” and was therefore predictive of the future trend. On other days, the price change was ascribed to “speculators,” evidently a less reliable sort. Most mysteriously of all, the price could move for “technical reasons,” which advances I was urged to dismiss as having no significance whatsoever. Still, it was rising, wasn’t it?

Copper cracked $1.50 and throughout its run paid not the slightest heed to the “reasons” I was dutifully laying bare. I knew that something in my analyses was deficient, but I didn’t know what. The problem was a lack of preparation. I hadn’t read Edwin Lefèvre’s Reminiscences of a Stock Operator; therefore, I did not know how to write about commodities markets, or stock markets, or any other kind of market.

If I had read it, I would have understood that “the tape” utters a more powerful argument than any reason or affidavit; you do not argue with the tape, you do not explain it or deconstruct it. And I would have read it on the third page and I would have read it in a single paragraph: