Jesse Livermore

[helios]

Thanks for the information - you are the Peter Lynch expert

Fidelity also have large positions in FRE/FNM, and continue to add to them earlier this year.

nope, dol ge.

Winston nuggled my neck on this ... you are certainly the expert, yes, is it worthwhile to read chapter 19 for his fannie mae diary log? you must be tracking on this?

[-dol-]

San mei,

I read about Fidelity's positions only in the papers - so I am late. Another well-known value house, Dodge and Cox, are also hit with large positions.

I wonder how they value FRE/FNM? The financial statements of financials (eg. C/UBS/MER/UBS etc) seem very complicated.

Enron's financial statements was like a black box and supposedly knowledgeable fund managers were averaging down all the way.

[millionairemind]

WHEN DOES A STOCK ACT RIGHT?
Markets never stand still. They are very dull at times, but they are not resting at one price. They are either moving up or down, if only a fraction. When a stock gets into a definite trend, it works automatically and consistently along certain lines throughout the progress of its move. At the beginning of the move, you will notice a very large volume of sales with gradually advancing prices for a few days. Then what Livermore termed a Normal Reaction will occur.

On that reaction, the sales volume will be much less than on the previous days of its advance. That little reaction is only normal. Never be afraid of the normal movement. But be very fearful of abnormal movements, like a major change in personality.

In a day or two, activity will start again, and the volume will increase. If it is a real movement, in a short space of time the natural, normal reaction will have been recovered, and the stock will be selling in new high territory. That movement should continue strong for a few days with only minor daily reactions.

Sooner or later, it will reach a point where it is due for another normal reaction. When it occurs, it should be along the same lines as the first reaction, because that is the natural way any stock will act when it is in a definite trend.

Pay attention to the price/volume action of your stocks. If it started going down for reasons you cannot find out and on higher volume, it is best to sell out and re-evaluate. Somebody probably know something you don't. Step aside and let the on-coming train passed. You can then decide if you want to hop on at a later stage when the coast clears.

[Cherry]

millionairemind wrote:

WHEN DOES A STOCK ACT RIGHT?
Markets never stand still...

Pay attention to the price/volume action of your stocks. If it started going down for reasons you cannot find out and on higher volume, it is best to sell out and re-evaluate. Somebody probably know something you don't. Step aside and let the on-coming train passed. You can then decide if you want to hop on at a later stage when the coast clears.

MM

Wise interpretation! Clear guidance! One good example is Cosco from >$7 in October 2007 all the way down to >$1 today. And you did sound the alarm bell in this forum at one stage on the first day of yet another big tank down. Salute you.

[millionairemind]

I never buy a stock even in a bull market, if it doesn't act as it ought to act in that kind of market. I have sometimes bought a stock during an undoubted bull market and found out that other stocks in the same group were not acting bullishly and I have sold out my stock. Why? Experience tells me that it is not wise to buck against what I may call the manifest group tendency. I cannot expect to play certainties only. I must reckon on probabilities and anticipate them.

An old broker once said to me: "If I am walking along a railroad track and I see a train coming toward me at sixty miles an hour, do I keep on walking on the ties? Friend, I sidestep. And I do not even pat myself on the back for being so wise and prudent."

Don't fight the trend. It will clean you out if you keep on insisting that you are correct and the market is wrong.

[winston]

On CNBC over the week-end, there were so many "experts" that were negative on the stock-market. They did not believe the market actually can rebound so much so fast. They went on and on and on on why the economy will continue to be bad, hence the stockmarket would also be bad.

Would not surprise me that these "experts" are also short the market and have not covered yet. Well, that is like watching a train come towards you as mentioned above by MM.

Will the rally last one day or one week ? Who knows ? In the meantime, do you short more, hold on to your existing short position or cover your positions ?

The trend is your friend indeed even for an afternoon, a day or even a week..

[millionairemind]

The theory that most of the sudden declines or particular sharp breaks are the results of some plunger's operations probably was invented as an easy way of supplying reasons to those speculators who, being nothing but blind gamblers, will believe anything that is told them rather than do a little thinking.

The raid excuse for losses that unfortunate speculators so often receive from brokers and financial gossipers is really an inverted tip. The difference lies in this: A bear tip is distinct, positive advice to sell short. But the inverted tip -- that is, the explanation that does not explain -- serves merely to keep you from wisely selling short.

The natural tendency when a stock breaks badly is to sell it. There is a reason -- an unknown reason but a good reason;
therefore get out. But it is not wise to get out when the break is the result of a raid by an operator, because the moment he
stops the price must rebound. Inverted tips!

SEC probably should have read and re-read JL's book before they banned short selling..

[iam802]

There is an article on SEC's COX not doing his job.

Imagine demonstrating some new technology on Sept 19. Does he really expect questions on that technology?

A little bit untimely.

http://bloomberg.com/apps/news?pid=2060 ... refer=home

[-dol-]

SEC probably should have read and re-read JL's book before they banned short selling..

They have messed up the market by first allowing naked shorting (when they should have just sticked to the uptick rule) and then haphazardly banning short selling when it suits their purposes in the short-term. It could have hurt some rogue traders but it is also taking down genuine investors who are shorting based on fundamentals.

It would be interesting to see how those participants who have been "ambushed" by this blatant tactics are going to seek recourse.

Now, people like Bernanke, Paulson, SEC etc are on my "black swans" list.

[millionairemind]

“Profits always take care of themselves but losses never do.” The speculator has to insure himself against considerable losses by taking the first small loss. In so doing, he keeps his account in order so that at some future time, when he has a constructive idea, he will be in a position to go into another deal, taking on the same amount of stock as he had when he was wrong.

The speculator has to be his own insurance broker, and the only way he can continue in business is to guard his capital account and never permit himself to lose enough to jeopardize his operations at some future date when his market judgment is correct.

While I believe that the successful investor or speculator must have well advanced reasons for making commitments on either side of the market, I feel he must also be able through some form of a specific guide to determine when to make his first commitments.

Let me repeat, there are definitely certain times when a movement really gets under way, and I firmly believe that anyone who has the instinct of a speculator and has the patience, can devise a specific method to be used as a guide which will permit him to judge correctly when to make his initial commitment. Successful speculation is not a mere guess.

To be consistently successful, an investor or speculator must have rules to guide him. Certain guides that I utilize may be of no value to anyone else.

Why is that so? If they are of inestimable value to me, why should they not serve you equally well? The answer to that is: “No guide can be 100% right.” If I use a certain guide, my own pet one, I know what should be the result. If my stock does not act as I anticipated, I immediately determine the time is not yet ripe- so I close out my commitment.

Perhaps a few days later my guide indicates I should get in again, so back I go, and probably this time it is 100% correct. I believe anyone who will take the time and trouble to study price movement should in time be able to develop a guide, which will aid him in future operations or investments. In this book I present some points which I have found valuable in my own speculative operations.

Rule No. 1 - Always cut your losses short.

Say if you are losing money left right and center this year. Would a simple cut loss strategy of say 8-10% from buy point saved you all the pain of seeing the stocks plummet by 40-60% from your buy price?

If you want to survive in both investing and trading, this is the No. 1 rule. Averaging down is to insist that the market is wrong and you are correct.

For CANSLIM practitioners, a follow thro' day marks a change in trend to the upside. So they start to tiptoe back to the market to go longs on partial positions. If they are wrong, they cut and wait for another opportunity.

It is never easy to make alot of money in the market. In a raging bull market, every body wants to be a WB and buy and hold for the long term and not cut loss.

It is in a super bear like now that Rule No. 1 will save ordinary investors/traders like you and me from severe financial damage.

Yes, the markets might recover, but your stocks might not.

History is littered with stocks that lead the last rally and never saw their highs again. Remember Creative at $65?? Chartered at $18?? Or even Keppel Corp at $15 (now only <$5)?

Everybody thinks the market is a pot of gold but most end up contributing to that pot of gold.

Be careful out there. Always trade/invest with the beliefs that the market ALWAYS knows more than you and you need to protect yourself against it.