22 April 2020

JM Finn Investment Book Club Review - Reminiscences of a Stock Operator

Reminiscences of a Stock Operator is a fictionalised account of the life of securities trader Larry Livingston.

by Atticus Kidd

Wealth Planning Assistant


Although the book begins over a century ago, it continues to offer relevant insights into trading and market speculation. The story follows Livingston's journey from tape reader to day trader, market speculator, market maker, and finally market manipulator, travelling across America from the “bucket shops” of New England to the heights of Wall Street. Along the way, Livingston learns many lessons, which he readily shares with the reader. The book is considered by many to be an investment classic.

The book follows Livingston as he sharpens his trading skills to varying degrees of success making and losing his fortune several times over. Despite this, his reputation as ‘the Boy Plunger’ never ceases as he finds a way to ply his trade and come out on top in a variety of market situations (often following a series of mistakes beforehand). He does this primarily through a knack for numbers, a memory for market movements and of course the odd piece of luck.

The book starts with Larry at age 14 in 1891. As a consequence of this there are a lot of outdated references which proved fascinating as an historical reference but unfortunately did make the book somewhat less relatable. Although, it was interesting to see that despite modernisation the nature of the market, its investors and manipulators has persisted, albeit now somewhat more sophisticated. We also get a good insight into investor psychology and the various pitfalls that befall the typical investor. We are repeatedly told to be wary of ‘hot tips’ from those that claim to have insider information and that an investor must act on the strength of their own knowledge and conviction rather than that of others, which is sound advice.

The piece of advice that stuck with me the most was that of a character referred to as ‘Old Turkey’, who seems to be one of the only characters to take long positions in the market rather than trading off of short term volatility. When his positions go through volatile periods and take knocks the other traders are quick to point these out and offer their advice on exit strategies, his response often remains the same with “Well, you know this a bull market!”. Livingston ponders on this point and eventually realises that a lot of the big scores lie not in playing the day to day volatility but in being able to spot the prevailing market trends and hold onto an investment long enough to prosper from full swings in the market cycle. Of course it is then important to be able to spot when the momentum has changed however, the core concept remains true.

‘Reminiscences of a Stock Operator’ acts as an entertaining historical reference on markets, their nature and that of its participants. It also provides an interesting insight into investor psychology and offers genuine pearls of wisdom for the regular day trader. However, unfortunately there is very little to take away for value investors as Livingston looks primarily at short-term and volatile positions which partly explains why he continuously bungees between vast wealth and bankruptcy. Overall, the book received mixed reviews from the members of our book club but, what we were all able to mutually agree on was that ‘Reminiscences of a Stock Operator’ does provide an intriguing historical insight of the industry from over a century ago.

The JM Finn  Investment Book Club was convened in the hope that, month by month, some of the wisdom of investing gurus such as Warren Buffet, Charlie Munger, and Mohnish Pabrai might rub off on the participants eager selves.


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