Failed Prediction from History. Economist and Yale professor Irving Fisher spent the early 20th century as one of the undisputed wizards of Wall Street. Today, however, he is best known for making what is perhaps the most disastrously timed stock market prediction in history. The call came in early October 1929, in the days after stock prices leapt to dizzying new heights. Some claimed the jump was a sign that a massive crash was imminent, but Fisher was famously optimistic. As reported in the New York Times, he told guests at a dinner meeting that stock prices had reached “what looks like a permanently high plateau… I believe the principle of the investment trusts is sound, and the public is justified in participating in them.” Only a few weeks later, the stock market experienced a catastrophic crash. Thousands of investors, including Fisher, lost their fortunes in the ensuing hysteria.
Irving Fisher and the Stock Market
To anticipate the market is to gamble. To be patient and react only when the market gives the signal is to speculate.
Without passion, you don’t have energy. Without energy, you have nothing.
Carl William Brown
I was broke in the 1970s, and I never wanted to be broke again. My philosophy was that if you make money every month, nothing bad is going to happen to you. So, you won’t be the richest person. You’ll never be the richest person anyway. What difference does it make? I’m proud of my futures trading, because I took $40,000 and ran it up to about $20 million with never more than a 3 percent draw down.
To do the job right requires such an enormous amount of concentration. It’s physically and emotionally mandatory that you find some time to relax. And you’ve got to be able to turn it off like that. There will be times though that I get so incredibly excited about a trade or even a project that I’ll wake up at 4 o’clock in the morning and there’s no way in hell that I’m going back to sleep. I’ll sit there in my dreams and trade for four hours.
Paul Tudor Jones
Where you want to be is always in control, never wishing, always trading, and always first and foremost protecting your ass. That’s why most people lose money as individual investors or traders because they’re not focusing on losing money. They need to focus on the money that they have at risk and how much capital is at risk in any single investment they have. If everyone spent 90 percent of their time on that, not 90 percent of the time on pie-in-the-sky ideas on how much money they’re going to make, then they will be incredibly successful investors.
Paul Tudor Jones
If anyone in the world was stranded on a deserted island, and they could only have access to one form of trading, either all the fundamental information in the world, or the access to charts for technical analysis, I would say that, and it’s not even remotely close, people would be foolish not to choose technical analysis every day of the week and twice on Sunday.
Paul Tudor Jones
Nobody can catch all the fluctuations. In a bull market your game is to buy and hold until you believe that the bull market is near its end. To do this you must study general conditions and not tips or special factors affecting individual stocks. Then get out of all your stocks; get out for keeps! You have to use your brains and your vision to do this; otherwise my advice would be as idiotic as to tell you to buy cheap and sell dear. One of the most helpful things that anybody can learn is to give up trying to catch the last eighth-or the first. These two are the most expensive eighths in the world.
Jesse Jesse Livermore
Failure to wait (for the Pivotal Point to be passed). There were two basic reasons. First, I lacked the patience to wait until the psychological time had arrived, price wise, to begin my operation. I had known that if cotton ever sold up to 12.5 cents a pound it would be on its way to much higher prices. But no, I did not have the will power to wait. I though I must make a few extra dollars quickly, before cotton reached the buying point, and I acted before the market was ripe. Not only did I lose around $200,000 in actual money, but a profit of $1,000,000. For my original plan, well fixed in mind, contemplated the accumulation of 100,000 bales after the Pivotal Point had been passed. I could not have missed making a profit of 200 points or more on that move.
One of the allures of this business is that sometimes the greatest ignoramus can do very well. That is unfortunate because it creates the impression that you don’t necessarily need any professionalism to do well, and that is a great trap. So the major advice I would give anybody is: Recognize that this is a very competitive business, and that when you decide to buy or sell a stock, you are competing with people who have devoted a good portion of their lives to this same endeavor. In many instances, those professionals are on the opposite side of your trades and, on balance, they are going to beat you.