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99 Market Wisdoms

Tyler Durden's picture




 

Forget 'red balloons', StreetTalkLive's Lance Roberts expands from his recent visualization of Bob Farrell's investment rules to six more market mavens with insights into money management and being a successful investor. What you will find interesting is that not one of them promote "buy and hold" investing for the long term - probably because in reality it doesn't work. 

 


12 Market Wisdoms From Gerald Loeb

1. The most important single factor in shaping security markets is public psychology.

2. To make money in the stock market you either have to be ahead of the crowd or very sure they are going in the same direction for some time to come.

3. Accepting losses is the most important single investment device to insure safety of capital.

4. The difference between the investor who year in and year out procures for himself a final net profit, and the one who is usually in the red, is not entirely a question of superior selection of stocks or superior timing. Rather, it is also a case of knowing how to capitalize successes and curtail failures.

5. One useful fact to remember is that the most important indications are made in the early stages of a broad market move. Nine times out of ten the leaders of an advance are the stocks that make new highs ahead of the averages.

6. There is a saying, "A picture is worth a thousand words." One might paraphrase this by saying a profit is worth more than endless alibis or explanations. . . prices and trends are really the best and simplest "indicators" you can find.

7. Profits can be made safely only when the opportunity is available and not just because they happen to be desired or needed.

8. Willingness and ability to hold funds uninvested while awaiting real opportunities is a key to success in the battle for investment survival.-

9. In addition to many other contributing factors of inflation or deflation, a very great factor is the psychological. The fact that people think prices are going to advance or decline very much contributes to their movement, and the very momentum of the trend itself tends to perpetuate itself.

10. Most people, especially investors, try to get a certain percentage return, and actually secure a minus yield when properly calculated over the years. Speculators risk less and have a better chance of getting something, in my opinion.

11. I feel all relevant factors, important and otherwise, are registered in the market's behavior, and, in addition, the action of the market itself can be expected under most circumstances to stimulate buying or selling in a manner consistent enough to allow reasonably accurate forecasting of news in advance of its actual occurrence.

12. You don't need analysts in a bull market, and you don't want them in a bear market


Jesse Livermore's Trading Rules Written in 1940

1. Nothing new ever occurs in the business of speculating or investing in securities and commodities.

2. Money cannot consistently be made trading every day or every week during the year.

3. Don't trust your own opinion and back your judgment until the action of the market itself confirms your opinion.

4. Markets are never wrong – opinions often are.

5. The real money made in speculating has been in commitments showing in profit right from the start.

6. As long as a stock is acting right, and the market is right, do not be in a hurry to take profits.

7. One should never permit speculative ventures to run into investments.

8. The money lost by speculation alone is small compared with the gigantic sums lost by so-called investors who have let their investments ride.

9. Never buy a stock because it has had a big decline from its previous high.

10. Never sell a stock because it seems high-priced.

11. I become a buyer as soon as a stock makes a new high on its movement after having had a normal reaction.

12. Never average losses.

13. The human side of every person is the greatest enemy of the average investor or speculator.

14. Wishful thinking must be banished.

15. Big movements take time to develop.

16. It is not good to be too curious about all the reasons behind price movements.

17. It is much easier to watch a few than many.

18. If you cannot make money out of the leading active issues, you are not going to make money out of the stock market as a whole.

19. The leaders of today may not be the leaders of two years from now.

20. Do not become completely bearish or bullish on the whole market because one stock in some particular group has plainly reversed its course from the general trend.

21. Few people ever make money on tips. Beware of inside information. If there was easy money lying around, no one would be forcing it into your pocket.


Dennis Gartman's Trading Rules

1. Never, under any circumstance add to a losing position.... ever! Nothing more need be said; to do otherwise will eventually and absolutely lead to ruin!

2. Trade like a mercenary guerrilla. We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand.

3. Capital comes in two varieties: Mental and that which is in your pocket or account. Of the two types of capital, the mental is the more important and expensive of the two. Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.

4. The objective is not to buy low and sell high, but to buy high and to sell higher. We can never know what price is "low." Nor can we know what price is "high." Always remember that sugar once fell from $1.25/lb to 2 cent/lb and seemed "cheap" many times along the way.

5. In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral. That may seem self-evident; it is not, and it is a lesson learned too late by far too many.

6. "Markets can remain illogical longer than you or I can remain solvent," according to our good friend, Dr. A. Gary Shilling. Illogic often reigns and markets are enormously inefficient despite what the academics believe.

7. Sell markets that show the greatest weakness, and buy those that show the greatest strength. Metaphorically, when bearish, throw your rocks into the wettest paper sack, for they break most readily. In bull markets, we need to ride upon the strongest winds... they shall carry us higher than shall lesser ones.

8. Try to trade the first day of a gap, for gaps usually indicate violent new action. We have come to respect "gaps" in our nearly thirty years of watching markets; when they happen (especially in stocks) they are usually very important.

9. Trading runs in cycles: some good; most bad. Trade large and aggressively when trading well; trade small and modestly when trading poorly. In "good times," even errors are profitable; in "bad times" even the most well researched trades go awry. This is the nature of trading; accept it.

10. To trade successfully, think like a fundamentalist; trade like a technician. It is imperative that we understand the fundamentals driving a trade, but also that we understand the market's technicals. When we do, then, and only then, can we or should we, trade.

11. Respect "outside reversals" after extended bull or bear runs. Reversal days on the charts signal the final exhaustion of the bullish or bearish forces that drove the market previously. Respect them, and respect even more "weekly" and "monthly," reversals.

12. Keep your technical systems simple. Complicated systems breed confusion; simplicity breeds elegance.

13. Respect and embrace the very normal 50-62% retracements that take prices back to major trends. If a trade is missed, wait patiently for the market to retrace. Far more often than not, retracements happen... just as we are about to give up hope that they shall not.

14. An understanding of mass psychology is often more important than an understanding of economics. Markets are driven by human beings making human errors and also making super-human insights.

15. Establish initial positions on strength in bull markets and on weakness in bear markets. The first "addition" should also be added on strength as the market shows the trend to be working. Henceforth, subsequent additions are to be added on retracements.

16. Bear markets are more violent than are bull markets and so also are their retracements.

17. Be patient with winning trades; be enormously impatient with losing trades. Remember it is quite possible to make large sums trading/investing if we are "right" only 30% of the time, as long as our losses are small and our profits are large.

18. The market is the sum total of the wisdom ... and the ignorance...of all of those who deal in it; and we dare not argue with the market's wisdom. If we learn nothing more than this we've learned much indeed.

19. Do more of that which is working and less of that which is not: If a market is strong, buy more; if a market is weak, sell more. New highs are to be bought; new lows sold.

20. The hard trade is the right trade: If it is easy to sell, don't; and if it is easy to buy, don't. Do the trade that is hard to do and that which the crowd finds objectionable. Peter Steidelmeyer taught us this twenty five years ago and it holds truer now than then.

21. There is never one cockroach! This is the "winning" new rule submitted by our friend, Tom Powell.

22. All rules are meant to be broken: The trick is knowing when... and how infrequently this rule may be invoked!


Bernanrd Baruch's 10 Investing Rules

1. Don't speculate unless you can make it a full-time job.

2. Beware of barbers, beauticians, waiters — of anyone — bringing gifts of "inside" information or "tips."

3. Before you buy a security, find out everything you can about the company, its management and competitors, its earnings and possibilities for growth.

4. Don't try to buy at the bottom and sell at the top. This can't be done — except by liars.

5. Learn how to take your losses quickly and cleanly. Don't expect to be right all the time. If you have made a mistake, cut your losses as quickly as possible.

6. Don't buy too many different securities. Better have only a few investments which can be watched.

7. Make a periodic reappraisal of all your investments to see whether changing developments have altered their prospects.

8. Study your tax position to know when you can sell to greatest advantage.

9. Always keep a good part of your capital in a cash reserve. Never invest all your funds.

10. Don't try to be a jack of all investments. Stick to the field you know best.


 James P. Arthur Huprich's Market Trusms And Axioms

1. Commandment #1: "Thou Shall Not Trade Against the Trend."

2. Portfolios heavy with underperforming stocks rarely outperform the stock market!

3. There is nothing new on Wall Street. There can't be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again, mostly due to human nature.

4. Sell when you can, not when you have to.

5. Bulls make money, bears make money, and "pigs" get slaughtered.

6. We can't control the stock market. The very best we can do is to try to understand what the stock market is trying to tell us.

7. Understanding mass psychology is just as important as understanding fundamentals and economics.

8. Learn to take losses quickly, don't expect to be right all the time, and learn from your mistakes.

9. Don't think you can consistently buy at the bottom or sell at the top. This can rarely be consistently done.

10. When trading, remain objective. Don't have a preconceived idea or prejudice. Said another way, "the great names in Trading all have the same trait: An ability to shift on a dime when the shifting time comes."

11. Any dead fish can go with the flow. Yet, it takes a strong fish to swim against the flow. In other words, what seems "hard" at the time is usually, over time, right.

12. Even the best looking chart can fall apart for no apparent reason. Thus, never fall in love with a position but instead remain vigilant in managing risk and expectations. Use volume as a confirming guidepost.

13. When trading, if a stock doesn't perform as expected within a short time period, either close it out or tighten your stop-loss point.

14. As long as a stock is acting right and the market is "in-gear," don't be in a hurry to take a profit on the whole positions. Scale out instead.

15. Never let a profitable trade turn into a loss, and never let an initial trading position turn into a long-term one because it is at a loss.

16. Don't buy a stock simply because it has had a big decline from its high and is now a "better value;" wait for the market to recognize "value" first.

17. Don't average trading losses, meaning don't put "good" money after "bad." Adding to a losing position will lead to ruin. Ask the Nobel Laureates of Long-Term Capital Management.

18. Human emotion is a big enemy of the average investor and trader. Be patient and unemotional. There are periods where traders don't need to trade.

19. Wishful thinking can be detrimental to your financial wealth.

20. Don't make investment or trading decisions based on tips. Tips are something you leave for good service.

21. Where there is smoke, there is fire, or there is never just one cockroach: In other words, bad news is usually not a one-time event, more usually follows.

22. Realize that a loss in the stock market is part of the investment process. The key is not letting it turn into a big one as this could devastate a portfolio.

23. Said another way, "It's not the ones that you sell that keep going up that matter. It's the one that you don't sell that keeps going down that does."

24. Your odds of success improve when you buy stocks when the technical pattern confirms the fundamental opinion.

25. As many participants have come to realize from 1999 to 2010, during which the S&P 500 has made no upside progress, you can lose money even in the "best companies" if your timing is wrong. Yet, if the technical pattern dictates, you can make money on a short-term basis even in stocks that have a "mixed" fundamental opinion.

26. To the best of your ability, try to keep your priorities in line. Don't let the "greed factor" that Wall Street can generate outweigh other just as important areas of your life. Balance the physical, mental, spiritual, relational, and financial needs of life.

27. Technical analysis is a windsock, not a crystal ball. It is a skill that improves with experience and study. Always be a student, there is always someone smarter than you!

 


James Montier's 7 Immutable Laws Of Investing

1. Always insist on a margin of safety

2. This time is never different

3. Be patient and wait for the fat pitch

4. Be contrarian

5. Risk is the permanent loss of capital, never a number

6. Be leery of leverage

7. Never invest in something you don't understand

 

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Fri, 02/22/2013 - 12:28 | 3267181 valkir
valkir's picture

I prefer 69

Fri, 02/22/2013 - 12:39 | 3267223 DJ Happy Ending
DJ Happy Ending's picture

Top or bottom?

Fri, 02/22/2013 - 13:03 | 3267296 Thomas
Thomas's picture

These guys are all day traders except for Montier. 

Fri, 02/22/2013 - 13:05 | 3267305 Thomas
Thomas's picture

My two rules: (1) nobody ever snagged a 10 bagger, let alone a hundred bagger, by following rules like these, and (2) We're totally fucked (which means this time is not different).

Fri, 02/22/2013 - 15:28 | 3267749 g speed
g speed's picture

these guys are all trend followers

Fri, 02/22/2013 - 12:30 | 3267187 JustObserving
JustObserving's picture

Only rule you ever need:

Avoid fraudulent markets like the US.

Fri, 02/22/2013 - 12:41 | 3267229 adr
adr's picture

My rule would be:

If you ever meet a banker, punch him in the face.

Fri, 02/22/2013 - 12:44 | 3267233 fourchan
fourchan's picture

buy the fucking dip.

Fri, 02/22/2013 - 13:05 | 3267306 JustObserving
JustObserving's picture

The bankers own the police and the system.  The FBI infiltrated and destroyed the Occupy Wall Street movement.  But millions of cases of mortgage fraud and not one conviction.  

Every morning, gold and silver smashed in USA.  Has been going on for years - it is blatant, in your face fraud.  But there will be no investigation, let alone any conviction.

Fri, 02/22/2013 - 12:30 | 3267188 Haus-Targaryen
Haus-Targaryen's picture

2. This time is never different

 

My favorite.  But according to Ben ... it really is different this time.

Fri, 02/22/2013 - 12:43 | 3267193 FLUSA.com
FLUSA.com's picture

I got 99 wisdoms but a Bernanke ain't one...  (Jay-Z)

Fri, 02/22/2013 - 12:31 | 3267195 francis_sawyer
francis_sawyer's picture

Here's the CLIFF's Notes version

~~~

 "The most important single factor in shaping security markets is MANIPULATION & MONEY PRINTING"

The End

 

Fri, 02/22/2013 - 12:37 | 3267218 dick cheneys ghost
dick cheneys ghost's picture

I heard Dennis Gartmann was 'long of bitcoin'................something about dropping it on his foot or something...........

Fri, 02/22/2013 - 14:40 | 3267589 SDRII
SDRII's picture

Which is why the FT resident gold shill purports to have digital FX brought under the domain of the FEDBOEECBBOJ

Fri, 02/22/2013 - 12:38 | 3267221 PUD
PUD's picture

It is not "money making' it is money "taking"...nothing is "made" on wall st

It is not "investing", it is speculation

Wall St "buzzwords" have to be eliminated from your consciousness as they are nothing but propaganda and lies.

"money on the sidelines" "putting money to work" etc etc are all deceptions

Stocks have only gone up through the years due to inflation, demographics and the lawmakers who have ceded judgement to bankers and created ever more vehicles to pry ever more $ out of workers pockets

Fri, 02/22/2013 - 14:01 | 3267480 marathonman
marathonman's picture

To paraphrase Nixon, 'We're all speculators now."

Fri, 02/22/2013 - 12:39 | 3267222 adr
adr's picture

All I read was "fundamentals don't matter" and "Investing is only about making money".

I think if you read a book about Poker tips, you'd find just about every thing mentoned above in it.

The stock market is a casino, nothing else. Only now you get to play with other peoples money instead of your own.

Fri, 02/22/2013 - 12:44 | 3267227 Bam_Man
Bam_Man's picture

One of the nuggets of wisdom should be:

"Realize that 99 out of 100 stocks eventually go to ZERO".

Even among supposed "blue-chips", that ratio is close to 9 out of 10.

Fri, 02/22/2013 - 12:43 | 3267230 spastic_colon
spastic_colon's picture

rule #1 - don't make so many rules

rule #2 - review rule #1

Fri, 02/22/2013 - 14:59 | 3267660 FrankDrakman
FrankDrakman's picture

Sorry, as every Australian philosophy professor and Monty Python fan understandS:

RULE #2 - NO POOFTERS!

Fri, 02/22/2013 - 12:43 | 3267232 willwork4food
willwork4food's picture

Ode to Wall Street

99 grade A stocks for sale on the wall!

99 stocks for sale!

Take one down,

after bleeding a pound-

98 grade A stocks for sale on the wall...

 

 

 

 

Fri, 02/22/2013 - 12:52 | 3267263 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

I got 99 problems but an rigged market ain't one. Hit me bitchez.

Fri, 02/22/2013 - 12:52 | 3267264 nobusiness
nobusiness's picture

Rule for 2008 plus - Become a banker at a large bank and pay yourself massive bonuses no matter what happens.

Fri, 02/22/2013 - 12:53 | 3267268 Pairadimes
Pairadimes's picture

I've got 99 wisdoms and an equity stake ain't one.

Fri, 02/22/2013 - 13:01 | 3267289 thismarketisrigged
thismarketisrigged's picture

my 99 market wisdoms.

 

1. this market is a giant fraud

 

2. it is not a market anymore, the market can only go one direction and that is up, and even if there are a few days of red, rest assured that by weeks end all gains will be back and then some.

 

fuck u fed and obama

Fri, 02/22/2013 - 13:05 | 3267301 riphowardkatz
riphowardkatz's picture

in this reality it doesn't work.

Fri, 02/22/2013 - 13:21 | 3267358 Itch
Itch's picture

I'll whittle it down to one; Keep a bucket beside you for shit, piss and puke.

Fri, 02/22/2013 - 13:26 | 3267369 reader2010
reader2010's picture

Dogma for consumers of speculation, aka financial markets. 

Fri, 02/22/2013 - 14:02 | 3267481 Aegelis
Aegelis's picture

My rule which is time-tested proven true: Never always though sometimes, maybe.

Fri, 02/22/2013 - 15:01 | 3267665 FrankDrakman
FrankDrakman's picture

You should always remember to never forget that.

Or is it never remember to always forget it?

I get so confused..

Fri, 02/22/2013 - 14:09 | 3267494 JohnG
JohnG's picture

 

 

http://www.zerohedge.com/news/2013-02-21/least-they-are-finally-honest

 

And how does the inside of that coat closet look Mr. Livermore?   A little messy perhaps?

Fri, 02/22/2013 - 14:56 | 3267647 mirac
mirac's picture

What?  I am I supposed to be listening to Nenas music again?

Fri, 02/22/2013 - 15:49 | 3267819 whoknoz
whoknoz's picture

better rule: read ZH regularly so you can skim the rest...

Fri, 02/22/2013 - 15:53 | 3267827 whoknoz
whoknoz's picture

"7. Profits can be made safely only when the opportunity is available and not just because they happen to be desired or needed."...

holy shit! this rule took so long to figure out that when I did sell I lost money...and  at the beginning, I really did want to make a few bucks because I really did need the $$

Fri, 02/22/2013 - 16:18 | 3267897 mkhs
mkhs's picture

Big bank rules:

 

  • 1. There are no rules.
  • 2. See rule 1.

 

Fri, 02/22/2013 - 20:13 | 3268725 Luke 21
Luke 21's picture

I didn't know Dennis Gartman was a market maven.

Fri, 02/22/2013 - 23:23 | 3269127 DowTheorist
DowTheorist's picture

Amen. Buy and hold works for the Buffets and money managers themselves (who don't need to tap on their investments as they derive a salary and bonuses from their own funds) and, on a general basis, for investors with deep pockets and staying power (both psychologically and financially). However, in real life, very few investors meet the requirements needed to be a successful buy and hold investor. Either psychological fortitude fails or weak staying power (liquidity) forces the investor to sell out at the worst possible time. An indictment of buy and hold can be found here:

 

http://www.dowtheoryinvestment.com/2013/02/dow-theory-special-issue-dow-...

 

Here     ( http://jugglingdynamite.com/2013/02/05/the-widely-misunderstood-value-in... ) it is literally said: "Buy and hold or constant equity allocations as an investment strategy is a disaster in real life." Period.

 

 

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