Day 4: Analyze a memorable story from "Reminiscences of a Stock Operator".
The Story from Chapter 7
Our protagonist shares this story, explaining he heard it about an old, wise trading tycoon.
A man, excited by some critical info, tells Deacon White that H. O. Havemeyer, a powerful figure and president of a major company, and his crew were aggressively buying up shares of Sugar. Believing this information would drive up the price, the informant expected Deacon White to act on this tip to buy shares. However, Deacon White, after carefully considering the information, stuns him and chooses to sell a large quantity of Sugar stock instead.
The informant is initially confused and distressed, thinking Deacon misunderstood. It cracks me up when the guy starts yelling at Deacon. However, it becomes clear that Deacon had a deeper strategy. He understood that the buying frenzy led by Havemeyer could be an opportunity to sell at a profit before the bubble burst. The story unfolds with a series of strategic moves by Deacon that leave the informant bewildered but highlight Deacon’s mastery over market operations and his ability to outmaneuver typical market reactions through unconventional but insightful strategies.
What I Like About The Story
For me, the story feels like it was written today, about myself and my previous experiences. Save for the language and phrases, these attention markets of crypto are on the same pulse Larry Livingston and these characters thrived on.
I didn't see the whole story as a mastery over markets either, though that might also be so. Deacon is smarter than his tipster- and when the lucky rube doesn't realize it, he gets upset! Deacon cracks me up when he tells the guy, "Do not let yourself become excited, my friend." Smart money doesn't insult, doesn't fret, doesn't worry. They follow a plan, even if those around them don't understand. That's my favorite part.
The book also highlights thematically, how everyone loves to share information, but almost ironically. They're not just sharing the information, they want you to act on it as well, as confirmation. I could imagine that's why the tipper got so upset as to repeat himself, yelling, "I said buy! Buy! The other guys are going to buy!"
I thought that the curve ball was that nobody knows what another does for sure, when Deacon asks his informant, "Did he tell you he was going to do that?" Of course, Mr. Info doesn't know for certain anyway, and is following the leadings of a tip, in the first place.
But that isn't it- I bet with as much money as 30,000 shares are in that story, Deacon wouldn't have bought or sold anything on anyone's word. It's also a cautionary tale about sizing in trades. But Deacon demonstrates his strategy by testing the veracity of his tipster's claims. He tries selling into the volume to see how it behaves.
Once he has his confirmation, of course, he agrees that the info is good and he buys in, for himself and the anon tipper who got so aggro all of a sudden. This is my favorite takeaway:
That's what I like about the story. Smart people don't take anybody's word for anything.
My Personal Connection To It
And so, when I think about my crypto journey, I've been both characters. To my friends in 2017, I was the crazy tipster telling my friends to own Bitcoin, to look at the performance that year, and buy the future of finance!
And, at different times, I was Deacon White, parsing through the noise to understand- do I really buy this speculative asset they call a meme coin? Why? Is there upside to this?
And most all, I've been the unlucky lackey to listen to others' insistent hinting and tipping. I let a few clowns that I worked with, inspire me to dump an asset near the bottom of the chart, when the only move left, besides even more downside, was incredible upside. And I missed out on massive returns at my cost basis later on that year.
I don't know about the characters in Edwin's book, but I speak for myself when I say, I am someone who forgives but doesn't forget. Those guys tried talking to me around the holidays last year. It's because we have mutuals that I was still even in a group chat with the one guy. The other tried to wish me a merry Christmas and exchange pleasantries about how I was doing.
View me how you want.
To answer that I say, I won't ever forget how I let two people I seldom saw face-to-face convince me my plans, my understanding that I'd experienced firsthand, and my observations were wrong.
It's one thing to believe something yourself and be proven wrong. It's another to be convinced by another to believe something, for you to turn out to be ultimately right. I'm not saying it's a mistake to listen to other people. No. Deacon and so many other experiences prove that's not the case.
It was wrong to let others shake my conviction, however. For that, they pay the ultimate price. They earned my silence.