tips - always with a grain of salt

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tips - always with a grain of salt

Post by Cals on Mon 28 Nov 2011, 03:33

always take tips with a grain of salt Hmm...

taken from "reminiscence of stock operator"

part 1

"Tips! How people want tips! They crave not only to get them but to give them. There
is greed involved, and vanity. It is very amusing, at times, to watch really intelligent
people fish for them. And the tip-giver need not hesitate about the quality, for the tipseeker
is not really after good tips, but after any tip. If it makes good, fine! If it doesn't,
better luck with the next. I am thinking of the average customer of the average
commission house. There is a type of promoter or manipulator that believes in tips
first, last and all the time. A good flow of tips is considered by him as a sort of
sublimated publicity work, the best merchandising dope in the world, for, since tipseekers
and tip-takers are invariably tip-passers, tip-broadcasting becomes a sort of
endless-chain advertising. The tipster-promoter labours under the delusion that no
human being breathes who can resist a tip if properly delivered. He studies the art of
handing them out artistically.

I get tips by the hundreds every clay from all sorts of people. I'll tell you a story about
Borneo Tin. You remember when the stock was brought out? It was at the height of
the boom. The promoter's pool had taken the advice of a very clever banker and
decided to float the new company in the open market at once instead of letting an
underwriting syndicate take its time about it. It was good advice. The only mistake the
members of the pool made came from inexperience. They did not know what the
stock market was capable of doing during a crazy boom and at the same time they
were not intelligently liberal. They were agreed on the need of marking up the price in
order to market the stock, but they started the trading at a figure at which the traders
and the speculative pioneers could not buy it without misgivings.

By rights the promoters ought to have got stuck with it, but in the wild bull market their
hoggishness turned out to be rank conservatism. The public was buying anything that
was adequately tipped. Investments were not wanted. The demand was for easy
money; for the sure gambling profit. Gold was pouring into this country through the
huge purchases of war material. They tell me that the promoters, while making their
plans for bringing out Borneo stock, marked up the opening price three different
times before their first transaction was officially recorded for the benefit of the public.

I had been approached to join the pool and I had looked into it but I didn't accept the
offer because if there is any market manoeuvring to do, I like to do it myself. I trade
on my own information and follow my own methods. When Borneo Tin was brought
out, knowing what the pool's resources were and what they had planned to do, and
also knowing what the public was capable of, I bought ten thousand shares during the
first hour of the first day. Its market debut was successful at least to that extent. As a
matter of fact the promoters found the demand so active that they decided it would
be a mistake to lose so much stock so soon. They found out that I had acquired my
ten thousand shares about at the same time that they found out that they would
probably be able to sell every share they owned if they merely marked up the price
twenty-five or thirty points. They therefore concluded that the profit on my ten
thousand shares would take too big a chunk out of the millions they felt were already
as good as banked. So they actually ceased their bull operations and tried to shake
me out. But I simply sat tight. They gave me up as a bad job because they didn't want
the market to get away from them, and then they began to put up the price, without
losing any more stock than they could help.

They saw the crazy height that other stocks rose to and they began to think in billions.
Well, when Borneo Tin got up to 120 I let them have my ten thousand shares. It
checked the rise and the pool managers let up on their jacking-up process. On the
next general rally they again tried to make an active market for it and disposed of
quite a little, but the merchandising proved to be rather expensive. Finally they
marked it up to 150. But the bloom was off the bull market for keeps, so the pool was
compelled to market what stock it could on the way down to those people who love to
buy after a good reaction, on the fallacy that a stock that has once sold at 150 must
be cheap at 130 and a great bargain at 120. Also, they passed the tip first to the floor
traders, who often are able to make a temporary market, and later to the commission
houses. Every little helped and the pool was using every device known. The trouble
was that the time for bulling stocks had passed. The suckers had swallowed other
hooks. The Borneo bunch didn't or wouldn't see it.

I was down in Palm Beach with my wife. One day I made a little money at Gridley's
and when I got home I gave Mrs. Livingston a five-hundred-dollar bill out of it. It was a
curious coincidence, but that same night she met at a dinner the president of the
Borneo Tin Company, a Mr. Wisenstein, who had become the manager of the stock
pool. We didn't learn until some time afterward that this Wisenstein deliberately
manoeuvred so that he sat next to Mrs. Livingston at dinner.

He laid himself out to be particularly nice to her and talked most entertainingly. In the
end he told her, very confidentially, "Mrs. Livingston, I'm going to do something I've
never done before. I am very glad to do it because you know exactly what it means."
He stopped and looked at Mrs. Livingston anxiously, to make sure she was not only
wise but discreet. She could read it on his face, plain as print. But all she said was,
"Yes."

"Yes, Mrs. Livingston. It has been a very great pleasure to meet you and your
husband, and I want to prove that I am sincere in saying this because I hope to see a
great deal of both of you. I am sure I don't have to tell you that what I am going to say
is strictly confidential!" Then he whispered, "If you will buy some Borneo Tin you will
make a great deal of money."

"Do you think so?" she asked.

"Just before I left the hotel," he said, "I received some cables with news that won't be
known to the public for several days at least. I am going to gather in as much of the
stock as I can. If you get some at the opening to-morrow you will be buying it at the
same time and at the same price as I. I give you my word that Borneo Tin will surely
advance. You are the only person that I have told this to. Absolutely the only one!"

She thanked him and then she told him that she didn't know anything about
speculating in stocks. But he assured her it wasn't necessary for her to know any
more than he had told her. To make sure she heard it correctly he repeated his
advice to her:

"All you have to do is to buy as much Borneo Tin as you wish. I can give you my word
that if you do you will not lose a cent. I've never before told a woman—or a man, for
that matter—to buy anything in my life. But I am so sure the stock won't stop this side
of 200 that I'd like you to make some money. I can't buy all the stock myself, you
know, and if somebody besides myself is going to benefit by the rise I'd rather it was
you than some stranger. Much rather! I've told you in confidence because I know you
won't talk about it. Take my word for it, Mrs. Livingston, and buy Borneo Tin!"

He was very earnest about it and succeeded in so impressing her that she began to
think she had found an excellent use for the five hundred dollars I had given her that
afternoon. That money hadn't cost me anything and was outside of her allowance. In
other words, it was easy money to lose if the luck went against her. But he had said
she would surely win. It would be nice to make money on her own hook—and tell me
all about it afterwards.

Well, sir, the very next morning before the market opened she went into Harding's
office and said to the manager:

"Mr. Haley, I want to buy some stock, but I don't want it to go in my regular account
because I don't wish my husband to know anything about it until I've made some
money. Can you fix it for me?"

Haley, the manager, said, "Oh, yes. We can make it a special account. What's the
stock and how much of it do you want to buy?"

She gave him the five hundred dollars and told him, "Listen, please. I do not wish to
lose more than this money. If that goes I don't want to owe you anything; and
remember, I don't want Mr. Livingston to know anything about this. Buy me as much
Borneo Tin as you can for the money, at the opening."

Haley took the money and told her he'd never say a word to a soul, and bought her a
hundred shares at the opening. I think she got it at 108. The stock was very active
that day and closed at an advance of three points. Mrs. Livingston was so delighted
with her exploit that it was all she could do to keep from telling me all about it.

It so happened that I had been getting more and more bearish on the general market.
The unusual activity in Borneo Tin drew my attention to it. I didn't think the time was
right for any stock to advance, much less one like that. I had decided to begin my
bear operations that very day, and I started by selling about ten thousand shares of
Borneo. If I had not I rather think the stock would have gone up five or six points
instead of three.

On the very next day I sold two thousand shares at the opening and two thousand
shares just before the close, and the stock broke to 102.

Haley, the manager of Harding Brothers' Palm Beach Branch, was waiting for Mrs.
Livingston to call there on the third morning. She usually strolled in about eleven to
see how things were, if I was doing anything.

Haley took her aside and said, "Mrs. Livingston, if you want me to carry that hundred
shares of Borneo Tin for you you will have to give me more margin."

"But I haven't any more," she told him.

"I can transfer it to your regular account," he said.

"No," she objected, "because that way L. L. would learn about it."

"But the account already shows a loss of " he began.

"But I told you distinctly I didn't want to lose more than the five hundred dollars. I didn't
even want to lose that," she said.

"I know, Mrs. Livingston, but I didn't want to sell it without consulting you, and now
unless you authorise me to hold it I'll have to let it go."

"But it did so nicely the day I bought it," she said, "that I didn't believe it would act this
way so soon. Did you?"

"No," answered Haley, "I didn't." They have to be diplomatic in brokers' offices.

"What's gone wrong with it, Mr. Haley?"

Haley knew, but he could not tell her without giving me away, and a customer's
business is sacred. So he said, "I don't hear anything special about it, one way or
another. There she goes! That's low for the move!" and he pointed to the quotation
board.

Mrs. Livingston gazed at the sinking stock and cried: "Oh, Mr. Haley! I didn't want to
lose my five hundred dollars! What shall I do?"

"I don't know, Mrs. Livingston, but if I were you I'd ask Mr. Livingston."

"Oh, no! He doesn't want me to speculate on my own hook. He's told me so. He'll buy
or sell stock for me, if I ask him, but I've never before done trading that he did not
know all about. I wouldn't dare tell him."

"That's all right," said Haley soothingly. "He is a wonderful trader and he'll know just
what to do." Seeing her shake her head violently he added devilishly: "Or else you put
up a thousand or two to take care of your Borneo."

The alternative decided her then and there. She hung about the office, but as the
market got weaker and weaker she came over to where I sat watching the board and
told me she wanted to speak to me. We went into the private office and she told me
the whole story. So I just said to her: "You foolish little girl, you keep your hands off
this deal."

She promised that she would, and so I gave her back her five hundred dollars and
she went away happy. The stock was par by that time.

I saw what had happened. Wisenstein was an astute person. He figured that Mrs.
Livingston would tell me what he had told her and I'd study the stock. He knew that
activity always attracted me and I was known to swing a pretty fair line. I suppose he
thought I'd buy ten or twenty thousand shares.

It was one of the most cleverly planned and artistically propelled tips I've ever heard
of. But it went wrong. It had to. In the first place, the lady had that very day received an
unearned five hundred dollars and was therefore in a much more venturesome mood
than usual. She wished to make some money all by herself, and womanlike
dramatised the temptation so attractively that it was irresistible. She knew how I felt
about stock speculation as practised by outsiders, and she didn't dare mention the
matter to me. Wisenstein didn't size up her psychology right.

He also was utterly wrong in his guess about the kind of trader I was. I never take tips
and I was bearish on the entire market. The tactics that he thought would prove
effective in inducing me to buy Borneo—that is, the activity and the three-point rise—
were precisely what made me pick Borneo as a starter when I decided to sell the
entire market.

After I heard Mrs. Livingston's story I was keener than ever to sell Borneo. Every
morning at the opening and every afternoon just before closing I let him have some
stock

It has always seemed to me the height of damfoolishness to trade on tips. I suppose I
am not built the way a tip-taker is. I sometimes think that tip-takers are like drunkards.
There are some who can't resist the craving and always look forward to those jags
which they consider indispensable to their happiness. It is so easy to open your ears
and let the tip in. To be told precisely what to do to be happy in such a manner that
you can easily obey is the next nicest thing to being happy—which is a mighty long
first step toward the fulfilment of your heart's desire. It is not so much greed made
blind by eagerness as it is hope bandaged by the unwillingness to do any thinking.

And it is not only among the outside public that you find inveterate tip-takers. The
professional trader on the floor of the New York Stock Exchange is quite as bad. I am
definitely aware that no end of them cherish mistaken notions of me because I never
give anybody tips. If I told the average man, "Sell yourself five thousand Steel!" he
would do it on the spot. But if I tell him I am quite bearish on the entire market and
give him my reasons in detail, he finds trouble in listening and after I'm done talking
he will glare at me for wasting his time expressing my views on general conditions
instead of giving him a direct and specific tip, like a real philanthropist of the type that
is so abundant in Wall Street— the sort who loves to put millions into the pockets of
friends, acquaintances and utter strangers alike.

The belief in miracles that all men cherish is born of immoderate indulgence in hope.
There are people who go on hope sprees periodically and we all know the chronic
hope drunkard that is held up before us as an exemplary optimist. Tip-takers are all
they really are."

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Re: tips - always with a grain of salt

Post by phoenix777 on Mon 28 Nov 2011, 18:46

+1 for sharing.....wow 3am [You must be registered and logged in to see this image.]

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Re: tips - always with a grain of salt

Post by Cals on Mon 28 Nov 2011, 21:45

phoenix wrote:+1 for sharing.....wow 3am [You must be registered and logged in to see this image.]

oops didnt know anyone noticed Giggle

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Re: tips - always with a grain of salt

Post by Cals on Sun 08 Jul 2012, 22:38

bump , good book for those who havent read it, an eye opener and bible for any operator

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Re: tips - always with a grain of salt

Post by Bursa berserker on Sun 08 Jul 2012, 22:40

Cals wrote:bump , good book for those who havent read it, an eye opener and bible for any operator
:D

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Re: tips - always with a grain of salt

Post by phoenix777 on Sun 08 Jul 2012, 22:40

good reminder ;)

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