Barton Biggs wrote columns to allow for people to help understand how he was seeing the world. For many years he was connected with Morgan Stanley helping to run its research, investment management division and the firm; later he left to manage his families money and others in a hedge fund. His columns from 2010 to 2012 were put together in the book Diary of a Hedgehog, John Wiley & Sons, 2012

In one of his columns Mr. Biggs wrote about Jessie Livermore and referenced the finest trading book ever written is Reminiscences of a Stock Operator (John Wiley & Sons, 1994), by Edwin LeFevre.  The book deals with lessons learned over a trading lifetime, and Mr. Livermore started with little and at his peak was worth billions of dollars. He passed away in 1940. Mr. Livermore was a speculator – he was a student of the rhythm of the markets and was convinced that you had to know yourself and be able to control your emotions to be successful. You also had to respect and listen to what the markets were saying. The most common and usually fatal ailments of the ordinary speculator was greed, fear and hope.

The game does not change and neither does human nature. In his years on Wall Street it was never my thinking that made me the big money, it was my sitting. Men who can both be right and sit tight are uncommon. The reason is a person can see straight and clearly but become impatient or doubtful when the market takes it time doing as he figured it must do. Many people have lost money, not because the market beat them, but they cannot sit tight. Intelligent patience. Take a position and stick to it.

If you believe you can time the market – buy low and sell high, you will invariably lose money. Never try to sell at the top. It is not wise. Sell after a reaction if there is no rally. Never average down – if you are an active trader, if something goes down about 10% sell, cut your losses and keep your gains. One of the hardest things to do if the stock goes down to do is to do even more research and become an expert on the stock. If you are the expert, you have too much emotion tied into the stock. The better solution understand there is a reason for the stock to go down, admit your mistake and do not try to outwit the supply and demand.

Linking to dividend producing stocks, because you are not trading and the stocks that you normally buy produce a dividend you do not have to follow the above advice. For the stocks you own that do not produce a dividend, follow the rules. The dividend means the company is producing profits which allow for stability in the price and a floor for the lowest price, if the market in general is going down. As the stock price goes down, the yield on the dividend goes up which increases the number of people wanting to buy the stock, there are buying opportunities.

There are more questions than answers, till the next time – to raising questions