Tuesday, March 08, 2005


I mentioned the name Bernard Baruch a couple of times and a reader says she never heard of him. Bernard was born in 1870 in Camden S.C.. He was rich at 30 years of age through shrewd investments in the stock market.

He served his country in a number of ways including helping to negotiate the peace at the end of WWI. He was a highly respected good man, a philanthropist. A university business school bears his name. I looked up a few details through the Columbia Encyclopedia as posted at www.bartleby.com.

It has been 30 years or more since I read his favorite saying. A member of the press had asked him to tell the secret of his success. He immediately replied, "Buy your straw hats in the winter time". I can't remember where I read about Bernard, but the idea has stayed with me. The idea has helped me to become a successful investor; it will help you do as well. Just remember that if everyone is excited about a certain stock or sector, it is almost too late to buy.

Another great investor I have mentioned from time is Jesse Livermore. Jesse was perhaps the greatest trader ever. His main idea was a little different from Bernard's. Jesse would shop carefully to find an out of favor good value that seemed to be making an upturn in price. He would commit 20% of his normal position size to the security and then wait. If the stock went up, he would buy another 20% and repeat until he had 100% invested. If the stock went up quickly, he might put the last 40% or even 60% into the stock but buy this time he had established a decent profit. Once onto a good stock, he was not afraid to ride it for as long as the business stayed strong. If the stock went down, he figured he had made a mistake. He would sell the position and look for another stock.

During the tremendous BIG BULL BOOM BUBBLE of 1912 to 1929, Jesse made a huge fortune. He became so widely followed that if word was out that he had purchased a stock 1000's of copy-cats would jump-in. He learned to be secretive about what he owned because he did not want to "taut and run". Near the top of the BIG BULL BOOM BUBBLE, Jesse realized the market was over-priced. He sold shares and sold shares short making another fortune as the market crashed. After the crash, he was despised by many. He was forced to operate out of an office a distance away from Wall Street.

One should consider adopting parts of the philosophies of both men; buy out of favor securities to get the best price; don't try to buy at the absolute bottom; average up on successful buys; dump unsuccessful purchases quickly; be generous with your good fortune; and, BUY YOUR STRAW HATS IN THE WINTER TIME.