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Chart reading doesn't work. He would have been better off to keep his positions. (My research: this meant a 9.0% annual return from 1940 (1st edition) to 1955 (2nd edition)). - Customers buy when stocks are high and sell then they are low. - Customers who have lost money tend to think they have been robbed rather than take responsibility for their actions. Limited liability - options act like "term" insurance. Wall Streeters tend to be romantics and dreamers. - History shows investment trusts aren't very good.
There is strong temptation for them to be dishonest because of the great sums of money they manage. - The public vilifies short sellers during and after a panic. It is simple probability that some speculators will be successful. It is human vanity to think the market can be predicted in two+ years.
The economy needs the opposite - curtail spending in good times and encourage it in bad times. Look at how many on Wall Street were fooled by the crash. - The author, being a financial writer who treats his subject lightly, sold his stock too frequently. - It doesn't work to buy popular securities because they are probably overpriced. This edition was left pretty much like the first edition because he wanted it to reflect what he was thinking at the time. Clients demand a high return which causes the managers to take risks. - Bankers do the opposite of what is needed - they lend money in prosperous times and retain money in bad times.
- Customers tend to misuse margin. A straddle is a put and a call bought together - stock must move sharply. Here are the highlights that I found:- The title of the book was more popular than the book itself because it was sold at a time when the market was down. Short's impact on the market is minimal because their numbers are so small. - Three kinds of options: puts, calls, and straddles. Option costs are high.
They also do not like to have a lot of cash in their account. - A man's true wealth is his income, not bank balance. - Financial statistics can be deceiving because they can give a lopsided view. - Tape reading does not tell you what the buyers and sellers were thinking. (I think it does in identifying trends, but of course there is no guarantee the trend will continue).- Finances in Wall Street are hard to discover. They will tend to churn their account to keep from being bored.
- The speculator doesn't think of a company as a business, but rather as a stock ticker. Bad luck plus bad brains.The book was very readable.
Yes, I am one of the few who read the book cover to cover. It does not take long, and it is really really funny.The funniest chapter was the one on short-selling.RShaw
I expect to see more bubbles before I am done investing. As the financial sector has neared meltdown lately the wit and wisdom of this broker from the 1920s era was enlightening. Will Wall Street ever learn. I'll probably be re-reading Schwed's book then, too. Jason Zweig is great, he made a lot of helpful updates to a few archaic references in the book, and otherwise updated it.
For the author investing is nothing but a flipping contest where you have 50/50 odds.Of course there is always a risk, and a possible reward, but if you are able to at least approximately calculate these risks and the reward outweights by a good margin the risk, then you are investing (which according to the author is impossible).It is funny, but if you are looking for a funny investing book "A fool and his money" is much more enjoyable.
He never talks down to his readers; nor does he require that they have PhDs in Economics. was written in 1940, but the advice and insights contained in this slim volume are as up-to-date as anything you will read on the Internet this week. Where are the Customers' Yachts. Rather, he simply states facts about what it is possible for Wall Street to provide and what it is foolish to ask Wall Street to attempt.Mr. Written in a humerous and down-to-earth style, without a lot of confusing jargon or mathematical equations, Mr. Schwed tells investors what they can expect from Wall Street and what they ought not to expect. Schwed has a low opinion of the SEC and demonstrates convincingly that the "investor confidence" mantra of the SEC and its brother regulators is not only deceitful but wrong-headed. What is needed is investors that understand the nature of the game they are playing.Reading this enjoyable and enlightening book is one of the best ways for any sensible person to gain that understanding.
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