 "Dottie, we've made more money today than ever before in our lives."One of my favorite books is Reminiscences of a Stock Operator by Edwin Lefèvre. It is a thinly veiled autobiography of Jesse Livermore, one of Wall Street's legendary stock traders. He made his first fortune in the crash of 1907 and his second in 1929. History tells us that the stock market crash began in late October 1929, with three big down days starting with Black Thursday, when the market traded a record 12.5 million shares and fell 11% only to recover later in the day when J.P. Mogan and other bankers pooled money to start buying and stabilized the market. But it didn’t hold. The selling continued the next week and the Dow Jones fell 13% on Black Monday - one of the biggest single day drops in history. This was followed by Black Tuesday, October 29, 1929. The market crashed another 12% which marked the peak of the panic. Here is a chart of the five years surrounding the Great Crash of 1929:
The Story The Wall Street tale goes that during this time of fear and uncertainty, Jesse Livermore was making astronomical profits by short-selling stocks as the market plummeted. After Black Tuesday, Livermore returned home to his lavish mansion in New York after a grueling day at the trading office. It is said that his profits for that day were in the millions and that he made more than $100 million during the crash. When Livermore arrived home, pulling off his gloves he found no one to take his hat. His wife Dottie was almost hysterical. She had learned from the neighbors that the market had crashed and that everyone on Wall Street was ruined. Dottie had taken drastic measures. She had all of their furniture moved to the barn with the idea that they would have to sell the house. And then, assuming that they could no longer afford to maintain their extravagant lifestyle she fired all of the staff. According to the story, Livermore, still exhilarated from his trading success, calmly reassured his wife and said to her: "Dottie, we've made more money today than ever before in our lives. Call the staff back—we're richer than ever!" His wife, stunned by the news, quickly reversed her decision, and the household staff was rehired and the furniture brought back into the mansion. --------- Sponsored --------- URGENT: Trump's AI Policy Shift Deregulation wave about to hit 9 AI stocks perfectly positioned Massive manufacturing reshoring is coming Smart money loading up quietly FREE report just released → Get your copy before it's too late ---------------------------------------
Of course, the 1929 crash was preceded by the boom times of the “Roaring Twenties.” It had many of the same qualities we’ve seen in more recent crashes. There was unprecedented growth based on new technologies, coupled with easy credit and unbounded optimism. The stock market soared as money poured into stocks on margin. By the end of the decade the Dow Jones was at record highs and newspapers pontificated that it would go up indefinitely. Livermore, who had lived through a few such booms before took the under. He pointed out three warning signals:
A month ago the price-to-book ratio on the S&P 500 was 5.04. The record was 5.06 in 2000. Price to sales hit 3.01, a similar record. The Shiller PE ratio is the third highest on record, just below 2022 and 2000. As far as number two goes: margin debt/ investor credit hit an all-time high in January. Market psychology was extremely high a few months ago with bitcoin climbing above $100,000 and AI stocks running hard. Generally speaking, it doesn’t seem quite as optimistic as 2007 in housing, 2000 in dotcoms, or even 2012 in commodities. There is plenty of optimism in certain companies but overall it is a bit more subdued. This makes me think we won’t have a massive crash but a slow slog as the market moves sideways and bleeds off valuation. Don’t get me wrong, there are plenty of places to make money. As I wrote last week, my American Stock Investor portfolio is up 69%. The places to make money just might not be the same places you looked before. (If you haven't joined yet, you can just click that link 3 lines up there ☝, and get in on my next round of gains.) All the best, Christian DeHaemer Outsider Club You Might Also Like: What is this ASI? https://www.outsiderclub.com/asi-average-gain-69-nice/ The R Word https://www.outsiderclub.com/the-r-word/ Giraffes https://www.outsiderclub.com/roadkill-giraffes-and-silver-bulls/
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Senin, 17 Maret 2025
"Dottie, we've made more money today than ever before in our lives."
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