Sit Tight With The Bull Market: An Investing Lesson From The Great Bear of Wall Street

Jesse Livermore made – then lost – millions of dollars several times over in the first few decades of the 1900s.

He amassed his last fortune by short-selling stocks during the 1929 stock market crash.

By 1934 he had lost it all.

He was bankrupt.

In 1940 he committed suicide. While tragic, spare a thought for his third wife, Harriet. Livermore was her fifth husband. And she had lost every one of them to suicide.

The book, Reminiscences of a Stock Operator by Edwin Lefèvre immortalised Jesse Livermore’s exploits. I have never read it so I can’t be sure the following quote is even from that book. But wherever it comes from, it might be the most wise advice you’ll ever read about how to handle a bull market.

For the record, I read it in a recent interview with James Turk, founder of

Keep in mind Livermore was a trader. He made and lost millions. This advice comes from bitter experience.

‘And right here let me say one thing: after spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets.

‘I’ve known many men who were right at exactly the right time, and began buying and selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine — that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money.

Sitting tight might sound easy. But our emotions get in the way. We are hard wired to ‘take action’ when threatened of losing, or gaining a ‘profit’.

Just take a look at what Dennis Gartman said recently…

Gartman publishes a well-known trading report in the US. His clients are mostly hedge funds and institutional investors. He influences the ‘big money’.

In his 13 December 2011 report he commented negatively on gold’s price action, ‘We have the beginnings of a real bear market, and the death of a bull’.

But early in the New Year, Gartman changed his call. The gold price correction was not as deep as he first feared. The subsequent rally back above US$1,600 forced him to concede the bull market was still intact.

For a trader like Gartman, switching between a bull and bear market call might not seem like a big deal. And for traders it might not be. But for investors it is. It’s a massive deal. Getting a bull market call right… and sticking with it… is the most important thing you can do to build wealth.

There’s a lot of market noise and gloom right now. So don’t lose sight of the fact that precious metals are in the middle of an epic bull market. I know it can be tough on your emotions when gold and silver sell off at the same time as stocks in general. It’s demoralising. The sharp falls in price can make you question your strategy. At its worst, it forces you to sell at the wrong time.

Let me assure you, the bull market has a long way to go. What you’re seeing now is the bull having a breather. It’s happened before and will most likely happen again.

Don’t confuse this lull, like Dennis Gartman did, as the start of a bear market. If you take a trader’s mentality in bull markets you risk giving up huge gains. That’s because you’ll trade in and out and might miss the biggest spikes.

So my advice to you is simple. Sit tight during this precious metals bull market. Do nothing.

And most of all, try to enjoy the ride.


Greg Canavan
for Markets and Money

Greg Canavan
Greg Canavan is a contributing Editor of Markets and Money and is the foremost authority for retail investors on value investing in Australia. He is a former head of Australasian Research for an Australian asset-management group and has been a regular guest on CNBC, Sky Business’s The Perrett Report and Lateline Business. Greg is also the editor of Crisis & Opportunity, an investment publication designed to help investors profit from companies and stocks that are undervalued on the market. To follow Greg's financial world view more closely you can subscribe to Markets and Money for free here. If you’re already a Markets and Money subscriber, then we recommend you also join him on Google+. It's where he shares investment research, commentary and ideas that he can't always fit into his regular Markets and Money emails. For more on Greg go here.

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3 Comments on "Sit Tight With The Bull Market: An Investing Lesson From The Great Bear of Wall Street"

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Ned S

“… spare a thought for his third wife, Harriet. Livermore was her fifth husband. And she had lost every one of them to suicide.”

Based on that track record, it sounds like being married to Harriet might have had more to do with him suiciding than the bankruptcy. What did Harriet’s sixth and subsequent hubbies die of? :)


yep join the dots

Ray Harrient

The irrational exuberance of 2000 signaled the end of the bull stock market and the “Flip This House” show signaled the end of the Housing bull bubble just as the endless gold ads today signal the end of the gold market.

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