Can anyone please explain this paragraph from Reminiscenses?

[kmiklas]

Hey All, I'm still a relative n00b to trading, and doing a lot of reading. There is a valuable lesson for me here, but I'm having trouble following the logic. Can anyone help to interpret the situation and strategy that he's recounting?

He did. It seems Teller was already doing a big business and would take all he could get. This was on a Friday. The market had been going up all that week--this was twenty years ago, remember--and it was a cinch the bank statement on Saturday would show a big decrease in the surplus reserve. That would give the conventional excuse to the big room traders to jump on the market and try to shake out some of the weak commission-house accounts. There would be the usual reactions in the last half hour of trading, particularly in stocks in which the public had been the most active. Those, of course, also would be the very stocks that Teller's customer would be most heavily long of, and the shop might be glad to see some short selling between them. There is nothing so nice as catching the suckers both ways; and nothing so easy--with one-point margins.

--Lefèvre, Reminiscenses of a Stock Operator, 1923. Pg 30.

Bah! I feel like an idiot. A couple of specific points that I'm stuck on:
a. Why would a big decrease in the surplus reserve be a conventional excuse for big room traders to jump on the market?
b. What does he mean when he says "shake out some of the weak commission-house accounts?"
c. What would the "usual reactions" be? The market would drop at the end of the day?
d. Why would the shop be glad to see short selling between them?
e. How is he catching the suckers both ways?

 

[K-Pia]

a. Why would a big decrease in the surplus reserve be a conventional excuse for big room traders to jump on the market?

I Guess it's bad news.

b. What does he mean when he says "shake out some of the weak commission-house accounts?"

Shake out weak hands as in e.
Suckers with shoestring margins ...
All the tight Stop Losses type of stuff.

c. What would the "usual reactions" be? The market would drop at the end of the day?

Ask Livermore. Keep Reading.

d. Why would the shop be glad to see short selling between them?

To decrease their long inventory / exposure.
Plus activity is always good for a commission-house.

e. How is he catching the suckers both ways?

By moving stocks Up & Down.

 

[lawrence-lugar]

--Lefèvre, Reminiscenses of a Stock Operator, 1923. Pg 30.

Don't be obsessed with ancient history -- it's history. Look forward.
Try to develop your own understanding of market hypothesis and philosophical viewpoint.

 

[Simples]

Hey All, I'm still a relative n00b to trading, and doing a lot of reading. There is a valuable lesson for me here, but I'm having trouble following the logic. Can anyone help to interpret the situation and strategy that he's recounting?

--Lefèvre, Reminiscenses of a Stock Operator, 1923. Pg 30.

Bah! I feel like an idiot. A couple of specific points that I'm stuck on:
a. Why would a big decrease in the surplus reserve be a conventional excuse for big room traders to jump on the market?
b. What does he mean when he says "shake out some of the weak commission-house accounts?"
c. What would the "usual reactions" be? The market would drop at the end of the day?
d. Why would the shop be glad to see short selling between them?
e. How is he catching the suckers both ways?

a) Supply decreasing, which means relative demand is increasing even if just de facto
b) Shake out weak hands - actors in the market that sell when price drops
c) Could be climax, could be drop - weekly traders selling?
d) More commissions? If everyone's buying and holding, less transactions and fees.
e) Sounds like market making and/or brokering

20 years ago would be 1903, so these "easy" markets were past even then.
Also in 1923 you would get the sunny-day stories of stock trading, and then there was 1929 just six years later..

 

[kmiklas]

...

Thank you.

...

Thank you.

Don't be obsessed with ancient history -- it's history. Look forward.
Try to develop your own understanding of market hypothesis and philosophical viewpoint.

That is my goal in the study of such classic works. I've found that it's much cheaper to learn from the mistakes of others. Those who ignore history are doomed to repeat it, and I have no interest in getting wiped.

 

[K-Pia]

Thank you.
Thank you.

That is my goal in the study of such classic works. I've found that it's much cheaper to learn from the mistakes of others. Those who ignore history are doomed to repeat it, and I have no interest in getting wiped.

You'll probably get wiped anyway.
But it's still valuable to read from others.
Especially about real speculators and risk takers.
I've read this book several time since I started trading.
There are always things I get that I had previously overlooked.
Because you can put experiences on these words.
Don't expect to avoid pitfalls just by reading.
Usually you knew / read about them ...
But .. Yet .. not intimately enough,
For doing the wise things.

 

[kmiklas]

You'll probably get wiped anyway.

Pfft... in this market? Fueled by 3.5T in Federal Quantitative Easing funds? We're in a "lost decade," and the Guv'ment will do anything and everything in their power to avoid an economic downturn--and another world war.I expect the S&P to break 3000 by 2020. Can't lose.

"This is a bull market, you know."

 

[Cswim63]

Another straw in the wind.

 

[mpdxc]

Probably better to get wiped out with a small account once or twice, to know what it's like before doing it first with a big busted account.

 

[SimpleMeLike]

Hey All, I'm still a relative n00b to trading, and doing a lot of reading. There is a valuable lesson for me here, but I'm having trouble following the logic. Can anyone help to interpret the situation and strategy that he's recounting?

--Lefèvre, Reminiscenses of a Stock Operator, 1923. Pg 30.

Bah! I feel like an idiot. A couple of specific points that I'm stuck on:
a. Why would a big decrease in the surplus reserve be a conventional excuse for big room traders to jump on the market?
b. What does he mean when he says "shake out some of the weak commission-house accounts?"
c. What would the "usual reactions" be? The market would drop at the end of the day?
d. Why would the shop be glad to see short selling between them?
e. How is he catching the suckers both ways?

Don't need to read book. Just watch the charts and draw your own conclusions. Trade what you see.