Edwin Lefevre: Man of Mystery

Did he ever existed, or did he not? This is the dilemma that has been raised for years regarding Edwin Lefevre, the author of Reminiscences of a Stock Operator, published in 1923. Ostensibly the autobiography of “Larry Livingstone,” a wheeler dealer on Wall St, this book is a thinly disguised profile of the prominent speculator Jesse Livermore. It is correctly seen as a Wall Street staple and is the choice of many influential investors.

Lefevre did such a fine job of portraying the mind of a high-stakes speculator, and so well tended to express Livermore’s attitude, that the rumor circulated (and has been generally believed to this day that the novel was a ghost-written book for Livermore, and that “Edwin Lefevre” was a mere alias. This theory seems reasonable in the light of the reality that Livermore was a publicity hound who was acquainted with many famous authors of the 1920s. What is more confusing is that several years later, when Livermore was down-and-out, he decided to write a book on investing under his label, even though he had nothing to do with its development. Even, to many western listeners, “Edwin Lefevre” sounds like a make-up word, mixing the first name of the Victorian period with the hard-to-pronounce French last name. But in reality, Lefevre did live. In reality, he was the most influential writer on Wall Street in the Booming 20’s and early 30’s.

Born in Colon, Colombia (now part of  Panama) on January 23, 1871, to American parents, Lefevre was raised in the U.S. (Michigan Military Academy and Lehigh University) and felt no special connection to Central America.

Edwin became a columnist for the New York Sun and then concentrated in focusing about the stock exchange. He contributed papers on finance to several of today’s leading mainstream publications, including Harper’s, Everbody’s, Munsey’s and The Saturday Evening Post, and published a variety of influential novels.

He reached an exclusive deal with The Saturday Evening Post in the 1920s, which was then America’s most commonly read magazine. Shortly afterwards, he agreed to question Jesse Livermore for a collection of papers that eventually constituted the majority of the Stock Operator’s Reminiscences.

The inspiration of Livermore and several high-stakes speculators was caught by Lefevre as he cites “Livingstone” as saying, “I didn’t think of anything but that I should try to show that my figure was right. That’s all the pleasure there is—-being correct when you use your head.”

An person with only a few dollars might walk into a bucket shop and bet that a specific stock would increase its value. For each share of the stock, the person would be paid a “margin” which in fact, was the spread that had to be beaten. For eg, if the profit was one-quarter for a share that last exchange registered was $15.25 per share, the buyer would have charged 25 cents a share. If the price subsequently rose over $15.50 (i.e. the last recorded price plus the 25 cent margin), the purchase receipt will be traded for the disparity between the stock price and $15.50 a share. Therefore the price will have to rise to more than $15.75 (i.e. the price at which the stock was in money plus the expense of the “margin”) until the buyer could make a profit. But if at the point before cashing in the receipt, the stock price fell to $15.25, the refund will be useless.

On several days at the point, markets exchanged on a thin scale. As a result, the stock price was more prone to drift below the margin than over it. This was valid also of the stocks that were headed up, because few saw an uninterrupted price rise. So the chances were in favour of the building.

In addition, there have been several techniques that have been utilized by foil consumers, such as wrongly disclosing stock trading. A more subtle solution was to negotiate a “wash sale” for an unscrupulous trader on the market, in which the buying order mirrored the sale order at a cheap price, and then reversed it. The two transactions (which were at a low price) are then announced, thereby closing the customer’s bucket shop even though no stock really changed hands. Of course, if a consumer is especially good, such as Livermore and his fictitious alter-ego, the bucket shop might actually fail to approve his request.

Lefevre resurrected his novel with a friendly usage of words. When a huge amount of securities are dumped on the market, the shares are “Niagaraing.” Anyone who buys without researching the fundamental reality “listen to the whispers of hope.” And an investor who takes action even when he is unaware of the course of the market has “traded out of season.”

Lefevre seems almost to have been answering existing traders when he said, “The desire for constant action, regardless of the underlying conditions, is responsible for many losses in Wall Street, even among professionals who feel that they have to take some money home every day as if they were working on regular wages.”

He recognized the role of psychology in investing, he said, ” A man can see straight and simple and yet become patient or doubtful as the market takes its time to do what he thought it had to do. That’s why so many Wall Street men are not in the loser class. Nevertheless, lose your capital. They’re not beaten by the business. They beat themselves, so they can’t stay tight though they have minds.”

Near the end of the novel, Lefevre gave what could be the perfect one-sentence description of what it takes to be a good investor. “As well as studying basic conditions, remembering market precedents and keeping in mind the psychology of the outside public as well as the limitations of its brokers, a trader must also know himself and counter his own weakness.”

For the August 6, 1932 issue of The Saturday night post, Lefevre wrote an article entitled “When is it healthy to invest? “His answer was Never ever! “And All the time! “He explained, ‘Never to the audience. ‘Always’ for a fair guy.’

Appropriately, Lefevre said that it had never invested more than minor transactions on the capital exchange. He resigned in the mid-1930s after confidence in the financial market evaporated in the midst of the Great Depression. He died a couple of years back at his retirement home in Dorset, Vermont, shortly after his 72nd birthday. While he was for a while the most frequently read writer on Wall Street, he quickly became little recognized, but the Market Operator’s reminiscences continued to amuse and educate investors.