The Zurich Axioms By Max Gunther
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It is unlikely that God’s plan for the universe includes making you rich.
A protestant minister used to come to our hose for dinner once in a while when I was a youngster. He and Frank Henry had known each other as boys in the little town of Wadenswil, on the south shore of Lake Zurich. The minister had migrated to America as a young man and was now the pastor of a little church somewhere in New Jersey.
He was building with enthusiasm one night. The Lord had given his church a great opportunity, he reported. A member of his flock, an elderly man, was about to move to a warmer climate. The move had to be accomplished fast for some reason or another, and the man wanted it to be a clean break, with no loose ends left behind. Among these loose ends was a holding of perhaps a dozen acres of undeveloped land at one edge of the town. He had bought this property many years back as an investment but had never done anything with it. He now wanted to sell it before he moved away. As a parting gift to the church, he was offering to sell it for exactly what he had paid years ago.
The minister was tremendously excited over this. His parish had never had much money. Here was a chance to make a killing overnight! Real estate values all over town had been soaring, and the area where the church member’s property lay was considered particularly desirable for homesites. The church could either resell the land for an instant profit or wait a little longer, put in a road or two, and sell off quarter-acre lots individually for still more profit. At last, the minister exulted, the parish was going to have money for all the good work that needed to be done!
Frank Henry said he was happy to hear this good news. He added that it sounded as though it might be a little too good to be true. In his experience, he said, instant killings and sure things usually turned out to be traps. Amateur speculators were always falling into them and crawling back out with their pockets emptied.
The minister said pooh-pooh. This was a gift from God. Sometimes the Lod punishes us and sometimes He rewards us. It isn’t our place to ask a lot of questions. We can only accept what is given. The minister wasn’t worried.
Frank Henry and I heard the end of the story a long time later. At the minister’s urging, the congregation voted to buy the departed member’s property and set up a committee to study what to to do with it. The committee determined that the best option would be to subdivide it and sell off individual lots. The committee chairman and the minister went to the town hall to apply for the necessary permits, and there they met the local building inspector, who told them the bad news.
That piece of land, he said, had some troublesome characteristics. It looked dry enough on the surface, but a couple of feet down it was pure swamp. No septic system you put in there would ever work right. More than one owner over the years had wanted to develop the place, but the town had always refused to allow it, unless the owner wanted to install a staggeringly expensive drainage system. That was why it had always remained undeveloped.
The church had been had.
The moral of the story, as Frank Henry put it, is that you can’t pray yourself rich. Indeed, if money is on your mind while praying, you are more likely to pray yourself poor. If you depend on God or any other supernatural power or agency to bring you wealth the chances are you will drop your guard and get flattened.
If there is a God, a question on which the Axioms hold no opinion, there is no evidence that this supreme being gives a hoot whether you die rich or poor. The Bible says several times, in fact, that from the viewpoint of maintaining a healthy Christian or Jewish soul, you are probably better off poor. Many eastern religions hold the same belief. (And Abraham Lincoln remarked once that God must have had a special love for the poor, since He made so many of them.) Thus, as far as the Axioms are concerned, it makes no difference whether you are devoutly religious, an atheist, or something in between. No matter what your beliefs might be, thoughts of God or other supernatural help should play no part in your speculative behavior.
Leaning on supernatural help produces the same result as leaning on a forecast or an illusion of order. It lulls you into a dangerously unworried state. Priests, ministers, and rabbis are always telling people they shouldn’t pray for money, but many do. If it isn’t a direct request for some specific financial outcome, it’s a blithe assumption by many pious people that they are beneficiaries of some kind of heavenly purse insurance: “God will protect me.”
Don’t count on it. God may do much for you, but one thing He plainly isn’t concerned about is the size of your bank account. That’s your problem. Yours alone.
Jesse Livermore, whom we met in our studies of another Axiom, leaned not on God but on another kind of otherworldly help. This may have contributed heavily to the final downfall of this complicated man. His story is worth examining.
Born poor on a Massachusetts farm, Livermore determined early in life that he would like to be rich. He went to Boston in 1893 and got a job in a stockbrokerage firm. Electronic display devices had not yet been invented; instead, stock price quotations were chalked on huge blackboards by agile young clerks scurrying up and down ladders. This was Livermore’s first job. As he matured in it, he developed what seemed to his friend an uncanny ability to guess which way prices were going to move.
The ability was undoubtedly a combination of good hunching and luck, but some began to mutter about clairvoyance and other occult powers. Livermore never totally accepted this as an explanation of his speculative success, but he never totally rejected it either. He went through his whole life wondering if it was true. Frank Henry, for one, believed Livermore would have been far better off if he had never been introduced to such mystical musings.
After he had been clerking for a few months, Livermore began to put money on his price predictions. The speculative medium he chose was a kind of betting parlor, common in Boston as in other cities, called a bucket shop.
Bucket shops promoted stock market gambling in its most bizarre and exaggerated forms. In a bucket shop you didn’t buy stocks themselves. Instead you placed various kinds of bets on price movements. It was pure horserace. The odds were rigged in favor of the house. To win, a speculator needed not only a lot of luck and good hunches but also a firm command of other skills we’ve been studying : when to cut losses, how to establish an ending position, and so on.
Jesse Livermore found that he had these skill sin abundance. He was a natural-born speculator. Starting with the tiniest of stakes – nickels and dimes saved out of his paltry salary – he quite quickly amassed something like $2,500, an enormous amount for a young man in those days. He sharpened his skills to such a degree that one bucket shop after another told him to take his money somewhere else.
He took it to Wall Street: the big time. There quickly established himself as one of the cleverest speculators who ever hit the Street. He was famous before he reached the age of thirty.
With his flowing blond hair and icy blue eyes, Jesse Livermore attracted women and newspaper reporters wherever he went. He married three times and kept mistresses in apartments and hotels all over America and Europe. He traveled with a herd of flunkies and sycophants. He could hardly walk a block in New York without being buttonholed by somebody who wanted investment advice. He photographed well and interviewed well, he looked and sounded like a man of unshakeable confidence. But inside, he was constantly being gnawed by that question about clairvoyance.
He didn’t know if he was clairvoyant or not. A lot of breathless newspaper and magazine articles said he was, and the sycophants all chorused agreement. Livermore thought sometimes that it might be so. At other times he concluded that the whole idea was nonsense.
He did have some astounding strokes of luck, which have support to the notion that he could see the future. He strolled into a broker’s office one day in 1906 and said he wanted to sell Union Pacific short. The broker was perplexed. Sell Union Pacific short? It was s supremely foolhardy thing to do. A bull market was in progress. Union Pacific was one of the hottest growth stocks on the board. Far from selling it short, the great majority of speculators were greedily buying it on margin.
But Livermore insisted on going short. The only explanation he ever offered was that he had a hunch the price was too high and a “correction” was coming. On the following day he returned to the broker’s office and sold another large bundle of the giant railroad company’s shares short.
The day after that, April 18, 1906, San Francisco was devastated by an earthquake. Millions of dollars in Union Pacific track and other property, plus untold millions in potential earnings, vanished beneath the rubble. The company’s stock price dropped like a stone. Jesse Livermore came out of the experience some $300,000 richer.
Seemingly weird events like that are bound to happen to anybody who speculates long enough. Every risk-taker has similar tales to tell. They will almost certainly happen to you. They don’t “prove” anything except that random events crash around blindly, hurting some, enriching others, and not caring which is which. Jesse Livermore undoubtedly was not the only plunger who sold Union Pacific short before the San Francisco earthquake, or who profited in some way or another from the great catastrophe.
It isn’t likely that many of the others thought they possessed a magical power to see the future. They must have realized they were just lucky. Livermore, too, was just lucky. But the “clairvoyant” label had been attached to him and the Union Pacific episode made it stick all the tighter.
There were times in his life when he tried earnestly to shake it off. This usually happened when his luck or “clairvoyance” forsook him, which luck will always do in time. When he was broke or going broke, he seemed to realize he had been depending too heavily on the supposed ability to see the future and then he would try to convince himself and others that he really had a more solid speculative footing than clairvoyance.
This happened for the last time in 1940. He had been bankrupt in 1934, had built up a fortune, but once again was in the process of losing it. In an apparent attempt to demonstrate that he was speculating by means of a rational system, rather than magic, he wrote a peculiar little book, published in 1940 entitled How to Trade in Stocks – the Livermore Formula for Combining Time Element and Price.
It was the kind of book that would have been applauded by Professor Irving Fisher, the fellow who went down the tubes in 1929 because he thought he saw patterns in the stock market. The book was a hymn to patterns. It contained charts and instructions about ‘Pivot Points’ and ‘Secondary Reactions’ and things like that.
It was perfect nonsense. Anybody who attempted to beat the market by following these instructions would end up very confused and perhaps broke – unless, of course, he or she was lucky. The book proved nothing except Livermore’s intense desire, at that point in his life, to get as far from the clairvoyant question as he could.
Perhaps he tried, in the end, to invent a speculative system that mixed charting and clairvoyance. That may have worked even worse than when he leaned on neither one separately. One afternoon in December, 1940, Jesse Livermore walked into New York’s Sherry-Netherland Hotel, drank two old-fashioneds, went to the men’s room, and shot himself dead.
Of course it is never possible to know exactly why somebody has chosen to end his or her life. Even when the person leaves a note, which Livermore didn’t, we are always left wondering which are real reasons and which are just easy explanations. Jesse Livermore was a complicated man with a complicated life, and it is conceivable his suicide was prompted by problems we know nothing of. “There were twenty different Livermores”, Frank Henry said sadly. “I only knew one of him.”
Still, it does seem likely that speculative difficulties were in the bag of trouble that weighed the man down. Speculation had been the great obsession of his life. At the time he was drinking his last two old-fashioneds at the Sherry-Netherland, his financial affairs were in disarray for the fourth time in his life. For the fourth time he was facing a painful truth: his approach to speculation was decidedly fallible. The voyance was not half as clair as he could have hoped. If he was leaning on that supposed gift of prophecy, it had let him down.
None of this means you are in danger of coming to Jesse Livermore’s tragic end. The Livermore story is only an unusually bizarre illustration of the way in which occult beliefs can get in the way of sound speculative thinking. Leaning on such beliefs may not be hazardous to your health, but it is to your money.