The Early Years of Jesse Livermore

Jesse Livermore is someone who has caught my attention and transformed it into fascination. He was born in the 1870's in Massachusetts. He attended school until the age of 14 when his father demanded he work the farm rather than continue with his education. This disappointed the young Jesse Livermore who had found a deep interest in numbers, math, writing, and reading books that weren't available at home. His father had dropped out of high school and worked on a small farm. He expected his son to contribute to the farm work and dedicate his life to being a farmer. Jesse had different ideas for his future. Bitter from being pulled from school experience which had opened his mind on subjects beyond the farm, Jesse wanted to escape the iron grip of his father and the destined future living as a farmer all of his life, as his father had done. Deciding the only way to escape both realities, he conspired with his mother, that he would run away, and catch a ride into town where he could start a new life for himself, and not be condemned to a future that was already chosen, without his consent. Giving him $5.00, his mother kept their secret and Livermore indeed, crept out and headed towards the road. He eventually caught a ride into town. Away from the farm, young livermore could pursue his love of numbers, love of reading, and could enjoy a new found freedom.

Livermore Finds Work as a Chalk Boy

Jesse rolled in to town and as it so happens, he walks into the office of Pain Weber. Just looking around, he sees young men writing numbers across a chalk board while another set of men watched the boards and called out orders. This environment fascinated livermore and after asking a couple questions, he soon realized the numbers on the board were prices of stocks as they were being bought and sold on the stock market. One of the "chalk boys" as they were called then, was out sick and the manager of the place, asked a wandering livermore, if he thought he could fill in. The rest is history as they say! Livermore's love of numbers and fascination with the city life he was now experiencing, took the offer and wrote the stock market quotes of a company assigned to him, on the chalk board as another young man in the office, called out the stock quotes. Livermore was intrigued. He had a good sense for numbers and wrote the quotes so flawlessly, he was hired as a new Chalk boy for the office. The small salary was enough for him to rent a room a few blocks away from the Pain Weber office. Every morning, he would arrive to the office before everyone else. Sometime he waited outside at 6a.m. waiting for the others to arrive and open the office. He started reading multiple newspapers and developed a keen sense for what was happening in the stock market, in business, in the economy, in global trade, in finance, and many other subjects that gave him new and fresh perspectives on how the world operated. I have tried this approach, disciplining myself to read multiple newspapers every single day. I have done this for the past 8 years, and I want to say, IT WORKS! I see why this guy was so interested in newspapers now! One of the main and most important things I came to learn is that the news is distributed to the masses. This means people are getting the same general information. What is most important however, is how that information is interpreted! It takes time to learn, but if you're a newspaper reader and stock trader, I'm sure you know what I mean. Often stories and market activity appear at odds to the untrained eye.

Stock Market Repeating Patterns

Anyways, back to Livermore, Each day as he wrote the stock quotes on the board for the investors and spectators who would call out buy and sell orders when certain quotes were drawn, Livermore began to notice some repeated patterns. They included the patterns occurring in the the stock quotes he was writing on the chalk board. He began to notice and carefully observe the fluctuations in price movements. He watched how those price movements moved in conjunction with other stocks,or another company in the same industry. He watched the fluctuations occur as news events were reported in the office. He noticed there were patterns at those times too. The second and possibly most important observation that Jesse Livermore had was the reaction of the people themselves. From the other Chalk Boys, to the Manager of the office, to the men watching quotes, trying to decide whether to buy or sell stocks. They all reacted in predictable manners when certain events occurred. He noticed for example that when stock prices pulled back after a strong rise, men in the office would rush to sell their positions not wanting to lose their profits. As they sold, the price of a stock went down a little more but then start to rise again. He would watch the frenzy like excitement in the office as those same investors who just sold a stock, now jumped back in with excitement as it rose. Livermore noticed that emotions were high and seemed to guide investors decisions not only in that office, but surely around the country. He calculated that human emotion collectively could be predicted to have certain impacts on the prices of stocks. If bad news came out, investors quickly sold a stock, only to often watch it rise past the level they sold it at a few weeks later. He would watch the bewilderment and even the confusion the men exhibited in the office as they reacted to stock price fluctuations. in the market when certain conditions were met. He would go on to explain in his later years that his desire to work alone and trade his own account, was so he could focus on his own ideas, thoughts, emotions, without the distraction of investors who were excited, nervous, and the various other emotions the stock market can invoke in traders. The exhilaration that comes from testing your ideas on the market is amazing. Being right as a result of your work and trading execution, is a very rewarding feeling. The ability to repeat it with high probability, is even more rewarding.

A Numbers Game Becomes Profitable

Jesse began keeping a notebook that he carried with him. It was filled with stock quotes that he had seen or written earlier in the day. When he arrived to his room after a days work, he carefully went over his notebook, studying the patterns that he had seen in the office. He began making trades in his notebook that weren't real, but practice to put his intuition and theory of patterns to the test. Surely he thought, if the market had patterns just like he observed, than its movements could be predicted with good accuracy for the specialist trained to see such a thing. As the story goes, Livermore would use his experience and knowledge on movements, and make fortunes in the stock market with that knowledge. A self made, self taught, man whose life went from poverty stricken, to one of the wealthiest in the country in his day. He worked from a numerical basis only, saying charts were confusing and misleading. I had no idea what that meant until I forcefully trained myself (painfully in the beginning) to watch stock prices not on charts but only on time stamps that show a buy or sale, the share amount, the company, and the time the transaction was made. From an online broker, this is an option in your screen that you watch stock prices from. It's called Time Stamp or something to that effect. What you realize is the chart is an after shot. Whats on the printed time stamp list is real trades, letting you get a better sense of what directions stocks are going and how powerful that direction is. Charts show that after its already happened. I see why charts can be confusing! I use them but as a secondary measure, Watching actual trades on a list is much easier, and much more revealing! Another reason I like this Livermore guy! He got me off using mostly charts, and taught me how to see and interpret where the real action is! I prefer following stock prices on a numerical base now.

My Stock Sale: Real-Estate Company CBG

I recently sold CB Richard Ellis Group Inc. whose stock ticker is CBG, earlier this week after I noticed a couple days before the CBG earnings release, the stock prices seemed to be falling on heavy volume. There was a day this week where the markets were generally up as measured by the Dow Jones Industrial Average, Nasdaq, and S&P500, but CBG seemed to be falling. I immediately took this as a Strong Sell signal, and I sold. I had been holding this company since December 13th when I got in at $20.31 per share. It recently reached over $29.50 but began to pull back. I sold on Tuesday, April 26th 2011 at $28.51 per share, rise of 40.4% in four months! I do want to mention, I had been watching and studying this stock and its price movements for nearly 3 months prior to me Buying it. On Wednesday of this week, CBG Released their quarterly earnings and the Earning Per Share came in one cent short of analyst expectations. The Stock has been falling since. To see a broader chart with more info on CBG provided by the New York Stock Exchange - EuroNext website, visit CBG Stock Market Chart.


*** CBG 6 Month self-updating Chart ***

Patience in Stock Trading is Key

In stock trading, Patience is everything! Wait to get in at the right moment. Because its possible to buy a good stock at the wrong time, or even a bad stock at a good time, (don't teach that on financial network CNBC) making sure you enter and exit is so very important! I noticed this stock was in a leading industry and for months, I watched both the stock and the industry. When I believed it was going to rise and rise quickly, I got in. I have embedded a 6 month chart of CBG here. Notice the December month and how the stock just took off. In trading, you almost have to see what is going to happen, then act on it. As you can see, hard work studying this move paid off, as a nice rise in a short amount of time, was my objective with this company. When I bought, I'd just started my website: Investing for Beginners When I took a position in this stock. I want to stress, that getting out as strategically as you got in is as important as ever in my opinion. When you get in a stock, you should have an expectation for how high it could rise. For me personally, I want a 10 point move out of a stock. If I buy and don't think I'll get it, I'll sell and go to cash while I scope my next moves. As I look, CBG right now is trading at $26.71 and had dropped as low as $26.45 (3 days after I sold my CBG position at $28.51). I must admit, although I'm tempted to get back into this stock if it begins rising on heavy volume, my intuition and past trading experience, tells me to take my 40% return with a satisfied smile, now go look for another company to start tracking, and an economy awaits to be evaluated! This also takes patience as it can be tedious and a time consuming, constant effort process it seems. But just like a Wise Trader named Jesse Livermore once said, Patience is Key. I learned to respect it and now experience benefit of its meaning.

Microsoft Stock Price Falls After Earnings

In earnings announcements, releases, or updates - check for revenue levels (growth or declines in hard numbers and percentage terms compared to previous year, previous quarter, or same quarter in a year ago period) in core product or services i.e. Microsoft Reported Earnings on which revealed revenue had declined from its core operating system software. Reasons could include the strong emergence of the ipad and similar tablet computer devices. Because Microsoft was slow to enter or compete in these markets, many people are now using computing devices that don't run on Microsoft operating systems or Microsoft's networks. This could indicate that peoples preference for connecting to the internet and using computers, evolve from PC's and laptops, to these new futuristic like tablet devices that can do many of the same things. Microsoft in my opinion has to respond somehow.

With consumer interest expanding and sales of these Tablet Computers increasing, Microsoft may be missing out on this emerging market. The Tablet Computers don't run on Microsoft software and as more people switch from laptops to tablets, Microsoft may be getting left of this rapidly growing market. Microsoft software is not run on these devices and while more and more people leave their computers and laptops behind for a tablet computer, the effect could weight on Microsoft Core Revenue growth number for sometime. In my mind, the advent of Cloud computing has really contributed to the success of the computer tablet as a preferred way to access the internet.

Cloud Computing and Microsoft

Now without the need of built in software programs or many other files, Cloud Computing allows access to these type of things using the internet to access them on a remote server. This allows the light, sleek mobility and sharp look of the ipad or other tablet computers which can allow a user to simply access all their files and programs using cloud computing. Someone could log in to their works systems from home with an internet connection. Microsoft can still lease their software to companies that run servers and then lease space to users who can then access Microsoft's products. However, it is my feeling that Microsoft did not have an effective strategy or counter strategy to deal with the emergence of cloud computing and computer tablets. Although I credit them for battling Google with the launch of the search engine Bing, Microsoft should have had their attention more focused on Mobile Search, Cloud Computing, Social Networking, and even video. As more and more people begin to use the internet for the very first time, the services that rule like Sales Force's Customer Relations Management software (basically an interactive database) or EMC Corporation. efforts in the cloud computing field, The future I believe will be ruled by internet giants and makes me wonder if Microsoft days of glory have passed. I associate the revenue in core business that fell, as a correlation to what its stock price has done or even its co-founder, Bill Gates.

Bill Gates Dumps Microsoft Stock

In November of 2010, I started noticing in the newspaper's business section in a column that lists large stock sells by an insider or corporate officer, That Bill Gates was dumping his Microsoft stock. Each day I checked this section of the paper, and sure enough Bill Gates continued to sell block after block, day after day of his Microsoft Stock. I must tell you, I don't pay much attention to what the insiders are doing. Most of these guys or ladies are professionals in their fields, not experts in investing. If they knew investing so well, they would run a hedge fund of something of that nature. That being said, they do have information or insights working for a company, but that doesn't necessarily mean the actions of the market are going to line up exactly with what they think will happen by deciding to buy or sell the stock of their own company. Anyways, back to the point... This selling by Bill Gates pretty much on a daily basis, went on to February 2011. This entire period, I watched Microsoft Stock price go from between $24 to $27 per share. The fact that I was watching and trading in other stocks, some of which went up over 60% during the same time, made me realize Microsoft stock at this point in time, is a dud. I don't see it going over $28 a share by the end of the year. It is currently trading at $25.62 per share. Although the increase I predict is minimal, there are many many better choices in stocks to make if you are looking for a better. I see Microsoft as falling behind in the internet / cloud computing era, losing ground to some might competitors like Apple, Google, or Facebook on various fronts. The way I see it, Bill Gates may have known this back in November 2010 when I first noticed that he was unloading big portions of his Microsoft holdings. Not only that, his heavy selling kept the price down. That's why it hasn't climbed. As Mr. Gates heavy selling of Microsoft stock undoubtedly, put downward pressure on the stock price, those still holding, had to deal with the effects of a stock that didn't really move. Investors shouldn't pay attention to insiders, but when its the second richest man in the world dumping stock of the company he founded, I think an exception can be made!

**Self Updating 90 day chart of Microsoft Corporation**

U.S. Economic Engine Slows in 1st Quarter

The U.S. Economy ended 2010 with a strong quarter. In the 4th quarter of last year, the economy expanded at a 3.1% rate. For the first quarter of 2011, that expansion rate dramatically slowed and according to the United States Department of Labor in a report they released yesterday that was titled: Productivity and Costs, 4th Quarter and Annual Averages 2010, Revised. The U.S. output for the 1st quarter of this year (which covers the January through March period) expanded at just a 1.8% rate. This is another example of how analyst can totally blow their estimates. At the beginning of this year, they were predicting a 4% GDP expansion rate for the first quarter. Obviously they are now giving new estimates, citing the middle east turmoil, steadily rising oil and gas prices, and rising commodity prices, analyst are now rushing to change their forecast and have the public forget about their last one. Kind of like the weather when the weather man says dress warm, its going to rain, only to have it become a nice sunny day. Yet, we are suppose to listen again to the next forecast!

Wheat Futures Continue to Climb

When I checked the commodity levels in the NY times yesterday, Wheat was at $8.41 per bushel. Keep in mind, countries around the world that included Jordan, Egypt, India and others experienced rioting in 2008 when Wheat was just over $9 per bushel. The rioting was largely attributed to rising food prices that was led by Wheat. In many of these countries, where the majority of the population is poor, a rise in food prices could be the matter of survival, leading to a feeling of organization to protest the exorbitant prices. I'm watching Wheat prices carefully; the high in a 52 week period reached $9.50 per bushel, and the current prices are steadily marching towards that direction. I've seen them climbing the past few weeks.

One exception in Commodity prices that I've generally observed recently is the falling prices prices of sugar futures. Interestingly enough, as I've watched other major commodity staples rising, Sugar has actually been declining. In the past few weeks, I've watched the price of sugar futures go from $28 to $23 per pound. To follow Sugar Prices or see other Commodity performance and charts, I visit www.indexmundi.com Obviously, oil continues to make production more expensive, as the cost of transporting goods or operating machinery has also risen in price. The added costs to run farm equipment and to ship goods, has become more expensive over the past several months, but for some odd reason, sugar continues to fall. The New York Times Business section reserves a portion of their newspaper for reporting on commodity prices. While I've watched most rise, it has been very interesting to simultaneously, watch sugar fall. I will keep a close eye on this situation for any further developments and will blog what I see in a future post.

Global Oil Prices March Higher

With the growing middle classes of China and other countries around the world, the increase global demand for oil and speculation of inflation across the board, has all contributed to the rise in oil prices. Consumers and businesses will have less discretionary income, since more will go to pay for oil related costs. On the other-side however, as the U.S. economy slowly improves, more people will go back to work, and more cars will be driven I personally have followed oil prices for the past 7 years. From what I see, these prices which currently stand at $112 per barrel, won't be going down anytime soon. As summer approaches and people begin to travel and take vacations, the added demand may send gas prices and oil prices up even higher. I learned not to be mislead by news reports or Analysts predictions. As a matter fact, here is a post I did on Goldman Sachs a couple weeks ago where they were publicly advising their clients to sell oil, saying short term prices would be going down. I completely disagreed and was somewhat outraged, as I felt Goldman Sachs was trying to pull a fast one on the public (Not like that has ever happened before right?) Here's a link to that particular post: Goldman Sachs Bearish on Oil, Yeah Right! I don't believe that for a second.

One could also look at the drop in home prices that continues to weight both on the market, and on consumer sentiment. Winter blizzards across the Midwest that have occurred in the past couple of months, shut many businesses temporarily, and even halted construction projects. The effect of this included a slow of investment dollars into non-residential construction projects, things like retail shops or business offices. This should cause prices in non-residential structures continue to fall as the added inventory means more competition to sell these building. With added competition, there will be sellers who drop their prices to appear more attractive to buyers. If others follow suite, prices will decline as a whole, much like what has already been happening in the U.S. real estate market. I've watched the 30 year fixed interest rate each day, and recently saw it currently stands at 4.77&. This is slightly higher than before, and indicates that loans for Mortgages may be going up. As more loans are demanded, the Interest rate goes up, since this means the lender can charge more for the loan and most likely get it (from increased demand for loans. I keep a close eye on many things in the market, but commodity prices, oil prices, unemployment situation, mortgage rates, lending rates, and stock market levels are some of the areas I focus closely on day in and day out. From what I can tell, the rest of this year should show expansion in GDP, but any unforeseen events like massive tornadoes or uprisings could quickly change that.

South Korean Search Engines vs. Google

South Korean Search Engine Companies recently filed complaints against Google claiming the Android that often comes preloaded on a phone, has Google as the default search engine and makes for uncompetitive practices in the growing mobile search market. NHN Corporation is the owner of the largest South Korean search engine, Naver. The second largest is Daum. Both companies asked the South Korean Trade Commission to Investigate whether Google intentionally offered their Android Operating System free to phone manufacturers, in order to reach the South Korean consumers directly when they buy phones with Google already installed as the search engine. The South Korean Search Market is competitive, especially with a growing base of smart phone users moving into the future.

Worldwide, Google's Android is expected to become the preferred Operating System on most Smart Phones. In South Korea, about 2/3 of all Smart Phones sold in 2010, were running on Google's Android OS . Combined, Naver and Daum control more than 70% of the mobile internet search market in South Korea. Part of the complaint was that Google was blocking installations of selecting a different search engine for your phone if it was Android equipped. The newspaper ran a story about this the other day and said it was proven that switching the search engine on an Android ran phone was possible. Nevertheless, the South Korean Search Engine giants do not want to yield market share to Google or any other competitor.

South Korean Mobile Search Market

The reality that more and more people are buying smart phones or trading their old cells in to get one, means that in South Korea, the Mobile Search market is expected to expand rapidly. Ad revenue from Mobile Search should grow, and a battle is on for Search Engine users who may be using it more from their phone than ever before. The numbers are staggering for the mobile phone growth. Looking at South Korea in 2009, the country had 800,000 Smart Phone Registered users. Now, the number is higher than 10 million with many analyst predicting that it will reach 20 million smart phone users by the end of this year. Whatever the number, one thing is clear, smart phones are on the rise, and competitive markets for mobile ad revenue are emerging in places beyond the United States where it use to to be Bing and Google who were the big competitors. They still are of course, but Google has more than just Bing on its mind in regards to its competition, it is looking to increase market share around the world. South Korean Companies undoubtedly will look to do the same.

Short Android Introduction Video

As I was researching Android after reading about they complaints from the two South Korean Search Engine companies, I came across this interesting video. Nick Sears is one of the co-founders of Android, he is the first person speaking in the video. It's short but just like its title, it is a very brief introduction into Android. Although I can see the South Korean company's point, I don't think Google is responsible for breaking any laws or conducting improper strategies to gain market share. Its like accusing Microsoft of having a monopoly on computers, since many come with the Microsoft windows preloaded. I think South Korea will have to find a way to remain competitive, much in the same way Google has been able to enter markets around the world. The Mobile Search Market is growing and growing fast!