Lessons From Jesse
I just finished reading Reminiscences of a Stock Operator, by Edwin Lefèvre. It is a biography of Jesse Livermore, a depression-era securities trader, who made and lost millions over his stock trading career.

The striking thing about this book is the fact that it's truths are timeless and still apply today. This book could easily have been written today and not 70 years ago.

One particular section caught my eye with regard to the current gold market is the following. Though he is talking specifically about stocks, the same applies to any commodity, including gold:

As I have said a thousand times, no manipulation can put
stocks down and keep them down. There is nothing mysterious
about this. The reason is plain to everybody who will take the
trouble to think about it half a minute. Suppose an operator
raided a stock -- that is, put the price down to a level below
its real value -- what would inevitably happen? Why, the raider
would at once be up against the best kind of inside buying. The
people who know what a stock is worth will always buy it when it
is selling at bargain prices. If the insiders are not able to
buy, it will be because general conditions are against their
free command of their own resources, and such conditions are not
bull conditions. When people speak about raids the inference is
that the raids are unjustified; almost criminal. But selling a
stock down to a price much below what it is worth is mighty
dangerous business. It is well to bear in mind that a raided
stock that fails to rally is not getting much inside buying and
where there is a raid, that is unjustified short selling --
there is usually apt to be inside buying; and when there is
that, the price does not stay down. I should say that in
ninety-nine cases out of a hundred, so-called raids are really
legitimate declines, accelerated at times but not primarily
caused by the operations of a professional trader, however big a
line he may be able to swing.

For over 10 years now I have watched the gold market get taken down almost daily by central banks who do not want a rising gold price to spell an end to their money printing cartels. And inevitably, the price continues to bound back, even higher after every crash. I think the above explains beautifully why that is.



With every massive sell-off of gold, such as the most recent which set the price back from $1900/oz. to $1600/oz., the insiders who know what gold is "really" worth simply begin buying it again at these artificially low prices. This of course forces the price up again.

Who are these insiders? China, Russia, India, the Arabs and Japanese. They know the dollar is toast and therefore gold is undervalued in dollar terms. These "insiders" are more than happy to buy all the gold they can get their hands on as they know the world is heading toward some sort of a gold-backed monetary system. The global rush to accumulate gold is over 10 years old with no end in sight.

As Jesse states above, no man or government can hold a market down forever. And to those who know the true value of that market, these short term take-downs are nothing but gift-wrapped buying opportunities.

Thanks Jesse for the reminder that the more things change, the more they stay the same.