Why Ignoring Wall Street Can Make You A Fortune

Amber Hestla's picture

Wednesday, November 20, 2019 - 12:00am

by Amber Hestla

I love being an investment analyst and trader. But I also love the fact that I don't work in New York City with other analysts and traders.

I'm not the only one who feels this way. So does Warren Buffett.

Buffett has explained why he prefers Omaha to New York: "People know better, but when they hear a rumor -- particularly when they hear it from a high place -- they just can't resist the temptation to go along," he said.


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Here's more of what he had to say on the matter:

It happens in Wall Street periodically, and then you get what are, in effect, manias. You look back on it, and you can't really understand how it could have happened. A group of lemmings looks like a pack of individualists compared to what happens on Wall Street when it gets a concept in its teeth.

It's one of the advantages of being out in Omaha, frankly. I worked in New York for a couple of years, and people kept whispering to me on street corners. And I kept listening to them, which was even worse. So I got back to Omaha, where there's less chance you'll go way off the track.

Even though I'm not Warren Buffett, I can sympathize. Even though I'm a couple thousand miles from Wall Street, I still find people keep whispering to me.

By the way, here's the view from my "office" in Wyoming...

Amber's "office"

The point is traders and analysts love sharing their ideas. And while this if often done with good intent, it can also lead to the wrong ideas catching on -- or even outright mania, as Buffett mentioned.

For example, for years I've been fascinated by the story of Hetty Green, the "Witch of Wall Street." 

I've passed my research along to other traders over the years. (In this piece, for example, I wrote about how her ideas can be applied to trading in today's market.)

And in return, a lot of traders and analysts have responded by telling me I should research Jesse Livermore.

Jesse Livermore: The Great Bear Of Wall Street

Jesse Livermore​Livermore is a legend among traders. It's a rite of passage on Wall Street to read the book "Reminisces of a Stock Operator," which is based on his life.

The book describes his exploits as one of the biggest traders in the early 1900s.

According to legend, when Wall Street was crashing in the Panic of 1907, J.P. Morgan, acting as the country's first central banker, personally asked Livermore to stop selling short and forcing prices down. By the time that panic ended, Livermore had reported a profit of $3 million dollars in one day.

He was even invited to the White House thanks to a trade. When the United States entered World War I in 1919, President Wilson asked Livermore to sell some cotton to the government so they could make uniforms for the Army. Livermore had corned the cotton market as prices rose in the run up to the decision of the U.S. to enter the war.

Livermore's strategies were based on following the market action. He ignored fundamentals. He bought when prices were rising and sold when prices were falling. He took extremely large positions when he was right and let his profits run.

He also tried to cut his losses quickly when the market moved against him. But he had such large positions that he couldn't always get out quickly. As a result, Livermore ended up declaring bankruptcy three times in his career.

Why Hetty Green's Approach Is Better 

Livermore appeals to many traders because of his aggressive style. I prefer the style of Hetty Green, the unknown investor who also met with J.P. Morgan in 1907. She also made a fortune in that panic by lending money at high interest rates to bail out banks and cities. Hetty was conservative, and she never suffered from market reversals like Livermore did.

Yet, Livermore is required reading for new traders and analysts and Hetty is not. That could explain why we seem to enter mania after mania, with a large degree of leverage in the financial system. Traders try to duplicate the style of Livermore, with extreme ups and downs. They'd be a lot better off emulating Hetty Green.

Meanwhile, far from Wall Street, I'm duplicating the quiet success of Hetty Green. I follow her lessons on avoiding losses while growing capital under any type of market conditions. Like Hetty, when I see volatility and extreme emotions on Wall Street, I want to step in and take advantage of it.

Also like Hetty, I want to focus on the short term and find opportunities to compound wealth rather than making large bets that will either pay out big... or cause large losses.

It takes patience and discipline to trade the way. And being far, far away from the Wall Street noise helps, too. But thanks to this approach, I'm able to make a nice living on my own terms. And it's why my readers have been able to pocket hundreds (even thousands) in income each week with a 90.5% success rate in my premium Income Trader service.

My advice: take a cue from Hetty Green. By keeping your emotions in check and grinding it out with steady, successful trades in your portfolio, you'll be far ahead of the crowd over the long-term. (And if you'd like to learn how Income Trader can help you with this, just go here.)

Amber Hestla does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.