the stock market it is timing, timing, timing. In order to assure himself that his timing was correct Jesse Livermorewent through a complex checklist before he pulled the trigger on a trade.It was also his observation that on many occasions the timing on selling astock was just as crucial as buying a stock; in fact, sometimes the sellingwas the more difﬁcult decision.Any stock trader will tell you that stock buying is the easier of the twotrades—getting in is the fun part. When traders buy stocks they are full ofhope and perhaps a touch of greed, so when they pull the trigger and buy astock there is often a feeling of elation, euphoria, similar to the feeling aperson gets when he makes a major purchase such as a car, or a house, ora boat. These feelings stem from the emotions of hope and greed. It islater, if the trade shows losses that these emotions often turn into fear. Thetrader has to ﬁght a constant emotional battle.This is where the second phase of Livermore’s Trading System, theMoney Management phase, becomes essential—choosing the moment tosell. Even if the stock goes in the right direction and the trader prospers bygaining several points, he still has to decide when to sell his position:Should I take the proﬁt now, or should I wait?The Livermore philosophy on this point is simple, like the rest of histrading strategies. You need valid reasons to buy, and you need valid reasons to sell. Some of Livermore’s greatest long-term triumphs in the market occurred when he bought a stock and waited for a valid signal to sell.
9
10
TRADE LIKE JESSE LIVERMORE
This book explains in detail when the buy signals occur and when thesell signals appear. It will be up to the astute trader to follow these signals correctly.Your timing should never be dictated by high prices. High prices werenever a timing signal to sell a stock. Just because a stock is now selling ata high price does not mean it won’t go higher. Livermore was just as comfortable on the short side, if that was the direction of the trend. Just because a stock has fallen in price does not mean that it won’t go lower.Livermore said: “I never buy a stock on declines, and I never short a stockon rallies.”Buying stocks as they made new highs and selling short as theymade new lows was a contrarian point of view in Livermore’s day. Helet the market tell him what to do. He got his clues and his cues fromwhat the market told him. He did not anticipate; he followed themessage he received from the tape. Some stocks keep making new highor lows for a very long time, and therefore can be held for a verylong time.Livermore had a reputation as a high-ﬂying speculator, not unlike ahigh-stakes gambler. Nothing could have been further from the truth. Livermore was more conservative in his trading than anyone ever knew. TheLivermore Trading System was a disciplined procedure for him. Simplystated, it was an attempt to place as many factors in the trader’s favor aspossible. Or, put a different way, don’t make a trade until all the odds arein your favor.The trick for Livermore was to have the discipline to often refrainfrom trading until the perfect, or as close to perfect as possible, tradecame along. And they did. Like streetcars, another one always camealong—better to miss one than to get on the wrong car and take a trip toﬁnancial hell.With this in mind, the ﬁrst thing Livermore did in his timing systemwas to check the overall direction of the market. It is important to reiterate that he did not care which direction the market was moving. Therewas always a trade possible for him, either up or down, short or long. Healways wanted the wind at his back. He wanted to trade with the trend,not against it. This may sound simple but just consider how many sophisticated mutual funds and investors were buying stock during the lastfew years when they should have been out of the market altogether, orselling short!Figures 2.1–2.3 illustrate the dramatic fall the stock markets experienced over the last three years. They had been in decline long beforethe 9/11 tragedy and bottomed out soon after that date. The only waytraders could make money in such a market was to trade the short side.
Timing Is Everything
11
Figure 2.1 This chart (one of three) illustrates the precipitous fall the markethas recently experienced.
This is usually prohibited for most mutual funds, which eliminatedthese type of funds from the possibility of making a proﬁt under thesecircumstances.Few people understand the short side of the market. In Livermore’sday, as in the climate of today’s trading, very few people would speculate on a stock going down. In fact, very few people understand thatyou can actually place an order to short a stock and make money as thestock price declines. Less than 4 percent of investors or traders actuallyever short stocks.Livermore shorted stocks, and this was one of several speciﬁc reasons why he was such a successful trader. He had concluded that thestock market goes up approximately a third of the time, sideways a thirdof the time, and down a third of the time. Therefore, if a trader only tradesin anticipation of a stock rising in price he is wrong on the trade twothirds of the time!
12
TRADE LIKE JESSE LIVERMORE
Figure 2.2 This chart (two of three) illustrates the precipitous fall the markethas recently experienced.
The speculator Louis Smitten deﬁnes the steps of a short sale asfollows: the sale of stock you don’t own, in anticipation of a drop inprice.1. Stock is borrowed from your broker for delivery to your account.2. Later, you purchase stock in the open market and return it to your
broker to pay back the stock you borrowed. This completes thetransaction.In other words, the stock is sold ﬁrst, then bought back at a later date, andat, it is hoped, a lower price. This is the reverse of a normal buy-ﬁrst, selllater transaction.So, the ﬁrst step in the Livermore procedure before making a trade isto determine the direction of the overall market—Livermore referred to
Timing Is Everything
13
Figure 2.3 This chart (three of three) illustrates the precipitous fall the markethas recently experienced.
this as determining the Line of Least Resistance. He did not generally usethe terms “bull” or “bear” for a very speciﬁc reason: He felt these terms ledthe trader to have a mind set that would cause him to anticipate the direction of a trade or the direction of the market—a deadly and dangerousthing to do—because the market is a dynamic entity driven by people’semotions—not reason.Don’t try and anticipate what the market will do next—simplygo with the evidence of what the market is telling you—presentingto you.—Jesse LivermoreThis is a complex, confusing area for traders in understanding theLivermore theory. There are times when his approach may appear con-
14
TRADE LIKE JESSE LIVERMORE
tradictory and confusing. You may ask yourself: Isn’t Livermore’s wholetheory a way of anticipating the direction of the market before ithappens?In the Livermore Trading System, the answers are always apparentin the actual performance of the stock. It is the trader’s job to investigate the facts and solve the mystery, to be like Sherlock Holmes—onlydeal in the facts that are presented by the stock—Do not anticipate what will happen next—Always wait for the market to conﬁrmyour trade.The successful speculator must formulate his plan in advance of astock’s movement. Because the market is driven not by logic but by emotion, it is most often unpredictable and goes against logic. Livermore believed that to even out the odds and increase the safety of a trade thetrader had to wait for the market to conﬁrm his judgment. This requiredpatience and discipline, two rare traits in most people. But if you followthis advice, you are in effect getting insurance on your position becauseyou have waited until the market has shown you what it is going to do.The rule is not to place your trade until the market itself conﬁrms youropinion or shows you a different path to follow.News items can often be deceiving. They can have less of an effect onthe market than one might think or, by contrast, they can have a greatereffect. The point is that there is no telling what effect news will have. Ascan be seen by the previous charts (Figures 2.1, 2.2, and 2.3), after thetragedy of 9/11 the market went down, but not as deeply or for as long ashad been predicted. This was because the market had already been declining for more than a year.It is too difﬁcult to know what is going on in the inner workingsof the market at the time of a news release. To illustrate: Perhaps themarket has been in a long-term period with plenty of solid momentumbehind it. In that case, a bullish or bearish piece of news may haveno effect. The market also may be in an overbought or oversold condition and absorb the news item without a tremor, effectively “ignoring”the news.When dealing with the news and its impact on the stock market,do not anticipate by using your own judgement and in effect “guess”what will happen. You must study the action of the market itself. AsLivermore said: “Markets are never wrong—opinions often are. He alsoremarked:Timing in the stock market is the key to success. A trader may deduce that a stock is going to go up or down in a big way and eventually he may be correct. In fact, if you have any experience in themarket this will ring true. I knew that stock was going to go up ten
Timing Is Everything
15
points—I was just too darn early on the trade. I lost my money but Iwas ultimately right on the stock. I just moved too soon, the marketwent against me and I sold out my position for a loss. I even made asecond attempt to buy it and it dropped three points, I got nervous,so I sold it.Often a trader will move too soon and then doubt his opinion on thestock and sell it out. Or perhaps he makes other commitments and has nomoney left to buy the stock when it does make a move. Having been toohasty and having made two erroneous commitments, he loses courage.This is a common lament of stock traders.What a trader is battling here is basically his greed. He wants everypoint out of the move and will kick himself if he is a point or two on thelate side of the trade. Don’t be anxious to make the trade. Wait for the conﬁrmation of the market before you place your order. Think of it as a smallinsurance plan—lose a point or two and help eliminate the bad trades onthe times when you are wrong and everyone is wrong on at least some oftheir trades.Say, for instance, a stock is selling around $25 and has been consolidating within a range of $22 to $28 for a considerable period. Assumingthat you believe that the stock should eventually sell at $50, have patience and wait until the stock becomes active, until it makes a newhigh, at around $28 to $29. Watch for an increase in volume activity, say50% or more over normal volume. You will then know that you are correct. The stock must have gone into a very strong position, or it wouldnot have broken out. Having done so, it is altogether likely that it is starting a very deﬁnite advance—the move is on. That is the time for you toback your opinion. Don’t let the fact that you did not buy at $25 causeyou any aggravation. The chances are if you had, you would have become tired of waiting and would have been out of it when the movestarted, because having once gotten out at a lower price, you would havebecome upset and perhaps fearful, and would not have gone back inwhen you should have.A key factor in the Livermore Trading System’s timing approach is tobe correct in the trade right from the beginning. You should have waitedpatiently until all the factors were in place before pulling the trading trigger...therefore the stock should move in the direction of your trade almostsimultaneously with entering the trade . . . that is, if you have acted correctly and been patient.By contrast, if you have made a decision to enter a trade and the stockdoes not move quickly, and perhaps just lies there, languishing going sideways, or if it moves against you in the opposite direction of your trade,you should consider immediately closing out that trade.
16
TRADE LIKE JESSE LIVERMORE
Experience proved to Livermore that the real money made in speculating was “in commitments in a stock or commodity and showing a proﬁtright from the start.”Livermore believed that if he was right in his timing and pulled thetrading trigger at the appropriate moment, then the momentum would belike a tidal wave right behind the trade, and it had to go up. Therefore, ifthe stock did not go up right away he would have to assume his judgementwas wrong. Yet there were times when Livermore admitted he did nothave the patience to wait for the right moment, because he wanted to constantly be in the market.You may well ask: With all his experience, why did he allow himself tobreak this rule? Livermore’s answer: He was human and subject to humanweakness. Like all speculators, he permitted impatience to outmaneuvergood judgment.There are aspects of trading that are very close to gambling, such asplaying card games like poker and high-stakes bridge, which Livermoredid every Monday night in his mansion on Long Island. Everyone who enjoys these games has an inclination to play every hand and win every pot.It is a key ﬁnger on the hand of greed, and if not curtailed by the self-discipline to adhere to the trader’s own rules, it will almost surely become hisgreatest ﬂaw. If not understood, it will surely bring about his downfall.Livermore exhorts the trader to have patience and wait until all factorsare in his favor.Livermore spent a great deal of time trying to determine when to sell astock. The timing on the sale of a stock is just as important as the purchase. Your buy can be perfect, but unless you sell at the right time, theentire trade may not show a proﬁt.It is a human trait to be hopeful, especially when you buy a stock; andto be equally fearful when you sell. Livermore believed that when you inject hope and fear into the business of speculation, you face a very formidable hazard, because you are apt to get the two confused and in reversepositions.Here is an illustration of the timing sequence in a typical trade. Youbuy a stock at $30.00. The next day it has a quick run-up to $32.00 or$32.50. You immediately become fearful that if you don’t take the proﬁt,you may see it fade away—so you sell and exit the trade with a smallproﬁt, at the very time when you should entertain all the hope in theworld. Why should you worry about losing two points’ proﬁt that you didnot have the previous day? If you can make two points’ proﬁt in one day,you might make two or three the next day, and perhaps ﬁve more the nextweek.As long as a stock is acting right, and the market is right, be in no
Timing Is Everything
17
hurry to take a proﬁt. You know you are right, because if you were not,you would have no proﬁt at all. At this point, you should let the stock ride,and ride along with it. It may make a very large proﬁt. As long as the market action does not give you any cause to worry, have the courage of yourconvictions . . . stay with it.By contrast, suppose you buy a stock at $30.00, and the next day itgoes to $28.00, showing a two-point loss. You would not be fearful that thenext day would possibly see a three-point loss or more. No, most traderswould regard it merely as a temporary reaction, feeling certain that thenext day it would recover its loss. But that is the very time when youshould be worried. That two-point loss could be followed by two pointsthe next day, or possibly ﬁve or ten within the next week or two. That iswhen you should be fearful that, because you did not get out, you mightbe forced to take a much greater loss later on. That is the time you shouldprotect yourself by selling your stock before the loss assumes larger proportions.Livermore learned that proﬁts always take care of themselves butlosses never do.His doctrine for the trader was to insure himself against considerablelosses by taking the ﬁrst small loss. In so doing, the trader keeps his account in cash so that at some future time, when a good trade presents itself, he will be in a position to go into another deal, taking on basically thesame amount of stock as he had when he was wrong.This strategy allows the trader to be his own insurance broker, because the only way he can continue trading stocks is to guard his capitalaccount and never permit himself to lose enough to jeopardize his overalloperations and be unable to trade at some future date, when his marketjudgment is correct.Livermore was convinced that nothing new ever occurs in the business of securities or commodities trading or investing. There are times tospeculate, and just as surely there are times not to speculate and stay outof the market.He believed in a very true adage: You can beat a horse race, but youcan’t beat the races. This is true with the stock market. There are timeswhen money can be made investing and speculating in stocks, but moneycannot consistently be made by constant trading every day or every weekof the year. Only the foolish will try. He felt that this strategy just was notin the cards and could not be done.The trader may ask himself a major timing question: Why can’t Ijust pick the correct time to buy a stock and then just forget about selling that stock because I am in for the long haul? If the last three yearshas taught us anything, it should be that there are no stocks that can
18
TRADE LIKE JESSE LIVERMORE
just simply be bought and put away, hidden in our mattresses for theyears to come.Livermore believed that there are no good stocks! There are onlystocks that make money!This book offers some of Jesse Livermore’s dos and don’ts for traders.One of the primary don’ts is: One should never permit speculative ventures to run into investments. Don’t become an Involuntary Investor. Investors often take tremendous losses for no other reason than that theirstocks are bought and paid for. How often have we all heard an investorsay: “I don’t have to worry about ﬂuctuations or margin calls. I never speculate in the market. When I buy stocks, I buy them for an investment, andif they go down, eventually they will come back.”But unhappily for such investors, many stocks bought at a time whenthey were deemed good investments have later met with drasticallychanged conditions. These such so-called investment stocks frequentlybecome purely speculative. Some go out of existence altogether. The original investment evaporates into thin air along with the investor’s capital.This is due to the failure to realize that so-called investments may becalled upon in the future to face a new set of conditions that would jeopardize the earning capacity of the stock, which was originally bought for apermanent investment.By the time the investor learns of this changed situation, the valueof his investment has most likely already greatly depreciated. The stockmarket moves in future time, not present time. Therefore, the so-calledinvestor must guard his capital account, just as the successful traderdoes in his speculative ventures. Then, those who like to call themselves investors will not be forced to become unwilling investors—norwill trust fund accounts and mutual funds accounts depreciate so muchin their value.In Livermore’s time it was considered safer to invest money in railroad stocks such as the New York, New Haven & Hartford Railroadthan to have it in a bank. On April 28, 1902, New Haven was selling at$255 a share. In December of 1906, Chicago, Milwaukee & St. Paul soldat $199.62. In January of that same year, Chicago Northwestern sold at$240 a share. Look at those safe investments approximately 40 yearslater.On January 2, 1940, they were quoted at the following prices: NewYork, New Haven & Hartford Railroad $.50 per share; Chicago Northwestern at 5/16, which is about $0.31 per share. On January 2, 1940,there was no quotation for Chicago, Milwaukee & St. Paul, but on January 5, 1940, it was quoted at $.25 per share. In Livermore’s time, hundreds of stocks considered gilt-edged investments eventually wereworth little or nothing. Great investments tumble, and with them the for-
Timing Is Everything
19
tunes of so-called conservative investors in the continuous distributionof wealth.There is no question that stock market traders have lost money. ButLivermore believed that the money lost in the long run was small compared to the gigantic sums lost by so-called investors who have let theirinvestments ride. The same is true in the current 1999–2004 stock market, as illustrated in the market charts at the end of this chapter. FromLivermore’s viewpoint, the investors are the big gamblers. They make abet, stay with it, and if it goes wrong, they lose it all. The trader mightbuy at the same time. But if he is an intelligent trader, he will recognize—if he keeps records—the danger signals warning him that all isnot well. He will, by acting promptly, hold his losses to a minimum, andawait more favorable market conditions, or trade on the short side ofthe market.When a stock starts sliding downward, no one can tell how far it willgo. Nor can anyone guess the ultimate top on a stock in a broad upwardmovement. Livermore recommended a few thoughts that should be keptuppermost in the trader’s mind.Never sell a stock because it seems high-priced. You may watch thestock go from 10 to 50 and decide that it is selling at too high a level.This is the time to determine whether anything will prevent it fromstarting at 50 and going to 150 under favorable earning conditions andgood corporate management. Many have lost their capital funds by selling a stock short after a seemingly too high, long upward movement.Study the stock on the basis of current conditions, looking for a clearreason to sell.By contrast, never buy a stock simply because it has had a big declinein price. The decline is probably based on a very good reason. For example, the stock may still be selling at an extremely high price relative to itsvalue—even if the current level seems low.Livermore’s trading method may come as a surprise to most traders.When he saw, by studying his records, that an upward trend was inprogress, he became a buyer as soon as the stock made a new high on itsmovement, after having had a normal reaction.The same applies whenever he took the short side. Why? Because hewas following the current trend direction, and his records signaled him togo ahead. It was a safe trade.The Livermore trading system insists that it is foolhardy to make asecond trade, if your ﬁrst trade shows you a loss.As an ironclad Livermore rule, never average losses. Let that thoughtbe written indelibly and forever upon your mind.Some 2004 examples of blue chip stocks reinforce Livermore’sown words. (See Figures 2.4–2.10.) There are no good stocks—only
20
TRADE LIKE JESSE LIVERMORE
stocks that make you money. Some people considered these stocksas unassailable . . . safe as money in the bank. These blue chip stocksinclude:•••••••
General ElectricCokeLucentGeneral MotorsMicrosoftSun MicrosystemsIntel
Perhaps these blue chip gilt edged stocks will come back in the future, but there is no doubt they will need many years to recover. The emotional hell of their owners is inestimable.
21
(2004) example of a stockconsidered a good(blue chip) stock.
Figure 2.4 A current
22
(2004) example of a stockconsidered a good(blue chip) stock.
Figure 2.5 A current
23
(2004) example of a stockconsidered a good(blue chip) stock.
Figure 2.6 A current
24
(2004) example of a stockconsidered a good(blue chip) stock.
Figure 2.7 A current
25
(2004) example of a stockconsidered a good(blue chip) stock.
Figure 2.8 A current
26
(2004)example of a stockconsidered a good(blue chip) stock.
Figure 2.9 A current
27
(2004) example of a stockconsidered a good(blue chip) stock.
Figure 2.10 A current
CHAPTER 3
LivermoreTradingDiscoveries
T
he stock market is forever evolving—it is dynamic. Because of itscomplexity, Livermore believed that a stock trader is “Always a student, never a master.” As Livermore gained knowledge over his 45years of trading, he modiﬁed his trading system accordingly. He always reviewed and studied each of his trades, good or bad. He went to school onhis successes and his failures. They always had a lesson for him, sometimes hidden, sometimes painful.
DISCOVERY 1: TRADE ONLY THE LEADERSOnce he was sure he was correct in his conclusions, he would incorporatethem into his trading system. One early Livermore lesson was “trade onlythe leaders in any particular industry group.” Don’t play in the junkyardwith the weaker stocks. Don’t try to ﬁsh for the bargain stock, the as yetundiscovered stock in an industry group. Rather, go with the proven leaders! In the long run, you will be much better off. This single piece of advicecan greatly assist a trader in the decision-making process. If you cannotmake money with the leaders of a stock group, it is unlikely that you canmake money at all in that group.He believed there is always the temptation in the stock market, particularly after a period of success, to become careless or excessively ambitious. Prudent trading requires the trader to use sound common sense andclear thinking to keep the proﬁt that he has already made in the market. If29
30
TRADE LIKE JESSE LIVERMORE
you will hold fast to sound principles, you will not lose your money, onceyou have acquired it.Everyone knows that stock prices move up and down. They alwayshave, and they always will. Livermore believed that behind these majormovements is an irresistible force: a momentum like a wave of water, insome cases a tidal wave that once set in motion would remain in motionuntil it hit an obstacle and stopped or was reversed—in stock trading thisis know as “the trend.”Noticing and observing this power is all one needs to do. It is not profitable to be too curious about all the reasons behind the force of pricemovements. You risk the danger of clouding your mind with nonessentials. Just recognize that the movement, the power, the momentum isthere, and take advantage of it by steering your speculative ship alongwith the tide. Use the power. Do not argue with the market you are observing, and most of all, do not try to combat it.Remember also that it is dangerous to start spreading out all over themarket, carrying several positions. Do not have an interest in too manystocks at any one time. It is much easier to watch a few than many. Livermore made this mistake of owning too many stocks early in his career,and it cost him money. He believed the most stocks that can be handled atany one time was 10, but he felt much safer and in control if the numberwas smaller, say no more than 5 stocks.Another mistake he recognized and warned against was to turn completely bearish or bullish on the whole market. Because one stock insome particular group had clearly reversed its course from the generalmarket trend, don’t assume from this that the entire market is changingin trend.Rather, be patient, and wait until you see other groups turning to anew direction, particularly the leading industry groups within the market. The time to act is when these other groups corroborate the actionsof the ﬁrst group and indicate a decline or advance in the direction ofthe market, showing that a new trend is forming. If you use the Livermore trading system principles, you will have plenty of time to see thetrend changing. In time, other stocks will clearly give you the same indication. Those are the cues you must wait for, and you must take themwhen they show themselves. These were the speciﬁc cues Livermore gotin the Crash of 1907, when he made $3 million in a single day, and in theCrash of 1929, when he proﬁted by more than $100 million by being onthe short side.Back in the wild bull markets of the late 1920s (before the Crash of1929), he saw clearly that the advance in the copper stocks had come toan end. Copper was a major commodity used as a bellwether in the1920s to predict the market, because it was so widely used in the building
Livermore Trading Discoveries
31
industry. Many of today’s traders still use copper in their calculations topredict market direction.In 1929, Livermore next noticed that the advance in the motor grouphad reached its zenith, stopped dead in its tracks, and rolled over. Because the bull market in those two industry groups had ended, he arrivedat the faulty conclusion that he could safely sell everything and jump onthe short side. He was wrong. The rest of the market kept moving in itsupward spiral. Livermore lost his shirt on these trades.But at the same time he was piling up huge proﬁts on his copper andmotor short sales. Overall, he was about breaking even. He persisted inhis short positions on the entire market and continued to lose on thesetrades. He spent the next six months of 1929 trying to ﬁnd the top of theutility group, another key bellwether group. Eventually, this and other industry groups reached their peaks. By that time, Anaconda copper wasselling 50 points below its previous high and the motor stocks were inclose to the same ratio. So the proﬁts on these short sales continued toclimb, offsetting his losses, but not by much.The lesson to impress upon your mind is that when you clearly see amove coming in a particular industry group, act upon it. But do not letyourself automatically act in the same way in another industry group untilyou plainly see signs that the second group is in a position to follow thetrend of the ﬁrst group you are trading. The trader must have patience andwait until his judgment is conﬁrmed by the market. In time, you will getthe same tip-off in other groups that you received in the ﬁrst group. Justdon’t spread out your positions and move to trade the entire market, untilyou have ﬁrst received conﬁrmation.Conﬁne your studies of movements only to the prominent stocks ofthe day, the leaders. If you cannot make money out of the leading activeissues in the leading industry groups, you are not going to make moneyout of the stock market as a whole. If a trader had followed Livermore’sadvice in the last crash (1999), he would have seen history repeat itselfas the leading stocks and groups such as Amazon, Yahoo, America Online, Lucent, Cisco Systems, Sun Microsystems, and even the great Microsoft reached their highs and rolled over, leading the entire marketwith them. The signals from these stocks came three to six months before the entire market followed suit. Livermore knew well that the market leaders in a strong bull market are the ﬁrst to go up and the ﬁrst toroll over and go down. Rarely are the market leaders of one bull marketthe same as the leaders of the new bull market, when it ﬁnally ralliesand begins its new cycle. The same will be true in this market of thenew millennium.Livermore always identiﬁed the market leaders and tracked themvery closely. He also spent a lot of time deducing who would be the new
32
TRADE LIKE JESSE LIVERMORE
leaders in a new market. If he were alive today, he would have alreadyﬁgured out what stocks will be the leaders of this new millenniummarket. A prudent trader of today would be wise to do the same. Findthe new markets, the new products, and the new market leaders beforethe crowd.Just as styles in women’s clothing are forever changing, the old stockmarket leaders drop out, and new ones rise up to take their places. In the1920s, the chief leaders were the railroads, American