Bernard Baruch’s 10 Rules

You want someone to emulate?

Bernard Baruch (August 19, 1870 – June 20, 1965) was the son of a South Carolina physician whose family moved to New York City when he was eleven year old. By his mid-twenties, he is able to buy an $18,000 seat on the exchange with his winnings and commissions from being a broker. By age 30, he is a millionaire and is known all over The Street as “The Lone Wolf”.

In his two-volume 1957 memoirs, My Own Story, Baruch left us with the following timeless rules for playing the game:

“Being so skeptical about the usefulness of advice, I have been reluctant to lay down any ‘rules’ or guidelines on how to invest or speculate wisely. Still, there are a number of things I have learned from my own experience which might be worth listing for those who are able to muster the necessary self-discipline:”
1. Don’t speculate unless you can make it a full-time job.
2. Beware of barbers, beauticians, waiters — of anyone — bringing gifts of “inside” information or “tips.”
3. Before you buy a security, find out everything you can about the company, its management and competitors, its earnings and possibilities for growth.
4. Don’t try to buy at the bottom and sell at the top. This can’t be done — except by liars.
5. Learn how to take your losses quickly and cleanly. Don’t expect to be right all the time. If you have made a mistake, cut your losses as quickly as possible.
6. Don’t buy too many different securities. Better have only a few investments which can be watched.
7. Make a periodic reappraisal of all your investments to see whether changing developments have altered their prospects.
8. Study your tax position to know when you can sell to greatest advantage.
9. Always keep a good part of your capital in a cash reserve. Never invest all your funds.
10. Don’t try to be a jack of all investments. Stick to the field you know best.


“The Stock Market is Rigged!”

Once upon a time in the late 1700′s, there were two types of sonofabitches trading the earliest version of securities in Lower Manhattan: There were the auctioneer sonofabitches and there were the merchant sonofabitches.

The auctioneers were all-powerful and totally destructive at times. They presided over trade, which took place outside under a Buttonwood Tree on Wall Street. What the auctioneers did that was most maddening to the rest of the participants in these protozoic markets was charge exorbitant commissions and allow for securities to trade in a lawless fashion, without regard for fairness of any kind.

Meanwhile, the cutthroat speculators were growing to be quite fed up with this arrangement so they did what all would-be conspirators do – they met in secret to plot an overthrow. In March of 1792, twenty four of these merchant sonofabitches snuck into the Corre’s Hotel, which occupied what is now 68 Wall Street (which has since been absorbed into 40 Wall Street, aka the Trump Building), for their clandestine sitdown.

Two months later, they hatched their scheme, signing a document called the Buttonwood Agreement (at left), named for the tree they’d been wheeling and dealing under each day. The accord meant that all twenty four signers were bound to trade securities only amongst each other, to deny entry into their clique to outsiders who’d not been accepted by the membership and to fix commissions on trades at a set amount (.25% of face value for all shares of stock or similar instrument). This banding together made these twenty four large-scale merchant sonofabitches into the de facto monopoly that controlled all trade and it sent the other sonofabitches, the auctioneers, out of business. (more…)

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