One of the best books about trading and the stock markets is André Kostolany´s “The fabulous world of money and the stock markets”, which is not available in English.
It was the first books I read about the stock markets, and it is one of the most sensible and practical of all I have read.
Kostolany knew that not everybody could be a speculator. He thought that most people should stay away from the stock markets. And, if you try to play with them stay away from short term speculation. What is to say, stay away from day trading, which, as for Kostolany, only benefited brokers and dealers.
If I had followed his advice I would have saved up a lot of money trying day trading.
Andre Kostolany Book
The book I mentioned is a sort of biography of Kostolany´s life.
He told us a lot of anecdotes and stories about his life.
He even says that market speculation was already active in the Middle Ages.
The most significant quote of the book is when he says is something like this:
who longs for small things do not deserve greatness.
Here, Kostolany says in a few words that the best a trader can do is to let the profits run and try to make big wins when he is right. The best way to do that was, in his opinion, medium-term speculation. Medium-term would be from six months, to three years, eventually five.
He said to buy when there is blood in the streets and sell when everybody is optimistic.
But his strategy cannot be easily done. Not everybody is capable of doing that.
He said that you needed some sort of intuition, character and general culture.
His trading was more macroeconomic, something similar to Jim Rogers.
Curiously enough Rogers wears bow ties, just like Kostolany used to.
One problem with his book, is the fact that if you are a novice trader may get carried away and buy cheap stocks just because Kostolany said something similar. But he did not recommend buying penny stocks because they were cheap. He recommended buying good stocks that had fallen due to a general market.
He used to trade based on macroeconomic and social general conditions.
He would place a great importance in interest rates cycles. Knowing where we are in the cycle, we can speculate more effectively.
He also talked about the various phases a market goes through, and its psychological aspects. One speculator has to act in the “exaggeration” phase, when the majority of people are optimistic and are buying stocks.
Apart from that he says that a speculator that has not gone bankrupt at least twice cannot consider him a true speculator.
He started his career as speculator in the crash of 1929.
Kostolany, as well as Jim Rogers, started as a dealer. That is how he built his “account”. Rogers did the same: he was George Soros partner in the legendary Quantum fund. He made a lot of money collecting premiums in that fund. Once Rogers and Kostolany had enough money they traded by their own.
Kostolany did not want to be a market maker. He would say:
A millionaire is someone whose capital or salary does not depend on anybody else. Someone who does not work, and who does not need to bow before anybody. Someone who can send anybody to hell whenever pleases. The man who can truly live like that can call himself a true millionaire.
Another interesting advice in his book is not to follow tips in the markets. He gives some good examples about it.
Andre Kostolany and gold
Nonetheless, I do not agree with Kostolany´s opinion on gold.
Kostolany was a genuine defender of Keynesianism and the abolition of gold from the financial markets. I think that it is true that Great Britain “recovered” after leaving the gold standard, but the recovery is a false one. The “recovery” was, despite the creation of the fiat system, not a consequence of it.
One funny anecdote in the book is when he talks about his trips to the communist Hungary. There he would find old stock market investors of 80 and 90 years old, talking about the stock markets with passion even though there was no stock market in Hungary. Those ex-investors were happy even though they had been confiscated by their government.
After all, some men and women do not need too much to live.
You can be happy travelling with little baggage.
Thanks for reading and for sharing.