Tim Price

INVESTMENT SPECIAL: The trend is your friend

The lessons taught by Wall Street genius Jesse Livermore

In the 1983 comedy Trading Places, two unscrupulous commodity brokers wagered that they could take a vagrant off the street and turn him into a successful trader. The film was a hit, symbolic of a more innocent age when interference in ordinary people’s livelihoods by gambling financiers was the exception rather than the rule. What is less well known is that its plot was essentially true.

Also in 1983, the commodities trader Richard Dennis set out to show that anybody could trade provided they were taught properly. His partner, William Eckhardt, disagreed, and a wager was born. Dennis placed classified ads in the back of the financial magazine Barron’s. Experience in trading was not necessary. He ended up with two classes of what he called ‘turtles’, named after a visit to a Singapore turtle-breeding farm. Dennis believed that he could grow traders in the same way that turtles were nurtured.

In short, he was right. He hired fewer than two dozen novices. Jerry Parker was among them. He now runs Chesapeake Capital and is believed to be worth upwards of $700 million; $1,000 invested with fellow turtle Tom Shanks’s Hawksbill Capital in 1988 would now be worth north of $100,000. Turtles Paul Rabar, Mike Carr, Howard Seidler and Jim DiMaria all set up successful investment firms. So what did Dennis teach them?

Old City hands will tell you that there are only two ways to look at financial markets. One of them is fundamental: what is happening to the economy, to interest rates, to inflation? The other is technical: what is happening to market prices? The City tends to favour fundamental analysis — which may be one reason why collectively we’re in such a mess — and most commentators distrust technical analysis. But the reality, known to Dennis and his turtles, is that price is the only metric worth trusting.

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