That’s the title of a very funny book about Wall Street written in 1940 by Fred Schwed. Mr. Schwed worked on Wall Street from the late 1920’s until 1940 and so saw the crash first hand. The title comes from an old joke about someone being shown the brokers yachts but wondering where the customers yachts are. Though the book is a little cynical, it’s hilarious, and it points out how little things have changed in 60 years. Back then as now, they had the same scandals and cheating, and the same stupidity by many analysts. Here are a few quotes from the book:
About the book:
” ‘Wall Street’ reads the sinister old gag ‘is a street with a river at one end and a graveyard at the other’. This is striking, but incomplete. It omits the kindergarten in the middle, and that’s what this book is about”.
Accounting scandals:
“In that year (1938), occurred those two fantastic accounting cases – McKesson and Robbins and Interstate Hosiery Mills. For some time both corporations had flourished like the green bay tree, chiefly on assets that simply weren’t there, but which everyone thought were there”.
On expensive stocks:
“Those classes of investments considered ‘best’ change from period to period. The pathetic fallacy is that what are thought to be the best are in truth only the most popular – the most active, the most talked of, the most boosted, and consequently, the highest in price at the time”.
About predicting the future:
“However, as soon as they (in this case, market makers) get a moment of leisure they try peering into the future for five or ten months. For this they are precisely as ill equipped as everybody else.”
About the 1929 crash and buying on margin:
“In due course of time, if they bought on margin, they went to ‘the Cleaners’, that mythical establishment to which their brother speculators had repaired some time earlier. ‘The Cleaners’ was not one of those exclusive clubs; by 1932 everybody who had ever tried speculation had been admitted to membership”.
The lessons of the book, buy low and sell high, being careful about who you hire to manage your investments, and sticking with good values because the future is unknowable, are timeless. And still just as true 60 years after the book was written. It’s both a funny and sobering read and I highly recommend it.