At the age of 20 Bernard left his job as an account clerk on Wall Street and headed to Cripple Creek, near Denver, to make  his fortune from mining. It didn’t turn out well.

“I learned my first lesson in money making – that people who try to get rich from mining often put more into the ground that they take out of it.”

He returned to Wall Street in 1891 and joined the brokerage firm A.A. Housman and Company. He became a partner and was successful with his clients’ money but much less so with his own. In fact, despite the large amount of money he was making as a partner, by his late twenties he was once again broke.

This was not to last, at the age of thirty-one he made over $700,000 through a short position on a copper mining stock. He never looked back.

Bernard_baruch

Image from My Own Story by Bernard Baruch. More details on the book here.

By 1903 he had his own brokerage firm and was a wealthy man. He was a financial supporter of Woodrow Wilson and, in 1912, was rewarded with the position of head of the Office of National Defence. Here he had dealings with many wealthy men, who were to become even more so during the First World War.

He was close to subsequent presidents and many considered that his fortune was made through inside information from his political contacts. For example, he was close to Roosevelt and it was said that he made a large amount of money in gold and silver by taking positions just before Roosevelt abolished the gold standard in 1933.

Bernard Baruch was born in South Carolina in 1870. His parents had emigrated from Germany and later moved to New York. “Baruch” is the Hebrew word for “blessed” and the four sons were certainly high achievers. He died in New York in 1965 at the age of 94. He was very generous and a great philanthropist all his life.

Trading Advice from Bernard Baruch

  • A speculator should only seek his own advice. Never take trading advice from anyone else or act on inside tips. On this basis he was known as “The Lone Wolf of Wall Street”. His reasoning is that others will often be seeking to profit at your expense.
  • It is imperative to understand broader market trends and have a thorough understanding of any stock prior to taking a position.
  • Only hold a few positions and watch them closely.
  • Keep a substantial cash reserve at all times.

I will finish with a couple of quotes:

“The main purpose of the stock market is to make fools of as many men as possible.”

“Don’t try to buy at the bottom and sell at the top. It can’t be done except by liars.”

 

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30 June 2014 Markets