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<\/p>\nThank you for visiting this blog. I imagine you receive many reports and blogs, so I appreciate you taking the time to open this one.<\/p>\n
I especially want to thank those of you who have pledged to upgrade to a paid subscription if I ever turn it on. For now, I prefer to keep Commodity Conversations free for all. I understand that many of you are students with limited funds who are considering a career in commodities. I don\u2019t want to exclude you.<\/p>\n
I genuinely enjoy writing this blog, and I will continue to do so myself rather than ask AI to write it for me. As attentive readers may have noticed, I did publish one blog (you know which one) entirely written by AI. It made me feel like a fraud, and I found no joy in it. From now on, I promise to only use AI as a research assistant, not as a writing substitute.<\/p>\n
I have a series of interviews and blogs scheduled for this year, inspired, as ever, by my two friends and mentors, Ivo Sarjanovic and Pedro Nonay. However, all views expressed will be my own, along with any mistakes and omissions. I will also be slotting in some sugar interviews as I update my sugar book. I hope you non-sugar people will find them interesting.<\/p>\n
So let’s get going.<\/p>\n
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During the recent holidays, I read 1929 \u2013 The Inside Story of the Greatest Crash in Wall Street History<\/a> by Andrew Ross Sorkin. I thoroughly enjoyed the book, though the author focuses more on the personalities and individuals involved than on a detailed analysis of the financial and economic forces at work. Nevertheless, I would recommend it to anyone interested in markets and trading.<\/p>\n Two of Sorkin\u2019s comments that genuinely struck a chord (among many) were:<\/p>\n \u201cMarkets are not contests of virtue and honour. By pitting the greed of their participants against one another, they wend their messy way towards fair and reasonable prices. Over time, in the aggregate, the system works, even if at any given moment, it can look like pure chaos.\u201d<\/p>\n And (whilst we are all debating whether AI is a bubble):<\/p>\n \u201cNo matter how many warnings are issued or how many laws are written, people will find new ways to believe that the good times can last forever. They will dress up hope as certainty. And in that collective fever, humanity will again and again lose its head.\u201d<\/p>\n Jesse Livermore, known as the Boy Plunger, plays a significant role in the book, earning $100 million by selling stocks short during the 1929 crash.<\/p>\n Livermore made and lost many fortunes during his trading career, and he lost all his gains from 1929 during the stock market rallies of 1932 and 1933, leaving him penniless. He ultimately shot himself in the cloakroom of the Sherry-Netherland Hotel in November 1940. In a letter to his wife, he wrote, \u201cThings have been bad with me. I am tired of fighting. Can\u2019t carry on any longer.\u201d<\/p>\n Livermore had amassed a $10 million fortune trading agricultural commodities in the early 1920s, when he took large short positions in wheat and corn on the Chicago Board of Trade. However, he soon lost everything when he traded cotton from the long side. It was the second time in his career that he had lost everything trading cotton, breaking his own rules by averaging down rather than accepting a small initial loss.<\/p>\n Sorokin\u2019s book features some excellent quotes from Livermore that remain just as relevant today as they were then. Livermore once told his eldest son:<\/p>\n \u201cEvery stock is like a human being: it has a personality, a distinctive personality: aggressive, reserved, hyper, high-strung, volatile, direct, logical, predictable, unpredictable. I often studied stocks like I would study people; after a while, their reactions to certain circumstances become more predictable.\u201d<\/p>\n The same applies to a commodity: each has its own character. By thoroughly understanding your commodity, you can anticipate how it will react in different situations.<\/p>\n Livermore had some important rules when he traded. Sorkin quotes two of them:<\/p>\n \u201cTake small losses. Profits always take care of themselves. But losses never do. The speculator has to ensure himself against considerable losses by taking the first small loss. In doing so, he keeps his account in order so that, at some future time, when he has a constructive idea, he will be in a position to enter another deal.\u201d<\/p>\n And:<\/p>\n \u201cDon’t trade every day. There are only a few times every year, possibly four or five, when you should allow yourself to make any commitment at all.\u201d<\/p>\n However, perhaps the most memorable quote in Sorkin\u2019s book is not from Livermore but from Ernest Hemingway\u2019s 1926 novel, The Sun Also Rises<\/a>. The character Bill asks Mike Campbell, \u201cHow did you go bankrupt?\u201d and Mike responds, \u201cTwo ways. Gradually and then suddenly.\u201d<\/p>\n Sorkin recounts an intriguing anecdote about a conversation Livermore had with Walter Crysler and others regarding his latest wheat trade. Livermore lamented that he had made a stupid mistake by cashing out a wheat position after the price increased by 25 cents a bushel.<\/p>\n Crysler asked him, \u201cHow the hell could it be a bad mistake to make a profit of two and a half million dollars?\u201d<\/p>\n \u201cBecause, Walter, \u201che replied,\u201d I sat back and watched wheat another twenty cents in price in three days.\u201d<\/p>\n \u201cI still don’t get it,\u201d Chrysler said.<\/p>\n Livermore explained that he sold his position out of fear.<\/p>\n \u201cWhy was I afraid?\u201d he said. \u201cThere was no good reason to sell the wheat. I wanted to take my profit. I was in too big a hurry to convert a paper profit into a cash profit. I had no other reason for selling out that wheat, except that I was afraid to lose the profit I had made.\u201d<\/p>\n Sorkin concludes, \u201cThe best traders, Livermore understood, were fearless.\u201d<\/p>\n But was Livermore fearless, or, as some commentators have suggested, not a trader at all but a compulsive gambler? Was he, as one of my friends proposed, as addicted to trading as an alcoholic is to alcohol?<\/p>\n He might have been, but that does not explain why he repeatedly lost everything by ignoring his own rules. It sometimes feels as if he wanted to lose everything to face the challenge of starting again.<\/p>\n This has prompted some commentators to suggest he may have had bipolar disorder. Livermore certainly experienced repeated cycles of intense elation and energy, followed by periods of profound depression, and, ultimately, he took his own life. It was during these depressive episodes that he lost everything.<\/p>\n However, what interests me is why he ignored his own rules during these periods, such as averaging down in his disastrous cotton trades.<\/p>\n I suppose we may never find out, but his life and trading demonstrate why you must have strict risk management rules \u2013 and why you should adhere to them.<\/p>\n Further reading<\/p>\n \u200bReminiscences of a Stock Operator<\/a> by Edwin Lef\u00e8vre is a fictionalised autobiography of Livermore\u2019s life, published in 1923. It remains one of my favourite books on trading. If you haven\u2019t read it and are involved in markets and trading, I recommend you move it to the top of your reading list.<\/p>\n![\"\"](\"https:\/\/i0.wp.com\/commodityconversations.com\/wordpress2\/wp-content\/uploads\/2026\/01\/IMG_0154.jpeg?resize=300%2C255&ssl=1\")
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