📖Jesse Livermore
Price vs Value Disconnect
Prices diverge from value short-term but converge long-term.
In the short run, the market is a voting machine; in the long run, it's a weighing machine. Prices can diverge wildly from value, but eventually converge.
🏠 Everyday Analogy
📖 Core Interpretation
In Price vs Value Disconnect, Jesse Livermore focuses on the gap between price and value. Returns come from paying less than what a business is worth, not from guessing short-term market moves.
💎 Key Insight：The voting-to-weighing machine transition is inevitable.
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❓ Why It Matters
Ignoring valuation turns even good companies into poor investments. Overpaying compresses future returns and leaves little margin when assumptions are wrong.
🎯 How to Practice
Estimate intrinsic value with conservative assumptions, set clear buy ranges, and act only when price offers a meaningful discount with acceptable downside.
⚠️ Common Pitfalls
Confusing a low price with true cheapness
Using one metric without business context
Overly optimistic assumptions that erase margin of safety
📚 Case Studies
1
1929 Market Top Warning (1929)
Tape action showed abnormal volatility, heavy distribution, and failing rallies in key leaders, contradicting public enthusiasm.
✨ Outcome：Moved heavily short into the crash, earning millions as prices cascaded lower while others were ruined by the downturn.
2
Union Pacific Panic of 1907 (1907)
Livermore shorted Union Pacific heavily into the panic, then patiently waited to cover instead of grabbing quick profits during violent intraday swings.
✨ Outcome：Covered near the bottom, locking in a fortune and reinforcing his rule to let a winning position fully mature.
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