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Hetty Green – the Lost Age of Trading

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Green Hetty

COMMENT: Mr. Armstrong,
Yes, it is absurd to think that they can train humans to bark, sit and roll over. But given how things have been evolving since last year, I see plenty of people becoming a two legged dog! I feel you just have to live in a place where, slowly but surely, people are losing the ability to reason. This is just a city full of people with their brains in a constant murk. Luckily, Mr. Armstrong, you live in a city where normalcy is still part of life, or at least, more so than here in Toronto.
What an extraordinary woman Mrs. Hetty Green was, and she was a Scorpio just like you! I should get her biography. I gathered three things from what you wrote about her today: 1) walk your own path even if it is an unknown and beaten track 2) listen to your instincts 3) there is no place for weakness and sentimentality in business.
Thank you for a great read today, sir.


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REPLY: I never met Hetty Green, I’m sure it would have been a real experience. Margaret Thacher was such a woman of great insight and instinct. She too had to prove herself in a world of men. She was remarkable and I truly miss being able to talk to heads of state who actually could hold a reasonable conversation without looking at their cue-cards. I fear that as politics has degenerated, the same will happen with analysis and trading.

Law John

John Law was really the man who set in motion the understanding of the economy which inspired Adam Smith, who plagiarized him. John Law fought a duel when it was tradition, but the King of England was declaring it illegal and would have sentenced him to death. Most likely his jailer released him and told him to flee England and he did. So, because John Law had that criminal charge, everyone else stole his work and never bothered to mention him. But it was John Law who established the first principle of supply and demand because he fled to Amsterdam and was a trader on the floor there.

It was John Law who wrote about the Paradox of Value explaining that things which have the greatest value in use have frequently little or no value in exchange. On the other hand, those objects that have the greatest value in exchange have frequently little or no value in use. John Law explained this Paradox using the example of water and diamonds which Adam Smith copied without credit to Law. Nothing is more useful than water, however, it will purchase scarcely anything in exchange for some other commodity. A diamond, on the contrary, has scarcely any use-value; but a very great quantity of other goods may frequently be had in exchange for it. We could say the same thing about gold or silver. Both have very limited value for use, but a diamond has greater value in exchange.

This served as the foundation of the principle of supply and demand which it took a trader to see. This is why I am hard on academics like Schwab. He has never stood in the dealing room and never experienced how markets really function. Eliminating the dealing rooms and everyone trading in isolation off of silent screens, you do not get the same feel as looking at the emotions on the other side of the trading pit.

The “feel” for the trade is something that is slowly dying. Hetty Green was clearly one who understood trading. I always called it – smelling the blood coming from the tape.