LEON LEVY, one of my former teachers at the Baruch School of the City College, has been in Forbes Annual 400 Richest People in the Country for many, many years, and in the mid October, 2001 issue Forbes showed his worth increasing from $650 million in 2000 to $750 million in 2001.
Ain't no Bear market for him.
His latest success. He Shorted NASDAQ stocks and bought bonds. Kind of what John Templeton did, and what we all should have done. Levy was by far the smartest stock market person I ever met, and when I taught at the New School University in New York, I patterned courses on his methods.
Donít believe everything you read in print
Leon Levy used to come in at 8 am three times a week and then ran off to play the market. My guess back then was that he was in his late 20's or early 30's. In hindsight, he knew everything about the market, while the Academics with their PhDs in School all day, knew little of the way the Market really works.
Early on, I was really impressed with him right off the bat, and when he told us that his favorite stock at that time was American Motors, I bought a hundred shares. The stock had risen from around $6 to $10, the level I got in at. A couple of weeks later, the stock had moved up to $12. I was feeling pretty good about it one Wednesday morning as I jumped on the #7 train at 7am at Jackson Heights to head to City College at 23rd Street in Manhattan.
My feelings changed quickly when I read a front page story in the New York Times quoting Louis Wolfson, a very, very famous Financier at the time AND a Director of American Motors. The gist of Wolfson's comments were that he thought American Motors was so overpriced that he had sold half his stock and was about to sell the rest of it. I turned white and got ready to kiss my $200 profit goodbye. $200 was a lot of Money then. Kids starting out made $40 to $50 a week.
Thank goodness, the market did not open till 9:30, and that my class was at 8.00.
Although, I don't know if any of the other students in the class owned the stock besides me, it was the main topic of the day. Levy said, "I don't know what the facts of this are, but I can tell you that no-one who is about to sell a large block of stock is going to announce it beforehand along with a lot of bad news." He then went on to say that we should treat everything we saw in print as being put there to make us do the wrong thing. He said that if we read in Barrons that some analyst liked a stock at $18, we could bet he would like it a lot better if we would drive the price up to $20 so he could get out. He said people didn't get paid for printing what they liked in the newspapers.
I went out that afternoon to check the market and I couldn't believe it. AMO was the most active stock, but it was unchanged. At that moment, I got the wonderful thought. I knew who was doing the selling, but who was doing the buying? That is something you should always ask yourself when you buy a stock. I had already decided NOT to sell, and that only reinforced the decision.
Within a day or two, the stock started to rise and a couple of weeks later it was at $19 when the news came out that Wolfson had not sold half his stock, he had sold it ALL, and on top of that, he had illegally gone short. Directors of companies are not allowed to do that. A judge immediately got an injunction prohibiting him from covering his short sale and as soon as the Street heard about the big short that couldn't get out they rocketed the stock to $29 where I sold.
Later, the stock went to $96 and Wolfson went to Jail. Did I feel bad that I had sold at $29. Not a bit, I was delighted.
© Chartcraft Inc October 16, 2001