How I made 2,000,000

How I made $2Mil Book pictureOK, I confess! I did not make $2 million in the stock market, but that title did catch your attention, did it not? How I made $2,000,000 in the Stock Market is one of the antique books in finance recently acquired by IFA’s Founder and President, Mark Hebner. Unfortunately, this one will definitely be placed on the fiction shelf. Written over 50 years ago by Nicolas Darvas, a world famous dancer who dabbled in the stock market, this book captured the imaginations of ordinary people who aspired to strike it rich on Wall Street. Darvas outlined some simple techniques like buying after a stock moves upward into new high ground and using stop loss orders to limit losses, which he claims turned a bankroll of $25,000 into a fortune of $2 million (about $15 million in today’s dollars) over a six-year period. Just one small problem: It never happened. At least that was the conclusion of the New York State Attorney General, Louis Lefkowitz. A write-up of the allegations against Darvas can be found here. Aside from outright misrepresentation of gains actually made, Darvas excluded his trades that resulted in losses and omitted the fact that much of his investments were made with the proceeds of margin loans. Despite all the damning evidence he collected, Lefkowitz declined to prosecute Darvas, but he did succeed in forcing Darvas to sign an agreement that he would never work in the U.S. securities industry. As an interesting historical note, Lefkowitz cited a “dangerous market situation” that had resulted from a plethora of stop loss orders placed by readers of this book.

Unfortunately, this is one false legend that refuses to die or fade away. The book was re-published last year and a newsletter touting Darvas’s techniques continues to be peddled to naïve investors. While it is clear that Darvas did not make $2 million in the stock market, it is entirely possible that he made a comparable sum selling books to benighted people who actually believed that some benevolent individual who discovered the secret to attaining fantastic wealth in the stock market would be happy to share it with the whole world.