Jesse Lauriston Livermore
Jesse Lauriston Livermore (July 26, 1877 – November 28, 1940) was an American investor.
Jesse Lauriston Livermore
|Died||November 28, 1940 (aged 63)|
New York City, U.S.
|Cause of death||Suicide by ballistic trauma|
|Other names||Boy Plunger|
The Great Bear of Wall Street
(m. 1900; div. 1917)
Dorothea "Dorothy" Wendt
(m. 1918; div. 1932)
Harriet Metz Noble (m. 1933–1940)
Livermore was born in Shrewsbury, Massachusetts to a poverty-stricken family and moved to Acton, Massachusetts, as a child. He started his trading career at the age of fourteen. With his mother's blessing, Livermore ran away from home to escape a life of farming his father intended for him. He then began his career by posting stock quotes at the Paine Webber brokerage in Boston.
While working, he would write down certain calculations he had about future market prices, which he would check for accuracy later. A friend convinced him to put his first actual money on the market by making a bet at a bucket shop, a type of gambling establishment that took bets on stock prices but did not actually buy or sell the stock. The bucket shop was owned by Arnold Rothstein. He and his friend pocketed $6 profit between them. This was in 1892 when Livermore was only 15.
Livermore started to trade on his own in the bucket shops, soon earning more than he did at Paine Webber. He quit his job and began trading full-time.
It took him very little time to make his first $1000 which he used to pay back his parents and build up a bigger bank roll. He was eventually barred from his local bucket shops for his consistent winning and took a stake of $10,000 to Wall Street to seek his fortune.
After around 6 months trading on Wall Street Jesse went bust. He had discovered that his bucket shop strategies were not effective in his new environment. He began to work on a new strategy making longer term trades.
His first big win came in 1901 when he went long Northern Pacific stocks hoping to capitalise on the prevailing bull market. He turned his $10,000 into $50,000.
The trading principles which Livermore established continue to be studied and absorbed by modern day traders and he is often quoted regarding the emotional aspects of trading. His beliefs included always trading with the trend and studying underlying market conditions. He would send out 'probe' trades to test his ideas, only building big positions when the market confirmed his beliefs about direction. He was as skilled as staying out of the market when conditions were not favourable as he was in putting out huge lines later in his career. He believed that prices were never too high to begin buying or too low to begin selling - a view which remains contrarian to this day.
Some of Livermore's trades have become legendary and have led to his being regarded as arguably the greatest trader who ever lived. He inexplicably took a massive short position the day before the San Francisco earthquake on April 18 1906. By selling Union Pacific stock he amassed $250,000 when much of San Francisco was destroyed. These intuitive decisions which almost always resulted in huge profit were a mystery to Livermore as much as anybody else. All he knew was that when he got a gut feeling he was wise to follow it.
In the crash of 1907 Livermore had huge short positions which could have netted him immense profits. He was, however, requested by JP Morgan who had bailed out the entire New York Stock Exchange during the crash, to refrain from further short selling in the interests of the national economy. Livermore agreed and instead profited to the tune of $3 million by buying into the rebound.
He lost his fortune following the 1907 crash by making grave errors in cotton trades. This led to his bankruptcy. He did, however, settle all of his debts as he traded his way back to profit.
Livermore cornered the cotton market in 1919 following the end of the First World War. He felt that demand would cease now that military requirements were waning but that they would recover in time. He began to secretly buy cotton and almost ended up owning every single bale. It was only interception by President Wilson after a call from the Secretary of Agriculture asking him to the White House that stopped his move. When asked why he had cornered the Cotton market Livermore replied, "To see if I could." He agreed to sell back the cotton at break even, thus preventing the troublesome rise in cotton which could have resulted.
Possibly his greatest known trade was during the stock market crash of 1929. He had amassed huge short positions before the market tumbled using more than 100 stockbrokers to hide what he was doing. When the crash came he netted around $100 million and was personally blamed by bankrupt members of the public following a series of newspaper articles declaring him the Great Bear of Wall Street. Death threats came thick and fast as ruined individuals thought him personally responsible for the crash - a notion which Livermore found laughable and ridiculous.
Livermore eventually lost the great fortune he had accumulated through 1929. His second divorce had taken a toll on his mental health and he was unable to trade with the same success as he had previously managed. The bankrupt Livermore was suspended as a member of the Chicago Board of Trade on March 7, 1934. It was never disclosed to anyone what happened to the great fortune he had made but a number of personal issues including the accidental shooting of his son Jesse Junior by his former wife as well as lawsuits surrounding some of his business dealings are thought to have contributed.
All through time, people have basically acted and reacted the same way in the market as a result of: greed, fear, ignorance, and hope. That is why the numerical formations and patterns recur on a constant basis.— Attributed to Jesse Livermore
One of Livermore's favorite books was Extraordinary Popular Delusions and the Madness of Crowds, by Charles Mackay, first published in 1841. This was also a favorite book of Bernard Baruch, a stock trader and close friend of Livermore. He also was one of the few people who did well in the crash of 1929. Livermore cited a lot of jokes, including an old story about "selling down to the sleeping point" from the book Speculation as a Fine Art by Dickson G. Watts.
Livermore was married three times and had two children. He married his first wife, Netit (Nettie) Jordan of Indianapolis, at the age of 23 in October 1900. Less than a year later, he went broke after some reverses in his stock trading; for a new stake, he asked her to pawn the substantial collection of jewelry he had bought her, but she refused, permanently damaging their relationship. They separated and finally divorced in October 1917. On December 2, 1918, Livermore married Dorothea (Dorothy) Fox Wendt, a 23-year old former Ziegfeld Follies showgirl. The couple had two sons. In 1931, Dorothy Livermore filed for divorce and took up temporary residence in Reno, Nevada, with her new lover (and later second husband) James Walter Longcope. On September 16, 1932, Dorothy divorced Livermore on grounds of desertion. She retained custody of the couple's two sons.
On March 28, 1933, Livermore married 38-year-old singer and socialite Harriet Metz Noble in Geneva, Illinois. The two met in Vienna where Metz Noble was performing. Metz Noble was from a prominent Omaha family who made a fortune in breweries. Livermore was Metz Noble's third husband; her second husband, Arthur Warren Noble, committed suicide in 1930 after losing all his money in the Wall Street crash. Livermore would also commit suicide in 1940.
On November 28, 1940, Livermore fatally shot himself in the cloakroom of the Sherry Netherland Hotel in Manhattan. Police found a suicide note of eight small handwritten pages in Livermore's personal, leather bound notebook. The note was addressed to Livermore's wife Harriet (whom Livermore nicknamed "Nina") read, "My dear Nina: Can't help it. Things have been bad with me. I am tired of fighting. Can't carry on any longer. This is the only way out. I am unworthy of your love. I am a failure. I am truly sorry, but this is the only way out for me. Love Laurie".
Publications and worksEdit
In late 1939, Livermore's son, Jesse Jr., suggested to his father that he write a book about his experiences and techniques in trading in the stock and commodity markets. This brought a flash of life back into Livermore, and the book was completed and published by Duell, Sloan and Pearce in March 1940. It was titled How To Trade In Stocks. The book did not sell well, World War II was under way, and the general interest in the stock market was low. His methods were still new and controversial at the time, and they received mixed reviews from stock market gurus of the period.
The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor.— Jesse Livermore, How To Trade In Stocks
Legacy and awardsEdit
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The book Reminiscences of a Stock Operator, by Edwin Lefèvre, reflects on many of those lessons, and is in effect a financial memoir of Livermore (a pseudonym is used) starting with the bucket shop days and ending in the 1920s before the crash. The book, which Lefèvre dedicated to Livermore, has an avid following in the investment community, and is still in print. There is some speculation that this partnership between the two men was not their first collaboration. Since Lefèvre was a writer and journalist, it is thought that he was one of the friendly newspapermen that Livermore employed for both information and planted articles.
Other books about Livermore include:
- 1923 – Reminiscences of a Stock Operator by Edwin Lefèvre (best-selling biography of Livermore) multiple reissues since, last on January 17, 2006, by Roger Lowenstein (Foreword) (ISBN 0-471-77088-4 ISBN 978-0-471-77088-6) – PDF
- 1985 – Jesse Livermore – Speculator King by Paul Sarnoff (ISBN 0-934380-10-4)
- 2001 – Jesse Livermore: The World's Greatest Stock Trader by Richard Smitten (ISBN 0-471-02326-4)
- 2003 – Speculation as a Fine Art by Dickson G. Watts (ISBN 0-87034-056-5) – PDF
- 2004 – Trade Like Jesse Livermore by Richard Smitten (ISBN 0-471-65585-6) – PDF
- 2004 – Lessons from the Greatest Stock Traders of All Time, by John Boik
- 2006 – How Legendary Traders Made Millions, by John Boik
- 2007 – The Secret of Livermore: Analyzing the Market Key System., by Andras Nagy (ISBN 978-0-9753093-7-7)
- 2014 – Jesse Livermore - Boy Plunger., by Tom Rubython, Foreword by Paul Tudor-Jones (ISBN 978-0-9570605-7-9)
- Edwin Lefèvre (1923). Reminiscences of a Stock Operator. p. 14.
- Smitten, Richard (2005). Trade like Jesse Livermore. Hoboken, N.J.: Wiley. p. 2. ISBN 0-471-65585-6.
- Edwin Lefèvre (1923). Reminiscences of a Stock Operator. p. 12.
- Richard Smitten (September 14, 2001). Jesse Livermore: The World's Greatest Stock Trader. p. 260.
- Richard Smitten (October 21, 2004). Trade Like Jesse Livermore. p. 76.
- Edwin Lefèvre (1923). Reminiscences of a Stock Operator. Chapter X, p. 98.
- Richard Smitten (September 14, 2001). Jesse Livermore: The World's Greatest Stock Trader. pp. 43, 47–48, 125.
- Richard Smitten (September 14, 2001). Jesse Livermore: The World's Greatest Stock Trader. pp. 115–116, 125–126.
- Hansen, Matthew. "Hansen: Tale of Omaha's 'black widow' is too tempting to not investigate". omaha.com. Retrieved September 25, 2016.
- "Getting Wild Sex! The Sexual Self Help Book Authored By Brandi Love! - About the Author of Getting Wild Sex". www.gettingwildsex.com. Archived from the original on 11 September 2009. Retrieved 14 February 2015.
- Richard Smitten (September 14, 2001). Jesse Livermore: The World's Greatest Stock Trader. p. 281.
- Richard Smitten (September 14, 2001). Jesse Livermore: The World's Greatest Stock Trader. pp. 281–182.
- Richard Smitten (September 14, 2001). Jesse Livermore: The World's Greatest Stock Trader. p. 276. ISBN 0-934380-75-9.
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