Jesse Lauriston Livermore
From Biocrawler, the free encyclopedia.
Jesse Lauriston Livermore (1877-1940) was a notable early 20th century trader. He was famed for his adroit use of short selling to earn profits on wall street. By way of this technique, he managed to make millions during the crash of 1907 as well as the great crash of 1929. However, as is often the case with massive success, Livermore had a great deal of turmoil in his life.
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Overview
He started his trading career at the age of fifteen when he ran away from home and managed to get a job at Paine Webber in Boston posting stock quotes. There, after analyzing the trends in the prices he frequently posted, he decided to make his instinct work for him. At the age of fifteen, he had earned profits of over $1000, a significant amount of money in the early 1890's. He gained and lost several multi-million fortunes during his lifetime. This, today, is attributable to an undiagnosed case of bipolar depression which Livermore is believed to have suffered from. Not only a famous securities speculator but Livermore is unique in that he has left traders a working philosophy for trading securities that emphasizes holding for the long term, increasing the size of your position as it goes in your direction and not trying to hold out for that last penny. The irony of this is that Livermore himself did not follow his own rules strictly. He was a man driven by emotion who liked to gamble. His book How to Trade Stocks was published in 1940, the same year he died.
Wall Street Success
During the boom, he was lionized by the press, during the bust he was attacked and vilified. He was the Michael Milken of the 1920s with one big difference – Jesse Livermore was richer. He was one of the stock market's biggest titans. A common story heard about Livermore in his early years was that during the crash of 1907, J. P. Morgan himself pleaded with Jesse to stop pounding the market down. As a speculator pure and simple, he made more money than any living human being and just as simply, in the mean years of the early 1930s, he lost every single penny.
The wealthy live well in any era, but to be as rich as Jesse Livermore was in the 1920's defies imagination. He had a series of mansions around the world each fully staffed with servants, a fleet of limousines, and a steel-hulled yacht for trips to Europe because, as his daughter-in-law tells us, "Jesse never took public transportation."
Livermore was curious mixture of New England Calvinist and lecher – he could recite the Bible and yet liked to cruise through Manhattan at night in one of his canary-yellow Rolls Royces, picking up girls to satisfy his considerable sexual appetite. His broker reported that, "When Livermore is speculating, he is thinking of screwing and when he is screwing he is thinking of speculating."
He built his fortune entirely on the risky business of short selling – he made money when the market went down. In an age of perpetual optimism, Livermore became the master manipulator of the subterranean depths of fear, with a touch approaching that of genius. He was an expert at sensing the nature and scope of mass hysteria, the threshold levels at which different men began to panic. When everyone else lost money in the crash of 1929, Livermore became still richer. In fact, roughly adjusted to today's dollars, the fortune he made during the crash of 1929, around 100 million, would be worth three billion dollars today. Yes, Jesse Livermore made three billion dollars in one day. This was truly one of the great investors of the 20th century.
Change of luck
But in the 1930s, the rules of the stock market had changed. His trades would have to be public and his huge stock manipulations would no longer work under the glare of full disclosure. In 1934, two million dollars in debt, he declared bankruptcy. In 1935, Dorothy, his wife, shot their son, Jesse Livermore Jr., in a heated drunken argument. Such an emotional man was not able to withstand so much. He would divorce Dorothy and go on to marry a woman who's previous three husbands had all commited suicide. This would prove to be a grim harbinger. Several years later in 1940, in the washroom of the Sherry-Netherland Hotel, he took out his ever-present gold pencil and wrote in a notebook, "I am a failure, I am a failure, I am a failure." He then shot himself through the head.
There are photographs of him both as a handsome young "plunger" and a broken old man, one taken hours before his suicide. He is among the most colorful Americans of the 20th century and yet his story, strangely relevant today, is not known except among wall street oldtimers.
