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Born | July 26, 1877 Shrewsbury, Massachusetts, U.S. |
---|---|
Died | November 28, 1940 (aged 63) |
Cause of death | Suicide by ballistic trauma |
Other names | Boy Plunger The Great Bear of Wall Street |
Occupation | Investor |
Spouse(s) | Nettie Jordan (m. 1900; div. 1917) Harriet Metz Noble (m. 1933–1940) |
Children | 2 |
Jesse Lauriston Livermore (July 26, 1877 – November 28, 1940) was an American investor.[1]
- 3Personal life
Early years[edit]
Livermore was born in Shrewsbury, Massachusetts to a poverty-stricken family and moved to Acton, Massachusetts, as a child.[2] 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.
Investment career[edit]
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.[3] 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.
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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[4] 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
Personal life[edit]
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.[5] 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.[6]
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.[7] On December 2, 1918, Livermore married Dorothea (Dorothy) Fox Wendt, a 23-year old former Ziegfeld Folliesshowgirl.[8] 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.[9]
Livermore's great granddaughter is pornographic model Brandi Love.[10]
Suicide[edit]
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.[11] 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'.[12]
Publications and works[edit]
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.[13] 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.[13]
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.
Legacy and awards[edit]
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.
Further reading[edit]
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) (ISBN0-471-77088-4ISBN978-0-471-77088-6) – PDF
- 1985 – Jesse Livermore – Speculator King by Paul Sarnoff (ISBN0-934380-10-4)
- 2001 – Jesse Livermore: The World's Greatest Stock Trader by Richard Smitten (ISBN0-471-02326-4)
- 2003 – Speculation as a Fine Art by Dickson G. Watts (ISBN0-87034-056-5) – PDF
- 2004 – Trade Like Jesse Livermore by Richard Smitten (ISBN0-471-65585-6) – 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 (ISBN978-0-9753093-7-7)
- 2014 – Jesse Livermore - Boy Plunger., by Tom Rubython, Foreword by Paul Tudor-Jones (ISBN978-0-9570605-7-9)
See also[edit]
References[edit]
- ^Edwin Lefèvre (1923). Reminiscences of a Stock Operator. p. 14.
- ^Smitten, Richard (2005). Trade like Jesse Livermore. Hoboken, N.J.: Wiley. p. 2. ISBN0-471-65585-6.
- ^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.
- ^ abRichard Smitten (September 14, 2001). Jesse Livermore: The World's Greatest Stock Trader. p. 276. ISBN0-934380-75-9.
External links[edit]
Wikiquote has quotations related to: Jesse Lauriston Livermore |
- Jesse Livermore Timeline – The Timing Of Major Events In Jesse Livermore's Career.
- Boy Plunger – Time, Monday, December 9, 1940
Retrieved from 'https://en.wikipedia.org/w/index.php?title=Jesse_Lauriston_Livermore&oldid=895757852'
Reminiscences of a Stock Operator is a fictionalized account of the early life and rise to fortune of Jesse Livermore, one of the most famous speculators in history. Renamed Larry Livingston in this book, he gets his start as a young boy in the 'bucket shops' of Boston, where small bets are made against the house on the rise and fall of stocks or commodities. Soon he graduates from quote-boy to beating the bucket houses at their own game, until they throw him out for winning too much. After that, he heads to Wall Street to try his hand at real trading, with many dramatic gains and losses along the way. Livingston becomes a force in the markets, which are not as highly regulated as they become eventually. His tips on speculating and human nature fill the pages and are still legendary among modern traders.
Livingston starts out as a quote-boy in the bucket-houses, where he quickly realizes he has a knack for understanding the movements of the various stock prices. He begins taking notes and making predictions, and eventually gives up his job in favor of betting on the prices. He does well and makes his first $1000 by the time his is 15. He has an excellent memory for the individual stocks and their patterns, and a head for figures. He begins making so much money in the bucket shops that they eventually ban him from betting.
Livingston decides to go to New York and try his hand at real trading on Wall Street. His stake is not very large and he does not have a way of increasing it in New York, because the bucket shops are closed down. He slowly loses money on Wall Street, mostly because the smaller short-term bets he is used to making do not work out for actual trades. He cannot make a trade quickly enough to react to small price movements; there is always a time lag that often causes him to lose money, especially when there is a large movement of the market.
After having lost his first stake, Livingston goes to St. Louis in search of bucket shops that have never heard of him. He make a few thousand dollars before they all throw him out also. After going back to New York, it does not take long for him to lose this money also. Dejected, he goes back to Boston to try and regain his stake and figure out what he is doing wrong. Although he cannot use the bucket shops, he finds some stock exchanges that are a bit unethical. These exchanges normally trick their clients into losing a lot of money, but he knows their games and turns the tables on them.
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Livingston goes back to Wall Street and begins to get better at trading. He learns that underlying market conditions and overall direction are more important than the short-term movements of individual stocks. He explains that one should buy on a rising market and sell on a falling market, never trading opposite the general trend on short-term rallies. In addition, he warns against trading in a ranging market and explains how to test the market to determine if a trend has been established.
By following these principles and studying the world financial situation, Livingston makes his first million dollars by going short in a bear market. At times he even works against attempts by traders to rally, because he believes the time is not yet right for the overall market to rally. Eventually, the financial situation gets so dire that there is a general shortage of cash in the banking system and no-one is able to buy stocks. J.P. Morgan assists in loosening up the cash flow and averting a panic, and Livingston does his part by agreeing not to put in any more sell orders. Instead, he begins buying and the stock market begins to rally. This is the point at which he believes he finally understands how the market works.
Livingston then buys a few yachts and goes off on a fishing vacation. Eventually the commodities market catches his eye and he begins to think about trading in cotton. He is well-known at this point, and a famous cotton trader contacts him to see if he wants to go into a partnership. Even though Livingston declines, the cotton trader eventually convinces him to buy when he should be selling. He starts losing a lot of money and ignores his own trading principles, selling commodities that are making a profit and hanging onto those that are losing money, hoping to turn the market around. When he has lost almost all of his money, he further compounds his mistakes by trying to force a profit out of Wall Street to make up for his losses, at a time when the market is not good for making money. In the end he goes flat broke and becomes very ill and disheartened. In the end, he realizes that one's own susceptibility to emotional responses is as important to understand as anything about the market.
Livingston goes through a long, difficult period when he is taken advantage of by one brokerage house only to realize that they are causing him to lose out on opportunities to protect their other clients. This is followed by a period in which the market is not doing anything that would allow a trader to make money and because he is trying anyway, Livingston's debts eventually rise to the level of nearly a million dollars. He declares bankruptcy, which frees him to trade with a clearer mind. He calls in a favor to get a small stake and the market rises sharply due to World War I, allowing him to make enough money to pay off all his previous debts and then some. He does describe how there are some events that cannot be foreseen that can cost a trader money, in his example of a group of coffee traders who go to Congress and get the rules changed in the middle of his trade, making it unprofitable.
Livingston gives some general advice about what he has learned during this period. First he discusses his general rule of not listening to tips even though everyone else seems to be hungry for them. He believes they are mostly used by insiders and stock manipulators to fool the public. One should rely on one's knowledge of general market conditions and trends, as well as information on the specific company. He provides some examples of insider trading and what a great effect it can have on individual stock prices, making a certain stock behave in a way that it should not. He also mentions his 'hunches,' which are somewhat famous. He does not think they are really anything supernatural, but rather a combination of small signals that an experienced trader would notice without necessarily being conscious of them.
Later in his career, Livingston becomes a stock manipulator or operator. He is paid by a group of insiders or investors to manipulate the price of stock so that he can sell their shares at a good prices, usually a large amount of shares that they could not otherwise dispose of profitably. Livingston first tells some tales of famous manipulators and their coups in the market, and then gives some examples of how he manipulates stock prices on behalf of his customers. He believes the best approach is not to spread rumors of tips, but rather to trade in the market in such a way as to give other traders certain impressions of what is happening with that stock and induce them to buy or sell accordingly.
Based on his career experiences, Livingston reviews some of the activities he believes are unethical and ought to be banned. Prominent among these is the printing of unattributed tips by the press, supposedly coming from high but unnamed sources within a company. Livingston believes that the general public, and even traders, lose a lot of money on these tips, which are really designed to allow insiders to dispose of their own holdings at an inflated price. He also discusses the conflict of interest that brokers have who accept commissions from insiders and then recommend the same stocks to their customers, inducing them to buy at these same inflated prices. Livingston frowns on stock splits and offering stocks on a payment plan. Finally, he closes with his most frequent admonition that to become a successful trader, one should not rely on the tips of others.
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