Jesse Lauriston Livermore
|Jesse Lauriston Livermore|
July 26, 1877|
Shrewsbury, Massachusetts, U.S.
November 28, 1940 (aged 63)|
New York City, U.S.
|Cause of death||Suicide by ballistic trauma|
The Great Bear of Wall Street
US$100 million (1929)|
US$5 million (1940)
(m. 1900; div. 1917)
Dorothea "Dorothy" Wendt
(m. 1918; div. 1932)
Harriet Metz Noble (m. 1933–1940)
Jesse Lauriston Livermore (July 26, 1877 – November 28, 1940) was an American investor and security analyst. Livermore was famed for making and losing several multimillion-dollar fortunes and short selling during the stock market crashes in 1907 and 1929.
Livermore was born in Shrewsbury, Massachusetts, 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.
By the age of fifteen, he had earned profits of over $1,000 ($27,200 in 2017 USD). In the next several years, he continued betting at the bucket shops. He was eventually banned from most bucket shops for winning too much money from them. He then moved to New York City and devoted his energies towards trading in legitimate markets. This change would lead him to devise a new set of rules to trade the market.
During his lifetime, Livermore gained and lost several multimillion-dollar fortunes. He sometimes played hunches, famously selling Union Pacific railroad short right before the 1906 San Francisco earthquake. Most notably, he was worth $3 million and $100 million after the 1907 and 1929 market crashes, respectively. Adjusted for inflation, $100 million in 1929, equals about $1.13 billion in 2016. He subsequently lost both fortunes. Apart from his success as a securities speculator, Livermore left traders a working philosophy for trading securities that emphasizes increasing the size of one's position as it goes in the right direction and cutting losses quickly.
Livermore sometimes did not follow his own rules strictly. He claimed that his lack of adherence to his own rules was the main reason for his losses after making his 1907 and 1929 fortunes.
Livermore first became famous after the Panic of 1907 when he sold the market short as it crashed. He noticed conditions where a lack of capital existed to buy stock. Accordingly, he predicted that there would be a sharp drop in prices when many speculators were simultaneously forced to sell by margin calls and a lack of credit. With the lack of capital, there would be no buyers in sight to absorb the sold stock, further driving down prices. After the crash and its aftermath, he was worth $3 million.
He proceeded to lose 90% of that 1907 fortune on a blown cotton trade. He violated many of his key rules; he listened to another person's advice (he preferred working alone) and added to a losing position. He continued losing money in the flat markets from 1908–1912. He was $1 million in debt and declared bankruptcy. He proceeded to regain his fortune and repay his creditors during the World War I bull market, a period during which he was correctly bullish on stocks. Livermore owned 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.
Livermore continued to make money in the bull markets of the 1920s. In 1929, he noticed market conditions similar to that of the 1907 market. He began shorting various stocks and adding to his positions, and they kept declining in price. When just about everyone in the markets lost money in the Wall Street crash of 1929, Livermore was worth $100 million after his short-selling profits.
For unknown reasons, Livermore yet again lost much of his trading capital accumulated through 1929. Thus, on March 7, 1934, the bankrupt Livermore was automatically suspended as a member of the Chicago Board of Trade. It was never disclosed to anyone what happened to the great fortune he had made in the crash of 1929, but he had lost it all. It is possible that Livermore turned prematurely bullish and bought stocks and commodities long before the market finally bottomed in the summer of 1932. Perhaps the rule changes after the crash that made it harder to short stocks hurt his trading style.
|“||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". At the time of his death, Livermore's estate was valued at over $5 million.
Publications and works
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 underway, 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|
Other books by Livermore include:
- 2001 – How To Trade In Stocks by Jesse Livermore (ISBN 0-934380-75-9) (Originally published 1940) – PDF
Legacy and awards
The popular 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. Livermore himself wrote a less widely read book, How to trade in stocks; the Livermore formula for combining time element and price. It was published in 1940, the same year Livermore committed suicide.
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, Forward 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.
- Federal Reserve Bank of Minneapolis Community Development Project. "Consumer Price Index (estimate) 1800–". Federal Reserve Bank of Minneapolis. Retrieved January 2, 2018.
- Thomas, Ryland; Williamson, Samuel H. (2018). "What Was the U.S. GDP Then?". MeasuringWorth. Retrieved January 5, 2018. United States Gross Domestic Product deflator figures follow the Measuring Worth series.
- 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.
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