Jesse Lauriston Livermore (July 26, 1877 – November 28, 1940) was an American stock trader. He is considered a pioneer of day trading and was the basis for the main character of ''

Reminiscences of a Stock Operator ''Reminiscences of a Stock Operator'' is a 1923 roman à clef by American author Edwin Lefèvre. It is told in the first person by a character inspired by the life of stock trader Jesse Livermore up to that point. The book remains in print (). ...

'', a best-selling book by Edwin Lefèvre. At one time, Livermore was one of the richest people in the world; however, at the time of his suicide, he had liabilities greater than his assets. In a time when accurate financial statements were rarely published, getting current stock quotes required a large operation, and market manipulation was rampant, Livermore used what is now known as technical analysis as the basis for his trades. His principles, including the effects of emotion on trading, continue to be studied. Some of Livermore's trades, such as taking

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positions before the

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and just before the Wall Street Crash of 1929, are legendary within investing circles. Some observers have regarded Livermore as the greatest trader who ever lived, but others have regarded his legacy as a cautionary tale about the risks of leverage to seek large gains rather than a strategy focused on smaller yet more consistent returns.

Early life

Livermore was born in Shrewsbury, Massachusetts, to a poverty-stricken family and moved to Acton, Massachusetts, as a child. Livermore learned to read and write at the age of three-and-a-half. At the age of 14, his father pulled him out of school to help with the farm; however, with his mother's blessing, Livermore ran away from home.

Career

In 1891, at the age of 14, he secured employment, as a board boy, posting stock quotes at a Boston, Massachusetts branch of Paine Webber stockbrokerage, at the rate of $5 per week. In 1892, at the age of 15, he bet $5 on

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at a bucket shop, a type of establishment that took leveraged bets on stock prices but did not buy or sell the stock. He earned $3.12 on the $5 bet. From 1893 to 1894, age 16–17, Livermore, nicknamed "The Boy Plunger", was earning about $200 per week, trading at the bucket shops in Boston, much more than his salary at Paine Webber. At the age of 16, he quit his job and began trading full-time. He brought $1,000 home to his mother, who disapproved of his " gambling"; he countered that he was not gambling, but " speculating". From 1895–1897, age 18–20, he accumulated $10,000 trading profits, a 1,000 per cent net return in three years of trading. However, he was eventually barred by most Boston area bucket shops, because of his consistent winning. Using disguises and false names to trade only prolonged the inevitable city-wide ban. From 1898–1900, age 21–22, he continued trading with Haight & Freese, the last Boston area bucket shop which had not banned him. However, Haight & Freese gradually widened the bid-ask spread and imposed restrictive margin requirements which made it much more difficult and risky for Livermore to make money. On September 14, 1900, age 23, he moved to New York, arriving in time for a strong bull market in stocks. He traded successfully, on the long side, at Harris, Hutton & Company stockbrokers, turning $10,000 into $50,000 in five days. In May 1901, he anticipated a correction and went short, using 400% margin. He lost his entire stake, as the ticker tape was not updated fast enough to make current trading decisions. He borrowed $2,000 from Ed Hutton and moved to St. Louis, where he was not known, and went back to betting at bucket shops. His first big win came in 1901 at the age of 24 when he bought stock in

Northern Pacific Railway The Northern Pacific Railway was a transcontinental railroad that operated across the northern tier of the western United States, from Minnesota to the Pacific Northwest. It was approved by Congress in 1864 and given nearly of land grants, whic ...

. He turned $10,000 into $500,000. In 1906, he vacationed in

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, at the club of

Edward R. Bradley Edward Riley Bradley (December 12, 1859 – August 15, 1946) was an American steel mill laborer, gold miner, businessman and philanthropist. As well as a race track proprietor, he was the preeminent owner and breeder of Thoroughbred racehor ...

. While on vacation, at the direction of Thomas W. Lawson, he took a massive short position in Union Pacific Railroad the day before the

, leading to a $250,000 profit. Some time later, Livermore went long on the stock; however, his friend, and owner of the brokerage house in which he did most of his trading,

Edward Francis Hutton Edward Francis Hutton (September 7, 1875 – July 11, 1962) was an American financier and co-founder of E. F. Hutton & Co., once one of the largest financial firms in the United States. Early life Hutton was born in Manhattan, New York City, the ...

, erroneously convinced Livermore to close his position, and he wound up losing $40,000. In the

Panic of 1907 The Panic of 1907, also known as the 1907 Bankers' Panic or Knickerbocker Crisis, was a financial crisis that took place in the United States over a three-week period starting in mid-October, when the New York Stock Exchange fell almost 50% from ...

, Livermore's huge short positions made him $1 million in a single day. However, his mentor, J. P. Morgan, who had bailed out the entire New York Stock Exchange during the crash, requested him to refrain from further short selling. Livermore agreed and instead, profited from the rebound, boosting his net worth to $3 million. He bought a $200,000 yacht, a rail car, and an apartment on the Upper West Side. He joined exclusive clubs and had mistresses. In 1908, he listened to Teddy Price, who told him to buy cotton, while Price secretly sold. He went bankrupt but was able to recover all of his losses. In 1915, he filed bankruptcy again. Following the end of World War I, Livermore secretly cornered the market in cotton. It was only interception by President Woodrow Wilson, prompted by a call from the United States Secretary of Agriculture, who asked him to the White House for a discussion that stopped his move. He agreed to sell back the cotton at

break-even Break-even (or break even), often abbreviated as B/E in finance, (sometimes called point of equilibrium) is the point of balance making neither a profit nor a loss. Any number below the break-even point constitutes a loss while any number above i ...

, thus preventing a troublesome rise in the price of cotton. When asked why he had cornered the cotton market, Livermore replied, "To see if I could, Mr. President." In 1924–1925, he engaged in market manipulation, making $10 million trading wheat and corn in a battle with

Arthur W. Cutten Arthur William Cutten (July 6, 1870 – June 24, 1936) was a Canadian-born businessman who gained great wealth and prominence as a commodity speculator in the United States. He was called to appear before the Banking and Currency Committee in re ...

and engineering a

short squeeze In the stock market, a short squeeze is a rapid increase in the price of a stock owing primarily to an excess of short selling of a stock rather than underlying fundamentals. A short squeeze occurs when there is a lack of supply and an excess of d ...

on the stock of

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. In early 1929, he amassed huge short positions, using more than 100 stockbrokers to hide what he was doing. By the spring, he was down over $6 million on paper. However, upon the Wall Street Crash of 1929, he netted approximately $100 million. Following a series of newspaper articles declaring him the "Great Bear of Wall Street", he was blamed for the crash by the public and received death threats, leading him to hire an armed bodyguard. His second divorce in 1932, the non-fatal shooting of his son by his wife in 1935, and a lawsuit from his Russian mistress led to a decline in his mental health, while the creation of the U.S. Securities and Exchange Commission in 1934 imposed new rules that affected his trading. Although it is unknown exactly how it happened, he eventually lost his fortune and filed bankruptcy for the third time in 1934, listing assets of $84,000 and debts of $2.5 million. He was suspended as a member of the

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on March 7, 1934. In 1937, he paid off his $800,000 tax bill. In 1939, he opened a financial advisory business, selling a technical analysis system.

Personal life

One of Livermore's favorite books was '' Extraordinary Popular Delusions and the Madness of Crowds'', by Charles Mackay, first published in 1841. That was also a favorite book of

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, a stock trader and close friend of Livermore. He enjoyed fishing and, in 1937, he caught a 486-pound

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Marriages

Livermore was married three times and had two children. He married his first wife, Netit (Nettie) Jordan, of

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, at the age of 23 in October 1900. They had only known each other a few weeks before they got married. Less than a year later, he went broke after some bad trades; 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 soon thereafter and finally divorced in October 1917. On December 2, 1918, at the age of 40, Livermore married 22–23-year-old Dorothea (Dorothy) Fox Wendt, a former

Ziegfeld girl Ziegfeld Girls were the chorus girls and showgirls from Florenz Ziegfeld's theatrical Broadway revue spectaculars known as the ''Ziegfeld Follies'' (1907–1931), in New York City, which were based on the Folies Bergère of Paris. Descripti ...

in Ziegfeld Follies. Livermore had affairs with several of the dancers. The couple had two sons: Jesse Livermore II, born in 1919 and Paul, born in 1922. He then bought an expensive house in Great Neck and let his wife spend as much as she wanted on the furnishings. In 1927, he and his wife were robbed at gunpoint in their home. The relationship became strained by Dorothy's drinking habits, Livermore's affairs with other Ziegfeld girls, and their lavish spending. In 1931, Dorothy Livermore filed for divorce and took up temporary residence in Reno, Nevada, with her new lover, James Walter Longcope. On September 16, 1932, the divorce was granted and she immediately married her boyfriend. She retained custody of their two sons and received a $10 million settlement. Dorothy sold the house in Great Neck, on which Livermore spent $3.5 million, for $222,000. The house was then torn down, depressing Livermore. On March 28, 1933, Livermore, now 56, married 38-year-old singer and socialite Harriet Metz Noble in

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. They had met in 1931 in Vienna, where Metz Noble was performing and Livermore was in the audience on vacation. Metz Noble was from a prominent

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family that had made a fortune in the Metz Brewery Company. Livermore was Metz Noble's fifth husband; at least two of Metz's previous husbands had committed suicide, including Warren Noble, who hanged himself after the Wall Street Crash of 1929.

Publications

In late 1939, Livermore's son, Jesse Jr., suggested to his father that he write a book about trading. The book, ''How to Trade in Stocks'', was published by Duell, Sloan and Pearce in March 1940. The book did not sell well as World War II was underway and the general interest in the stock market was low. His investment methods were controversial at the time, and the book received mixed reviews upon publication.

Death

On Thanksgiving day, November 28, 1940, just after 5:30 pm, Livermore fatally shot himself with an

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in the cloakroom of The Sherry-Netherland hotel in Manhattan, where he usually had cocktails. 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") and it 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".

References

{{DEFAULTSORT:Livermore, Jesse Lauriston 1877 births 1940 deaths American financiers American investors American money managers American stock traders Businesspeople from Massachusetts Businesspeople from New York City People from Shrewsbury, Massachusetts Suicides by firearm in New York City 1940 suicides