Jesse Lauriston Livermore (July 26, 1877 – November 28, 1940) was an American stock trader. He is considered a pioneer of

day trading Day trading is a form of speculation in securities in which a trader buys and sells a financial instrument within the same trading day, so that all positions are closed before the market closes for the trading day to avoid unmanageable risks ...

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 In economics and finance, market manipulation is a type of market abuse where there is a deliberate attempt to interfere with the free and fair operation of the market; the most blatant of cases involve creating false or misleading appearances ...

was rampant, Livermore used what is now known as

technical analysis In finance, technical analysis is an analysis methodology for analysing and forecasting the direction of prices through the study of past market data, primarily price and volume. Behavioral economics and quantitative analysis use many of the sam ...

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 short positions before the

1906 San Francisco earthquake At 05:12 Pacific Standard Time on Wednesday, April 18, 1906, the coast of Northern California was struck by a major earthquake with an estimated moment magnitude of 7.9 and a maximum Mercalli intensity of XI (''Extreme''). High-intensity ...

and just before the

Wall Street Crash of 1929 The Wall Street Crash of 1929, also known as the Great Crash, was a major American stock market crash that occurred in the autumn of 1929. It started in September and ended late in October, when share prices on the New York Stock Exchange coll ...

, 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 Shrewsbury (/ˈʃruzberi/ ''SHROOZ-bury'') is a town in Worcester County, Massachusetts, United States. Shrewsbury, unlike the surrounding towns of Grafton, Millbury, Westborough, Northborough, Boylston, and West Boylston did not become a ...

, to a poverty-stricken family and moved to

Acton, Massachusetts Acton is a town in Middlesex County, Massachusetts, United States, approximately west-northwest of Boston along Massachusetts Route 2 west of Concord and about southwest of Lowell. The population was 24,021 in April 2020, according to the Unit ...

, 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 PaineWebber & Co. was an American investment bank and stock brokerage firm that was acquired by the Swiss bank UBS in 2000. The company was founded in 1880 in Boston, Massachusetts, by William Alfred Paine and Wallace G. Webber. Operating with t ...

stockbrokerage, at the rate of $5 per week. In 1892, at the age of 15, he bet $5 on

Chicago, Burlington and Quincy Railroad The Chicago, Burlington and Quincy Railroad was a railroad that operated in the Midwestern United States. Commonly referred to as the Burlington Route, the Burlington, or as the Q, it operated extensive trackage in the states of Colorado, Illin ...

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 Gambling (also known as betting or gaming) is the wagering of something of value ("the stakes") on a random event with the intent of winning something else of value, where instances of strategy are discounted. Gambling thus requires three ele ...

"; 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 Ticker tape was the earliest electrical dedicated financial communications medium, transmitting stock price information over telegraph lines, in use from around 1870 through 1970. It consisted of a paper strip that ran through a machine called ...

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, wh ...

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

Palm Beach, Florida Palm Beach is an incorporated town in Palm Beach County, Florida. Located on a barrier island in east-central Palm Beach County, the town is separated from several nearby cities including West Palm Beach and Lake Worth Beach by the Intrac ...

, 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 racehors ...

. While on vacation, at the direction of Thomas W. Lawson, he took a massive short position in

Union Pacific Railroad The Union Pacific Railroad , legally Union Pacific Railroad Company and often called simply Union Pacific, is a freight-hauling railroad that operates 8,300 locomotives over routes in 23 U.S. states west of Chicago and New Orleans. Union Paci ...

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, 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% fro ...

, Livermore's huge short positions made him $1 million in a single day. However, his mentor,

J. P. Morgan John Pierpont Morgan Sr. (April 17, 1837 – March 31, 1913) was an American financier and investment banker who dominated corporate finance on Wall Street throughout the Gilded Age. As the head of the banking firm that ultimately became known ...

, who had bailed out the entire

New York Stock Exchange The New York Stock Exchange (NYSE, nicknamed "The Big Board") is an American stock exchange in the Financial District of Lower Manhattan in New York City. It is by far the world's largest stock exchange by market capitalization of its liste ...

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 The Upper West Side (UWS) is a neighborhood in the borough of Manhattan in New York City. It is bounded by Central Park on the east, the Hudson River on the west, West 59th Street to the south, and West 110th Street to the north. The Upper West ...

. 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 Thomas Woodrow Wilson (December 28, 1856February 3, 1924) was an American politician and academic who served as the 28th president of the United States from 1913 to 1921. A member of the Democratic Party, Wilson served as the president of ...

, prompted by a call from the

United States Secretary of Agriculture The United States secretary of agriculture is the head of the United States Department of Agriculture. The position carries similar responsibilities to those of agriculture ministers in other governments. The department includes several organ ...

, who asked him to the

White House The White House is the official residence and workplace of the president of the United States. It is located at 1600 Pennsylvania Avenue NW in Washington, D.C., and has been the residence of every U.S. president since John Adams in ...

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 it ...

, 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

, 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 reg ...

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 ...

on the stock of Piggly Wiggly. 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

, 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

Chicago Board of Trade The Chicago Board of Trade (CBOT), established on April 3, 1848, is one of the world's oldest futures and options exchanges. On July 12, 2007, the CBOT merged with the Chicago Mercantile Exchange (CME) to form CME Group. CBOT and three other exch ...

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

system.

Personal life

One of Livermore's favorite books was ''

Extraordinary Popular Delusions and the Madness of Crowds ''Extraordinary Popular Delusions and the Madness of Crowds'' is an early study of crowd psychology by Scottish journalist Charles Mackay, first published in 1841 under the title ''Memoirs of Extraordinary Popular Delusions''. The book was pub ...

'', by Charles Mackay, first published in 1841. That was also a favorite book of

Bernard Baruch Bernard Mannes Baruch (August 19, 1870 – June 20, 1965) was an American financier and statesman. After amassing a fortune on the New York Stock Exchange, he impressed President Woodrow Wilson by managing the nation's economic mobilization in W ...

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

swordfish Swordfish (''Xiphias gladius''), also known as broadbills in some countries, are large, highly migratory predatory fish characterized by a long, flat, pointed bill. They are a popular sport fish of the billfish category, though elusive. Swordf ...

Marriages

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

Indianapolis Indianapolis (), colloquially known as Indy, is the state capital and most populous city of the U.S. state of Indiana and the seat of Marion County. According to the U.S. Census Bureau, the consolidated population of Indianapolis and Marion ...

, 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. Desc ...

Ziegfeld Follies The ''Ziegfeld Follies'' was a series of elaborate theatrical revue productions on Broadway in New York City from 1907 to 1931, with renewals in 1934 and 1936. They became a radio program in 1932 and 1936 as ''The Ziegfeld Follies of the Ai ...

. 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 Great Neck is a region on Long Island, New York, that covers a peninsula on the North Shore and includes nine villages, among them Great Neck, Great Neck Estates, Great Neck Plaza, Kings Point, and Russell Gardens, and a number of unincorp ...

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 Reno ( ) is a city in the northwest section of the U.S. state of Nevada, along the Nevada-California border, about north from Lake Tahoe, known as "The Biggest Little City in the World". Known for its casino and tourism industry, Reno is th ...

, 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

Geneva, Illinois Geneva is a city in and the county seat of Kane County, Illinois, United States. It is located on the western side of the Chicago suburbs. Per the 2020 census, the population was 21,393. Geneva is part of a tri-city area, located between S ...

. They had met in 1931 in

Vienna en, Viennese , iso_code = AT-9 , registration_plate = W , postal_code_type = Postal code , postal_code = , timezone = CET , utc_offset = +1 , timezone_DST ...

, where Metz Noble was performing and Livermore was in the audience on vacation. Metz Noble was from a prominent

Omaha Omaha ( ) is the largest city in the U.S. state of Nebraska and the county seat of Douglas County. Omaha is in the Midwestern United States on the Missouri River, about north of the mouth of the Platte River. The nation's 39th-largest c ...

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

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 Duell, Sloan and Pearce was a publishing company located in New York City. It was founded in 1939 by C. Halliwell Duell, Samuel Sloan and Charles A. Pearce. It initially published general fiction and non-fiction, but not westerns, light romances ...

in March 1940. The book did not sell well as

World War II World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the World War II by country, vast majority of the world's countries—including all of the great power ...

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

Automatic Colt Pistol Automatic Colt Pistol (ACP) denotes various John Moses Browning cartridge designs primarily used in Colt and Fabrique Nationale de Herstal semi-automatic pistols. All of these cartridges are straight-sided and appear similar. The .32 ACP, .38 ...

in the cloakroom of

The Sherry-Netherland The Sherry-Netherland is a 38-story apartment hotel located at 781 Fifth Avenue on the corner of East 59th Street in the Upper East Side neighborhood of Manhattan, New York City. It was designed and built by Schultze & Weaver with Buchman & K ...

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