Jesse Lauriston Livermore

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also from "fact finding archives":

Jesse Lauriston Livermore (1877-1940) was a notable early 20th century trader. He started his trading career as a kid and by age of 15 he had managed to earn profits over 1000$, a significant amount of money at that time. He gained and lost several multi-million fortunes during his lifetime. 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. His book How to Trade Stocks was published in 1940, the same year he died.

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 a richer. He was the stock market's single biggest titan. As a speculator pure and simple, he made more money than any living human being and just as pure and 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, in a time of no income tax and the five cent cigar, 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."

Unlike the faceless corporate raiders of the nineties, he was a character. A 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. One would have thought that the Depression would have made him even richer.

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. 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.

from Wikipedia:

Born in Acton, Massachusetts, Jesse Livermore started his trading career at the age of fifteen. He ran away from home with his mother's blessing to escape a life of farming his father wished him to have. He then began his career by posting stock quotes at the Paine Webber brokerage in Boston.

While working, he would write down certain hunches he had about future market prices, which he would check for accuracy later. A friend convinced him to put in his first money trade. He risked $5 and made $3.12 in profit from his first trade from Burlington stock.[2] With these humble beginnings, he began trading for himself.

At the age of fifteen, he had earned profits of over $1000 (which equates to approximately $20,000 today). In the next several years, he made his money at bucket shops. These were places where people would enter trades, but no actual trades were executed; they were betting against the house. Most people would lose money to the bucket shops because of fluctuations in stocks that would wipe out their slim margins. Livermore would regularly beat the bucket shops and was eventually banned from them. He then devoted his energies towards trading in legitimate markets. This change would lead him to devise a new set of rules to beat the market.

During his lifetime, Livermore gained and lost several multi-million dollar fortunes. Most notably, he was worth $3 million and $100 million after the 1907 and 1929 market crashes, respectively. 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.

Ironically, Livermore sometimes did not follow his rules strictly. He claimed that lack of adherence to his own rules was the main reason for his losses after making his 1907 and 1929 fortunes.

The popular book Reminiscences of a Stock Operator, by Edwin Lefevre, reflects many of those lessons. 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 he committed suicide. It was later revealed by Livermore that he had actually penned the book Reminiscences of a Stock Operator, and that LeFevre had acted as the editor and coach. There is some speculation that this partnership between the two men was not their first collaboration. Since LeFevre 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.

A contrary view of Livermore's life is provided by Paul Sarnoff. Sarnoff says that Livermore was a hype merchant and that many of his brilliant successes were gross exaggerations. He states that Livermore did not in fact make much money during the 1929 crash as he was heavily hedged. He accuses Livermore, at the end of his career as being little better than a tout.[3]

Wall Street success

Livermore became a successful trader at an early age. In his book, he claims his parents were against his trading even after his success because they couldn't understand how a person who didn't work could make such a sum of money relatively quickly. Livermore made his money by following trends in market prices. He would choose a particular stock or commodity to buy or sell short based on its price and volume action. Then, he would establish relatively small initial positions. He would then add to his positions if they made him money or sell them if they were unprofitable. This technique resulted in large gains and small losses. He also bucked the trends of prevailing sentiment of the markets at critical points. For example, when people were exuberant about the markets near the tops in 1907 and 1929, he began short-selling.

After devising his rules, he temporarily disregarded them in 1906. He repeatedly shorted Union Pacific in a rising market and kept adding to his position even when the stock temporarily rose. He couldn't explain why, but he had a strong urge to short the company. A few days later, the San Francisco Earthquake of 1906 struck. Livermore kept adding to his position and made $250,000.

He first became famous in 1907, when he short sold the market as it crashed. He noticed conditions where a lack of capital existed to buy stock. Accordingly, there would be drops in prices with too many sellers, driven by margin calls. 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 and resulting downtrend.

He 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. He married Dorothy, a beautiful Ziegfeld Follies showgirl when he was about 40 years old.

Livermore continued to make money in the bull markets of The Roaring 20's. 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.

Favorite Book

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 who also was one of the few people that did well in the crash of 1929.[4]

Jesse 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.[5]

After the Crash of '29

Dorothy finally filed for divorce and took up temporary residence in Reno, Nevada, with her new lover, Agent Longcope. On September 16, 1932, Dorothy divorced Livermore on grounds of desertion. They had been married since December 2, 1918 - 14 years. Dorothy retained custody of their boys.[6]

On March 28, 1933, Livermore married the 38 year old Harriet Metz Noble in Geneva, Illinois; there was no honeymoon. It was Harriet's fifth marriage, and all four of her previous husbands had committed suicide.[7].

Through unknown mechanisms, he 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.[8]

His book

“ 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. ”

—Jesse Livermore, How To Trade In Stocks

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.[9] 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.[10]

“ 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

Suicide

In the Squibb building at 745 Fifth Avenue, at the age of 63, Livermore entered the Sherry-Netherland Hotel on November 28, 1940, at 4:30 in the afternoon. Sitting on a stool at the end of the cloakroom, he withdrew a .32-caliber Colt automatic pistol (he had bought the gun in 1928 while he was living in Evermore), placed the barrel of the gun behind his right ear and pulled the trigger, dying instantly.[11]

The police revealed that there was a suicide note of eight small handwritten pages in Livermore's personal notebook. It was reported in the November 30 issue of the New York Tribune.[12] The press wanted to know what it said, and the police tersely responded: “There was a leather-bound memo book found in Mr. Livermore's pocket. It was addressed to his wife.” A police spokesman read from the notebook: “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”.[13]

Although untouchable trusts and cash assets at his death totalled over $5 million, Livermore had failed to regain his trading confidence before his death. A lifelong history of clinical depression had become the dominant factor in his final years.

=

also from "fact finding archives":

Jesse Lauriston Livermore (1877-1940) was a notable early 20th century trader. He started his trading career as a kid and by age of 15 he had managed to earn profits over 1000$, a significant amount of money at that time. He gained and lost several multi-million fortunes during his lifetime. 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. His book How to Trade Stocks was published in 1940, the same year he died.

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 a richer. He was the stock market's single biggest titan. As a speculator pure and simple, he made more money than any living human being and just as pure and 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, in a time of no income tax and the five cent cigar, 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."

Unlike the faceless corporate raiders of the nineties, he was a character. A 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. One would have thought that the Depression would have made him even richer.

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. 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.

from Wikipedia:

Born in Acton, Massachusetts, Jesse Livermore started his trading career at the age of fifteen. He ran away from home with his mother's blessing to escape a life of farming his father wished him to have. He then began his career by posting stock quotes at the Paine Webber brokerage in Boston.

While working, he would write down certain hunches he had about future market prices, which he would check for accuracy later. A friend convinced him to put in his first money trade. He risked $5 and made $3.12 in profit from his first trade from Burlington stock.[2] With these humble beginnings, he began trading for himself.

At the age of fifteen, he had earned profits of over $1000 (which equates to approximately $20,000 today). In the next several years, he made his money at bucket shops. These were places where people would enter trades, but no actual trades were executed; they were betting against the house. Most people would lose money to the bucket shops because of fluctuations in stocks that would wipe out their slim margins. Livermore would regularly beat the bucket shops and was eventually banned from them. He then devoted his energies towards trading in legitimate markets. This change would lead him to devise a new set of rules to beat the market.

During his lifetime, Livermore gained and lost several multi-million dollar fortunes. Most notably, he was worth $3 million and $100 million after the 1907 and 1929 market crashes, respectively. 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.

Ironically, Livermore sometimes did not follow his rules strictly. He claimed that lack of adherence to his own rules was the main reason for his losses after making his 1907 and 1929 fortunes.

The popular book Reminiscences of a Stock Operator, by Edwin Lefevre, reflects many of those lessons. 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 he committed suicide. It was later revealed by Livermore that he had actually penned the book Reminiscences of a Stock Operator, and that LeFevre had acted as the editor and coach. There is some speculation that this partnership between the two men was not their first collaboration. Since LeFevre 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.

A contrary view of Livermore's life is provided by Paul Sarnoff. Sarnoff says that Livermore was a hype merchant and that many of his brilliant successes were gross exaggerations. He states that Livermore did not in fact make much money during the 1929 crash as he was heavily hedged. He accuses Livermore, at the end of his career as being little better than a tout.[3]

Wall Street success

Livermore became a successful trader at an early age. In his book, he claims his parents were against his trading even after his success because they couldn't understand how a person who didn't work could make such a sum of money relatively quickly. Livermore made his money by following trends in market prices. He would choose a particular stock or commodity to buy or sell short based on its price and volume action. Then, he would establish relatively small initial positions. He would then add to his positions if they made him money or sell them if they were unprofitable. This technique resulted in large gains and small losses. He also bucked the trends of prevailing sentiment of the markets at critical points. For example, when people were exuberant about the markets near the tops in 1907 and 1929, he began short-selling.

After devising his rules, he temporarily disregarded them in 1906. He repeatedly shorted Union Pacific in a rising market and kept adding to his position even when the stock temporarily rose. He couldn't explain why, but he had a strong urge to short the company. A few days later, the San Francisco Earthquake of 1906 struck. Livermore kept adding to his position and made $250,000.

He first became famous in 1907, when he short sold the market as it crashed. He noticed conditions where a lack of capital existed to buy stock. Accordingly, there would be drops in prices with too many sellers, driven by margin calls. 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 and resulting downtrend.

He 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. He married Dorothy, a beautiful Ziegfeld Follies showgirl when he was about 40 years old.

Livermore continued to make money in the bull markets of The Roaring 20's. 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.

Favorite Book

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 who also was one of the few people that did well in the crash of 1929.[4]

Jesse 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.[5]

After the Crash of '29

Dorothy finally filed for divorce and took up temporary residence in Reno, Nevada, with her new lover, Agent Longcope. On September 16, 1932, Dorothy divorced Livermore on grounds of desertion. They had been married since December 2, 1918 - 14 years. Dorothy retained custody of their boys.[6]

On March 28, 1933, Livermore married the 38 year old Harriet Metz Noble in Geneva, Illinois; there was no honeymoon. It was Harriet's fifth marriage, and all four of her previous husbands had committed suicide.[7].

Through unknown mechanisms, he 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.[8]

His book

“ 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. ”

—Jesse Livermore, How To Trade In Stocks

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.[9] 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.[10]

“ 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

Suicide

In the Squibb building at 745 Fifth Avenue, at the age of 63, Livermore entered the Sherry-Netherland Hotel on November 28, 1940, at 4:30 in the afternoon. Sitting on a stool at the end of the cloakroom, he withdrew a .32-caliber Colt automatic pistol (he had bought the gun in 1928 while he was living in Evermore), placed the barrel of the gun behind his right ear and pulled the trigger, dying instantly.[11]

The police revealed that there was a suicide note of eight small handwritten pages in Livermore's personal notebook. It was reported in the November 30 issue of the New York Tribune.[12] The press wanted to know what it said, and the police tersely responded: “There was a leather-bound memo book found in Mr. Livermore's pocket. It was addressed to his wife.” A police spokesman read from the notebook: “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”.[13]

Although untouchable trusts and cash assets at his death totalled over $5 million, Livermore had failed to regain his trading confidence before his death. A lifelong history of clinical depression had become the dominant factor in his final years.