Introduction to Jesse L. Livermore
Let me introduce you to Jesse L. Livermore, a prominent stock trader from the early 20th century. You should know him for his sharp ability to predict market movements and for the way he built and lost multiple fortunes over his career.
Jesse L. Livermore stands out as a noted stock trader at the turn of the 20th century. Even without formal education, he kicked off his career at just 14 years old. As a true Wall Street legend, he's influenced countless stock and commodity traders across generations.
He's the author of books like How to Trade Stocks and My Life in Wall Street and How I Made Three Fortunes in the Stock Market. Tragically, Jesse L. Livermore died by suicide on November 28, 1940.
Key Takeaways
Jesse L. Livermore was a renowned stock trader in the early 20th century. He started working for Paine Webber & Co. at the age of 14. You can find his experiences detailed in the book Reminiscences of a Stock Operator by Edwin Lefevre.
Early Life and Education
Jesse L. Livermore was born on July 26, 1877, in Shrewsbury, Massachusetts. He grew up in poverty and only attended elementary school.
At 14, he joined Paine Webber & Co. in Boston. There, as a board boy, he copied share prices onto a blackboard from ticker tape recordings straight from the stock exchange.
The Stock Trader
In the book Jesse Livermore Boy Plunger: The Man Who Sold America Short in 1929 by Tom Rubython, Livermore is described as the man who made the most money in a single day and also lost the most in a single day. Between 1900 and 1940, he made and lost three fortunes. He bought and held during bull markets and sold when the momentum shifted. His strategy was remarkable, especially since companies didn't publish financial statistics or do fundamental analyses back then.
His first trade at age 15 brought in a profit of $3.12. By 16, he'd quit Paine Webber & Co. and started trading on his own. Trades often happened in bucket shops, where people gambled on stock prices with high leverage. When he got banned from Boston's bucket shops for winning too consistently, he headed to New York City.
The Bear of Wall Street
Jesse L. Livermore earned credit on Wall Street for predicting market drops, which got him the nickname 'the Bear of Wall Street.' His two most famous trades were during the Panic of 1907 and the start of the Great Depression.
As a market bubble grew in 1906, he rode the long trend until his instincts told him to switch. In a well-known trade, he shorted Union Pacific stock and made $300,000 in profit two days later when the San Francisco earthquake hit. The market crashed in 1907, and he followed J.P. Morgan's advice to buy while others sold. Traders copied him, and he's credited with helping the market recover early.
In 1929, he was positioned well in the market but watched for weakness as another bubble built. Through small trades, he sold long positions by testing short bets, losing about $250,000 at first. But he kept building his short position, and on Black Tuesday, October 29, 1929, he reportedly made $100 million from his Great Depression short.
Reports say his peak wealth would be worth $1.5 billion today. He traded freely without regulations until the SEC launched in 1934, which started his downfall. By 1940, he was bankrupt.
Influence and Interactions
Who did Jesse L. Livermore influence? His experiences in Reminiscences of a Stock Operator by Edwin Lefevre inspired people like William J. O'Neil, founder of Investor's Business Daily, who called it one of the few truly valuable books in his 45 years in the business. Today, many follow a pseudonymous Twitter account named after him that discusses his strategies.
How did the White House affect his trading? In the unregulated market after World War I, he cornered the cotton market using brokers worldwide. Within 18 months, he owned most of the U.S. cotton. President Woodrow Wilson asked him to sell his position to avoid economic harm, and he did.
How did J.P. Morgan influence him? During the 1907 panic, he made $1 million in one day on short positions. When J.P. Morgan urged him to close those shorts for the country's good, he complied and then netted another $3 million on the rebound.
The Bottom Line
Jesse L. Livermore's journey from board boy to Wall Street legend offers lessons for investors today. His story records what unregulated stock trading looked like in the early 20th century.
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