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"I have been in the speculative game ever since I was fourteen. It is all I have ever done. I think I know what I am talking about!" -JLL
Born in Acton, Mass. in 1877, Jesse Lauriston Livermore reportedly ran away from home as a teenager to persue his dreams and escape a life of farming his father wished him to have. He began his career in trading shortly after by posting stock quotes at the Paine Webber brokerage in Boston.
"I went to work when I was just out of grammar school. I got a job as quotation-board boy in a stock-brokerage office... As quotation-board boy I posted the numbers on the big board in the customers' room... It was not long before I was anticipating movements in prices. My only guide, as I say, was their past performances... I got so interested in my game and so anxious to anticipate advances and declines in all the active stocks that I got a little book. I put down my observations in it... One day one of the office boys, he was older than I, came to me where I was eating my lunch and asked me on the quiet if I had any money... (He wanted to purchase Burlington stock) Sure enough, Burlington, according to my figuring, was acting as it usually did before it went up. I had never bought or sold anything in my life, and I never gambled with the other boys. But all I could see was that this was a grand chance to test the accuracy of my work, of my hobby... So I gave him all I had (about $5), and with our pooled resources he went to one of the nearby bucket shops and bought some Burlington. Two days later we cashed in. I made a profit of $3.12... After that first trade, I got to speculating on my own hook in the bucket shops... I was fifteen when I had my first thousand and laid the cash in front of my mother -- all made in the bucket shops in a few months, besides what I had taken home. My mother carried on something awful. She wanted me to put it away in the savings bank out of reach of temptation. She said it was more money than she ever heard any boy of fifteen had made, starting with nothing. She didn't quite believe it was real money."
This story of a professional stock trader named "Larry" Livermore, from the book Reminiscences of a Stock Operator by Edwin Lefevre, began as a series of articles published in The Saturday Evening Post. While published as fiction, it was later revealed by Jesse Livermore that he had actually penned the book about his own real life experiences. It is from these very humble beginnings of beating the bucket shops, to the point of where they banned his business, that Livermore is accredited with amassing several separate fortunes as high as over $100 million. To this day many would still consider Livermore, nicknamed the "Boy Plunger" in his early years, the greatest trader in history.
"I was only twenty when I first accumulated ten thousand dollars in cash. And you ought to have heard my mother. You'd have thought that ten thousand dollars in cash was more than anybody carried around except old John D., and she used to tell me to be satisfied and go into some regular business." -JLL, on profits from his bucket shop forays
Livermore is most noted for short selling Union Pacific in 1906, and shorting stocks during the market "break" of 1907 and the crash of 1929, which earned him the title: The Great Bear of Wall Street, but these were just a few of his market operations, and not all of them were bearish. In addition to speculation in stocks, Livermore also traded in commodities such as cotton, wheat, and coffee.
"I was not betting blindly. I wasn't a crazy bear. I wasn't drunk with success or thinking that because Frisco was pretty well wiped off the map the entire country was headed for the scrap heap. No, indeed! I didn't look for a panic. Well, the next day I cleaned up. I made two hundred and fifty thousand dollars. It was my biggest winnings up to that time. It was all made in a few days." -JLL, refering to his short in U.P. and the '06 earthquake
When the '07 break turned to shear panic, JP Morgan himself personally asked of Livermore to "stop pounding the market" with short selling. JL was rumored to have gained 3 million dollars in one day.
"The newspapers said that Livermore, the Boy Plunger, had made several millions. Well, I was worth over one million after the close of business that day. But my biggest winnings were not in dollars but in the intangibles: I had been right, I had looked ahead and followed a clear-cut plan... It was a day of days for me." -JLL, talking about the "big break" in the stock market on October 24, 1907
Apparently, each of these fortunes were eventually lost, sometimes very quickly, but Livermore never expressed much regret in losing money back to trading. He also lived quite well when he had the money to spend and bought fully staffed mansions, limousines, yachts, including a steel-hulled yacht for trips to Europe, and he also took plenty of time to vacation and go fishing. To him it was just part of the game, the losses were a learning experience, and what was important was that he was doing what he did best and what he loved to do. Livermore wrote that lack of adherence to his own rules was the only real reason for his losses after making his fortunes. If there was any regret it was in not following these hard won rules he had already learned and becoming what he called a "sucker" at times.
"After all those long years of successes, tempered by mistakes that really served to pave the way for greater successes, I was now worse off than when I began in the bucket shops. I had learned a great deal about the game of stock speculation, but I had not learned quite so much about the play of human weaknesses." -JLL, refering to losing millions and going bankrupt during the market doldrums just before WWI
"It has always seemed to me, however, that I might have learned my lesson quite as well if the cost had been only one million. But Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill, knowing you have to pay it, no matter what the amount may be. Having learned what folly I was capable of I closed that particular incident. Percy Thomas went out of my life." -JLL, on taking a huge loss in the commodity market after "breaking his own rules" by listening to someone else's advice
Some of these losses left him flat broke, but Livermore took great pride in never being a welcher and paying back every cent he owed. Livermore explained that all he wanted was to get back on his feet, get back to trading, and pay his debts; being legally released from these debts was the only way he could keep his head clear to do this. Despite being bankrupt and at times being in debt for over $1 million, nearly all of his creditors released his debts to allow him to get back on his feet. At one of these low points the only two creditors threatening to sue him were the ones he owed the least amounts to. One in particular he owed $800, and Livermore made light of his "harassing" by deliberately paying all of his other creditors first, even those debts that had been released and he was not legally liable for.
"All my life I have made mistakes, but in losing money I have gained experience and accumulated a lot of valuable don’ts. I have been flat broke several times, but my loss has never been a total loss. Otherwise, I wouldn’t be here now. I always knew I would have another chance and that I would not make the same mistake a second time. I believed in myself. A man must believe in himself and his judgment if he expects to make a living at this game."
"Most of my creditors were very nice and didn't bother me; but there were two who did bedevil me. They used to follow me around. Every time I made a winning each of them was Johnny-on-the-spot, wanting to know all about it and insisting on getting theirs right off. One of them, to whom I owed eight hundred dollars, threatened to sue me, seize my furniture, and so forth. I can't conceive why he thought I was concealing assets, unless it was that I didn't quite look like a stage hobo about to die of destitution."
"I had always paid my debts in full and this new experience was most mortifying to me. I knew I'd pay off everybody some day if I lived, but everybody who read the article wouldn't know it." -JLL, on a newspaper article which made remarks to his debts and bankruptcy
Livermore, back on his feet and once again shorting stocks at the heights of a bull market and adding to his positions as the decline worsened, built a huge fortune around $100 million during the crash of 1929. To put this into perspective one need only to compare it to the GDP of the time and calculate a relative share of GDP for present terms, estimates are as high as $12 Billion in today's terms.
In March of 1934 Livermore was suspended as a member of the CBOT and filed for bankruptcy yet again. It was not disclosed what happened to the great fortune he had made in the crash of 1929, but he had lost it all. It is said that Livermore never recovered from this loss, mentally or financially.
It is hard to imagine how such an experienced trader, the same man that created his own rules and penned Reminiscences of a Stock Operator, could lose this fortune. Earlier, in 1917, Livermore had set $800,000 aside in annuities for the specific purpose of ensuring his family was protected from his activities in the markets. This move and his comments about it suggest that he was fully aware of how easily he could be separated from his fortune. It has been suggested that a lifelong history of clinical depression played a large role in the repeated losses of the fortunes he built. Livermore was indeed a loner, and his market positions were executed under his authority alone. One can only imagine how destructive it would have been to be in such leveraged market positions during the onset of a mental depression or mania. It is reported that at such times in his life he was out of touch and simply out of contact to liquidate losing positions, or that perhaps his mania even welcomed such losses. Ultimately these bouts of depression had become a dominant factor in his life leading to his unfortunate suicide in 1940 at the age of 63. Protected assets at the time of his death totalled over $5 million.
Livermore's writings, his story and his insights into speculation and human nature have gone well beyond standing the test of time and have inspired many a trader. His story is not only a classic "Wall Street" story, it also a story of a person pursuing his or her dreams against many odds. It is proof that via the free markets anyone, even a young man or woman with little more than $5 to thier name, can become one of the wealthiest people in the world through hard work, honesty, and dedication. I cannot help but admire his successes and life long lessons with great awe and respect, and yet feel a deep sadness that his life ended in such turmoil. Please send a friend request, and if you have anything to add about Livermore post a comment or message this profile. The purpose of this profile is to remember Jesse Lauriston Livermore "The world's greatest trader", and not to tout picks, media, trading systems or the like. More info about his life and times can easily be found by using his name in any reliable search engine. Thank you kindly for visiting.