Jesse L. Livermore was a noted stock trader at the turn of the 20th century. Despite his lack of formal education, he began his career at age 14. Regarded as a Wall Street legend, Livermore has influenced generations of stock and commodity traders.
Livermore is the author of How to Trade Stocks and My Life in Wall Street and How I Made Three Fortunes in the Stock Market.
Jesse L. Livermore died by suicide on Nov. 28, 1940.
Key Takeaways
- Jesse L. Livermore was a renowned stock trader in the early 20th century.
- He worked for Paine Webber & Co. at the age of 14.
- Livermore's experiences are recounted in the book, Reminiscences of a Stock Operator by Edwin Lefevre.
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Early Life and Education
Jesse L. Livermore was born on July 26, 1877, in Shrewsbury, Massachusetts. Raised in poverty, Livermore attended only elementary school.
At age 14, he joined Paine Webber & Co in Boston. As a board boy, Livermore copied share prices onto a blackboard from the ticker tape recordings from the stock exchange.
The Stock Trader
In his book, Jesse Livermore Boy Plunger: The Man Who Sold America Short in 1929, Tom Rubython describes Livermore as the man who made the most money in a single day and the man who lost the most money in a single day. Between 1900 and 1940, Jesse Livermore made and lost three fortunes. Livermore bought and held during bull markets and sold when market momentum shifted. His strategy was uncanny when considering that companies did not publish financial statistics or conduct fundamental analyses.
Livermore's first trade at the age of 15 gleaned a profit of $3.12. By age 16, he had quit his job at Paine Webber & Co. and began trading on his own. At the time, trades were often conducted at bucket shops, where customers gambled on stock prices, often using high degrees of leverage. When banned from Boston's bucket shops because of his consistent success, Livermore moved to New York City.
The Bear of Wall Street
Jesse L. Livermore garnered credit on Wall Street for predicting market drops, earning the nickname “the Bear of Wall Street.” His two noted trades occurred during the Panic of 1907 and at the start of the Great Depression.
As a market bubble expanded in 1906, Livermore followed the long trend until instinct advised him otherwise. In a famous trade, Livermore shorted Union Pacific stock and netted a $300,000 profit two days later when an earthquake struck San Francisco. The market plunged in 1907 and Livermore followed the advice of J.P. Morgan and bought while others sold. Traders followed suit and Livermore is credited with aiding an early recovery in the market.
In 1929, Livermore was well-positioned in the stock market but looked for the first signs of weakness as another market bubble loomed. In several small trades, Livermore sold his long positions by probing short bets into the market. In doing so, he lost close to $250,000. Livermore, however, continued to build a short position, and on Black Tuesday, Oct. 29, 1929, Livermore reportedly made $100 million on his Great Depression short.
According to reports, Livermore’s peak wealth would equate to $1.5 billion today. He traded freely and unregulated until the launch of the Securities and Exchange Commission (SEC) in 1934, which marked the beginning of the end for Livermore. By 1940, Livermore was bankrupt.
Who Did Jesse L. Livermore Influence?
Noting Livermore's experiences chronicled in the book, Reminiscences of a Stock Operator by Edwin Lefevre, William J. O'Neil, the founder of"Investor's Business Daily," wrote, "in my 45 years of experience in this business, I have only found 10 or 12 books that were of any real value and Reminiscencesis one of them." Today, many in the market know Jesse Livermore from thepseudonymous Twitter accountof the same name where the strategies of Jesse Livermore are discussed and advised.
How Did the White House Affect Jesse L. Livermore's Trading?
In the unregulated market, Livermore cornered the cotton market after World War I. He used brokers worldwide to build positions in cotton and within 18 months, he owned most of the cotton in the United States.President Woodrow Wilson petitioned Livermore to sell his strong position, which he did, to evade harming the U.S. economy.
How Did J.P. Morgan Influence Jesse L. Livermore?
During the panic of 1907, Livermore made $1 million on short positions in one day.When the renowned banker, J.P. Morgan, urged him to close his shorts for the good of the country, Livermore did. Livermore would then net an additional $3 million on the market rebound.
The Bottom Line
Jesse L. Livermore's rise from board boy to Wall Street legend remains a lesson to investors today. His experiences are a historical record of unregulated stock trading in the early 20th century.
