Wall Street never changes. Speculators will change, stocks will change, and moneybags will change. But Wall Street will never change because human nature never changes.
The market always has only one direction. It is neither bullish nor bearish, but the correct direction.
In 1907, he correctly judged the great stock market crash and earned 3 million US dollars in one day. To save the market, the financier J.P. Morgan sent a special envoy to ask him not to short the market anymore. He was honored to agree. In 1921, during the stage of economic recession and sluggish stock market, he entered the market and went long. In 1929, he accurately shorted the market before the great crash and earned 100 million US dollars, reaching the peak.
He is Jesse Livermore, the king of speculation, a landmark legendary figure on Wall Street.
Today we will restore the life of Jesse Livermore, including those you already know and those you don’t know yet.
1. Who is Jesse Livermore?
Jesse Livermore was born in the United States in 1877. His parents were both farmers. As the youngest of the three children in the family, Jesse was not favored by his father, but his mother liked him very much and wanted to teach him the best things in life.
Fortunately, Jesse learned very quickly. At the age of three and a half, he began to learn to read and write. At the age of five, he could already read newspapers and was deeply interested in the financial section. However, his father was a pragmatist who forced little Jesse, who was still in school at the age of 14, to drop out of school and leave school to earn money by farming.
The young and determined Jesse left his hometown ambitiously by carriage.
5 dollars.
He threw away the piece of paper clutched in his hand, on which there was the address given to him by his mother. Because when the carriage passed by Paine Webber Company, Jesse immediately asked the coachman to stop. That was a securities trading company in Boston. Little Jesse was completely fascinated from the moment he saw it.
Jesse, who had a maturity beyond his age, soon obtained a job and the trust of others at Paine Webber Company. As a small trader with a weekly salary of 5 dollars and working by writing numbers on the trading board, Jesse officially began his legendary life.
After working for a period of time, little Jesse’s notebook was filled with dense numbers. But soon he found that these trading numbers seemed to follow a pattern. So, when he was 15 years old, Jesse began to take his weekly salary of 5 dollars to trade in the market. After a few weeks, his earnings had already exceeded what he got at Paine Webber.
This was the first pot of gold that Jesse earned for the first time through the study of trends. Later, at the age of 16, Jesse left Paine and began to trade in a larger market in Boston.
The high-profile Jesse always won beautifully and was a bit showy in his victories. Soon the trading market discovered the brash actions of this young man and kept kicking him out. The clever him put on a beard, but in the end he was still discovered and permanently banned from entering. At that time, he also made a small fortune of 10,000 dollars.
In 1899, Jesse felt that the time had come to challenge his ability. He decided to go to New York to try his luck. In the same year, he met his wife, Nettie Jordan. They got married only a few weeks after they met, but separated in a hurry a few months later.
Due to the lag of 30 to 40 minutes of real-time data, Jesse lost everything. He asked Nettie to pawn some jewelry and ornaments that he had given to Nettie as gifts, but this enraged her.
5000 dollars.
Having been brutally defeated but still full of confidence, Jesse returned to his starting point. He lingered in the trading market in St. Louis again. Due to the trading floor’s ban on him, he could only entrust others to trade on his behalf. Eventually, he earned 5000 dollars. This 5000 dollars later made the name “Jesse Livermore” resound through the sky of Wall Street.
In 1901, Jesse returned to Wall Street, which was in the midst of a great bull market. At the age of 24, he immediately made 50,000 dollars, but lost it in cotton trading. This failure taught Jesse a lesson. His trading style began to become conservative. He was so overly worried that he became hesitant and unable to move forward.
“I could have made 20,000 dollars, but I only made 2,000,” he said as he enjoyed the life of a wealthy and alluring bachelor in the city.
At the age of 28, Jesse already had 100,000 dollars in his name. But at this time, he lost his confidence. His conservatism, coupled with his experience of not having consecutive wins in the stock market, made him begin to question his long-term stock trading ability. So he decided to take a vacation for himself in Palm Beach – this became a turning point in his life.
While on vacation in a luxury hotel, Jesse gambled and socialized with the owner of the beach. He had an unprecedented “psychological shock” and immediately decided to short Union Pacific stocks.
As soon as Jesse returned to the city, he heard the news about the San Francisco earthquake – Union Pacific stocks then fell. By this time, Jesse already had 250,000 dollars.
Soon after, Jesse decided to buy Union Pacific stocks and was looking for the right time to act. But one of his old friends, Edward Hutton, warned him not to act rashly. Jesse followed this advice and then immediately regretted it because Hutton was completely wrong. For this, Jesse blamed himself constantly.
In 1907, Jesse once made a maximum of 1 million dollars in a single day. But seeing the market in crisis, Jesse decided to do something correct and wise. He began to buy as much as possible and led other Wall Street people to buy together. The market began to recover.
In just one year, Jesse made a leap from zero to 3 million dollars and entered a new wealth class. To imitate Morgan, he spent 200,000 dollars to buy a yacht and purchased a villa in the Upper West Side of Manhattan. From then on, he only went in and out of the most exclusive clubs in New York and had countless mistresses.
But gradually, Jesse was overwhelmed by high costs and was unable to make ends meet. So he returned to the stock market once again.
5 million dollars.
In 1908, because he trusted a “friend” blindly, he lost all his property of 5 million dollars in the Chicago commodity trading market. He was in a desperate predicament.
After a high-profile and protracted divorce, 40-year-old Jesse finally got rid of Nettie and married Dorothy, a 22-year-old actress from the Ziegfeld Follies. In 1919, they had their first child, Jesse Livermore II. In 1922, their second child, Paul, was born. They were wealthy, of high status, and shuttled through high society. That was Jesse’s happiest family time.
The illustrious Livermore also frequently appeared on the headlines of the media. People were all looking forward to his stock recommendations in the newspaper to buy and sell stocks. Jesse set up a formal trading office and made 15 million dollars. Two years later, they moved to a larger office and Jesse had 60 employees.
For writing 《Reminiscences of a Stock Operator》, Edwin Lefèvre contacted and interviewed Livermore. After obtaining permission, it was published in 1923. During the release period, no one realized that the real prototype of this book was Livermore. The protagonist in the book was named Livingston. But it did sell extremely well and was reprinted many times.
At the same time, Jesse’s popularity continued to grow on Wall Street. In 1925, he made a 10 million dollar trade in wheat and corn on the Chicago trading board. This was also a declaration of war against Arthur Cutten, a famous bull market trader known for his skill in manipulating the market.
In 1927, two robbers broke into Livermore’s house and pointed guns at him and his wife. Dorothy was unexpectedly calm and only begged the robbers to leave them some valuable jewelry. When the robbers left, she also persuaded them not to wake up her children.
1 hundred million dollars
In 1929, Livermore keenly sensed some changes in the market. He decided to leave the office and leave the trading until October 29. The news of Black Tuesday spread like wildfire. The market collapsed and countless traders went bankrupt overnight. Those who heard it were terrified. Panic enveloped Dorothy and her mother. When Jesse returned home, they cried to him that everything was over. But they didn’t realize that Jesse had already made one hundred million dollars by shorting Wall Street.
Jesse got the news that the Bank of England was preparing to raise interest rates and accurately predicted that stocks were about to be sold off and there was no doubt that stock prices would fall. At the same time, being shrewd, he analyzed the value of the economic depression warning through various newspaper clippings. So he took the lead and continuously sold and shorted stocks. Because of his accurate judgment and getting out ahead of others, he made 100 million dollars and made a large number of profits.
However, Livermore’s family happiness seemed to have come to an end. Dorothy gradually became unable to extricate herself from alcoholism. Jesse’s scandals and countless mistresses also shamed her. She demanded a quick end to this marriage. She took custody of the two children and a villa worth 10 million dollars. On the same day of the divorce, she quickly married a young official.
At the age of 56, Jesse was no longer young and wealthy. He decided to spend all the money he had left on vacations. He met his third wife, American singer Harriet Metz.
Livermore planned to use the vacation to recuperate and make a comeback from bankruptcy and return to New York. But mentally he was already overwhelmed.
His ex-wife Dorothy still wanted to live the same luxurious Palm Beach life as before, but she was already deeply in debt. So, she sold Jesse’s painstaking effort, that mansion he was proud of, that house that had carried countless family joys. In an instant, it was sold off. Jesse was plunged into great despair. Moreover, the jewels and wedding ring that Jesse gave to Dorothy were sold in a very cheap way, which made Jesse extremely ashamed. It cost Jesse 35 million dollars to buy and renovate, but Dorothy sold it for only 220,000 dollars.
2.Three bankruptcies ended with a magnificent curtain call.
One year later, Livermore had to announce his third bank bankruptcy. This time, he felt powerless to recover. He had friends and had made a comeback before. But this bankruptcy at the age of 60 might be fatal to him. Although Livermore made a high-profile return to the stock market twice before, the establishment of the US Securities and Exchange Commission and the loss of the passion for phoenix nirvana dragged everything into the abyss of despair and came to an end.
Jesse’s son, Jesse Livermore II, was a dissolute person with many problems and was addicted to alcohol like his mother. On Thanksgiving night, they had dinner together. Dorothy’s son’s alcohol problem recurred. Dorothy stared at her son and coldly said, “I would rather see you die than see you drink like that.” Her son contemptuously threw her a gun and said word by word, “You don’t have the courage to pull the trigger.” In the midst of the quarrel, the drunk Dorothy lost her head and pulled the trigger at her son. Although the son barely survived and Dorothy was exempt from prosecution, this incident added to the already high-pressure life of Jesse.
A series of family changes and the establishment of the US Securities and Exchange Commission deeply made Jesse realize that his former glory was gone and he could no longer dominate the Wall Street trading market as before. In 1940, Livermore’s book “How to Trade in the Stock Market” was published, but obviously it was not as popular as the previous “Reminiscences of a Stock Operator.”
No one can always occupy the high ground in the wise game of stock trading. In 1940, Livermore, who felt lost, shot himself in a hotel in New York and left almost no money. His son also ended his life in the same way in 1975.
The reason for Livermore’s final suicide is not because of bankruptcy as everyone guessed. More likely, it is due to depression caused by the failure of marriage and family life. Once a speculator commissioned his classmate in the United States to specially consult relevant materials to prove this point.
If you have done research, you will know that he had gone bankrupt four times, so bankruptcy was not a terrible blow to him. And after his last bankruptcy, his life was still not bad. Judging from the news and photos at that time, after going bankrupt in 1934, the first thing he did was to travel to Europe with his wife for 20 months. Before boarding the upper deck, he told reporters, “I hope to solve some problems in my mind.” He still rode in a car when going in and out, wore a neat suit to attend social occasions, and often went to nightclubs.
Although Jesse Livermore’s legendary life has come to an end in his later years, his wisdom has been inherited and influenced generations of traders. The mistakes he made are also regarded as experience and lessons by today’s traders.
3.The enlightenment of Jesse Livermore’s legendary life.
Although Jesse’s legendary and splendid life has come to an end, his story is still widely circulated on Wall Street and is talked about with relish, just as when he was five years old, he read the financial news with great interest.
Fundamentals: Jesse never fully believes in rumors. Instead, he believes in sufficient preparation and research on fundamentals and will also conduct market research on his own. He follows the trend and only operates leading stocks with broad prospects in strong industries and sells stocks in industries with poor prospects.
He is an extremely self-disciplined person with regular work and rest, a light diet, and accurate judgment.
He emphasizes that it is the profitability of the company that determines the stock price trend.
Trend aspect: Unlike traders who trade frequently several times in the market, Jesse is very patient. As long as he judges that the trend is right, he can wait until the best opportunity arises. Most successful traders move forward along the direction of the market and minimize resistance. Before making a big move, Jesse will first conduct a test with a small amount to confirm that everything is correct before following up vigorously.
Risk aspect: The boldness of shorting Wall Street with 100 million dollars makes many people think that Jesse is an out-and-out high-risk preference person. Neil from the Gaodun FRM Research Center said that in fact, this statement is only half right. Livermore is sometimes even very conservative in the face of risks. He has a famous quote: When I see a danger signal, I don’t argue with it. I dodge. A few days later, if everything looks good, I’ll come back. Moreover, Neil added that as long as the market performance is contrary to his judgment, considering the risk of the principal, Jesse will stop immediately and never allow a loss of more than 10%.
Psychological aspect: A good stock operator does not rely solely on technical analysis and some insider information. They also thoroughly study the deep desire in stocks – human nature. Jesse grasped this point, studied trading psychology, and took psychology courses at night school, hoping to have a better understanding of the stock trading market. Although Jesse believes that following the majority is relatively safe, he always has the idea of breaking away from the group and going in the opposite direction. Buffett also said similar words, “Be fearful when others are greedy, and be greedy when others are fearful.”
There is no news on Wall Street. What happens today in the trading market has happened in the past and will happen again.
Wall Street never changes. Speculators will change, stocks will change, and money bags will change, but
Wall Street will never change because human nature never changes.
Reproduction Notes：InvestFancy » Jesse Livermore: The Legendary Stock Market Speculator.