Jesse Livermore

"He would divorce Dorothy and marry another woman whose previous three husbands had all committed suicide. This would prove to be a grim harbinger."
Lol, this is so funny, whos that woman?I mean wtf was she doing to get that kind of resume

 

What book was that?

 

How to Trade in Stocks

http://www.amazon.com/gp/product/09...f=pd_bbs_2/104-3671540-5470303?_encoding=UTF8

 

One thing I'm quite sure.

Although he managed to come back many times, he was very weak at risk & money management.

A sound trader shouldn't even run into bankruptcy.

but it doesn't mean we have nothing to learn from this legendary trader. Take out his good parts, and learn from his mistake, so you won't commit the same kind of mistakes again.

 

Folklore is not just Paul Bunyon, Daniel Boone and Davey Crockett. There is a distinction between skill/money management and 10% margin, no upticks, outside capital, acts of God, press releases, and insider information.

For clarification, here's a sketchy chronology:

By 1900, aged 23, he had amassed roughly $50,000, from the bucket shops.

Fall of 1905 Thomas Lawson of Boston provided all partnership capital for Livermore to raid Union Pacifc stock. Actively traded by Harriman. pool.
Losing his ass up until April 18, 1906 San Franciso earthquake. Stock took two days to respond lower. Lawson got the proceeds and Livermore pocketed $300,000 Took off for Saratoga.

On an unknown date soon after Livermore made the mistake of going short the SAME stock. Harriman pool was prepared. Livermore watched a quarter of a million vanish on upticks.

Another 50/50 deal with Lawson to short Great Northern. Made a second killing. .

Made his FIRST million in shorting Anaconda in the summer of 1907. Market panic as much as his skill. Banks calling existing loans. October 24, 1907 J.P. Morgan forced his fellow capitalists to start supporting stocks. Livermore knew better than to buck the Morgan crowd. Bought his first yacht, the Anita Venetian.

Had an epihany that commodities posed less “problems” because prices depended upon supply and demand (rather than synthetic measures). Long 120,000 bales of cotton. First used the power of the press release. in the New York Hearld “July Cotton Cornered by Jesse Livermore”. Shorts covered, suckers (his term) rushed in, Livermore unloaded. New nickname, Cotton King.

Spring of 1908, Desperately trying to stem a dropping price by buying in both New Orleans and Liverpool, found himself long 500,000 bales. Simply put, the Anita Venetian went under the hammer.

For Livermore 1911-1913 appear to be lean years.

In 1914 he was living Bretton Hall Hotel at 86th & Broadway.

Filed bankruptcy in 1915 with $102,474 in professed liabilities.

The Bethlehem Steel trade in LeFevere's book was in here somewhere.

December 20, 1916, somehow became alerted to a telegram to Finlay Barrel & Co. in Palm Beach from a Washington reporter named W.W. Price leaking of Wilson warning the warring parties. Figuring there’d be a market collapse, Livermore approached Lawson again. With capital, shorted the “four horsmen” US Steel, American Can, Baldwin, and Anaconda. E.F Hutton made a flash wire to its offices hours before Wilson’s note was publicized. Bids melted away. Livermore bought a half million annuity to throw off $30,000 per annum Also rushed out and bought a speed boat called the ‘sub-catcher” and a $120,000 platinum and emerald ring.

Unloaded his first wife via Reno in October 1917 and the 40 year on December 2, 1918 old married the 18 year old daughter of a wealthy Brooklyn merchant named Wendt. Rented a furnished townhouse at 8 West 76th Street. January 1920, bought a seat on the Curb (today the AMEX). 1919, first son.

1921 had a pool agreement with the Lewisohn Brothers to ramp Seneca Copper. After running from $12 to $25, the brothers cancelled the (then legal) agreement.

Summer of 1922, Livermore was reported to have lost $8.5 million on the short side of Mexican Pete. June 1922, Clarence Saunders, owner of the Piggly Wiggly chain hired Livermore to “kill the bears”. By November, Livermore had amassed 105,000 of 200,000 shares outstanding at an average of $35. March 1923, stock was over $70. Livermore had 198,872 of the float. March 19th, Saunders asked Livermore to spring the trap demanding delivery from short sellers. Livermore reneged. Suander’s somehow succeeded anyway. From an open of 75 ½ skyrocked to $124, and closed the day at $82. Same year, ran the Mammoth Oil pool involving Harry Sinclair.

In 1924, Arthur Cutten forced wheat to over $2 per bushel for the first time. Livermore was short and lost a considerable amount.

In 1927, Livermore ran a pool to ramp Freeport Texas stock from $19 to $74 ½. Also a dirrector of Minter & Assoc, selling $9 miilion worth of Florida lots and filing BK two years after inception. Robbed at gunpoint in his home in May 1927.

April 1929, sued for $1,450,000 over the 1926 Boca Raton RE crash.

July 1929 refused to make a court appearance in a $525,000 suit against him by the Carbonite Corp for an alleged breach of agreement.

October 1929, details sketchy but even though Livermore “won” millions on the short side, he lost $6 million in his long positions in the crash.. Arthur Cutten purportedly lost $50 million.

August 16, 1932. Divored his second wife. March 28, 1933, married his third wife at age 56. May 30, 1933. Security Legislation enacted. Pool operations outlawed.

March 4, 1934, Livermore filed BK. $2,259,212 liabilities/$184,000 assets.

Thanksgiving Eve 1935 his divorced second wife shot his first son. Non-fatal.

Summer 1937 charterd a yacht (Nina) rather than owning it outright.

Apparently from 1934 to 1940 he was an investment advisor/broker. Apparently to acquire capital for a comeback, he decided to write a book (in two versions) The office that’s frquently mentioned in awe appears to have been a facade to promote the book. The “legendary” market key, is patterned after Dow Theory confirmation, but using two companies in each of about 5 leading industries. Not original, basically the opposite of pairs trading.

November 28, 1940, shot himself in the head in the hat check room of the Sherry-Netherland hotel after writing an 8 page note to his wife with the recurrent theme “My life has been a failure”

 

Looks like a lot of his money was made doing what is now illegal.

Once the rules changed (SEC, early 30's FDR changes), he no longer could play the game.

 

For some traders, bankruptcy is a step in the process of becoming a sound trader. You learn how to trade by trading.

You can still be successful if you go bankrupt.....

you can not be successful if you see bankruptcy as "the end" 99% of traders give up after clamining bankruptcy or after having lost a lot of capital. Determination to succeed is paramount as is resilience.

 

I still feel it's better to skip this step. This step is not necessary anyway.

A wise trader should avoid it in the first place.

I have already succeeded and I have yet to go bankrupt. Lucky!

Is it really too difficult to be disciplined? Discipline is here to save you money, not cost you money! Why no discipline?
You wish to lose moeny?!

I don't have such a problem either. Lucky again!

You just have to start all over again.

Whether you like it or not, you have to face the reality.
Stand up again after the fall is the only way to go.

Jesse can do so again and again many times.
Why you can't?

 

Is that the reason why he lost his trading confidence?

 

Interesting thread. If I remember correctly from ROASO, been a while since I last read it, Livermore was very upset when the government started to tax capital gains.