Business education

Who was Livermore?

Jesse Lauriston Livermore, an iconic figure in Wall Street history, was born on July 26, 1877, in Acton and passed away on November 28, 1940, in New York City. Known for his uncanny ability to amass and lose massive fortunes, Livermore gained notoriety for his short selling tactics, which allowed him to profit immensely even in the face of market crashes. He amassed a staggering $3 million during the crash of 1907 and an extraordinary $100 million during the 1929 collapse.

Livermore’s journey in the world of finance began when he defied his father’s wishes for him to be a farmer, escaping to Boston at just 15 years old. There, he began his career marking board prices at a local brokerage firm, and spending his free time betting on stock fluctuations in bucket shops, or informal brokerage houses. Even at such a tender age, he managed to earn a significant sum, equivalent to $20,000 in today’s money.

As he gained success, he was frequently ostracized from the bucket shops and finally migrated to New York City, where he launched his career on the actual stock exchange. Livermore developed a keen strategy of buying more stocks as they trended upwards and rapidly cutting losses when they declined. This strategy served him well, except for the times he failed to stick to it, which led to the loss of his considerable wealth.

Livermore shared his trading wisdom in two seminal books, ‘Reminiscences of a Stock Operator’ (published under the name of its editor, Edwin Lefevre, in 1923) and ‘How to Trade in Stocks: The Livermore Formula for Combining Time Element and Price’ (1940). His teachings and strategies continue to influence traders today.

However, Livermore’s life wasn’t just about successes. In 1907, after predicting a sharp market drop due to a lack of credit and capital, he lost 90% of his fortune in cotton trading. By 1912, he was in $1 million debt and had to declare bankruptcy. Despite his setbacks, he made a significant comeback during World War I and the following market downturn.

In his heyday, Livermore led a lavish lifestyle, owning several global residences with complete services, an array of limousines, and even a steel-hulled yacht for European journeys. Around 1917, he wed the glamorous showgirl Dorothy Wendt, his second wife in a trio of marriages.

Livermore profited handsomely during the 1920s bull market and the 1929 crash but lost yet another fortune in the 1930s, potentially due to sugar trading. By 1934, he had declared bankruptcy once again. Sadly, on November 28, 1940, he took his own life in the cloakroom of the Sherry Netherland hotel in Manhattan. His farewell letter revealed a man tired of relentless struggles and long suffering from depression. At the time of his death, he left behind cash assets and protected trust funds worth $5 million.