TIL: Jesse Livermoore pioneered day trading. His shorts for the 1906 SF earthquake and the 1929 crash are considered legendary. He grew up poor, but at 14 worked as a board boy at a stock firm and started gambling. He would consistently become rich or bankrupt, and he died with millions in debt.
en.wikipedia.orgSubmitted by Flares117 t3_10h7n0z in todayilearned
Flares117 OP t1_j56xi0v wrote
His life is fucking insane, he went poor to rich as fuck, but keeps trading and loses it all, then gets lucky again. He lost the 100mill which is 15BILLION today within a few years after gaining it due to cotton and other poor trades.
He mostly short, short squeeze, etc.
I find it funny at 15 he just literally started gambling and not the day trade rambling, like horse races
In 1891, at the age of 14, he secured employment, as a board boy, posting stock quotes at a Boston, Massachusetts branch of Paine Webber stockbrokerage, at the rate of $5 per week. He made his first trade when he bought five shares of Burlington for $5.[7]
In 1892, at the age of 15, he bet $5 on Chicago, Burlington and Quincy Railroad at a bucket shop, a type of establishment that took leveraged bets on stock prices but did not buy or sell the stock.[1] He earned $3.12 on the $5 bet.[6]
From 1893 to 1894, age 16–17, Livermore, nicknamed "The Boy Plunger", was earning about $200 per week, trading at the bucket shops in Boston, much more than his salary at Paine Webber.[8] At the age of 16, he quit his job and began trading full-time. He brought $1,000 home to his mother, who disapproved of his "gambling"; he countered that he was not gambling, but "speculating".[9]
From 1895–1897, age 18–20, he accumulated $10,000 trading profits, a 1,000 per cent net return in three years of trading. However, he was eventually barred by most Boston area bucket shops, because of his consistent winning. Using disguises and false names to trade only prolonged the inevitable city-wide ban.[8]
From 1898–1900, age 21–22, he continued trading with Haight & Freese, the last Boston area bucket shop which had not banned him. However, Haight & Freese gradually widened the bid-ask spread and imposed restrictive margin requirements which made it much more difficult and risky for Livermore to make money.[8]
On September 14, 1900, age 23, he moved to New York, arriving in time for a strong bull market in stocks. He traded successfully, on the long side, at Harris, Hutton & Company stockbrokers, turning $10,000 into $50,000 in five days. In May 1901, he anticipated a correction and went short, using 400% margin. He lost his entire stake, as the ticker tape was not updated fast enough to make current trading decisions. He borrowed $2,000 from Ed Hutton and moved to St. Louis, where he was not known, and went back to betting at bucket shops.[6]
His first big win came in 1901 at the age of 24 when he bought stock in Northern Pacific Railway. He turned $10,000 into $500,000.[6]
In 1906, he vacationed in Palm Beach, Florida, at the club of Edward R. Bradley.[6] While on vacation, at the direction of Thomas W. Lawson, he took a massive short position in Union Pacific Railroad the day before the 1906 San Francisco earthquake, leading to a $250,000 profit.[10] Some time later, Livermore went long on the stock; however, his friend, and owner of the brokerage house in which he did most of his trading, Edward Francis Hutton, erroneously convinced Livermore to close his position, and he wound up losing $40,000.[6]
In the Panic of 1907, Livermore's huge short positions made him $1 million in a single day.[6] However, his mentor, J. P. Morgan, who had bailed out the entire New York Stock Exchange during the crash, requested him to refrain from further short selling. Livermore agreed and instead, profited from the rebound, boosting his net worth to $3 million.[6]
He bought a $200,000 yacht, a rail car, and an apartment on the Upper West Side. He joined exclusive clubs and had mistresses.[6]
In 1908, he listened to Teddy Price, who told him to buy cotton, while Price secretly sold. He went bankrupt but was able to recover all of his losses.[6]
In 1915, he filed bankruptcy again.[11]
Following the end of World War I, Livermore secretly cornered the market in cotton. It was only interception by President Woodrow Wilson, prompted by a call from the United States Secretary of Agriculture, who asked him to the White House for a discussion that stopped his move. He agreed to sell back the cotton at break-even, thus preventing a troublesome rise in the price of cotton. When asked why he had cornered the cotton market, Livermore replied, "To see if I could, Mr. President."[12]
In 1924–1925, he engaged in market manipulation, making $10 million trading wheat and corn in a battle with Arthur W. Cutten[6] and engineering a short squeeze on the stock of Piggly Wiggly.[9]
In early 1929, he amassed huge short positions, using more than 100 stockbrokers to hide what he was doing. By the spring, he was down over $6 million on paper. However, upon the Wall Street Crash of 1929, he netted approximately $100 million.[6] Following a series of newspaper articles declaring him the "Great Bear of Wall Street", he was blamed for the crash by the public and received death threats, leading him to hire an armed bodyguard.[9]
His second divorce in 1932, the non-fatal shooting of his son by his wife in 1935, and a lawsuit from his Russian mistress led to a decline in his mental health, while the creation of the U.S. Securities and Exchange Commission in 1934 imposed new rules that affected his trading. Although it is unknown exactly how it happened,[12] he eventually lost his fortune and filed bankruptcy for the third time in 1934, listing assets of $84,000 and debts of $2.5 million.[9][6] He was suspended as a member of the Chicago Board of Trade on March 7, 1934.[12]
In 1937, he paid off his $800,000 tax bill.[13]
His life is fucking wild, he literally goes from rags to riches to rags 3 times