Jesse Livermore

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Jesse Lauriston Livermore (* 26 de Julho de 1877 em South Acton, † Massachusetts, 28 de Novembro de 1940), também conhecido por Boy Plunger,<ref>Edwin Lefèvre (1923). Reminiscences of a Stock Operator, p. 14. </ref> foi um notável trader do início do séc. XX. Ficou famoso por fazer e perder várias fortunas multimilionárias, e por fazer vendas a descoberto nos crashes de 1907 e 1929.

Resumo

Nascido em South Acton, Massachusetts, Jesse Livermore começou a sua carreira de trader aos quinze anos. Fugiu de casa com a benção de sua mãe para escapar à vida de agricultor que o seu pai lhe desejava. Começou a sua carreira afixando as cotações das acções na correctora Paine Webber em Boston.

Enquanto trabalhava, apontava alguns palpites que tinha acerca das cotações futuras das acções, os quais consultava mais tarde para aferir a exactidão. Um amigo convenceu-o a fazer o seu primeiro trade. Arriscou $5 nas acções da Burlington e ganhou $3.12 no seu primeiro trade.<ref>Edwin Lefèvre (1923). Reminiscences of a Stock Operator, p. 12. </ref> Com este começo modesto, começou a fazer trades para si próprio.

Aos quinze anos, já tinha ganho mais de $1000 (cerca de $20000 hoje em dia). Nos anos seguintes ganhou o seu dinheiro nas bucket shops. Estas eram locais onde as pessoas submetiam os seus trades, mas nenhuma transacção real era executada, estes apostavam contra a casa. A maior parte das pessoas perdia dinheiro para as bucket shops, pois as flutuações das cotações das acções normalmente limpava as suas pequenas margens. Livermore regularmente batia as bucket shops e acabou por ser banido destas. Dedicou então as suas energias ao trading em mercados legítimos. Esta mudança levou-o a criar um novo conjunto de regras para bater o mercado.

Durante a sua vida, Livermore ganhou e perdeu várias fortunas multimilionárias. A sua fortuna ascendia a $3 milhões e a $100 milhões após os crashes de 1907 e 1929, respectivamente. Posteriormente perdeu ambas. Além do seu sucesso como especulador de valores mobiliários, Livermore deixou aos traders uma filosofia de trabalho que enfatiza o aumento de uma posição enquanto esta se mover na direcção correcta e o rápido corte das perdas.

Ironicamente, Livermore às vezes não seguia as suas regras à risca. Afirmou que a falta de adesão às suas próprias regras tinha sido a razão das suas perdas após ter feito as fortunas de 1907 e 1929.

The popular book Reminiscences of a Stock Operator, by Edwin Lefevre, reflects many of those lessons. Livermore himself wrote a less widely read book, "How to trade in stocks; the Livermore formula for combining time element and price". It was published in 1940, the same year he committed suicide. It was later revealed by Livermore that he had actually penned the book Reminiscences of a Stock Operator, and that LeFevre had acted as the editor and coach. There is some speculation that this partnership between the two men was not their first collaboration. Since LeFevre was a writer and journalist, it is thought that he was one of the friendly newspapermen that Livermore employed for both information and planted articles.

A contrary view of Livermore's life is provided by Paul Sarnoff. Sarnoff says that Livermore was a hype merchant and that many of his brilliant successes were gross exaggerations. He states that Livermore did not in fact make much money during the 1929 crash as he was heavily hedged. He accuses Livermore, at the end of his career as being little better than a tout.<ref>Sarnoff, Paul [1967] (1985 June). Jesse Livermore Speculator King. Greenville, South Carolina: Traders Press. ISBN 978-0934380102. OCLC 14938376. </ref>

Wall Street success

Livermore became a successful trader at an early age. He claims to have made 1,000 dollars by the age of 15 trading stocks. In his book, he claims his parents were against his trading even after his success because they couldn't understand how a person who didn't work could make such a sum of money relatively quickly. Livermore made his money by following trends in market prices. He would choose a particular stock or commodity to buy or short based on its price and volume action. Then, he would establish relatively small initial positions. He would then add to his positions if they made him money or sell them if they were unprofitable. This technique resulted in large gains and small losses. He also bucked the trends of prevailing sentiment of the markets at critical points. For example, when people were exuberant about the markets near the tops in 1907 and 1929, he began short-selling.

After devising his rules, he temporarily disregarded them in 1906. He repeatedly shorted Union Pacific in a rising market and kept adding to his position even when the stock temporarily rose. He couldn't explain why, but he had a strong urge to short the company. A few days later, the San Francisco Earthquake of 1906 struck. Livermore kept adding to his position and made $250,000.

He first became famous in 1907, when he short sold the market as it crashed. He noticed conditions where a lack of capital existed to buy stock. Accordingly, there would be drops in prices with too many sellers, driven by margin calls. With the lack of capital, there would be no buyers in sight to absorb the sold stock, further driving down prices. After the crash and its aftermath, he was worth $3 million.

He proceeded to lose 90% of that 1907 fortune on a blown cotton trade. He violated many of his key rules; he listened to another person's advice (he preferred working alone) and added to a losing position. He continued losing money in the flat markets from 1908-1912. He was $1 million in debt and declared bankruptcy. He proceeded to regain his fortune and repay his creditors during the World War I bull market and resulting downtrend.

He owned a series of mansions around the world, each fully staffed with servants, a fleet of limousines, and a steel-hulled yacht for trips to Europe. He married Dorothy, a beautiful Ziegfeld Follies showgirl when he was about 40 years old.

Livermore continued to make money in the bull markets of The roaring 20's. In 1929, he noticed market conditions similar to that of the 1907 market. He began shorting various stocks and adding to his positions and they kept declining in price. When just about everyone in the markets lost money in the Wall Street crash of 1929, Livermore was worth $100 million after his short-selling profits.

Favorite Book

One of Livermore's favorite books was "Extraordinary Popular Delusions and the Madness of Crowds", by Charles Mackay, first published in 1841. This was also a favorite book of Bernard Baruch, a stock trader and close friend of Livermore's who also was one of the few people that did well in the crash of 1929.<ref>Richard Smitten (October 21, 2004). Trade Like Jesse Livermore, p. 76. </ref>

Jesse cited a lot of jokes, including an old story about "selling down to the sleeping point" from the book "Speculation as a Fine Art" by Dickson G. Watts.<ref>Edwin Lefèvre (1923). Reminiscences of a Stock Operator, Chapter X, p. 98. </ref>

After the Crash of '29

Dorothy finally filed for divorce and took up temporary residence in Reno, Nevada, with her new lover, Agent Longcope. On September 16 1932, Dorothy divorced Livermore on grounds of desertion. They had been married since December 2 1918 - 14 years. Dorothy retained custody of their boys.<ref>Richard Smitten (September 14, 2001). Jesse Livermore: The World's Greatest Stock Trader, p. 248. </ref>

On March 28 1933, Livermore married the 38 year old Harriet Metz Noble in Geneva, Illinois; there was no honeymoon. It was Harriet's fifth marriage, and all four of her previous husbands had committed suicide.<ref>Richard Smitten (September 14, 2001). Jesse Livermore: The World's Greatest Stock Trader, p. 250. </ref>.

Through unknown mechanisms, he yet again lost much of his trading capital, accumulated through 1929. Thus, on March 7 1934, the bankrupt Livermore was automatically suspended as a member of the Chicago Board of Trade. It was never disclosed to anyone what happened to the great fortune he had made in the crash of 1929, but he had lost it all.<ref>Richard Smitten (September 14, 2001). Jesse Livermore: The World's Greatest Stock Trader, p. 260. </ref>

Livermore writes his book

In late 1939, Livermore's son, Jesse Jr., suggested to his father that he write a book about his experiences and techniques in trading in the stock and commodity markets. This brought a flash of life back into Livermore, and the book was completed and published by Duell, Sloan, and Pearce in March 1940. It was titled How To Trade In Stocks.<ref>Richard Smitten (September 14, 2001). Jesse Livermore: The World's Greatest Stock Trader, p. 276. </ref> The book did not sell well, World War II was underway, and the general interest in the stock market was low. His methods were still new and controversial at the time, and they received mixed reviews from stock market gurus of the period.<ref>Richard Smitten (September 14, 2001). Jesse Livermore: The World's Greatest Stock Trader, p. 276. </ref>

Suicide

In the Squibb building at 745 Fifth Avenue, at the age of 63, Livermore entered the Sherry-Netherland Hotel on November 28 1940, at 4:30 in the afternoon. Sitting on a stool at the end of the cloakroom, he withdrew a .32-caliber Colt automatic pistol (he had bought the gun in 1928 while he was living in Evermore), placed the barrel of the gun behind his right ear and pulled the trigger, dying instantly.<ref>Richard Smitten (September 14, 2001). Jesse Livermore: The World's Greatest Stock Trader, p. 278-279. </ref>

The police revealed that there was a suicide note of eight small handwritten pages in Livermore's personal notebook. It was reported in the November 30 issue of the New York Tribune.<ref>Richard Smitten (September 14, 2001). Jesse Livermore: The World's Greatest Stock Trader, p. 281. </ref> The press wanted to know what it said, and the police tersely responded: “There was a leather-bound memo book found in Mr. Livermore's pocket. It was addressed to his wife.” A police spokesman read from the notebook: “My dear Nina: Can’t help it. Things have been bad with me. I am tired of fighting. Can’t carry on any longer. This is the only way out. I am unworthy of your love. I am a failure. I am truly sorry, but this is the only way out for me. Love Laurie”.<ref>Richard Smitten (September 14, 2001). Jesse Livermore: The World's Greatest Stock Trader, p. 281-182. </ref>

Although untouchable trusts and cash assets at his death totalled over $5 million, Livermore had failed to regain his trading confidence before his death. A lifelong history of clinical depression had become the dominant factor in his final years.


References

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Books

External links

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