He was called The Boy Plunger. Jesse Livermore made and lost multiple fortunes, including the biggest short in history during the 1929 crash. This is the story of the man who could read every tick in the market, but never mastered himself.
This episode is about Jesse Livermore. The most legendary trader who ever lived, and the man behind Reminiscences of a Stock Operator.
He made $100 million shorting the 1929 crash (about $1.9 billion today), yet died broke just a decade later.
Livermore’s life reads like a novel: ambition, obsession, and lessons written in blood.
What to expect in this episode:
“It never was my thinking that made the big money for me. It always was my sitting.” — Jesse Livermore
Books Mentioned:
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[00:00:00] This episode is gonna be about Jesse Livermore. So he's the main character in reminiscence of a stock operator, which is essentially a fictionalized biography based on his life. Now, we do know that the author, Edwin Lafa, he actually interviewed Lev Livermore extensively, so it's probably the most accurate description we have.
Of how he actually thought and operated. Jesse also wrote his own book called How to Trade in Stocks, which is essentially part manual, part memoir. So a lot of the details of his life and strategies have come from that as well. Some people say that he was the greatest speculator of all time, and I wanna start with his story, which is also a tragedy because he committed suicide at the age of just 63 and he was completely broke and destitute.
So on the one hand, uh, he was one of the greatest. So on the one hand, he was one of the greatest traders of all time, but on the other hand, he lost everything. And there are a lot of lessons to be learned from a story like that. So he was born in 1877 in Shrewsbury, Massachusetts. He said my father was a farmer.
He wanted me to work on the farm, but I didn't want to. And that's basically how it starts. A kid who didn't wanna spend his life behind a plow. So at 14 he actually [00:01:00] runs away from home. He said, one day I told my mother I was gonna leave home. I didn't wanna work on the farm, and that was all there was to it.
So here's what he ends up doing. He ends up gonna Boston and he gets a job for $5 a week, which is approximately about $200 in today's money. He said I was 14 when I got a job at a as a Quotate. He said I was 14 when I got a job as quotate as a.
He said I was 14 when I got a job as a quotation board at. He said I was 14 when I got a job as a quotation board boy in a stock brokerage office in Boston. It wasn't really a brokerage in the modern sense. It was what they called essentially a bucket shop, a place where people bet on stock prices instead of actually buying and selling the stocks.
He said it was a bucket shop, of course, but I didn't know that. I only knew that the quotations were printed on a tape and that I had to write them on the board. His job was simple. Take prices from the ticket tape, write them on the board, erase them, and do it all day long. And this is where he first starts to think about how the markets actually work.
There were always changing. He said there was, there were always changing. He said, that was all I had to think about for five hours a day. And they were alway that. They were always changing. He said That was all I had to think about for five hours a day, that they were always changing. That is how I first came to be interested in the behavior of [00:02:00] prices.
So at this point, he doesn't fully understand what he's doing other than that. His job is update the board with new quotes as they come in. And because he's just generally interested in numbers, he starts to spot patterns. He begins to track, he begins to keep track of. So he begins to keep track of these patterns in a small notebook every day.
He copies the prices down, so opens, highs, lows, closes, and he starts noticing these patterns that keep repeating themselves every day. He copies the prices down, opens highs, lows, closes, and he starts noticing these patterns that just keep repeating themselves. Certain movements that seem to happen before big moves up or.
Certain movements that seem to happen before big moves up or down. He doesn't actually know it yet, but he's basically discovering technical analysis decades before the phrase ever existed. Eventually, he tries to trade with another one of the boys who worked in the bucket shop, and the story went that the other boy had a tip on Burlington Railroad.
And so Jesse not trusting his tip. Opens up his little notebook and notices that Burlington is in fact acting the way it should before it goes up. And so together they place a bet. He ends up making exactly $3 and 12 cents, which in today is about a hundred dollars. He said after that first trade, I was speculating on my own hook. I [00:03:00] was playing a system and not a favorite stock or backing opinions. All I knew was the arithmetic of it, and I actually really love that line right there.
Not opinions, but the arithmetic, which is very different back, back in that time because a lot of people were essentially just focusing on taking tips from newspapers and that kind of stuff. And so essentially this becomes the foundation of his career. He doesn't care for tips because he's probably noticing at this point that that's how most of the customer is actually losing their money.
And so instead he relies on his notebook and the repeater patterns he has written down. That's probably why he starts winning from the very beginning. At 15 years old, he's making more money trading than he makes at his job, and so eventually he does what every teenager would probably do. He ends up quitting, and so he comes home one day. I really love his story. He comes home one day and he shows his mother a stack of cash.
It's about $1,000. He actually slaps it down on the table in front of her, which would essentially be a roughly $35,000 in today's money and so much money that at first his mother doesn't believe it's real. It's more money than she's seen in her entire life. So I actually think it's really funny. She actually tells him to put [00:04:00] it into a savings account.
He said she didn't quite believe it was real money. He said she didn't quite believe it was real money. She used to worry about. She used to worry. He said she didn't quite believe it was real money. She used to worry and fret about it. But all I.
He said she didn't quite believe it was real money. She used to worry and fret about it, but I didn't think of anything. I didn't think of anything except that I could be pro. Okay. He said she didn't quite believe it was real money. She used to worry and fret about it, and I love what he says next to you, he said, but I didn't think of anything except that I could keep on proving.
My figuring was right. That's all the fun there is being right by using your head, and so you can already see the mindset of Jesse starting to form here. For him, it wasn't really about the money, it was about being right through observation and logic.
So from there, the wins just keep coming. He actually becomes known around Boston as what they call the boy plunger. Now, plunger, back then, it didn't mean what it means now.
So essentially what it meant was someone who took big positions, who plunged in, he was betting in multiple bucket shops at once. Actually at this point, using fake names, which I think is really funny because they just kept banning him for winning too much. He said it didn't take long for the bucket shops to get sore of me for beating them.
I'd walk in and plank down my margin, but they'd look at it without making a move. They'd tell me there was nothing doing. So you have to remember at this point, there are basically, these things are basically scam houses [00:05:00] and he's figured out a way to beat them. And I'll, I'm gonna tell you exactly how he did it.
So first he knew the prices better than the operators themselves, which I think is kind of interesting. He wasn't gambling on tips as well. He studied the behavior of the ticket tapes, which is watching that ticket tape over and over and over again. Right? And so
is that right? You notice the tape's rhythm shifted.
He noticed the tape's rhythm shifted before big moves, essentially speeding up for rallies or slowing down for drops. Also, these bucket shops ran on a delayed ticker, which meant that quotes lagged behind the real market by about 10 to 20 minutes.
So what he did is he used this essentially, and he placed bets in one shop before the update hit, and he would gain a slim edge with observation and memory. So he was just like looking at his notepad. He was just noticing when patterns were showing up and he was essentially getting in front of. These bucket shops.
So eventually all but one of them actually refused to take his trades and the one that did, they put a serious handicap on him making it almost impossible for him to win. So he actually went as far as to disguise himself with several different names and addresses, but all, so he actually went as, so we actually had to go as far as to disguise himself with different names and addresses, but they all knew who he was and they AC ended up refusing.
So he actually went as far as to disguise himself with different names and addresses, but they all knew who he was and they refused his business every single time. [00:06:00] So he knew at this point he'd outgrown the game, and that's when he decided to leave for New York and start trading for real. And that's really where this story begins.
So after cleaning out the bucket shops in Boston, he decides he's ready for the real market. He said, when I left Boston to go to New York, I had about $2,500 saved up all I had made in the bucket shops. So $2,500 would be about $80,000 today. So he's got a, he's decently flushed at this point, so he goes to New York to see if he can make it as a real trader.
He said, I went to New York. So he goes to New York to see if he can make it as a real trader. He said, I went to a New York Stock Exchange house, one of the biggest ones in the country, and opened an account. At first, he thinks it's going to be the same kind of game.
He's reading the tape, taking small positions, just like what he did in the bucket shops. But then reality sets in, he says in the bucket shops, I could get the next quotation here. The tape always talked ancient history to me. By the time I got the quotation, the price had already changed, so there was no delay, which meant that he had to be quicker on his feet to play the same kind of game
he had a. In Boston, he had a built-in advantage. He was faster in Boston, he had a built-in advantage. He was faster than the house in New York. There was no [00:07:00] lag.
So everything, everything's in real time here and he's suddenly a slow one and he has to, and he begins to lose big.
Everything's in real time here, and he's suddenly the slow one and he begins to lose big. He said, on my first attempt, I lost $1,100. It was my first real experience of trading in a stock brokerage office. I was almost wiped out on the first try. It wasn't six months before I was broke. So he walked in thinking he was unbeatable, and just six months later he's completely broke.
Then comes.
Then comes one of the most important things he ever says. What beat me was not having brains enough to stick to my own game. That is to play the market. Only when I was sat satisfied. When precedents fuck you, then comes one of the most important things that he ever says. What beat me was not having brains enough to stick to my own game.
That is to play the market. Only when I was satisfied that precedents favored my play. Now I've thought about that line a lot. It's so easy to lose discipline and as soon as you start trading outside of what works
now, I actually sat with that line a lot and I sort of broke it down in my head. Fuck you dickhead. I thought about that line a lot, and I realized that it was so easy to lose your discipline. And as soon as you start trading outside of what works, things start to go wrong. And that's what Jesse had experienced.
He keeps going, whenever I read the tape, by the light of experience, I made money. When I made a plain fool play, I had to lose. So again, he's saying that he went away from his strategy and probably started taking tips from other traders. And then he said this about his temperament. I never lose my temper over the stock market.
I never argue with [00:08:00] the tape. Getting sore at the market doesn't get you anywhere. Absolutely love that. Essentially what he has is that mindset of a professional. He's seeing the market as something that is neutral and not something that's against him. He didn't take it personally, he didn't get angry, and then I just love this quote from the book. He says, the market does not beat them.
They beat themselves, and that's the truth. Every trader eventually has to learn later he said. A man must believe in himself and his judgment. If he expects to make a living at this game, he must not believe blindly. And after years of reflection, he summed up his philosophy with a line that I think defines.
Who he would later become, which we're about to find out. He said, after spending many years in Wall Street and after making and losing millions of dollars, I want to tell you this. It never was my thinking that made the big money for me. It always was. My sitting got that my sitting tight. So during this period, you can tell, you can tell.
So during this period, you can tell he was quite restless and wanting to trade pretty frequently, [00:09:00] and at the bucket shops, maybe that strategy worked. But on Wall Street it didn't so much, and so he had to start making adjustments. He said, men who can both Mm. And this is where he said, men who can both be right and sit tight are uncommon.
I found it one of the hardest things to learn. So you can see that he's starting to form his foundational principles at this point, and during that time. So you can see at this point he is starting to form his foundational principles and he is gonna come into play later when he starts to win really big after going broke in New York, he doesn't give up. He said, after losing all my money, I went to St. Louis and got a job in a bucket shop. I made a little stake and came back to New York. So when he comes back to New York, he commits to being more conservative this time around.
So more business-like. He's not just watching the tape anymore, he starts to study himself. And I love what he says here. He says, after that first wipe out, I began to see where I had been wrong. I realized that the tape told the truth. But that I had not learned to listen to it properly. That line I think is really important.
The tape told the truth, but I hadn't learned to listen, and that's essentially the psychological turning point for him at this stage. And he started to look at the market more broadly, what he calls general conditions. He says a man must study general conditions to seize them so that he can, so that he may, and he is starting to look at the market more broadly right now.
So what he, what he calls. He's starting to look at the market more broadly, what he calls general conditions. He says, a man fuck,
and he's starting to look at the market more broadly now, what he [00:10:00] calls general conditions. He says, A man must study general conditions to seize them so that he may anticipate probabilities. And notice that word right there, probabilities. He's moving from trying to be right to trying to be prepared. So he is making the shift from prediction to probability he adds if after.
He adds if after I study the general market, I reach the conclusion that stocks in general are not going up. It is not worthwhile to buy anything. I will not buy until I'm sure that the market itself is right. And I think that's exactly how the best traders today think. You saw a struck Miller Dalio al them say some version of this so by 1906,
so by 1906, he's back in New York and trading again, this is the year of the San Francisco earthquake. It's a complete.
This is the year of the San Francisco earthquake. It's a national disaster and it's caused a, a cascade of financial stress. He said in 1906 after the San Francisco earthquake, I went short of the market and made a small fortune. But what's fascinating is how he made that trade. He wasn't guessing at this point.
He was reading conditions. When the money market got tight, I began to sell stocks short again. It was not a [00:11:00] guess. I could feel that the market was weak.
I'll say that again. He said, I could feel that the market was weak, and that line gets quoted a lot and it's actually misunderstood even more. He's not talking about intuition in the mystical sense. He's talking about pattern recognition here, so essentially seeing the same setup, repeat, and knowing how it usually ends. Then comes the panic of 19 0 7, one of the worst financial crisis in US history, the Knicker bok Trust. Fails, credit disappears and panic starts to spread, and Livermore is positioned perfectly for it.
He said when the panic came, I was short 100,000 shares in the right stocks. It was the easiest money I ever made. I wasn't guessing the market told me what to do. That's such a great quote right there. I wasn't guessing. The market told me what to do and he continues. It was my plan to make money out of the it.
And he continues. It was not my plan to make money out of the distress of others, but I had followed my system and the system was right. He's making millions while the market is collapsing, but it's not luck and it's not opportunism, it's [00:12:00] discipline. He's doing exactly what his rules told him to do,
And then there's this incredible moment where he gets the timing perfect because he notices JP Morgan, like as in the JP Morgan and other bankers. They start to push for support and as soon as that happens, he knows for certain that he needs to get out of his short positions and he starts to buy again.
Then he says this, which might be one of those quoted lines in all of reminiscence of a stock operator. He says, there is nothing new in Wall Street. There can't be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again. again. What is telling us there is that markets are just a reflection of human nature and human nature never changes, keeps repeating itself over and over again. And he adds the game does not change, and neither does human nature and that's. Really the heart of what he's trying to get at here. Every chart, every trade, every boom, every bust, they're all expressions of the same emotional cycle.
So by the end of 1907, he's made a fortune. So by the end of 1907, he's made a fortune, but even in victory, he's still reflective. He said It was my sitting tight that made the money for me in the panic of 1907, and I knew it, but it is.
By the end of 1907, he's made an absolute fortune, [00:13:00] but even in victory, he's still reflective. He said It was my sitting tight that made the money for me in the panic in 1907, and I knew it, but it is one thing to know it and another to keep knowing it. I think that last sentence, it is one thing to know it and another to keep knowing it might be one of the most honest lines ever written about trading.
He knows the lesson. He just doesn't.
He knows the lesson. He just doesn't know if he'll be able to hold onto it.
So at this point, he's really starting to form some incredible principles. He's proven that essentially the market always tells the truth. Patience, beats prediction. Human nature never changes. And the hardest thing is not learning a rule. It's remembering it. And we can kind of think of Warren Buffett's famous saying here.
He says, rule number one, never lose money. Rule number two, never forget rule number one.
So after 1907, Jesse Livermore is super rich at this point, and he is only 30 years old. He's gone from a kid watching a ticket tape in a bucket shop to one of the most talked about traders in Wall Street. He said after the panic of 1907, I was worth over $3 million. I had to make it all. Fuck. So after 1907, he's really, really rich and he's only 30 years old.
He's gone from a kid watching ticket tape.
So after 1907, Jesse Livermore is really rich and he is only 30 years old. He's gone from a kid watching a ticket tape in a bucket shop to one of the most talked about traders on Wall Street. He said after the panic of 1907, I was worth over $3 million. I had made it all in the stock market, [00:14:00] so $3 million in 1907, which is, that's close to about a hundred million dollars a day.
and so as you can imagine, he's in his early thirties. He's probably living like a king at this stage, and everyone on Wall Street knows his name. But even in the middle of success, he's uneasy. He said The speculators deadly enemies are ignorance, greed, fear, and hope, and that's such a simple list, but that's the whole game if you really think about it.
Ignorance, greed, fear, and hope. And I think every trader today still fights those four things. Every time they click buy or sell, he continues. The average man doesn't wish to be told that it is a bull or bear market. What he desires is to be told specifically which particular stock to buy or sell, and absolutely love what he's saying here.
He says, most people, they don't want to actually think, they just want to tip. They want someone else thinking for them, which is probably why a commentators make so much money these days, even though you're better off tr.
I absolutely love what he's saying here. Essentially what he's saying is that most people, what they don't actually want to think, they just wanna tip, they want someone else thinking for them, which is probably why commentators end up making so much money, even though most of the time you're probably better off fading their advice rather than actually taking it.
And that's exactly how Livermore gets into trouble again because he starts [00:15:00] listening to other people.
Even though he's made a fortune, he keeps trading. He can't stop, even though he should probably slow down and take less risks. This is where he said the desire for constant action, irrespective of underlying conditions, is responsible for many losses in Wall Street, even among the professionals. And what he is doing, he is essentially talking about himself here.
He's made millions by sitting tight, and now he starts losing it because. He's trading too much and it just keeps on spiraling. He said, it is inseparable for human nature to hope and to fear in speculation. When the market goes against you, you hope that every day will be your last day and you lose more than you should if you don't get out.
Essentially, hope is the killer.
He's seen it in others, and now he's seeing it in in himself. Hope that is. Here's what he says. He says, and when the market goes your way, you become fearful that the next day will take away your profit and you get out too soon. And that's one of those universal truths you could hang in front of you, essentially cutting your winnings short and, and that's one of those universal truths you could hang in front of you, cutting your winning shorts and letting. Cutting your winners short and letting your losers run [00:16:00] all because of emotion. And that's what I love about Paul Ju Tuda Jones style. Who admits that he chooses.
And that's really what I love about Paul Tuda Jones Tu. And that's what I really love about Paul to the Jones style, who admits that he chooses to play on defense most of the time. So if you don't like a trade, he says you should probably get out and remember that you can always get in again if you want.
Livermore summarizes the problem perfectly. He says, fear keeps you from making as much money as you ought to. Hope keeps you from making any at all.
So by 1915, his fortune is completely gone again. He said I'd lost everything. My creditors were pressing me. I had to file a petition in for bank in for bankruptcy. So by 1915, he's actually lost everything and he says I had to. So by 1915, he's gone and lost everything again. He said I had nearly lost every his fortune.
So by 1915, his fortune is almost completely gone. He said I had lost nearly everything. My creditors were pressing me. I had to file a petition in bankruptcy.
This isn't because his system di stopped working. This isn't because his system stopped working. It's because he stopped working it. He broke his own rules. He started speculating in commodities trading without signals and over leveraging himself. He said I was playing a system, but it was not the old Livermore system.
It was a wish system.
So then he becomes super honest with himself here. He calls it a wish system, right? And so, so he is being so here, he's being really honest with himself. He calls it a wish system. And every trader at some point has traded a wish system for sure, a setup built on hope instead of actual logic.
But again, he doesn't stay down for long. He goes back to his [00:17:00] principles and he starts studying his own mistakes all over again. He said, the only thing to do when a man is wrong is to be right by ceasing, to be wrong, and that's just a brilliant line right there. When you're wrong, just stop being wrong.
And slowly he starts to recover. He's humbled now, but not defeated and learn something new he said. The big money was not in the individual fluctuations, but in the made movements that is not in reading the tape, but in sizing up the entire market and its trend. So what he's doing here is he is finally learning to zoom out.
He's realizing that trading is less about predicting ticks and more about understanding tides.
And then there's this beautiful passage that sums up how he thought about the market after decades of wins and losses. He said, the market does not beat the man who tries to reason it out. It is the man who changes his mind after the market has changed, that fails, and that right there, that's conviction.
It's not stubbornness. He's not trying to be stubborn. It's conviction earned through pattern recognition. And right after saying that, he adds this sobering truth. He says, speculation is a hard and trying [00:18:00] business and a speculator must be on the job all the time, or he'll soon have no job to be on.
And so by the time he's back on his feet, world War I is ending. He's richer again, not 1907, rich, but definitely comfortable at this stage. But if you've read ahead, you already know the pattern. Livermore's greatest strength and his greatest weakness are the same thing.
It's obsession. He's completely market. He's definitely mastered the market at this point, but he hasn't fully mastered himself yet, which we're about to learn.
So by the early 1920s, Jesse Livermore is back. He's back in the game. He's made and lost multiple fortunes by this point, but now he's entering his prime. He's trading much bigger, smarter, and slower as well. He said, I never buy stocks cheap. I never sell stocks cheap. What he's saying is that he doesn't care about price.
He cares about timing. Cheap stocks can get cheaper and expensive. Ones can get more expensive. He said prices like everything else, move along the line of lease resistance. They will do whatever comes easiest, and that's such a useful idea to really keep in mind the [00:19:00] line of least resistance. It's how he explains trends. He's not fighting the market anymore. He's flowing with it. He adds a prudent speculator, never argues with a tape. Markets are never wrong. Opinions often are.
He is not saying you can't have opinions, he's just saying that your opinions don't matter when the market disagrees.
So now that he's more established at this point, he starts thinking about capital very differently. He's not trying to catch every move he's trying to compound intelligently. He said, don't take action with a trade until the market itself confirms your opinion.
Being a little late in a trade is insurance that your opinion is correct. And that's such a fantastic piece of advice right there. He's saying, let the market prove you right before you risk real money. Patience is confirmation, and I think this is one of the biggest differences between amateur and professional traders, is not having the patience to wait until a trend is confirmed before diving in.
He goes on and adds. One of the most helpful things that anybody can learn is to give up, trying to catch the last eighth or the first. These two are the most [00:20:00] expensive eighths in the world.
And so I think what he's trying to say here is that he's probably lost a lot of money trying to time the tops and the bottoms. And so now he's starting to be a lot more conservative with his trades by waiting for a confirmation before he goes in.
And on top of that, he's learning to control something even more difficult, which is himself. He said it is what people do in the stock market. That counts not what they say they are going to do. And so that one actually hit me really hard because I have a bit of a bad habit of hesitating too much and concerning myself with wanting to be right versus just accepting the probabilities he keeps going. The average man doesn't wish to think of the market as a game of skill. He regards it as a game of chance, and that's such a profound observation.
Even after decades of seeing the same patterns repeat themselves, most people still think trading is only about luck. Livermore knew better, but he also knew how easy it was to forget that truth. In a bull market.
So by the mid 1920s, he's become an absolute legend in New York. He owns a Fifth Avenue mansion. It's a private yacht. He has a bunch of custom cars [00:21:00] and people also writing about him in newspapers. He's one of the first traders ever to become essentially a celebrity, and he's actually aware of the danger of that.
He said, when I study a market, I look, that's not even about it. So by the nine, so by the mid 1920s, he's become an absolute legend. He owns a Fifth Avenue mansion, private yacht, a bunch of custom cars. People are writing about him all the time in newspapers. He's one of the first traders to ever become a celebrity, but by the late 1920s, he can start to feel something.
Building
doesn't make any fucking sense.
By the mid 1920s, he's become an absolute legend. He owns a Fifth Avenue mansion. He's got a private yacht, a bunch of custom cars. People are writing about him all the time in newspapers, and he is one of the first traders to ever become a celebrity. And by the late 1920s, he can f.
And so at this point, we're in the bull market of the roaring twenties, but he can start to feel something building before that though, he said, when I study a market, I look for a line of least resistance. When everything points up, I go long. When everything points down, I go short. And now everything is pointing up. The roaring twenties, they're in full swing. At this point, stocks are doubling and tripling everyone from bankers to barbers who's trading on margin. Livermore's seen this movie before. He knows exactly how it ends. He said, people who look for easy money invariably pay for the privilege of proving conclusively that it cannot be found on this earth.
And that's the setup for what's coming next, the 1920 crash. And that's the setup for what's coming next. The 1929 crash, the greatest trade of his life.
It is 1929 now, and his capital base is enormous. His confidence has been restored. He's operating completely independently. He's got no partners, no syndicates, no clients. The market meanwhile, is absolutely [00:22:00] euphoric. As you can imagine, credit is easy, leverages everywhere, and the idea that stocks can fall has absolutely vanished.
He's watching it all unfold. On the ticker, he said, the speculator's chief enemies are always boring from within. It is inseparable for human nature to hope and to fear, and that's the foundation of every bubble, hope and fear, alternating in that perfect rhythm. He's seeing something familiar Now. Prices aren't rising because of earnings or innovation.
They're rising because people are afraid of missing out. And as the market keeps climbing, he starts building his short positions quietly. He's not trying to call a top. He's just waiting for confirmation. He said. I don't try to pick tops or bottoms. I wait for the market to show its hand, and that's Livermore's version of trade.
What you see, not what you think. And for the first time in years, he can feel panic starting to creep in. He said, I went short because the tape showed me the public was drunk on margin same as 1907. So when the crash hits. Which is black. Thursday, October [00:23:00] 24th, the market opens down and never recovers.
Within days, stocks lose nearly half their value. But at that, but by that time, he had slowly been building a strong short position. He said it was the easiest money I ever made. I wasn't guessing the market told me what to do. Black Thursday was a tape. Screaming and panic was my signal to hold short newspapers called him the Man Who Sold America Short.
Now, obviously his ego must have kicked in at this point, but it seemed as though he was able to control his emotions quite well, saying I never allow myself to get excited or enthusiastic about any position I may have. It is the surest way to defeat, and that's the mentality that formed over time with all the ups and downs.
Absolute detachment. He's made the greatest short trade in history and feels nothing but confirmation that his work.
He's made the greatest short in his. He's made the greatest short trade in history and feels absolutely, and feels nothing. He's made the greatest short trade in history and feels nothing but confirmation that his rules work. And so coming back to the original motivation for when he made his first thousand dollars, when he said to his mother, that's all the fun there is being right by using your head.
But as we're about to hear, [00:24:00] success comes with a price. The public ends up hating him for profiting from a collapse that wiped out millions of lives and savings. He said the public blames me for what they themselves did. I did not cause the market to go down. I only read the signal and that it was going to do so.
Of course success comes with a price. The public ends up hating him for profiting from a collapse that wiped out millions of lives and savings. He said the public blames me for what they did themselves. I did not cause the market to go down. I only read the signal that it was going to do so. So after the crash, he's, wealth is almost beyond comprehension, but he's also really exhausted and the market has given him everything and taken.
Almost as much in return. He reflects upon this where he says, after 40 years of studying, after 40 years of study and trading, I have learned that it is not good to, to try to make all the money after 40 years of studying and trading. I've learned that it is not good to try to make all the money in the world, and that's the voice of a man who finally understands the cost of his obsession.
So that's where we find him at the end of 1929, richer than ever, but still restless.
So at this point, he is made what was probably the single greatest trading history. And for a moment he's completely untouchable. But markets have a way of humbling even the best players. And by 1932, the same discipline that made him rich starts to slip again. He begins buying too early, trying to catch a recovery After the crash. He is still trading the last war and the same pattern that's [00:25:00] defined. His life starts repeating itself. He said, there is no training classroom or otherwise that can prepare a man for the emotional hazards of the market.
And that's what's happening to him again. Now, he's exhausted, not physically, but maybe mentally at this point. He's been living inside the market for four decades, and the emotional toll is finally catching up to him. He, he also said the only thing that endures in speculation is the continuous change and conditions.
The trader must adjust himself accordingly, but by the time he. But by this time he isn't adjusting. The market's evolved. New SEC rules are coming in tighter spreads. There's a slower tape as well. His old instincts clash with the new game and he keeps forcing the same movements, but it doesn't work. He admitted there's nothing, there's nothing like losing all you have in the world for teaching you what not to do.
And yet he still made the same mistakes, which I think is, is actually kind of crazy.
Through the early 1930s, he keeps trading in and outta the market, but the results get worse. He files for bankruptcy again in 1934. By 1940, after losing much of his a hundred million dollars, which is about [00:26:00] $1.9 billion in today's money, by the way, his debts exceeded $2.5 million against $84,000 in assets.
So at this point, he actually tries to write and teach instead, and he published how to Trade in Stocks that same year. It's part memoir, as I said before, part instruction manual and also part confession as well, where he writes, the successful trader has to fight these two deep-seated instincts.
Josh: He has to reverse what you might call his natural impulses. Instead of hoping, he must fear instead of fearing, he must hope he's describing exactly what he can no longer do himself. And as the decades wear on. The pressure builds. His third marriage is falling apart. His health is declining. He's probably drinking more at this point.
And the market, the one thing that gave his life meaning keeps punishing him by the, by the late and by late 1940. He's 63 years old, and November, and by late 1940, he's 63 years old and on, on and on November. And by late 1940, he's 63 years old. And on November 28th, 1940, Jesse Livermore walked in the cloak room of the Sherry Netherland Hotel in New York.
He wrote a note to his wife. It read my Dear Nina, things have been bad for me. I'm tired of fighting. I [00:27:00] cannot carry on this way any longer. This is the only way out. I'm unworthy of your love. I'm sorry, but this is the end of the road. Love Jesse. Moments later, he shoots himself.
And it's one of the most tragic endings in financial history. A man who could read every tick in the market, but couldn't read the limits of his own mind. And he once said, the game taught me the game, and it broke me. And that's exactly what happened. He mastered the market, but he never mastered himself.
And that's exactly what happened. He mastered the market, but he never mastered himself.
So when Jesse Livermore died in 1940, the market opened the very next morning, right on schedule. The ticket kept printing, stocks kept moving because that's what markets do, right? They outlive everyone. And maybe that's the most sobering truth for all, is that you can beat the market for a while. You can even master it, but the market doesn't remember you, only the lessons you leave behind.
He said the game of speculation is the most uniform. The game of speculation is the most uniformly fascinating game in the world, but is not a game for the stupid, the mentally lazy or the get rich quick adventurer. And that line is still true a century later. And his lessons, discipline, patience, attachment, and what every trait, uh.
That line is still true a century later, and his lessons of discipline, patience, attachment are [00:28:00] what every trader eventually discovers the hard way. Because what Livermore was really studying all along wasn't price. It was human nature, and human nature never changes.
And that's the story of Jesse Livermore, one of the world's greatest speculators. If you've got something outta this episode, please share it with someone who needs to hear it.
Also, get in touch with me on X. Also, you can get in touch with me on X at Traders show, and I'll be back soon with another story. Until then, keep studying, keep evolving, protect your money, and at at all costs. Stay in the game. Until then, keep studying, keep evolving, protect your money and stay in the game.