Tuesday, November 7, 2017

The tragic end of Jesse Livermore

This month of November, specifically the 28th, marks the 77th anniversary of the passing of the legendary trader Jesse Lauriston Livermore.

Nicknamed "The Boy Plunger," and "The Lone Wolf of Wall Street," he made his first trade at 15, and went on to make -- and lose -- many millions.  Some call him the greatest speculator of all time.  Livermore inspired what some call "the trader's bible": Edwin Lefevre's "Reminiscences of a Stock Operator." In the trading world, surely Livermore's was the most operatic story, the most "film noir."

As adept at selling short as buying stock, he made millions in the crashes of 1907 and 1929, $100 million in the latter, it is said.

Not as often stated, by 1934, he had lost the entire $100 million.

A habitue of New York's Sherry-Netherland Hotel, he ate lunch there often, then would return after work for drinks.  November 28, 1940 must have seemed like a normal day, more or less, to the wait staff and bartenders who knew him.  And it was -- until he went over to the cloakroom and shot his brains out.

He left behind an eight-page suicide note placed in a leather-bound notebook, and then carefully placed in his pocket.  It was addressed to his third wife, Harriet, a singer.  Livermore was her fifth husband.  Appears both had a lot of stick-to-itiveness when it came to marriage;  they would keep doing it until they got it "right."

That's not the strangest fact here.

Remarkably, each of Harriett's previous four husbands killed themselves, too.  So goes the "story."

Turns out it is just that, a "story", not true:  Matthew Hansen writes at omaha.com:

"Harriet Metz Noble’s first four or five husbands didn’t all kill themselves, contrary to the information found in at least two Livermore biographies as well as on the ever-reliable Wikipedia.

"Harriet wasn’t even married four times before she married Livermore, Sparber writes in his first email to me.

"The truth: Harriet’s first husband, William Schnorr, died of pneumonia years after Harriet divorced him after alleging physical abuse.

"Her second husband, Noble, did commit suicide. So did her third husband, Livermore.

"And her fourth and final husband, an Italian aristocrat named Alexander de Rostaing, whom she married and divorced, appears to have actually outlived Harriet.

"So, if you are keeping score at home, that’s actually two divorces and two husbands who committed suicide. That’s not the stuff of legend. That’s the stuff of tragedy.

"Harriet Metz Noble died in Pasadena, California, in January 1967. She was a woman who lived a big life — European singing tours, four marriages, a decade spent with a famous stock trader in a Manhattan penthouse apartment — and then died fairly poor, according to her family."

You can't beat research.

One piece of further strangeness in Livermoreiana, however, that turns out to be true:  Livermore's second wife, Dorothea, shot their 15-year-old son, in a "drunken argument, November 29, 1935.  The story was reported in the Spartanburg, S.C. Herald.  Other headlines that hinted at the carnage, on a global scale, to come were adjacent on the page:  "Hitler explains his popularlity" and "Japan's military fund increased."

Another undisputed fact:  Livermore believed he was a failure, this goaded on by what may be diagnosed today as bipolar syndrome.  Lots of ups and downs in his life.   In the Crash of 1929, he had amassed a fortune of $100 million.  By 1934, only $5 million remained, invested in annuities.  The trading capital -- gone, and for Livermore, that was apparently untenable.

The Board of Trade had suspended his membership.  Livermore turned his attention to writing a book: "How to trade in stocks; the Livermore formula for combining time element and price." It was published in that fateful year, 1940.  In it he said:

“The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor.”

But writing about stocks wasn't the same as trading them.  In his final years, he succumbed to clinical depression.

His biographer Richard Smitten, in Jesse Livermore, World's Greatest Stock Trader, tells the story:

The last photo of Jesse Livermore, as described here
ON WEDNESDAY NOVEMBER 27, 1940, THE 63-YEAR-OLD Livermore and his wife, Harriet, whom he had nicknamed "Nina," were at the Stork Club, Livermore's favorite club. The house photographer came up and asked if he could take a photo."Of course you can," Livermore said. "But it's the last picture you will take, because tomorrow I'm going away for a long, long time."

Nina was shocked. She asked Livermore, "Laurie, what do you mean?"

"Only a joke, darling, only a joke." He smiled back at her.

The flashbulb fired. Several people came by from time to time to join them, and Nina had a few dances with friends. Livermore looked on, a faraway stare in his eye. His food went untouched; he had long since lost his appetite. He looked thin and wan.

The next day, November 28, at noon, he wandered up from his offices in the Squibb building at 745 Fifth Avenue and entered the Sherry Netherland Hotel. He stopped to say hello to Eugene Voit, the manager. He had lived in the hotel for years before moving to Park Avenue. He often stopped by for a cocktail on his walk home from work.

At 12:30 he sat down for lunch alone, which was not unusual. He was well known to the staff and a favorite regular at the hotel bar and restaurant. He sat near the bar and accepted his old-fashioned, which the bartender automatically made when he saw him enter. He spoke to no one during lunch. He appeared to the waiter to be distraught and intense.

Throughout his lunch, he would whip out his favorite small leather-covered memorandum book and extract the gold pen attached to the chain on his vest to write. He wrote hurriedly, a page or two at a time, like someone who had a lot to say but could only say a little at any moment. Each time he replaced the notebook in his pocket. He did this several times through lunch. He smoked cigarette after cigarette as he sat there. At 2:30, he left the hotel and returned to his office.

He came back to the Sherry Netherland at 4:30 in the afternoon and went directly to his favorite table near the bar. As usual, he was handed an old-fashioned as he sat down. Livermore smiled at the waiter but said nothing. He sat there for an hour, taking his notebook out and writing in it, then replacing it. He ordered one more old-fashioned during the hour he sat there.

He finally rose from his table and walked out of the bar into the lobby.

To get to the men's washroom in this hotel, it was necessary to enter the lobby and walk about 120 feet, through swinging doors that obscured the view, to an area which then led into the banquet room, the cloakroom, and the washrooms.

At 5:33, Livermore walked through the swinging doors and slipped through the closed door of the dim, dark, cloakroom. He took a seat on the stool at the end of the cloakroom. He withdrew a .32-caliber Colt automatic pistol and slid, the barrel back, popping a round into the chamber. The clip was full. He had bought the gun in 1928 when he was living at Evermore.

He placed the barrel of the gun behind his right ear and pulled the trigger.

The bullet ripped through his brain. He died instantly.

A few minutes later, the assistant manager, Patrick Murray, was making his hourly rounds when he opened the door to the cloakroom. He saw Livermore slumped in the chair. At first he thought he should not disturb him, that Livermore was asleep. Then he saw a pool of blood on the floor and the gun.
Jesse Livermore Jr. arrives at a Sherry Netherland hotel,
New York City, November 28, 1940.  Thirty-five years
later, he would meet the same fate.

He ran back to the reception desk and called the police. The news spread like wildfire.


His suicide note read, in part:

“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."

(We have searched for the full eight-page text, but have not been successful in finding it yet.)

Livermore was something of a Gatsby figure, chasing wealth, failing, finding death instead.  But he wasn't entirely alone in that.  In "Waking from the American Dream," Donald McCullough writes:  "In 1923, seven men who had made it to the top of the financial success pyramid met together at the Edgewater Hotel in Chicago,  Collectively, they controlled more wealth than the entire U.S. Treasury, and for years the media held that up as examples of success.

"Who were they?  Charles Schwab, president of the world's largest steel company .  Arthur Cutten, the greatest wheat speculator of his day.  Richard Whitney, president of the NYSE, Albert Fall, a member of the President's Cabinet, Jesse Livermore, the greatest bear on Wall Street, Leon Fraser, president of the International Bank of Settlement, and Ivan Kruegger, the head of the world's largest monopoly.

"What happened to them?  Schwab and Cutten both died broke;  Whitney spent years of his life in Sing Sing penitentiary;  Fall also spent years in priosn, but was released so he could die at home;  and the others Livermore, Fraser, and Kruegger, committed suicide."

Biographer Rubython put his final, official, accounted-for net worth at minus $350,000.

However.

To add a bit of complexity, son Paul reported to the biographer Smitten many years later that on the night of his father's suicide, he recalls seeing a large amount of cash in three paper bags, perhaps as much as $3 million, and perhaps another $1 million in jewelry, in his father's apartment.  Could that have been part of his stepmother's $7 million fortune that kept Jesse afloat?  That part is not clear.  In the reported exchange between stepmother and son, she seems to refer to the money as Jesse's, as "your father kept too much cash in the house," but again, whose cash it was, is not perfectly clear.

Things are not as they seem, nor are they otherwise.  Mystery would surround Livermore to and through the end, it would seem.

Whatever the case, whether fortified with $4 million in cash and jewels, or with a net worth of minus $350,000, Livermore himself had lost hope, lost confidence in himself, and called it quits.

RIP, Jesse Livermore, and all such aspirants like him.  Livermore was 63.

The death of his son, Jesse Jr., was another study in tragedy, including alcohol, guns, prison, attempted murder.  As with his father, the story ended in suicide;  Jesse Jr. was 55.

The third generation would follow the same path.  Livermore's grandson, Jesse III, committed suicide February 26, 2006.  He was 65.

An extraordinary comedown not just for the Boy Plunger, the Wolf of Wall Street, but for an entire family -- across three generations.


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Livermore quotes, from the man who made $100,000,000 in 1929, and had lost it all by 1934 (his

1. “Money is made by sitting, not trading.”
2. “It takes time to make money.”
3. “It was never my thinking that made the big money for me, it always was sitting.”
4. “Nobody can catch all the fluctuations.”
5. “The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street even among the professionals, who feel that they must take home some money everyday, as though they were working for regular wages.”
6. “Buy right, sit tight.”
7. “Men who can both be right and sit tight are uncommon.”
8. “Don’t give me timing, give me time.”
and finally, the most important thing:
9. “There is a time for all things, but I didn’t know it. And that is precisely what beats so many men in Wall Street who are very far from being in the main sucker class. There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. Not many can always have adequate reasons for buying and selling stocks daily – or sufficient knowledge to make his play an intelligent play.”


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SOURCES:
Smitten, Richard.  Jesse Livermore, World's Greatest Stock Trader..  New York:  Wiley, 2001.
Rubython, Tom.  Jesse Livermore Boy Plunger.  The man who sold America short in 1929.  London:Myrtle Press, 2015.  (Granular detail, highly recommended.)


Wednesday, October 11, 2017

Nobel Prize winner Richard Thaler baffled by market

Nobel Prize winner Richard Thaler says this could be ‘the riskiest moment of our lives’ - MarketWatch



‘We seem to be living in the riskiest moment of our lives, and yet the stock market seems to be napping. I admit to not understanding it.’

Richard Thaler