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  • Jesse Livermore World's Greatest Stock Trader

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    内容提示: JesseLIVERMOREWORLD’S GREATEST STOCK TRADERRichard SmittenJOHN WILEY & SONS, INC.New York • Chichester • Weinheim • Brisbane • Singapore • Toronto8467_Smitten_fm_a. qxd 08/14/2001 3: 32 PM Page i Copyright © 2001 by Richard Smitten. All rights reserved.Published by John Wiley & Sons, Inc.All excerpts from the New Times Company. Reprinted with permission.Y ork Times copyright © 2001 by the New YorkNo part ofthis publication may be reproduced, stored in a retrieval system or transmitted in any ...

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    JesseLIVERMOREWORLD’S GREATEST STOCK TRADERRichard SmittenJOHN WILEY & SONS, INC.New York • Chichester • Weinheim • Brisbane • Singapore • Toronto8467_Smitten_fm_a. qxd 08/14/2001 3: 32 PM Page i Copyright © 2001 by Richard Smitten. All rights reserved.Published by John Wiley & Sons, Inc.All excerpts from the New Times Company. Reprinted with permission.Y ork Times copyright © 2001 by the New YorkNo part ofthis publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical,photocopying, recording, scanning or otherwise, except as permitted underSections 107 or 108 ofthe 1976 United States Copyright Act, without eitherthe prior written permission ofthe Publisher, or authorization throughpayment ofthe appropriate per-copy fee to the Copyright Clearance Center,222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 750-4744. Requests to the Publisher for permission should be addressed to thePermissions Department, John Wiley & Sons, Inc., 605 Third Avenue, NewYork, NY 10158-0012, (212) 850-6011, fax (212) 850-6008, E-Mail:PERMREQ@WILEY.COM.This publication is designed to provide accurate and authoritative informationin regard to the subject matter covered. It is sold with the understanding thatthe publisher is not engaged in rendering professional services. Ifprofessionaladvice or other expert assistance is required, the services ofa competentprofessional person should be sought.This title is also available in print as ISBN 0-471-02326-4. For moreinformation about Wiley products, visit our web site at www.Wiley.com.fcopyebk. qxd 10/17/01 12: 09 PM Page ii This book is dedicated to my f ather, Louis Smitten.Without him there would be no book. He is a man who has done close to the impossible: He hasbalanced worldly success with spiritual success.8467_Smitten_fm_a. qxd 08/14/2001 3: 32 PM Page iii 8467_Smitten_fm_a. qxd 08/14/2001 3: 32 PM Page iv In 1923, seven men who had made it to the top ofthe finan-cial success pyramid met together at the Edgewater Hotel inChicago. Collectively, they controlled more wealth than the en-tire United States T reasury, and for years the media had heldthem up as examples ofsuccess.Who were they? Charles Schwab, president ofthe world’slargest steel company, Arthur Cutten, the greatest wheat spec-ulator ofhis day, Richard Whitney, president ofthe New Y orkStock Exchange, Albert Fall, a member of the President’sCabinet, Jesse Livermore, the greatest bear on W all Street,Leon Fraser, president ofthe International Bank ofSettlement,and Ivan Kruegger, the head ofthe world’s largest monopoly.What happened to them? Schwab and Cutten both diedbroke; Whitney spent years of his life in Sing Sing peni-tentiary; Fall also spent years in prison, but was released so he could die at home; and the others Livermore, Fraser, andKruegger, committed suicide.W aking from the American DreamDonald McCullogh, The steps ofa short sale are defined as a sale ofstock you don’town, in anticipation ofa drop in price. Stock is borrowed fromyour broker for delivery to the purchaser. Later, stock is pur-chased in the open market and returned to the broker to com-plete the transaction. In other words, the stock is sold first thenbought later, hopefully at a lower price. normal buy-first, sell-later transaction.This is the reverse ofaLouis Smitten, speculator8467_Smitten_fm_a. qxd 08/14/2001 3: 32 PM Page v 8467_Smitten_fm_a. qxd 08/14/2001 3: 32 PM Page vi ContentsPref aceAcknowledgmentsixxiiichapter oneThe Great Bear ofWall Street1chapter twoThe Back Story19chapter threeThe San Francisco Earthquake Rumbles in New York39chapter fourThe Crash of190763chapter fiveThe Cotton King85chapter sixBack on His Game107chapter sevenPerfecting His Market Theory127chapter eightStock Pools and Scandals151chapter nineBoston Billy175 chapter tenThe Crash of1929191chapter elevenWhen to Hold and When to Fold205chapter twelveLivermore’s Money-Management Rules223chapter thirteenLivermore’s Luck Sours245chapter fourteenThe Shooting ofJesse Livermore Jr.265chapter fifteenFacing the Grim Reaper277appendixLivermore’s Laws and Trading Secrets Revealed301SourcesBibliography315317• viii •CONTENTS PrefaceThere is nothing more difficult to take in hand, more perilousto conduct, or more uncertain in its success than to take the leadin the introduction ofa new order ofthings.Niccolo MachiavelliWHEN I est stock trader who ever lived, Jesse Livermore. I sat and listenedas my father informed me that Livermore had set a new standardfor the trading ofstocks. Fascinated, I began reading about Liver-more before I was 14.I did not know that 40 years later Livermore and I would havea date with destiny—or that I would devote more than a year ofmy life to investigating his life. I did not know that I would ulti-mately get to know him as well as anyone ever did get to knowhim.Livermore was a person of great secrecy, mystery, and silence.He strove to control his emotions and thereby overcome thehuman frailty of passions that we all suffer from. Above all, hewanted to beat the game, solve the puzzle, best the stock market.Many readers will be familiar with Jesse Livermore under thename Larry Livingston, from the best-selling book Reminiscences ofa Stock Operatorby Edwin LeFevre, a financial journalist. First pub-lished in 1923, Reminiscences ofa Stock Operator is the fictionalizedbiography ofLivermore. There is no question that Reminiscences isone of the best financial books ever written. Generations oftraders, investors, and market watchers have turned to it for insightW AS 13, MY FATHER TOLD ME ABOUT THE GREAT- into the strategies ofa great trader and for understanding ofcrowdpsychology and market timing.After reading Reminiscences and Livermore’s own book, How toT rade in Stocks, I realized that there was a lot more to Livermore’sstory. The published record revealed almost nothing about the realJesse Livermore. I embarked on a two-year journey that wouldtake me into Livermore’s world—both professional and personal. Iwas able to interview Paul Livermore, Jesse’s surviving son, whospoke for the record for the first time about his father. I also spoketo Patricia Livermore, the wife ofJesse Livermore Junior and closeconfidant ofDorothy Livermore, Livermore’s second wife and themother ofhis two children.Just like the famous financier J.P. Morgan, Livermore sufferedfrom great bouts ofdepression throughout his life. In the period helived there were no remedies for this condition, and finally, in1940, he ended his life by his own hand.Livermore was quiet and secretive, yet lived a very opulent andexciting life, moving in the highest social circles. He was person-ally blamed for the great crash of 1929, and received numerousdeath and kidnapping threats. He married a beautiful Ziegfeld Fol-lies showgirl and fathered two children, one of whom wouldeventually be shot by his own mother.This book is a complete biography ofJesse Livermore, the manand the trader. It chronicles his life in fine detail and also revealsmany new aspects of his groundbreaking trading techniques,which were revolutionary then and which remain revolutionarytoday.There are four simple themes to this book.First, human nature never changes. Therefore, the stock marketnever changes. Only the faces, the pockets, the suckers and themanipulators, the wars, the disasters, and the technologies change.The market itselfnever changes. How can it? Human nature never• x •PREFACE changes, and human nature runs the market—not reason, not eco-nomics, and certainly not logic. It is our human emotions thatdrive the market, as they do most other things on this planet.Second, the achievement ofmaterial goals and career ambitionsdoes not equal the achievement of happiness in life. There is nocorrelation between success and happiness. There is no automaticbalance between worldly riches and emotional fulfillment.Third, it is our will that allows each of us to accomplish ourgoals, not our intellect. Talent is not enough. Luck is not enough.Only the will to suffer hard work and incredible persistence leadsto the attainment ofthe impossible. There are no shortcuts; thereis no easy way. Especially, as you’ll find out, in the stock market.Finally, it is the individual, not the group, that has led to thegreat discoveries ofhumanity. The great ideas, the great fortunes,and the giant steps forward in technology, politics, and medicinehave all come from individuals, not groups.There are many ways to play the market, hundreds oftheories,techniques, systems, and strategies. This book covers Livermore’sapproach. It reveals for the first time in one volume his secrets onhow to successfully speculate and make money. A great deal oftheresearch conducted on Livermore’s life was based on interviewswith his family, personal papers, newspaper accounts, and Liver-more’s own writings. Some poetic license was taken in recreatingdialogue to paint a more vibrant picture of Jesse Livermore, theman, and his times. In certain parts of the book I have replicatedconversations as they were told to me by family members.And I think you will agree, after reading this book, that therenever was another stock market speculator like Jesse Livermore.PREFACE• xi • 8467_Smitten_fm_a. qxd 08/14/2001 3: 32 PM Page xii AcknowledgmentsSpecial thanks to Paul Livermore for his kind cooperation in goingback in time in such great detail to revisit a sometimes painful pastand to Paul’s beautiful wife, Ann, who was so gracious with hertime.Thanks to Patricia Livermore, who also had to travel back to theyears she was married to Jesse Livermore Jr. and relive so muchheartbreak, tragedy, and sorrow.Special thanks to my father for introducing me to the Livermorestory when I was a young man and for his brilliant technical assis-tance and editing ofthe book. Also thanks must go to my fabulousdaughter, Kelley Smitten, for her constant support and help inediting this book.I also must thank Ed Dobson at Trader’s Press for his greatencouragement during preparation of the original edition of thisbook. Ed shares with me, and many other people, an endless fasci-nation with Livermore’s life and times.Thanks to Debi Murray ofthe Historical Society ofPalm BeachCounty for guiding me through the society’s precious archives andletting me have a glimpse into Palm Beach life at the turn of thelast century.Finally, thanks to Jesse Livermore for trying to do the impossi-ble—beat the game and master the stock market.8467_Smitten_fm_a. qxd 08/14/2001 3: 32 PM Page xiii 8467_Smitten_fm_a. qxd 08/14/2001 3: 32 PM Page xiv *chapter one*The Great Bear ofWall StreetChaos is come again.Shakespeare, OthelloEarly on the morning ofT uesday, October 29th, the canyons ofW all Street were thronged with thousands of excited thrill-seekers who had come to witness the anticipated carnage. Po-licemen on horseback and detectives in uniform attempted tokeep the mob clear ofthe entrance to the New Y ork Stock Ex-change, but it was no use;every time they succeeded in openinga pathway, the jostling crowd immediately closed ranks again.Inside, on the floor ofthe exchange, one could actually feelthe tension and fear in the air as the hands ofthe clock crawledtoward 10:00 and the opening gong. Less than a week earlieron Black Thursday, the stock market had suffered the most dis-astrous decline in its history, and the staggering plunge ofpriceson the following Monday afternoon had only increased the pre-vailing sense ofpanic.In broker’s rooms across the country, investors visited nerv-ously and coughed and shifted their feet as they stood and staredin hypnotic f ascination at the silent stock ticker, the mechanicalcourier that would soon deliver, with cold indifference, a verdictofsurvival or—more likely—utter ruin.William Klingaman, 1929:The Y ear ofthe Great Crash8467_Smitten_01_a. qxd 08/14/2001 3: 38 PM Page 1 ON THAT SAME MORNING, AT EXACTLY 7:20, NOT 7:19 OR7:21, Jesse Livermore stood at the massive entrance to his 29-roommansion in King’s Point, Long Island, waiting to see the flying-maiden hood ornament on his black Rolls-Royce. The chauffeurknew the drill, he had to enter the driveway at seven twenty. JesseLivermore was a precise man.A light gray fog wafted in from Long Island Sound. It accentu-ated the cold air, the change ofseasons, and added an ominous feelto the air. As usual, the car rolled down the long circular drive atprecisely 7:20 and stopped in front of Livermore. He noddedsilently to the chauffeur, opened his own door, and slipped intothe back seat, the newspapers folded under his arm. He placedthem on the leather seats as he did every morning: the New Y orkTimes, the London Times, the W all Street Journal. He glanced at theheadlines again; they were basically all the same—“Stock MarketsPlummet Throughout the World.”As the car made its way down the driveway, Livermore clickedon his reading lamp and pulled the side-window curtains closed.He wanted to study the newspapers in dark silence. There were nosurprises in these newspapers for him. In fact, he had been waitingfor these very headlines for almost a year now. He had plannedcarefully for this day, and he had been patient.When the car crossed into Manhattan, the driver did not dropthe window between them. Instead, he used the microphone.“Mr. Livermore, we’ve passed into Manhattan. You asked me totell you.”Livermore pushed open the thick black curtain and let the lightof the sun stream into the darkness of the back of the limo. Hethought about telling the chauffeur to drive down to Wall Street sohe could see, could feel, the atmosphere in the Wall Streetcanyons.• 2 •JESSE LIVERMORE: WORLD’S GREATEST STOCK TRADER8467_Smitten_01_a. qxd 08/14/2001 3: 38 PM Page 2 But that might somehow affect the way he played it from hereon out, affect his emotions, his objectivity. Was this the bottom?Was it just a pause in a steep decline? Would confidence in themarket return and stop the free fall? Should he cover his shortpositions? His fortune would rest on the answers to these ques-tions, and he had long ago realized that it was what people actuallydid in the stock market that counted—not what they said theywere going to do.Some people might want to see the human chaos, feel the des-perate financial pandemonium that occurred when the fear-devilrose up and conquered the greed-god that had appeared so strongand indestructible—but not Livermore; he wanted to stayuntouched by these human reactions. He would be able to seeeverything clearly soon enough. He would listen to the quietclicking verdict of the stock tickers in his office suite when themarket opened for trading.He slid the black curtain back across the window and began tostudy the newspapers again in the darkness. He spoke withoutlooking up. “Harry, we’ll go straight to the office.”Before the automated traffic-light system was installed, a NewYork City police officer would sit in a booth and operate thelights. When the Livermore limousine approached, this officerwould make sure the light was green so Livermore would have nointerruptions on his journey from King’s Point to his office inManhattan.Once a week, Harry the chauffeur would retrace the route, stop-ping at each traffic-light booth. There he would pass out a cash gra-tuity to the police officer in charge for the officer’s kindconsideration in making sure the financier always had a green lightwhen he passed. Livermore was a person who demanded precision.Livermore exited his car at 730 Fifth Avenue, the HecksherTHE GREAT BEAR OF WALL STREET• 3 •8467_Smitten_01_a. qxd 08/14/2001 3: 38 PM Page 3 Building. He stepped into the private express elevator that stoppedon the eighteenth floor, the penthouse. Livermore demanded astraight shot to his office. He chose not to speak with anyone, ifhecould avoid it.There was no name on the door ofLivermore’s office suite. Heopened it with his key and entered the small waiting room, ananteroom where Harry Edgar Dache sat during office hours. Itwas difficult to get past Dache, who stood 6 foot 6, weighed 275pounds, and was considered by the press to be pug-ugly as well asnot very friendly.At this hour, however, the office suite was empty. Livermorewas always first. He opened the second door with a special keykept in a safe. Only he and Dache had the combination. Dacheeven supervised the cleaning people when they cleaned Liver-more’s offices. Many considered them the most palatial in NewYork City, with hand-carved arches, custom bookshelves, andwalls paneled in beautiful mahogany and carved oak. Livermorehad first seen this paneling in the library ofan old English manorhouse. He had paid to have the paneling dismantled and shipped toNew York, where it was reassembled in his offices.The office suite itself consisted of an anteroom; the tradingroom with its green chalkboard that covered the entire wall, alongwith the walkway for the board men; the conference room; andfinally Livermore’s huge private office. The chalkboard was visiblefrom all the rooms.Livermore usually employed a staffofseven, six board men plusDache. The primary job ofhis employees was to post stock quoteson the green chalkboards that stretched the length ofthe office area.Dache oversaw all activities in the office and did whatever else hewas asked. The board men were sworn to secrecy and paid well. Therule in the offices was no talking during market hours. Livermore• 4 •JESSE LIVERMORE: WORLD’S GREATEST STOCK TRADER8467_Smitten_01_a. qxd 08/14/2001 3: 38 PM Page 4 wanted no distractions while the market was open. The quotes hadto be posted immediately and accurately; millions were riding.There were several ticker-tape machines in each room. Thesnaking tape was like the blood that flowed through his veins. Itwas life itself. He was never out of arm’s reach of a stock ticker.There were tickers in the main rooms ofall his homes: Lake Placid,Long Island, the Manhattan apartment, the suite of rooms in theBreakers Hotel in Palm Beach, even on his 300-foot yacht.Livermore read the numerous New Y ork Times articles that hehad saved from the recent editions. All the papers blamed him forthe calamitous crash, personally blamed him for initiating thedecline—the precipitous free fall which now seemed to have nobottom. But he believed that business—in his case, the stock mar-ket—was like war. In war, you died ifyou made a mistake; in thestock market, ifyou made a mistake, you could go broke very fast.One could die, financially, in a heartbeat.Livermore was a serious person, and on this day he planned todo some serious business. He was impeccably dressed, as he wasevery day, in a handmade suit from Saville Row in London. Hisshirts were the latest style, made of the finest Egyptian cotton,monogrammed on the cuff. His suit hung perfectly from his slimframe, his silk tie subtly striped to blend in with it. His blond hairwas combed back, parted on the left side. He used pince-nezglasses, which were perched on his nose. He wore a vest with agold chain that spanned the pockets. On one end of the chainhung a thin gold pencil, on the other, a small golden penknife. Heoften fidgeted with the pen or the knife, spinning one or the other,while he was talking.He was the most famous bear on Wall Street, a trader who wasas likely to sell short as to buy long. He didn’t care; he knew thatstocks went down as often as they went up—but when theyTHE GREAT BEAR OF WALL STREET• 5 •8467_Smitten_01_a. qxd 08/14/2001 3: 38 PM Page 5 declined, they did it twice as fast as when they went up, and thatwas what was going on today.He had a line out at the present time of over a million shares,well over $100 million. It had been placed months ago, slowly,secretly, and silently, using more than 100 stockbrokers, so nobodycould tell what he was doing. He was short the market—he hadsold stock that he would later supply, at a much lower price. Hewas living up to his reputation as the Great Bear ofWall Street.Today, he was like a lone wolfstalking the arctic tundra, lookingfor prey—and looking out for other predators that might kill him.There were plenty of Wall Street players he knew who could dojust that—end his financial life with one deadly, hammering blow.He picked up one of the New Y ork Times articles he had savedfrom October 20, and read the headline: “Stocks Driven Down inWave of Selling.” He was careful not to gloat. There was no onewho knew better than Livermore how fast things could change inthe stock market. He read on:In the two hours in which trading was limited on the NewYork Stock Exchange active issues passed through one ofthewildest breaks in history. Final quotations revealed net lossesranging from 5 to 20 points and the aggregate depreciation inopen market values was estimated at $1,000,000,000 (one bil-lion) or more.The total turnover was 3,488,100 shares which representedthe second heaviest volume for a Saturday since the StockExchange was established. During the first half hour tradingtook place at a rate of more than 8,500,000 shares for a fullfive-hour day. The stock market community did not knowuntil an hour and twenty-three minutes after the 12 o’clockclosing gong what the final prices were, so late was the over-burdened ticker.• 6 •JESSE LIVERMORE: WORLD’S GREATEST STOCK TRADER8467_Smitten_01_a. qxd 08/14/2001 3: 38 PM Page 6 PIVOTAL STOCKS HITOne of the stories which gained wide circulation whereverstock market tickers clicked yesterday was that Jesse L. Liver-more, formerly one of the country’s biggest speculators, isthe leader of the bear clique that has been hammering awayat the market for weeks, and that the particular weaknesswhich developed in high priced and pivotal stocks was to beattributed, in part at least, to his activities.Arthur W. Cutten ofChicago, the recognized leader ofthebull party, watched the ticker from his hotel in Atlantic Cityyesterday and told close friends that nothing has developed tochange his opinion about the market—that good stockswould eventually sell higher.Reports of a struggle between Livermore and Cutten forstock market supremacy, which have circulated widely inWall Street for the last three or four days, were discredited.Livermore is presumed to be heavily short of leading stocksand Cutten heavily long of the same group of issues. Theascendency ofLivermore to the position he once held as thecountry’s leading market operator on the bear side, after sev-eral years of eclipse, is one of the most interesting develop-ments in the market.The short selling which it was generally agreed was theprincipal factor in today’s decline, served to induce furtherliquidation of stocks and the cumulative effect was reflectedin a demoralized market in certain issues. It was plain that themarket was receiving no organized support. Stocks whichordinarily have powerful backing were allowed to shift forthemselves.With stocks driving higher during the last few months fol-lowing each downward reaction, the situation was readymade for Livermore. The Street stories are that he went shortTHE GREAT BEAR OF WALL STREET• 7 •8467_Smitten_01_a. qxd 08/14/2001 3: 38 PM Page 7 of a large line of issues such as: United States Steel, Mont-gomery Ward, Simmons Co., General Electric, Americanand Foreign Power and half a dozen other of the market’spivotal issues. He then initiated his familiar hammering tac-tics under which the market first faltered, then broke.Cutten, the Fishers, Durant and others of the groupknown in Wall Street as the “Big Ten” were large holders ofthese particular stocks and have seen their plans and poolswrecked by what were natural economic developments, cou-pled with much shrewd short selling.One ofthe tales started and circulated in the financial dis-trict yesterday, was that Livermore had the backing in a bearcampaign of Walter P. Chrysler, who was said to be piquedbecause he suspected that the Chicago-Detroit group hadhammered at Chrysler motors in the market, driving it downbelow 55 from its high of135 this year.The outstanding bear leader appears to be Livermore, whohas regained a tremendous fortune through adroit short sell-ing and who, temporarily at least, is regarded as being exactly“right” on this market. Cutten, who started as a grain trader,has amassed an estimated $100 million or more in the stockmarket during the last three years of bull markets. Cutten isthe leader of the bull faction and is temporarily at leastregarded as “wrong” on the market.Mr. Cutten was in New York and watched the marketfrom the office of the head of the stock exchange. Hisexpressed opinion to friends is that much of the selling hadbeen hysterical, and that he believes good stocks should beheld for higher prices. He has not changed his formerlystated position about the long distance outlook. Neither hashe made any statement about the market for publication.Naturally they have nothing to say about their market • 8 •JESSE LIVERMORE: WORLD’S GREATEST STOCK TRADER8467_Smitten_01_a. qxd 08/14/2001 3: 38 PM Page 8 positions at the moment or what they have been doing inrecent days.The Times article had more to tell:Jesse L. Livermore, who has been in eclipse, so far as stockmarket operations are concerned, for several years, has madea smashing comeback, if Wall Street reports are true. Thecomeback of Mr. Livermore as one of the foremost marketplayers is another Wall Street wonder. As a boy he was a boardmarker in Boston brokerage houses where he developed suchskill at tape reading that, despite limited capital he was barredfrom every bucket shop in Boston and New York. This gavehim the nickname that has stuck to him through later years ofthe “Boy Plunger.”Coming to New York and playing the markets skilfullyafter long series ofups and downs he struck an extended win-ning streak and made a fortune of many millions. It isreported that in the current bull market he decided thatstocks were too high and guessed wrong. The continuedadvances of such issues as General Motors, Steel, GeneralElectric and others is said to have taken back a large part ofhis fortune. He was short of them all and covered time andtime again. It was reported in the financial district that he wasdown to his large irrevocable annuities, ofwhich he has sev-eral for himselfand his family, acquired during years ofearlierprosperity.Arthur Cutten, Livermore’s rival, might be mistaken for acountry storekeeper. He cares nothing for conventions,appearances or customs. Shy, quiet and unassuming, he hasmany times sat back in the corner of a Pullman smokingroom and heard casual travelers discussing his stock marketTHE GREAT BEAR OF WALL STREET• 9 •8467_Smitten_01_a. qxd 08/14/2001 3: 38 PM Page 9 feats without disclosing his identity. When not attending tohis businesses, he is a gentleman farmer on his estate nearChicago.On the other hand, Livermore is the fastidious, well-dressed man of the city. Slight and blond, and he wears hisdark clothes well, rides in Rolls-Royce cars, maintains a ret-inue ofservants, halfa dozen places ofresidence and proba-bly the most luxurious offices in New York located atop theHecksher Building.Temperamentally, the two are entirely unlike. Cutten iscalm, slow of speech and not at all impetuous. Livermore isquick, nervous and excitable, given to superstitions, but will-ing to bet his last nickel ifhe thinks he is right. Livermore hasbeen down not once, but halfa dozen times. Cutten at leastin the last years, has typified the bull market.The markets of the next month or so are likely to provewildly exciting affairs, because of the direct pull and haulagainst each other of a wide variety of economic factors, allof them powerful. It is now pretty certain that when stocksgo up, Mr. Cutten will be there helping them along. It isequally certain that when they decline, Mr. Livermore will bein the market hammering away. There is however no personalbattle between them.“Humph, it’s never personal!” uttered Livermore, as he finishedthe article and placed it on his desk. He and Cutten had often beentrading adversaries for years now, ever since they had been youngmen buying and selling commodities in the Chicago grain pits.The phone rang, and Livermore signaled to his assistant Dache,who had just arrived, that he would answer.“Hello.”“This Jesse Livermore?”• 10 •JESSE LIVERMORE: WORLD’S GREATEST STOCK TRADER8467_Smitten_01_a. qxd 08/14/2001 3: 38 PM Page 10 “Speaking.”“You bastard, Livermore. This is your doing and you are goingto pay. I’m broke thanks to you. No, I’m more than broke. I owemy broker thousands ofdollars ofmargin money, but I still got mygun. I’m headed down there to blow your brains out. Next timeyou answer your door I’ll be standing there and the next thing youknow you’ll be walking through the gates ofhell, which is whereyou deserve to be you . . .”Livermore slammed the phone down. It all sprang from thesearticles, picked up by every paper in the United States, blaminghim for the crash. But it wasn’t him. He wasn’t that powerful; noone was, not even the men from the great House ofMorgan. Butthat wouldn’t stop the public from thinking he had triggered thecrash and was driving it down by selling, selling, selling. He hadcalled the Times and given them an interview explaining that hewas not to blame, but it had not worked. No matter what, itseemed people wanted to blame him, maybe just so they couldhave someone to call on the phone and threaten. He reread theheadline ofthe interview he had given that appeared in the Octo-ber 22, 1929 edition ofthe Times: “Livermore Not in Bear Pool.”He read on:Jesse L. Livermore, who has been widely reported in WallStreet to have been heavily short ofthe market on the presentbreak, and to be the leader of a bear pool, denied yesterdayany connection with such a pool.Mr. Livermore’s statement, issued from his offices at 730Fifth Avenue, follows:“In connection with the various reports, which have beenindustriously spread during the last few days through thenewspapers and various brokerage houses, to the effect that alarge bear pool has been formed, headed by myself andTHE GREAT BEAR OF WALL STREET• 11 •8467_Smitten_01_a. qxd 08/14/2001 3: 38 PM Page 11 financed by various well known capitalists; I wish to state thatthere is no truth whatever in any such rumors as far as I’mconcerned, and I know ofno such combination having beenformed by others.“What little business I do in the stock market has onlybeen as an individual and will continue to be done on such abasis.“It is very foolish to think that any individual or combina-tion of individuals could artificially bring about a decline inthe stock market in a country so large and so prosperous asthe United States. What has happened during the last fewweeks is the inevitable result ofa long period ofcontinuous,rank manipulation ofmany stock issues causing their prices torise many times above their actual worth, based on real earn-ings and yield returns.“The men who are responsible for bringing about thesefictitious prices are the same men who are directly responsi-ble for what is happening in the stock market today. It isunfortunate for the general public when such a conditionarises that real sound investment issues have to suffer alongwith the readjustment ofissues ofleast merit.“Ifanyone will take the trouble to analyze the selling pricesofdifferent stocks, as for instance, United States Steel, whichis selling around eight to ten times its current earnings, manyother issues must look, and have looked for a long time, asselling at ridiculously high prices.“The Federal Reserve Board through its various warningsand many expressions from very high banking authoritiescould not stop the market from going up, so it must be plainand seem utterly ridiculous for any sane person to presumethat one lone individual could have any material effect on thecourse ofthe prices ofsecurities.”• 12 •JESSE LIVERMORE: WORLD’S GREATEST STOCK TRADER8467_Smitten_01_a. qxd 08/14/2001 3: 38 PM Page 12 “Fools,” Livermore mumbled on finishing the interview.“Fools, to think I could have brought an entire market to its knees.Impossible!”Perhaps he was part ofthe trigger mechanism, but it was a preg-nant situation. Wild speculation always brought the market to itsknees. He had been trading for 35 years, since he was 14 years old.He had made and lost millions of dollars. In 1929, he was at theheight of his power, and he knew this was another moment ofeuphoria.Livermore pondered the situation carefully. The threateningphone calls had shaken him. He was well aware of the deep...

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