Jesse Livermore- Boy Plunger Read online

  Many of us are blind to key psychological elements of ourselves; that’s why people go to therapists or get outside help for any number of problems. That was what happened to me in 1993. Then, a combination of people helped me discover that my trading style had incorporated some inimitable traits, completely unbeknownst to me. These bad habits were responsible for the worst year of my career, and the only one that came close to being negative for my trading accounts.

  It’s easier for someone on the outside to understand why people do what they do than it is for people to figure it out for themselves. Individually, each of us probably thinks we are just about perfect, which of course is why marriage was invented - to kill off that delusion.

  The point is that it is in many ways easier for readers of this book and Edwin Lefèvre, the author of Livermore’s fictional biography, to figure out the psychology of Jesse Livermore’s trading than it was for Jesse himself. It’s not so easy to see yourself, and it’s even harder to clearly describe what you might see in yourself. From reading this and Lefèvre’s book, we can probably see more of what was unique about Livermore than Livermore could ever have seen for himself.

  Paul Tudor Jones

  Connecticut

  United States of America

  October 1st 2014

  Prologue

  A man must believe in himself

  By Jesse Livermore

  A man must believe in himself and his judgement if he expects to make a living at this game. I know from experience, and it took me five years to learn to play the game intelligently enough to make big money when I was right.

  My task was very simple: To look at speculation from another angle. But I didn’t know that there was much more to the game than I could possibly learn in the bucket shops. There I thought I was beating the game when in reality I was only beating the shop. At the same time, the tape-reading ability that trading in bucket shops developed in me and the training of my memory have been extremely valuable. Both of these things came easy to me. I owe my early success as a trader to them and not to brains or knowledge, because my mind was untrained and my ignorance was colossal. The game taught me the game. And it didn’t spare the rod while teaching.

  I didn’t have as many interesting experiences as you might imagine, and the process of learning how to speculate does not seem very dramatic at this distance. I went broke several times, and that is never pleasant, but the way I lost money is the way everybody loses money who loses money in Wall Street. Speculation is a hard and trying business, and a speculator must be on the job all the time or he’ll soon have no job to be on.

  When I am wrong, only one thing convinces me of it, and that is to lose money. And I am only right when I make money.

  That is speculating.

  Jesse Livermore

  New York City

  United States of America

  April 1923

  CHAPTER 1

  Death By His Own Hand

  The final meltdown

  1940

  On the evening of Wednesday November 27th 1940, in the exclusive Cub Room at New York’s fashionable Stork Club, Don Arden, a society photographer, stopped off at Jesse Livermore’s table where he was eating supper with his third wife Harriet.

  It was very noisy as the photographer asked Livermore if he minded having his photo taken. “Not at all,” replied Livermore, adding: “But it’s the last picture you’ll take because tomorrow I’m going away for a long, long time.” No one took any notice, however. The flash bulb went off and Arden got his shot. With that, Livermore’s wife, whom he affectionately called Nina, and who, in return, always called him Laurie, got up to dance with her friends and left her husband brooding at his table alone. He had no need of company that evening as he was in the middle of taking the biggest decision of his life: whether to end it all.

  The resulting photograph was haunting; by the time it left the darkroom, the subject would already be dead. The youthful Boy Plunger looked youthful no more. Whereas he had always seemed 10 years younger than his real age, as he entered his fifties the process had reversed and he now looked 10 years older. Although only 63, he had the look and gait of a man in his late seventies.

  The following morning, on Thursday November 28th, he left his triplex apartment at 1100 Park Avenue and walked to his office at the top of the Squibb Building at 745 Fifth Avenue, overlooking Central Park. But nothing much was happening at the office. These days, he passed his time as a stock market consultant trading shares, not very successfully, for others. The rules of the stock market, and what constituted acceptable behavior, had changed with the advent of Franklin Roosevelt’s Securities & Exchange Commission in 1934, which made life very difficult for the old breed of traders like Livermore. The new SEC laws had gradually worn him down. Now, almost every method he had used to amass four large fortunes, which briefly had made him one of the richest men in the world, were outlawed and illegal. As he sat in his office each morning, all he could do was think about the glory days, long since passed, and how to wile away the hours until lunch.

  At lunchtime, he ventured out to the nearby Sherry-Netherland Hotel. The hotel enjoyed fine views of Central Park, situated at the junction of Fifth Avenue and East 59th Street. It had been open for barely 13 years and occupied a very small part of what was then the largest single block of residential apartments in the world. Built of limestone, the brown edifice was one of the most elegant buildings of the period and the public rooms were styled in a mixture of all of the best of the renaissance period. The bar where he often ate lunch was small and intimate and had been designed for the prohibition era. But it suited Livermore and over the years became his favorite place in the whole of Manhattan. It was a place where he could lose himself in his own thoughts as he gazed out across Central Park.

  In the old days, he had even kept a suite of rooms at the Sherry-Netherland as his Manhattan base. When the stock market closed, he would leave the office early and enjoy regular liaisons with young showgirls introduced to him by his friend, the impresario, Florenz Ziegfeld Jr. He later recalled those times as the “happiest days of my life.” He had only finally vacated his rooms in 1936, when he and his wife bought a permanent apartment in Park Avenue.

  For that reason, and for the memories it held, Livermore’s choice for the location of his death was probably no accident. It had also been his lunch venue since 1927 and he regularly stopped-by for a cocktail after work, often to share a drink again with old girlfriends, most of whom, by that time, were married with children.

  But the mood of the man who walked into the Sherry-Netherland that lunchtime was not that of the most successful investor Wall Street had ever seen. Instead, it was the mood of a has-been who believed his life had ultimately been for nothing. His multi-million dollar fortune was long gone and he relied for his income on a modest annuity and the generosity of his wife. She was wealthy in her own right from her four previous marriages, all of which had ended in widowhood.

  In his mind, Livermore had been a complete failure – a failure in business and a failure in his personal life. He was well aware of the cause of his failures, as he had analyzed them many times over. His problems could be summed up all too easily in one word, “consistency”. Although he was arguably second only to John Pierpont Morgan in Wall Street folklore, he had veered throughout his life from being America’s richest man to America’s poorest man – once achieving both distinctions inside a five-year time frame. He was also much married, and his personal life over the years had been as controversial as one man’s could be. By his own estimate, in between making millions on the stock market, he had bedded hundreds of women, most of them whilst he was married and many of them not yet turned 21.

  That Thursday, Livermore was seated at a table by himself, enjoying a chicken salad with a glass of white wine and scribbling in a notebook that was attached to his wallet. He then got up and left for the walk back to his office. According to those whom he acknowledged along the way, he app
eared to be finalizing in his mind events that would transpire later. It would be typical of Livermore to plan his own death just like he planned every stock market move he ever made.

  But when he returned to the Sherry-Netherland three hours later, at around half past four in the afternoon, there was nothing at all for anyone to be suspicious about. Carl Fischer, the barman who had served him at lunchtime, mixed the first of two tumblers of a cocktail known as an ‘Old Fashioned’, a strong mixture of whisky and bitters. It appeared to be the Dutch courage Livermore needed to get the deed done.

  He sat at a small table in the bar for a half an hour, speaking to no one, sipping his drink and writing in his pocket notebook. Every so often he looked up, deep in thought. Fischer later recalled him acting more “fidgety” and “nervously” than normal, but nothing out of the ordinary.

  Then he gestured to Fischer and ordered a second Old Fashioned. Half an hour later, Carl Fischer, the last person ever to speak to him, asked him if he wanted his drink refreshing a third time. He didn’t and simply said “that will be all” as he reached for his money clip to settle his final tab. At 5:25pm, the 63-year-old got up and walked into the Sherry-Netherland’s lobby and right across to the men’s cloakroom without stopping. His eyes met those of Eugene Voit, the hotel manager, but no words were exchanged. Voit was the last man to see him alive and later said: “There was nothing unusual about Mr Livermore’s appearance, he looked normal and cheerful enough to me.”

  Livermore had difficulty finding his coat but finally retrieved it from behind a pile of others. Folding it neatly, he sat down on a chair in the corner of the cloakroom and placed the book in the left hand pocket of his jacket. Then he unbuttoned his shirt and took a Colt .32 automatic revolver from his right hand coat pocket. He was left-handed and, calmly and coolly, he raised the gun to the left side of his head and pulled the trigger. He fell back into the chair. There was very little blood and indeed no sign that anything untoward had occurred. Anyone observing the man in the chair would have thought he had just fallen asleep. Surprisingly, the small cloakroom seemed to have contained the noise of the shot and no one heard a thing. Livermore was a marksman and an expert on guns. He would have known precisely what to do to kill himself cleanly and with no fuss.

  At 5:35pm, the attendant Patrick Murray, making his hourly rounds, entered the cloakroom and saw Livermore slumped on the chair. Murray, believing Livermore had collapsed and was ill, immediately called Vincent Murphy, the hotel’s assistant manager. Murphy recognized Livermore and tried to rouse him. He then saw blood trickling from the bullet’s exit wound behind his right ear. It was a remarkably clean shot. Murphy spotted the gun on the floor and instantly realized what had happened in the cloakroom. He told Murray to wait by the door and not to let anyone in as he rushed for a phone at reception. He dialled the East 67th precinct of the New York Police Department and briefly explained the situation. The duty officer, who had no idea who Livermore was, said he would dispatch a crew and an ambulance. Next, Murphy dialled the office of Eugene Voit.

  When Voit arrived downstairs, the two men went into the cloakroom and stood silently around Livermore’s body, unconsciously protecting his privacy until the police arrived. The policeman immediately realized Livermore was dead. The ambulance arrived from Metropolitan Hospital and waited outside on the kerb. Inside was Dr Villeminia, a surgeon who specialized in head injuries, but there was nothing he could do other than pronounce Livermore dead and call the Medical Examiner’s office.

  An Inspector Patrick Kenny arrived to take charge of the police operation. By then a swarm of New York paparazzi had assembled outside tipped off by hotel staff.

  Once Kenny had assessed the situation, he walked to 1100 Park Avenue with Eugene Voit to break the news to Livermore’s wife, Harriet. She immediately became hysterical and Kenny put a call out to her doctor. The men stayed until the doctor arrived and put her to bed with a strong sedative. From the apartment, Kenny called Livermore’s son Jesse Jr and was forced to relay the news of his father’s death to him over the telephone, something he didn’t like doing. He asked him to come to the Sherry-Netherland immediately and formally identify his father’s body. A stunned Livermore agreed. He went to his bedroom and put on a chequered suit, smart overcoat and a trilby. He walked down to the street to find a cab. Oblivious to all else, he left behind his keys and wallet. It was 6:45pm by the time he arrived at the hotel. As he stepped out of the cab, seemingly in a daze, cigarette dangling from his lips, a sea of flashbulbs went off. He stared directly at the cameras and walked inside the hotel lobby without paying the cabbie. The bellboy, realizing what had happened, paid off the fare.

  Jesse Jr was in a terrible state and stood in the hotel lobby shaken to the core uncertain what to do. Voit and Kenny grabbed him and took him straight to the cloakroom for the formal identification. Hotel staff had closed off a small dining room next to the cloakroom and he was ushered inside. A telephone was brought in and young Livermore was told he could stay and use the room as long as he needed. Within an hour, news had circulated downtown and journalists thronged the hotel lobby. A police incident van had arrived outside the hotel and police cars were parked haphazardly with the lights flashing. Despite that, business carried on in the hotel remarkably unaffected and the majority of guests in the lobby remained indifferent to the fact that the great Jesse Livermore had just died a few feet from where they stood.

  By this time, the general manager of Livermore’s office, Walter McNerney, had arrived. He attempted to comfort Jesse Jr, and when he had calmed down, they broached the subject of how to tell his younger brother, 17-year-old Paul who was at boarding school in Lakeville, Connecticut, at the famous Hotchkiss School. Schools didn’t come more prestigious or expensive than Hotchkiss. It was a feeder school to Yale and past pupils had included Henry Luce, Henry Ford II, Forrest and John Mars, Harold Stanley and Tom Werner.

  McNerney told Jesse he would take care of making that call. With that, Jesse put on his coat and walked through the streets to his father’s apartment.

  With a very heavy heart, McNerney got the number of the school from reception and picked up the receiver to dial the headmaster, George van Santvoord. The receptionist of the 600-pupil school was reluctant to put him through until he told her the nature of the call. When she realized what had happened, she didn’t hesitate. Van Santvoord had been headmaster for 14 years and this was not the first phone call like this he had received. He had driven ambulances at the front in France during the First World War, and he was used to delivering bad news. McNerney informed him that Livermore’s chauffeur was already on his way to pick up Paul.

  Paul Livermore was in a room studying at just before eight o’clock when a friend knocked on the door to tell him he was wanted in the headmaster’s office. For any boy of 17, that was almost always bad news.

  When he arrived, Van Santvoord knew there could be no preamble, so he simply told him his father had shot himself and was dead. After a few seconds taking in the news, Paul fainted into the headmaster’s arms. Van Santvoord lay him down and called for water. Paul remained in the headmaster’s office clutching his glass of water until the chauffeur arrived to drive him to his father’s apartment in Park Avenue where his stepmother, who had regained her composure, was waiting for him at around 10 o’clock.

  Meanwhile, New York’s assistant Medical Examiner, Raymond Miles, had arrived at the Sherry-Netherland at 9:45pm and was greeted by McNerney, who had taken charge of the situation. Miles took just 20 minutes to examine the body and complete his paperwork. He informed McNerney that an autopsy would not be necessary as the cause of death was readily apparent. Afterwards, he spoke to reporters in the lobby to confirm the bare details that Livermore was dead, but he refused to comment on the cause of death. The Medical Examiner released the body to the family and McNerney took care of the arrangements for collection of the body with the Campbell Funeral Church at 81st Street and Madison Avenue. McNerney waited until the ambulance
arrived from the funeral home and had taken Livermore’s body away.

  Inspector Kenny remained, completed his paperwork and wrote up the official report, which he had been ordered to deliver to the home of the Police Commissioner that night.

  Kenny’s report stated that there was no doubt about what had happened. Death had come by Livermore’s own hand. The gun was found by his feet and a suicide note in his pocket. The note was scribbled in longhand over eight-pages of his notebook and addressed to his now five-times widowed wife. Kenny laboriously wrote the exact contents of the suicide note in his report before he handed it to McNerney who delivered it to Jesse Jr at the Livermore apartment.

  Whilst there was nothing strange about Livermore’s suicide, there was certainly something strange about his wife. It was later revealed in the newspapers that her previous four late husbands had also committed suicide, and Livermore had made it a fifth. It was a remarkable series of coincidences that were never properly explained. But what wasn’t in doubt was that Livermore had taken his own life whilst in a depressed state.

  In modern times, Livermore would have been described as clinically depressed in the final years of his life. Later, he was labelled autistic and bipolar. Ironically, a few years earlier, he had written that the job of a Wall Street investor was not for people of “inferior emotional balance.” The irony was lost on no one that day.

  Livermore had been a very popular regular at the Sherry-Netherland ever since it had opened and had always tipped extremely well – the tears flowed even amongst the staff that evening. That night, the manager gathered all the staff in his office and commanded a few moments silence in honour of a favored patron.