Book Review: Jesse Livermore Boy Plunger, The Man Who Sold America Short In 1929 by Tom Rubython
by Zak Mir
The life of the Editor of Spreadbet Magazine has its moments, in terms of the luxury lifestyle and mixing with multi-millionaire fund managers and speculators of the City of London. However, I had hoped that the “rock star” lifestyle would have happened to me in my 20s, along with the “live fast and die young” philosophy.
However, as even “hope I die before I get old” was not followed through by its originator Pete Townshend (he either chickened out, or wasn’t debauched enough), it is to the financial markets and Jesse Livermore now I turn.
The reason is that we have just been treated to the long awaited biography of arguably the first trader who had both a rock and roll lifestyle and attitude – Jesse Livermore. Indeed, markets legend Paul Tudor Jones also points to the heroic aspects of the first “rock and roll” trader in the foreword.
The author of the book, Tom Rubython, has painstakingly picked apart the story of a man who at his peak in the 1920s represented perhaps everything which is the best and the worst in the world of trading and investing. Those looking for boring Buffett or sneaky Soros type ideas to make millions should perhaps look away now. Livermore operated in a world largely untouched by the sanitised, arbitrarily over regulated and under regulated markets which still manage to have sleepy regulators with an insatiable appetite to fine everything that moves – after the event which they should have been policing / preventing.
What we learn from Rubython’s book is that Livermore was a man operating in the “Wild West”, a place which had effectively moved from the interior of the U.S. to Wall Street in the early years of the 20th Century. Particularly breathtaking as a revelation was the sequence of Livermore’s trading process, his logic, the totally amorality and related to this, his nerve.
For instance, for him, the opportunity to go short in the wake of the San Francisco earthquake disaster was clear right from the moment the news filtered through. There was no hesitation, no soul searching, just the idea to go short up to the eyeballs, even when the initial Wall Street reaction was to hold firm.
In fact, his short in Union Pacific was not really a general short bet on the market – as going short of the Dow would be, but a specific bear call. The idea was that whatever happened it would take a while for the railroad company to get back on its feet, even after a minor tremor. The result of this particular trading victory was plus $250,000.
But of course the highlight of Livermore’s career (and any book on his rollercoaster life) was the Wall Street Crash of 1929 and how he was on the right side of it when others were ruined. Unfortunately, ruin and Livermore were also destined to be intertwined at various stages of his life. To provide an indication, between the start of 1930 and 1934 the $100 million he had amassed by the immediate aftermath of the Crash had been evaporated down to bankruptcy for the second time. And that was in a time when $100 million was a proper amount of cash!
In fact, while the Boy Plunger is made that much more spicy by the losses and Livermore’s need to trade his way out of them, my preference is to look on the man as a giant, and one that we can all learn from him – both the good and the bad, the lucky and the unlucky.
It is clear that everyone who trades the markets has something of Livermore in them, if only it is usually with the volume on mute.
It is no surprise that when his suicide was announced, after he effectively gave up on ever again being the man he once was, Wall Street was shaken as violently as San Francisco had been during its earthquake.
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