The following is a guest post by John Douglas, who enjoys intelligent discussions around writing and focuses on portfolio enhancement through options.
Jesse Livermore and Titanic Thompson: Part 1 in a 5 part series. Through a strange time warp-or perhaps just a dream- the narrator is transported back to the early part of the twentieth century. He is charged with re-discovering the lessons of two of the country’s greatest legends, and revealing these lessons to a new set of traders and odds-makers.
Intro
I’ve come to tell you a story- a story of two legends. The truth is, though, that I wanted to keep this story to myself. But, that wasn’t part of the deal. You see, the information that I’ve been chosen to reveal will change your life forever. Only by agreeing to share this information, was I allowed to spend a lifetime with two men-Jesse Livermore and Titanic Thompson.
Maybe you’ve never heard of these two men. That’s entirely possible. They certainly didn’t garner the publicity of a Babe Ruth, or an Albert Einstein. Yet, they are just as enshrined and immortalized in American folklore as Horatio Alger. Both transcended the rags to riches barriers, and used a set of skills unrivaled-then or now-to generate hundreds of millions of dollars. They never punched a time clock, wrote a resume or excelled in academics. What they knew, and what I’m about to reveal to you, will never be taught in any institution of higher learning.
To those of you that choose to make a living by calculating probabilities, discerning patterns and attempting to extrapolate same to increase your personal wealth, the wisdom you seek cannot be found in the latest crop report, economic statistic or company announcement. Know this. You cannot drink deep from the pool of true knowledge until you transcend the chamber of maiden thought. But, that is not easy. Were it so, the world would be a different place. That’s another subject, though.
Well, the clock is ticking, and we have miles to go.
In the early part of the twentieth century, Great Britain was still the most influential nation on earth. Germany, though, was pre-eminent in the world of ideas. At that time, Vienna could be said to represent the mentality of Western Europe. In October of 1900, Pablo Picasso arrived in Paris, home to Marie Curie, Claude Debussy and Emile Zola. The United States though, in many ways, was still recovering from the Civil War. In the latter part of the 1800’s, Rudyard Kipling, while staying at the Palmer House in Chicago, found it “a gilded rabbit warren…full of people talking about money and spitting.” The ‘frontier mentality’ still pervaded the minds and imagination of most Americans. The United States at that time was decidedly not the bastion of political correctness that so pervades the atmosphere at the dawn of the twenty-first century.
There was a time-not so long ago- when people truly lived off their wits and physical skills. Although, that’s still true today, the distinction is to be found in a degree of self-reliance and intestinal fortitude required to hone those skills, and to survive without a safety net. Carl Sagan, of “Cosmos” fame, once remarked that in the history of all humanity, two mortals strode across the planet god-like: Isaac Newton and Albert Einstein.
Far be it for this mortal to take issue with Mr. Sagan. But, in the annals of iron nerves and blazingly quick wit, combined with an incredible faith in their one-of-a-kind gifts, Jesse Livermore and Titanic Thompson were second to none. Both are twentieth century contemporaries, and both lived in a time where guile, panache and wit trumped over anything that could be gleaned from B-school.
Through a strange time warp-or perhaps just a dream- the narrator is transported back to the early part of the twentieth century. He is charged with re-discovering the lessons of two of the country’s greatest legends, and revealing these lessons to a new set of traders and odds-makers.
CHAPTER 1: An Introduction to Jesse Livermore
The night air did little to alleviate the heat of a hot summer day. Yeah, the calendar insisted that it was still spring-but barely. How long had I been sleeping? The slight, monotonous sound of the central air-conditioning system kicked in and I could feel the rush of cool air. Had I been dreaming? I looked for the soft light of the digital clock. I planned to get up early, as the markets were, once again, in a perilous state.
I blinked, trying to clear my eyes, but something was amiss. I’m in some kind of very old automobile, with a couple of kids-college age, I assumed. I caught a glimpse of a sign that said “New Haven.”
“Who are you?” I asked pointedly. “And what the hell am I doing here?”
They were engrossed in their own conversation, and either ignored me, or pretended I wasn’t there. I’m dreaming again, reported my cerebral cortex. Okay, I thought, I’ll wake up in a moment, but in the meantime, I’ll just let this little dream play out.
The two college kids were animated now. The driver of the car-I gathered that his name was Jesse- had parked the car. The two were discussing something called a “bucket shop.” Jesse was instructing his traveling companion on how they would go about trading stocks. I have to admit that this dream was getting more vivid by the moment. I wondered if I could introduce myself and tag around with these guys for a while. It seems as if the driver of the car read my mind.
“My name is Jesse Livermore,” replied the young man, looking at me with a bemused grin. “You will live the rest of my life with me, as well as a gentleman you’ll meet a bit later.”
“But, uh, that’s not possible. You don’t understand.” I started to explain that there had to be some kind of mistake, but Jesse cut me off.
“Don’t worry. It’ll only seem like a long time. But you’ve got a hell of a lot to learn before the morning trading session begins.”
“But, how could you know that-“Jesse held up his hand, and put a finger to his lips. I immediately became quiet. He smiled again. “Keep quiet and pay attention.”
With that admonition, we walked into a rustic-looking building, filled with blackboards, telegraph wires, and men huddled together constantly looking at a sliver of paper, which seemed to materialize out of some glass like container-all of which was permeated with stale cigar smoke and loud voices. From historical accounts and old photographs, I knew we were, indeed, in an early twentieth-century bucket shop.
“Good morning, gentlemen!”
The two college-looking kids were greeted with ample enthusiasm by a P.T. Barnum look-a-like. I could see that the proprietor was a bit too friendly. Even in my world, this guy was a dead-ringer for a fast-talking stock broker. I suddenly wanted to warn this young kid, Jesse, to watch his step. I didn’t have to. He looked at me, and allowed me to share his thoughts. I had no idea how he could do this, but, hey, I’m here, and I decided to go with the flow.
Jesse already knew what the effusive proprietor was thinking. In fact, it was all part of the plan. They were a couple of Yale college students, driving a sporty automobile, and naïve in the ways of the market. The super friendly man was very persuasive in telling the kids that a large bankroll was possible with just a minimal outlay. Having been around the block myself, I could see that he was already licking his chops at the certain commissions.
Jesse played along with the man, even thanking the man for helping a couple of lads pay their way through college. But, allow me to let Jesse Livermore tell you what happened next:
“I began to trade, very conservatively, but increasing the line as I won.” My friend followed me. We stayed overnight in New Haven and the next morning found us at the hospitable shop at five minutes to ten. The orator was happy to see us, thinking his turn would come that day. But I cleaned up within a few dollars of fifteen hundred. The next morning when we dropped in on the great orator, and handed him an order to sell five hundred Sugar he hesitated, but finally accepted-in silence! The stock broke over a point and I closed out and gave him the ticket…He folded his arms, bit his lower lip, kept it bit, and stared at the top of a window behind me. I told him I’d like to sell two hundred Steel. But he never stirred. He didn’t hear me. I repeated my wish, only I made it three hundred shares. He turned his head. I waited for the speech. But all he did was look at me…Finally he waved his hand toward the yellow-backs in my hand and said, “Take away that bauble!”
“Take away what?” I said. I hadn’t quite understood what he was driving at. “Where are you going student?” He spoke very impressively.
“New York,” I told him. “That’s right,” he said, nodding about twenty times. “That is exactly right. You are going away from here all right, because now I know two things-two, student! I know who you are not, and I know who you are. Yes! Yes! Yes!”
So, we walked out of the establishment, leaving the guy talking and muttering to himself.
“Jesse, I figure you made about ten grand, no wonder that guy is upset. Of course, he meant to clean you out-if he could of. “
“He probably didn’t mind the money so much,” Jesse told me matter-of -factly. No professional gambler does. It’s all in the game and the luck’s bound to turn. It was his being fooled in us that hurt his pride.”
I thought about what happened for a good, long while.
T0 be continued…
