Pushkin too quick.

No, it's perfect push kit stop you got it?

Hi, Robert, Hello, chickib Jacob.

I want to talk about the big stock market crash of nineteen twenty nine, The big one, the big one.

It's very much on our minds these days.

And you know, is it very much on your mind?

It is very much on my mind.

Is the bubble sort of inflates?

Right, it's not going to be that bad.

It's not going to be.

Always think about a crash as like this single moment.

Right, it's a crash.

It's like a car crash, like boom.

But in October of nineteen twenty nine, it was way more painful than that.

It was actually like six days ease of dread and pain, gut wrenching fear.

Right.

It starts on Black Thursday, October twenty fourth.

Stock prices start to go down, down at some point around eleven percent.

Okay, that's bad, but like normal, dad, Yeah, it doesn't feel good news.

It's definitely news.

On Friday, people buy the dip.

Banks sort of come in to back everyone up.

Things are looking okay, but it takes them all weekend to go through all the stock orders on paper.

It's paper then right, people are going wild.

Right, Monday morning comes.

Monday's are always hard.

This one was black black Monday down thirteen percent market.

Yes.

And then we get to the morning of Tuesday, October twenty ninth, and everyone in New York seems to know something bad is coming.

Tourists.

Tourists start to go down to Wall Street to see like they heard, like something bad's gonna happen.

The crash is coming.

So they're in the streets.

Police have set up barricades.

People are bringing tour buses down parade.

But for they are looking to lose at a car crash, right, And there is this sickening feeling inside the investment firms that they need to sell.

They need to get out.

Everybody needs to get out.

That's a bad moment.

That is a bad moment.

The most famous speculator of the day was nowhere to be seen in Wall Street or downtown.

Jesse Livermore.

On this morning of Tuesday, he leaves at exactly seven to twenty from his mansion.

He's got a driver's driving into the city.

He says, take me uptown.

Doesn't go to Wall Street.

He goes to his office on Fifth Avenue, and this office was amazing, mahogany leather seats.

They've got these giant chalkboards and people are writing stock quotes on the chalkboards, like.

The Bloomberg terminal of its day is a kid writing stock quotes.

He got forty stock tickers under the glass.

You know they're going along right.

No one is allowed to talk because he wants complete silence on this day because he wants to sit and he wants to think about what is happening in the stock market.

I love that.

So like downtown people are screaming and yelling and then just it's just in the silent office.

Well, Jesse Livermore at this point has been trading stocks for like thirty five years.

He started when he was fourteen years old.

Super famous.

He's made millions, lost millions.

And he had this theory that you should not be guided by emotion in the stock market, and on this day the stock market was nothing but emotion.

He just wanted to sit and think about it.

I'm Jacob Goldstein, I'm Robert Smith, and this is Business History.

A show about the history of business.

There you go.

Today we begin a series of stories about the great minds of the stock market over the last one hundred years.

We're going to look at people who took the stock market from wild West gambling to intellectual investing.

We'll look at the speculator today.

Jesse Livermore.

That's the wild West gambling part YEP.

The Great investor, Warren Buffett.

The Great Investor.

You love it when I say that, Warren Buffett.

Warren Buffett, and Jim Simon's the quant guy who brought math to the games.

So much big and so much money.

Now, you could look at this series and I don't blame you as this sort of guide to getting rich.

Right, these people did it.

Maybe you can do it too, but I see it completely differently.

Right, So, each of these men discovered a flaw in the stock market.

They exploited that flaw, they made money, and by doing so, they closed the flaw and the flaw didn't exist anymore.

So this is really a story as you look about this history of investing of the stock market getting better, more efficient.

Uh huh.

Right, people find a flawed they get rich.

Other people see that person getting rich and as a result, basically that flaw goes away.

Jesse Livermore, who we're going to talk about today, he saw the flaw, he made the bets, he made fortunate and fame.

He became a legend on Wall Street, and then he met a tragic end.

So, Robert, where are we starting the story of Jesse Livermore.

Let's start in a farm in rural Massachusetts.

The year is eighteen seventy seven, and Jesse Livermore is born to a farming family at the time.

You know, this is not how you would start in a career in Wall Street.

But Jesse Livermore had this gift for math, for numbers.

He would later say that he could like feel numbers in his soul, whatever that means.

Right, But at the age of fourteen, probably to escape going to the fields, he goes to Boston instead, and he shows up at the storefront of a stockbroker Payne Weber heard of it, yes, to exist in our childhood, right right, right, So that was the stock office at the time.

And he walks inside and he sees this scene and it's more like a gentleman's club than anything.

Right.

There are chairs where people can sit and watch the stocks move.

And the way they watch the move is there are these giants chalkboards, and there are these boys the chalkboard boys who would write the quotes in the little squares on the chalkboard, and the men would sit there and drink and watch this, and there's the ticker going off in the background with all the stock quotes, and they update.

Edison had invented a better stock ticker.

Right, that was like one of his early things.

Yeah, so this was like a big thing, right.

It was like going to the horse races or something.

Right, And so for years Livermore is a chalkboard boy.

And he says that he starts to see patterns in the numbers.

Right, He's doing numbers all day long, and he could tell if a stock is moving and it's going to keep moving or whether it's plateaued.

He has these premonitions.

I tend to be skeptical of that in general.

Right, Like there's this thing today called technical analysis where people talk about these like patterns in the stock chart.

Seems dubious to me.

But maybe Livermore knew what he was doing.

Well.

I mean this is obviously before computers or even ways that people were recording long term trends in stocks.

I guess the classic thing is if you're the first one to see a pattern maybe you can make money off it, and maybe the person who figures it out, if the person wants to write them in chalk from morning tonight and is a math genius.

Yeah, he's like a walking Bloomberg terminal.

Love that.

So he does this for a while and he decides I can do this, I can make money.

So he pools money with one of the other chalkboard boys and they go to something called a bucket shop.

Yes, now, a bucket shop is a really like sketchy stock trading parlor.

The name comes apparently from the UK, where there were certain places that would collect the slop that came from bars, put it in a bucket, warm beer that ran off the bar, collected in a bucket, and then sell that.

Is that true?

Don't tell me if it's not true.

Is it true?

It's true?

I want it to be.

You want a cheap beer, you don't care if it's warm because you're British.

The backwash bar, the King's backwash and arms.

You can get a good chip there, a chip buddy.

You know a chip buddy.

I do know what a chip buddy is.

French fries, sandwich.

I can't believe it.

So you know what it goes great with that a bucket of warm slop.

Oh god, yes.

So these bucket shops morphed into these sketchy stock parlors, And the thing about them is they are not actually buying and selling stocks.

At the bucket shops, they are making bets on the stock prices, but without any of the like buying and selling and that sort of thing.

So essentially, they make a bet that a stock price is going to go up.

Everyone watches the ticker.

If it goes up, you make money.

If it goes down, you lose money.

So the bucket shop is like a book taking bets on the football game, and they just need to have basically the same amount of money on both sides.

And presumably they take some vig or something.

Yeah, and you could even borrow money.

You could do this on margin.

So essentially you could use a small amount of money to make large bets.

Yea stock goes down, they take everything.

Stock goes up, you can make a lot of money.

And zero day options today are a little bit like this, right there are a way to make what is sort of essentially a leverage bet on what the stock is going to do today, and you're not buying or selling the stock.

It's it's pure speculation.

Yeah, I guess that's I guess that's right.

So you know it has more to do with luck really than anything else.

Or if you are a math genius who spent ten years writ numbers out of chalkboard.

You have it in the fingers.

Apparently Livermore was so gifted to the bucket shops that he gets the highest honor, which is to be banned from them.

Oh just like sports betting apps today, literally what sports meta apps do too.

He's really good at they ban him.

There are stories of him putting on disguises no, and sneaking into the shops with like a mustache or a little wig or something, getting caught.

John Livermore, you don't know, man, I'm Jesse Jones.

So you make some money.

He gets thro out of these shops.

At the age of twenty, he has enough money to finally hit the big leagues.

He goes to Wall Street and he goes to the office of E.

F.

Hutton.

Also heard of the F.

Hutton.

This is not the investment company of E.

F.

Hutton.

He goes to E.

F.

Hutton, the man himself.

Oh my dad took sat prep from Kaplan, from the man in Brooklyn in the nineteen fifties.

So he said, Kaplin, what kind of boards you need to get into Princeton?

And Kaplan said the moon.

That's too good.

Well, well let's imagine that.

EF Hutton said that.

You know, Jesse Livermore has got his small amount of money and E.

F.

Hutton's life give it a try, kid, Okay, and Jesse Livermore boy plunger, they had called him, and the plungers plunger.

He plunges into stocks, He goes to the stock mark, he buys some stuff, He gets his ass absolutely kicked.

Didn't see that content to him because of this weird little thing.

Right.

He is used to betting on numbers.

He bets on a number.

Second later the number goes up, the number goes to top life.

This is his bucket seup life.

Yeah, but when you're actually trading stocks, you have to make a bid on the stock.

You see what the price is and it's delayed a little bit, right, you make a bid on the stock that needs to be written down and handed to someone on the floor who has to make that bid.

Right.

This is the dude's yelling at each other era of stock trading.

Yes, and so that takes time and you maybe can get the bid you want, maybe you can't.

All this has to go through all these systems, right, great example of this is the Panic of nineteen oh one.

One of the lesser known panics.

This one is like a railroad panic.

Right, we should say, I mean this word panic a thing that happened about every ten years.

You certainly in the eighteen hundreds and into the nineteen hundreds was there were these financial crises that they called panics.

So the panic of nineteen oh one is one of these.

Yeah, and it was a classic right.

A bank had lent a lot of money to some enterprise that went under.

The bank needed to recall them all the loans that it made.

It had no money in its faults.

People wanted to pull all the money out of the banks.

They had to shut down the banks.

Classic panic.

People in the streets.

Right.

So, right before the Panic of nineteen oh one, Jesse Livermore, he has one of his intuitions.

He's like, I think the stock market's going to go down.

I think there's problems here.

Right.

He wants to bet against us steel.

Okay, classic stock right, have the.

Biggest companies in America at that time, Carnegie Morgan.

So it's at like, let's say, one hundred dollars, right, So he shorts the stock.

He bets against it.

He thinks it's the price is going to go down, and he's absolutely right.

He bets against it.

Price starts to go down.

He thinks, I did it, I did it, I predicted the future.

I am rich.

And then he sees the volume.

Thousands and thousands of shares are trading hands, and he realizes that he's in line to trade.

He has bet against the stock, but his trade hasn't actually been put in, as the stock is going down.

By the time he actually sells this stock, it's at eighty five dollars.

This is as low as he thought it was going to go.

And he's like, oh no, I don't have the price I want.

So he wants to start buying back.

He's like, it's gonna go back up.

He starts to go buying back, but again his order is standing in line.

He has to wait.

He goes up, up and up until it's over one hundred.

Again, he loses on the way down.

He loses on the way up.

So I guess the limit order had not been invented yet.

Just just to be clear, today, it doesn't have to happen to you because you can say, yes, I will sell, but only at this price.

And if it's not at this price, I don't want to sell.

It was hard to handwrite that on a little slippery paper, too complicated that the dude's yelling on the floor.

So liberal tip use living orders instead of market orders is not investing advice.

Liver War loses twenty five thousand dollars because of this right.

And this was an important lesson because he realized that timing is everything right as it is and many things in life.

So he goes back to the bucket shops and make some more money.

It comes back to Wall Street.

It's a new wig.

He gets a new wig.

I think he goes to like Saint Louis or something.

Well, they don't recognize him.

Yeah, yeah, yeah, So this time when he comes to Wallstree, he's going to do it completely different.

Okay, this is when he sets up his own office, gets his own stock ticker, and eventually sets up this whole system to get ahead of what's on the ticker.

Right.

Oh, he has his own chalkboard boys, and they would have wired headphones communicating directly with the floor of the stock exchange so we didn't have to wait for the piece of paper to come out.

He could beat the ticker by minutes.

Wow, I know.

And he has the information ahead of time.

That's free money.

That is free money.

And I mean he's not the only person who does this, but yeah, this is something that the big wigs were doing.

And this is a perennial finance story, right, I mean you have Reuiter's was a dude named Reuter who was using like the telegraph and carrier pigeons to deliver information.

And then all the way into the like twenty first century, you had people like building their own private I think it was fiber optic lines between Chicago and New York to be like a millisecond faster and make money.

Like this is this story.

This is this story.

He's got the system.

Now, he's got a stash of money, and he's about to enter the perfect period for him, which is the nineteen tens and nineteen twenties.

These wild stock swings, right, and if you're someone who has money and information and all of a sudden there's volatility, you are set up to make a ton of money.

Yeah.

I mean in general, traders love volatility, right, They love a market that goes up and down a.

Lot, exactly because you can make big bets and you can recover from bad bets.

Right.

This time is also essential for another reason, which is, you know, this is the coming.

Into the Roaring twenties.

Right.

We've talked about the Gilded Age and the nineteen tens and nineteen ten twenties before in our Thomas Edison show.

People have this new technology of electricity and electric lights and cars and refrigerators and washing machines.

It's an age of technological miracles.

Yeah, a mass consumption is beginning, right, But we haven't talked about the finance side of this.

Because people want to make these big purchases, and all of a sudden they're able to borrow money to do so.

Banks are willing to lend so that people can take part in this amazing technological transformation.

And at the same time, people are looking at the stock market.

Right, what was once.

This fringe activity for rich people in the late eighteen hundreds, All of a sudden, regular people can buy stocks and guess what they can borrow money to do that too wrong?

What could possibly go wrong?

They would borrow money, buy the stocks, make some more money, buy a refrigerator, and then put more money into stocks and borrow more.

So this is the era where Jesse Livermore is primed, primed to start to make his move to make his millions, and he does it by betting against all those schmos.

I love dot Mark.

After the break, all.

Right, the ads are over, and Robert you teased us before the break with Livermore betting against the American dream of the nineteen twenties of Jesse Livermore essentially shorting the boom, right, shorting the market.

And I will just say for now, I think shorts are vastly underrated.

More on that later.

Yeah, and you should know that like short sell is a time honor tradition.

The very first short was in like the sixteen hundreds for the very first on the first stock.

Yeah, the first stock, the dutchy Cidia company.

And like a minute later, this guy's like, I've got an idea I could make money if I think it's going to go down.

And it's immensely logical.

Right, stocks go up, stocks go down, you can bet they'll go up.

You can bet they will go down.

And yet psychologically, psychologically it feels bad to know that someone is betting for prices to go down for you know, bad things to happen, and the rest of us because most people are long stocks, right, they're betting they go up, and the rest of us want it to go up.

Yeah, they're either long stocks or they're just not in the market.

Right.

It's like there's a sort of vibe of like, if you can't say something nice, don't say it at all.

But whatever, shortening is a thing, and mechanically it's it's interesting, right You What you do is you actually borrow a stock that you don't own, and then you sell it and then later you buy it back and pay back them alone when it's cheap.

When it's cheap, you hope, and if the price goes down, you make money, and if the price goes up, you lose money.

So one of Jesse Livermore's first big, big, big shorts was he bet against the railroad union Pacific.

You can't bet against America any more than that, right, Like they're uniting America.

Everyone's piling to railroad stocks, and I don't know, he gets a premonition and idea.

Nobody really knows, but he bets against the stock and what do you know, nineteen oh six San Francisco earthquake.

Huh, train station's destroyed, rails twisted.

It takes a while for the news to filter out, but sure enough the stock goes down and eventually it plunges.

Jesse Livermore makes a quarter of a million dollars.

Okay, nineteen oh six, Right, he's short the market again in nineteen oh seven.

I know what's gonna happen in the year two.

It's another panic, a big one.

One of my favorite panics, if I might eventually.

This came from some investors trying to cor to the market in copper perfect and you know, they had borrowed all this money to do so.

They were going to control the market, set the prices, make millions.

They failed to do so, they're out of business.

The banks that lent the money they're in trouble.

People know this and start to pull their money out.

It's a classic bank run.

And remember at the time, the US didn't have deposit insurance like we have today, the government that didn't stand behind the banks, and there also was no central bank, the Federal Reserve didn't exist yet, and in fact, part of the reason the Fed was created was for moments like this, right, these moments when even though the economy is basically sound, everybody is trying to pull their money out of the bank.

Everybody wants to call in loans and nobody wants to lend, right, And so you need some lender of last resort, somebody to lend money to people who are basically sound but just need money because it's a panic.

Yeah, and the way its infected the stock market, right, because the stock market technically wouldn't have that much connection to copper in some of those happening.

With a bank.

Except at this time, not everyone was in the stock market, but the few who were were doing this margin trick.

They were borrowing money.

They're borrowing money from banks to buy stocks, investment firms to buy stocks.

And I didn't believe this was possible.

But companies would lend money to people so that they could buy stock in their own company.

Yeah, they would issue stock, take that cash, lend it to people who would then buy more of the stock of the company.

Tell me they did it again after that seems bad, right, So everyone's leveraged.

The panic comes and here is Jesse Livermore somehow short the market.

He thinks it's going to go down.

Now, what happened in the panic?

Is JP Morgan, very rich and powerful banker at the time.

He eventually gets a bunch of bankers together and says, we're going to get together the loans and guarantees and money to stabilize the market.

Yeah, basically, because the US didn't have a central JP Morgan was playing the role of the central bank.

There's another dude, Jesse Livermore, who has bet against the market and is doing extraordinarily well during this panic.

Right, he is apparently up around a million dollars and he hasn't even like covered his short bets yet.

He just expects the market to go down and down, and he is driving it down.

He wants this to go to the bottom so that he can make his big score, the biggest score of all time.

Right, he's thirty one years old.

The boy Plunger is finally at the center of the action and a messenger comes to him.

A messenger comes to him from JP Morgan, and JP Morgan says, for the good of the country, we need you to start buying again.

We need you to close your shorts and to stop pressuring the market.

And he does it.

Huh, he does it.

He buys, the stock market starts to go up.

So Jesse Livermore ends up making more money, ends up making three million dollars, but more than that.

And you tell people about this.

J.

P.

Morgan knows his name.

A great man came to him and asked him to hold back.

And this is a beautiful moment for Jesse Livermore.

He finally feels like he has made it on Wall Street.

Huh.

At this point, Jesse Livermore is a famous invested right at age of thirty one, He's all over the papers.

Eventually he talks to a reporter Edwin Lefevre.

I don't know how to quite say his name, but he has this famous book called Reminiscences of a Stock Operator, and it's essentially this fictionalized biography of Jesse Livermore as told to the reporter.

So Jesse Livermore gives him all of these notes and Edwin sort of makes up this story, but it's essentially everyone knows that this is the story of Jesse Livermore, and this book is still to this day famous on Wall Street.

It is still a book that people buy or give to you know, give to you on the first day of your trading at a firm because it has all of these like hard bitten rules for stock trading, right.

Or what do you say it still is?

You mean it was twenty five years ago.

I'm curious.

I think today they'd be like, what's a book?

Yeah?

I think I looked it up.

It is still like not a bestseller, but like people still buy this book.

Right, and so his number one rule and the rules are in the book.

Right.

Number one rule is don't take tips of any kind, no matter where they come from.

Huh, says the man who often gives tips to the newspaper.

But yes, but don't take.

The tips, right, So he knows you shouldn't it right.

Don't worry about catching the top or the bottom of the market.

Smart, hard, very smart to this day.

Right.

Keep the number of stocks you track to a manageable number.

Disagree with that one.

Love an index fund?

They hadn't been invented yet though.

Is this before index funds?

He had to keep it all in his head.

Don't buy too many stocks, right, take your losses quickly.

And don't brood about them.

I mean amazing to say, so hard to do in life.

Just in investing.

He had a rule where if a stock was down ten percent and he was betting that it would go up, he'd just sell it and then not think about it again.

I mean, I'm still thinking about the lasagna I made last night that definitely should have been four noodles wide, but I only did three, so all the goog slipped out on the scene.

It was down ten percent in volumes.

Yes, you should have you should have sold it, should have should have just got rid of it.

So Jesse livermore super famous at this point, and this actually gives him the final key to become the investor who's going to become like just to go back over his career, right, master of the numbers, of no emotion, of just looking at the numbers.

Right.

Then he had the technology, you know, he had the way to get information quick and make moves quickly.

And the third one is if you have the money and you are rich and famous and people listen to you, you can move markets yourself.

Hah.

You can start to use that fame to like nudge things here and there, to make things happen.

Kind of foreshadowing the Buffet story that we're going to get to later.

Right, Like, in certain contexts, Buffett can get a good deal because he's Buffett, Like you're saying, this is Jesse Livermore at this point.

Yeah, And this is when the stock market is reacting in such a way that people are sort of looking at the second and third order things, not just like is this a good company?

Is it going to go up?

But like who's investing this way?

Who's investing that way?

You know, is someone trying to corner this market?

Maybe I should get in on it?

Right?

Is somebody making the stock go up?

They had these things called syndicates, right, you know, the these trading clubs where people would essentially decide they were going to make a stock go up.

They would all buy it, trade it to each other, I know, not legal now, pump the stock up, and then they would when the stock price is up, they would sell it and make a ton of money, which sounds bad, except the rumors would start to go through the stock market.

Oh so and so is starting a club.

They're going to make the stock price go up, and people would pile into it knowing it was fake.

Yeah, okay, right, so everybody is just gambling.

They're just all kind of spinning the roulette wheel.

And it was legal, right.

Importantly, the sort of modern regime of market regulation that we live in now didn't exist.

Yeah, and Livermore, he's basically living the super rich guy life at this point.

He's got the shirts of Egyptian cotton.

He has this chain that he always wears.

It has a little gold pencil on one side and a little pocket knife on the other, which I don't know, maybe is to carve the pencil or maybe shive the guy on the other end of the deal.

Yeah, exactly.

If you were trying to corner the cotton market, people were going along with you.

He apparently put lifts in his shoes.

He was already a tall guy, but this made him six feet tall.

That's tall.

If lifts six feet tall.

He's well for the time.

Right, he's married, but he's dating famous show girls on the side.

Right, it's all in the papers.

People want to be Jesse Livermore.

And in the nineteen twenties, there is an easy way to do it.

All you have to do is bet on the hot technology of the time, a technology that would transform the country a miracle.

Everyone wanted to be part of the magic, which was Radio Radio Corporation of America RCI.

Ladies and gentlemen, it's the radio.

I don't know why you have to do that.

They didn't have headphones.

You love the radio.

I should just say, as a personal manner, you love radio more than anyone I know.

Under the age of eighty, I still listen to AM radio.

That's how much I love radio.

And at the time, like you could see that, people thought like, oh, this could be everything, Like this is how we will learn and communicate, and like all of our entertainment right would be on the radio.

They could see that other things would come right.

But I think the important thing was that it was so accessible to be a part of it.

Like at this point, the stock market was easy.

Right at the beginning of the twenties, RCA stock is one dollar right nineteen twenty nine, one hundred and fourteen dollars a share, and there were stock splits in there, so like you were making a ton of money.

It didn't seem like anything could happen.

It's the tech stock.

Of its day, It's the Nvidia of its day or whatever.

Exactly, and at this point, like more and more money is coming into the market.

There are stories of investment firms saying, like, you know, where are we going to get more investors.

One head of investment firm like looking out on the streets of the city and saying, they're all out there, they can all be investors.

And apparently at the time there are sort of stock touts, you know, who would stop people coming out of bars and restaurants and be like, you know, you want to buy some stock in Radio Corporation of America.

First of all, always say no if someone asked you that.

But if you said yes, what would happen?

I think they would drag you down to some investment firm and they would get your money.

And remember they're going to lend you the money to buy more stock.

And the stock goes up.

You feel rich, they feel rich, everybody feels rich.

And at this time we now have the Central Bank, the Federal Reserve is in place, so the Panics have sort of died down a little bit.

Stocks are going up.

People are pouring in and they're doing these tricks that they call painting the tape, which just ways in which you can get the numbers to go up inside.

Investors can do this because at the time, there are not a lot of rules in the market.

Because the rules were set up for rich people.

They didn't really conceive of the fact that someone with a real job would put their entire life savings.

Yeah, and in general, the economy was much less regulated.

Finance was less regulated.

Right, there's still no insurance for banks.

The idea is like people are going to do whatever they're going to do.

Good luck.

So Jesse Livermore looks out on this and he has one of his intuitions and it's not the craziest intuition in the world, which is, you know, maybe the stock market's too high.

I think I'm going to bet against it.

And he had this technique, not advising this.

I don't know if it works, but at the time there were sort of big stocks and smaller stocks, stocks that had huge volume, and stocks that people barely traded in.

And he looked at the big stocks, the ones that it was hard to manipulate the markets, maybe even the RCAs right, and he found that they had sort of hit a plateau, but a lot of the smaller stocks were continuing to bid up in price.

The smaller stock is the easier it is to manipulate the price, right, Like you couldn't get twelve to your buddies and move the price of RCA because there was too much money in it.

But some little company nobody'd ever heard of yesterday.

Sure.

Yeah, So in nineteen twenty nine, remember everyone's watching each other, he begins a seat plan right, apparently has hundreds of people working for him, starting to short various stocks.

He doesn't want anyone to know that Jesse Livermore hates the market.

He wants someone to think Jesse Livermore is all in right, and so he makes these bets that the market's going to go down, huh in secret, in secret, huh.

And then.

Black Thursday, Black Monday, Black Tuesday.

Right, he's eleven percent down, thirteen percent down.

There's a book that I love called Devil Take the Hindmost by Edward Chancellor.

Have you read this?

I have not.

I don't know.

It really good.

It's a history of speculation goes for hundreds of years.

The name Devil Take the Most.

It's like the thing of like if a bear is chasing you in another guy, you don't have to be faster than the bear.

You just have to be faster than the other guy.

It's that basically, right, Yeah, it's the speculator's credo, right, I just got to get out before the other schmuck.

He has this great description of black Tuesday, when the stock market crashes.

I love this quote.

On the floor, a broker grabbed a messenger by his hair.

Another fled the floor, screaming like a madman.

Jackets were torn, collars dislodged.

Clerks in their frenzy lashed out against each other.

And then then the technology starts to fail.

The Transatlantic cable broke, the ticker stopped running, the telephone lines became clogged, and apparently at the time, Western Union hired taxi cabs to send messages across New York.

At one point on Wall Street and step on it, and there is Jesse Livermore.

He's sitting in silence on Fifth Avenue, or he's trying to sit in silence because the phone keeps ringing and people are starting to blame him for the crash, getting death threats.

People are like, is this you?

Are you doing this?

He denies causing the panic to The New York Times, and a lot of people don't believe him, right, because he's pulled off this before, I made millions of dollars, right, They think he has some control over the market.

But the truth is scarier.

The truth is that finally no one has control over the market.

When the stock market was smaller, you would hear these stories of big investors coming in moving the market right, cornering the cotton trade.

Or like nineteen oh seven JP Morgan getting everybody together to stop the panic.

But in nineteen twenty nine, because of their efforts, the stock market is now so big that no individual can do anything about it.

And some bankers did try in the few days before this Black Tuesday to pour money into the market, and it was like a bottomless pit.

It just kept going down, and so by the end of Black Tuesday, people are just ruined, absolutely ruined.

Jesse Livermore on Fifth Avenue gets in his rolls Royce and goes back to Long Island to his mansion.

The first thing he notices is that his family isn't there.

His wife and his two kids are gone, nowhere to be seen.

He notices the paintings have been taken off the walls, the Persian rug rolled up and gone.

Right.

He's like, where is everybody where's all our stuff?

He goes up to the safe.

She's got right opens the safe.

His wife's jewelry is gone.

It's expensive collection.

He's panicked and he's, you know, thinking, I don't know you have they been taken?

You know?

Did they flee?

Like like, what has happened to my family?

And he runs downstairs sees some servants.

He's like, what happened?

What happened to the family, And they say, oh, go look in the chauffeur's house.

All right, So trumps down to the chauffeur's house and there they are his wife and two kids, like in one room with the paintings and the Persian rugs and the jewels, and his wife's like I heard on the radio.

I heard on the radio that everyone is broke, everyone has lost their money.

And I wanted to make sure we had all the stuff and protect it and if we need to like hawk these jewels, like we can do it to survive.

And Jesse Livermore is like, oh no, no, no, no, no, you don't need to hawk your jewels.

I just had the best day I have ever had in the stock market.

We're gonna be fine.

How much did he make.

He made profit and equity one hundred million dollars.

Wow, that's more than one point eight billion dollars in today's money.

That's extraordinary.

It's extraordinary in one day.

And it's even more extraordinary because who can you even brag to everyone you know is bankrupt, the country is devastated, and you just made one point eight billion dollars.

We'll be back in just a minute.

It's the end of the ads, Robert, Let's do the end of the show.

So after Jesse Livermore pulls off what people would call the greatest trade ever, we don't know much about how he celebrated, because the man who basically had a reporter or write a fictional autobiography of him, all of a sudden isn't really.

Talking to the press.

Good move, Yes, we do know that.

In nineteen thirty one, he hired the entire Barnum and Bailey circus to perform on his lawn for his son's eighth birthday.

Bad move, nineteen thirty one.

Depression is setting in.

Don't hire the literal circus to perform on your literal front lawn.

It seems it seems like a bad look, right, But as I read the rest of his story.

This may have been the best moment that he had, you know, celebrating his on his birthday.

There's like a fire breather on his lawn.

Elephants, right, trapeze artists.

Because everything that comes after this, I don't know.

It just feels like it is a letdown after his huge success and like some literal bad bets.

Right, we know he's still making bets on the stock market, amazingly enough, right after getting all that money.

Like, why would you stop at that point?

Well, you know, it's funny.

In the book nineteen twenty nine, the new book by Andrew Ross Sorkin, Jesse Livermore is complaining about some bad bets and he was forced to ask the financierarm reading from the book now nineteen twenty nine, is forced to ask the financier Arthur A.

Robertson for a loan of five thousand dollars, and Robertson says, do men of your kind put away ten million dollars where nobody can ever touch it.

Jesse Livermore says, young man, what's the use of having ten million if you can't have big money?

Like he's an addict and he loves them, even though he could retire obviously for the rest of his life.

When he appears in the newspaper, Jesse Livermore is dating more showgirls, He's fighting with his wife, his wife is drinking more.

His kids he barely saw them and send them way to private school.

He ends up getting a divorce, and there's this really sad story about the divorce.

He goes to Nevada to get like an easy divorce, right, stands with his wife in front of the judge, and Jesse Livermore is like, take anything you want, take it all, Like, just take anything you want.

The divorce is final, and his wife turns to her lover in the courtroom and has the same judge marry them right there minutes after the divorce.

Does is it actually make you sad to hear that story?

I'll admit I find it funny?

Does that make me a horrible human being?

I'm like, listen, you spent more time with Jesse Livermore than I did.

Maybe that's why I grew fond of him, right, And I also saw this weird thing, right that you can have so much success and still like ruin your life, fall into absolute depression like the country itself, right, and then there's all this anger at Jesse Livermore for what they felt was like a trick or a manipulation of the market.

And you know, it's like in the Boom Times, it's all Jay Gatsby and everyone wants the gold chains with the little pencil and the little carving knife on the other side.

But after the crash, everybody's like, oh, we got to have congressional hearings.

We have to have regulations, we have to punish the bankers, we have to punish the investors, and especially the short right, especially like not only was this guy, some Wall Street guy who never contributed anything, he bet against everybody.

And so of course, of course there are congress people who are like, we need to ban short selling.

This wouldn't happen if people weren't betting that the stock market goes down, which, if you know anything about economics, is a terrible idea.

Oh yeah, I mean I love shorts, right, Like you know, I mean there is this bigger question that's really interesting here, right, and that is what's the stock market for?

Yeah?

To get rich?

Right?

Well, yes, yes, I mean that it is useful that ordinary people can get a piece of big companies.

That actually is a good thing.

But that doesn't mean that it's good for the stock market to always go up, right, Like, you want stock prices to reflect reality, right, And I know this may seem naive people like, oh so, dom, are you really that dumb?

I think in the long run, they're better than anything else.

Right.

You want the price of a company's stock to reflect the you know, net present value of all that company's profits forever.

You actually do want that because that means that the better companies will get more investment money and the worst companies will get less investment money.

And shorts play a really important role in this, right, because the companies incentive are all on the side of talking about how they are.

The investors who are long who are buying stock, have the same incentive to talk about how great they are.

The short is the only person in the system who has a financial incentive to just look at a company and say, like, I think it's too expensive or in some cases, I think it's a fraud.

Right, And like, you want people to be able to profit by seeing that a company is too expensive.

It makes the market work better, It makes the economy work better, and it makes me.

It drives me up the wall where people don't get that.

Frankly, we talk about the wisdom of crowds, but the key to that is that people have to have different opinions about what's going to happen, and they have to be able to risk their own money on a bet, essentially in order to show you how serious they are about it.

Yes, like, what if I told you there was a way that people could be financially incentivized to go root out companies that are lying about themselves.

Great, let's do that.

Okay, it's shorting now.

Clearly after the crash, some rules need to be put in place, not banning short selling, but you know there are little rules like, oh, I don't know.

Companies should have to report regularly about how they're doing and how much money they have.

You shouldn't be able to have insider trades that inflate the price of a stock, you know, painting the stock as they called it.

You shouldn't be able to do that.

And if you're going to try to corner the market or take over a company, you should have to declare when you have a certain amount of stock in that company.

These are all good things transparency.

And there's lots of arguments about investment banks and banks and what their rules and reserves and all this stuff should be.

But clearly we are in an age of sobriety and of regulation, and it's just a matter of how much regulation there is going to be People like Jesse Livermore this day of like, I'm going to feel the numbers.

I can do anything I want.

I can secretly have a bunch of people go make shorts without saying I'm the one doing it.

Yeah, that is going to disappear.

And to be clear of these rules that are coming into place in the kind of mid thirties, right just as Jesse Livermore is sort of going down, These are creating the market regime we still live in, right, Like the SEC the security is an exchange commission.

This is created at this time, like the modern market is born.

Just at the end of Livermore's career.

And there really isn't a place for Jesse Livermore anymore.

He declares bankruptcy.

What happened to the hundred million dollars?

I have no idea.

I don't know if he had any idea.

He made bets.

They were bad bets.

He had the divorce, bankruptcy, so many mistresses, right, he just lost the money.

And then years after the crash November twenty seventh, nineteen forty, Jesse Livermore still at an office.

He was still trading.

He still wanted to like have another big score.

And he goes to the bar at the Sherry Netherlander Hotel where he had lived for a while, and they put a Manhattan in front of him.

He didn't even have to ask.

He was your regular Manhattan.

And he's scribbling in a notebook.

People recall this and they give him another Manhattan drinks it keeps scribbling the notebook, and then he excuses himself and he goes to the cloakroom there at the hotel and he shoots himself with one of his pistols he had in his immense collection of firearms that he had when he was rich.

He was cremated the next day.

Apparently only a few people showed up for his funeral.

A newspaper looked into the probate records and the final tally on his big chalkboard ten thousand dollars in assets, three hundred and sixty one thousand dollars in liabilities, he died underwater.

Died underwater.

It reminds me of a saying he used to have, and remember he would pass out these sayings like stock tips right.

He said, there's nothing like losing all you have in the world for teaching you what not to do.

Robert, what's the next show in your Great Investors series?

Nineteen thirty, the year after the Great Stock market Crash?

A young man is born, almost the baby if you will.

Keep going, keep going.

At the infant a baby in arms.

And that baby's name Warren Buffett.

What's his middle name?

I wanted to say, Warren G.

Buffett, Warren G.

Buffett, Warren Buffett middle name Edward one, Edward Buffett, Baby Buffett.

You can reach us via email at Business History, at Pushkin dot fm FML like the radio, my Twitter, it will always be Twitter to me.

Handle is just Jacob Goldstein or at Jacob Goldstein.

As we used to say, how do people reach you?

Robert Smith, I'm on X.

I'm at Radio Smith Radius smith Man loves the Radio.

Our producer is Gabriel Hunter Chang, our engineer is Sarah Bruguier, and our showrunner is Ryan Dilly.

I'm Jacob Goldstein.

And I'm Robert Smith.

We'll be back next week with another episode of Business History, a show about the history wait for it, of business Robert Smith.

As you know, there is nowhere in Pushkin's office to make a video to make a video podcast, which is unfortunate.

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