steveh2005

SOHO is a fictionalized account of a person's life up to his mid-40's. Unless you've also read the Sarnoff book, based on independent research about the real person and not these Richard Smitten lovey/dovey "family ties" related books, it's easy to be misled by what Livermore actually did vs. what others said he did. He was a total news hound, embellishing any big play he was involved in to make it seem as though he had a magic touch. He didn't, but it helped to attract more money for him to, ahem, "manage". He won big, lost big and spent the majority of gains he ever made like a sailor on perpetual leave in Bangkok. He hung around the rich in their social playgrounds so he could either get their big trading ideas or what was going on in the manipulation world. It was a very different time and place (pre-1930) than the markets we see today...the land of no SEC. Let's face it, 1906 was a complete luck-out fortune made because of the San Fran earthquake. Livermore was being financially backed (NOT a "lone hand", by the way) and he was totally against the ropes on his Union Pacific short when serendipity intervened. Now, who wouldn't rather hear of the SOHO account of the New Jersey boardwalk vacation stroll to the broker's office out of sheer boredom story than the reality of Livermore being a hair's breath from having his b@lls nailed to a fence post on the next short squeeze? I'll go for a re-read of the SOHO story any day of the week! It's fiction and fiction loves to play with your imagination. I'm not disputing the fundamental principles of trend following as laid out in SOHO or that Livermore was a fake in the sense that he never made millions at any given time in his career. I'm saying that most of Livermore's success came from (now) illegal manipulations of the market. It's not hard to look like a market genius when you have a large pool of shares tied up in a stock of that era and you're pretty much calling all the zigs and zags because of the size you're swinging around. The most important thing you can do to keep your head straight when you hear 'this story' or 'that story' about other people's successes in life is to trust that Occam's Razor is about the closest thing you'll get to the truth without knowing all of the facts firsthand.

The book "Jesse Livermore Speculator King" by Sarnoff tells a more believable story. The bulk of Livermore's wealth/success came from operating pools of stock for groups of wealthy syndicates. Much of the types of stock manipulations he did in the 20's became illegal in the 30's with the formation of the SEC. Contrary to popular belief, the book also says that Livermore did not make a killing in the '29 crash as Kennedy and Baruch had done. It seems that he was too hedged. He had large long positions which offset all those great shorts he got off. I think it's obvious that Richard Smitten's books are overly biased in favor or believing all the things that he personally wanted to believe about Livermore. Ironically, he was "smitten" with Livermore. It's in Smitten's own personal interest to glorify Livermore in print. It appeals to people's love of fantasies about making money from taking high risks. I enjoyed reading ROSO a few times as I was learning how to trade. But the more I gained in my own experiences in day trading futures, the more I saw that Livermore, as told by Sarnoff, liked to leave out the details of these popular stories which would have otherwise cast Livermore in a dimmer light than the way he liked to recount them. Another lesson to learn from ROSO...even if you find financial success in this life, you can easily lose it all again if you persist in spending money like a drunken sailor.