The Art Is Not in Making Money, But in Keeping It

Jesse Livermore, the so called “Boy Plunger” and probably the greatest Wall Street Trader who ever lived, died $340,000 in debt.

Many look at his life to learn the secrets of his often extraordinary trading success. A better track for financial prosperity is to study and learn from mistakes he committed in his personal life.

The clues for true riches can be found there. The lessons from his personal failures are exponentially more important for modern investors than his exploits in the commodities and stock markets.

During the Stock Market Crash of 1929, Jesse Livermore made $100 million dollars betting that the stock market would plummet in spectacular fashion.

When he arrived home after another appalling day of market bloodletting in October of 1929, both his wife and mother-in-law met him at the door in tears.

They assumed he had lost everything and they were financially ruined. Imagine their surprise when he told them that he was now one of the ten wealthiest men in the world!

Little did they all know that this would be his pinnacle of success; things would spiral horrifically out of control during the next decade.

Most would agree that personal wealth and happiness is attained by having a plan, saving in a disciplined manner, controlling expenditures, and avoiding making crushing financial errors.

None of this will work if investors spend more than they make, have unhealthy habits, and make bad choices regarding the people they associate with, both professionally and personally.

Jesse Livermore was guilty of all of the above and more. Often investors learn much more from knowing what not do rather than trying to become the next Warren Buffet.

Jesse Livermore provides a valuable case study in making calamitous unforced errors in lifestyle choices.

Here are five behavior tips that are the foundation for both building wealth but, more importantly, creating a happy and healthy lifestyle.

While Jesse Livermore was a master trader, his dysfunctional personal life proved to be his real undoing:

Avoid Lifestyle Creep – Keeping up with the Joneses will make you a slave to your paycheck. Livermore not only wanted to keep up with his rich posse, he desired to lap them several times over.  In 1922 he bought an estate in Great Neck N.Y. for $250,000. He proceeded to dump $1 million into various upgrades. These included $200,000 for silverware, $305,000 for jade ornaments, and $110,000 on furniture! Remember, this was 1922 when having hot water was the number one luxury for the one per centers.

Marry well – The choice of the right spouse is an integral part of wealth creation. It’s pretty hard to make it into Fortune’s list of the 500 wealthiest people if your spouse walks away with half of your assets, or more. Getting married several times will only compound this problem.  Jesse Livermore was married three times. His marriage to his first wife, Nettie, lasted less than a year. Amazingly, they remained married for the next 17 years though they barely saw each other!  After he was finally able to divorce Nettie, he married a former Ziegfeld Girl, Dorothy, who turned out to be a raging alcoholic. In addition, she came with the bonus of an annoying mother who took up residence in their home.  After divorcing Dorothy, Jesse married Harriet. She was ominously referred to as “The Widow-Maker.” Her previous four husbands all committed suicide! Unfortunately, Jesse kept this eerie streak intact.

Find the Right Friends – Good friends can keep you grounded and focused. Jesse’s acquaintances often had the opposite effect. He liked to roll with movie stars, show girls, and other assorted corporate titans. Earning and saving money in volatile trading markets was next to impossible associating with this crew.

Don’t Spoil Your Children – Creating Paris Hilton clones will be devastating, both for family wealth and society as a whole. Jesse did not have the opportunity to spend much time with his sons. He compensated for this by spending lavish amounts on them. The family owned its own Pullman Train Car, several yachts and had an 80-member personal staff to service any whim, no matter how ridiculous.  The result of all this indulgence was disaster and tragedy.  His son, Jesse Livermore Jr., committed suicide in order to avoid life imprisonment for the attempted murder of a police officer. Sadly, his grandson also killed himself.

Find Healthy Habits – Adopting healthy habits tends to reduce stress and improve life quality, both of which increase the chances for less illness and lower medical costs; which, in turn, supports wealth building. When Jesse was not trading, he could often be found gambling in high-end speakeasies located in Palm Beach.Drinking was another favorite pastime, which didn’t complement his extensive firearms collection. This led to Dorothy nearly shooting Jesse Jr. during a drunken argument, nearly killing him.

Though Jesse was a financial wizard, he completely failed at all of the things that really matter. In the end, these lifestyle choices predictably destroyed his financial empire.

To be fair, it is highly probable that Jesse would have been diagnosed today as a manic depressive and possibly bi-polar. These conditions had a major impact on many of the decisions he made.

In the end, Jesse contradicted one of his most famous sayings, “Buy right, sit tight.”

He chose the wrong spouses, constantly bought new trinkets that he thought would make everyone happy, and let his losses run.

“It is not the man who has too little, but the man who craves more, that is poor.”  – Seneca

Source: Jesse Livermore Boy Plunger