The Last Hurrah: Uncovering Jesse Livermore’s Strategies and Harnessing ‘Dead Money’ Pots!

The final episode of Jesse Livermore’s life story is an ominous one, with it being a cautionary tale for investors around the world. Little is known of the man’s end, as our knowledge of his life ends abruptly after his death. What we do know, however, is that the final few years of his life were filled with cautionary tales and reminders for investors of the dangers of holding onto dead-money positions for too long. For Jesse Livermore, the stock market was like a game, and he was determined to beat it, no matter the cost. While good fortune certainly graced him in his earliest days of trading, he soon found out that luck was fleeting. But he was wise in his decision to learn from his mistakes, and so, rather than rashly rush into a new stock, he adopted the mentality of a patient hunter, so as to only pick off the best investments. This proved to be a successful strategy for him, as he was able to squirrel away considerable sums of money during his lifetime. But even the most prudent of investors can be struck by misfortune, and in Livermore’s case, he found himself in a quandary. With his own fortune set up, he began to dabble in the inverse of short-term investing, holding onto dead-money positions long after the initial investing flurry had petered out. It was here that he fell prey to the trap that so many investors fall into: holding onto these positions even when the data has pointed out that the market may have moved on from the stagnation. Rather than crouching in fear of the losses he knew he might incur, or clinging onto the hope of breaking even, Livermore was wise and kept himself from having an emotional attachment to the stock. He didn’t wait for the long haul when he knew it was time to move on. He began to free himself from the dreaded “dead-money positions” portfolio by selling at a loss, but still made sure to leverage his remaining funds to create new profits. His final insights on this matter? “Money comes into the stock market when there is hope of winning; money leaves the stock market when there is the prospect of a loss. . .when we actually hold dead money, the risk of a complete loss is always somewhere in the picture.” Though Jesse Livermore’s career in the stock market was tragically cut short prior to his finish, his cautionary tale of holding onto dead-money positions stands as a testament to the lessons that we can take away from his life story. It’s a reminder to all investors to always remain on the outlook for the signs of a shift in the market, and to not put their eggs all in one basket. As the old saying goes, “a bird in the hand is worth two in the bush”– and in the stock market, that same sentiment holds true.