The 1929 Crash and the $100 Million Profit

This weekend marks the 82nd anniversary of the greatest stock market crash in American history. Given the recent market struggles (which seem miniscule in comparison), it is fitting to highlight an individual who wound up making $100 million dollars in that epic collapse. It is autumn1929 and the Dow is up five-fold in the last six years. Euphoria is gripping the market and everyone is getting involved. Brokers are promoting loans to buy stocks and the public cannot get enough - putting up less than one third of the purchase price is a great deal for seemingly guaranteed gains. The total outstanding amount of loans begins to balloon, reaching $8.5 billion outstanding, which, fascinatingly enough, is more than the total amount of money in circulation. Stocks level off and start to decline in September 1929, and Jesse Livermore, one of the most renowned traders in history, sees his opportunity. He begins to heavily short the market, despite the cautioning of his counterparts. It does not take long for his bet to pay off. In the following weeks, the stock market experienced what has become known as the “Great Stock Market Crash of 1929” – the most destructive stock market collapse in the history of the United States. The decline included a two-day, 25% drop on what is now referred to as “Black Monday (October 28th)” and “Black Tuesday (October 29th).” The Dow plunged 47% from the market high of 381.17 on September 3rd, 1929, to its interim bottom of 198.60. The official low was not seen until 1932, when the market hit 41.22 – an 89% drop in 3 years. Livermore, as a result, benefitted greatly. His profit from the initial drop and the decline that followed is one of the largest wins by a stock trader in history - $100 million dollars.

Born in 1877, Jesse got his first job at the age of 14 writing stock quotes on a chalkboard in a broker's office. He would watch the prices change and try to find patterns. By the age of 15 he had already made his first $1,000 from trading, a sizable sum at the time – not to mention for someone his age. His career progressed and he continued to trade his own money in the small brokerage houses (referred to as bucket shops at the time), despite their objections. He quickly became known as “the boy plunger” for his ability to suck money out of the market. In the 1907 crash, Jesse was 30 years old and solidified his reputation as a real market participant. It was during that collapse, that he made his first million. 1929, however, provided him with his crowning achievement. The short positions he took just before the “Great Crash,” earned him a profit of $100 million dollars, which, in today's figures equates to $1.327 billion dollars!

Despite his many successes, Livermore battled constant depression, and in 1940 wound up taking his own life. The classic novel,