Legendary investor Jesse Livermore is known for pioneering the concept of holding “dead money” positions. This investing strategy, which has been adopted by investors around the world, entails holding onto an asset or position after its price has stalled without showing any signs of long-term potential. As the final episode of his life-defining career, Livermore used this skill to great effect while facing bankruptcy court proceedings in 1934.
Before his downfall, Livermore was often nicknamed the “Boy Plunger” and “Great Bear of Wall Street”. This was due to his formidable reputation as a highly successful speculator who consistently managed to extract considerable gains out of the volatile stock market. His success enabled him to amass a vast fortune, building houses and yachts for himself and his family.
However, by 1934 the tide had turned on Livermore, and his penchant for gambling had created massive losses. Facing bankruptcy and the inevitable liquidation of all his investments, Livermore realized that he could still salvage some value by holding onto certain stocks that he had collected in the past.
Thus, instead of trying to cut his losses, Livermore began to hold on to his investments in companies that had little to no value or growth potential. Furthermore, he investigated the companies for any glimmer of promise that may enable them to resolve their problems and become profitable in time. Eventually, he found enough companies that were able to turn a profit, allowing him to continue trading without going bankrupt.
Livermore’s “dead money” strategy paid off in the end: after holding onto the positions for long enough, they began to gradually recover and earn profits for him. This enabled him to eventually bounce back from his financial woes and become a successful investors once again.
Thus, as a final episode of his illustrious career, Jesse Livermore’s recovery from near-bankruptcy provided us with invaluable insight in the power of holding “dead money” investments. With this knowledge, investors can remain in control and can continue to capitalize on their investments, even in the face of adversity.