Jesse Livermore- Boy Plunger by Tom Rubython

Author:Tom Rubython
Language: eng
Format: azw3
ISBN: 9780141036304
Publisher: The Myrtle Press
Published: 2016-05-03T04:00:00+00:00

CHAPTER 22

War and a Coffee Scam

Roasters outwit Livermore

1917

When President Wilson declared war on Germany on April 6th 1917, shortly after congress had voted in favor of a declaration, Jesse Livermore was out of the market and in one of his periods of relative inactivity. Livermore had foreseen the outbreak of war but could not predict what the stock market’s reaction would be.

War was by no means certain, and President Wilson had only garnered the support of the American people after a document called the Zimmermann Telegram was published. The telegram was so called because it was sent by Arthur Zimmermann, the German Foreign Secretary, to the German ambassador in Mexico, Heinrich von Eckardt. It proposed that Germany would offer Mexico assistance to annexe Texas and other parts of the southwest if America entered the war against Germany. The telegram was intercepted and decoded by British army intelligence officers. The code for the encrypted message had been cracked by a group of code breakers in London, known internally as Room 40 because of their secret location in the heart of Whitehall, a region of London almost exclusively occupied by government offices. Decoding that telegram was the most significant event of the First World War. It was also one of the most foolish and inept diplomatic communications ever sent and virtually guaranteed that Germany would ultimately lose the war.

Its publication outraged ordinary Americans and made President Wilson’s mission much easier. The final declaration of war came after Germany sank seven US merchant ships on the way to Europe.

Livermore was certain that the stock market would decline but was unsure for how much and for how long. Conscious of how easily he had previously let millions of dollars of profits slip through his fingers, he resisted the temptation and stayed on the sidelines whilst all the time studying the markets and looking for opportunities. Wealth preservation became his main priority.

The market went on a swoon throughout 1917, although Livermore was a modest bear and read the market reasonably well. But the war made him doubly cautious of committing to stocks and shares, and he preferred the safer waters of commodities during this period.

It was Livermore’s opinion that America’s entry into the war guaranteed that the price of commodities would rise sharply: “It was as easy to foresee that as to foresee war inflation. Of course, the general advance continued as the war prolonged itself, and I now had the time, the money and the inclination to consider trading in commodities as well as in stocks.”

But much of the price rise had already happened by the time Livermore was ready to plunge in. He had been focusing on the easy money in stocks and had missed the commodities boom which had seen everything rise from between 100 per cent and as much as 400 per cent inside two years.

But there was one commodity that hadn’t taken off, and that was coffee. The reason was clear; at the outbreak of war, all supplies had been

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