Welcome to Finance Monthly's countdown of the Top 10 Greatest Trades that the trading floor has ever seen. We take a look at each trader, the audacious move they pulled off and where they are now.
Scroll through to see who tops our list.
10. The 1929 Short - Jesse Livermore
Result: $100 million profit
Livermore can be classed as one of the world’s pioneers in terms of shorting the market.
His first attempt was shorting the market by selling Union Pacific just before the San Francisco Earthquake of 1906. The pay-out was £250,000 but that was only the beginning. He followed that up by shorting the market again in 1907. As the stock market crashed Livermore took home $1 million for his efforts. Always looking for the next target, he concentrated on the wheat industry in 1925, with another successful short that earned him $3million.
Livermore was gaining a significant reputation but his real coup de grace would make his earlier trades pale in comparison. In the early autumn of 1929 the Dow Jones is up five-fold in the last 5 years and the euphoric atmosphere that pervaded the entire floor wasn’t shared by Livermore. As the money flowed in reaching an $8.5 billion high, it got to the point where the outstanding loans had exceeded the current amount of money in circulation. In September, as the stocks began to level out, Livermore gambled on his biggest short, which took place on that fateful day in 1929. Looking for a bigger haul and seeing what was coming, Livermore shorted the entire market. As the US Financial sector went into meltdown, Livermore earned himself $100million which in today’s market would equate to a $1.4 billion-dollar haul.
Incredibly, Livermore was declared bankrupt and was banned from the Chicago Board of Trade in 1934, just five years after his greatest success as an investor. No one knows exactly why and indeed how he lost all his money, but his reputation as one of the best ‘shorters’ still stands to this day.
Next: Shorting Black Monday
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Here Lee Wild, Head of Equity Strategy at Interactive Investor discusses corporate American investment ahead of third quarter reports.
Decent economic data has kept records tumbling on Wall Street, and who’s to say this run will unwind any time soon. Overnight, it’s talk Donald Trump could name Fed governor and market’s choice Jerome Powell as Fed chair Janet Yellen’s replacement that’s driving sentiment.
Winning streaks like this are always difficult for investors, as the head keeps asking how much higher? It requires calm and nerve to hold stocks in these situations, even more to continue buying.
Valuations are toppy in areas of the market both in the US and over here, but history is littered with examples where investors tried to call the market peak and failed. The experts who’ve predicted a crash for more than a year have been wrong, and investors who’d followed their lead will have missed out on substantial profits.
So, there are still plenty of good quality stocks to buy, which are growing profits, pay decent dividends, and have great prospects. That said, corporate America begins reporting third-quarter results in a couple of weeks, and the numbers had better be good, given the size of earnings beats already baked into stock prices.
It’s a big day for ex-dividends in London, among them the third of Next’s 45p special payouts and WPP’s generous interim, which lands highly-paid boss Martin Sorrell another huge windfall.
Even with the impact of ex-divs, the FTSE 100 has significant momentum right now and there’s a great chance it will break above 7,500 soon, putting it within 100 points of a new record. Miners and supermarkets are flavour of the month Thursday.
With little of interest coming out of the European Central Bank’s September policy meeting, it’ll be interesting to see if today’s minutes give any clues as to tapering plans or thoughts about how to handle the strong euro.
After that there’s a jumble of data out of the US, although the chance of any major upset is slim. Many traders could be tempted to keep their powder dry ahead of tomorrow’s US non-farm payrolls.
Following an internal review, SEC Chairman Jay Clayton revealed that the organisation had been the victim of “Malicious attacks”. The revelation came in a 4,000-word statement released on Wednesday and caused concerns among those on the trading floor.
The Securities and Exchange Commission is responsible for handling almost 1.7 million financial market disclosure documents a year through its EDGAR system, which was revealed as the source of the leak. The admission will be a source of embarrassment for the SEC, whose mission statement is to ‘protect investors’. Clayton’s statement confirmed that the leak was discovered and subsequently fixed in 2016. However, last month they discovered that the breach may have resulted in people being able to use the data acquired in the hack to illegally make profits on the stock market.
In addition to the cyber hack, Clayton’s statement also confirmed the use of private e-mails being used to transmit confidential data and that a number of SEC laptops that may contain confidential data are missing.
Wall Street has been suitably dismayed by the leak, given the potential risks that have been thrust upon it by the very organisation that is tasked with policing trades. However, the cyber breach will not come as a surprise to many within the government who have previously raised concerns about the SEC’s security systems in the past, including the Department of Homeland security who reportedly discovered five “critical” weaknesses in their system as recently as the start of 2017.
The US markets are already on edge, following the recent Equifax data breach which resulted in the leak of 143 million consumer records and is the subject of increased scrutiny and at least one Federal investigation.
In a bid to restore faith in the institution, Clayton has given his assurances that the SEC is taking cyber security seriously; he stated that: "The Commission will continue to prioritize its efforts to promote effective cybersecurity practices within the Commission itself and with respect to the markets and market participants it oversees," and that all steps are being taken to ensure there is not a repeat of a leak.
The move is a further indication that large financial companies and institutions are under increasing threat from cyber hacks. The SEC statement did not specify who was behind the breach, but recently countries such as Russia and North Korea have been linked to several high-profile hacks on large organisations.
Clayton and the SEC will need to ensure that it does not fall victim again if it is to rebuild its significantly damaged reputation on Wall Street.
The Wall Street Fraud Watchdog is now offering an unsurpassed due diligence service for EB-5 Visa applicants that is designed to ensure the investment is not a get rich quick scheme on the part of a regional center. At the same time, they are offering to work directly with the EB-5 Visa applicant to make certain they do not overpay for legal services associated with the EB-5 Visa program.
According to the Wall Street Fraud Watchdog: “It is very possible a regional center promoting an investment opportunity to a EB-5 Visa investment to a person from China, India, Korea, Eastern Europe, the Middle East or South/Central America will not be completely honest with the investor. In many instances, it is likely the regional center will embellish to make it sound like their investment is too good to be true, or it will produce a significant return on investment. Furthermore-why pay a $50,000 'finders-fee' or 'broker fee' when the investment and broker are all one in the same?
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Note from the Wall Street Fraud Watchdog - "If the apartment building industry uses the word 'moderate' in a forecast for 2017, investors should pause."
For information about a recent settlement involving EB-5 Visa investor fraud please refer to a news article titled Raymond James Settles For $145.5 Million With Jay Peak Receiver.
The Wall Street Fraud Watchdog is concerned US based law firms with offices in China, Central America, the Middle East or in Europe could be more interested in legal fee generation for the law firm-than a high quality outcome for a EB-5 Visa applicant. At the same time, they are not confident all regional centers have a make sense investment product for the EB-5 Visa applicant. Their initiative is all about protecting the EB-5 Visa program applicant and their money with their affordable due diligence services. "Why settle for less?"
(Source: Wall Street Fraud Watchdog)
