Jacob Little
Born: 1794, Newburyport, Massachusetts Died: 1865, New York City Known as: First "Great Bear of Wall Street" Peak wealth: Multiple fortunes made and lost
The first great bear operator on Wall Street. Known as a "master of every kind of game played in stocks" — corners, rings, sleight-of-hand, bluff, lock-up and bar-out.
Innovations
The manipulated short sale: Little is credited with inventing the modern short sale — selling shares of a company's stock while simultaneously floating damaging rumors about the company's financial condition to push the price down so he could cover cheaply.
The convertible bond escape: He was also the claimed inventor of the convertible bond as a tool for breaking corners. When bulls cornered him in Erie stock in 1855, he converted bonds he had quietly accumulated in England into an equivalent amount of Erie stock — throwing the shares onto the market and crushing the corner. (Daniel Drew later applied the same tactic in 1866.)
Career Arc
Little caught big breaks in the Panics of 1837 and 1847, building and losing nine fortunes. Said a biographer: "He would reign the king of the market, fight a dozen pitched battles, suffer defeat, abdicate, and then once more ascend the throne, all in the space of six months." He finally failed during the Civil War when the rising tide of currency inflation overwhelmed his short positions.
His end: "Poor and unnoticed, he passed away from the scene, and left nothing behind him but the shadow of what was once a great Wall Street reputation."
Little's motto: "I care more for the game than the results, and, winning or losing, I like to be in it!"
Historical Significance
Livermore cites Little (along with Daniel Drew and Jay Gould) as an example of the Gilded Age operators whose specific manipulation techniques are now obsolete and illegal, but whose understanding of crowd psychology remains permanently relevant. "The principles of successful stock speculation are based on the supposition that people will continue in the future to make the mistakes they have made in the past."
Sources
- reminiscences-of-a-stock-operator — Ch 19 (Markman annotations)