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Jacob Little
Jacob Little (March 17, 1794 – March 28, 1865) was an early 19th-century Wall Street investor and the first and one of the greatest speculators in the history of the stock market, known at the time as the "Great Bear of Wall Street". Little was born in Newburyport, Massachusetts, and moved to New York City in 1817, first clerking for Jacob Barker; he then opened his own establishment in 1822, and finally his own brokerage in 1834. A market pessimist, Little made his wealth "bearing stocks", at turns short selling various companies and at others cornering markets to extract profits from other short sellers. Through his great financial foresight Little amassed an enormous fortune, becoming one of the richest men in America and one of the leading financiers on Wall Street in the 1830s and 1840s, but his speculative activities irritated his peers and earned him few admirers. Little lost and remade his legendary fortune multiple times before losing it for good in 1857; although a great many owed him enormous debts, he was a generous creditor and never collected them, and at his deathbed in 1865 Little was penniless. Although well-known on the stock market in his time, he was quickly forgotten after his death, and today has been relegated to relative obscurity.
Although much is known of Little's investment activities in his adult life, little is known about his early years. Jacob Little was born in Newburyport, Massachusetts on March 17, 1794. The son of a successful local shipbuilder and of Quaker origin, Little exhibited a strong understanding of money and financial markets from an early age. In 1817 he emigrated to New York City and became a clerk in the store of Jacob Barker, a highly successful financier, merchant, and politically well-connected founding member of the Democratic Party political machine Tammany Hall. Little spent five years in apprenticeship under Barker before moving out in 1822 to start his own business with $700 he had accrued over the length of his employment. He bought a small office in the basement of a Wall Street building, which served as his base of operations for the next twelve years, before moving out of his old office to a new one in the basement of the old exchange building in 1834, from which he opened a brokerage—the start of his investment career.
Little entered the stock market at a time when banking and stock-brokerage was coming in of its own, progressing to a profit-motivated business in its own right. However, a large part of this growth came not from "solid" investors—those interested in the business ventures they funded—but from speculative "wheeler-dealers" who would manipulate prices to profiteer from their holdings or, just as often, from those of others. By the eve of the American Civil War there were hundreds of such speculative brokerage firms on Wall Street; warring cliques of bulls and bears would routinely drive prices artificially high and low, respectively, often in underhand ways that angered more legitimate stockbrokers.
Little was one of the earliest and most successful practitioners of Short Selling, making a fortune by leveraging both drops in market value and short sellers. In the former, he would sell stocks to other traders under contract to purchase it at a later date, betting that the market value would go down in the future and he could pocket the difference (trade rules have changed, and short selling is more complicated than this today). In the latter he would execute the opposite maneuver, corner a market by buying up all of the bonds of a particular company or sector, up-ticking the price so as to make a profit at the expense of any short sales based on those stocks. Hardworking, highly ambitious, and with his eyes set on the very top from the very beginning, Little commonly spent twelve hours a day working on such maneuvers in his office and a further six during the evening engaged in currency speculation.
His first great coup was when in 1834 he successfully bought out the Morris Canal and Banking Company which pushed its stock price from $10 ($323 today) per share in December 1834 to $185 ($5,966 today) a share in January 1835. Although theoretically he could have asked for more (he was, after all, in total control of the company), Little chose not to force the issue because he feared the resulting bankruptcies would destabilize the market potentially cause a collapse. He repeated this feat in September of the same year, cornering stocks for the construction of the Harlem Railroad. Approximately 60,000 shares had been sold short by that time, but only 7,000 shares had yet been issued; needless to say, Little prospered immensely.
By this time Little was already one of the richest men in America, accruing millions of dollars in security holdings through short sales, a market volume that made him the "Napoleon of the Board." He was noted for being personally retired in manner, diffident except to business, in correspondence with most of the major economic voices of the nation, and a devout member of the Episcopal Church. As a trader, he was unscrupulous and serendipitous; in one instance he promised a group of Bostonian traders that he would not sell his holdings in the Norwich and Worcester Railroad below the price of 90 dollars a share, but promptly did so soon after when noticed its price slipping, earning him much condemnation and lasting outrage from other traders. But he was also known for his practiced judgement, the promptness of his dealings, and his great financial foresight; Little was able to predict Andrew Jackson's campaign against the Bank of the United States and the resultant Panic of 1837, and was able to protect his interests during the financial debacle by short selling his own holdings, a lucrative operation that earned him his most lasting title: "The Great Bear of Wall Street." Little himself often stated he was in the business of "bearing stock", in the tradition of the bear market.
Little distinguished himself with large, early investments into the railroad construction industry, still regarded with some suspicion by financiers. His 1845 investment of $100,000 towards the Providence and Worcester Railroad was crucial to that company beginning construction. As with his other activities, these paid off handily, eventually earning him a new title, that of the "Railroad King". However, for all of his wealth Little was little loved by his peers, many of whom secretly believed him to be lacking personal integrity, a hulking, manipulative figure who built his fortune through speculation and market manipulation and crushed other traders underfoot as he did. Little "had been known to gorge and digest more stock in one day than the weight of bulk of his whole body in certificates." Other investors followed his actions closely, terming him "too shrewd to be caught, too rich to be ruined", and his sway and influence in the market was indeed enormous.
However, this aura of untouchability nearly came to an end when the cornermaster was himself cornered. Little particularly favored shorting the stocks of the Erie Railroad Company, and it was here that he was trapped by the cornering of the company's stock by a hostile syndicate of rival stockbrokers calling itself the "Happy Family" (in much the same way as he had done to countless other traders before). This led to a rather dramatic showdown between Little and the financiers involved. At the time, making good on a purchase promise required a transaction at the associated clerk's office, and on the day it was due the brokers gathered at the Erie Railroad Company clerk's office, smug at the likelihood that they had beaten Little at his own game. What the traders did not know was that Little had purchased convertible bonds at a company sale in London a few years before; Little entered the premises, apparently unrushed, carrying an oversize bag of what was revealed to be those very bonds, which Little had converted to stocks. To the astonishment of all, Little not only outplayed the syndicate but came out hundreds of thousands of dollars ahead; such a maneuver was never attempted again.
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Jacob Little
Jacob Little (March 17, 1794 – March 28, 1865) was an early 19th-century Wall Street investor and the first and one of the greatest speculators in the history of the stock market, known at the time as the "Great Bear of Wall Street". Little was born in Newburyport, Massachusetts, and moved to New York City in 1817, first clerking for Jacob Barker; he then opened his own establishment in 1822, and finally his own brokerage in 1834. A market pessimist, Little made his wealth "bearing stocks", at turns short selling various companies and at others cornering markets to extract profits from other short sellers. Through his great financial foresight Little amassed an enormous fortune, becoming one of the richest men in America and one of the leading financiers on Wall Street in the 1830s and 1840s, but his speculative activities irritated his peers and earned him few admirers. Little lost and remade his legendary fortune multiple times before losing it for good in 1857; although a great many owed him enormous debts, he was a generous creditor and never collected them, and at his deathbed in 1865 Little was penniless. Although well-known on the stock market in his time, he was quickly forgotten after his death, and today has been relegated to relative obscurity.
Although much is known of Little's investment activities in his adult life, little is known about his early years. Jacob Little was born in Newburyport, Massachusetts on March 17, 1794. The son of a successful local shipbuilder and of Quaker origin, Little exhibited a strong understanding of money and financial markets from an early age. In 1817 he emigrated to New York City and became a clerk in the store of Jacob Barker, a highly successful financier, merchant, and politically well-connected founding member of the Democratic Party political machine Tammany Hall. Little spent five years in apprenticeship under Barker before moving out in 1822 to start his own business with $700 he had accrued over the length of his employment. He bought a small office in the basement of a Wall Street building, which served as his base of operations for the next twelve years, before moving out of his old office to a new one in the basement of the old exchange building in 1834, from which he opened a brokerage—the start of his investment career.
Little entered the stock market at a time when banking and stock-brokerage was coming in of its own, progressing to a profit-motivated business in its own right. However, a large part of this growth came not from "solid" investors—those interested in the business ventures they funded—but from speculative "wheeler-dealers" who would manipulate prices to profiteer from their holdings or, just as often, from those of others. By the eve of the American Civil War there were hundreds of such speculative brokerage firms on Wall Street; warring cliques of bulls and bears would routinely drive prices artificially high and low, respectively, often in underhand ways that angered more legitimate stockbrokers.
Little was one of the earliest and most successful practitioners of Short Selling, making a fortune by leveraging both drops in market value and short sellers. In the former, he would sell stocks to other traders under contract to purchase it at a later date, betting that the market value would go down in the future and he could pocket the difference (trade rules have changed, and short selling is more complicated than this today). In the latter he would execute the opposite maneuver, corner a market by buying up all of the bonds of a particular company or sector, up-ticking the price so as to make a profit at the expense of any short sales based on those stocks. Hardworking, highly ambitious, and with his eyes set on the very top from the very beginning, Little commonly spent twelve hours a day working on such maneuvers in his office and a further six during the evening engaged in currency speculation.
His first great coup was when in 1834 he successfully bought out the Morris Canal and Banking Company which pushed its stock price from $10 ($323 today) per share in December 1834 to $185 ($5,966 today) a share in January 1835. Although theoretically he could have asked for more (he was, after all, in total control of the company), Little chose not to force the issue because he feared the resulting bankruptcies would destabilize the market potentially cause a collapse. He repeated this feat in September of the same year, cornering stocks for the construction of the Harlem Railroad. Approximately 60,000 shares had been sold short by that time, but only 7,000 shares had yet been issued; needless to say, Little prospered immensely.
By this time Little was already one of the richest men in America, accruing millions of dollars in security holdings through short sales, a market volume that made him the "Napoleon of the Board." He was noted for being personally retired in manner, diffident except to business, in correspondence with most of the major economic voices of the nation, and a devout member of the Episcopal Church. As a trader, he was unscrupulous and serendipitous; in one instance he promised a group of Bostonian traders that he would not sell his holdings in the Norwich and Worcester Railroad below the price of 90 dollars a share, but promptly did so soon after when noticed its price slipping, earning him much condemnation and lasting outrage from other traders. But he was also known for his practiced judgement, the promptness of his dealings, and his great financial foresight; Little was able to predict Andrew Jackson's campaign against the Bank of the United States and the resultant Panic of 1837, and was able to protect his interests during the financial debacle by short selling his own holdings, a lucrative operation that earned him his most lasting title: "The Great Bear of Wall Street." Little himself often stated he was in the business of "bearing stock", in the tradition of the bear market.
Little distinguished himself with large, early investments into the railroad construction industry, still regarded with some suspicion by financiers. His 1845 investment of $100,000 towards the Providence and Worcester Railroad was crucial to that company beginning construction. As with his other activities, these paid off handily, eventually earning him a new title, that of the "Railroad King". However, for all of his wealth Little was little loved by his peers, many of whom secretly believed him to be lacking personal integrity, a hulking, manipulative figure who built his fortune through speculation and market manipulation and crushed other traders underfoot as he did. Little "had been known to gorge and digest more stock in one day than the weight of bulk of his whole body in certificates." Other investors followed his actions closely, terming him "too shrewd to be caught, too rich to be ruined", and his sway and influence in the market was indeed enormous.
However, this aura of untouchability nearly came to an end when the cornermaster was himself cornered. Little particularly favored shorting the stocks of the Erie Railroad Company, and it was here that he was trapped by the cornering of the company's stock by a hostile syndicate of rival stockbrokers calling itself the "Happy Family" (in much the same way as he had done to countless other traders before). This led to a rather dramatic showdown between Little and the financiers involved. At the time, making good on a purchase promise required a transaction at the associated clerk's office, and on the day it was due the brokers gathered at the Erie Railroad Company clerk's office, smug at the likelihood that they had beaten Little at his own game. What the traders did not know was that Little had purchased convertible bonds at a company sale in London a few years before; Little entered the premises, apparently unrushed, carrying an oversize bag of what was revealed to be those very bonds, which Little had converted to stocks. To the astonishment of all, Little not only outplayed the syndicate but came out hundreds of thousands of dollars ahead; such a maneuver was never attempted again.
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