Wall Street’s Forgotten King: the First Great Market Speculator - OZY | A Modern Media Company

Wall Street’s Forgotten King: the First Great Market Speculator

Wall Street’s Forgotten King: the First Great Market Speculator

By James Watkins


Because the “Great Bear of Wall Street” would be rubbing his hands in today’s overvalued market.

By James Watkins

Animal spirits were running high as stock traders began turning bombast into riches. In 1855, Wall Street’s so-called promoters — analysts, CEOs and traders alike — promoted stocks beyond all reasonable valuations, trading mostly in infrastructural development in a rapidly industrializing and optimistic United States. Growth boomed in the decades following the War of 1812, but trouble was brewing: These traders had little idea what a balance sheet looked like, or the effects their wildly swinging stock prices had on the companies involved.

The latest bull market had rallied around stock in the Erie Railroad, but one trader was skeptical and started short selling Erie by the bucketload. Jacob Little’s reserved nature set him apart from his colleagues, and “the higher the price went, the more Erie he sold,” writes Edwin Lefèvre in Reminiscences of a Stock Operator (1923). As the stock price edged higher, fellow traders took turns estimating how much Little would lose — a couple of million overnight (equivalent to billions today), they all agreed.

His lips had a habit of protruding, as though he would literally test the market by sense of taste.

Edwin Lefèvre, Reminiscences of a Stock Operator

“Everyone waited for news of the settlement in order to say ‘I told you so,’” continues Lefèvre. On the day of reckoning for the trade, Little left the Erie transfer office with all of Wall Street watching. “He was sneering sourly at the entire world,” writes Lefèvre, referring to Little’s trademark smirk. Far from losing millions, Little had exploited a loophole, enabling him to buy bonds in London and convert them into cheap stock to cover his audacious short sale. It was “one of the greatest of what we would [now] call arbitrage coups of all time,” says Charles Geisst, a professor of finance at Manhattan College and author of Wall Street: A History.

And this was no one-off win for Little, nicknamed “the Great Bear of Wall Street” for his skepticism. Throughout his career, Little made, and then lost, a fortune in the millions nine different times — “an astounding amount of money” back then, says Geisst. Each time, he became one of the richest men in America before, like many speculators of his day, losing it all again. “He was more than an enormously rich man: He was Jacob Little, the King of the Stock Market,” Lefèvre writes.


Born in Massachusetts in the late 18th century, the devout Episcopalian moved to New York City in his early 20s, opening up his own brokerage in 1834. It didn’t take long for him to make his name: He “accurately prejudged the swollen market of 1837,” according to the Museum of American Finance — the financial crash of that year led to a seven-year recession — “emphatically establishing [his] bearish reputation.” 

Jacob little

Jacob Little was Wall Street’s first infamous short seller.

Source Creative Commons

Little was the first short seller in the history of Wall Street, or at least the first of any prominence, says Geisst. The tactic has since made fortunes for generations of speculators. And while short sellers today tend to bet against overvalued companies based on sophisticated data, in Little’s day it was “mostly on the basis of rumor,” Geisst explains — not unlike famous short sellers Joseph Kennedy in the Great Depression or even John Paulson during the 2008 financial crisis. “These were people inside the industry who heard … that a lot of the stuff that was being sold out there was worthless. This was essentially the same information that Little worked on.”

Little was a tall, thin man with a stoop, whose “lips had a habit of protruding, as though he would literally test the market by sense of taste,” according to Lefèvre. Back then, there were a lot more shenanigans on the stock market than there are today, and Little “just recognized BS for what it was,” says Geisst.

Eventually, the law of averages came back to bite Little. Legend has it that following each of his bankruptcies, Little would pay back his creditors years later, after rebuilding his fortune, even though they had long ago written off his debts. Not everyone had the same attitude; after losing everything for a final time a few years before his death, Little reportedly had dozens of IOUs — valued in the millions — that he never collected from debtors. He died penniless, and a friend collected a fraction of what had been owed Little to give to his family.

“It is safe to predict,” writes Lefèvre, “that Little’s record of stock-market profits will never be equaled.” And while that may have been too bold a prediction, even for 1923, Little nevertheless forged a path for the great speculators that have dominated Wall Street since.

Sign up for the weekly newsletter!

Related Stories