From $5 to a Millionaire: The Wall Street Legend and Self-Destruction of Leverage

Prologue: The Paradox of Genius

Few traders in history have been able to command the financial markets like Léonard M. — wielding influence and yet falling victim to personal failure. His story is regarded as a classic by investment giants like Buffett and Soros. His trading principles are still studied by quantitative trading teams today. Yet, this Wall Street bear ultimately took his own life in a hotel closet. This is not only a personal tragedy but also an allegory about how human nature and desire can devour even the brightest minds.

Escape from the Farm: Starting with 180 Dollars at Age 14

Born in 1877, Léonard M. spent his childhood on a poor farm in Massachusetts. He was literate at age 3, reading financial pages by age 5—indicators that he was not destined for the fields. But his father’s stern attitude complicated things—insisting that this bright boy follow in the family’s farming footsteps.

His mother’s secret actions changed everything. She raised $5 (equivalent to about $180 today) and helped her 14-year-old son escape the farm in spring 1891, taking a train to Boston. This was not a reckless runaway but a gamble by a mother on her genius son.

Upon arriving in the bustling city, Léonard did not follow his mother’s plan to stay with relatives. Instead, he was captivated by a string of numbers outside the Paine Webber building. Using his somewhat mature appearance, he applied for a job as a quote board clerk. From this position, the foundation of a trading empire was quietly laid.

From Clerk to Trader: Secrets Behind the Numbers

His work at Paine Webber seemed mundane but was his awakening. His strong mathematical talent allowed him to discover patterns in the dull numerical records:

• The stock price of Union Pacific Railroad often exhibited similar fluctuations at specific times, as if driven by an “invisible tide.”
• The retracement of stocks was often 3/8 of the previous upward move, a ratio that repeatedly appeared.
• Large buy orders were always supported by psychological price levels.

These observations gradually formed the prototype of modern technical analysis. At 16, Léonard decided to leave Paine Webber and enter the betting houses (an early form of derivatives markets). He invested $5, made his first profit of $3.12. Soon after, at only 20, he earned $10,000 from betting houses in Boston (equivalent to about $300,000 today), gaining fame and being blacklisted by local betting syndicates.

It was like a young master winning too often at the casino and being banned—Léonard became one of Wall Street’s earliest “unwelcome traders.”

Early Frustration in New York: Jewelry and Bankruptcy

In 1899, at age 23, Léonard moved to New York, stepping onto a bigger stage. He quickly married Nattie Jordan, an Indian girl. But the complexity of the financial center far exceeded Boston’s. Relying on automated data recorders, he traded based on delayed data—30 to 40 minutes behind real-time quotes—this time lag became a fatal flaw.

Within less than a year, Léonard faced his first bankruptcy. To recover, he asked his newlywed wife to pawn her jewelry, which he had bought for her. When refused, their marriage gradually unraveled over the next seven years. This was not just financial hardship but a first real setback for a genius trader confronting reality.

Earthquake and Short Selling: A Trade That Changed Wall Street

After years of steady accumulation, by 1906 Léonard had amassed $100,000. But he began to question his overly conservative approach. During a vacation in Palm Beach, a historic event rewrote his trajectory.

On April 18, 1906, San Francisco was struck by a 7.9 magnitude earthquake, followed by fires. Union Pacific Railroad, the key transportation hub in the West, faced huge losses. The market expected stock prices to rise due to reconstruction needs, but Léonard’s analysis pointed in the opposite direction:

• The earthquake caused a sharp decline in freight volume for the railroad.
• Insurance companies would need to pay out, possibly selling off stocks.
• The company’s financial reports would fall far below market expectations.

He did not rush to short immediately. Instead, he waited until the stock hit a key technical resistance level, then gradually built short positions through multiple brokerages, using appropriate leverage but strictly controlling individual positions. The process unfolded in three phases:

• April-May: initiated positions at $160.
• June: after negative earnings reports, the stock broke support at $150, and he increased his short.
• July: as panic spread and the stock plunged near $90, he closed his positions. Profits exceeded $250,000, equivalent to about $7.5 million today.

This trade exemplified Léonard’s core philosophy: combining fundamental analysis with technical signals, leveraging information advantage with risk management, patiently waiting, and executing decisively.

The 1907 Panic: A Legendary Battle of $3 Million

In fall 1907, Léonard discovered that trusts like New York Trust were heavily leveraged in junk bonds, with interbank lending rates soaring from 6% to 100%—a clear liquidity crisis signal. He personally disguised as a client to investigate and confirmed that many trust companies’ assets were in poor shape.

On October 14, he shorted key stocks like Union Pacific and U.S. Steel through multiple brokerages. After publicly questioning the solvency of Nickeburg Trust on the 14th, the trust declared bankruptcy within three days, spreading panic.

On the 22nd, he concentrated his short sales before market close, using the rare “pyramid adding” method (adding to winning positions), triggering automated stop-losses. On the 24th, NYSE’s chairman begged him to stop shorting, warning that the market would collapse entirely. The Dow plunged 8%, and Morgan’s group intervened to stabilize.

An hour before Morgan’s capital infusion, Léonard precisely closed 70% of his shorts. By month’s end, he was fully out. Total profit: $3 million, roughly $100 million today. Within a week, the trader from Wall Street had become a legend.

His calm yet sarcastic response: “The market needs a thorough cleansing.”

The Cotton Scam: Genius Self-Punishment

But even geniuses can be blinded by desire. In the 1910s, Léonard met Teddy Price, an authority in the cotton industry. Price publicly bullish on cotton but secretly shorted with growers’ cooperation. He exploited Léonard’s desire to “prove cross-market ability,” constantly feeding him the narrative of “supply shortages.”

Even when Léonard’s data showed the opposite, he still believed his friend and held 300 million pounds of cotton futures—far beyond reasonable positions. Ultimately, he lost $3 million, wiping out all the profits from his 1907 short. This failure forced him to close other market positions, leading to consecutive bankruptcies in 1915-1916.

Léonard violated his own three ironclad rules: never trust others’ advice, never average down, and never let narrative override price signals. Rather than being deceived, it was a form of self-punishment—perhaps a gambler’s all-in failure.

Rebirth from the Ashes: From $50,000 to $3 Million

After the cotton debacle, Léonard filed for bankruptcy protection, retaining only $50,000 for living expenses. He secretly obtained credit from old rival Daniel Williamson, on the condition that all trades be executed by him—an effective form of oversight that forced him to develop disciplined trading habits. He was forced to use 1:5 leverage (previously accustomed to 1:20), with single positions limited to 10% of total capital.

These restrictions became his salvation.

When World War I broke out, U.S. military orders surged. Unpublished financial data from Bethlehem Steel leaked, causing volume to spike while prices stagnated—classic accumulation signs. Starting with $50,000, in July 1915 he tentatively bought 5% of his capital at $50. In August, he increased to 30% at over $60. In September, when prices retraced to $58, he refused to cut losses, as the upward trend remained intact.

By January next year, the stock soared to $700—14 times profit. He regained $3 million.

Money and Human Nature: Wall Street’s Final Betrayal

Over the next thirty years, Léonard continued his story of money and women. He built a formal trading business, earning $15 million, with a large office employing 60 staff. In 1925, he made $10 million trading wheat and corn. During the 1929 crash, he profited $100 million through shorting.

But these riches were lost in divorce, taxes, and extravagance.

After a long divorce from his first wife, he married Dorothy, a beautiful dancer from the Zigfield troupe. Despite having two sons, he maintained an ambiguous relationship with European opera singer Anita Venice, even naming his luxury yacht after her. Dorothy indulged in alcohol, and in 1931, they divorced, with her receiving $10 million. He also sold his mansion—purchased for $3.5 million—for just $222,000.

In 1932, at age 55, Léonard met 38-year-old Harriet Mets Noble. She may have misjudged his wealth—he was actually $2 million in debt. After his last bankruptcy in 1934, they were forced to leave their Manhattan apartment and survive by selling jewelry.

The New Yorker once commented: “Léonard is as precise as a scalpel in the market, yet blind as a drunkard in love. He spent his life shorting the market but always longing to go long on love—and both led to his ruin.”

The End: Gunfire and a Last Note

In November 1940, Harriet shot herself in a hotel room with Léonard’s revolver, leaving a note: “I cannot bear poverty and his alcoholism.” A year later, on Thanksgiving Eve, in the cloakroom of the Shirley-Holland Hotel in Manhattan, a gunshot rang out.

63-year-old Léonard ended his life with the same Colt .32 revolver he bought after his 1907 shorting spree—a symbolic closing of the loop.

He left three lines on a note:

• “My life is a failure”
• “I am tired of fighting, I cannot endure anymore”
• “This is the only way out”

In his pocket, only $8.24 in cash and an expired horse racing betting ticket. Only 15 people attended his funeral, including two creditors. His tombstone was initially blank until 1999, when fans funded an inscription:

“His life proved that the sharpest trading blade will ultimately cut himself.”

Reflection from Future Generations: What Did Léonard Leave Behind?

Léonard experienced four rises and falls, and his trading rules are regarded as classics. Though his life ended tragically, his insights into markets and human nature remain relevant:

“Wall Street has never changed. Pockets change, stocks change, but Wall Street never changes because human nature never changes.”

“Making big money depends on patience, not frequent trading.”

“The market only has one side—not bullish or bearish, but the right side.”

“Speculation is the most fascinating game in the world, but fools cannot play, lazy people shouldn’t, and the psychologically fragile are not allowed.”

Léonard’s tragedy was not due to a lack of trading skill but to indulgence in human weaknesses. He could predict markets precisely but could not foresee his own desires. His story reminds every trader: controlling the market is much easier than controlling oneself. The first lesson of risk management is always managing your own psychology.