From $5 to a net worth of over a billion and then to suicide: Lifmo reveals why financial geniuses ultimately fall into despair

The Wall Street Legend of a 14-Year-Old Farm Boy

Born in 1877, Lafomo’s life took a dramatic turn in the spring of 1891. At 14 years old, this boy raised on a Massachusetts farm secretly with his mother’s $5 savings, fled his home, and boarded a train to Boston. Instead of seeking relatives, he was captivated by a string of flashing numbers outside the Pan-Weber Stock Brokerage building. With a relatively mature appearance, he successfully applied for a quote board clerk position.

This seemingly ordinary job marked the beginning of Lafomo’s discovery of the secrets of the financial world. During his daily record-keeping of stock prices, he noticed patterns invisible to others—repetitive digit combinations, fluctuations at specific times, and the relationship between volume and price. By 16, he had shifted from an employee to an independent trader, frequently profiting from betting houses (similar to modern CFD trading platforms). Starting with just $5, he earned $3.12 in profit and accumulated $10,000 (equivalent to about $300,000 today) within a few years.

His success in Boston caused panic among betting houses—this young man was winning too much, leading to a market-wide effort to block him.

Failure in New York and the Path to a Comeback

In 1899, at 23, Lafomo left Boston for New York, the financial hub. There he met Native American girl Nattie Jordan and quickly married her. However, the bigger stage did not bring greater success. Relying on outdated stock data automation tools for trading, he went bankrupt within a year. To raise funds, he even asked his wife to pawn her jewelry—an appeal she refused, and they divorced seven years later.

But Lafomo’s talent was ultimately validated. By 1906, at 28, he had rebuilt his capital to $100,000. That year, the San Francisco earthquake with a magnitude of 7.9 destroyed the city. The market generally expected Union Pacific Railroad, the most important Western U.S. railway company, to rise due to reconstruction needs.

But Lafomo saw a different picture.

The Art of Short Selling: From Fundamentals to Psychological Warfare

Through field research and intelligence networks, Lafomo discovered: the earthquake caused a sharp drop in freight volume, insurance companies might sell stocks to pay huge claims, and Union Pacific’s financial health was far worse than market expectations. He began waiting—waiting for the stock price to hit key resistance levels in his trading system.

Starting in April 1906, Lafomo built a short position in three phases. First shorting near $160, then adding to the position when the critical support at $150 broke, and finally closing all positions around $90. In three months, he made over $250,000—about $7.5 million today. The success stemmed from his deep understanding of market psychology: good news is often bad news.

But this was not Lafomo’s most famous battle.

The 1907 Financial Crisis: Making $100 Million in a Week

A year later, in fall 1907, Lafomo sensed systemic risk in Trust Companies in New York. These firms heavily leveraged junk bonds and relied on short-term borrowing. Interbank lending rates soared from 6% to 100%, signaling an impending liquidity crisis.

He secretly investigated the collateral lists of several trust companies, confirming their poor asset quality. Then, this lurking giant prepared a deadly strike.

Lafomo dispersed short positions across multiple brokerages in Union Pacific, U.S. Steel, and other major stocks. On October 14, he publicly questioned the solvency of Nickberk Trust, triggering a bank run. Three days later, the trust went bankrupt, spreading panic across markets.

On October 22, Lafomo used the then-current 24-hour settlement rule (T+0) to concentrate sell stocks before market close. He employed the “pyramid adding” method—continuing to add to his short after profits, triggering automated stop-loss orders, and accelerating the crash.

On October 24, the NYSE chairman personally begged him to stop shorting, or the market would collapse entirely. The Dow Jones plunged 8% in a single day. Just one hour before Morgan’s consortium announced a bailout, Lafomo precisely timed his exit, closing all positions. Total profit: $3 million (about $100 million today).

This battle cemented Lafomo’s reputation as the “King of Wall Street Shorts.”

The Genius Trap: Deception by Friends and Self-Indulgence

With wealth came enjoyment. Yachts, train cars, Upper West Side apartments, and a harem of lovers. But during this period, he also faced his greatest career setback.

His friend Teddy Price, an authority in the cotton industry, had firsthand information on the spot market. Price publicly bullish on cotton but secretly shorted with growers. Exploiting Lafomo’s desire to “prove cross-market ability,” he kept pushing the “supply shortage” narrative. Although Lafomo’s database showed the opposite, he chose to believe his friend, ultimately holding a 3 million pound cotton futures long position. The result: a $3 million loss—exactly the amount he earned from shorting in 1907.

This failure violated Lafomo’s three strict rules: never trust others’ advice, never average down losing positions, and never let fundamentals override price signals. It was not just deception; it was a self-punishment of a genius.

The Last Stand and Further Collapse

Lafomo filed for bankruptcy protection, reaching an agreement with creditors, retaining only $50,000 for living expenses. Through secret credit from former rivals, he was forced into low-leverage 1:5 trading and strict risk controls. Ironically, these restrictions helped him rebuild his discipline.

In 1915, with World War I erupting, Lafomo again sensed opportunity. Military orders surged, but the market had not yet reflected this in Bethlehem Steel’s stock. He began tentative buying at $50, adding when it broke $60 in August, refusing to stop loss, and by January, the price soared to $700. With a 14-fold profit, he turned $50,000 into $3 million again.

Over the next decade, Lafomo continued his stories of money and women. In 1925, he made $10 million trading wheat and corn; in 1929, profited $100 million (about $1.5 billion today) shorting during the Wall Street crash. But subsequent divorce, taxes, and reckless spending caused it all to vanish.

The Tragedy of Marriage and Final Despair

His second wife, Dorothy (a dancer from the Sigfeld Revue), bore two sons, but Lafomo had an ambiguous relationship with European opera singer Anita. He even named his yacht after her. Dorothy, neglected, fell into alcohol addiction.

After their divorce in 1931, Dorothy received a $10 million settlement. The family mansion, once bought for $3.5 million, was sold for only $222,000. The jewelry and engraved rings Lafomo gave Dorothy were also sold cheaply. These events dealt a heavy blow to his psyche.

In 1932, at 55, Lafomo met 38-year-old Harriet Metz Noble. The socialite misjudged his true debt of $2 million. After his final bankruptcy in 1934, they were forced to leave their Manhattan apartment and survive by selling jewelry.

In November 1940, Harriet committed suicide in a hotel room with Lafomo’s revolver. The note mentioned “unable to endure poverty and his alcoholism.” Lafomo wrote in his diary: “I have killed everyone close to me.”

A year later, on November 28, 1941—Thanksgiving Eve—at the Shirley-Holland Hotel in Manhattan, a gunshot was heard in the cloakroom. Depressed, Lafomo shot himself in the temple with the same gun. He left three notes:

“My life is a failure” “I’m tired of fighting and cannot endure anymore” “This is the only way out”

He had only $8.24 in cash and an expired horse race betting ticket. Only 15 people attended his funeral, including two creditors. It wasn’t until 1999 that fans raised funds to inscribe on his tombstone: “His life proved that the sharpest trading blade ultimately turns inward.”

The Lessons Lafomo Left for Traders

Lafomo’s life was a rollercoaster of rises and falls. His trading methods are revered as the “Trading Bible” by Buffett, Soros, and Lynch. His core trading wisdom includes:

Market Philosophy: Wall Street has no new tricks because human nature never changes. There is only one side of the market— the right side, not long or short. Buy rising stocks, sell falling stocks. Trade only when there is a clear trend.

Risk Management: Investors must beware of many things, especially themselves. Making big money depends on patience, not frequent trading. The market is never wrong; only human nature makes mistakes.

Psychological Warning: Speculation is the most fascinating game in the world, but fools shouldn’t play, lazy people shouldn’t play, and mentally fragile individuals are not allowed.

Lafomo’s life is a story of the battle between a financial genius and human weakness. He could wield his trading sword to defeat Wall Street but could not conquer his own greed, loneliness, and despair. From fleeing a farm with $5 at age 14 to shooting himself in a hotel room at 63, Lafomo’s legend is both an enlightenment and a wake-up call.