diff options
| author | nfenwick <nfenwick@pglaf.org> | 2025-01-27 18:50:55 -0800 |
|---|---|---|
| committer | nfenwick <nfenwick@pglaf.org> | 2025-01-27 18:50:55 -0800 |
| commit | e5a94782eb2b91eadd57a5cfe13bb5e56f0a0208 (patch) | |
| tree | 31094ff2d0d567a870196b6d6c3d9060f103e0c8 | |
| parent | 56641ca4bfb69704e0d50bb206cabc1b21c1c6f4 (diff) | |
| -rw-r--r-- | .gitattributes | 4 | ||||
| -rw-r--r-- | LICENSE.txt | 11 | ||||
| -rw-r--r-- | README.md | 2 | ||||
| -rw-r--r-- | old/60979-0.txt | 11117 | ||||
| -rw-r--r-- | old/60979-0.zip | bin | 225187 -> 0 bytes | |||
| -rw-r--r-- | old/60979-h.zip | bin | 363407 -> 0 bytes | |||
| -rw-r--r-- | old/60979-h/60979-h.htm | 12962 | ||||
| -rw-r--r-- | old/60979-h/images/cover.jpg | bin | 153453 -> 0 bytes | |||
| -rw-r--r-- | old/60979-h/images/logo.png | bin | 437 -> 0 bytes |
9 files changed, 17 insertions, 24079 deletions
diff --git a/.gitattributes b/.gitattributes new file mode 100644 index 0000000..d7b82bc --- /dev/null +++ b/.gitattributes @@ -0,0 +1,4 @@ +*.txt text eol=lf +*.htm text eol=lf +*.html text eol=lf +*.md text eol=lf diff --git a/LICENSE.txt b/LICENSE.txt new file mode 100644 index 0000000..6312041 --- /dev/null +++ b/LICENSE.txt @@ -0,0 +1,11 @@ +This eBook, including all associated images, markup, improvements, +metadata, and any other content or labor, has been confirmed to be +in the PUBLIC DOMAIN IN THE UNITED STATES. + +Procedures for determining public domain status are described in +the "Copyright How-To" at https://www.gutenberg.org. + +No investigation has been made concerning possible copyrights in +jurisdictions other than the United States. Anyone seeking to utilize +this eBook outside of the United States should confirm copyright +status under the laws that apply to them. diff --git a/README.md b/README.md new file mode 100644 index 0000000..4f3ad8a --- /dev/null +++ b/README.md @@ -0,0 +1,2 @@ +Project Gutenberg (https://www.gutenberg.org) public repository for +eBook #60979 (https://www.gutenberg.org/ebooks/60979) diff --git a/old/60979-0.txt b/old/60979-0.txt deleted file mode 100644 index 4e89336..0000000 --- a/old/60979-0.txt +++ /dev/null @@ -1,11117 +0,0 @@ -Project Gutenberg's Reminscences of a Stock Operator, by Edwin Lefevre - -This eBook is for the use of anyone anywhere in the United States and most -other parts of the world at no cost and with almost no restrictions -whatsoever. You may copy it, give it away or re-use it under the terms of -the Project Gutenberg License included with this eBook or online at -www.gutenberg.org. If you are not located in the United States, you'll have -to check the laws of the country where you are located before using this ebook. - -Title: Reminscences of a Stock Operator - -Author: Edwin Lefevre - -Release Date: December 20, 2019 [EBook #60979] - -Language: English - -Character set encoding: UTF-8 - -*** START OF THIS PROJECT GUTENBERG EBOOK REMINSCENCES OF A STOCK OPERATOR *** - - - - -Produced by Charlie Howard and the Online Distributed -Proofreading Team at http://www.pgdp.net - - - - - - - - - -Transcriber’s Note - - -Table of Contents created by Transcriber and placed in the Public -Domain. - - - - - REMINISCENCES - OF A - STOCK OPERATOR - - - - - REMINISCENCES - OF A - STOCK OPERATOR - - - By Edwin Lefevre - - _with a new Introduction by_ - Benton W. Davis - - - [Illustration] - - American Research Council · Larchmont, New York - - - - - Copyright © 1923 by George H. Doran Company - - All Rights Reserved - - Reprinted by arrangement with Doubleday & Company, Inc. - - Library of Congress Catalog Card Number: 64-23364 - Printed in the United States of America - - - - - To - Jesse Lauriston Livermore - - - - -CONTENTS - - - I 1 - II 14 - III 30 - IV 39 - V 55 - VI 67 - VII 80 - VIII 87 - IX 100 - X 117 - XI 131 - XII 144 - XIII 160 - XIV 173 - XV 190 - XVI 199 - XVII 215 - XVIII 230 - XIX 238 - XX 245 - XXI 257 - XXII 273 - XXIII 293 - XXIV 304 - - - - -_I_ - - -I went to work when I was just out of grammar school. I got a job -as quotation-board boy in a stock-brokerage office. I was quick at -figures. At school I did three years of arithmetic in one. I was -particularly good at mental arithmetic. As quotation-board boy I -posted the numbers on the big board in the customers’ room. One of the -customers usually sat by the ticker and called out the prices. They -couldn’t come too fast for me. I have always remembered figures. No -trouble at all. - -There were plenty of other employes in that office. Of course I made -friends with the other fellows, but the work I did, if the market was -active, kept me too busy from ten A.M. to three P.M. to let me do much -talking. I don’t care for it, anyhow, during business hours. - -But a busy market did not keep me from thinking about the work. Those -quotations did not represent prices of stocks to me, so many dollars -per share. They were numbers. Of course, they meant something. They -were always changing. It was all I had to be interested in--the -changes. Why did they change? I didn’t know. I didn’t care. I didn’t -think about that. I simply saw that they changed. That was all I had to -think about five hours every day and two on Saturdays: that they were -always changing. - -That is how I first came to be interested in the behaviour of prices. -I had a very good memory for figures. I could remember in detail how -the prices had acted on the previous day, just before they went up or -down. My fondness for mental arithmetic came in very handy. - -I noticed that in advances as well as declines, stock prices were apt -to show certain habits, so to speak. There was no end of parallel cases -and these made precedents to guide me. I was only fourteen, but after -I had taken hundreds of observations in my mind I found myself testing -their accuracy, comparing the behaviour of stocks to-day with other -days. It was not long before I was anticipating movements in prices. My -only guide, as I say, was their past performances. I carried the “dope -sheets” in my mind. I looked for stock prices to run on form. I had -“clocked” them. You know what I mean. - -You can spot, for instance, where the buying is only a trifle better -than the selling. A battle goes on in the stock market and the tape is -your telescope. You can depend upon it seven out of ten cases. - -Another lesson I learned early is that there is nothing new in Wall -Street. There can’t be because speculation is as old as the hills. -Whatever happens in the stock market to-day has happened before and -will happen again. I’ve never forgotten that. I suppose I really manage -to remember when and how it happened. The fact that I remember that way -is my way of capitalizing experience. - -I got so interested in my game and so anxious to anticipate advances -and declines in all the active stocks that I got a little book. I -put down my observations in it. It was not a record of imaginary -transactions such as so many people keep merely to make or lose -millions of dollars without getting the swelled head or going to the -poorhouse. It was rather a sort of record of my hits and misses, and -next to the determination of probable movements I was most interested -in verifying whether I had observed accurately; in other words, whether -I was right. - -Say that after studying every fluctuation of the day in an active stock -I would conclude that it was behaving as it always did before it broke -eight or ten points. Well, I would jot down the stock and the price -on Monday, and remembering past performances I would write down what -it ought to do on Tuesday and Wednesday. Later I would check up with -actual transcriptions from the tape. - -That is how I first came to take an interest in the message of the -tape. The fluctuations were from the first associated in my mind with -upward or downward movements. Of course there is always a reason for -fluctuations, but the tape does not concern itself with the why and -wherefore. It doesn’t go into explanations. I didn’t ask the tape why -when I was fourteen, and I don’t ask it to-day, at forty. The reason -for what a certain stock does to-day may not be known for two or three -days, or weeks, or months. But what the dickens does that matter? Your -business with the tape is now--not to-morrow. The reason can wait. But -you must act instantly or be left. Time and again I see this happen. -You’ll remember that Hollow Tube went down three points the other day -while the rest of the market rallied sharply. That was the fact. On the -following Monday you saw that the directors passed the dividend. That -was the reason. They knew what they were going to do, and even if they -didn’t sell the stock themselves they at least didn’t buy it. There was -no inside buying; no reason why it should not break. - -Well, I kept up my little memorandum book perhaps six months. Instead -of leaving for home the moment I was through with my work, I’d jot down -the figures I wanted and would study the changes, always looking for -the repetitions and parallelisms of behaviour--learning to read the -tape, although I was not aware of it at the time. - -One day one of the office boys--he was older than I--came to me where I -was eating my lunch and asked me on the quiet if I had any money. - -“Why do you want to know?” I said. - -“Well,” he said, “I’ve got a dandy tip on Burlington. I’m going to play -it if I can get somebody to go in with me.” - -“How do you mean, play it?” I asked. To me the only people who -played or could play tips were the customers--old jiggers with oodles -of dough. Why, it cost hundreds, even thousands of dollars, to get -into the game. It was like owning your private carriage and having a -coachman who wore a silk hat. - -“That’s what I mean; play it!” he said. “How much you got?” - -“How much you need?” - -“Well, I can trade in five shares by putting up $5.” - -“How are you going to play it?” - -“I’m going to buy all the Burlington the bucket shop will let me carry -with the money I give him for margin,” he said. “It’s going up sure. -It’s like picking up money. We’ll double ours in a jiffy.” - -“Hold on!” I said to him, and pulled out my little dope book. - -I wasn’t interested in doubling my money, but in his saying that -Burlington was going up. If it was, my note-book ought to show it. -I looked. Sure enough, Burlington, according to my figuring, was -acting as it usually did before it went up. I had never bought or sold -anything in my life, and I never gambled with the other boys. But all I -could see was that this was a grand chance to test the accuracy of my -work, of my hobby. It struck me at once that if my dope didn’t work in -practice there was nothing in the theory of it to interest anybody. So -I gave him all I had, and with our pooled resources he went to one of -the near-by bucket shops and bought some Burlington. Two days later we -cashed in. I made a profit of $3.12. - -After that first trade, I got to speculating on my own hook in the -bucket shops. I’d go during my lunch hour and buy or sell--it never -made any difference to me. I was playing a system and not a favorite -stock or backing opinions. All I knew was the arithmetic of it. As a -matter of fact, mine was the ideal way to operate in a bucket shop, -where all that a trader does is to bet on fluctuations as they are -printed by the ticker on the tape. - -It was not long before I was taking much more money out of the bucket -shops than I was pulling down from my job in the brokerage office. So I -gave up my position. My folks objected, but they couldn’t say much when -they saw what I was making. I was only a kid and office-boy wages were -not very high. I did mighty well on my own hook. - -I was fifteen when I had my first thousand and laid the cash in front -of my mother--all made in the bucket shops in a few months, besides -what I had taken home. My mother carried on something awful. She wanted -me to put it away in the savings bank out of reach of temptation. She -said it was more money than she ever heard any boy of fifteen had made, -starting with nothing. She didn’t quite believe it was real money. She -used to worry and fret about it. But I didn’t think of anything except -that I could keep on proving my figuring was right. That’s all the fun -there is--being right by using your head. If I was right when I tested -my convictions with ten shares I would be ten times more right if I -traded in a hundred shares. That is all that having more margin meant -to me--I was right more emphatically. More courage? No! No difference! -If all I have is ten dollars and I risk it, I am much braver than when -I risk a million, if I have another million salted away. - -Anyhow, at fifteen I was making a good living out of the stock market. -I began in the smaller bucket shops, where the man who traded in twenty -shares at a clip was suspected of being John W. Gates in disguise or -J. P. Morgan traveling incognito. Bucket shops in those days seldom -lay down on their customers. They didn’t have to. There were other -ways of parting customers from their money, even when they guessed -right. The business was tremendously profitable. When it was conducted -legitimately--I mean straight, as far as the bucket shop went--the -fluctuations took care of the shoestrings. It doesn’t take much of a -reaction to wipe out a margin of only three quarters of a point. Also, -no welsher could ever get back in the game. Wouldn’t have any trade. - -I didn’t have a following. I kept my business to myself. It was a -one-man business, anyhow. It was my head, wasn’t it? Prices either -were going the way I doped them out, without any help from friends -or partners, or they were going the other way, and nobody could stop -them out of kindness to me. I couldn’t see where I needed to tell my -business to anybody else. I’ve got friends, of course, but my business -has always been the same--a one-man affair. That is why I have always -played a lone hand. - -As it was, it didn’t take long for the bucket shops to get sore on me -for beating them. I’d walk in and plank down my margin, but they’d -look at it without making a move to grab it. They’d tell me there -was nothing doing. That was the time they got to calling me the Boy -Plunger. I had to be changing brokers all the time, going from one -bucket shop to another. It got so that I had to give a fictitious name. -I’d begin light, only fifteen or twenty shares. At times, when they got -suspicious, I’d lose on purpose at first and then sting them proper. -Of course after a while they’d find me too expensive and they’d tell -me to take myself and my business elsewhere and not interfere with the -owners’ dividends. - -Once, when the big concern I’d been trading with for months shut down -on me I made up my mind to take a little more of their money away -from them. That bucket shop had branches all over the city, in hotel -lobbies, and in near-by towns. I went to one of the hotel branches -and asked the manager a few questions and finally got to trading. But -as soon as I played an active stock my especial way he began to get -messages from the head office asking who it was that was operating. The -manager told me what they asked him and I told him my name was Edward -Robinson, of Cambridge. He telephoned the glad news to the big chief. -But the other end wanted to know what I looked like. When the manager -told me that I said to him, “Tell him I am a short fat man with dark -hair and a bushy beard!” But he described me instead, and then he -listened and his face got red and he hung up and told me to beat it. - -“What did they say to you?” I asked him politely. - -“They said, ‘You blankety-blank fool, didn’t we tell you to take no -business from Larry Livingston? And you deliberately let him trim us -out of $700!’” He didn’t say what else they told him. - -I tried the other branches one after another, but they all got to know -me, and my money wasn’t any good in any of their offices. I couldn’t -even go in to look at the quotations without some of the clerks making -cracks at me. I tried to get them to let me trade at long intervals by -dividing my visits among them all. But that didn’t work. - -Finally there was only one left to me and that was the biggest and -richest of all--the Cosmopolitan Stock Brokerage Company. - -The Cosmopolitan was rated as A-1 and did an enormous business. It -had branches in every manufacturing town in New England. They took -my trading all right, and I bought and sold stocks and made and lost -money for months, but in the end it happened with them as usual. They -didn’t refuse my business point-blank, as the small concerns had. Oh, -not because it wasn’t sportsmanship, but because they knew it would -give them a black eye to publish the news that they wouldn’t take a -fellow’s business just because that fellow happened to make a little -money. But they did the next worse thing--that is, they made me put -up a three-point margin and compelled me to pay a premium at first -of a half point, then a point, and finally, a point and a half. Some -handicap, that! How? Easy! Suppose Steel was selling at 90 and you -bought it. Your ticket read, normally: “_Bot ten Steel at 90⅛._” If you -put up a point margin it meant that if it broke 89¼ you were wiped out -automatically. In a bucket shop the customer is not importuned for more -margin or put to the painful necessity of telling his broker to sell -for anything he can get. - -But when the Cosmopolitan tacked on that premium they were hitting -below the belt. It meant that if the price was 90 when I bought, -instead of making my ticket: “_Bot Steel at 90⅛_,” it read: “_Bot -Steel at 91⅛_.” Why, that stock could advance a point and a quarter -after I bought it and I’d still be losing money if I closed the trade. -And by also insisting that I put up a three-point margin at the very -start they reduced my trading capacity by two-thirds. Still, that was -the only bucket shop that would take my business at all, and I had to -accept their terms or quit trading. - -Of course I had my ups and downs, but was a winner on balance. However, -the Cosmopolitan people were not satisfied with the awful handicap they -had tacked on me, which should have been enough to beat anybody. They -tried to double-cross me. They didn’t get me. I escaped because of one -of my hunches. - -The Cosmopolitan, as I said, was my last resort. It was the richest -bucket shop in New England, and as a rule they put no limit on a trade. -I think I was the heaviest individual trader they had--that is, of the -steady, every-day customers. They had a fine office and the largest and -completest quotation board I have ever seen anywhere. It ran along the -whole length of the big room and every imaginable thing was quoted. -I mean stocks dealt in on the New York and Boston Stock Exchanges, -cotton, wheat, provisions, metals--everything that was bought and sold -in New York, Chicago, Boston and Liverpool. - -You know how they traded in bucket shops. You gave your money to a -clerk and told him what you wished to buy or sell. He looked at the -tape or the quotation board and took the price from there--the last -one, of course. He also put down the time on the ticket so that it -almost read like a regular broker’s report--that is, that they had -bought or sold for you so many shares of such a stock at such a price -at such a time on such a day and how much money they received from -you. When you wished to close your trade you went to the clerk--the -same or another, it depended on the shop--and you told him. He took the -last price or if the stock had not been active he waited for the next -quotation that came out on the tape. He wrote that price and the time -on your ticket, O.K.’d it and gave it back to you, and then you went to -the cashier and got whatever cash it called for. Of course, when the -market went against you and the price went beyond the limit set by your -margin, your trade automatically closed itself and your ticket became -one more scrap of paper. - -In the humbler bucket shops, where people were allowed to trade in as -little as five shares, the tickets were little slips--different colors -for buying and selling--and at times, as for instance in boiling bull -markets, the shops would be hard hit because all the customers were -bulls and happened to be right. Then the bucket shop would deduct both -buying and selling commissions and if you bought a stock at 20 the -ticket would read 20¼. You thus had only ¾, of a point’s run for your -money. - -But the Cosmopolitan was the finest in New England. It had thousands -of patrons and I really think I was the only man they were afraid of. -Neither the killing premium nor the three-point margin they made me put -up reduced my trading much. I kept on buying and selling as much as -they’d let me. I sometimes had a line of 5000 shares. - -Well, on the day the thing happened that I am going to tell you, I was -short thirty-five hundred shares of Sugar. I had seven big pink tickets -for five hundred shares each. The Cosmopolitan used big slips with a -blank space on them where they could write down additional margin. Of -course, the bucket shops never ask for more margin. The thinner the -shoestring the better for them, for their profit lies in your being -wiped. In the smaller shops if you wanted to margin your trade still -further they’d make out a new ticket, so they could charge you the -buying commission and only give you a run of ¾ of a point on each -point’s decline, for they figured the selling commission also exactly -as if it were a new trade. - -Well, this day I remember I had up over $10,000 in margins. - -I was only twenty when I first accumulated ten thousand dollars in -cash. And you ought to have heard my mother. You’d have thought that -ten thousand dollars in cash was more than anybody carried around -except old John D., and she used to tell me to be satisfied and go into -some regular business. I had a hard time convincing her that I was not -gambling, but making money by figuring. But all she could see was that -ten thousand dollars was a lot of money and all I could see was more -margin. - -I had put out my 3500 shares of Sugar at 105¼. There was another fellow -in the room, Henry Williams, who was short 2500 shares. I used to sit -by the ticker and call out the quotations for the board boy. The price -behaved as I thought it would. It promptly went down a couple of points -and paused a little to get its breath before taking another dip. The -general market was pretty soft and everything looked promising. Then -all of a sudden I didn’t like the way Sugar was doing its hesitating. -I began to feel uncomfortable. I thought I ought to get out of the -market. Then it sold at 103--that was low for the day--but instead of -feeling more confident I felt more uncertain. I knew something was -wrong somewhere, but I couldn’t spot it exactly. But if something was -coming and I didn’t know where from, I couldn’t be on my guard against -it. That being the case I’d better be out of the market. - -You know, I don’t do things blindly. I don’t like to. I never did. -Even as a kid I had to know why I should do certain things. But this -time I had no definite reason to give to myself, and yet I was so -uncomfortable that I couldn’t stand it. I called to a fellow I knew, -Dave Wyman, and said to him: “Dave, you take my place here. I want you -to do something for me. Wait a little before you call out the next -price of Sugar, will you?” - -He said he would, and I got up and gave him my place by the ticker so -he could call out the prices for the boy. I took my seven Sugar tickets -out of my pocket and walked over to the counter, to where the clerk was -who marked the tickets when you closed your trades. But I didn’t really -know why I should get out of the market, so I just stood there, leaning -against the counter, my tickets in my hand so that the clerk couldn’t -see them. Pretty soon I heard the clicking of a telegraph instrument -and I saw Tom Burnham, the clerk, turn his head quickly and listen. -Then I felt that something crooked was hatching, and I decided not to -wait any longer. Just then Dave Wyman by the ticker, began: “Su--” -and quick as a flash I slapped my tickets on the counter in front of -the clerk and yelled, “Close Sugar!” before Dave had finished calling -the price. So, of course, the house had to close my Sugar at the last -quotation. What Dave called turned out to be 103 again. - -According to my dope Sugar should have broken 103 by now. The engine -wasn’t hitting right. I had the feeling that there was a trap in the -neighbourhood. At all events, the telegraph instrument was now going -like mad and I noticed that Tom Burnham, the clerk, had left my tickets -unmarked where I laid them, and was listening to the clicking as if he -were waiting for something. So I yelled at him: “Hey, Tom, what in hell -are you waiting for? Mark the price on these tickets--103! Get a gait -on!” - -Everybody in the room heard me and began to look toward us and ask what -was the trouble, for, you see, while the Cosmopolitan had never laid -down, there was no telling, and a run on a bucket shop can start like a -run on a bank. If one customer gets suspicious the others follow suit. -So Tom looked sulky, but came over and marked my tickets “Closed at -103” and shoved the seven of them over toward me. He sure had a sour -face. - -Say, the distance from Tom’s place to the cashier’s cage wasn’t over -eight feet. But I hadn’t got to the cashier to get my money when Dave -Wyman by the ticker yelled excitedly: “Gosh! Sugar, 108!” But it was -too late; so I just laughed and called over to Tom, “It didn’t work -that time, did it, old boy?” - -Of course, it was a put-up job. Henry Williams and I together were -short six thousand shares of Sugar. That bucket shop had my margin and -Henry’s, and there may have been a lot of other Sugar shorts in the -office; possibly eight or ten thousand shares in all. Suppose they had -$20,000 in Sugar margins. That was enough to pay the shop to thimblerig -the market on the New York Stock Exchange and wipe us out. In the old -days whenever a bucket shop found itself loaded with too many bulls on -a certain stock it was a common practice to get some broker to wash -down the price of that particular stock far enough to wipe out all -the customers that were long of it. This seldom cost the bucket shop -more than a couple of points on a few hundred shares, and they made -thousands of dollars. - -That was what the Cosmopolitan did to get me and Henry Williams and the -other Sugar shorts. Their brokers in New York ran up the price to 108. -Of course it fell right back, but Henry and a lot of others were wiped -out. Whenever there was an unexplained sharp drop which was followed -by instant recovery, the newspapers in those days used to call it a -bucket-shop drive. - -And the funniest thing was that not later than ten days after the -Cosmopolitan people tried to double-cross me a New York operator did -them out of over seventy thousand dollars. This man, who was quite a -market factor in his day and a member of the New York Stock Exchange, -made a great name for himself as a bear during the Bryan panic of -’96. He was forever running up against Stock Exchange rules that -kept him from carrying out some of his plans at the expense of his -fellow members. One day he figured that there would be no complaints -from either the Exchange or the police authorities if he took from -the bucket shops of the land some of their ill-gotten gains. In the -instance I speak of he sent thirty-five men to act as customers. They -went to the main office and to the bigger branches. On a certain day -at a fixed hour the agents all bought as much of a certain stock as -the managers would let them. They had instructions to sneak out at a -certain profit. Of course what he did was to distribute bull tips on -that stock among his cronies and then he went in to the floor of the -Stock Exchange and bid up the price, helped by the room traders, who -thought he was a good sport. Being careful to pick out the right stock -for that work, there was no trouble in putting up the price three or -four points. His agents at the bucket shops cashed in as prearranged. - -A fellow told me the originator cleaned up seventy thousand dollars -net, and his agents made their expenses and their pay besides. He -played that game several times all over the country, punishing the -bigger bucket shops of New York, Boston, Philadelphia, Chicago, -Cincinnati and St. Louis. One of his favorite stocks was Western Union, -because it was so easy to move a semiactive stock like that a few -points up or down. His agents bought it at a certain figure, sold at -two points profit, went short and took three points more. By the way, I -read the other day that that man died, poor and obscure. If he had died -in 1896 he would have got at least a column on the first page of every -New York paper. As it was he got two lines on the fifth. - - - - -_II_ - - -Between the discovery that the Cosmopolitan Stock Brokerage Company was -ready to beat me by foul means if the killing handicap of a three-point -margin and a point-and-a-half premium didn’t do it, and hints that they -didn’t want my business anyhow, I soon made up my mind to go to New -York, where I could trade in the office of some member of the New York -Stock Exchange. I didn’t want any Boston branch, where the quotations -had to be telegraphed. I wanted to be close to the original source. -I came to New York at the age of 21, bringing with me all I had, -twenty-five hundred dollars. - -I told you I had ten thousand dollars when I was twenty, and my margin -on that Sugar deal was over ten thousand. But I didn’t always win. My -plan of trading was sound enough and won oftener than it lost. If I -had stuck to it I’d have been right perhaps as often as seven out of -ten times. _In fact, I always made money when I was sure I was right -before I began. What beat me was not having brains enough to stick to -my own game--that is, to play the market only when I was satisfied -that precedents favored my play._ There is a time for all things, but -I didn’t know it. And that is precisely what beats so many men in Wall -Street who are very far from being in the main sucker class. There is -the plain fool, who does the wrong thing at all times everywhere, but -there is the Wall Street fool, who thinks he must trade all the time. -No man can always have adequate reasons for buying or selling stocks -daily--or sufficient knowledge to make his play an intelligent play. - -I proved it. Whenever I read the tape by the light of experience I -made money, but when I made a plain fool play I had to lose. I was no -exception, was I? There was the huge quotation board staring me in -the face, and the ticker going on, and people trading and watching -their tickets turn into cash or into waste paper. Of course I let the -craving for excitement get the better of my judgment. In a bucket -shop where your margin is a shoestring you don’t play for long pulls. -You are wiped too easily and quickly. The desire for constant action -irrespective of underlying conditions is responsible for many losses -in Wall Street even among the professionals, who feel that they must -take home some money every day, as though they were working for regular -wages. I was only a kid, remember. [I did not know then what I learned -later, what made me fifteen years later, wait two long weeks and see -a stock on which I was very bullish go up thirty points before I felt -that it was safe to buy it. I was broke and was trying to get back, -and I couldn’t afford to play recklessly. I had to be right, and so I -waited.] That was in 1915. It’s a long story. I’ll tell it later in its -proper place. Now let’s go on from where after years of practice at -beating them I let the bucket shops take away most of my winnings. - -And with my eyes wide open, to boot! And it wasn’t the only period of -my life when I did it, either. A stock operator has to fight a lot -of expensive enemies within himself. Anyhow, I came to New York with -twenty-five hundred dollars. There were no bucket shops here that a -fellow could trust. The Stock Exchange and the police between them -had succeeded in closing them up pretty tight. Besides, I wanted to -find a place where the only limit to my trading would be the size of -my stake. I didn’t have much of one, but I didn’t expect it to stay -little forever. The main thing at the start was to find a place where -I wouldn’t have to worry about getting a square deal. So I went to -a New York Stock Exchange house that had a branch at home where I -knew some of the clerks. They have long since gone out of business. I -wasn’t there long, didn’t like one of the partners, and then I went -to A. R. Fullerton & Co. Somebody must have told them about my early -experiences, because it was not long before they all got to calling me -the Boy Trader. I’ve always looked young. It was a handicap in some -ways but it compelled me to fight for my own because so many tried to -take advantage of my youth. The chaps at the bucket shops seeing what a -kid I was, always thought I was a fool for luck and that was the only -reason why I beat them so often. - -Well, it wasn’t six months before I was broke. I was a pretty active -trader and had a sort of reputation as a winner. I guess my commissions -amounted to something. I ran up my account quite a little, but, of -course, in the end I lost. I played carefully; but I had to lose. I’ll -tell you the reason: it was my remarkable success in the bucket shops! - -I could beat the game my way only in a bucket shop, where I was betting -on fluctuations. My tape reading had to do with that exclusively. When -I bought the price was there on the quotation board, right in front -of me. Even before I bought I knew exactly the price I’d have to pay -for my stock. And I always could sell on the instant. I could scalp -successfully, because I could move like lightning. [I could follow up -my luck or cut my loss in a second.] Sometimes, for instance, I was -certain a stock would move at least a point. Well, I didn’t have to -hog it, I could put up a point margin and double my money in a jiffy; -or I’d take half a point. On one or two hundred shares a day, that -wouldn’t be bad at the end of the month, what? - -The practical trouble with that arrangement, of course, was that even -if the bucket shop had the resources to stand a big steady loss, they -wouldn’t do it. They wouldn’t have a customer around the place who had -the bad taste to win all the time. - -At all events, what was a perfect system for trading in bucket shops -didn’t work in Fullerton’s office. There I was actually buying and -selling stocks. The price of Sugar on the tape might be 105 and I could -see a three-point drop coming. As a matter of fact, at the very moment -the ticker was printing 105 on the tape the real price on the floor -of the Exchange might be 104 or 103. By the time my order to sell a -thousand shares got to Fullerton’s floor man to execute, the price -might be still lower. I couldn’t tell at what price I had put out my -thousand shares until I got a report from the clerk. When I surely -would have made three thousand on the same transaction in a bucket shop -I might not make a cent in a Stock Exchange house. Of course, I have -taken an extreme case, but the fact remains that in A. R. Fullerton’s -office the tape always talked ancient history to me, as far as my -system of trading went, and I didn’t realise it. - -And then, too, if my order was fairly big my own sale would tend -further to depress the price. In the bucket shop I didn’t have to -figure on the effect of my own trading. I lost in New York because the -game was altogether different. It was not that I now was playing it -legitimately that made me lose, but that I was playing it ignorantly. -I have been told that I am a good reader of the tape. But reading -the tape like an expert did not save me. I might have made out a -great deal better if I had been on the floor myself, a room trader. -In a particular crowd perhaps I might have adapted my system to the -conditions immediately before me. But, of course, if I had got to -operating on such a scale as I do now, for instance, the system would -have equally failed me, on account of the effect of my own trading on -prices. - -In short, I did not know the game of stock speculation. I knew a part -of it, a rather important part, which has been very valuable to me at -all times. But if with all I had I still lost, what chance does the -green outsider have of winning, or, rather, of cashing in? - -It didn’t take me long to realise that there was something wrong with -my play, but I couldn’t spot the exact trouble. There were times when -my system worked beautifully, and then, all of a sudden, nothing but -one swat after another. I was only twenty-two, remember; not that I -was so stuck on myself that I didn’t want to know just where I was at -fault, but that at that age nobody knows much of anything. - -The people in the office were very nice to me. I couldn’t plunge as I -wanted to because of their margin requirements, but old A. R. Fullerton -and the rest of the firm were so kind to me that after six months of -active trading I not only lost all I had brought and all that I had -made there but I even owed the firm a few hundreds. - -There I was, a mere kid, who had never before been away from home, -flat broke; but I knew there wasn’t anything wrong with me; only with -my play. I don’t know whether I make myself plain, but I never lose my -temper over the stock market. I never argue with the tape. Getting sore -at the market doesn’t get you anywhere. - -I was so anxious to resume trading that I didn’t lose a minute, but -went to old man Fullerton and said to him, “Say, A. R., lend me five -hundred dollars.” - -“What for?” says he. - -“I’ve got to have some money.” - -“What for?” he says again. - -“For margin, of course,” I said. - -“Five hundred dollars?” he said, and frowned. “You know they’d expect -you to keep up a 10 per cent margin, and that means one thousand -dollars on one hundred shares. Much better to give you a credit----” - -“No,” I said, “I don’t want a credit here. I already owe the firm -something. What I want is for you to lend me five hundred dollars so I -can go out and get a roll and come back.” - -“How are you going to do it?” asked old A. R. - -“I’ll go and trade in a bucket shop,” I told him. - -“Trade here,” he said. - -“No,” I said. “I’m not sure yet I can beat the game in this office, but -I am sure I can take money out of the bucket shops. I know that game. I -have a notion that I know just where I went wrong here.” - -He let me have it, and I went out of that office where the Boy Terror -of the Bucket Shops, as they called him, had lost his pile. I couldn’t -go back home because the shops there would not take my business. New -York was out of the question; there weren’t any doing business at that -time. They tell me that in the 90’s Broad Street and New Street were -full of them. But there weren’t any when I needed them in my business. -So after some thinking I decided to go to St. Louis. I had heard of two -concerns there that did an enormous business all through the Middle -West. Their profits must have been huge. They had branch offices in -dozens of towns. In fact I had been told that there were no concerns in -the East to compare with them for volume of business. They ran openly -and the best people traded there without any qualms. A fellow even told -me that the owner of one of the concerns was a vice-president of the -Chamber of Commerce but that couldn’t have been in St. Louis. At any -rate, that is where I went with my five hundred dollars to bring back a -stake to use as margin in the office of A. R. Fullerton & Co., members -of the New York Stock Exchange. - -When I got to St. Louis I went to the hotel, washed up and went out to -find the bucket shops. One was the J. G. Dolan Company, and the other -was H. S. Teller & Co. I knew I could beat them. I was going to play -dead safe--carefully and conservatively. My one fear was that somebody -might recognize me and give me away, because the bucket shops all over -the country had heard of the Boy Trader. They are like gambling houses -and get all the gossip of the profesh. - -Dolan was nearer than Teller, and I went there first. I was hoping I -might be allowed to do business a few days before they told me to take -my trade somewhere else. I walked in. It was a whopping big place and -there must have been at least a couple of hundred people there staring -at the quotations. I was glad, because in such a crowd I stood a better -chance of being unnoticed. I stood and watched the board and looked -them over carefully until I picked out the stock for my initial play. - -I looked around and saw the order-clerk at the window where you put -down your money and get your ticket. He was looking at me so I walked -up to him and asked, “Is this where you trade in cotton and wheat?” - -“Yes, sonny,” says he. - -“Can I buy stocks too?” - -“You can if you have the cash,” he said. - -“Oh, I got that all right, all right,” I said like a boasting boy. - -“You have, have you?” he says with a smile. - -“How much stock can I buy for one hundred dollars?” I asked, -peeved-like. - -“One hundred; if you got the hundred.” - -“I got the hundred. Yes; and two hundred too!” I told him. - -“Oh, my!” he said. - -“Just you buy me two hundred shares,” I said sharply. - -“Two hundred what?” he asked, serious now. It was business. - -I looked at the board again as if to guess wisely and told him, “Two -hundred Omaha.” - -“All right!” he said. He took my money, counted it and wrote out the -ticket. - -“What’s your name?” he asked me, and I answered, “Horace Kent.” - -He gave me the ticket and I went away and sat down among the customers -to wait for the roll to grow. I got quick action and I traded several -times that day. On the next day too. In two days I made twenty-eight -hundred dollars, and I was hoping they’d let me finish the week out. -At the rate I was going, that wouldn’t be so bad. Then I’d tackle the -other shop, and if I had similar luck there I’d go back to New York -with a wad I could do something with. - -On the morning of the third day, when I went to the window, -bashful-like, to buy five hundred B.R.T. the clerk said to me, “Say, -Mr. Kent, the boss wants to see you.” - -I knew the game was up. But I asked him, “What does he want to see me -about?” - -“I don’t know.” - -“Where is he?” - -“In his private office. Go in that way.” And he pointed to a door. - -I went in. Dolan was sitting at his desk. He swung around and said, -“Sit down, Livingston.” - -He pointed to a chair. My last hope vanished. I don’t know how he -discovered who I was; perhaps from the hotel register. - -“What do you want to see me about?” I asked him. - -“Listen, kid. I ain’t got nothin’ agin yeh, see? Nothin’ at all. See?” - -“No, I don’t see,” I said. - -He got up from his swivel chair. He was a whopping big guy. He said to -me, “Just come over here, Livingston, will yeh?” and he walked to the -door. He opened it and then he pointed to the customers in the big room. - -“D’yeh see them?” he asked me. - -“See what?” - -“Them guys. Take a look at ’em, kid. There’s three hundred of ’em! -Three hundred suckers! They feed me and my family. See? Three hundred -suckers! Then yeh come in, and in two days yeh cop more than I get out -of the three hundred in two weeks. That ain’t business, kid--not for -me! I ain’t got nothin’ agin yeh. Yer welcome to what ye’ve got. But -yeh don’t any more. There ain’t any here for yeh!” - -“Why, I----” - -“That’s all. I seen yeh come in day before yesterday, and I didn’t -like yer looks. On the level, I didn’t. I spotted yeh for a ringer. I -called in that jackass there”--he pointed to the guilty clerk--“and -asked what you’d done; and when he told me I said to him: ‘I don’t -like that guy’s looks. He’s a ringer!’ And that piece of cheese says: -‘Ringer my eye, boss! His name is Horace Kent, and he’s a rah-rah boy -playing at being used to long pants. He’s all right!’ Well, I let him -have his way. That blankety-blank cost me twenty-eight hundred dollars. -I don’t grudge it yeh, my boy. But the safe is locked for yeh.” - -“Look here--” I began. - -“You look here, Livingston,” he said. “I’ve heard all about yeh. I make -my money coppering suckers’ bets, and yeh don’t belong here. I aim to -be a sport and yer welcome to what yeh pried off’n us. But more of that -would make me a sucker, now that I know who yeh are. So toddle along, -sonny!” - -I left Dolan’s place with my twenty-eight hundred dollars’ profit. -Teller’s place was in the same block. I had found out that Teller was -a very rich man who also ran up a lot of pool rooms. I decided to -go to his bucket shop. I wondered whether it would be wise to start -moderately and work up to a thousand shares or to begin with a plunge, -on the theory that I might not be able to trade more than one day. They -get wise mighty quick when they’re losing and I did want to buy one -thousand B.R.T. I was sure I could take four or five points out of it. -But if they got suspicious or if too many customers were long of that -stock they might not let me trade at all. I thought perhaps I’d better -scatter my trades at first and begin small. - -It wasn’t as big a place as Dolan’s, but the fixtures were nicer and -evidently the crowd was of a better class. This suited me down to the -ground and I decided to buy my one thousand B.R.T. So I stepped up to -the proper window and said to the clerk, “I’d like to buy some B.R.T. -What’s the limit?” - -“There’s no limit,” said the clerk. “You can buy all you please--if -you’ve got the money.” - -“Buy fifteen hundred shares,” I says, and took my roll from my pocket -while the clerk starts to write the ticket. - -Then I saw a red-headed man just shove that clerk away from the -counter. He leaned across and said to me, “Say, Livingston, you go back -to Dolan’s. We don’t want your business.” - -“Wait until I get my ticket,” I said. “I just bought a little B.R.T.” - -“You get no ticket here,” he said. By this time other clerks had got -behind him and were looking at me. “Don’t ever come here to trade. We -don’t take your business. Understand?” - -There was no sense in getting mad or trying to argue, so I went back -to the hotel, paid my bill and took the first train back to New York. -It was tough. I wanted to take back some real money and that Teller -wouldn’t let me make even one trade. - -I got back to New York, paid Fullerton his five hundred, and started -trading again with the St. Louis money. I had good and bad spells, but -I was doing better than breaking even. After all, I didn’t have much to -unlearn; only to grasp the one fact that there was more to the game of -stock speculation than I had considered before I went to Fullerton’s -office to trade. I was like one of those puzzle fans, doing the -crossword puzzles in the Sunday supplement. He isn’t satisfied until he -gets it. Well, I certainly wanted to find the solution to my puzzle. I -thought I was done with trading in bucket shops. But I was mistaken. - -About a couple of months after I got back to New York an old jigger -came into Fullerton’s office. He knew A.R. Somebody said they’d once -owned a string of race horses together. It was plain he’d seen better -days. I was introduced to old McDevitt. He was telling the crowd about -a bunch of Western race-track crooks who had just pulled off some skin -game out in St. Louis. The head devil, he said, was a pool-room owner -by the name of Teller. - -“What Teller?” I asked him. - -“Hi Teller; H. S. Teller.” - -“I know that bird,” I said. - -“He’s no good,” said McDevitt. - -“He’s worse than that,” I said, “and I have a little matter to settle -with him.” - -“Meaning how?” - -“The only way I can hit any of the short sports is through their -pocketbook. I can’t touch him in St. Louis just now, but some day I -will.” And I told McDevitt my grievance. - -“Well,” says old Mac, “he tried to connect here in New York and -couldn’t make it, so he’s opened a place in Hoboken. The word’s gone -out that there is no limit to the play and that the house roll has got -the Rock of Gibraltar faded to the shadow of a bantam flea.” - -“What sort of a place?” I thought he meant pool room. - -“Bucket shop,” said McDevitt. - -“Are you sure it’s open?” - -“Yes; I’ve seen several fellows who’ve told me about it.” - -“That’s only hearsay,” I said. “Can you find out positively if it’s -running, and also how heavy they’ll really let a man trade?” - -“Sure, sonny,” said McDevitt. “I’ll go myself to-morrow morning, and -come back and tell you.” - -He did. It seems Teller was already doing a big business and would -take all he could get. This was on Friday. The market had been going -up all that week--this was twenty years ago, remember--and it was a -cinch the bank statement on Saturday would show a big decrease in the -surplus reserve. That would give the conventional excuse to the big -room traders to jump on the market and try to shake out some of the -weak commission-house accounts. There would be the usual reactions in -the last half hour of the trading, particularly in stocks in which the -public had been the most active. Those, of course, also would be the -very stocks that Teller’s customers would be most heavily long of, -and the shop might be glad to see some short selling in them. There -is nothing so nice as catching the suckers both ways; and nothing so -easy--with one-point margins. - -That Saturday morning I chased over to Hoboken to the Teller place. -They had fitted up a big customers’ room with a dandy quotation board -and a full force of clerks and a special policeman in gray. There were -about twenty-five customers. - -I got talking to the manager. He asked me what he could do for me and -I told him nothing; that a fellow could make much more money at the -track on account of the odds and the freedom to bet your whole roll and -stand to win thousands in minutes instead of piking for chicken feed in -stocks and having to wait days, perhaps. He began to tell me how much -safer the stock-market game was, and how much some of their customers -made--you’d have sworn it was a regular broker who actually bought and -sold your stocks on the Exchange--and how if a man only traded heavy he -could make enough to satisfy anybody. He must have thought I was headed -for some pool room and he wanted a whack at my roll before the ponies -nibbled it away, for he said I ought to hurry up as the market closed -at twelve o’clock on Saturdays. That would leave me free to devote the -entire afternoon to other pursuits. I might have a bigger roll to carry -to the track with me--if I picked the right stocks. - -I looked as if I didn’t believe him, and he kept on buzzing me. I was -watching the clock. At 11:15 I said, “All right,” and I began to give -him selling orders in various stocks. I put up two thousand dollars in -cash, and he was very glad to get it. He told me he thought I’d make a -lot of money and hoped I’d come in often. - -It happened just as I figured. _The traders hammered the stocks in -which they figured they would uncover the most stops, and, sure enough, -prices slid off. I closed out my trades just before the rally of the -last five minutes on the usual traders’ covering._ - -There was fifty-one hundred dollars coming to me. I went to cash in. - -“I’m glad I dropped in,” I said to the manager, and gave him my tickets. - -“Say,” he says to me, “I can’t give you all of it. I wasn’t looking for -such a run. I’ll have it here for you Monday morning, sure as blazes.” - -“All right. But first I’ll take all you have in the house,” I said. - -“You’ve got to let me pay off the little fellows,” he said. “I’ll give -you back what you put up, and anything that’s left. Wait till I cash -the other tickets.” So I waited while he paid off the winners. Oh, I -knew my money was safe. Teller wouldn’t welsh with the office doing -such a good business. And if he did, what else could I do better than -to take all he had then and there? I got my own two thousand dollars -and about eight hundred dollars besides, which was all he had in the -office. I told him I’d be there Monday morning. He swore the money -would be waiting for me. - -I got to Hoboken a little before twelve on Monday. I saw a fellow -talking to the manager that I had seen in the St. Louis office the day -Teller told me to go back to Dolan. I knew at once that the manager had -telegraphed to the home office and they’d sent up one of their men to -investigate the story. Crooks don’t trust anybody. - -“I came for the balance of my money,” I said to the manager. - -“Is this the man?” asked the St. Louis chap. - -“Yes,” said the manager, and took a bunch of yellow backs from his -pocket. - -“Hold on!” said the St. Louis fellow to him and then turns to me, “Say, -Livingston, didn’t we tell you we didn’t want your business?” - -“Give me my money first,” I said to the manager, and he forked over -two thousands, four five-hundreds and three hundreds. - -“What did you say?” I said to St. Louis. - -“We told you we didn’t want you to trade in our place.” - -“Yes,” I said; “that’s why I came.” - -“Well, don’t come any more. Keep away!” he snarled at me. The private -policeman in gray came over, casual-like. St. Louis shook his fist -at the manager and yelled: “You ought to’ve known better, you poor -boob, than to let this guy get into you. He’s Livingston. You had your -orders.” - -“Listen, you,” I said to the St. Louis man. “This isn’t St. Louis. You -can’t pull off any trick here, like your boss did with Belfast Boy.” - -“You keep away from this office! You can’t trade here!” he yells. - -“If I can’t trade here nobody else is going to,” I told him. “You can’t -get away with that sort of stuff here.” - -Well, St. Louis changed his tune at once. - -“Look here, old boy,” he said, all fussed up, “do us a favor. Be -reasonable! You know we can’t stand this every day. The old man’s going -to hit the ceiling when he hears who it was. Have a heart, Livingston!” - -“I’ll go easy,” I promised. - -“Listen to reason, won’t you? For the love of Pete, keep away! Give us -a chance to get a good start. We’re new here. Will you?” - -“I don’t want any of this high-and-mighty business the next time I -come,” I said, and left him talking to the manager at the rate of a -million a minute. I’d got some money out of them for the way they -treated me in St. Louis. There wasn’t any sense in my getting hot or -trying to close them up. I went back to Fullerton’s office and told -McDevitt what had happened. Then I told him that if it was agreeable -to him I’d like to have him go to Teller’s place and begin trading in -twenty or thirty share lots, to get them used to him. Then, the moment -I saw a good chance to clean up big, I’d telephone him and he could -plunge. - -I gave McDevitt a thousand dollars and he went to Hoboken and did as I -told him. He got to be one of the regulars. Then one day when I thought -I saw a break impending I slipped Mac the word and he sold all they’d -let him. I cleared twenty-eight hundred dollars that day, after giving -Mac his rake-off and paying expenses, and I suspect Mac put down a -little bet of his own besides. Less than a month after that, Teller -closed his Hoboken branch. The police got busy. And, anyhow, it didn’t -pay, though I only traded twice. We ran into a crazy bull market when -stocks didn’t react enough to wipe out even the one-point margins, and, -of course, all the customers were bulls and winning and pyramiding. No -end of bucket shops busted all over the country. - -Their game has changed. Trading in the old-fashioned bucket shop had -some decided advantages over speculating in a reputable broker’s -office. For one thing the automatic closing out of your trade when the -margin reached the exhaustion point was the best kind of stop-loss -order. You couldn’t get stung for more than you had put up and there -was no danger of rotten execution of orders, and so on. In New York -the shops never were as liberal with their patrons as I’ve heard they -were in the West. Here they used to limit the possible profit on -certain stocks of the football order to two points. Sugar and Tennessee -Coal and Iron were among these. No matter if they moved ten points in -ten minutes you could only make two on one ticket. They figured that -otherwise the customer was getting too big odds; he stood to lose one -dollar and to make ten. And then there were times when all the shops, -including the biggest, refused to take orders on certain stocks. In -1900, on the day before Election Day, when it was foregone conclusion -that McKinley would win, not a shop in the land let its customers buy -stocks. The election odds were 3 to 1 on McKinley. By buying stocks -on Monday you stood to make from three to six points or more. A man -could bet on Bryan and buy stocks and make sure money. The bucket shops -refused orders all that day. - -If it hadn’t been for their refusing to take my business I never would -have stopped trading with them. And then I never would have learned -that there was much more to the game of stock speculation than to play -for fluctuations of a few points. - - - - -_III_ - - -It takes a man a long time to learn all the lessons of all his -mistakes. They say there are two sides to everything. But there is -only one side to the stock market; and it is not the bull side or -the bear side, but the right side. It took me longer to get that -general principle fixed firmly in my mind than it did most of the more -technical phases of the game of stock speculation. - -I have heard of people who amuse themselves conducting imaginary -operations in the stock market to prove with imaginary dollars how -right they are. Sometimes these ghost gamblers make millions. It is -very easy to be a plunger that way. It is like the old story of the man -who was going to fight a duel the next day. - -His second asked him, “Are you a good shot?” - -“Well,” said the duelist, “I can snap the stem of a wineglass at twenty -paces,” and he looked modest. - -“That’s all very well,” said the unimpressed second. “But can you snap -the stem of the wineglass while the wineglass is pointing a loaded -pistol straight at your heart?” - -With me I must back my opinions with my money. My losses have taught me -that I must not begin to advance until I am sure I shall not have to -retreat. But if I cannot advance I do not move at all. I do not mean -by this that a man should not limit his losses when he is wrong. He -should. But that should not breed indecision. All my life I have made -mistakes, but in losing money I have gained experience and accumulated -a lot of valuable don’ts. I have been flat broke several times, but my -loss has never been a total loss. Otherwise, I wouldn’t be here now. I -always knew I would have another chance and that I would not make the -same mistake a second time. I believed in myself. - -A man must believe in himself and his judgment if he expects to make -a living at this game. That is why I don’t believe in tips. If I buy -stocks on Smith’s tip I must sell those same stocks on Smith’s tip. -I am depending on him. Suppose Smith is away on a holiday when the -selling time comes around? No, sir, nobody can make big money on what -someone else tells him to do. _I know from experience that nobody can -give me a tip or a series of tips that will make more money for me -than my own judgment. It took me five years to learn to play the game -intelligently enough to make big money when I was right._ - -I didn’t have as many interesting experiences as you might imagine. -I mean, the process of learning how to speculate does not seem very -dramatic at this distance. I went broke several times, and that is -never pleasant, but the way I lost money is the way everybody loses -money who loses money in Wall Street. Speculation is a hard and trying -business, and a speculator must be on the job all the time or he’ll -soon have no job to be on. - -My task, as I should have known after my early reverses at Fullerton’s, -was very simple: To look at speculation from another angle. But I -didn’t know that there was much more to the game than I could possibly -learn in the bucket shops. There I thought I was beating the game -when in reality I was only beating the shop. At the same time the -tape-reading ability that trading in bucket-shops developed in me and -the training of my memory have been extremely valuable. Both of these -things came easy to me. I owe my early success as a trader to them and -not to my brains or knowledge, because my mind was untrained and my -ignorance was colossal. The game taught me the game. And it didn’t -spare the rod while teaching. - -I remember my very first day in New York. I told you how the bucket -shops, by refusing to take my business, drove me to seek a reputable -commission house. One of the boys in the office where I got my first -job was working for Harding Brothers, members of the New York Stock -Exchange. I arrived in this city in the morning, and before one o’clock -that same day I had opened an account with the firm and was ready to -trade. - -I didn’t explain to you how natural it was for me to trade there -exactly as I had done in the bucket shops, where all I did was to bet -on fluctuations and catch small but sure changes in prices. Nobody -offered to point out the essential differences or set me right. If -somebody had told me my method would not work I nevertheless would have -tried it out to make sure for myself, for when I am wrong only one -thing convinces me of it, and that is, to lose money. And I am only -right when I make money. That is speculating. - -They were having some pretty lively times those days and the market was -very active. That always cheers up a fellow. I felt at home right away. -There was the old familiar quotation board in front of me, talking a -language that I had learned before I was fifteen years old. There was -a boy doing exactly the same thing I used to do in the first office -I ever worked in. There were the customers--same old bunch--looking -at the board or standing by the ticket calling out the prices and -talking about the market. The machinery was to all appearances the -same machinery that I was used to. The atmosphere was the atmosphere -I had breathed since I had made my first stock-market money--$3.12 -in Burlington. The same kind of ticker and the same kind of traders, -therefore the same kind of game. And remember, I was only twenty-two. I -suppose I thought I knew the game from A to Z. Why shouldn’t I? - -I watched the board and saw something that looked good to me. It was -behaving right. I bought a hundred at 84. I got out at 85 in less than -a half hour. Then I saw something else I liked, and I did the same -thing; took three-quarters of a point net within a very short time. I -began well, didn’t I? - -Now mark this: On that, my first day as a customer of a reputable Stock -Exchange house, and only two hours of it at that, I traded in eleven -hundred shares of stock, jumping in and out. And the net result of the -day’s operations was that I lost exactly eleven hundred dollars. That -is to say, on my first attempt, nearly one-half of my stake went up the -flue. And remember, some of the trades showed me a profit. But I quit -eleven hundred dollars minus for the day. - -It didn’t worry me, because I couldn’t see where there was anything -wrong with me. My moves, also, were right enough, and if I had been -trading in the old Cosmopolitan shop I’d have broken better than even. -That the machine wasn’t as it ought to be, my eleven hundred vanished -dollars plainly told me. But as long as the machinist was all right -there was no need to stew. Ignorance at twenty-two isn’t a structural -defect. - -After a few days I said to myself, “I can’t trade this way here. The -ticker doesn’t help as it should!” But I let it go at that without -getting down to bed rock. I kept it up, having good days and bad days, -until I was cleaned out. I went to old Fullerton and got him to stake -me to five hundred dollars. And I came back from St. Louis, as I told -you, with money I took out of the bucket shops there--a game I could -always beat. - -I played more carefully and did better for a while. As soon as I was in -easy circumstances I began to live pretty well. I made friends and had -a good time. I was not quite twenty-three, remember; all alone in New -York with easy money in my pockets and the belief in my heart that I -was beginning to understand the new machine. - -I was making allowances for the actual execution of my orders on the -floor of the Exchange, and moving more cautiously. But I was still -sticking to the tape--that is, I was still ignoring general principles; -and as long as I did that I could not spot the exact trouble with my -game. - -We ran into the big boom of 1901 and I made a great deal of -money--that is, for a boy. You remember those times? The prosperity -of the country was unprecedented. We not only ran into an era of -industrial consolidations and combinations of capital that beat -anything we had had up to that time, but the public went stock mad. -In previous flush times, I have heard, Wall Street used to brag of -two-hundred-and-fifty-thousand-share days, when securities of a par -value of twenty-five million dollars changed hands. But in 1901 we had -a three-million-share day. Everybody was making money. The steel crowd -came to town, a horde of millionaires with no more regard for money -than drunken sailors. The only game that satisfied them was the stock -market. We had some of the biggest high rollers the Street ever saw: -John W. Gates, of ‘Bet-you-a-million’ fame, and his friends, like John -A. Drake, Loyal Smith, and the rest; the Reid-Leeds-Moore crowd, who -sold part of their steel holdings and with the proceeds bought in the -open market the actual majority of the stock of the great Rock Island -system; and Schwab and Frick and Phipps and the Pittsburg coterie; to -say nothing of scores of men who were lost in the shuffle but would -have been called great plungers at any other time. A fellow could -buy and sell all the stock there was. Keene made a market for the -U.S. Steel shares. A broker sold one hundred thousand shares in a few -minutes. A wonderful time! And there were some wonderful winnings. And -no taxes to pay on stock sales! And no day of reckoning in sight. - -Of course, after a while, I heard a lot of calamity howling and the -old stagers said everybody--except themselves--had gone crazy. But -everybody except themselves was making money. I knew, of course, there -must be a limit to the advances and an end to the crazy buying of -A.O.T.--Any Old Thing--and I got bearish. But every time I sold I lost -money, and if it hadn’t been that I ran darn quick I’d have lost a -heap more. I looked for a break, but I was playing safe--making money -when I bought and chipping it out when I sold short--so that I wasn’t -profiting by the boom as much as you’d think when you consider how -heavily I used to trade, even as a boy. - -There was one stock that I wasn’t short of, and that was Northern -Pacific. My tape reading came in handy. I thought most stocks had been -bought to a standstill, but Little Nipper behaved as if it were going -still higher. We know now that both the common and the preferred were -being steadily absorbed by the Kuhn-Loeb-Harriman combination. Well, -I was long a thousand shares of Northern Pacific common, and held it -against the advice of everybody in the office. When it got to about 110 -I had thirty points profit, and I grabbed it. It made my balance at my -brokers’ nearly fifty thousand dollars, the greatest amount of money -I had been able to accumulate up to that time. It wasn’t so bad for -a chap who had lost every cent trading in that selfsame office a few -months before. - -If you remember, the Harriman crowd notified Morgan and Hill of their -intention to be represented in the Burlington-Great Northern-Northern -Pacific combination, and then the Morgan people at first instructed -Keene to buy fifty thousand shares of N.P. to keep the control in -their possession. I have heard that Keene told Robert Bacon to make -the order one hundred and fifty thousand shares and the bankers did. -At all events, Keene sent one of his brokers, Eddie Norton, into the -N.P. crowd and he bought one hundred thousand shares of the stock. -This was followed by another order, I think, of fifty thousand shares -additional, and the famous corner followed. After the market closed on -May 8, 1901, the whole world knew that a battle of financial giants was -on. No two such combinations of capital had ever opposed each other in -this country. Harriman against Morgan; an irresistible force meeting an -immovable object. - -There I was on the morning of May ninth with nearly fifty thousand -dollars in cash and no stocks. As I told you, I had been very bearish -for some days, and here was my chance at last. I knew what would -happen--an awful break and then some wonderful bargains. There would -be a quick recovery and big profits--for those who had picked up the -bargains. It didn’t take Sherlock Holmes to figure this out. We were -going to have an opportunity to catch them coming and going, not only -for big money but for sure money. - -Everything happened as I had foreseen. I was dead right and--I lost -every cent I had! I was wiped out by something that was unusual. If -the unusual never happened there would be no difference in people and -then there wouldn’t be any fun in life. The game would become merely -a matter of addition and subtraction. It would make of us a race of -bookkeepers with plodding minds. It’s the guessing that develops a -man’s brain power. Just consider what you have to do to guess right. - -The market fairly boiled, as I had expected. The transactions were -enormous and the fluctuations unprecedented in extent. I put in a lot -of selling orders at the market. When I saw the opening prices I had a -fit, the breaks were so awful. My brokers were on the job. They were -as competent and conscientious as any; but by the time they executed -my orders the stocks had broken twenty points more. The tape was way -behind the market and reports were slow in coming in by reason of the -awful rush of business. When I found out that the stocks I had ordered -sold when the tape said the price was, say, 100 and they got mine -off at 80, making a total decline of thirty or forty points from the -previous night’s close, it seemed to me that I was putting out shorts -at a level that made the stocks I sold the very bargains I had planned -to buy. The market was not going to drop right through to China. So I -decided instantly to cover my shorts and go long. - -My brokers bought; not at the level that had made me turn, but at the -prices prevailing in the Stock Exchange when their floor man got my -orders. They paid an average of fifteen points more than I had figured -on. A loss of thirty-five points in one day was more than anybody could -stand. - -The ticker beat me by lagging so far behind the market. I was -accustomed to regarding the tape as the best little friend I had -because I bet according to what it told me. But this time the tape -double-crossed me. The divergence between the printed and the actual -prices undid me. It was the sublimation of my previous unsuccess, the -selfsame thing that had beaten me before. It seems so obvious now that -tape reading is not enough, irrespective of the brokers’ execution, -that I wonder why I didn’t then see both my trouble and the remedy for -it. - -I did worse than not see it; I kept on trading, in and out, regardless -of the execution. You see, I never could trade with a limit. I must -take my chances with the market. That is what I am trying to beat--the -market, not the particular price. When I think I should sell, I sell. -When I think stocks will go up, I buy. My adherence to that general -principle of speculation saved me. To have traded at limited prices -simply would have been my old bucket-shop method inefficiently adapted -for use in a reputable commission broker’s office. I would never have -learned to know what stock speculation is, but would have kept on -betting on what a limited experience told me was a sure thing. - -Whenever I did try to limit the prices in order to minimize the -disadvantages of trading at the market when the ticker lagged, I simply -found that the market got away from me. This happened so often that I -stopped trying. I can’t tell you how it came to take me so many years -to learn that instead of placing piking bets on what the next few -quotations were going to be, my game was to anticipate what was going -to happen in a big way. - -After my May ninth mishap I plugged along, using a modified but still -defective method. If I hadn’t made money some of the time I might have -acquired market wisdom quicker. But I was making enough to enable me -to live well. I liked friends and a good time. I was living down the -Jersey Coast that summer, like hundreds of prosperous Wall Street men. -My winnings were not quite enough to offset both my losses and my -living expenses. - -I didn’t keep on trading the way I did through stubbornness. I simply -wasn’t able to state my own problem to myself, and, of course, it was -utterly hopeless to try to solve it. I harp on this topic so much to -show what I had to go through before I got to where I could really make -money. My old shotgun and BB shot could not do the work of a high-power -repeating rifle against big game. - -Early that fall I not only was cleaned out again but I was so sick -of the game I could no longer beat that I decided to leave New York -and try something else some other place. I had been trading since my -fourteenth year. I had made my first thousand dollars when I was a kid -of fifteen, and my first ten thousand before I was twenty-one. I had -made and lost a ten-thousand-dollar stake more than once. In New York -I had made thousands and lost them. I got up to fifty thousand dollars -and two days later that went. I had no other business and knew no other -game. After several years I was back where I began. No--worse, for I -had acquired habits and a style of living that required money; though -that part didn’t bother me as much as being wrong so consistently. - - - - -_IV_ - - -Well, I went home. But the moment I was back I knew that I had but one -mission in life and that was to get a stake and go back to Wall Street. -That was the only place in the country where I could trade heavily. -Some day, when my game was all right, I’d need such a place. When a man -is right he wants to get all that is coming to him for being right. - -I didn’t have much hope, but, of course, I tried to get into the bucket -shops again. There were fewer of them and some of them were run by -strangers. Those who remembered me wouldn’t give me a chance to show -them whether I had gone back as a trader or not. I told them the truth, -that I had lost in New York whatever I had made at home; that I didn’t -know as much as I used to think I did; and that there was no reason why -it should not now be good business for them to let me trade with them. -But they wouldn’t. And the new places were unreliable. Their owners -thought twenty shares was as much as a gentleman ought to buy if he had -any reason to suspect he was going to guess right. - -I needed the money and the bigger shops were taking in plenty of it -from their regular customers. I got a friend of mine to go into a -certain office and trade. I just sauntered in to look them over. I -again tried to coax the order clerk to accept a small order, even if -it was only fifty shares. Of course he said no. I had rigged up a code -with this friend so that he would buy or sell when and what I told him. -But that only made me chicken feed. Then the office began to grumble -about taking my friend’s orders. Finally one day he tried to sell a -hundred St. Paul and they shut down on him. - -We learned afterward that one of the customers saw us talking together -outside and went in and told the office, and when my friend went up to -the order clerk to sell that hundred St. Paul the guy said: - -“We’re not taking any selling orders in St. Paul, not from you.” - -“Why, what’s the matter, Joe?” asked my friend. - -“Nothing doing, that’s all,” answered Joe. - -“Isn’t that money any good? Look it over. It’s all there.” And my -friend passed over the hundred--my hundred--in tens. He tried to -look indignant and I was looking unconcerned; but most of the other -customers were getting close to the combatants, as they always did when -there was loud talking or the slightest semblance of a scrap between -the shop and any customer. They wanted to get a line on the merits of -the case in order to get a line on the solvency of the concern. - -The clerk, Joe, who was a sort of assistant manager, came out from -behind his cage, walked up to my friend, looked at him and then looked -at me. - -“It’s funny,” he said slowly--“it’s damned funny that you never do a -single thing here when your friend Livingston isn’t around. You just -sit and look at the board by the hour. Never a peep. But after he comes -in you get busy all of a sudden. Maybe you are acting for yourself; but -not in this office any more. We don’t fall for Livingston tipping you -off.” - -Well, that stopped my board money. But I had made a few hundred more -than I had spent and I wondered how I could use them, for the need of -making enough money to go back to New York with was more urgent than -ever. I felt that I would do better the next time. I had had time to -think calmly of some of my foolish plays; and then, one can see the -whole better when one sees it from a little distance. The immediate -problem was to make the new stake. - -One day I was in a hotel lobby, talking to some fellows I knew, who -were pretty steady traders. Everybody was talking stock market. I made -the remark that nobody could beat the game on account of the rotten -execution he got from his brokers, especially when he traded at the -market, as I did. - -A fellow piped up and asked me what particular brokers I meant. - -I said, “The best in the land,” and he asked who might they be. I could -see he wasn’t going to believe I ever dealt with first-class houses. - -But I said, “I mean, any member of the New York Stock Exchange. It -isn’t that they are crooked or careless, but when a man gives an order -to buy at the market he never knows what that stock is going to cost -him until he gets a report from the brokers. There are more moves of -one or two points than of ten and fifteen. But the outside trader can’t -catch the small rises or drops because of the execution. I’d rather -trade in a bucket shop any day in the week, if they’d only let a fellow -trade big.” - -The man who had spoken to me I had never seen before. His name was -Roberts. He seemed very friendly disposed. He took me aside and asked -me if I had ever traded in any of the other exchanges, and I said no. -He said he knew some houses that were members of the Cotton Exchange -and the Produce Exchange and the smaller stock exchanges. These firms -were very careful and paid special attention to the execution. He said -that they had confidential connections with the biggest and smartest -houses on the New York Stock Exchange and through their personal pull -and by guaranteeing a business of hundreds of thousands of shares a -month they got much better service than an individual customer could -get. - -“They really cater to the small customer,” he said. “They make a -specialty of out-of-town business and they take just as much pains -with a ten-share order as they do with one for ten thousand. They are -very competent and honest.” - -“Yes. But if they pay the Stock Exchange house the regular eighth -commission, where do they come in?” - -“Well, they are supposed to pay the eighth. But--you know!” He winked -at me. - -“Yes,” I said. “But the one thing a Stock Exchange firm will not do is -to split commissions. The governors would rather a member committed -murder, arson and bigamy than to do business for outsiders for less -than a kosher eighth. The very life of the Stock Exchange depends upon -their not violating that one rule.” - -He must have seen that I had talked with Stock Exchange people, for he -said, “Listen! Every now and then one of those pious Stock Exchange -houses is suspended for a year for violating that rule, isn’t it? There -are ways and ways of rebating so nobody can squeal.” He probably saw -unbelief in my face, for he went on: “And besides, on certain kinds of -business we--I mean, these wire houses--charge a thirty-second extra, -in addition to the eighth commission. They are very nice about it. They -never charge the extra commission except in unusual cases, and then -only if the customer has an inactive account. It wouldn’t pay them, you -know, otherwise. They aren’t in business exclusively for their health.” - -By that time I knew he was touting for some phony brokers. - -“Do you know any reliable house of that kind?” I asked him. - -“I know the biggest brokerage firm in the United States,” he said. -“I trade there myself. They have branches in seventy-eight cities in -the United States and Canada. They do an enormous business. And they -couldn’t very well do it year in and year out if they weren’t strictly -on the level, could they?” - -“Certainly not,” I agreed. “Do they trade in the same stocks that are -dealt in on the New York Stock Exchange?” - -“Of course; and on the curb and on any other exchange in this country, -or Europe. They deal in wheat, cotton, provisions; anything you -want. They have correspondents everywhere and memberships in all the -exchanges, either in their own name or on the quiet.” - -I knew by that time, but I thought I’d lead him on. - -“Yes,” I said, “but that does not alter the fact that the orders have -to be executed by somebody, and nobody living can guarantee how the -market will be or how close the ticker’s prices are to the actual -prices on the floor of the Exchange. By the time a man gets the -quotation here and he hands in an order and it’s telegraphed to New -York, some valuable time has gone. I might better go back to New York -and lose my money there in respectable company.” - -“I don’t know anything about losing money; our customers don’t acquire -that habit. They make money. We take care of that.” - -“Your customers?” - -“Well, I take an interest in the firm, and if I can turn some business -their way I do so because they’ve always treated me white and I’ve made -a good deal of money through them. If you wish I’ll introduce you to -the manager.” - -“What’s the name of the firm?” I asked him. - -He told me. I had heard about them. They ran ads in all the papers, -calling attention to the great profits made by those customers who -followed their inside information on active stocks. That was the firm’s -great specialty. They were not a regular bucket shop, but bucketeers, -alleged brokers who bucketed their orders but nevertheless went through -an elaborate camouflage to convince the world that they were regular -brokers engaged in a legitimate business. They were one of the oldest -of that class firms. - -They were the prototype at that time of the same sort of brokers that -went broke this year by the dozen. The general principles and methods -were the same, though the particular devices for fleecing the public -differed somewhat, certain details having been changed when the old -tricks became too well known. - -These people used to send out tips to buy or sell a certain -stock--hundreds of telegrams advising the instant purchase of a certain -stock and hundreds recommending other customers to sell the same stock, -on the old racing-tipster plan. Then orders to buy and sell would come -in. The firm would buy and sell, say, a thousand of that stock through -a reputable Stock Exchange firm and get a regular report on it. This -report they would show to any doubting Thomas who was impolite enough -to speak about bucketing customers’ orders. - -They also used to form discretionary pools in the office and as a -great favor allowed their customers to authorize them, in writing, to -trade with the customer’s money and in the customer’s name, as they in -their judgment deemed best. That way the most cantankerous customer -had no legal redress when the money disappeared. They’d bull a stock, -on paper, and put the customers in and then they’d execute one of the -old-fashioned bucket-shop drives and wipe out hundreds of shoe-string -margins. They did not spare anyone, women, school-teachers and old men -being their best bet. - -“I’m sore on all brokers,” I told the tout. “I’ll have to think this -over,” and I left him so he wouldn’t talk any more to me. - -I inquired about this firm. I learned that they had hundreds of -customers and although there were the usual stories I did not find any -case of a customer not getting his money from them if he won any. The -difficulty was in finding anybody who had ever won in that office; but -I did. Things seemed to be going their way just then, and that meant -that they probably would not welsh if a trade went against them. Of -course most concerns of that kind eventually go broke. There are times -when there are regular epidemics of bucketeering bankruptcies, like -the old-fashioned runs on several banks after one of them goes up. -The customers of the others get frightened and they run to take their -money out. But there are plenty of retired bucket-shop keepers in this -country. - -Well, I heard nothing alarming about the tout’s firm except that they -were on the make, first, last and all the time, and that they were not -always truthful. Their specialty was trimming suckers who wanted to -get rich quick. But they always asked their customers’ permission, in -writing, to take their rolls away from them. - -One chap I met did tell me a story about seeing six hundred telegrams -go out one day advising customers to get aboard a certain stock and six -hundred telegrams to other customers strongly urging them to sell that -same stock, at once. - -“Yes, I know the trick,” I said to the chap who was telling me. - -“Yes,” he said. “But the next day they sent telegrams to the same -people advising them to close out their interest in everything and -buy--or sell--another stock. I asked the senior partner, who was in the -office, ‘Why do you do that? The first part I understand. Some of your -customers are bound to make money on paper for a while, even if they -and the others eventually lose. But by sending out telegrams like this -you simply kill them all. What’s the big idea?’ - -“‘Well,’ he said, ‘the customers are bound to lose their money anyhow, -no matter what they buy, or how or where or when. When they lose their -money I lose the customers. Well, I might as well get as much of their -money as I can--and then look for a new crop.’” - -Well, I admit frankly that I wasn’t concerned with the business ethics -of the firm. I told you I felt sore on the Teller concern and how it -tickled me to get even with them. But I didn’t have any such feeling -about this firm. They might be crooks or they might not be as black as -they were painted. I did not propose to let them do any trading for me, -or follow their tips or believe their lies. My one concern was with -getting together a stake and returning to New York to trade in fair -amounts in an office where you did not have to be afraid the police -would raid the joint, as they did the bucket shops, or see the postal -authorities swoop down and tie up your money so that you’d be lucky to -get eight cents on the dollar a year and a half later. - -Anyhow, I made up my mind that I would see what trading advantages of -this firm offered over what you might call the legitimate brokers. I -didn’t have much money to put up as margin, and firms that bucketed -orders were naturally much more liberal in that respect, so that a few -hundred dollars went much further in their offices. - -I went down to their place and had a talk with the manager himself. -When he found out that I was an old trader and had formerly had -accounts in New York with Stock Exchange houses and that I had lost -all I took with me he stopped promising to make a million a minute for -me if I let them invest my savings. He figured that I was a permanent -sucker, the ticker-hound kind that always plays and always loses; a -steady-income provider for brokers, whether they were the kind that -bucket your orders or modestly content themselves with the commissions. - -I just told the manager that what I was looking for was decent -execution, because I always traded at the market and I didn’t want to -get reports that showed a difference of a half or a whole point from -the ticker price. - -He assured me on his word of honor that they would do whatever I -thought was right. They wanted my business because they wanted to show -me what high-class brokering was. They had in their employ the best -talent in the business. In fact, they were famous for their execution. -If there was any difference between the ticker price and the report -it was always in favor of the customer, though of course they didn’t -guarantee that. If I opened an account with them I could buy and sell -at the price which came over the wire, they were so confident of their -brokers. - -Naturally that meant that I could trade there to all intents and -purposes as though I were in a bucket shop--that is, they’d let me -trade at the next quotation. I didn’t want to appear too anxious, so I -shook my head and told him I guessed I wouldn’t open an account that -day, but I’d let him know. He urged me strongly to begin right way as -it was a good market to make money in. It was--for them; a dull market -with prices seesawing slightly, just the kind to get customers in and -then wipe them out with a sharp drive in the tipped stock. I had some -trouble in getting away. - -I had given him my name and address, and that very same day I began to -get prepaid telegrams and letters urging me to get aboard of some stock -or other in which they said they knew an inside pool was operating for -a fifty-point rise. - -I was busy going around and finding out all I could about several other -brokerage concerns of the same bucketing kind. It seemed to me that if -I could be sure of getting my winnings out of their clutches the only -way of my getting together some real money was to trade in these near -bucket shops. - -When I had learned all I could I opened accounts with three firms. I -had taken a small office and had direct wires run to the three brokers. - -I traded in a small way so they wouldn’t get frightened off at the very -start. I made money on balance and they were not slow in telling me -that they expected real business from customers who had direct wires to -their offices. They did not hanker for pikers. They figured that the -more I did the more I’d lose, and the more quickly I was wiped out the -more they’d make. It was a sound enough theory when you consider that -these people necessarily dealt with averages and the average customer -was never long-lived, financially speaking. A busted customer can’t -trade. A half-crippled customer can whine and insinuate things and make -trouble of one or another kind that hurts business. - -I also established a connection with a local firm that had a direct -wire to its New York correspondent, who were also members of the New -York Stock Exchange. I had a stock ticker put in and I began to trade -conservatively. As I told you, it was pretty much like trading in -bucket shops, only it was a little slower. - -It was a game that I could beat, and I did. I never got it down to -such a fine point that I could win ten times out of ten; but I won on -balance, taking it week in and week out. I was again living pretty -well, but always saving something, to increase the stake that I was -to take back to Wall Street. I got a couple of wires into two more of -these bucketing brokerage houses, making five in all--and, of course, -my good firm. - -There were times when my plans went wrong and my stocks did not run -true to form, but they did the opposite of what they should have done -if they had kept up their regard for precedent. But they did not hit -me very hard--they couldn’t, with my shoestring margins. My relations -with my brokers were friendly enough. Their accounts and records did -not always agree with mine, and the differences uniformly happened to -be against me. Curious coincidence--not! But I fought for my own and -usually had my way in the end. They always had the hope of getting -away from me what I had taken from them. They regarded my winnings as -temporary loans, I think. - -They really were not sporty, being in the business to make money by -hook or by crook instead of being content with the house percentage. -Since suckers always lose money when they gamble in stocks--they never -really speculate--you’d think these fellows would run what you might -call a legitimate illegitimate business. But they didn’t. “Copper your -customers and grow rich” is an old and true adage, but they did not -seem ever to have heard of it and didn’t stop at plain bucketing. - -Several times they tried to double-cross me with the old tricks. They -caught me a couple of times because I wasn’t looking. They always did -that when I had taken no more than my usual line. I accused them of -being short sports or worse, but they denied it and it ended by my -going back to trading as usual. The beauty of doing business with a -crook is that he always forgives you for catching him, so long as you -don’t stop doing business with him. It’s all right as far as he is -concerned. He is willing to meet you more than half-way. Magnanimous -souls! - -Well, I made up my mind that I couldn’t afford to have the normal rate -of increase of my stake impaired by crooks’ tricks, so I decided to -teach them a lesson. I picked out some stock that after having been -a speculative favorite had become inactive. Water-logged. If I had -taken one that never had been active they would have suspected my -play. I gave out buying orders on this stock to my five bucketeering -brokers. When the orders were taken and they were waiting for the next -quotation to come out on the tape I sent in an order through my Stock -Exchange house to sell a hundred shares of that particular stock at -the market. I urgently asked for quick action. Well, you can imagine -what happened when the selling order got to the floor of the Exchange; -a dull inactive stock that a commission house with out-of-town -connections wanted to sell in a hurry. Somebody got cheap stock. But -the transaction as it would be printed on the tape was the price that I -would pay on my five buying orders. I was long on balance four hundred -shares of that stock at a low figure. The wire house asked me what -I’d heard, and I said I had a tip on it. Just before the close of the -market I sent an order to my reputable house to buy back that hundred -shares, and not waste any time; that I didn’t want to be short under -any circumstances; and I didn’t care what they paid. So they wired to -New York and the order to buy that hundred quick resulted in a sharp -advance. I of course had put in selling orders for the five hundred -shares that my friends had bucketed. It worked very satisfactorily. - -Still, they didn’t mend their ways, and so I worked that trick on -them several times. I did not dare punish them as severely as they -deserved, seldom more than a point or two on a hundred shares. But it -helped to swell my little hoard that I was saving for my next Wall -Street venture. I sometimes varied the process by selling some stock -short, without overdoing it. I was satisfied with my six or eight -hundred clear for each crack. - -One day the stunt worked so well that it went far beyond all -calculations for a ten-point swing. I wasn’t looking for it. As a -matter of fact it so happened that I had two hundred shares instead -of my usual hundred at one broker’s, though only a hundred in the four -other shops. That was too much of a good thing--for them. They were -sore as pups about it and they began to say things over the wires. So -I went and saw the manager, the same man who had been so anxious to -get my account, and so forgiving every time I caught him trying to put -something over on me. He talked pretty big for a man in his position. - -“That was a fictitious market for that stock, and we won’t pay you a -damned cent!” he swore. - -“It wasn’t a fictitious market when you accepted my order to buy. You -let me in then, all right, and now you’ve got to let me out. You can’t -get around that for fairness, can you?” - -“Yes, I can!” he yelled. “I can prove that somebody put up a job.” - -“Who put up a job?” I asked. - -“Somebody!” - -“Who did they put it up on?” I asked. - -“Some friends of yours were in it as sure as pop,” he said. - -But I told him, “You know very well that I play a lone hand. Everybody -in this town knows that. They’ve known it ever since I started trading -in stocks. Now I want to give you some friendly advice: you just send -and get that money for me. I don’t want to be disagreeable. Just do -what I tell you.” - -“I won’t pay it. It was a rigged-up transaction,” he yelled. - -I got tired of his talk. So I told him: “You’ll pay it to me right now -and here.” - -Well, he blustered a little more and accused me flatly of being -the guilty thimblerigger; but he finally forked over the cash. The -others were not so rambunctious. In one office the manager had been -studying these inactive-stock plays of mine and when he got my order -he actually bought the stock for me and then some for himself in the -Little Board, and he made some money. These fellows didn’t mind being -sued by customers on charges of fraud, as they generally had a good -technical legal defense ready. But they were afraid I’d attach the -furniture--the money in the bank I couldn’t because they took care not -to have any funds exposed to that danger. It would not hurt them to be -known as pretty sharp, but to get a reputation for welshing was fatal. -For a customer to lose money at his broker’s is no rare event. But for -a customer to make money and then not get it is the worst crime on the -speculators’ statute books. - -I got my money from all; but that ten-point jump put an end to the -pleasing pastime of skinning skinners. They were on the lookout for the -little trick that they themselves had used to defraud hundreds of poor -customers. I went back to my regular trading; but the market wasn’t -always right for my system--that is, limited as I was by the size of -the orders they would take, I couldn’t make a killing. - -I had been at it over a year, during which I used every device that I -could think of to make money trading in those wire houses. I had lived -very comfortably, bought an automobile and didn’t limit myself about -my expenses. I had to make a stake, but I also had to live while I was -doing it. If my position on the market was right I couldn’t spend as -much as I made, so that I’d always be saving some. If I was wrong I -didn’t make any money and therefore couldn’t spend. As I said, I had -saved up a fair-sized roll, and there wasn’t so much money to be made -in the five wire houses; so I decided to return to New York. - -I had my own automobile and I invited a friend of mine who also was a -trader to motor to New York with me. He accepted and we started. We -stopped at New Haven for dinner. At the hotel I met an old trading -acquaintance, and among other things he told me there was a shop in -town that had a wire and was doing a pretty good business. - -We left the hotel on our way to New York, but I drove by the street -where the bucket shop was to see what the outside looked like. We found -it and couldn’t resist the temptation to stop and have a look at the -inside. It wasn’t very sumptuous, but the old blackboard was there, and -the customers, and the game was on. - -The manager was a chap who looked as if he had been an actor or a stump -speaker. He was very impressive. He’d say good morning as though he -had discovered the morning’s goodness after ten years of searching for -it with a microscope and was making you a present of the discovery as -well as of the sky, the sun and the firm’s bank roll. He saw us come -up in the sporty-looking automobile, and as both of us were young and -careless--I don’t suppose I looked twenty--he naturally concluded we -were a couple of Yale boys. I didn’t tell him we weren’t. He didn’t -give me a chance, but began delivering a speech. He was very glad to -see us. Would we have a comfortable seat? The market, we would find, -was philanthropically inclined that morning; in fact, clamoring to -increase the supply of collegiate pocket money, of which no intelligent -undergraduate ever had a sufficiency since the dawn of historic time. -But here and now, by the beneficence of the ticker, a small initial -investment would return thousands. More pocket money than anybody could -spend was what the stock market yearned to yield. - -Well, I thought it would be a pity not to do as the nice man of the -bucket shop was so anxious to have us do, so I told him I would do as -he wished, because I had heard that lots of people made lots of money -in the stock market. - -I began to trade, very conservatively, but increasing the line as I -won. My friend followed me. - -We stayed overnight in New Haven and the next morning found us at the -hospitable shop at five minutes to ten. The orator was glad to see us, -thinking his turn would come that day. But I cleaned up within a few -dollars of fifteen hundred. The next morning when we dropped in on the -great orator, and handed him an order to sell five hundred Sugar he -hesitated, but finally accepted it--in silence! The stock broke over a -point and I closed out and gave him the ticket. There was exactly five -hundred dollars coming to me in profits, and my five hundred dollar -margin. He took twenty fifties from the safe, counted them three times -very slowly, then he counted them again in front of me. It looked as if -his fingers were sweating mucilage the way the notes seemed to stick to -him, but finally he handed the money to me. He folded his arms, bit his -lower lip, kept it bit, and stared at the top of a window behind me. - -I told him I’d like to sell two hundred Steel. But he never stirred. -He didn’t hear me. I repeated my wish, only I made it three hundred -shares. He turned his head. I waited for the speech. But all he did was -to look at me. Then he smacked his lips and swallowed--as if he was -going to start an attack on fifty years of political misrule by the -unspeakable grafters of the opposition. - -Finally he waved his hand toward the yellow-backs in my hand and said, -“Take away that bauble!” - -“Take away what?” I said. I hadn’t quite understood what he was driving -at. - -“Where are you going, student?” He spoke very impressively. - -“New York,” I told him. - -“That’s right,” he said, nodding about twenty times. “That is ex-actly -right. You are going away from here all right, because now I know two -things--two, student! I know what you are not, and I know what you are. -Yes! Yes! Yes!” - -“Is that so?” I said very politely. - -“Yes. You two--” He paused; and then he stopped being in Congress -and snarled: “You two are the biggest sharks in the United States of -America! Students? Ye-eh! You must be Freshmen! Ye-eh!” - -We left him talking to himself. He probably didn’t mind the money so -much. No professional gambler does. It’s all in the game and the luck’s -bound to turn. It was his being fooled in us that hurt his pride. - -That is how I came back to Wall Street for a third attempt. I had -been studying, of course, trying to locate the exact trouble with my -system that had been responsible for my defeats in A. R. Fullerton & -Co.’s office. I was twenty when I made my first ten thousand, and I -lost that. But I knew how and why--because I traded out of season all -the time; because when I couldn’t play according to my system, which -was based on study and experience, I went in and gambled. I hoped to -win, instead of knowing that I ought to win on form. When I was about -twenty-two I ran up my stake to fifty thousand dollars; I lost it on -May ninth. But I knew exactly why and how. It was the laggard tape -and the unprecedented violence of the movements that awful day. But -I didn’t know why I had lost after my return from St. Louis or after -the May ninth panic. I had theories--that is, remedies for some of the -faults that I thought I found in my play. But I needed actual practice. - -There is nothing like losing all you have in the world for teaching you -what not to do. And when you know what not to do in order not to lose -money, you begin to learn what to do in order to win. Did you get that? -_You begin to learn!_ - - - - -_V_ - - -The average ticker hound--or, as they used to call him, tape-worm--goes -wrong, I suspect, as much from over-specialization as from anything -else. It means a highly expensive inelasticity. After all, the game -of speculation isn’t all mathematics or set rules, however rigid the -main laws may be. Even in my tape reading something enters that is more -than mere arithmetic. There is what I call the behavior of a stock, -actions that enable you to judge whether or not it is going to proceed -in accordance with the precedents that your observation has noted. If a -stock doesn’t act right don’t touch it; because, being unable to tell -precisely what is wrong, you cannot tell which way it is going. No -diagnosis, no prognosis. No prognosis, no profit. - -It is a very old thing, this of noting the behavior of a stock and -studying its past performances. When I first came to New York there -was a broker’s office where a Frenchman used to talk about his chart. -At first I thought he was a sort of pet freak kept by the firm because -they were good-natured. Then I learned that he was a persuasive and -most impressive talker. He said that the only thing that didn’t lie -because it simply couldn’t was mathematics. By means of his curves -he could forecast market movements. Also he could analyse them, and -tell, for instance, why Keene did the right thing in his famous -Atchison preferred bull manipulation, and later why he went wrong in -his Southern Pacific pool. At various times one or another of the -professional traders tried the Frenchman’s system--and then went back -to their old unscientific methods of making a living. Their hit-or-miss -system was cheaper, they said. I heard that the Frenchman said Keene -admitted that the chart was 100 per cent right but claimed that the -method was too slow for practical use in an active market. - -Then there was one office where a chart of the daily movement of prices -was kept. It showed at a glance just what each stock had done for -months. By comparing individual curves with the general market curve -and keeping in mind certain rules the customers could tell whether the -stock on which they got an unscientific tip to buy was fairly entitled -to a rise. They used the chart as a sort of complementary tipster. -To-day there are scores of commission houses where you find trading -charts. They come ready-made from the offices of statistical experts -and include not only stocks but commodities. - -I should say that a chart helps those who can read it or rather who can -assimilate what they read. The average chart reader, however, is apt to -become obsessed with the notion that the dips and peaks and primary and -secondary movements are all there is to stock speculation. If he pushes -his confidence to its logical limit he is bound to go broke. There is -an extremely able man, a former partner of a well-known Stock Exchange -house, who is really a trained mathematician. He is a graduate of a -famous technical school. He devised charts based upon a very careful -and minute study of the behaviour of prices in many markets--stocks, -bonds, grain, cotton, money, and so on. He went back years and years -and traced the correlations and seasonal movements--oh, everything. He -used his charts in his stock trading for years. What he really did was -to take advantage of some highly intelligent averaging. They tell me he -won regularly--until the World War knocked all precedents into a cocked -hat. I heard that he and his large following lost millions before they -desisted. But not even a world war can keep the stock market from -being a bull market when conditions are bullish, or a bear market when -conditions are bearish. And all a man needs to know to make money is to -appraise conditions. - -I didn’t mean to get off the track like that, but I can’t help it when -I think of my first few years in Wall Street. I know now what I did not -know then, and I think of the mistakes of my ignorance because those -are the very mistakes that the average stock speculator makes year in -and year out. - -After I got back to New York to try for the third time to beat the -market in a Stock Exchange house I traded quite actively. I didn’t -expect to do as well as I did in the bucket shops, but I thought that -after a while I would do much better because I would be able to swing -a much heavier line. Yet, I can see now that my main trouble was my -failure to grasp the vital difference between stock gambling and stock -speculation. Still, by reason of my seven years’ experience in reading -the tape and a certain natural aptitude for the game, my stake was -earning not indeed a fortune but a very high rate of interest. I won -and lost as before, but I was winning on balance. The more I made the -more I spent. This is the usual experience with most men. No, not -necessarily with easy-money pickers, but with every human being who is -not a slave of the hoarding instinct. Some men, like old Russell Sage, -have the money-making and the money-hoarding instinct equally well -developed, and of course they die disgustingly rich. - -The game of beating the market exclusively interested me from ten to -three every day, and after three, the game of living my life. Don’t -misunderstand me. I never allowed pleasure to interfere with business. -When I lost it was because I was wrong and not because I was suffering -from dissipation or excesses. There never were any shattered nerves or -rum-shaken limbs to spoil my game. I couldn’t afford anything that kept -me from feeling physically and mentally fit. Even now I am usually in -bed by ten. As a young man I never kept late hours, because I could -not do business properly on insufficient sleep. I was doing better than -breaking even and that is why I didn’t think there was any need to -deprive myself of the good things of life. The market was always there -to supply them. I was acquiring the confidence that comes to a man -from a professionally dispassionate attitude toward his own method of -providing bread and butter for himself. - -The first change I made in my play was in the matter of time. I -couldn’t wait for the sure thing to come along and then take a point -or two out of it as I could in the bucket shops. I had to start much -earlier if I wanted to catch the move in Fullerton’s office. In other -words, I had to study what was going to happen; to anticipate stock -movements. That sounds asininely commonplace, but you know what I -mean. It was the change in my own attitude toward the game that was of -supreme importance to me. It taught me, little by little, the essential -difference between betting on fluctuations and anticipating inevitable -advances and declines, between gambling and speculating. - -I had to go further back than an hour in my studies of the -market--which was something I never would have learned to do in the -biggest bucket shop in the world. I interested myself in trade reports -and railroad earnings and financial and commercial statistics. Of -course I loved to trade heavily and they called me the Boy Plunger; -but I also liked to study the moves. I never thought that anything was -irksome if it helped me to trade more intelligently. Before I can solve -a problem I must state it to myself. When I think I have found the -solution I must prove I am right. I know of only one way to prove it; -and that is, with my own money. - -Slow as my progress seems now, I suppose I learned as fast as I -possibly could, considering that I was making money on balance. If I -had lost oftener perhaps it might have spurred me to more continuous -study. I certainly would have had more mistakes to spot. But I am not -sure of the exact value of losing, for if I had lost more I would have -lacked the money to test out the improvements in my methods of trading. - -Studying my winning plays in Fullerton’s office I discovered that -although I often was 100 per cent right on the market--that is, in my -diagnosis of conditions and general trend--I was not making as much -money as my market “rightness” entitled me to. Why wasn’t I? - -There was as much to learn from partial victory as from defeat. - -For instance, I had been bullish from the very start of a bull market, -and I had backed my opinion by buying stocks. An advance followed, -as I had clearly foreseen. So far, all very well. But what else did -I do? Why, I listened to the elder statesmen and curbed my youthful -impetuousness. I made up my mind to be wise and play carefully, -conservatively. Everybody knew that the way to do that was to take -profits and buy back your stocks on reactions. And that is precisely -what I did, or rather what I tried to do; for I often took profits and -waited for a reaction that never came. And I saw my stock go kiting up -ten points more and I sitting there with my four-point profit safe in -my conservative pocket. _They say you never grow poor taking profits. -No, you don’t. But neither do you grow rich taking a four-point profit -in a bull market._ - -Where I should have made twenty thousand dollars I made two thousand. -That was what my conservatism did for me. About the time I discovered -what a small percentage of what I should have made I was getting I -discovered something else, and that is that suckers differ among -themselves according to the degree of experience. - -The tyro knows nothing, and everybody, including himself, knows it. -But the next, or second, grade thinks he knows a great deal and makes -others feel that way too. He is the experienced sucker, who has -studied--not the market itself but a few remarks about the market made -by a still higher grade of suckers. The second-grade sucker knows how -to keep from losing his money in some of the ways that get the raw -beginner. It is this semisucker rather than the 100 per cent article -who is the real all-the-year-round support of the commission houses. -He lasts about three and a half years on an average, as compared with -a single season of from three to thirty weeks, which is the usual Wall -Street life of a first offender. It is naturally the semisucker who is -always quoting the famous trading aphorisms and the various rules of -the game. _He knows all the don’ts that ever fell from the oracular -lips of the old stagers--excepting the principal one, which is: Don’t -be a sucker!_ - -_This semisucker is the type that thinks he has cut his wisdom teeth -because he loves to buy on declines._ He waits for them. He measures -his bargains by the number of points it has sold off from the top. In -big bull markets the plain unadulterated sucker, utterly ignorant of -rules and precedents, buys blindly because he hopes blindly. He makes -most of the money--until one of the healthy reactions takes it away -from him at one fell swoop. But the Careful Mike sucker does what I -did when I thought I was playing the game intelligently--according to -the intelligence of others. I knew I needed to change my bucket-shop -methods and I thought I was solving my problem with any change, -particularly one that assayed high gold values according to the -experienced traders among the customers. - -Most--let us call ’em customers--are alike. You find very few who can -truthfully say that Wall Street doesn’t owe them money. In Fullerton’s -there were the usual crowd. All grades! Well, there was one old chap -who was not like the others. To begin with, he was a much older man. -Another thing was that he never volunteered advice and never bragged of -his winnings. He was a great hand for listening very attentively to the -others. He did not seem very keen to get tips--that is, he never asked -the talkers what they’d heard or what they knew. But when somebody gave -him one he always thanked the tipster very politely. Sometimes he -thanked the tipster again--when the tip turned out O.K. But if it went -wrong he never whined, so that nobody could tell whether he followed it -or let it slide by. It was a legend of the office that the old jigger -was rich and could swing quite a line. But he wasn’t donating much to -the firm in the way of commissions; at least not that anyone could see. -His name was Partridge, but they nicknamed him Turkey behind his back, -because he was so thick-chested and had a habit of strutting about the -various rooms, with the point of his chin resting on his breast. - -The customers, who were all eager to be shoved and forced into doing -things so as to lay the blame for failure on others, used to go to old -Partridge and tell him what some friend of a friend of an insider had -advised them to do in a certain stock. They would tell him what they -had not done with the tip so he would tell them what they ought to do. -But whether the tip they had was to buy or to sell, the old chap’s -answer was always the same. - -The customer would finish the tale of his perplexity and then ask: -“What do you think I ought to do?” - -Old Turkey would cock his head to one side, contemplate his fellow -customer with a fatherly smile, and finally he would say very -impressively, “You know, it’s a bull market!” - -Time and again I heard him say, “Well, this is a bull market, you -know!” as though he were giving to you a priceless talisman wrapped up -in a million-dollar accident-insurance policy. And of course I did not -get his meaning. - -One day a fellow named Elmer Harwood rushed into the office, wrote out -an order and gave it to the clerk. Then he rushed over to where Mr. -Partridge was listening politely to John Fanning’s story of the time he -overheard Keene give an order to one of his brokers and all that John -made was a measly three points on a hundred shares and of course the -stock had to go up twenty-four points in three days right after John -sold out. It was at least the fourth time that John had told him that -tale of woe, but old Turkey was smiling as sympathetically as if it was -the first time he heard it. - -Well, Elmer made for the old man and, without a word of apology to -John Fanning, told Turkey, “Mr. Partridge, I have just sold my Climax -Motors. My people say the market is entitled to a reaction and that -I’ll be able to buy it back cheaper. So you’d better do likewise. That -is, if you’ve still got yours.” - -Elmer looked suspiciously at the man to whom he had given the original -tip to buy. The amateur, or gratuitous, tipster always thinks he owns -the receiver of his tip body and soul, even before he knows how the tip -is going to turn out. - -“Yes, Mr. Harwood, I still have it. Of course!” said Turkey gratefully. -It was nice of Elmer to think of the old chap. - -“Well, now is the time to take your profit and get in again on the -next dip,” said Elmer, as if he had just made out the deposit slip -for the old man. Failing to perceive enthusiastic gratitude in the -beneficiary’s face, Elmer went on: “I have just sold every share I -owned!” - -From his voice and manner you would have conservatively estimated it at -ten thousand shares. - -But Mr. Partridge shook his head regretfully and whined, “No! No! I -can’t do that!” - -“What?” yelled Elmer. - -“I simply can’t!” said Mr. Partridge. He was in great trouble. - -“Didn’t I give you the tip to buy it?” - -“You did, Mr. Harwood, and I am very grateful to you. Indeed, I am, -sir. But----” - -“Hold on! Let me talk! And didn’t that stock go up seven points in ten -days? Didn’t it?” - -“It did, and I am much obliged to you, my dear boy. But I couldn’t -think of selling that stock.” - -“You couldn’t?” asked Elmer, beginning to look doubtful himself. It is -a habit with most tip givers to be tip takers. - -“No, I couldn’t.” - -“Why not?” And Elmer drew nearer. - -“Why, this is a bull market!” The old fellow said it as though he had -given a long and detailed explanation. - -“That’s all right,” said Elmer, looking angry because of his -disappointment. “I know this is a bull market as well as you do. But -you’d better slip them that stock of yours and buy it back on the -reaction. You might as well reduce the cost to yourself.” - -“My dear boy,” said old Partridge, in great distress--“my dear boy, _if -I sold that stock now I’d lose my position; and then where would I be_?” - -Elmer Harwood threw up his hands, shook his head and walked over to me -to get sympathy: “Can you beat it?” he asked me in a stage whisper. “I -ask you!” - -I didn’t say anything. So he went on: “I give him a tip on Climax -Motors. He buys five hundred shares. He’s got seven points’ profit and -I advise him to get out and buy ’em back on the reaction that’s overdue -even now. And what does he say when I tell him? He says that if he -sells he’ll lose his job. What do you know about that?” - -“I beg your pardon, Mr. Harwood; I didn’t say I’d lose my job,” cut in -old Turkey. “I said I’d lose my position. And when you are as old as I -am and you’ve been through as many booms and panics as I have, you’ll -know that to lose your position is something nobody can afford; not -even John D. Rockefeller. I hope the stock reacts and that you will be -able to repurchase your line at a substantial concession, sir. But I -myself can only trade in accordance with the experience of many years. -I paid a high price for it and I don’t feel like throwing away a second -tuition fee. But I am as much obliged to you as if I had the money in -the bank. It’s a bull market, you know.” And he strutted away, leaving -Elmer dazed. - -What old Mr. Partridge said did not mean much to me until I began -to think about my own numerous failures to make as much money as I -ought to when I was so right on the general market. The more I studied -the more I realized how wise that old chap was. He had evidently -suffered from the same defect in his young days and knew his own -human weaknesses. He would not lay himself open to a temptation that -experience had taught him was hard to resist and had always proved -expensive to him, as it was to me. - -I think it was a long step forward in my education when I realized at -last that when old Mr. Partridge kept on telling the other customers, -“Well, you know this is a bull market!” he really meant to tell them -that the big money was not in the individual fluctuations but in the -main movements--that is, not in reading the tape but in sizing up the -entire market and its trend. - -And right here let me say one thing: After spending many years in -Wall Street and after making and losing millions of dollars I want to -tell you this: _It never was my thinking that_ made the big money for -me. _It was always my sitting._ Got that? My sitting tight! _It is no -trick at all to be right on the market. You always find lots of early -bulls in bull markets and early bears in bear markets._ I’ve known -many men who were right at exactly the right time, and began buying or -selling stocks when prices were at the very level which should show the -greatest profit. And their experience invariably matched mine--that is, -they made no real money out of it. Men who can both be right and sit -tight are uncommon. I found it one of the hardest things to learn. But -it is only after a stock operator has firmly grasped this that he can -make big money. It is literally true that millions come easier to a -trader after he knows how to trade than hundreds did in the days of his -ignorance. - -The reason is that a man may see straight and clearly and yet become -impatient or doubtful _when the market takes its time about doing -as he figured it must do_. That is why so many men in Wall Street, -who are not at all in the sucker class, not even in the third grade, -nevertheless lose money. The market does not beat them. They beat -themselves, because though they have brains _they cannot sit tight_. -Old Turkey was dead right in doing and saving what he did. He had not -only the courage of his convictions but the intelligent patience to sit -tight. - -Disregarding the big swing and trying to jump in and out was fatal to -me. _Nobody can catch all the fluctuations._ In a bull market your game -is to buy and hold until you believe that the bull market is near its -end. To do this you must study the general conditions and not tips or -special factors affecting individual stocks. Then get out of all your -stocks; get out for keeps! Wait until you see--or if you prefer, until -you think you see--the turn of the market; the beginning of a reversal -of general conditions. You have to use your brains and your vision to -do this; otherwise my advice would be as idiotic as to tell you to buy -cheap and sell dear. _One of the most helpful things that anybody can -learn is to give up trying to catch the last eighth--or the first. -These two are the most_ expensive eighths in the world. They have cost -stock traders, in the aggregate, enough millions of dollars to build a -concrete highway across the continent. - -Another thing I noticed in studying my plays in Fullerton’s office -after I began to trade less unintelligently was that my initial -operations seldom showed me a loss. That naturally made me decide to -start big. It gave me confidence in my own judgment before I allowed -it to be vitiated by the advice of others or even by my own impatience -at times. Without faith in his own judgment no man can go very far -in this game. That is about all I have learned--to study general -conditions, _to take a position and stick to it. I can wait without -a twinge of impatience. I can see a setback without being shaken, -knowing that it is only temporary._ I have been short one hundred -thousand shares and I have seen a big rally coming. I have figured--and -figured correctly--that such a rally as I felt was inevitable, and even -wholesome, would make a difference of one million dollars in my paper -profits. And I nevertheless have stood pat and seen half my paper -profit wiped out, without once considering the advisability of covering -my shorts to put them out again on the rally. I knew that if I did I -might lose my position and with it the certainty of a big killing. It -is the big swing that makes the big money for you. - -If I learned all this so slowly it was because I learned by my -mistakes, _and some time always elapses between making a mistake -and realizing it_, and more time between realizing it and exactly -determining it. But at the same time I was faring pretty comfortably -and was very young, so that I made up in other ways. Most of my -winnings were still made in part through my tape reading because the -kind of markets we were having lent themselves fairly well to my -method. I was not losing either as often or as irritatingly as in the -beginning of my New York experiences. It wasn’t anything to be proud -of, when you think that I had been broke three times in less than two -years. And as I told you, being broke is a very efficient educational -agency. - -I was not increasing my stake very fast because I lived up to the -handle all the time. I did not deprive myself of many of the things -that a fellow of my age and tastes would want. I had my own automobile -and I could not see any sense in skimping on living when I was taking -it out of the market. The ticker only stopped Sundays and holidays, -which was as it should be. Every time I found the reason for a loss or -the why and how of another mistake, I added a brand-new _Don’t!_ to -my schedule of assets. And the nicest way to capitalize my increasing -assets was by not cutting down on my living expenses. Of course I had -some amusing experiences and some that were not so amusing, but if I -told them all in detail I’d never finish. As a matter of fact, the only -incidents that I remember without special effort are those that taught -me something of definite value to me in my trading; something that -added to my store of knowledge of the game--and of myself! - - - - -_VI_ - - -In the spring of 1906 I was in Atlantic City for a short vacation. I -was out of stocks and was thinking only of having a change of air and -a nice rest. By the way, I had gone back to my first brokers, Harding -Brothers, and my account had got to be pretty active. I could swing -three or four thousand shares. That wasn’t much more than I had done in -the old Cosmopolitan shop when I was barely twenty years of age. But -there was some difference between my one-point margin in the bucket -shop and the margin required by brokers who actually bought or sold -stocks for my account on the New York Stock Exchange. - -You may remember the story I told you about that time when I was -short thirty-five hundred Sugar in the Cosmopolitan and I had a hunch -something was wrong and I’d better close the trade? Well, I have often -had that curious feeling. As a rule, I yield to it. But at times I have -pooh-poohed the idea and have told myself that it was simply asinine -to follow any of these sudden blind impulses to reverse my position. -I have ascribed my hunch to a state of nerves resulting from too many -cigars or insufficient sleep or a torpid liver or something of that -kind. When I have argued myself into disregarding my impulse and have -stood pat I have always had cause to regret it. A dozen instances -occur to me when I did not sell as per hunch, and the next day I’d go -downtown and the market would be strong, or perhaps even advance, and -I’d tell myself how silly it would have been to obey the blind impulse -to sell. But on the following day there would be a pretty bad drop. -Something had broken loose somewhere and I’d have made money by not -being so wise and logical. The reason plainly was not physiological but -psychological. - -I want to tell you only about one of them because of what it did for -me. It happened when I was having that little vacation in Atlantic City -in the spring of 1906. I had a friend with me who also was a customer -of Harding Brothers. I had no interest in the market one way or another -and was enjoying my rest. I can always give up trading to play, unless -of course it is an exceptionally active market in which my commitments -are rather heavy. It was a bull market, as I remember it. The outlook -was favorable for general business and the stock market had slowed down -but the tone was firm and all indications pointed to higher prices. - -One morning after we had breakfasted and had finished reading all the -New York morning papers, and had got tired of watching the sea gulls -picking up clams and flying up with them twenty feet in the air and -dropping them on the hard wet sand to open them for their breakfast, my -friend and I started up the Boardwalk. That was the most exciting thing -we did in the daytime. - -It was not noon yet, and we walked up slowly to kill time and breathe -the salt air. Harding Brothers had a branch office on the Boardwalk and -we used to drop in every morning and see how they’d opened. It was more -force of habit than anything else, for I wasn’t doing anything. - -The market, we found, was strong and active. My friend, who was quite -bullish, was carrying a moderate line purchased several points lower. -He began to tell me what an obviously wise thing it was to hold stocks -for much higher prices. I wasn’t paying enough attention to him to take -the trouble to agree with him. I was looking over the quotation board, -noting the changes--they were mostly advances--until I came to Union -Pacific. I got a feeling that I ought to sell it. I can’t tell you -more. I just felt like selling it. I asked myself why I should feel -like that, and I couldn’t find any reason whatever for going short of -UP. - -I stared at the last price on the board until I couldn’t see any -figures or any board or anything else, for that matter. All I knew -was that I wanted to sell Union Pacific and I couldn’t find out why I -wanted to. - -I must have looked queer, for my friend, who was standing alongside of -me, suddenly nudged me and asked, “Hey, what’s the matter?” - -“I don’t know,” I answered. - -“Going to sleep?” he said. - -“No,” I said. “I am not going to sleep. What I am going to do is to -sell that stock.” I had always made money following my hunches. - -I walked over to a table where there were some blank order pads. My -friend followed me. I wrote out an order to sell a thousand Union -Pacific at the market and handed it to the manager. He was smiling when -I wrote it and when he took it. But when he read the order he stopped -smiling and looked at me. - -“Is this right?” he asked me. But I just looked at him and he rushed it -over to the operator. - -“What are you doing?” asked my friend. - -“I’m selling it!” I told him. - -“Selling what?” he yelled at me. If he was a bull how could I be a -bear? Something was wrong. - -“A thousand UP.,” I said. - -“Why?” he asked me in great excitement. - -I shook my head, meaning I had no reason. But he must have thought I’d -got a tip, because he took me by the arm and led me outside into the -hall, where we could be out of sight and hearing of the other customers -and rubbering chairwarmers. - -“What did you hear?” he asked me. - -He was quite excited. UP. was one of his pets and he was bullish on it -because of its earnings and its prospects. But he was willing to take a -bear tip on it at second hand. - -“Nothing!” I said. - -“You didn’t?” He was skeptical and showed it plainly. - -“I didn’t hear a thing.” - -“Then why in blazes are you selling?” - -“I don’t know,” I told him. I spoke gospel truth. - -“Oh, come across, Larry,” he said. - -He knew it was my habit to know why I traded. I had sold a thousand -shares of Union Pacific. I must have a very good reason to sell that -much stock in the face of the strong market. - -“I don’t know,” I repeated. “I just feel that something is going to -happen.” - -“What’s going to happen?” - -“I don’t know. I can’t give you any reason. All I know is that I want -to sell that stock. And I’m going to let ’em have another thousand.” - -I walked back into the office and gave an order to sell a second -thousand. If I was right in selling the first thousand I ought to have -out a little more. - -“What could possibly happen?” persisted my friend, who couldn’t make up -his mind to follow my lead. If I’d told him that I had heard UP. was -going down he’d have sold it without asking me from whom I’d heard it -or why. “What could possibly happen?” he asked again. - -“A million things could happen. But I can’t promise you that any of -them will. I can’t give you any reasons and I can’t tell fortunes,” I -told him. - -“Then you’re crazy,” he said. “Stark crazy, selling that stock without -rime or reason. You don’t know why you want to sell it?” - -“I don’t know why I want to sell it. I only know I do want to,” I -said. “I want to, like everything.” The urge was so strong that I sold -another thousand. - -That was too much for my friend. He grabbed me by the arm and said, -“Here! Let’s get out of this place before you sell the entire capital -stock.” - -I had sold as much as I needed to satisfy my feeling, so I followed him -without waiting for a report on the last two thousand shares. It was a -pretty good jag of stock for me to sell even with the best of reasons. -It seemed more than enough to be short of without any reason whatever, -particularly when the entire market was so strong and there was nothing -in sight to make anybody think of the bear side. But I remembered that -on previous occasions when I had the same urge to sell and didn’t do it -I always had reasons to regret it. - -I have told some of these stories to friends, and some of them tell me -it isn’t a hunch but the subconscious mind, which is the creative mind, -at work. That is the mind which makes artists do things without their -knowing how they came to do them. Perhaps with me it was the cumulative -effect of a lot of little things individually insignificant but -collectively powerful. Possibly my friend’s unintelligent bullishness -aroused a spirit of contradiction and I picked on UP. because it had -been touted so much. I can’t tell you what the cause or motive for -hunches may be. All I know is that I went out of the Atlantic City -branch office of Harding Brothers short three thousand Union Pacific in -a rising market, and I wasn’t worried a bit. - -I wanted to know what price they’d got for my last two thousand shares. -So after luncheon we walked up to the office. I had the pleasure of -seeing that the general market was strong and Union Pacific higher. - -“I see your finish,” said my friend. You could see he was glad he -hadn’t sold any. - -The next day the general market went up some more and I heard nothing -but cheerful remarks from my friend. But I felt sure I had done right -to sell UP., and I never get impatient when I feel I am right. What’s -the sense? That afternoon Union Pacific stopped climbing, and toward -the end of the day began to go off. Pretty soon it got down to a point -below the level of the average of my three thousand shares. I felt more -positive than ever that I was on the right side, and since I felt that -way I naturally had to sell some more. So, toward the close, I sold an -additional two thousand shares. - -There I was, short five thousand shares of UP. on a hunch. That was -as much as I could sell in Harding’s office with the margin I had -up. It was too much stock for me to be short of, on a vacation; so -I gave up the vacation and returned to New York that very night. -There was no telling what might happen and I thought I’d better be -Johnny-on-the-spot. There I could move quickly if I had to. - -The next day we got the news of the San Francisco earthquake. It was -an awful disaster. But the market opened down only a couple of points. -_The bull forces were at work, and the public never is independently -responsive to news. You see that all the time. If there is a solid -bull foundation, for instance, whether or not what the papers call -bull manipulation is going on the same time, certain news items fail -to have the effect they would have if the Street was bearish._ It is -all in the state of sentiment at the time. In this case the Street did -not appraise the extent of the catastrophe because it didn’t wish to. -Before the day was over prices came back. - -I was short five thousand shares. The blow had fallen, but my stock -hadn’t. My hunch was of the first water, but my bank account wasn’t -growing; not even on paper. The friend who had been in Atlantic City -with me when I put out my short line in UP. was glad and sad about it. - -He told me: “That was some hunch, kid. But, say, when the talent and -the money are all on the bull side what’s the use of bucking against -them? They are bound to win out.” - -“Give them time,” I said. I meant prices. I wouldn’t cover because I -knew the damage was enormous and the Union Pacific would be one of the -worst sufferers. _But it was exasperating to see the blindness of the -Street._ - -“Give ’em time and your skin will be where all the other bear hides are -stretched out in the sun, drying,” he assured me. - -“What would you do?” I asked him. “Buy UP. on the strength of the -millions of dollars of damage suffered by the Southern Pacific and -other lines? Where are the earnings for dividends going to come from -after they pay for all they’ve lost? The best you can say is that the -trouble may not be as bad as it is painted. But is that a reason for -buying the stocks of the roads chiefly affected? Answer me that.” - -But all my friend said was: “Yes, that listens fine. But I tell you, -the market doesn’t agree with you. The tape doesn’t lie, does it?” - -“_It doesn’t always tell the truth on the instant_,” _I said._ - -“Listen. A man was talking to Jim Fisk a little before Black Friday, -giving ten good reasons why gold ought to go down for keeps. He got so -encouraged by his own words that he ended by telling Fisk that he was -going to sell a few million. And Jim Fisk just looked at him and said, -“Go ahead! Do! Sell it short and invite me to your funeral.” - -“Yes,” I said; “and if that chap had sold it short, look at the killing -he would have made! Sell some UP. yourself.” - -“Not I! I’m the kind that thrives best on not rowing against wind and -tide.” - -On the following day, when fuller reports came in, the market began to -slide off, but even then not as violently as it should. Knowing that -nothing under the sun could stave off a substantial break I doubled up -and sold five thousand shares. Oh, by that time it was plain to most -people, and my brokers were willing enough. It wasn’t reckless of them -or of me, not the way I sized up the market. On the day following, the -market began to go for fair. There was the dickens to pay. Of course I -pushed my luck for all it was worth. I doubled up again and sold ten -thousand shares more. It was the only play possible. - -I wasn’t thinking of anything except that I was right--100 per cent -right--and that this was a heaven-sent opportunity. It was up to me to -take advantage of it. I sold more. Did I think that with such a big -line of shorts out, it wouldn’t take much of a rally to wipe out my -paper profits and possibly my principal? I don’t know whether I thought -of that or not, but if I did it didn’t carry much weight with me. I -wasn’t plunging recklessly. I was really playing conservatively. There -was nothing that anybody could do to undo the earthquake, was there? -They couldn’t restore the crumpled buildings overnight, free, gratis, -for nothing, could they? All the money in the world couldn’t help much -in the next few hours, could it? - -I was not betting blindly. I wasn’t a crazy bear. I wasn’t drunk with -success or thinking that because Frisco was pretty well wiped off the -map the entire country was headed for the scrap heap. No, indeed! I -didn’t look for a panic. Well, the next day I cleaned up. I made two -hundred and fifty thousand dollars. It was my biggest winnings up to -that time. It was all made in a few days. The Street paid no attention -to the earthquake the first day or two. They’ll tell you that it was -because the first despatches were not so alarming, but I think it was -because it took so long to change the point of view of the public -toward the securities markets. Even the professional traders for the -most part were slow and shortsighted. - -I have no explanation to give you, either scientific or childish. I am -telling you what I did, and why, and what came of it. I was much less -concerned with the mystery of the hunch than with the fact that I got a -quarter of a million out of it. It meant that I could now swing a much -bigger line than ever, if or when the time came for it. - -That summer I went to Saratoga Springs. It was supposed to be a -vacation for me, but I kept an eye on the market. To begin with, -I wasn’t so tired that it bothered me to think about it. And then, -everybody I knew up there had or had had an active interest in it. -We naturally talked about it. I have noticed that there is quite a -difference between talking and trading. Some of these chaps remind you -of the bold clerk who talks to his cantankerous employer as to a yellow -dog--when he tells you about it. - -Harding Brothers had a branch office in Saratoga. Many of their -customers were there. But the real reason, I suppose, was the -advertising value. Having a branch office in a resort is simply -high-class billboard advertising. I used to drop in and sit around -with the rest of the crowd. The manager was a very nice chap from the -New York office who was there to give the glad hand to friends and -strangers and, if possible, to get business. It was a wonderful place -for tips--all kinds of tips, horse-race, stock-market, and waiters’. -The office knew I didn’t take any, so the manager didn’t come and -whisper confidentially in my ear what he’d just got on the q. t. from -the New York office. He simply passed over the telegrams, saying, “This -is what they’re sending out,” or something of the kind. - -Of course I watched the market. With me, to look at the quotation board -and to read the signs is one process. My good friend Union Pacific, I -noticed, looked like going up. _The price was high, but the stock acted -as if it were being accumulated._ I watched it a couple of days without -trading in it, and the more I watched it the more convinced I became -that it was being bought on balance by somebody who was no piker, -somebody who not only had a big bank roll but knew what was what. Very -clever accumulation, I thought. - -As soon as I was sure of this I naturally began to buy it, at about -160. It kept on acting all hunky, and so I kept on buying it, five -hundred shares at a clip. _The more I bought the stronger it got, -without any spurt, and I was feeling very comfortable._ I couldn’t see -any reason why that stock shouldn’t go up a great deal more; not with -what I read on the tape. - -All of a sudden the manager came to me and said they’d got a message -from New York--they had a direct wire of course--asking if I was in -the office, and when they answered yes, another came saying: “Keep him -there. Tell him Mr. Harding wants to speak to him.” - -I said I’d wait, and bought five hundred shares more of UP. I couldn’t -imagine what Harding could have to say to me. I didn’t think it was -anything about business. My margin was more than ample for what I was -buying. Pretty soon the manager came and told me that Mr. Harding -wanted me on the long-distance telephone. - -“Hello, Ed,” I said. - -But he said, “What the devil’s the matter with you? Are you crazy?” - -“Are you?” I said. - -“What are you doing?” he asked. - -“What do you mean?” - -“Buying all that stock.” - -“Why, isn’t my margin all right?” - -“It isn’t a case of margin, but of being a plain sucker.” - -“I don’t get you.” - -“Why are you buying all that Union Pacific?” - -“It’s going up,” I said. - -“Going up, hell! Don’t you know that the insiders are feeding it out to -you? You’re just about the easiest mark up there. You’d have more fun -losing it on the ponies. Don’t let them kid you.” - -“Nobody is kidding me,” I told him. “I haven’t talked to a soul about -it.” - -But he came back at me: “You can’t expect a miracle to save you every -time you plunge into that stock. Get out while you’ve still got a -chance,” he said. “It’s a crime to be long of that stock at this -level--when these highbinders are shoveling it out by the ton.” - -“The tape says they’re buying it,” I insisted. - -“Larry, I got heart disease when your orders began to come in. For the -love of Mike, don’t be a sucker. Get out! Right away. It’s liable to -bust wide open any minute. I’ve done my duty. Good-by!” And he hung up. - -Ed Harding was a very clever chap, unusually well-informed and a real -friend, disinterested and kind-hearted. And what was even more, I knew -he was in position to hear things. All I had to go by, in my purchases -of UP., was my years of studying the behaviour of stocks and my -perception of certain symptoms which experience had taught me usually -accompanied a substantial rise. _I don’t know what happened to me, -but I suppose I must have concluded that my tape reading told me the -stock was being absorbed simply because very clever manipulation by the -insiders made the tape tell a story that wasn’t true._ Possibly I was -impressed by the pains Ed Harding took to stop me from making what he -was so sure would be a colossal mistake on my part. Neither his brains -nor his motives were to be questioned. Whatever it was that made me -decide to follow his advice, I cannot tell you; but follow it, I did. - -I sold out all my Union Pacific. _Of course if it was unwise to be long -of it, it was equally unwise not to be short of it. So after I got rid -of my long stock I sold four thousand shares short. I put out most of -it around 162._ - -The next day the directors of the Union Pacific Company declared a 10 -per cent dividend on the stock. At first nobody in Wall Street believed -it. It was too much like the desperate manœuvre of cornered gamblers. -All the newspapers jumped on the directors. But while the Wall Street -talent hesitated to act the market boiled over. Union Pacific led, and -on huge transactions made a new high-record price. Some of the room -traders made fortunes in an hour and I remember later hearing about -a rather dull-witted specialist who made a mistake that put three -hundred and fifty thousand dollars in his pocket. He sold his seat the -following week and became a gentleman farmer the following month. - -Of course I realised, the moment I heard the news of the declaration -of the unprecedented 10 per cent dividend, that I got what I deserved -for disregarding the voice of experience and listening to the voice of -a tipster. _My own convictions I had set aside for the suspicions of a -friend, simply because he was disinterested and as a rule knew what he -was doing._ - -As soon as I saw Union Pacific making new high records I said to -myself, “This is no stock for me to be short of.” - -All I had in the world was up as margin in Harding’s office. I was -neither cheered nor made stubborn by the knowledge of that fact. What -was plain was that I had read the tape accurately and that I had been a -ninny to let Ed Harding shake my own resolution. There was no sense in -recriminations, because I had no time to lose; and besides, what’s done -is done. So I gave an order to take in my shorts. The stock was around -165 when I sent in that order to buy in the four thousand UP. at the -market. I had a three-point loss on it at that figure. Well, my brokers -paid 172 and 174 for some of it before they were through. I found when -I got my reports that Ed Harding’s kindly intentioned interference cost -me forty thousand dollars. _A low price for a man to pay for not having -the courage of his own convictions! It was a cheap lesson._ - -I wasn’t worried, because the tape said still higher prices. It was -an unusual move and there were no precedents for the action of the -directors, but I did this time what I thought I ought to do. As soon -as I had given the first order to buy four thousand shares to cover my -shorts I decided to profit by what the tape indicated and so I went -along. I bought four thousand shares and held that stock until the next -morning. Then I got out. I not only made up the forty thousand dollars -I had lost but about fifteen thousand besides. If Ed Harding hadn’t -tried to save me money I’d have made a killing. But he did me a very -great service, for it was the lesson of that episode that, I firmly -believe, _completed_ my education as a trader. - -It was not that all I needed to learn was not to take tips but follow -my own inclination. _It was that I gained confidence in myself and I -was able finally to shake off the old method of trading._ That Saratoga -experience was my last haphazard, hit-or-miss operation. From then on -I began to think of basic conditions instead of individual stocks. I -promoted myself to a higher grade in the hard school of speculation. It -was a long and difficult step to take. - - - - -_VII_ - - -I never hesitate to tell a man that I am bullish or bearish. But I do -not tell people to buy or sell any particular stock. In a bear market -all stocks go down and in a bull market they go up. I don’t mean of -course that in a bear market caused by a war, ammunition shares do not -go up. I speak in a general sense. But the average man doesn’t wish to -be told that it is a bull or a bear market. What he desires is to be -told specifically which particular stock to buy or sell. He wants to -get something for nothing. He does not wish to work. He doesn’t even -wish to have to think. It is too much bother to have to count the money -that he picks up from the ground. - -Well, I wasn’t that lazy, but I found it easier to think of individual -stocks than of the general market and therefore of individual -fluctuations rather than of general movements. _I had to change and I -did._ - -_People don’t seem to grasp easily the fundamentals of stock trading. I -have often said that to buy on a rising market is the most comfortable -way of buying stocks. Now, the point is not so much to buy as cheap as -possible or go short at top prices, but to buy or sell at the right -time. When I am bearish and I sell a stock, each sale must be at a -lower level than the previous sale. When I am buying, the reverse is -true. I must buy on rising scale. I don’t buy long stock on a scale -down, I buy on a scale up._ - -Let us suppose, for example, that I am buying some stock. _I’ll buy -two thousand shares at 110. If the stock goes up to 111 after I buy -it I am, at least temporarily, right in my operation, because it is a -point higher; it shows me a profit. Well, because I am right I go in -and buy another two thousand shares._ If the market is still rising I -buy a third lot of two thousand shares. Say the price goes up to 114. -I think it is enough for the time being. I now have a trading basis to -work from. I am long six thousand shares at an average of 111¾, and -the stock is selling at 114. I won’t buy any more just then. I wait -and see. I figure that at some stage of the rise there is going to be -a reaction. I want to see how the market takes care of itself after -that reaction. It will probably react to where I got my third lot. Say -that after going higher it falls back to 112¼, and then rallies. Well, -just as it goes back to 113¾ I shoot an order to buy four thousand--at -the market of course. Well, if I get that four thousand at 113¾ I know -something is wrong and I’ll give a testing order--that is, I’ll sell -one thousand shares to see how the market takes it. But suppose that of -the order to buy the four thousand shares that I put in when the price -was 113¾ I get two thousand at 114 and five hundred at 114½ and the -rest on the way up so that for the last five hundred I pay 115½. Then -I know I am right. It is the way I get the four thousand shares that -tells me whether I am right in buying that particular stock at that -particular time--_for of course I am working on the assumption that I -have checked up general conditions pretty well and they are bullish. I -never want to buy stocks too cheap or too easily._ - -I remember a story I heard about Deacon S. V. White when he was one of -the big operators of the Street. He was a very fine old man, clever as -they make them, and brave. He did some wonderful things in his day, -from all I’ve heard. - -It was in the old days when Sugar was one of the most continuous -purveyors of fireworks in the market. H. O. Havemeyer, president of the -company, was in the heyday of his power. I gather from talks with the -old-timers that H.O. and his following had all the resources of cash -and cleverness necessary to put through successfully any deal in their -own stock. They tell me that Havemeyer trimmed more small professional -traders in that stock than any other insider in any other stock. As a -rule, the floor traders are more likely to thwart the insiders’ game -than help it. - -One day a man who knew Deacon White rushed into the office all excited -and said, “Deacon, you told me if I ever got any good information to -come to you at once with it and if you used it you’d carry me for a few -hundred shares.” He paused for breath and for confirmation. - -The deacon looked at him in that meditative way he had and said, “I -don’t know whether I ever told you exactly that or not, but I am -willing to pay for information that I can use.” - -“Well, I’ve got it for you.” - -“Now, that’s nice,” said the deacon, so mildly that the man with the -info swelled up and said, “Yes, sir, deacon.” Then he came closer so -nobody else would hear and said, “H. O. Havemeyer is buying Sugar.” - -“Is he?” asked the deacon quite calmly. - -It peeved the informant, who said impressively: “Yes, sir. Buying all -he can get, deacon.” - -“My friend, are you sure?” asked old S.V. - -“Deacon, I know it for a positive fact. The old inside gang are buying -all they can lay their hands on. It’s got something to do with the -tariff and there’s going to be a killing in the common. It will cross -the preferred. And that means a sure thirty points for a starter.” - -“D’you really think so?” And the old man looked at him over the top of -the old-fashioned silver-rimmed spectacles that he had put on to look -at the tape. - -“Do I think so? No, I don’t think so; I know so. Absolutely! Why, -deacon, when H. O. Havemeyer and his friends buy Sugar as they’re doing -now they’re never satisfied with anything less than forty points net. I -shouldn’t be surprised to see the market get away from them any minute -and shoot up before they’ve got their full lines. There ain’t as much -of it kicking around the brokers’ offices as there was a month ago.” - -“He’s buying Sugar, eh?” repeated the deacon absently. - -“Buying it? Why, he’s scooping it in as fast as he can without putting -up the price on himself.” - -“So?” said the deacon. That was all. - -But it was enough to nettle the tipster, and he said, “Yes, sir-ree! -And I call that very good information. Why, it’s absolutely straight.” - -“Is it?” - -“Yes; and it ought to be worth a whole lot. Are you going to use it?” - -“Oh, yes. I’m going to use it.” - -“When?” asked the information bringer suspiciously. - -“Right away.” And the deacon called: “Frank!” It was the first name of -his shrewdest broker, who was then in the adjoining room. - -“Yes, sir,” said Frank. - -“I wish you’d go over to the Board and sell ten thousand Sugar.” - -“Sell?” yelled the tipster. There was such suffering in his voice that -Frank, who had started out at a run, halted in his tracks. - -“Why, yes,” said the deacon mildly. - -“But I told you H. O. Havemeyer was buying it!” - -“I know you did, my friend,” said the deacon calmly; and turning to the -broker: “Make haste, Frank!” - -The broker rushed out to execute the order and the tipster turned red. - -“I came in here,” he said furiously, “with the best information I ever -had. I brought it to you because I thought you were my friend, and -square. I expected you to act on it--” - -“I am acting on it,” interrupted the deacon in a tranquillising voice. - -“But I told you H.O. and his gang were buying!” - -“That’s right. I heard you.” - -“Buying! Buying! I said buying!” shrieked the tipster. - -“Yes, buying! That is what I understood you to say,” the deacon assured -him. He was standing by the ticker, looking at the tape. - -“But you are selling it.” - -“Yes; ten thousand shares.” And the deacon nodded. “Selling it, of -course.” - -He stopped talking to concentrate on the tape and the tipster -approached to see what the deacon saw, for the old man was very foxy. -While he was looking over the deacon’s shoulder a clerk came in with a -slip, obviously the report from Frank. The deacon barely glanced at it. -He had seen on the tape how his order had been executed. - -It made him say to the clerk, “Tell him to sell another ten thousand -Sugar.” - -“Deacon, I swear to you that they really are buying the stock!” - -“Did Mr. Havemeyer tell you?” asked the deacon quietly. - -“Of course not! He never tells anybody anything. He would not bat an -eyelid to help his best friend make a nickel. But I know this is true.” - -“Do not allow yourself to become excited, my friend.” And the deacon -held up a hand. He was looking at the tape. The tip-bringer said, -bitterly: - -“If I had known you were going to do the opposite of what I expected -I’d never have wasted your time or mine. But I am not going to feel -glad when you cover that stock at an awful loss. I’m sorry for you, -deacon. Honest! If you’ll excuse me I’ll go elsewhere and act on my own -information.” - -“I’m acting on it. I think I know a little about the market; not as -much, perhaps, as you and your friend H. O. Havemeyer, but still a -little. What I am doing is what my experience tells me is the wise -thing to do with that information you brought me. After a man has been -in Wall Street as long as I have he is grateful for anybody who feels -sorry for him. Remain calm, my friend.” - -The man just stared at the deacon, for whose judgment and nerve he had -great respect. - -Pretty soon the clerk came in again and handed a report to the deacon, -who looked at it and said: “Now tell him to buy thirty thousand Sugar. -Thirty thousand!” - -The clerk hurried away and the tipster just grunted and looked at the -old gray fox. - -“My friend,” the deacon explained kindly, “I did not doubt that you -were telling me the truth as you saw it. But even if I had heard H. O. -Havemeyer tell you himself, I still would have acted as I did. For -there was only one way to find out if anybody was buying the stock in -the way you said H. O. Havemeyer and his friends were buying it, and -that was to do what I did. The first ten thousand shares went fairly -easily. It was not quite conclusive. But the second ten thousand was -absorbed by a market that did not stop rising. The way the twenty -thousand shares were taken by somebody proved to me that somebody was -in truth willing to take all the stock that was offered. It doesn’t -particularly matter at this point who that particular somebody may be. -So I have covered my shorts and am long ten thousand shares, and I -think that your information was good as far as it went.” - -“And how far does it go?” asked the tipster. - -“You have five hundred shares in this office at the average price of -the ten thousand shares,” said the deacon. “Good day, my friend. Be -calm the next time.” - -“Say, deacon,” said the tipster, “won’t you please sell mine when you -sell yours? I don’t know as much as I thought I did.” - -That’s the theory. _That is why I never buy stocks cheap._ Of course I -always try to buy effectively--in such a way as to help my side of the -market. When it comes to selling stocks, it is plain that nobody can -sell unless somebody wants those stocks. - -If you operate on a large scale you will have to bear that in mind all -the time. A man studies conditions, plans his operations carefully and -proceeds to act. He swings a pretty fair line and he accumulates a big -profit--on paper. Well, that man can’t sell at will. You can’t expect -the market to absorb fifty thousand shares of one stock as easily as -it does one hundred. He will have to wait until he has a market there -to take it. There comes the time when he thinks the requisite buying -power is there. When that opportunity comes he must seize it. As a -rule he will have been waiting for it. _He has to sell when he can, -not when he wants to._ To learn the time, he has to watch and test. It -is no trick to tell when the market can take what you give it. But in -starting a movement it is unwise to take on your full line unless you -are convinced that conditions are exactly right. _Remember that stocks -are never too high for you to begin buying or too low to begin selling. -But after the initial transaction, don’t make a second unless the first -shows you a profit. Wait and watch._ That is where your tape reading -comes in--to enable you to decide as to the proper time for beginning. -_Much depends upon beginning at exactly the right time._ It took me -years to realize the importance of this. It also cost me some hundreds -of thousands of dollars. - -I don’t mean to be understood as advising persistent pyramiding. _A -man can pyramid and make big money that he couldn’t make if he didn’t -pyramid; of course._ But what I meant to say was this: Suppose a man’s -line is five hundred shares of stock. I say that he ought not to buy -it all at once; not if he is speculating. If he is merely gambling the -only advice I have to give him is, don’t! - -Suppose he buys his first hundred, and that promptly shows him a loss. -Why should he go to work and get more stock? He ought to see at once -that he is in wrong; at least temporarily. - - - - -_VIII_ - - -The Union Pacific incident in Saratoga in the summer of 1906 made me -more independent than ever of tips and talk--that is, of the opinions -and surmises and suspicions of other people, however friendly or -however able they might be personally. Events, not vanity, proved -for me that I could read the tape more accurately than most of the -people about me. I also was better equipped than the average customer -of Harding Brothers in that I was utterly free from speculative -prejudices. The bear side doesn’t appeal to me any more than the bull -side, or vice versa. My one steadfast prejudice is against being wrong. - -Even as a lad I always got my own meanings out of such facts as I -observed. It is the only way in which the meaning reaches me. I cannot -get out of facts what somebody tells me to get. They are my facts, -don’t you see? If I believe something you can be sure it is because -I simply must. When I am long of stocks it is because my reading of -conditions has made me bullish. But you find many people, reputed to be -intelligent, who are bullish because they have stocks. I do not allow -my possessions--or my prepossessions either--to do any thinking for me. -That is why I repeat that I never argue with the tape. To be angry at -the market because it unexpectedly or even illogically goes against you -is like getting mad at your lungs because you have pneumonia. - -I had been gradually approaching the full realization of how much more -than tape reading there was to stock speculation. Old man Partridge’s -insistence on the vital importance of being continuously bullish in a -bull market doubtless made my mind dwell on the need above all other -things of determining the kind of market a man is trading in. _I began -to realize that the big money must necessarily be in the big swing. -Whatever might seem to give a big swing its initial impulse, the fact -is that its continuance is not the result of manipulations by pools -or artifice by financiers, but depends upon basic conditions. And no -matter who opposes it, the swing must inevitably run as far and as fast -and as long as the impelling forces determine._ - -After Saratoga I began to see more clearly--perhaps I should say more -maturely--that since the entire list moves in accordance with the -main current there was not so much need as I had imagined to study -individual plays or the behaviour of this or the other stock. Also, -by thinking of the swing a man was not limited in his trading. He -could buy or sell the entire list. In certain stocks a short line is -dangerous after a man sells more than a certain percentage of the -capital stock, the amount depending on how, where and by whom the stock -is held. But he could sell a million shares of the general list--if he -had the price--without the danger of being squeezed. A great deal of -money used to be made periodically by insiders in the old days out of -the shorts and their carefully fostered fears of corners and squeezes. - -_Obviously the thing to do was to be bullish in a bull market and -bearish in a bear market._ Sounds silly, doesn’t it? But I had to grasp -that general principle firmly before I saw that to put it into practice -really meant to anticipate probabilities. It took me a long time to -learn to trade on those lines. But in justice to myself I must remind -you that up to then I had never had a big enough stake to speculate -that way. A big swing will mean big money if your line is big, and to -be able to swing a big line you need a big balance at your broker’s. - -I always had--or felt that I had--to make my daily bread out of the -stock market. It interfered with my efforts to increase the stake -available for the more profitable but slower and therefore more -immediately expensive method of trading on swings. - -But not only did my confidence in myself grow stronger but my brokers -ceased to think of me as a sporadically lucky Boy Plunger. They had -made a great deal out of me in commissions, but now I was in a fair way -to become their star customer and as such to have a value beyond the -actual volume of my trading. _A customer who makes money is an asset to -any broker’s office._ - -The moment I ceased to be satisfied with merely studying the tape I -ceased to concern myself exclusively with the daily fluctuations in -specific stocks, and when that happened I simply had to study the game -from a different angle. I worked back from the quotation to first -principles; from price-fluctuations to basic conditions. - -Of course I had been reading the daily dope regularly for a long time. -All traders do. But much of it was gossip, some of it deliberately -false, and the rest merely the personal opinion of the writers. The -reputable weekly reviews when they touched upon underlying conditions -were not entirely satisfactory to me. The point of view of the -financial editors was not mine as a rule. It was not a vital matter for -them to marshal their facts and draw their conclusions from them, but -it was for me. Also there was a vast difference in our appraisal of the -element of time. _The analysis of the week that had passed was less -important to me than the forecast of the weeks that were to come._ - -For years I had been the victim of an unfortunate combination of -inexperience, youth and insufficient capital. But now I felt the -elation of a discoverer. My new attitude toward the game explained my -repeated failures to make big money in New York. But now with adequate -resources, experience and confidence, I was in such a hurry to try -the new key that I did not notice that there was another lock on the -door--_a time lock!_ It was a perfectly natural oversight. I had to pay -the usual tuition--a good whack per each step forward. - -I studied the situation in 1906 and I thought that the money outlook -was particularly serious. Much actual wealth the world over had -been destroyed. Everybody must sooner or later feel the pinch, and -therefore nobody would be in position to help anybody. It would not -be the kind of hard times that comes from the swapping of a house -worth ten thousand dollars for a carload of race horses worth eight -thousand dollars. It was the complete destruction of the house by fire -and of most of the horses by a railroad wreck. It was good hard cash -that went up in cannon smoke in the Boer War, and the millions spent -for feeding nonproducing soldiers in South Africa meant no help from -British investors as in the past. Also, the earthquake and the fire in -San Francisco and other disasters touched everybody--manufacturers, -farmers, merchants, labourers and millionaires. The railroads must -suffer greatly. I figured that nothing could stave off one peach of a -smash. _Such being the case there was but one thing to do--sell stocks!_ - -I told you I had already observed that my initial transaction, after I -made up my mind which way I was going to trade, was apt to show me a -profit. And now when I decided to sell I plunged. Since we undoubtedly -were entering upon a genuine bear market I was sure I should make the -biggest killing of my career. - -The market went off. Then it came back. It shaded off and then it began -to advance steadily. My paper profits vanished and paper losses grew. -One day it looked as if not a bear would be left to tell the tale -of the strictly genuine bear market. _I couldn’t stand the gaff. I -covered. It was just as well. If I hadn’t I wouldn’t have had enough to -buy a postal card. I lost most of my fur, but it was better to live to -fight another day._ - -I had made a mistake. But where? I was bearish in a bear market. -That was wise. I had sold stocks short. That was proper. _I had sold -them too soon. That was costly. My position was right but my play was -wrong._ However, every day brought the market nearer to the inevitable -smash. So I waited and when the rally began to falter and pause I let -them have as much stock as my sadly diminished margins permitted. _I -was right this time--for exactly one whole day_, for on the next there -was another rally. Another big bite out of yours truly! So I read the -tape and covered and waited. In due course I sold again--and again they -went down promisingly and then they rudely rallied. - -It looked as if the market were doing its best to make me go back to -my old and simple ways of bucket-shop trading. _It was the first time -I had worked with a definite forward-looking plan embracing the entire -market instead of one or two stocks._ I figured that I must win if -I held out. Of course at that time I had not developed my system of -placing my bets or I would have put out my short line on a declining -market, as I explained to you the last time. I would not then have lost -so much of my margin. _I would have been wrong but not hurt._ You see, -I had observed certain facts but had not learned to co-ordinate them. -My incomplete observation not only did not help but actually hindered. - -_I have always found it profitable to study my mistakes._ Thus I -eventually discovered that it was all very well not to lose your bear -position in a bear market, but that at all times the tape should be -read to determine the propitiousness of the time for operating. If -you begin right you will not see your profitable position seriously -menaced; and then you will find no trouble in sitting tight. - -Of course to-day I have greater confidence in the accuracy of my -observations--in which neither hopes nor hobbies play any part--and -also I have greater facilities for verifying my facts as well as -for variously testing the correctness of my views. But in 1906 the -succession of rallies dangerously impaired my margins. - -I was nearly twenty-seven years old. I had been at the game twelve -years. _But the first time I traded because of a crisis that was still -to come I found that I had been using a telescope._ Between my first -glimpse of the storm cloud and the time for cashing in on the big break -the stretch was evidently so much greater than I had thought that I -began to wonder whether I really saw what I thought I saw so clearly. -_We had had many warnings and sensational ascensions in call-money -rates._ Still some of the great financiers talked hopefully--at least -to newspaper reporters--and the ensuing rallies in the stock market -gave the lie to the calamity howlers. Was I fundamentally wrong in -being bearish or merely temporarily wrong in having begun to sell short -too soon? - -I decided that I began too soon, but that I really couldn’t help it. -Then the market began to sell off. That was my opportunity. I sold all -I could, and then stocks rallied again, to quite a level. - -It cleaned me out. - -There I was--right and busted! - -I tell you it was remarkable. What happened was this: I looked ahead -and saw a big pile of dollars. Out of it stuck a sign. It had “Help -yourself,” on it, in huge letters. Beside it stood a cart with -“Lawrence Livingston Trucking Corporation” painted on its side. I had -a brand-new shovel in my hand. There was not another soul in sight, -so I had no competition in the gold-shoveling, which is one beauty of -seeing the dollar-heap ahead of others. The people who might have seen -it if they had stopped to look were just then looking at baseball games -instead, or motoring or buying houses to be paid for with the very -dollars that I saw. That was the first time that I had seen big money -ahead, and I naturally started toward it on the run. Before I could -reach the dollar-pile my wind went back on me and I fell to the ground. -The pile of dollars was still there, but I had lost the shovel, and the -wagon was gone. So much for sprinting too soon! I was too eager to -prove to myself that I had seen real dollars and not a mirage. I saw, -and knew that I saw. Thinking about the reward for my excellent sight -kept me from considering the distance to the dollar-heap. I _should -have walked and not sprinted._ - -That is what happened. I didn’t wait to determine whether or not the -time was right for plunging on the bear side. On the one occasion when -I should have invoked the aid of my tape-reading I didn’t do it. That -is how I came to learn that even _when one is properly bearish at the -very beginning of a bear market it is well not to begin selling in bulk -until there is no danger of the engine back-firing_. - -I had traded in a good many thousands of shares at Harding’s office in -all those years, and, moreover, the firm had confidence in me and our -relations were of the pleasantest. I think they felt that I was bound -to be right again very shortly and they knew that with my habit of -pushing my luck all I needed was a start and I’d more than recover what -I had lost. They had made a great deal of money out of my trading and -they would make more. So there was no trouble about my being able to -trade there again as long as my credit stood high. - -The succession of spankings I had received made me less aggressively -cocksure; perhaps I should say less careless, for of course I knew -I was just so much nearer to the smash. All I could do was wait -watchfully, as I should have done before plunging. It wasn’t a case of -locking the stable after the horse was stolen. I simply had to be sure, -the next time I tried. _If a man didn’t make mistakes he’d own the -world in a month. But if he didn’t profit by his mistakes he wouldn’t -own a blessed thing._ - -Well, sir, one fine morning I came downtown feeling cocksure once more. -There wasn’t any doubt this time. I had read an advertisement in the -financial pages of all the newspapers that was the high sign I hadn’t -had the sense to wait for before plunging. It was the announcement -of a new issue of stock by the Northern Pacific and Great Northern -roads. The payments were to be made on the installment plan for the -convenience of the stockholders. This consideration was something new -in Wall Street. It struck me as more than ominous. - -For years the unfailing bull item on Great Northern preferred had -been the announcement that another melon was to be cut, said melon -consisting of the right of the lucky stockholders to subscribe at par -to a new issue of Great Northern stock. These rights were valuable, -since the market price was always way above par. But now _the money -market_ was such that the most powerful banking houses in the country -were none too sure the stockholders would be able to pay cash for the -bargain. And Great Northern preferred was selling at about 330! - -As soon as I got to the office I told Ed Harding, “The time to sell is -right now. This is when I should have begun. Just look at that ad, will -you?” - -He had seen it. I pointed out what the bankers’ confession amounted to -in my opinion, but he couldn’t quite see the big break right on top of -us. He thought it better to wait before putting out a very big short -line by reason of the market’s habit of having big rallies. If I waited -prices might be lower, but the operation would be safer. - -“Ed,” I said to him, “the longer the delay in starting the sharper the -break will be when it does start. That ad is a signed confession on -the part of the bankers. What they fear is what I hope. This is a sign -for us to get aboard the bear wagon. It is all we needed. If I had ten -million dollars I’d stake every cent of it this minute.” - -I had to do some more talking and arguing. He wasn’t content with the -only inferences a sane man could draw from that amazing advertisement. -It was enough for me, but not for most of the people in the office. I -sold a little; too little. - -A few days later St. Paul very kindly came out with an announcement of -an issue of its own; either stocks or notes, I forget which. But that -doesn’t matter. What mattered then was that I noticed the moment I read -it that the date of payment was set ahead of the Great Northern and -Northern Pacific payments, which had been announced earlier. It was as -plain as though they had used a megaphone that grand old St. Paul was -trying to beat the other two railroads to what little money there was -floating around in Wall Street. The St. Paul’s bankers quite obviously -feared that there wasn’t enough for all three and they were not saying, -“After you, my dear Alphonse!” If money already was that scarce--and -you bet the bankers knew--what would it be later? The railroads needed -it desperately. It wasn’t there. What was the answer? - -Sell ’em! Of course! The public, with their eyes fixed on the stock -market, saw little--that week. The wise stock operators saw much--that -year. That was the difference. - -For me, that was the end of doubt and hesitation. I made up my mind -for keeps then and there. That same morning I began what really was -my first campaign along the lines that I have since followed. I told -Harding what I thought and how I stood, and he made no objections to -my selling Great Northern preferred at around 330, and other stocks at -high prices. I profited by my earlier and costly mistakes and sold more -intelligently. - -My reputation and my credit were reestablished in a jiffy. That is the -beauty of being right in a broker’s office, whether by accident or not. -But this time I was cold-bloodedly right, not because of a hunch or -from skillful reading of the tape, but as a result of my analysis of -conditions affecting the stock market in general. I wasn’t guessing. -I was anticipating the inevitable. It did not call for any courage to -sell stocks. I simply could not see anything but lower prices, and I -had to act on it, didn’t I? What else could I do? - -The whole list was soft as mush. Presently there was a rally and people -came to me to warn me that the end of the decline had been reached. -The big fellows, knowing the short interest to be enormous, had decided -to squeeze the stuffing out of the bears, and so forth. It would set -us pessimists back a few millions. It was a cinch that the big fellows -would have no mercy. I used to thank these kindly counsellors. I -wouldn’t even argue, because then they would have thought that I wasn’t -grateful for the warnings. - -The friend who had been in Atlantic City with me was in agony. He could -understand the hunch that was followed by the earthquake. He couldn’t -disbelieve in such agencies, since I had made a quarter of a million -by intelligently obeying my blind impulse to sell Union Pacific. He -even said it was Providence working in its mysterious way to make me -sell stocks when he himself was bullish. And he could understand my -second UP. trade in Saratoga because he could understand any deal that -involved one stock, on which the tip definitely fixed the movement -in advance, either up or down. But this thing of predicting that all -stocks were bound to go down used to exasperate him. What did that kind -of dope do anybody? How in blazes could a gentleman tell what to do? - -I recalled old Partridge’s favourite remark--“Well, this is a bull -market, you know”--as though that were tip enough for anybody who -was wise enough; as in truth it was. It was very curious how, after -suffering tremendous losses from a break of fifteen or twenty points, -people who were still hanging on, welcomed a three-point rally and were -certain the bottom had been reached and complete recovery begun. - -One day my friend came to me and asked me, “Have you covered?” - -“Why should I?” I said. - -“For the best reason in the world.” - -“What reason is that?” - -“To make money. They’ve touched bottom and what goes down must come up. -Isn’t that so?” - -“Yes,” I answered. “First they sink to the bottom. Then they come up; -but not right away. They’ve got to be good and dead a couple of days. -It isn’t time for these corpses to rise to the surface. They are not -quite dead yet.” - -An old-timer heard me. He was one of those chaps that are always -reminded of something. He said that William R. Travers, who was -bearish, once met a friend who was bullish. They exchanged market -views and the friend said, “Mr. Travers, how can you be bearish with -the market so stiff?” and Travers retorted, “Yes! Th-the s-s-stiffness -of d-death!” It was Travers who went to the office of a company and -asked to be allowed to see the books. The clerk asked him, “Have you an -interest in this company?” and Travers answered, “I sh-should s-say I -had! I’m sh-short t-t-twenty thousand sh-shares of the stock!” - -Well, the rallies grew feebler and feebler. I was pushing my luck -for all I was worth. Every time I sold a few thousand shares of -Great Northern preferred the price broke several points. I felt out -weak spots elsewhere and let ’em have a few. All yielded, with one -impressive exception; and that was Reading. - -When everything else hit the toboggan slide Reading stood like the Rock -of Gibraltar. Everybody said the stock was cornered. It certainly acted -like it. They used to tell me it was plain suicide to sell Reading -short. There were people in the office who were now as bearish on -everything as I was. But when anybody hinted at selling Reading they -shrieked for help. I myself had sold some short and was standing pat -on it. At the same time I naturally preferred to seek and hit the soft -spots instead of attacking the more strongly protected specialties. My -tape reading found easier money for me in other stocks. - -I heard a great deal about the Reading bull pool. It was a mighty -strong pool. To begin with they had a lot of low-priced stock, so that -their average was actually below the prevailing level, according to -friends who told me. Moreover, the principal members of the pool had -close connections of the friendliest character with the banks whose -money they were using to carry their huge holdings of Reading. As -long as the price stayed up the bankers’ friendship was staunch and -steadfast. One pool member’s paper profit was upward of three millions. -That allowed for some decline without causing fatalities. No wonder -the stock stood up and defied the bears. Every now and then the room -traders looked at the price, smacked their lips and proceeded to test -it with a thousand shares or two. They could not dislodge a share, so -they covered and went looking elsewhere for easier money. Whenever -I looked at it I also sold a little more--just enough to convince -myself that I was true to my new trading principles and wasn’t playing -favourites. - -In the old days the strength of Reading might have fooled me. The tape -kept on saying, “Leave it alone!” But my reason told me differently. I -was anticipating a general break, and there were not going to be any -exceptions, pool or no pool. - -I have always played a lone hand. I began that way in the bucket shops -and have kept it up. It is the way my mind works. I have to do my -own seeing and my own thinking. But I can tell you after the market -began to go my way I felt for the first time in my life that I had -allies--the strongest and truest in the world: underlying conditions. -They were helping me with all their might. Perhaps they were a trifle -slow at times bringing up the reserves, but they were dependable, -provided I did not get too impatient. I was not pitting my tape-reading -knack or my hunches against chance. The inexorable logic of events was -making money for me. - -The thing was to be right; to know it and to act accordingly. General -conditions, my true allies, said “Down!” and Reading disregarded the -command. It was an insult to us. It began to annoy me to see Reading -holding firmly, as though everything was serene. It ought to be the -best short sale in the entire list because it had not gone down and the -pool was carrying a lot of stock that it would not be able to carry -when the money stringency grew more pronounced. Some day the bankers’ -friends would fare no better than the friendless public. The stock -must go with the others. If Reading didn’t decline, then my theory was -wrong; I was wrong; facts were wrong; logic was wrong. - -I figured that the price held because the Street was afraid to sell it. -So one day I gave to two brokers each an order to sell four thousand -shares, at the same time. - -You ought to have seen that cornered stock, that it was sure suicide -to go short of, take a headlong dive when those competitive orders -struck it. I let ’em have a few thousand more. The price was 111 when I -started selling it. Within a few minutes I took in my entire short line -at 92. - -I had a wonderful time after that, and in _February of 1907 I cleaned -up_. Great Northern preferred had gone down sixty or seventy points, -and other stocks in proportion. _I had made a good bit, but the reason -I cleaned up was that I figured that the decline had discounted the -immediate future._ I looked for a fair recovery, but I wasn’t bullish -enough to play for a turn. I wasn’t going to lose my position entirely. -The market would not be right for me to trade in for a while. The first -ten thousand I made in the bucket shops _I lost because I traded in -and out of season, every day, whether or not conditions were right. I -wasn’t making that mistake twice._ Also, don’t forget that I had gone -broke a little while before because I had seen this break too soon -and started selling before it was time. Now when I had a big profit I -wanted to cash in so that I could feel I had been right. The rallies -had broken me before. I wasn’t going to let the next rally wipe me out. -Instead of sitting tight I went to Florida. I love fishing and I needed -a rest. I could get both down there. And besides, there are direct -wires between Wall Street and Palm Beach. - - - - -_IX_ - - -I cruised off the coast of Florida. The fishing was good. I was out of -stocks. My mind was easy. I was having a fine time. One day off Palm -Beach some friends came alongside in a motor boat. One of them brought -a newspaper with him. I hadn’t looked at one in some days and had not -felt any desire to see one. I was not interested in any news it might -print. But I glanced over the one my friend brought to the yacht, and I -saw that the market had had a big rally; ten points and more. - -I told my friends that I would go ashore with them. Moderate rallies -from time to time were reasonable. But the bear market was not over; -and here was Wall Street or the fool public or desperate bull interests -disregarding monetary conditions and marking up prices beyond reason or -letting somebody else do it. It was too much for me. I simply had to -take a look at the market. I didn’t know what I might or might not do. -But I knew that my pressing need was the sight of the quotation board. - -My brokers, Harding Brothers, had a branch office in Palm Beach. When -I walked in I found there a lot of chaps I knew. Most of them were -talking bullish. They were of the type that trade on the tape and want -quick action. Such traders don’t care to look ahead very far because -they don’t need to with their style of play. I told you how I’d got to -be known in the New York office as the Boy Plunger. Of course people -always magnify a fellow’s winnings and the size of the line he swings. -The fellows in the office had heard that I had made a killing in New -York on the bear side and they now expected that I again would plunge -on the short side. They themselves thought the rally would go to a good -deal further, but they rather considered it my duty to fight it. - -I had come down to Florida on a fishing trip. I had been under a pretty -severe strain and I needed my holiday. But the moment I saw how far the -recovery in prices had gone I no longer felt the need of a vacation. -I had not thought of just what I was going to do when I came ashore. -But now I knew I must sell stocks. I was right, and I must prove it in -my old and only way--by saying it with money. To sell the general list -would be a proper, prudent, profitable and even patriotic action. - -The first thing I saw on the quotation board was that Anaconda was on -the point of crossing 300. It had been going up by leaps and bounds -and there was apparently an aggressive bull party in it. It was an old -trading theory of mine that when a stock crosses _100 or 200 or 300 -for the first time the price does not stop at the even figure but goes -a good deal higher, so that if you buy it as soon as it crosses the -line it is almost certain to show you a profit_. Timid people don’t -like to buy a stock at a new high record. But I had the history of such -movements to guide me. - -Anaconda was only quarter stock--that is, the par of the shares was -only twenty-five dollars. It took four hundred shares of it to equal -the usual one hundred shares of other stocks, the par value of which -was one hundred dollars. I figured that when it crossed 300 it ought to -keep on going and probably touch 340 in a jiffy. - -I was bearish, remember, but I was also a tape-reading trader. I knew -Anaconda, if it went the way I figured, would move very quickly. -Whatever moves fast always appeals to me. I have learned patience and -how to sit tight, but my personal preference is for fleet movements, -and Anaconda certainly was no sluggard. My buying it because it -crossed 300 was prompted by the desire, always strong in me, of -confirming my observations. - -Just then the tape was saying that the buying was stronger than the -selling, and therefore the general rally might easily go a bit further. -It would be prudent to wait before going short. Still I might as well -pay myself wages for waiting. This would be accomplished by taking a -quick thirty points out of Anaconda. Bearish on the entire market and -bullish on that one stock! So I bought thirty-two thousand shares of -Anaconda--that is, eight thousand full shares. It was a nice little -flyer but I was sure of my premises and I figured that the profit would -help to swell the margin available for bear operations later on. - -On the next day the telegraph wires were down on account of a storm -up North or something of the sort. I was in Harding’s office waiting -for news. The crowd was chewing the rag and wondering all sorts of -things, as stock traders will when they can’t trade. Then we got a -quotation--the only one that day: Anaconda, 292. - -There was a chap with me, a broker I had met in New York. He knew I -was long eight thousand full shares and I suspect that he had some of -his own, for when we got that one quotation he certainly had a fit. -He couldn’t tell whether the stock at that very moment had gone off -another ten points or not. The way Anaconda had gone up it wouldn’t -have been anything unusual for it to break twenty points. But I said to -him, “Don’t you worry, John. It will be all right to-morrow.” That was -really the way I felt. But he looked at me and shook his head. He knew -better. He was that kind. So I laughed, and I waited in the office in -case some quotation trickled through. But no, sir. That one was all we -got: Anaconda, 292. It meant a paper loss to me of nearly one hundred -thousand dollars. I had wanted quick action. Well, I was getting it. - -The next day the wires were working and we got the quotations as usual. -Anaconda opened at 298 and went up to 302¾, but pretty soon it began -to fade away. Also, the rest of the market was not acting just right -for a further rally. I made up my mind that if Anaconda went back to -301 I must consider the whole thing a fake movement. On a legitimate -advance the price should have gone to 310 without stopping. If instead -it reacted it meant that precedents had failed me and I was wrong; _and -the only thing to do when a man is wrong is to be right by ceasing to -be wrong_. I had bought eight thousand full shares in expectation of a -thirty or forty point rise. It would not be my first mistake; nor my -last. - -Sure enough, Anaconda fell back to 301. The moment it touched that -figure I sneaked over to the telegraph operator--they had a direct wire -to the New York office--and I said to him, “Sell all my Anaconda, eight -thousand shares.” I said it in a low voice. I didn’t want anybody else -to know what I was doing. - -He looked up at me almost in horror. But I nodded and said, “All I’ve -got!” - -“Surely, Mr. Livingston, you don’t mean at the market?” and he looked -as if he was going to lose a couple of millions of his own through bum -execution by a careless broker. But I just told him, “Sell it! Don’t -argue about it!” - -The two Black boys, Jim and Ollie, were in the office, out of hearing -of the operator and myself. They were big traders who had come -originally from Chicago, where they had been famous plungers in wheat, -and were now heavy traders on the New York Stock Exchange. They were -very wealthy and were high rollers for fair. - -As I left the telegraph operator to go back to my seat in front of the -quotation board Oliver Black nodded to me and smiled. - -“You’ll be sorry, Larry,” he said. - -I stopped and asked him, “What do you mean?” - -“To-morrow you’ll be buying it back.” - -“Buying what back?” I said. I hadn’t told a soul except the telegraph -operator. - -“Anaconda,” he said. “You’ll be paying 320 for it. That wasn’t a good -move of yours, Larry.” And he smiled again. - -“What wasn’t?” And I looked innocent. - -“Selling your eight thousand Anaconda at the market; in fact, insisting -on it,” said Ollie Black. - -I knew that he was supposed to be very clever and always traded on -inside news. But how he knew my business so accurately was beyond me. I -was sure the office hadn’t given me away. - -“Ollie, how do you know that?” I asked him. - -He laughed and told me: “I got it from Charlie Kratzer.” That was the -telegraph operator. - -“But he never budged from his place,” I said. - -“I couldn’t hear you and him whispering,” he chuckled. “But I heard -every word of the message he sent to the New York office for you. I -learned telegraphy years ago after I had a big row over a mistake in a -message. Since then when I do what you did just now--give an order by -word of mouth to an operator--I want to be sure the operator sends the -message as I give it to him. I know what he sends in my name. But you -will be sorry you sold that Anaconda. It’s going to 500.” - -“Not this trip, Ollie,” I said. - -He stared at me and said, “You’re pretty cocky about it.” - -“Not I; the tape,” I said. There wasn’t any ticker there so there -wasn’t any tape. But he knew what I meant. - -“I’ve heard of those birds,” he said, “who look at the tape and instead -of seeing prices they see a railroad time-table of the arrival and -departure of stocks. But they were in padded cells where they couldn’t -hurt themselves.” - -I didn’t answer him anything because about that time the boy brought me -a memorandum. They had sold five thousand shares at 299¾. I knew our -quotations were a little behind the market. The price on the board at -Palm Beach when I gave the operator the order to sell was 301. I felt -so certain that at that very moment the price at which the stock was -actually selling on the Stock Exchange in New York was less, that if -anybody had offered to take the stock off my hands at 296 I’d have been -tickled to death to accept. What happened shows you that I am right in -never trading at limits. Suppose I had limited my selling price to 300? -I’d never have got it off. No, sir! _When you want to get out, get out._ - -Now, my stock cost me about 300. They got off five hundred shares--full -shares, of course--at 299¾. The next thousand they sold at 299⅝. Then -a hundred at ½; two hundred at ⅜ and two hundred at ¼. The last of -my stock went at 298¾. It took Harding’s cleverest floor man fifteen -minutes to get rid of that last one hundred shares. They didn’t want to -crack it wide open. - -The moment I got the report of the sale of the last of my long stock -I started to do what I had really come ashore to do--that is, to sell -stocks. I simply had to. There was the market after its outrageous -rally, begging to be sold. Why, people were beginning to talk bullish -again. The course of the market, however, told me that the rally had -run its course. It was safe to sell them. It did not require reflection. - -The next day Anaconda opened below 296. Oliver Black, who was waiting -for a further rally, had come down early to be Johnny-on-the-spot when -the stock crossed 320. I don’t know how much of it he was long of or -whether he was long of it all. But he didn’t laugh when he saw the -opening prices, nor later in the day when the stock broke still more -and the report came back to us in Palm Beach that there was no market -for it at all. - -Of course that was all the confirmation any man needed. My growing -paper profit kept reminding me that I was right, hour by hour. -Naturally I sold some more stocks. Everything! It was a bear market. -They were all going down. The next day was Friday, Washington’s -Birthday. I couldn’t stay in Florida and fish because I had put out a -very fair short line, for me. I was needed in New York. Who needed me? -I did! Palm Beach was too far, too remote. Too much valuable time was -lost telegraphing back and forth. - -I left Palm Beach for New York. On Monday I had to lie in St. Augustine -three hours, waiting for a train. There was a broker’s office there, -and naturally I had to see how the market was acting while I was -waiting. Anaconda had broken several points since the last trading day. -As a matter of fact, it didn’t stop going down until the big break that -fall. - -I got to New York and traded on the bear side for about four months. -The market had frequent rallies as before, and I kept covering and -putting them out again. I didn’t, strictly speaking, sit tight. -Remember, I had lost every cent of the three hundred thousand dollars -I made out of the San Francisco earthquake break. I had been right, -and nevertheless had gone broke. I was now playing safe--because after -being down a man enjoys being up, even if he doesn’t quite make the -top. _The way to make money is to make it. The way to make big money is -to be right at exactly the right time._ In this business a man has to -think of both theory and practice. A speculator must not be merely a -student, he must be both a student and a speculator. - -I did pretty well, even if I can now see where my campaign was -tactically inadequate. When summer came the market got dull. It was -a cinch that there would be nothing doing in a big way until well -along in the fall. Everybody I knew had gone or was going to Europe. -I thought that would be a good move for me. So I cleaned up. When I -sailed for Europe I was a trifle more than three-quarters of a million -to the good. To me that looked like some balance. - -I was in Aix-les-Bains enjoying myself. I had earned my vacation. It -was good to be in a place like that with plenty of money and friends -and acquaintances and everybody intent upon having a good time. Not -much trouble about having that, in Aix. Wall Street was so far away -that I never thought about it, and that is more than I could say of any -resort in the United States. I didn’t have to listen to talk about the -stock market. I didn’t need to trade. I had enough to last me quite a -long time, and besides, when I got back I knew what to do to make much -more than I could spend in Europe that summer. - -One day I saw in the Paris _Herald_ a dispatch from New York that -Smelters had declared an extra dividend. They had run the price of the -stock and the entire market had come back quite strong. Of course that -changed everything for me in Aix. The news simply meant that the bull -cliques were still fighting desperately against conditions--against -common sense and against common honesty, for they knew what was coming -and were resorting to such schemes to put up the market in order to -unload stocks before the storm struck them. It is possible they really -did not believe the danger was as serious or as close at hand as I -thought. _The big men of the Street are as prone to be wishful thinkers -as the politicians or the plain suckers. I myself can’t work that way._ -In a speculator such an attitude is fatal. Perhaps a manufacturer of -securities or a promoter of new enterprises can afford to indulge in -hope-jags. - -At all events, I knew that all bull manipulation was foredoomed to -failure in that bear market. The instant I read the dispatch I knew -there was only one thing to do to be comfortable, and that was to sell -Smelters short. Why, the insiders as much as begged me on their knees -to do it, when they increased the dividend rate on the verge of a money -panic. It was as infuriating as the old “dares” of your boyhood. They -dared me to sell that particular stock short. - -I cabled some selling orders in Smelter and advised my friends in New -York to go short of it. When I got my report from the brokers I saw the -price they got was six points below the quotations I had seen in the -Paris Herald. It shows you what the situation was. - -My plans had been to return to Paris at the end of the month and about -three weeks later sail for New York, but as soon as I received the -cabled reports from my brokers I went back to Paris. The same day I -arrived I called at the steamship offices and found there was a fast -boat leaving for New York the next day. I took it. - -There I was, back in New York, almost a month ahead of my original -plans, because it was the most comfortable place to be short of the -market in. I had well over half a million in cash available for -margins. My return was not due to my being bearish but to my being -logical. - -I sold more stocks. _As money got tighter call-money rates went higher -and prices of stocks lower._ I had foreseen it. At first, my foresight -broke me. But now I was right and prospering. However, the real joy was -in the consciousness that as a trader I was at last on the right track. -I still had much to learn but I knew what to do. No more floundering, -no more half-right methods. _Tape reading was an important part of -the game; so was beginning at the right time; so was sticking to your -position. But my greatest discovery was that a man must study general -conditions, to size them so as to be able to anticipate probabilities._ -In short, I had learned that I had to work for my money. I was no -longer betting blindly or concerned with mastering the technic of the -game, but with earning my successes by hard study and clear thinking. I -also found out that nobody was immune from the danger of making sucker -plays. And for a sucker play a man gets sucker pay; for the paymaster -is on the job and never loses the pay envelope that is coming to you. - -Our office made a great deal of money. My own operations were so -successful that they began to be talked about and, of course, were -greatly exaggerated. I was credited with starting the breaks in various -stocks. People I didn’t know by name used to come and congratulate me. -They all thought the most wonderful thing was the money I had made. -They did not say a word about the time when I first talked bearish to -them and they thought I was a crazy bear with a stock-market loser’s -vindictive grouch. That I had foreseen the money troubles was nothing. -That my brokers’ bookkeeper had used a third of a drop of ink on the -credit side of the ledger under my name was a marvellous achievement to -them. - -Friends used to tell me that in various offices the Boy Plunger in -Harding Brothers’ office was quoted as making all sorts of threats -against the bull cliques that had tried to mark up prices of various -stocks long after it was plain that the market was bound to seek a much -lower level. To this day they talk of my raids. - -From the latter part of September on, the money market was megaphoning -warnings to the entire world. But a belief in miracles kept people from -selling what remained of their speculative holdings. Why a broker told -me a story the first week of October that made me feel almost ashamed -of my moderation. - -You remember that money loans used to be made on the floor of the -Exchange around the Money Post. Those brokers who had received notice -from their banks to pay call loans knew in a general way how much -money they would have to borrow afresh. And of course the banks knew -their position so far as loanable funds were concerned, and those -which had money to loan would send it to the Exchange. This bank money -was handled by a few brokers whose principal business was time loans. -At about noon the renewal rate for the day was posted. Usually this -represented a fair average of the loans made up to that time. Business -was as a rule transacted openly by bids and offers, so that everyone -knew what was going on. Between noon and about two o’clock there -was ordinarily not much business done in money, but after delivery -time--namely, 2:15 P.M.--brokers would know exactly what their cash -position for the day would be, and they were able either to go to the -Money Post and lend the balances that they had over or to borrow what -they required. This business also was done openly. - -Well, sometime early in October the broker I was telling you about came -to me and told me that brokers were getting so they didn’t go to the -Money Post when they had money to loan. The reason was that members of -a couple of well-known commission houses were on watch there, ready to -snap up any offerings of money. Of course no lender who offered money -publicly could refuse to lend to these firms. They were solvent and the -collateral was good enough. But the trouble was that once these firms -borrowed money on call there was no prospect of the lender getting that -money back. They simply said they couldn’t pay it back and the lender -would willy-nilly have to renew the loan. So any Stock Exchange house -that had money to loan to its fellows used to send its men about the -floor instead of to the Post, and they would whisper to good friends, -“Want a hundred?” meaning, “Do you wish to borrow a hundred thousand -dollars?” The money brokers who acted for the banks presently adopted -the same plan, and it was a dismal sight to watch the Money Post. Think -of it! - -Why, he also told me that it was a matter of Stock Exchange etiquette -in those October days for the borrower to make his own rate of -interest. You see, it fluctuated between 100 and 150 per cent per -annum. I suppose by letting the borrower fix the rate the lender in -some strange way didn’t feel so much like a usurer. But you bet he got -as much as the rest. The lender naturally did not dream of not paying -a high rate. He played fair and paid whatever the others did. What he -needed was the money and was glad to get it. - -Things got worse and worse. _Finally there came the awful day of -reckoning for the bulls and the optimists and the wishful thinkers -and those vast hordes that, dreading the pain of a small loss at -the beginning, were now about to suffer total amputation--without -anaesthetics._ A day I shall never forget, October 24, 1907. - -Reports from the money crowd early indicated that borrowers would have -to pay whatever the lenders saw fit to ask. There wouldn’t be enough -to go around. That day the money crowd was much larger than usual. -When delivery time came that afternoon there must have been a hundred -brokers around the Money Post, each hoping to borrow the money that his -firm urgently needed. Without money they must sell what stocks they -were carrying on margin--sell at any price they could get in a market -where buyers were as scarce as money--and just then there was not a -dollar in sight. - -My friend’s partner was as bearish as I was. The firm therefore did not -have to borrow, but my friend, the broker I told you about, fresh from -seeing the haggard faces around the Money Post, came to me. He knew I -was heavily short of the entire market. - -He said, “My God, Larry! I don’t know what’s going to happen. I never -saw anything like it. It can’t go on. Something has got to give. It -looks to me as if everybody is busted right now. You can’t sell stocks, -and there is absolutely no money in there.” - -“How do you mean?” I asked. - -But what he answered was, “Did you ever hear of the classroom -experiment of the mouse in a glass-bell when they begin to pump the air -out of the bell? You can see the poor mouse breathe faster and faster, -its sides heaving like over-worked bellows, trying to get enough oxygen -out of the decreasing supply in the bell. You watch it suffocate till -its eyes almost pop out of their sockets, gasping, dying. Well, that -is what I think of when I see the crowd at the Money Post! No money -anywhere, and you can’t liquidate stocks because there is nobody to buy -them. The whole Street is broke at this very moment, if you ask me!” - -It made me think. I had seen a smash coming, but not, I admit, the -worst panic in our history. It might not be profitable to anybody--if -it went much further. - -Finally it became plain that there was no use in waiting at the Post -for money. There wasn’t going to be any. Then hell broke loose. - -The president of the Stock Exchange, Mr. R. H. Thomas, so I heard later -in the day, knowing that every house in the Street was headed for -disaster, went out in search of succour. He called on James Stillman, -president of the National City Bank, the richest bank in the United -States. Its boast was that it never loaned money at a higher rate than -6 per cent. - -Stillman heard what the president of the New York Stock Exchange had -to say. Then he said, “Mr. Thomas, we’ll have to go and see Mr. Morgan -about this.” - -The two men, hoping to stave off the most disastrous panic in our -financial history, went together to the office of J. P. Morgan & Co. -and saw Mr. Morgan, Mr. Thomas laid the case before him. The moment he -got through speaking Mr. Morgan said, “Go back to the Exchange and tell -them that there will be money for them.” - -“Where?” - -“At the banks!” - -So strong was the faith of all men in Mr. Morgan in those critical -times that Thomas didn’t wait for further details but rushed back -to the floor of the Exchange to announce the reprieve to his -death-sentenced fellow members. - -Then, before half past two in the afternoon, J. P. Morgan sent John -T. Atterbury, of Van Emburgh & Atterbury, who was known to have close -relations with J. P. Morgan & Co., into the money crowd. My friend said -that the old broker walked quickly to the Money Post. He raised his -hand like an exhorter at a revival meeting. The crowd, that at first -had been calmed down somewhat by President Thomas’ announcement, was -beginning to fear that the relief plans had miscarried and the worst -was still to come. But when they looked at Mr. Atterbury’s face and saw -him raise his hand they promptly petrified themselves. - -In the dead silence that followed, Mr. Atterbury said, “I am authorized -to lend ten million dollars. Take it easy! There will be enough for -everybody!” - -Then he began. Instead of giving to each borrower the name of the -lender he simply jotted down the name of the borrower and the amount -of the loan and told the borrower, “You will be told where your money -is.” He meant the name of the bank from which the borrower would get -the money later. - -I heard a day or two later that Mr. Morgan simply sent word to the -frightened bankers of New York that they must provide the money the -Stock Exchange needed. - -“But we haven’t got any. We’re loaned up to the hilt,” the banks -protested. - -“You’ve got your reserves,” snapped J. P. - -“But we’re already below the legal limit,” they howled. - -“Use them! That’s what reserves are for!” And the banks obeyed and -invaded the reserves to the extent of about twenty million dollars. It -saved the stock market. The bank panic didn’t come until the following -week. He was a man, J. P. Morgan was. They don’t come much bigger. - -That was the day I remember most vividly of all the days of my life as -a stock operator. It was the day when my winnings exceeded one million -dollars. It marked the successful ending of my first deliberately -planned trading campaign. What I had foreseen had come to pass. But -more than all these things was this: a wild dream of mine had been -realised. I had been king for a day! - -I’ll explain, of course. After I had been in New York a couple of years -I used to cudgel my brains trying to determine the exact reason why I -couldn’t beat in a Stock Exchange house in New York the game that I -had beaten as a kid of fifteen in a bucket shop in Boston. I knew that -some day I would find out what was wrong and I would stop being wrong. -I would then have not alone the will to be right but the knowledge to -insure my being right. And that would mean power. - -Please do not misunderstand me. It was not a deliberate dream of -grandeur or a futile desire born of overweening vanity. It was rather -a sort of feeling that the same old stock market that so baffled me in -Fullerton’s office and in Harding’s would one day eat out of my hand. -I just felt that such a day would come. And it did--October 24, 1907. - -The reason why I say it is this: That morning a broker who had done -a lot of business for my brokers and knew that I had been plunging -on the bear side rode down in the company of one of the partners of -the foremost banking house in the Street. My friend told the banker -how heavily I had been trading, for I certainly pushed my luck to the -limit. What is the use of being right unless you get all the good -possible out of it. - -Perhaps the broker exaggerated to make his story sound important. -Perhaps I had more of a following than I knew. Perhaps the banker knew -far better than I how critical the situation was. At all events, my -friend said to me: “He listened with great interest to what I told him -you said the market was going to do when the real selling began, after -another push or two. When I got through he said he might have something -for me to do later in the day.” - -When the commission houses found out there was not a cent to be had at -any price I knew the time had come. I sent brokers into the various -crowds. Why, at one time there wasn’t a single bid for Union Pacific. -Not at any price! Think of it! And in other stocks the same thing. No -money to hold stocks and nobody to buy them. - -I had enormous paper profits and the certainty that all that I had -to do to smash prices still more was to send in orders to sell ten -thousand shares each of Union Pacific and of a half dozen other good -dividend-paying stocks and what would follow would be simply hell. It -seemed to me that the panic that would be precipitated would be of such -an intensity and character that the board of governors would deem it -advisable to close the Exchange, as was done in August, 1914, when the -World War broke out. - -It would mean greatly increased profits on paper. It might also mean -an inability to convert those profits into actual cash. But there were -other things to consider, and one was that a further break would -retard the recovery that I was beginning to figure on, the compensating -improvement after all that blood-letting. Such a panic would do much -harm to the country generally. - -I made up my mind that since it was unwise and unpleasant to continue -actively bearish it was illogical for me to stay short. So I turned and -began to buy. - -It wasn’t long after my brokers began to buy in for me--and, by the -way, I got bottom prices--that the banker sent for my friend. - -“I have sent for you,” he said, “because I want you to go instantly to -your friend Livingston and say to him that we hope he will not sell -any more stocks to-day. The market can’t stand much more pressure. As -it is, it will be an immensely difficult task to avert a devastating -panic. Appeal to your friend’s patriotism. This is a case where a man -has to work for the benefit of all. Let me know at once what he says.” - -My friend came right over and told me. He was very tactful. I suppose -he thought that having planned to smash the market I would consider his -request as equivalent to throwing away the chance to make about ten -million dollars. He knew I was sore on some of the big guns for the way -they had acted trying to land the public with a lot of stock when they -knew as well as I did what was coming. - -As a matter of fact, the big men were big sufferers and lots of the -stocks I bought at the very bottom were in famous financial names. I -didn’t know it at the time, but it did not matter. I had practically -covered all my shorts and it seemed to me there was a chance to buy -stocks cheap and help the needed recovery in prices at the same -time--if nobody hammered the market. - -So I told my friend, “Go back and tell Mr. Blank that I agree with them -and that I fully realised the gravity of the situation even before he -sent for you. I not only will not sell any more stocks to-day, but I am -going in and buy as much as I can carry.” And I kept my word. I bought -one hundred thousand shares that day, for the long account. I did not -sell another stock short for nine months. - -That is why I said to friends that my dream had come true and that -I had been king for a moment. The stock market at one time that day -certainly was at the mercy of anybody who wanted to hammer it. I do not -suffer from delusions of grandeur; in fact you know how I feel about -being accused of raiding the market and about the way my operations are -exaggerated by the gossip of the Street. - -I came out of it in fine shape. The newspapers said that Larry -Livingston, the Boy Plunger, had made several millions. Well, I was -worth over one million after the close of business that day. But my -biggest winnings were not in dollars but in the intangibles: I had been -right, I had looked ahead and followed a clear-cut plan. I had learned -what a man must do in order to make big money; I was permanently out of -the gambler class; I had at last learned to trade intelligently in a -big way. It was a day of days for me. - - - - -_X_ - - -The recognition of our own mistakes should not benefit us any more -than the study of our successes. But there is a natural tendency in -all men to avoid punishment. When you associate certain mistakes with -a licking, you do not hanker for a second dose, and, of course, all -stock-market mistakes wound you in two tender spots--your pocketbook -and your vanity. But I will tell you something curious: A stock -speculator sometimes makes mistakes and knows that he is making them. -And after he makes them he will ask himself why he made them; and -after thinking over it cold-bloodedly a long time after the pain of -punishment is over he may learn how he came to make them, and when, and -at what particular point of his trade; but not why. And then he simply -calls himself names and lets it go at that. - -Of course, if a man is both wise and lucky, he will not make the same -mistake twice. But he will make any one of the ten thousand brothers or -cousins of the original. The Mistake family is so large that there is -always one of them around when you want to see what you can do in the -fool-play line. - -To tell you about the first of my million-dollar mistakes I shall have -to go back to this time when I first became a millionaire, right after -the big break of October, 1907. As far as my trading went, having a -million merely meant more reserves. Money does not give a trader more -comfort, because, rich or poor, he can make mistakes and it is never -comfortable to be wrong. And when a millionaire is right his money -is merely one of his several servants. Losing money is the least of -my troubles. _A loss never bothers me after I take it. I forget it -overnight. But being wrong--not taking the loss--that is what does the -damage to the pocketbook and to the soul._ You remember Dickson G. -Watts’ story about the man who was so nervous that a friend asked him -what was the matter. - -“I can’t sleep,” answered the nervous one. - -“Why not?” asked the friend. - -“I am carrying so much cotton that I can’t sleep thinking about it. It -is wearing me out. What can I do?” - -“Sell down to the sleeping point,” answered the friend. - -As a rule a man adapts himself to conditions so quickly that he loses -the perspective. He does not feel the difference much--that is, he -does not vividly remember how it felt not to be a millionaire. He only -remembers that there were things he could not do that he can do now. It -does not take a reasonably young and normal man very long to lose the -habit of being poor. It requires a little longer to forget that he used -to be rich. I suppose that is because money creates needs or encourages -their multiplication. I mean that after a man makes money in the stock -market he very quickly loses the habit of not spending. But after he -loses his money it takes him a long time to lose the habit of spending. - -After I took in my shorts and went long in October, 1907, I decided to -take it easy for a while. I bought a yacht and planned to go off on a -cruise in Southern waters. I am crazy about fishing and I was due to -have the time of my life. I looked forward to it and expected to go any -day. But I did not. The market wouldn’t let me. - -_I always have traded in commodities as well as in stocks._ I began as -a youngster in the bucket shops. I studied those markets for years, -though perhaps not so assiduously as the stock market. As a matter -of fact, _I would rather play commodities than stocks_. There is no -question about their greater legitimacy, as it were. It partakes more -of the nature of a commercial venture than trading in stocks does. -A man can approach it as he might any mercantile problem. It may be -possible to use fictitious arguments for or against a certain trend in -a commodity market; but success will be only temporary, _for in the -end the facts are bound to prevail_, so that a trader gets dividends -on study and observation, as he does in a regular business. He can -watch and weigh conditions and he knows as much about it as anyone -else. He need not guard against inside cliques. Dividends are not -unexpectedly passed or increased overnight in the cotton market or in -wheat or corn. _In the long run commodity prices are governed but by -one law--the economic law of demand and supply._ The business of the -trader in commodities is simply to get facts about the demand and the -supply, present and prospective. He does not indulge in guesses about a -dozen things as he does in stocks. It always appealed to me--trading in -commodities. - -Of course the same things happen in all speculative markets. The -message of the tape is the same. That will be perfectly plain to -anyone who will take the trouble to think. He will find if he asks -himself questions and considers conditions, that the answers will -supply themselves directly. But people never take the trouble to -ask questions, leave alone seeking answers. The average American is -from Missouri everywhere and at all times except when he goes to -the brokers’ offices and looks at the tape, whether it is stocks or -commodities. The one game of all games that really requires study -before making a play is the one he goes into without his usual highly -intelligent preliminary and precautionary doubts. _He will risk half -his fortune in the stock market with less reflection than he devotes to -the selection of a medium-priced automobile._ - -This matter of tape reading is not so complicated as it appears. Of -course you need experience. But it is even more important to keep -certain fundamentals in mind. To read the tape is not to have your -fortune told. The tape does not tell you how much you will surely be -worth next Thursday at 1:35 P.M. The object of reading the tape is to -ascertain, first, how and, next, when to trade--that is, whether it is -wiser to buy than to sell. It works exactly the same for stocks as for -cotton or wheat or corn or oats. - -You watch the market--that is, the course of prices as recorded by the -tape--with one object: to determine the direction--that is, the price -tendency. Prices, we know, will move either up or down according to the -resistance they encounter. For purposes of easy explanation we will -say that _prices, like everything else, move along the line of least -resistance_. They will do whatever comes easiest, therefore they will -go up if there is less resistance to an advance than to a decline; and -vice versa. - -Nobody should be puzzled as to whether a market is a bull market or a -bear market after it fairly starts. The trend is evident to a man who -has an open mind and reasonably clear sight, for it is never wise for a -speculator to fit his facts to his theories. Such a man will, or ought -to, know whether it is a bull or a bear market, and if he knows that he -knows whether to buy or to sell. It is therefore at the very inception -of the movement that a man needs to know whether to buy or to sell. - -Let us say, for example, that the market, as it usually does in those -between-swings times, fluctuates within a range of ten points; up to -130 and down to 120. It may look very weak at the bottom; or, on the -way up, after a rise of eight or ten points, it may look as strong as -anything. A man ought not to be led into trading by tokens. _He should -wait until the tape tells him that the time is ripe. As a matter of -fact, millions upon millions of dollars have been lost by men who -bought stocks because they looked cheap or sold them because they -looked dear. The speculator is not an investor. His object is not to -secure a steady return on his money at a good rate of interest, but to -profit by either a rise or a fall in the price of whatever he may be -speculating in. Therefore the thing to determine is the speculative -line of least resistance at the moment of trading; and what he should -wait for is the moment when that line defines itself, because that is -his signal to get busy._ - -Reading the tape merely enables him to see that at 130 the selling had -been stronger than the buying and a reaction in the price logically -followed. Up to the point where the selling prevailed over the buying, -superficial students of the tape may conclude that the price is not -going to stop short of 150, and they buy. But after the reaction -begins to hold on, or sell out at a small loss, or they go short and -talk bearish. But at 120 there is stronger resistance to the decline. -The buying prevails over the selling, there is a rally and the shorts -cover. The public is so often whipsawed that one marvels at their -persistence in not learning their lesson. - -Eventually something happens that increases the power of either the -upward or the downward force and the point of greatest resistance moves -up or down--that is, the buying at 130 will for the first time be -stronger than the selling, or the selling at 120 be stronger than the -buying. The price will break through the old barrier or movement-limit -and go on. As a rule, there is always a crowd of traders who are short -at 120 because it looked so weak, or long at 130 because it looked so -strong, and, when the market goes against them they are forced, after a -while, either to change their minds and turn or to close out. In either -event they help to define even more clearly the price line of least -resistance. Thus the intelligent trader who has patiently waited to -determine this line will enlist the aid of fundamental trade conditions -and also of the force of the trading of that part of the community that -happened to guess wrong and must now rectify mistakes. Such corrections -tend to push prices along the line of least resistance. - -And right here I will say that, though I do not give it as a -mathematical certainty or as an axiom of speculation, my experience -has been that accidents--that is, the unexpected or unforeseen--have -always helped me in my market position whenever the latter has been -based upon my determination of the line of least resistance. Do you -remember that Union Pacific episode at Saratoga that I told you about? -Well, I was long because I found out that the line of least resistance -was upward. I should have stayed long instead of letting my broker tell -me that insiders were selling stocks. It didn’t make any difference -what was going on in the directors’ minds. That was something I -couldn’t possibly know. But I could and did know that the tape said: -“Going up!” And then came the unexpected raising of the dividend rate -and the thirty-point rise in the stock. At 164 prices looked mighty -high, but as I told you before, _stocks are never too high to buy -or too low to sell_. _The price_, per se, _has nothing to do with -establishing my line of least resistance._ - -You will find in actual practice that if you trade as I have indicated -any important piece of news given out between the closing of one market -and the opening of another is usually in harmony with the line of -least resistance. _The trend has been established before the news is -published, and in bull markets bear items are ignored and bull news -exaggerated, and vice versa._ Before the war broke out the market was -in a very weak condition. There came the proclamation of Germany’s -submarine policy. I was short one hundred and fifty thousand shares of -stock, not because I knew the news was coming, but because I was going -along the line of least resistance. What happened came out of a clear -sky, as far as my play was concerned. Of course I took advantage of the -situation and I covered my shorts that day. - -It sounds very easy to say that all you have to do is to watch the -tape, establish your resistance points and be ready to trade along the -line of least resistance as soon as you have determined it. _But in -actual practice a man has to guard against many things, and most of all -against himself_--that is, against human nature. That is the reason -why I say that the man who is right always has two forces working in -his favor--_basic conditions and the men who are wrong_. _In a bull -market bear factors are ignored._ That is human nature, and yet human -beings profess astonishment at it. People will tell you that the wheat -crop has gone to pot because there has been bad weather in one or two -sections and some farmers have been ruined. When the entire crop is -gathered and all the farmers in all the wheat-growing sections begin -to take their wheat to the elevators the bulls are surprised at the -smallness of the damage. They discover that they merely have helped the -bears. - -When a man makes his play in a commodity market he must not permit -himself set opinions. He must have an open mind and flexibility. _It -is not wise to disregard the message of the tape, no matter what -your opinion of crop conditions or of the probable demand may be._ -I recall how I missed a big play just by trying to anticipate the -starting signal. I felt so sure of conditions that I thought it was not -necessary to wait for the line of least resistance to define itself. I -even thought I might help it arrive, because it looked as if it merely -needed a little assistance. - -I was very bullish on cotton. It was hanging around twelve cents, -running up and down within a moderate range. It was in one of those -in-between places and I could see it. I knew I really ought to wait. -But I got to thinking that if I gave it a little push it would go -beyond the upper resistance point. - -I bought fifty thousand bales. Sure enough, it moved up. And sure -enough, as soon as I stopped buying it stopped going up. Then it began -to settle back to where it was when I began buying it. I got out and -it stopped going down. I thought I was now much nearer the starting -signal, and presently I thought I’d start it myself again. I did. -The same thing happened. I bid it up, only to see it go down when I -stopped. I did this four or five times until I finally quit in disgust. -It cost me about two hundred thousand dollars. I was done with it. It -wasn’t very long after that when it began to go up and never stopped -till it got to a price that would have meant a killing for me--if I -hadn’t been in such a great hurry to start. - -This experience has been the experience of so many traders so many -times that I can give this rule: _In a narrow market, when prices -are not getting anywhere to speak of but move within a narrow range, -there is no sense in trying to anticipate what the next big movement -is going to be--up or down._ The thing to do is to watch the market, -read the tape to determine the limits of the get-nowhere prices, and -make up your mind that you will not take an interest until the price -breaks through the limit in either direction. A speculator must concern -himself with making money out of the market and not with insisting that -the tape must agree with him. Never argue with it or ask it for reasons -or explanations. _Stock-market post-mortems don’t pay dividends._ - -Not so long ago I was with a party of friends. They got to talking -wheat. Some of them were bullish and others bearish. Finally they asked -me what I thought. Well, I had been studying the market for some time. -I knew they did not want any statistics or analyses of conditions. So I -said: “If you want to make some money out of wheat I can tell you how -to do it.” - -They all said they did and I told them, “If you are sure you wish to -make money in wheat just you watch it. Wait. The moment it crosses -$1.20 buy it and you will get a nice quick play in it!” - -“Why not buy it now, at $1,14?” one of the party asked. - -“Because I don’t know yet that it is going up at all.” - -“Then why buy it at $1.20? It seems a mighty high price.” - -“Do you wish to gamble blindly in the hope of getting a great big -profit or do you wish to speculate intelligently and get a smaller but -much more probable profit?” - -They all said they wanted the smaller but surer profit, so I said, -“Then do as I tell you. If it crosses $1.20 buy.” - -As I told you, I had watched it a long time. For months it sold between -$1.10 and $1.20, getting nowhere in particular. Well, sir, one day it -closed at above $1.19. I got ready for it. Sure enough the next day it -opened at $1.20½, and I bought. It went to $1.21, to $1.22, to $1.23, -to $1.25, and I went with it. - -Now I couldn’t have told you at the time just what was going on. I -didn’t get any explanations about its behaviour during the course of -the limited fluctuations. I couldn’t tell whether the breaking through -the limit would be up through $1.20 or down through $1.10, though I -suspected it would be up because there was not enough wheat in the -world for a big break in prices. - -As a matter of fact, it seems Europe had been buying quietly and a lot -of traders had gone short of it at around $1.19. Owing to the European -purchases and other causes, a lot of wheat had been taken out of the -market, so that finally the big movement got started. The price went -beyond the $1.20 mark. That was all the point I had and it was all -I needed. I knew that when it crossed $1.20 it would be because the -upward movement at last had gathered force to push it over the limit -and something had to happen. In other words, by crossing $1.20 the line -of least resistance of wheat prices was established. It was a different -story then. - -I remember that one day was a holiday with us and all our markets were -closed. Well, in Winnipeg wheat opened up six cents a bushel. When our -market opened on the following day, it also was up six cents a bushel. -The price just went along the line of least resistance. - -What I have told you gives you the essence of my trading system as -based on studying the tape. I merely learn the way prices are most -probably going to move. I check up my own trading by additional tests, -to determine the psychological moment. _I do that by watching the way -the price acts after I begin._ - -It is surprising how many experienced traders there are who look -incredulous when I tell them that when I buy stocks for a rise I like -to pay top prices and when I sell I must sell low or not at all. It -would not be so difficult to make money if a trader always stuck to his -speculative guns--that is, waited for the line of least resistance to -define itself and began buying only when the tape said up or selling -only when it said down. _He should accumulate his line on the way up._ -Let him buy one-fifth of his full line. If that does not show him a -profit he must not increase his holdings because he has obviously begun -wrong; he is wrong temporarily and there is no profit in being wrong -at any time. The same tape that said UP did not necessarily lie merely -because it is now saying NOT YET. - -In cotton I was very successful in my trading for a long time. I had my -theory about it and I absolutely lived up to it. Suppose I had decided -that my line would be forty to fifty thousand bales. Well, I would -study the tape as I told you, watching for an opportunity either to -buy or to sell. Suppose the line of least resistance indicated a bull -movement. Well, I would buy ten thousand bales. After I got through -buying that, if the market _went up ten points over my initial purchase -price, I would take on another ten thousand bales_. Same thing. Then, -if I could get twenty points’ profit, or one dollar a bale, I would -buy twenty thousand more. That would give me my line--my basis for my -trading. But if after buying the first ten or twenty thousand bales, -it showed me a loss, out I’d go. I was wrong. It might be I was only -temporarily wrong. But as I have said before _it doesn’t pay to start -wrong in anything_. - -What I accomplished by sticking to my system was that I always had a -line of cotton in every real movement. In the course of accumulating -my full line I might chip out fifty or sixty thousand dollars in these -feeling-out plays of mine. This looks like a very expensive testing, -but it wasn’t. After the real movement started, how long would it take -me to make up the fifty thousand dollars I had dropped in order to -make sure that I began to load up at exactly the right time? No time at -all! _It always pays a man to be right at the right time._ - -As I think I also said before, this describes what I may call my system -for placing my bets. It is simple arithmetic to prove that it is a wise -thing to have the big bet down only when you win, and when you lose to -lose only a small exploratory bet, as it were. If a man trades in the -way I have described, he will always be in the profitable position of -being able to cash in on the big bet. - -Professional traders have always had some system or other based -upon their experience and governed either by their attitude toward -speculation or by their desires. I remember I met an old gentleman in -Palm Beach whose name I did not catch or did not at once identify. I -knew he had been in the Street for years, way back in Civil War times, -and somebody told me that he was a very wise old codger who had gone -through so many booms and panics that he was always saying there was -nothing new under the sun and least of all in the stock market. - -The old fellow asked me a lot of questions. When I got through telling -him about my usual practice in trading he nodded and said, “Yes! Yes! -You’re right. The way you’re built, the way your mind runs, makes your -system a good system for you. It comes easy for you to practice what -you preach, because the money you bet is the least of your cares. I -recollect Pat Hearne. Ever hear of him? Well, he was a very well-known -sporting man and he had an account with us. Clever chap and nervy. He -made money in stocks, and that made people ask him for advice. He would -never give any. If they asked him point-blank for his opinion about -the wisdom of their commitments he used a favorite race-track maxim of -his: ‘You can’t tell till you bet.’ He traded in our office. He would -buy one hundred shares of some active stock and when, or if, it went up -1 per cent he would buy another hundred. On another point’s advance, -another hundred shares; and so on. He used to say he wasn’t playing the -game to make money for others and therefore he would put in a stop-loss -order one point below the price of his last purchase. When the price -kept going up he simply moved up his stop with it. On a 1 per cent -reaction he was stopped out. He declared he did not see any sense in -losing more than one point, whether it came out of his original margin -or out of his paper profits. - -“You know, a professional gambler is not looking for long shots, -but for sure money. Of course long shots are fine when they come -in. In the stock market Pat wasn’t after tips or playing to catch -twenty-points-a-week advances, but sure money in sufficient quantity -to provide him with a good living. Of all the thousands of outsiders -that I have run across in Wall Street, Pat Hearne was the only one who -saw in stock speculation merely a game of chance like faro or roulette, -but, nevertheless, had the sense to stick to a relatively sound betting -method. - -“After Hearne’s death one of our customers who had always traded with -Pat and used his system made over one hundred thousand dollars in -Lackawanna. Then he switched over to some other stock and because he -had made a big stake he thought he need not stick to Pat’s way. When a -reaction came, instead of cutting short his losses he let them run--as -though they were profits. Of course every cent went. When he finally -quit he owed us several thousand dollars. - -“He hung around for two or three years. He kept the fever long after -the cash had gone; but we did not object as long as he behaved himself. -I remember that he used to admit freely that he had been ten thousand -kinds of an ass not to stick to Pat Hearne’s style of play. Well, one -day he came to me greatly excited and asked me to let him sell some -stock short in our office. He was a nice enough chap who had been a -good customer in his day and I told him I personally would guarantee -his account for one hundred shares. - -“He sold short one hundred shares of Lake Shore. That was the time Bill -Travers hammered the market, in 1875. My friend Roberts put out that -Lake Shore at exactly the right time and kept selling it on the way -down as he had been wont to do in the old successful days before he -forsook Pat Hearne’s system and instead listened to hope’s whispers. - -“Well, sir, in four days of successful pyramiding, Roberts’ account -showed him a profit of fifteen thousand dollars. Observing that he had -not put in a stop-loss order I spoke to him about it and he told me -that the break hadn’t fairly begun and he wasn’t going to be shaken -out by any one-point reaction. This was in August. Before the middle -of September he borrowed ten dollars from me for a baby carriage--his -fourth. He did not stick to his own proved system. That’s the trouble -with most of them,” and the old fellow shook his head at me. - -And he was right. I sometimes think that speculation must be an -unnatural sort of business, because I find that the average speculator -has arrayed against him his own nature. The weaknesses that all men -are prone to are fatal to success in speculation--usually those very -weaknesses that make him likable to his fellows or that he himself -particularly guards against in those other ventures of his where -they are not nearly so dangerous as when he is trading in stocks or -commodities. - -_The speculator’s chief enemies are always boring from within. It is -inseparable from human nature to hope and to fear._ In speculation when -the market goes against you you hope that every day will be the last -day--and you lose more than you should had you not listened to hope--to -the same ally that is so potent a success-bringer to empire builders -and pioneers, big and little. And when the market goes your way you -become fearful that the next day will take away your profit, and you -get out--too soon. _Fear keeps you from making as much money as you -ought to._ The successful trader has to fight these two deep-seated -instincts. He has to reverse what you might call his natural impulses. -_Instead of hoping he must fear; instead of fearing he must hope._ He -must fear that his loss may develop into a much bigger loss, and hope -that his profit may become a big profit. _It is absolutely wrong to -gamble in stocks the way the average man does._ - -I have been in the speculative game ever since I was fourteen. It is -all I have ever done. I think I know what I am talking about. And the -conclusion that I have reached after nearly thirty years of constant -trading, both on a shoestring and with millions of dollars back of -me, is this: A man may beat a stock or a group at a certain time, but -no man living can beat the stock market! A man may make money out of -individual deals in cotton or grain, but no man can beat the cotton -market or the grain market. It’s like the track. A man may beat a horse -race, but he cannot beat horse racing. - -If I knew how to make these statements stronger or more emphatic I -certainly would. It does not make any difference what anybody says to -the contrary. I know I am right in saying these are incontrovertible -statements. - - - - -_XI_ - - -And now I’ll get back to October, 1907. I bought a yacht and made all -preparations to leave New York for a cruise in Southern waters. I am -really daffy about fishing and this was the time when I was going to -fish to my heart’s content from my own yacht, going wherever I wished -whenever I felt like it. Everything was ready. I had made a killing in -stocks, but at the last moment corn held me back. - -I must explain that before the money panic which gave me my first -million I had been trading in grain at Chicago. I was short ten million -bushels of wheat and ten million bushels of corn. I had studied the -grain markets for a long time and was as bearish on corn and wheat as I -had been on stocks. - -Well, they both started down, but while wheat kept on declining the -biggest of all the Chicago operators--I’ll call him Stratton--took it -into his head to run a corner in corn. After I cleaned up in stocks -and was ready to go South on my yacht I found that wheat showed me a -handsome profit, but in corn Stratton had run up the price and I had -quite a loss. - -I knew there was much more corn in the country than the price -indicated. The law of demand and supply worked as always. But the -demand came chiefly from Stratton and the supply was not coming at -all, because there was an acute congestion in the movement of corn. I -remember that I used to pray for a cold spell that would freeze the -impassable roads and enable the farmers to bring their corn into the -market. But no such luck. - -There I was, waiting to go on my joyously planned fishing trip and that -loss in corn holding me back. I couldn’t go away with the market as it -was. Of course Stratton kept pretty close tabs on the short interest. -He knew he had me, and I knew it quite as well as he did. But, as I -said, I was hoping I might convince the weather that it ought to get -busy and help me. Perceiving that neither the weather nor any other -kindly wonder-worker was paying any attention to my needs I studied how -I might work out of my difficulty by my own efforts. - -I closed out my line of wheat at a good profit. But the problem in corn -was infinitely more difficult. If I could have covered my ten million -bushels at the prevailing prices I instantly and gladly would have done -so, large though the loss would have been. But, of course, the moment I -started to buy in my corn Stratton would be on the job as squeezer in -chief, and I no more relished running up the price on myself by reason -of my own purchases than cutting my own throat with my own knife. - -Strong though corn was, my desire to go fishing was even stronger, so -it was up to me to find a way out at once. I must conduct a strategic -retreat. I must buy back the ten million bushels I was short of and in -so doing keep down my loss as much as I possibly could. - -It so happened that Stratton at that time was also running a deal in -oats and had the market pretty well sewed up. I had kept track of all -the grain markets in the way of crop news and pit gossip, and I heard -that the powerful Armour interests were not friendly, marketwise, to -Stratton. Of course I knew that Stratton would not let me have the -corn I needed except at his own price, but the moment I heard the -rumors about Armour being against Stratton it occurred to me that I -might look to the Chicago traders for aid. The only way in which they -could possibly help me was for them to sell me the corn that Stratton -wouldn’t. The rest was easy. - -First, I put in orders to buy five hundred thousand bushels of corn -every eighth of a cent down. After these orders were in I gave to each -of four houses an order to sell simultaneously fifty thousand bushels -of oats at the market. That, I figured, ought to make a quick break in -oats. Knowing how the traders’ minds worked, it was a cinch that they -would instantly think that Armour was gunning for Stratton. Seeing the -attack opened in oats they would logically conclude that the next break -would be in corn and they would start to sell it. If that corner in -corn was busted, the pickings would be fabulous. - -My dope on the psychology of the Chicago traders was absolutely -correct. When they saw oats breaking on the scattered selling they -promptly jumped on corn and sold it with great enthusiasm. I was -able to buy six million bushels of corn in the next ten minutes. The -moment I found that their selling of corn ceased I simply bought in -the other four million bushels at the market. Of course that made -the price go up again, but the net result of my manœuvre was that I -covered the entire line of ten million bushels within one-half cent of -the price prevailing at the time I started to cover on the traders’ -selling. The two hundred thousand bushels of oats that I sold short -to start the traders’ selling of corn I covered at a loss of only -three thousand dollars. That was pretty cheap bear bait. The profits I -had made in wheat offset so much of my deficit in corn that my total -loss on all my grain trades that time was only twenty-five thousand -dollars. Afterwards corn went up twenty-five cents a bushel. Stratton -undoubtedly had me at his mercy. If I had set about buying my ten -million bushels of corn without bothering to think of the price there -is no telling what I would have had to pay. - -A man can’t spend years at one thing and not acquire a habitual -attitude towards it quite unlike that of the average beginner. The -difference distinguishes the professional from the amateur. It is the -way a man looks at things that makes or loses money for him in the -speculative markets. The public has the dilettante’s point of view -toward his own effort. The ego obtrudes itself unduly and the thinking -therefore is not deep or exhaustive. The professional concerns himself -with doing the right thing rather than with making money, knowing that -the profit takes care of itself if the other things are attended to. -A trader gets to play the game as the professional billiard player -does--that is, he looks far ahead instead of considering the particular -shot before him. It gets to be an instinct to play for position. - -I remember hearing a story about Addison Cammack that illustrates very -nicely what I wish to point out. From all I have heard, I am inclined -to think that _Cammack_ was one of the ablest stock traders the Street -ever saw. He was not a chronic bear as many believe, but he felt the -greater appeal of trading on the bear side, of utilizing in his behalf -the two great human factors of hope and fear. He is credited with -coining the warning: “Don’t sell stocks when the sap is running up the -trees!” and the old-timers tell me that his biggest winnings were made -on the bull side, so that it is plain he did not play prejudices but -conditions. At all events, he was a consummate trader. It seems that -once--this was way back at the tag end of a bull market--Cammack was -bearish, and J. Arthur Joseph, the financial writer and raconteur, -knew it. The market, however, was not only strong but still rising, -in response to prodding by the bull leaders and optimistic reports by -the newspapers. Knowing what use a trader like Cammack could make of -bearish information, Joseph rushed to Cammack’s office one day with -glad tidings. - -“Mr. Cammack, I have a very good friend who is a transfer clerk in the -St. Paul office and he has just told me something which I think you -ought to know.” - -“What is it?” asked Cammack listlessly. - -“You’ve turned, haven’t you? You are bearish now?” asked Joseph, -to make sure. If Cammack wasn’t interested he wasn’t going to waste -precious ammunition. - -“Yes. What’s the wonderful information?” - -“I went around to the St. Paul office to-day, as I do in my -news-gathering rounds two or three times a week, and my friend -there said to me: ‘The Old Man is selling stock.’ He meant William -Rockefeller. ‘Is he really, Jimmy?’ I said to him, and he answered, -‘Yes; he is selling fifteen hundred shares every three-eighths of a -point up. I’ve been transferring the stock for two or three days now.’ -I didn’t lose any time, but came right over to tell you.” - -Cammack was not easily excited, and, moreover, was so accustomed to -having all manner of people rush madly into his office with all manner -of news, gossip, rumors, tips and lies that he had grown distrustful of -them all. He merely said now, “Are you sure you heard right, Joseph?” - -“Am I sure? Certainly I am sure! Do you think I am deaf?” said Joseph. - -“Are you sure of your man?” - -“Absolutely!” declared Joseph. “I’ve known him for years. He has never -lied to me. He wouldn’t! No object! I know he is absolutely reliable -and I’d stake my life on what he tells me. I know him as well as I know -anybody in this world--a great deal better than you seem to know me, -after all these years.” - -“Sure of him, eh?” And Cammack again looked at Joseph. Then he said, -“Well, you ought to know.” He called his broker, W. B. Wheeler. Joseph -expected to hear him give an order to sell at least fifty thousand -shares of St. Paul. William Rockefeller was disposing of his holdings -in St. Paul, taking advantage of the strength of the market. Whether it -was investment stock or speculative holdings was irrelevant. The one -important fact was that the best stock trader of the Standard Oil crowd -was getting out of St. Paul. What would the average man have done if he -had received the news from a trustworthy source? No need to ask. - -But Cammack, the ablest bear operator of his day, who was bearish on -the market just then, said to his broker, “Billy, go over to the board -and buy fifteen hundred St. Paul every three-eighths up.” The stock was -then in the nineties. - -“Don’t you mean sell?” interjected Joseph hastily. He was no novice in -Wall Street, but he was thinking of the market from the point of view -of the newspaper man and, incidentally, of the general public. The -price certainly ought to go down on the news of inside selling. And -there was no better inside selling than Mr. William Rockefeller’s. The -Standard Oil getting out and Cammack buying! It couldn’t be! - -“No,” said Cammack; “I mean buy!” - -“Don’t you believe me?” - -“Yes!” - -“Don’t you believe my information?” - -“Yes.” - -“Aren’t you bearish?” - -“Yes.” - -“Well, then?” - -“That’s why I’m buying. Listen to me now: You keep in touch with that -reliable friend of yours and the moment the scaled selling stops, let -me know. Instantly! Do you understand?” - -“Yes,” said Joseph, and went away, not quite sure he could fathom -Cammack’s motives in buying William Rockefeller’s stock. It was the -knowledge that Cammack was bearish on the entire market that made his -manœuvre so difficult to explain. However, Joseph saw his friend the -transfer clerk and told him he wanted to be tipped off when the Old Man -got through selling. Regularly twice a day Joseph called on his friend -to inquire. - -One day the transfer clerk told him, “There isn’t any more stock coming -from the Old Man.” Joseph thanked him and ran to Cammack’s office with -the information. - -Cammack listened attentively, turned to Wheeler and asked, “Billy, -how much St. Paul have we got in the office?” Wheeler looked it up and -reported that they had accumulated about sixty thousand shares. - -Cammack, being bearish, had been putting out short lines in the other -Grangers as well as in various other stocks, even before he began to -buy St. Paul. He was now heavily short of the market. He promptly -ordered Wheeler to sell the sixty thousand shares of St. Paul that -they were long of, and more besides. He used his long holdings of St. -Paul as a lever to depress the general list and greatly benefit his -operations for a decline. - -St. Paul didn’t stop on that move until it reached forty-four and -Cammack made a killing in it. He played his cards with consummate -skill and profited accordingly. The point I would make is his habitual -attitude toward trading. He didn’t have to reflect. He saw instantly -what was far more important to him than his profit on that one stock. -He saw that he had providentially been offered an opportunity to begin -his big bear operations not only at the proper time but with a proper -initial push. The St. Paul tip made him buy instead of sell because he -saw at once that it gave him a vast supply of the best ammunition for -his bear campaign. - -To get back to myself. After I closed my trade in wheat and corn I went -South in my yacht. I cruised about in Florida waters, having a grand -old time. The fishing was great. Everything was lovely. I didn’t have a -care in the world and I wasn’t looking for any. - -One day I went ashore at Palm Beach. I met a lot of Wall Street friends -and others. They were all talking about the most picturesque cotton -speculator of the day. A report from New York had it that Percy Thomas -had lost every cent. It wasn’t a commercial bankruptcy; merely the -rumor of the world-famous operator’s second Waterloo in the cotton -market. - -I had always felt a great admiration for him. The first I ever heard of -him was through the newspapers at the time of the failure of the Stock -Exchange house of Sheldon & Thomas, when Thomas tried to corner cotton. -Sheldon, who did not have the vision or the courage of his partner, got -cold feet on the very verge of success. At least, so the Street said -at the time. At all events, instead of making a killing they made one -of the most sensational failures in years. I forget how many millions. -The firm was wound up and Thomas went to work alone. He devoted himself -exclusively to cotton and it was not long before he was on his feet -again. He paid off his creditors in full with interest--debts he was -not legally obliged to discharge--and withal had a million dollars -left to himself. His comeback in the cotton market was in its way as -remarkable as Deacon S. V. White’s famous stock-market exploit of -paying off one million dollars in one year. Thomas’ pluck and brains -made me admire him immensely. - -Everybody in Palm Beach was talking about the collapse of Thomas’ deal -in March cotton. You know how the talk goes--and grows; the amount of -misinformation and exaggeration and improvements that you hear. Why, -I’ve seen a rumor about myself grow so that the fellow who started it -did not recognize it when it came back to him in less than twenty-four -hours, swollen with new and picturesque details. - -The news of Percy Thomas’ latest misadventure turned my mind from the -fishing to the cotton market. I got files of the trade papers and read -them to get a line on conditions. When I got back to New York I gave -myself up to studying the market. Everybody was bearish and everybody -was selling July cotton. You know how people are. I suppose it is the -contagion of example that makes a man do something because everybody -around him is doing the same thing. Perhaps it is some phase or variety -in the herd instinct. In any case it was, in the opinion of hundreds -of traders, the wise and proper thing to sell July cotton--and so safe -too! You couldn’t call that general selling reckless; the word is too -conservative. The traders simply saw one side to the market and a great -big profit. They certainly expected a collapse in prices. - -I saw all this, of course, and it struck me that the chaps who were -short didn’t have a terrible lot of time to cover in. The more I -studied the situation the clearer I saw this, until I finally decided -to buy July cotton. I went to work and quickly bought one hundred -thousand bales. I experienced no trouble in getting it because it -came from so many sellers. It seemed to me that I could have offered -a reward of one million dollars for the capture, dead or alive, of a -single trader who was not selling July cotton and nobody would have -claimed it. - -I should say this was in the latter part of May. I kept buying more -and they kept on selling it to me until I had picked up all the -floating contracts and I had one hundred and twenty thousand bales. A -couple of days after I had bought the last of it it began to go up. -Once it started the market was kind enough to keep on doing very well -indeed--that is, it went up from forty to fifty points a day. - -One Saturday--this was about ten days after I began operations--the -price began to creep up. I did not know whether there was any more July -cotton for sale. It was up to me to find out, so I waited until the -last ten minutes. At that time, I knew, it was usual for those fellows -to be short and if the market closed up for the day they would be -safely hooked. So I sent in four different orders to buy five thousand -bales each, at the market, at the same time. That ran the price up -thirty points and the shorts were doing their best to wriggle away. The -market closed at the top. All I did, remember, was to buy that last -twenty thousand bales. - -The next day was Sunday. But on Monday, Liverpool was due to open up -twenty points to be on a parity with the advance in New York. Instead, -it came fifty points higher. That meant that Liverpool had exceeded -our advance by 100 per cent. I had nothing to do with the rise in that -market. This showed me that my deductions had been sound and that I -was trading along the line of least resistance. At the same time I was -not losing sight of the fact that I had a whopping big line to dispose -of. A market may advance sharply or rise gradually and yet not possess -the power to absorb more than a certain amount of selling. - -Of course the Liverpool cables made our own market wild. But I noticed -the higher it went the scarcer July cotton seemed to be. I wasn’t -letting go any of mine. Altogether that Monday was an exciting and not -very cheerful day for the bears; but for all that, I could detect no -signs of impending bear panic; no beginnings of a blind stampede to -cover. And I had one hundred and forty thousand bales for which I must -find a market. - -On Tuesday morning as I was walking to my office I met a friend at the -entrance of the building. - -“That was quite a story in the _World_ this morning,” he said with a -smile. - -“What story?” I asked. - -“What? Do you mean to tell me you haven’t seen it?” - -“I never see the _World_,” I said. “What is the story?” - -“Why, it’s all about you. It says you’ve got July cotton cornered.” - -“I haven’t seen it,” I told him and left him. I don’t know whether he -believed me or not. He probably thought it was highly inconsiderate of -me not to tell him whether it was true or not. - -When I got to the office I sent out for a copy of the paper. Sure -enough, there it was, on the front page, in big headlines: - - JULY COTTON CORNERED BY LARRY LIVINGSTON - -Of course I knew at once that the article would play the dickens with -the market. If I had deliberately studied ways and means of disposing -of my one hundred and forty thousand bales to the best advantage I -couldn’t have hit upon a better plan. It would not have been possible -to find one. That article at that very moment was being read all over -the country either in the _World_ or in other papers quoting it. It had -been cabled to Europe. That was plain from the Liverpool prices. That -market was simply wild. No wonder, with such news. - -Of course I knew what New York would do, and what I ought to do. The -market here opened at ten o’clock. At ten minutes after ten I did not -own any cotton. I let them have every one of my one hundred and forty -thousand bales. For most of my line I received what proved to be the -top prices of the day. The traders made the market for me. All I really -did was to see a heaven-sent opportunity to get rid of my cotton. I -grasped it because I couldn’t help it. What else could I do? - -The problem that I knew would take a great deal of hard thinking to -solve was thus solved for me by an accident. If the _World_ had not -published that article I never would have been able to dispose of my -line without sacrificing the greater portion of my paper profits. -Selling one hundred and forty thousand bales of cotton without sending -the price down was a trick beyond my powers. But the _World_ story -turned it for me very nicely. - -Why the _World_ published it I cannot tell you. I never knew. I suppose -the writer was tipped off by some friend in the cotton market and he -thought he was printing a scoop. I didn’t see him or anybody from the -_World_. I didn’t know it was printed that morning until after nine -o’clock; and if it had not been for my friend calling my attention to -it I would not have know it then. - -Without it I wouldn’t have had a market _big_ enough to unload in. That -is one trouble about trading on a large scale. You cannot sneak out as -you can when you pike along. You cannot always sell out when you wish -or when you think it wise. You have to get out when you can; when you -have a market that will absorb your entire line. Failure to grasp the -opportunity to get out may cost you millions. You cannot hesitate. If -you do you are lost. Neither can you try stunts like running up the -price on the bears by means of competitive buying, for you may thereby -reduce the absorbing capacity. And I want to tell you that perceiving -your opportunity is not as easy as it sounds. A man must be on the -lookout so alertly that when his chance sticks in its head at his door -he must grab it. - -Of course not everybody knew about my fortunate accident. In Wall -Street, and, for that matter, everywhere else, any accident that makes -big money for a man is regarded with suspicion. When the accident is -unprofitable it is never considered an accident but the logical outcome -of your hoggishness or of the swelled head. But when there is a profit -they call it loot and talk about how well unscrupulousness fares, and -how ill conservatism and decency. - -It was not only the _evil-minded shorts_ smarting under punishment -brought about by their own recklessness who accused me of having -deliberately planned the coup. Other people thought the same thing. - -One of the biggest men in cotton in the entire world met me a day or -two later and said, “That was certainly the slickest deal you ever put -over, Livingston. I was wondering how much you were going to lose when -you came to market that line of yours. You knew this market was not big -enough to take more than fifty or sixty thousand bales without selling -off, and how you were going to work off the rest and not lose all your -paper profits was beginning to interest me. I didn’t think of your -scheme. It certainly was slick.” - -“I had nothing to do with it,” I assured him as earnestly as I could. - -But all he did was to repeat: “Mighty slick, my boy. Mighty slick! -Don’t be so modest!” - -It was after that deal that some of the papers referred to me as the -Cotton King. But, as I said, I really was not entitled to that crown. -It is not necessary to tell you that there is not enough money in the -United States to buy the columns of the New York _World_ or enough -personal pull to secure the publication of a story like that. It gave -me an utterly unearned reputation that time. - -But I have not told this story to moralize on the crowns that are -sometimes pressed down upon the brows of undeserving traders or to -emphasize the need of seizing the opportunity, no matter where or -how it comes. My object merely was to account for the vast amount of -newspaper notoriety that came to me as a result of my deal in July -cotton. If it hadn’t been for the newspapers I never would have met -that remarkable man, Percy Thomas. - - - - -_XII_ - - -Not long after I closed my July cotton deal more successfully than I -had expected I received by mail a request for an interview. The letter -was signed by Percy Thomas. Of course I immediately answered that I’d -be glad to see him at my office at any time he cared to call. The next -day he came. - -I had long admired him. His name was a household word wherever men took -an interest in growing or buying or selling cotton. In Europe as well -as all over this country people quoted _Percy Thomas’_ opinions to me. -I remember once at a Swiss resort talking to a Cairo banker who was -interested in cotton growing in Egypt in association with the late Sir -Ernest Cassel. When he heard I was from New York he immediately asked -me about Percy Thomas, whose market reports he received and read with -unfailing regularity. - -Thomas, I always thought, went about his business scientifically. He -was a true speculator, a thinker with the vision of a dreamer and the -courage of a fighting man--an unusually well-informed man, who knew -both the theory and the practice of trading in cotton. He loved to hear -and to express ideas and theories and abstractions, and at the same -time there was mighty little about the practical side of the cotton -market or the psychology of cotton traders that he did not know, for he -had been trading for years and had made and lost vast sums. - -After the failure of his old Stock Exchange firm of Sheldon & -Thomas he went it alone. Inside of two years he came back, almost -spectacularly. I remember reading in the _Sun_ that the first thing he -did when he got back on his feet financially was to pay off his old -creditors in full, and the next was to hire an expert to study and -determine for him how he had best invest a million dollars. This expert -examined the properties and analysed the reports of several companies -and then recommended the purchase of Delaware & Hudson stock. - -Well, after having failed for millions and having come back with more -millions, Thomas was cleaned out as the result of his deal in March -Cotton. There wasn’t much time wasted after he came to see me. He -proposed that we form a working alliance. Whatever information he -got he would immediately turn over to me before passing it on to the -public. My part would be to do the actual trading, for which he said I -had a special genius and he hadn’t. - -That did not appeal to me for a number of reasons. I told him frankly -that I did not think I could run in double harness and wasn’t keen -about trying to learn. But he insisted that it would be an ideal -combination until I said flatly that I did not want to have anything to -do with influencing other people to trade. - -“If I fool myself,” I told him, “I alone suffer and I pay the bill at -once. There are no drawn-out payments or unexpected annoyances. I play -a lone hand by choice and also because it is the wisest and cheapest -way to trade. I get my pleasure out of matching my brains against the -brains of other traders--men whom I have never seen and never talked -to and never advised to buy or sell and never expect to meet or know. -When I make money I make it backing my own opinions. I don’t sell them -or capitalise them. If I made money in any other way I would imagine I -had not earned it. Your proposition does not interest me because I am -interested in the game only as I play it for myself and in my own way.” - -He said he was sorry I felt the way I did, and tried to convince me -that I was wrong in rejecting his plan. But I stuck to my views. The -rest was a pleasant talk. I told him I knew he would “come back” and -that I would consider it a privilege if he would allow me to be of -financial assistance to him. But he said he could not accept any loans -from me. Then he asked me about my July deal and I told him all about -it; how I had gone into it and how much cotton I bought and the price -and other details. We chatted a little more and then he went away. - -When I said to you some time ago that a speculator has a host of -enemies, many of whom successfully bore from within, I had in mind my -many mistakes. I have learned that a man may possess an original mind -and a lifelong habit of independent thinking and withal be vulnerable -to attacks by a persuasive personality. I am fairly immune from the -commoner speculative ailments, such as greed and fear and hope. But -being an ordinary man I find I can err with great ease. - -I ought to have been on my guard at this particular time because not -long before that I had had an experience that proved how easily a -man may be talked into doing something against his judgment and even -against his wishes. It happened in Harding’s office. I had a sort of -private office--a room that they let me occupy by myself--and nobody -was supposed to get to me during market hours without my consent. I -didn’t wish to be bothered and, as I was trading on a very large scale -and my account was fairly profitable, I was pretty well guarded. - -One day just after the market closed I heard somebody say, “Good -afternoon, Mr. Livingston.” - -I turned and saw an utter stranger--a chap of about thirty-five. I -could not understand how he’d got in, but there he was. I concluded -his business with me had passed him. But I didn’t say anything. I just -looked at him and pretty soon he said, “I came to see you about that -Walter Scott,” and he was off. - -He was a book agent. Now, he was not particularly pleasing of manner or -skillful of speech. Neither was he especially attractive to look at. -But he certainly had personality. He talked and I thought I listened. -But I do not know what he said. I don’t think I ever knew, not even -at the time. When he finished his monologue he handed me first his -fountain pen and then a blank form, which I signed. It was a contract -to take a set of Scott’s works for five hundred dollars. - -The moment I signed I came to. But he had the contract safe in his -pocket. I did not want the books. I had no place for them. They weren’t -of any use whatever to me. I had nobody to give them to. Yet I had -agreed to buy them for five hundred dollars. - -I am so accustomed to losing money that I never think first of that -phase of my mistakes. It is always the play itself, the reason why. -In the first place I wish to know my own limitations and habits of -thought. Another reason is that I do not wish to make the same mistake -a second time. _A man can excuse his mistakes only by capitalising them -to his subsequent profit._ - -Well, having made a five-hundred dollar mistake but not yet having -localised the trouble, I just looked at the fellow to size him up as -a first step. I’ll be hanged if he didn’t actually smile at me--an -understanding little smile! He seemed to read my thoughts. I somehow -knew that I did not have to explain anything to him; he knew it without -my telling him. So I skipped the explanations and the preliminaries -and asked him, “How much commission will you get on that five hundred -dollar order?” - -He promptly shook his head and said, “I can’t do it! Sorry!” - -“How much do you get?” I persisted. - -“A third. But I can’t do it!” he said. - -“A third of five hundred dollars is one hundred and sixty-six dollars -and sixty-six cents. I’ll give you two hundred dollars cash if you -give me back that signed contract.” And to prove it I took the money -out of my pocket. - -“I told you I couldn’t do it,” he said. - -“Do all of your customers make the same offer to you?” I asked. - -“No,” he answered. - -“Then why were you so sure that I was going to make it?” - -“It is what your type of sport would do. You are a first-class loser -and that makes you a first-class business man. I am much obliged to -you, but I can’t do it.” - -“Now tell me why you do not wish to make more than your commission?” - -“It isn’t that exactly,” he said. “I am not working just for the -commission.” - -“What are you working for then?” - -“For the commission and the record,” he answered. - -“What record?” - -“Mine.” - -“What are you driving at?” - -“Do you work for money alone?” he asked me. - -“Yes,” I said. - -“No.” And he shook his head. “No, you don’t. You wouldn’t get enough -fun out of it. You certainly do not work merely to add a few more -dollars to your bank account and you are not in Wall Street because you -like easy money. You get your fun some other way. Well, same here.” - -I did not argue but asked him, “And how do you get your fun?” - -“Well,” he confessed, “we’ve all got a weak spot.” - -“And what’s yours?” - -“Vanity,” he said. - -“Well,” I told him, “you’ve succeeded in getting me to sign on. Now -I want to sign off, and I am paying you two hundred dollars for ten -minutes’ work. Isn’t that enough for your pride?” - -“No,” he answered. “You see, all the rest of the bunch have been -working Wall Street for months and failed to make expenses. They said -it was the fault of the goods and the territory. So the office sent for -me to prove that the fault was with their salesmanship and not with -the books or the place. They were working on a 25 per cent commission. -I was in Cleveland, where I sold eighty-two sets in two weeks. I am -here to sell a certain number of sets not only to people who did not -buy from the other agents but to people they couldn’t even get to see. -That’s why they give me 33⅓ per cent.” - -“I can’t quite figure out how you sold me that set.” - -“Why,” he said consolingly, “I sold J. P. Morgan a set.” - -“No, you didn’t,” I said. - -He wasn’t angry. He simply said, “Honest, I did.” - -“A set of Walter Scott to J. P. Morgan, who not only has some fine -editions but probably the original manuscripts of some of the novels as -well?” - -“Well, here’s his John Hancock.” And he promptly flashed on me a -contract signed by J. P. Morgan himself. It might not have been Mr. -Morgan’s signature, but it did not occur to me to doubt it at the time. -Didn’t he have mine in his pocket? All I felt was curiosity. So I asked -him, “How did you get past the librarian?” - -“I didn’t see any librarian. I saw the Old Man himself. In the office.” - -“That’s too much!” I said. Everybody knew that it was much harder to -get into Mr. Morgan’s private office empty handed than into the White -House with a parcel that ticked like an alarm clock. - -But he declared, “I did.” - -“But how did you get into his office?” - -“How did I get into yours?” he retorted. - -“I don’t know. You tell me,” I said. - -“Well, the way I got into Morgan’s office and the way I got into yours -are the same. I just talked to the fellow at the door whose business it -was not to let me in. And the way I got Morgan to sign was the same -way I got you to sign. You weren’t signing a contract for a set of -books. You just took the fountain pen I gave you and did what I asked -you to do with it. No difference. Same as you.” - -“And is that really Morgan’s signature?” I asked him, about three -minutes late with my skepticism. - -“Sure! He learned how to write his name when he was a boy.” - -“And that’s all there is to it?” - -“That’s all,” he answered. “I know exactly what I am doing. That’s -all the secret there is. I am much obliged to you. Good day, Mr. -Livingston.” And he started to go out. - -“Hold on,” I said. “I’m bound to have you make an even two hundred -dollars out of me.” And I handed him thirty-five dollars. - -He shook his head. Then: “No,” he said. “I can’t do that. But I can do -this!” And he took the contract from his pocket, tore it in two and -gave me the pieces. - -I counted two hundred dollars and held the money before him, but he -again shook his head. - -“Isn’t that what you meant?” I said. - -“No.” - -“Then, why did you tear up the contract?” - -“Because you did not whine, but took it as I would have taken it myself -had I been in your place.” - -“But I offered you the two hundred dollars of my own accord,” I said. - -“I know; but money isn’t everything.” - -Something in his voice made me say, “You’re right; it isn’t. And now -what do you really want me to do for you?” - -“You’re quick, aren’t you?” he said. “Do you really want to do -something for me?” - -“Yes,” I told him, “I do. But whether I will or not depends what it is -you have in mind.” - -“Take me with you into Mr. Ed Harding’s office and tell him to let me -talk to him three minutes by the clock. Then leave me alone with him.” - -I shook my head and said, “He is a good friend of mine.” - -“He’s fifty years old and a stock broker,” said the book agent. - -That was perfectly true, so I took him into Ed’s office. I did not hear -anything more from or about that book agent. But one evening some weeks -later when I was going uptown I ran across him in a Sixth Avenue L -train. He raised his hat very politely and I nodded back. He came over -and asked me, “How do you do, Mr. Livingston? And how is Mr. Harding?” - -“He’s well. Why do you ask?” I felt he was holding back a story. - -“I sold him two thousand dollars’ worth of books that day you took me -in to see him.” - -“He never said a word to me about it,” I said. - -“No; that kind doesn’t talk about it.” - -“What kind doesn’t talk?” - -“The kind that never makes mistakes on account of its being bad -business to make them. That kind always knows what he wants and -nobody can tell him different. That is the kind that’s educating my -children and keeps my wife in good humor. You did me a good turn, Mr. -Livingston. I expected it when I gave up the two hundred dollars you -were so anxious to present to me.” - -“And if Mr. Harding hadn’t given you an order?” - -“Oh, but I knew he would. I had found out what kind of man he was. He -was a cinch.” - -“Yes. But if he hadn’t bought any books?” I persisted. - -“I’d have come back to you and sold you something. Good day, Mr. -Livingston. I am going to see the mayor.” And he got up as we pulled up -at Park Place. - -“I hope you sell him ten sets,” I said. His Honor was a Tammany man. - -“I’m a Republican, too,” he said, and went out, not hastily, but -leisurely, confident that the train would wait. And it did. - -I have told you this story in such detail because it concerned a -remarkable man who made me buy what I did not wish to buy. He was the -first man who did that to me. There never should have been a second, -but there was. You can never bank on there being but one remarkable -salesman in the world or on complete immunization from the influence of -personality. - -When Percy Thomas left my office, after I had pleasantly but definitely -declined to enter into a working alliance with him, I would have sworn -that our business paths would never cross. I was not sure I’d ever see -him again. But on the very next day he wrote me a letter thanking me -for my offers of help and inviting me to come and see him. I answered -that I would. He wrote again. I called. - -I got to see a great deal of him. It was always a pleasure for me -to listen to him, he knew so much and he expressed his knowledge so -interestingly. I think he is the most magnetic man I ever met. - -We talked of many things, for he is a widely read man with an -amazing grasp of many subjects and a remarkable gift for interesting -generalization. The wisdom of his speech is impressive; and as for -plausibility, he hasn’t an equal. I have heard many people accuse Percy -Thomas of many things, including insincerity, but I sometimes wonder -if his remarkable plausibility does not come from the fact that he -first convinces himself so thoroughly as to acquire thereby a greatly -increased power to convince others. - -Of course we talked about market matters at great length. I was not -bullish on cotton, but he was. I could not see the bull side at all, -but he did. He brought up so many facts and figures that I ought to -have been overwhelmed, but I wasn’t. I couldn’t disprove them because -I could not deny their authenticity, but they did not shake my belief -in what I read for myself. But he kept at it until I no longer felt -sure of my own information as gathered from the trade papers and the -dailies. That meant I couldn’t set the market with my own eyes. A man -cannot be convinced against his own convictions, but he can be talked -into a state of uncertainty and indecision, which is even worse, for -that means that he cannot trade with confidence and comfort. - -I cannot say that I got all mixed up, exactly, but I lost my poise; or -rather, I ceased to do my own thinking. I cannot give you in detail -the various steps by which I reached the state of mind that was to -prove so costly to me. I think it was his assurances of the accuracy -of his figures, which were exclusively his, and the undependability of -mine, which were not exclusively mine, but public property. He harped -on the utter reliability, as proved time and again, of all his ten -thousand correspondents throughout the South. In the end I came to read -conditions as he himself read them--because we were both reading from -the same page of the same book, held by him before my eyes. He has a -logical mind. Once I accepted his facts it was a cinch that my own -conclusions, derived from his facts, would agree with his own. - -When he began his talks with me about the cotton situation I not only -was bearish but I was short of the market. Gradually, as I began -to accept his facts and figures, I began to fear I had been basing -my previous position on misinformation. Of course I could not feel -that way and not cover. And once I had covered because Thomas made -me think I was wrong, I simply had to go long. It is the way my mind -works. You know, I have done nothing in my life but trade in stocks -and commodities. I naturally think that if it is wrong to be bearish -it must be right to be a bull. And if it is right to be a bull it is -imperative to buy. As my old Palm Beach friend said Pat Hearne used to -say, “You can’t tell till you bet!” I must prove whether I am right on -the market or not; and the proofs are to be read only in my brokers’ -statements at the end of the month. - -I started in to buy cotton and in a jiffy I had my usual line, about -sixty thousand bales. It was the most asinine play of my career. -Instead of standing or falling by my own observation and deductions I -was merely playing another man’s game. It was eminently fitting that my -silly plays should not end with that. I not only bought when I had no -business to be bullish but I didn’t accumulate my line in accordance -with the promptings of experience. I wasn’t trading right. Having -listened, I was lost. - -The market was not going my way. I am never afraid or impatient when -I am sure of my position. But the market didn’t act the way it should -have acted had Thomas been right. Having taken the first wrong step I -took the second and the third, and of course it muddled me all up. I -allowed myself to be persuaded not only into not taking my loss but -into holding up the market. That is a style of play foreign to my -nature and contrary to my trading principles and theories. Even as a -boy in the bucket shops I had known better. But I was not myself. I was -another man--a Thomasized person. - -I not only was long of cotton but I was carrying a heavy line of -wheat. That was doing famously and showed me a handsome profit. My -fool efforts to bolster up cotton had increased my line to about one -hundred and fifty thousand bales. I may tell you that about this time -I was not feeling very well. I don’t say this to furnish an excuse for -my blunders, but merely to state a pertinent fact. I remember I went to -Bayshore for a rest. - -While there I did some thinking. It seemed to me that my speculative -commitments were overlarge. I am not timid as a rule, but I got to -feeling nervous and that made me decide to lighten my load. To do this -I must clean up either the cotton or the wheat. - -It seems incredible that knowing the game as well as I did and with -an experience of twelve or fourteen years of speculating in stocks -and commodities _I did precisely the wrong thing_. _The cotton showed -me a loss and I kept it. The wheat showed me a profit and I sold it -out._ It was an utterly foolish play, but all I can say in extenuation -is that it wasn’t really my deal, but Thomas’. _Of all speculative -blunders there are few greater than trying to average a losing game._ -My cotton deal proved it to the hilt a little later. _Always sell -what shows you a loss and keep what shows you a profit._ That was so -obviously the wise thing to do and was so well known to me that even -now I marvel at myself for doing the reverse. - -And so I sold my wheat, deliberately cut short my profit in it. After I -got out of it the price went up twenty cents a bushel without stopping. -If I had kept it I might have taken a profit of about eight million -dollars. And having decided to keep on with the losing proposition I -bought more cotton! - -I remember very clearly how every day I would buy cotton, more cotton. -And why do you think I bought it? To keep the price from going down! -If that isn’t a supersucker play, what is? I simply kept putting up -more and more money--more money to lose eventually. My brokers and my -intimate friends couldn’t understand it; and they don’t to this day. -Of course if the deal had turned out differently I would have been a -wonder. More than once I was warned against placing too much reliance -on Percy Thomas’ brilliant analyses. To this I paid no heed, but kept -on buying cotton to keep it from going down. I was even buying it in -Liverpool. I accumulated four hundred and forty thousand bales before I -realized what I was doing. And then it was too late. So I sold out my -line. - -I lost nearly all that I had made out of all my other deals in stocks -and commodities. I was not completely cleaned out, but I had left fewer -hundreds of thousands than I had millions before I met my brilliant -friend Percy Thomas. For me of all men to violate all the laws that -experience had taught me to observe in order to prosper was more than -asinine. - -_To learn that a man can make foolish plays for no reason whatever was -a valuable lesson._ It cost me millions to learn that another dangerous -enemy to a trader is his susceptibility to the urgings of a magnetic -personality when plausibly expressed by a brilliant mind. It has always -seemed to me, however, that I might have learned my lesson quite as -well if the cost had been only one million. But Fate does not always -let you fix the tuition fee. She delivers the educational wallop and -presents her own bill, knowing you have to pay it, no matter what the -amount may be. Having learned what folly I was capable of I closed that -particular incident. Percy Thomas went out of my life. - -There I was, with more than nine-tenths of my stake, as Jim Fisk used -to say, gone where the woodbine twineth--up the spout. I had been a -millionaire rather less than a year. My millions I had made by using -brains, helped by luck. I had lost them by reversing the process. I -sold my two yachts and was decidedly less extravagant in my manner of -living. - -But that one blow wasn’t enough. Luck was against me. I ran up first -against illness and then against the urgent need of two hundred -thousand dollars in cash. A few months before that sum would have -been nothing at all; but now it meant almost the entire remnant of my -fleet-winged fortune. I had to supply the money and the question was: -Where would I get it? I didn’t want to take it out of the balance I -kept at my brokers’ because if I did I wouldn’t have much of a margin -left for my own trading; and I needed trading facilities more than -ever if I was to win back my millions quickly. There was only one -alternative that I could see, and that was to take it out of the stock -market! - -Just think of it! If you know much about the average customer of the -average commission house you will agree with me that the hope of making -the stock market pay your bill is one of the most prolific sources of -loss in Wall Street. You will chip out all you have if you adhere to -your determination. - -Why, in Harding’s office one winter a little bunch of high flyers -spent thirty or forty thousand dollars for an overcoat--and not one -of them lived to wear it. It so happened that a prominent floor -trader--who since has become world-famous as one of the dollar-a-year -men--came down to the Exchange wearing a fur overcoat lined with -sea otter. In those days, before furs went up sky high, that coat -was valued at only ten thousand dollars. Well, one of the chaps in -Harding’s office, Bob Keown, decided to get a coat lined with Russian -sable. He priced one uptown. The cost was about the same, ten thousand -dollars. - -“That’s the devil of a lot of money,” objected one of the fellows. - -“Oh, fair! Fair!” admitted Bob Keown amiably. “About a week’s -wages--unless you guys promise to present it to me as a slight but -sincere token of the esteem in which you hold the nicest man in the -office. Do I hear the presentation speech? No? Very well. I shall let -the stock market buy it for me!” - -“Why do you want a sable coat?” asked Ed Harding. - -“It would look particularly well on a man of my inches,” replied Bob, -drawing himself up. - -“And how did you say you were going to pay for it?” asked Jim Murphy, -who was the star tip-chaser of the office. - -“By a judicious investment of a temporary character, James. That’s -how,” answered Bob, who knew that Murphy merely wanted a tip. - -Sure enough, Jimmy asked, “What stock are you going to buy?” - -“Wrong as usual, friend. This is no time to buy anything. I propose to -sell five thousand Steel. It ought to go down ten points at the least. -I’ll just take two and a half points net. That is conservative, isn’t -it?” - -“What do you hear about it?” asked Murphy eagerly. He was a tall thin -man with black hair and a hungry look, due to his never going out to -lunch for fear of missing something on the tape. - -“I hear that coat’s the most becoming I ever planned to get.” He turned -to Harding and said, “Ed, sell five thousand U.S. Steel common at the -market. To-day, darling!” - -He was a plunger, Bob was, and liked to indulge in humorous talk. It -was his way of letting the world know that he had an iron nerve. He -sold five thousand Steel, and the stock promptly went up. Not being -half as big an ass as he seemed when he talked, Bob stopped his loss -at one and a half points and confided to the office that the New -York climate was too benign for fur coats. They were unhealthy and -ostentatious. The rest of the fellows jeered. But it was not long -before one of them bought some Union Pacific to pay for the coat. He -lost eighteen hundred dollars and said sables were all right for the -outside of a woman’s wrap, but not for the inside of a garment intended -to be worn by a modest and intelligent man. - -After that, one after another of the fellows tried to coax the market -to pay for that coat. One day I said I would buy it to keep the office -from going broke. But they all said that it wasn’t a sporting thing to -do; that if I wanted the coat for myself I ought to let the market give -it to me. But Ed Harding strongly approved of my intention and that -same afternoon I went to the furrier’s to buy it. I found out that a -man from Chicago had bought it the week before. - -That was only one case. There isn’t a man in Wall Street who has -not lost money trying to make the market pay for an automobile or a -bracelet or a motor boat or a painting. I could build a huge hospital -with the birthday presents that the tight-fisted stock market has -refused to pay for. In fact, of all hoodoos in Wall Street I think the -resolve to induce the stock market to act as a fairy godmother is the -busiest and most persistent. - -Like all well-authenticated hoodoos this has its reason for being. -What does a man do when he sets out to make the stock market pay for -a sudden need? Why, he merely hopes. He gambles. He therefore runs -much greater risks than he would if he were speculating intelligently, -in accordance with opinions or beliefs logically arrived at after a -dispassionate study of underlying conditions. To begin with, he is -after an immediate profit. He cannot afford to wait. The market must -be nice to him at once if at all. He flatters himself that he is not -asking more than to place an even-money bet. Because he is prepared -to run quick--say, stop his loss at two points when all he hopes to -make is two points--he hugs the fallacy that he is merely taking a -fifty-fifty chance. Why, I’ve known men to lose thousands of dollars -on such trades, particularly on purchases made at the height of a bull -market just before a moderate reaction. It certainly is no way to trade. - -Well, that crowning folly of my career as a stock operator was the -last straw. It beat me. I lost what little my cotton deal had left me. -It did even more harm, for I kept on trading--and losing. I persisted -in thinking that the stock market must perforce make money for me in -the end. But the only end in sight was the end of my resources. I went -into debt, not only to my principal brokers but to other houses that -accepted business from me without my putting up an adequate margin. I -not only got in debt but I stayed in debt from then on. - - - - -_XIII_ - - -There I was, once more broke, which was bad, and dead wrong in my -trading, which was a sight worse. I was sick, nervous, upset and unable -to reason calmly. That is, I was in the frame of mind in which no -speculator should be when he is trading. Everything went wrong with me. -Indeed, I began to think that I could not recover my departed sense of -proportion. Having grown accustomed to swinging a big line--say, more -than a hundred thousand shares of stock--I feared I would not show good -judgment trading in a small way. It scarcely seemed worthwhile being -right when all you carried was a hundred shares of stock. After the -habit of taking a big profit on a big line I wasn’t sure I would know -when to take my profit on a small line. I can’t describe to you how -weaponless I felt. - -Broke again and incapable of assuming the offensive vigorously. In -debt and wrong! After all those long years of successes, tempered by -mistakes that really served to pave the way for greater successes, I -was now worse off than when I began in the bucket shops. I had learned -a great deal about the game of stock speculation, but I had not learned -quite so much about the play of human weaknesses. There is no mind -so machinelike that you can depend upon it to function with equal -efficiency at all times. I now learned that I could not trust myself to -remain equally unaffected by men and misfortunes at all times. - -Money losses have never worried me in the slightest. But other -troubles could and did. I studied my disaster in detail and of course -found no difficulty in seeing just where I had been silly. I spotted -the exact time and place. A man must know himself thoroughly if he is -going to make a good job out of trading in the speculative markets. To -know what I was capable of in the line of folly was a long educational -step. I sometimes think that no price is too high for a speculator -to pay to learn that which will keep him from getting the swelled -head. A great many smashes by brilliant men can be traced directly to -the swelled head--an expensive disease everywhere to everybody, but -particularly in Wall Street to a speculator. - -I was not happy in New York, feeling the way I did. I didn’t want to -trade, because I wasn’t in good trading trim. I decided to go away -and seek a stake elsewhere. The change of scene could help me to find -myself again, I thought. So once more I left New York, beaten by the -game of speculation. I was worse than broke, since I owed over one -hundred thousand dollars spread among various brokers. - -I went to Chicago and there found a stake. It was not a very -substantial stake, but that merely meant that I would need a little -more time to win back my fortune. A house that I once had done business -with had faith in my ability as a trader and they were willing to prove -it by allowing me to trade in their office in a small way. - -I began very conservatively. I don’t know how I might have fared had I -stayed there. But one of the most remarkable experiences in my career -cut short my stay in Chicago. It is an almost incredible story. - -One day I got a telegram from Lucius Tucker. I had known him when he -was the office manager of a Stock Exchange firm that I had at times -given some business to, but I had lost track of him. The telegram read: - - Come to New York at once. - L. TUCKER. - -I knew that he knew from mutual friends how I was fixed and therefore -it was certain he had something up his sleeve. At the same time I had -no money to throw away on an unnecessary trip to New York; so instead -of doing what he asked me to do I got him on the long distance. - -“I got your telegram,” I said. “What does it mean?” - -“It means that a big banker in New York wants to see you,” he answered. - -“Who is it?” I asked. I couldn’t imagine who it could be. - -“I’ll tell you when you come to New York. No use otherwise.” - -“You say he wants to see me?” - -“He does.” - -“What about?” - -“He’ll tell you in person if you give him a chance,” said Lucius. - -“Can’t you write me?” - -“No.” - -“Then tell me more plainly,” I said. - -“I don’t want to.” - -“Look here, Lucius,” I said, “just tell me this much: Is this a fool -trip?” - -“Certainly not. It will be to your advantage to come.” - -“Can’t you give me an inkling?” - -“No,” he said. “It wouldn’t be fair to him. And besides, I don’t know -just how much he wants to do for you. But take my advice: Come, and -come quick.” - -“Are you sure it is I that he wishes to see?” - -“Nobody else but you will do. Better come, I tell you. Telegraph me -what train you take and I’ll meet you at the station.” - -“Very well,” I said, and hung up. - -I didn’t like quite so much mystery, but I knew that Lucius was -friendly and that he must have a good reason for talking the way he -did. I wasn’t faring so sumptuously in Chicago that it would break my -heart to leave it. At the rate I was trading it would be a long time -before I could get together enough money to operate on the old scale. - -I came back to New York, not knowing what would happen. Indeed, more -than once during the trip I feared nothing at all would happen and that -I’d be out my railroad fare and my time. I could not guess that I was -about to have the most curious experience of my entire life. - -Lucius met me at the station and did not waste any time in telling me -that he had sent for me at the urgent request of Mr. Daniel Williamson, -of the well-known Stock Exchange house of Williamson & Brown. Mr. -Williamson told Lucius to tell me that he had a business proposition -to make to me that he was sure I would accept since it would be very -profitable for me. Lucius swore he didn’t know what the proposition -was. The character of the firm was a guaranty that nothing improper -would be demanded of me. - -Dan Williamson was the senior member of the firm, which was founded by -Egbert Williamson way back in the ’70’s. There was no Brown and hadn’t -been one in the firm for years. The house had been, very prominent -in Dan’s father’s time and Dan had inherited a considerable fortune -and didn’t go after much outside business. They had one customer who -was worth a hundred average customers and that was Alvin Marquand, -Williamson’s brother-in-law, who in addition to being a director in -a dozen banks and trust companies was the president of the great -Chesapeake and Atlantic Railroad system. He was the most picturesque -personality in the railroad world after James J. Hill, and was the -spokesman and dominant member of the powerful banking coterie known as -the Fort Dawson gang. He was worth from fifty million to five hundred -million dollars, the estimate depending upon the state of the speaker’s -liver. When he died they found out that he was worth two hundred and -fifty million dollars, all made in Wall Street. So you see he was some -customer. - -Lucius told me he had just accepted a position with Williamson & -Brown--one that was made for him. He was supposed to be a sort of -circulating general business getter. The firm was after a general -commission business and Lucius had induced Mr. Williamson to open a -couple of branch offices, one in one of the big hotels uptown and the -other in Chicago. I rather gathered that I was going to be offered a -position in the latter place, possibly as office manager, which was -something I would not accept. I didn’t jump on Lucius because I thought -I’d better wait until the offer was made before I refused it. - -Lucius took me into Mr. Williamson’s private office, introduced me to -his chief and left the room in a hurry, as though he wished to avoid -being called as witness in a case in which he knew both parties. I -prepared to listen and then to say no. - -Mr. Williamson was very pleasant. He was a thorough gentleman, -with polished manners and a kindly smile. I could see that he made -friends easily and kept them. Why not? He was healthy and therefore -good-humored. He had slathers of money and therefore could not be -suspected of sordid motives. These things, together with his education -and social training, made it easy for him to be not only polite but -friendly, and not only friendly but helpful. - -I said nothing. I had nothing to say and, besides, I always let the -other man have his say in full before I do any talking. Somebody -told me that the late James Stillman, president of the National City -Bank--who, by the way, was an intimate friend of Williamson’s--made -it his practice to listen in silence, with an impassive face, to -anybody who brought a proposition to him. After the man got through Mr. -Stillman continued to look at him, as though the man had not finished. -So the man, feeling urged to say something more, did so. Simply by -looking and listening Stillman often made the man offer terms much more -advantageous to the bank than he had meant to offer when he began to -speak. - -I don’t keep silent just to induce people to offer a better bargain, -but because I like to know all the facts of the case. By letting a man -have his say in full you are able to decide at once. It is a great -time-saver. It averts debates and prolonged discussions that get -nowhere. Nearly every business proposition that is brought to me can be -settled, as far as my participation in it is concerned, by my saying -yes or no. But I cannot say yes or no right off unless I have the -complete proposition before me. - -Dan Williamson did the talking and I did the listening. He told me he -had heard a great deal about my operations in the stock market and how -he regretted that I had gone outside of my bailiwick and come a cropper -in cotton. Still it was to my bad luck that he owed the pleasure of -that interview with me. He thought my forte was the stock market, that -I was born for it and that I should not stray from it. - -“And that is the reason, Mr. Livingston,” he concluded pleasantly, “why -we wish to do business with you.” - -“Do business how?” I asked him. - -“Be your brokers,” he said. “My firm would like to do your stock -business.” - -“I’d like to give it to you,” I said, “but I can’t.” - -“Why not?” he asked. - -“I haven’t any money,” I answered. - -“That part is all right,” he said with a friendly smile. “I’ll furnish -it.” He took out a pocket checkbook, wrote out a check for twenty-five -thousand dollars to my order, and gave it to me. - -“What’s this for?” I asked. - -“For you to deposit in your own bank. You will draw your own checks. I -want you to do your trading in our office. I don’t care whether you win -or lose. If that money goes I will give you another personal check. So -you don’t have to be so very careful with this one. See?” - -I knew that the firm was too rich and prosperous to need anybody’s -business, much less to give a fellow the money to put up as margin. -And then he was so nice about it! Instead of giving me a credit with -the house he gave me the actual cash, so that he alone knew where -it came from, the only string being that if I traded I should do so -through his firm. And then the promise that there would be more if that -went! Still, there must be a reason. - -“What’s the idea?” I asked him. - -“The idea is simply that we want to have a customer in this office who -is known as a big active trader. Everybody knows that you swing a big -line on the short side, which is what I particularly like about you. -You are known as a plunger.” - -“I still don’t get it,” I said. - -“I’ll be frank with you, Mr. Livingston. We have two or three very -wealthy customers who buy and sell stocks in a big way. I don’t want -the Street to suspect them of selling long stock every time we sell -ten or twenty thousand shares of any stock. If the Street knows that -you are trading in our office it will not know whether it is your -short selling or the other customers’ long stock that is coming on the -market.” - -I understood at once. He wanted to cover up his brother-in-law’s -operations with my reputation as a plunger! It so happened that I had -made my biggest killing on the bear side a year and a half before, and, -of course, the Street gossips and the stupid rumor-mongers had acquired -the habit of blaming me for every decline in prices. To this day when -the market is very weak they say I am raiding it. - -I didn’t have to reflect. I saw at a glance that Dan Williamson was -offering me a chance to come back and come back quickly. I took the -check, banked it, opened an account with his firm and began trading. It -was a good active market, broad enough for a man not to have to stick -to one or two specialties. I had begun to fear, as I told you, that I -had lost the knack of hitting it right. But it seems I hadn’t. In three -weeks’ time I had made a profit of one hundred and twelve thousand -dollars out of the twenty-five thousand that Dan Williamson lent me. - -I went to him and said, “I’ve come to pay you back that twenty-five -thousand dollars.” - -“No, no!” he said and waved me away exactly as if I had offered him a -castor-oil cocktail. “No, no, my boy. Wait until your account amounts -to something. Don’t think about it yet. You’ve only got chicken feed -there.” - -There is where I made the mistake that I have regretted more than any -other I ever made in my Wall Street career. It was responsible for long -and dreary years of suffering. I should have insisted on his taking the -money. I was on my way to a bigger fortune than I had lost and walking -pretty fast. For three weeks my average profit was 150 per cent per -week. From then on my trading would be on a steadily increasing scale. -But instead of freeing myself from all obligation I let him have his -way and did not compel him to accept the twenty-five thousand dollars. -Of course, since he didn’t draw out the twenty-five thousand dollars he -had advanced me I felt I could not very well draw out my profit. I was -very grateful to him, but I am so constituted that I don’t like to owe -money or favours. I can pay the money back with money, but the favours -and kindnesses I must pay back in kind--and you are apt to find these -moral obligations mighty high priced at times. Moreover there is no -statute of limitations. - -I left the money undisturbed and resumed my trading. I was getting on -very nicely. I was recovering my poise and I was sure it would not be -very long before I should get back into my 1907 stride. Once I did -that, all I’d ask for would be for the market to hold out a little -while and I’d more than make up my losses. But making or not making -the money was not bothering me much. What made me happy was that I was -losing the habit of being wrong, of not being myself. It had played -havoc with me for months but I had learned my lesson. - -Just about that time I turned bear and I began to sell short several -railroad stocks. Among them was Chesapeake & Atlantic. I think I put -out a short line in it; about eight thousand shares. - -One morning when I got downtown Dan Williamson called me into his -private office before the market opened and said to me: “Larry, don’t -do anything in Chesapeake & Atlantic just now. That was a bad play of -yours, selling eight thousand short. I covered it for you this morning -in London and went long.” - -I was sure Chesapeake & Atlantic was going down. The tape told it to -me quite plainly; and besides I was bearish on the whole market, not -violently or insanely bearish, but enough to feel comfortable with a -moderate short line out. I said to Williamson, “What did you do that -for? I am bearish on the whole market and they are all going lower.” - -But he just shook his head and said, “I did it because I happen to know -something about Chesapeake & Atlantic that you couldn’t know. My advice -to you is not to sell that stock short until I tell you it is safe to -do so.” - -What could I do? That wasn’t an asinine tip. It was advice that came -from the brother-in-law of the chairman of the board of directors. Dan -was not only Alvin Marquand’s closest friend but he had been kind and -generous to me. He had shown his faith in me and confidence in my word. -I couldn’t do less than to thank him. And so my feelings again won over -my judgment and I gave in. To subordinate my judgment to his desires -was the undoing of me. Gratitude is something a decent man can’t help -feeling, but it is for a fellow to keep it from completely tying him -up. The first thing I knew I not only had lost all my profit but I owed -the firm one hundred and fifty thousand dollars besides. I felt pretty -badly about it, but Dan told me not to worry. - -“I’ll get you out of this hole,” he promised. “I know I will. But I -can only do it if you let me. You will have to stop doing business on -your own hook. I can’t be working for you and then have you completely -undo all my work in your behalf. Just lay off the market and give me a -chance to make some money for you. Won’t you, Larry?” - -Again I ask you: What could I do? I thought of his kindliness and -I could not do anything that might be construed as lacking in -appreciation. I had grown to like him. He was very pleasant and -friendly. I remember that all I got from him was encouragement. He kept -on assuring me that everything would come out O.K. One day, perhaps -six months later, he came to me with a pleased smile and gave me some -credit slips. - -“I told you I would pull you out of that hole,” he said, “and I have.” -And then I discovered that not only had he wiped out the debt entirely -but I had a small credit balance besides. - -I think I could have run that up without much trouble, for the market -was right, but he said to me, “I have bought you ten thousand shares -of Southern Atlantic.” That was another road controlled by his -brother-in-law, Alvin Marquand, who also ruled the market destinies of -the stock. - -When a man does for you what Dan Williamson did for me you can’t say -anything but “Thank you”--no matter what your market views may be. You -may be sure you’re right, but as Pat Hearne used to say: “You can’t -tell till you bet!” and Dan Williamson had bet for me--with his money. - -Well, Southern Atlantic went down and stayed down and I lost, I forget -how much, on my ten thousand shares before Dan sold me out. I owed him -more than ever. But you never saw a nicer or less importunate creditor -in your life. Never a whimper from him. Instead, encouraging words and -admonitions not to worry about it. In the end the loss was made up for -me in the same generous but mysterious way. - -He gave no details whatever. They were all numbered accounts. Dan -Williamson would just say to me, “We made up your Southern Atlantic -loss with profits on this other deal,” and he’d tell me how he had sold -seventy-five hundred shares of some other stock and made a nice thing -out of it. I can truthfully say that I never knew a blessed thing about -those trades of mine until I was told that the indebtedness was wiped -out. - -After that happened several times I began to think, and I got to look -at my case from a different angle. Finally I tumbled. It was plain that -I had been used by Dan Williamson. It made me angry to think it, but -still angrier that I had not tumbled to it quicker. As soon as I had -gone over the whole thing in my mind I went to Dan Williamson, told -him I was through with the firm, and I quit the office of Williamson & -Brown. I had no words with him or any of his partners. What good would -that have done me? But I will admit that I was sore--at myself quite as -much as at Williamson & Brown. - -The loss of the money didn’t bother me. Whenever I have lost money -in the stock market I have always considered that I have learned -something; that if I have lost money I have gained experience, so that -the money really went for a tuition fee. A man has to have experience -and he has to pay for it. But there was something that hurt a whole lot -in that experience of mine in Dan Williamson’s office, and that was the -loss of a great opportunity. The money a man loses is nothing; he can -make it up. But opportunities such as I had then do not come every day. - -The market, you see, had been a fine trading market. I was right; I -mean, I was reading it accurately. The opportunity to make millions was -there. But I allowed my gratitude to interfere with my play. I tied -my own hands. I had to do what Dan Williamson in his kindness wished -done. Altogether it was more unsatisfactory than doing business with a -relative. Bad business! - -And that wasn’t the worst thing about it. It was that after that there -was practically no opportunity for me to make big money. The market -flattened out. Things drifted from bad to worse. I not only lost all I -had but got into debt again--more heavily than ever. Those were long -lean years, 1911, 1912, 1913 and 1914. There was no money to be made. -The opportunity simply wasn’t there and so I was worse off than ever. - -It isn’t uncomfortable to lose when the loss is not accompanied by a -poignant vision of what might have been. That was precisely what I -could not keep my mind from dwelling on, and of course it unsettled me -further. I learned that the weaknesses to which a speculator is prone -are almost numberless. It was proper for me as a man to act the way I -did in Dan Williamson’s office, but it was improper and unwise for me -as a speculator to allow myself to be influenced by any consideration -to act against my own judgment. _Noblesse oblige_--but not in the stock -market, because the tape is not chivalrous and moreover does not reward -loyalty. I realise that I couldn’t have acted differently. I couldn’t -make myself over just because I wished to trade in the stock market. -But business is business always, and my business as a speculator is to -back my own judgment always. - -It was a very curious experience. I’ll tell you what I think happened. -Dan Williamson was perfectly sincere in what he told me when he first -saw me. Every time his firm did a few thousand shares in any one stock -the Street jumped at the conclusion that Alvin Marquand was buying or -selling. He was the big trader of the office, to be sure, and he gave -this firm all his business; and he was one of the best and biggest -traders they have ever had in Wall Street. Well, I was to be used as a -smoke screen, particularly for Marquand’s selling. - -Alvin Marquand fell sick shortly after I went in. His ailment was early -diagnosed as incurable, and Dan Williamson of course knew it long -before Marquand himself did. That is why Dan covered my Chesapeake & -Atlantic stock. He had begun to liquidate some of his brother-in-law’s -speculative holdings of that and other stocks. - -Of course when Marquand died the estate had to liquidate his -speculative and semispeculative lines, and by that time we had run -into a bear market. By tying me up the way he did, Dan was helping the -estate a whole lot. I do not speak boastfully when I say that I was a -very heavy trader and that I was dead right in my views on the stock -market. I know that Williamson remembered my successful operations -in the bear market of 1907 and he couldn’t afford to run the risk of -having me at large. Why, if I had kept on the way I was going I’d have -made so much money that by the time he was trying to liquidate part -of Alvin Marquand’s estate I would have been trading in hundreds of -thousands of shares. As an active bear I would have done damage running -into the millions of dollars to the Marquand heirs, for Alvin left only -a little over a couple of hundred millions. - -It was much cheaper for them to let me get into debt and then to pay -off the debt than to have me in some other office operating actively on -the bear side. That is precisely what I would have been doing but for -my feeling that I must not be outdone in decency by Dan Williamson. - -I have always considered this the most interesting and most unfortunate -of all my experiences as a stock operator. As a lesson it cost me a -disproportionately high price. It put off the time of my recovery -several years. I was young enough to wait with patience for the strayed -millions to come back. But five years is a long time for a man to be -poor. Young or old, it is not to be relished. I could do without the -yachts a great deal easier than I could without a market to come back -on. The greatest opportunity of a lifetime was holding before my very -nose the purse I had lost. I could not put out my hand and reach for -it. A very shrewd boy, that Dan Williamson; as slick as they make -them; farsighted, ingenious, daring. He is a thinker, has imagination, -detects the vulnerable spot in any man and can plan cold-bloodedly to -hit it. He did his own sizing up and soon doped out just what to do to -me in order to reduce me to complete inoffensiveness in the market. -He did not actually do me out of any money. On the contrary, he was -to all appearances extremely nice about it. He loved his sister, Mrs. -Marquand, and he did his duty toward her as he saw it. - - - - -_XIV_ - - -It has always rankled in my mind that after I left Williamson & Brown’s -office the cream was off the market. We ran smack into a long moneyless -period; four mighty lean years. There was not a penny to be made. As -Billy Henriquez once said, “It was the kind of market in which not even -a skunk could make a scent.” - -It looked to me as though I was in Dutch with destiny. It might have -been the plan of Providence to chasten me, but really I had not been -filled with such pride as called for a fall. I had not committed any of -those speculative sins which a trader must expiate on the debtor side -of the account. I was not guilty of a typical sucker play. What I had -done, or, rather, what I had left undone, was something for which I -would have received praise and not blame--north of Forty-second Street. -In Wall Street it was absurd and costly. But by far the worst thing -about it was the tendency it had to make a man a little less inclined -to permit himself human feelings in the ticker district. - -I left Williamson’s and tried other brokers’ offices. In every one -of them I lost money. It served me right, because I was trying to -force the market into giving me what it didn’t have to give--to wit, -opportunities for making money. I did not find any trouble in getting -credit, because those who knew me had faith in me. You can get an idea -of how strong their confidence was when I tell you that when I finally -stopped trading on credit I owed well over one million dollars. - -The trouble was not that I had lost my grip but that during those -four wretched years the opportunities for making money simply didn’t -exist. Still I plugged along, trying to make a stake and succeeding -only in increasing my indebtedness. After I ceased trading on my -own hook because I wouldn’t owe my friends any more money I made a -living handling accounts for people who believed I knew the game well -enough to beat it even in a dull market. For my services I received a -percentage of the profits--when there were any. That is how I lived. -Well, say that is how I sustained life. - -Of course, I didn’t always lose, but I never made enough to allow me -materially to reduce what I owed. Finally, as things got worse, I felt -the beginnings of discouragement for the first time in my life. - -Everything seemed to have gone wrong with me. I did not go about -bewailing the descent from millions and yachts to debts and the -simple life. I didn’t enjoy the situation, but I did not fill up with -self-pity. I did not propose to wait patiently for time and Providence -to bring about the cessation of my discomforts. I therefore studied -my problem. It was plain that the only way out of my troubles was by -making money. To make money I needed merely to trade successfully. I -had so traded before and I must do so once more. More than once in the -past I had run up a shoestring into hundreds of thousands. Sooner or -later the market would offer me an opportunity. - -I convinced myself that whatever was wrong was wrong with me and not -with the market. Now what could be the trouble with me? I asked myself -that question in the same spirit in which I always study the various -phases of my trading problems. I thought about it calmly and came to -the conclusion that my main trouble came from worrying over the money -I owed. I was never free from the mental discomfort of it. I must -explain to you that it was not mere consciousness of my indebtedness. -Any business man contracts debts in the course of his regular business. -Most of my debts were really nothing but business debts, due to -what were unfavourable business conditions for me, and no worse than -a merchant suffers from, for instance, when there is an unusually -prolonged spell of unseasonable weather. - -Of course as time went on and I could not pay I began to feel less -philosophical about my debts. I’ll explain: I owed over a million -dollars--all of it stock-market losses, remember. Most of my creditors -were very nice and didn’t bother me; but there were two who did bedevil -me. They used to follow me around. Every time I made a winning each of -them was Johnny-on-the-spot, wanting to know all about it and insisting -on getting theirs right off. One of them, to whom I owed eight hundred -dollars, threatened to sue me, seize my furniture, and so forth. I -can’t conceive why he thought I was concealing assets, unless it was -that I didn’t quite look like a stage hobo about to die of destitution. - -As I studied the problem I saw that it wasn’t a case that called for -reading the tape but for reading my own self. I quite cold-bloodedly -reached the conclusion that I would never be able to accomplish -anything useful so long as I was worried, and it was equally plain that -I should be worried so long as I owed money. I mean, as long as any -creditor had the power to vex me or to interfere with my coming back by -insisting upon being paid before I could get a decent stake together. -This was all so obviously true that I said to myself, “I must go -through bankruptcy.” What else could relieve my mind? - -It sounds both easy and sensible, doesn’t it? But it was more than -unpleasant, I can tell you. I hated to do it. I hated to put myself -in a position to be misunderstood or misjudged. I myself never cared -much for money. I never thought enough of it to consider it worthwhile -lying for. But I knew that everybody didn’t feel that way. Of course I -also knew that if I got on my feet again I’d pay everybody off, for the -obligation remained. But unless I was able to trade in the old way I’d -never be able to pay back that million. - -I nerved myself and went to see my creditors. It was a mighty difficult -thing for me to do, for all that most of them were personal friends or -old acquaintances. - -I explained the situation quite frankly to them. I said: “I am not -going to take this step because I don’t wish to pay you but because, -in justice to both myself and you, I must put myself in a position to -make money. I have been thinking of this solution off and on for over -two years, but I simply didn’t have the nerve to come out and say so -frankly to you. It would have been infinitely better for all of us if -I had. It all simmers down to this: I positively cannot be my old self -while I am harassed or upset by these debts. I have decided to do now -what I should have done a year ago. I have no other reason than the one -I have just given you.” - -What the first man said was to all intents and purposes what all of -them said. He spoke for his firm. - -“Livingston,” he said, “we understand. We realise your position -perfectly. I’ll tell you what we’ll do: we’ll just give you a release. -Have your lawyer prepare any kind of paper you wish, and we’ll sign it.” - -That was in substance what all my big creditors said. That is one -side of Wall Street for you. It wasn’t merely careless good nature -or sportsmanship. It was also a mighty intelligent decision, for it -was clearly good business. I appreciated both the good will and the -business gumption. - -These creditors gave me a release on debts amounting to over a million -dollars. But there were the two minor creditors who wouldn’t sign off. -One of them was the eight-hundred-dollar man I told you about. I also -owed sixty thousand dollars to a brokerage firm which had gone into -bankruptcy, and the receivers, who didn’t know me from Adam, were on -my neck early and late. Even if they had been disposed to follow the -example set by my largest creditors I don’t suppose the court would -have let them sign off. At all events my schedule of bankruptcy -amounted to only about one hundred thousand dollars; though, as I said, -I owed well over a million. - -It was extremely disagreeable to see the story in the newspapers. I -had always paid my debts in full and this new experience was most -mortifying to me. I knew I’d pay off everybody some day if I lived, -but everybody who read the article wouldn’t know it. I was ashamed to -go out after I saw the report in the newspapers. But it all wore off -presently and I cannot tell you how intense was my feeling of relief to -know that I wasn’t going to be harried any more by people who didn’t -understand how a man must give his entire mind to his business--if he -wishes to succeed in stock speculation. - -My mind now being free to take up trading with some prospect of -success, unvexed by debts, the next step was to get another stake. The -Stock Exchange had been closed from July thirty-first to the middle of -December, 1914, and Wall Street was in the dumps. There hadn’t been any -business whatever in a long time. I owed all my friends. I couldn’t -very well ask them to help me again just because they had been so -pleasant and friendly to me, when I knew that nobody was in a position -to do much for anybody. - -It was a mighty difficult task, getting a decent stake, for with the -closing of the Stock Exchange there was nothing that I could ask any -broker to do for me. I tried in a couple of places. No use. - -Finally I went to see Dan Williamson. This was in February, 1915. I -told him that I had rid myself of the mental incubus of debt and I was -ready to trade as of old. You will recall that when he needed me he -offered me the use of twenty-five thousand dollars without my asking -him. - -Now that I needed him he said, “When you see something that looks good -to you and you want to buy five hundred shares go ahead and it will be -all right.” - -I thanked him and went away. He had kept me from making a great deal of -money and the office had made a lot in commissions from me. I admit -I was a little sore to think that Williamson & Brown didn’t give me a -decent stake. I intended to trade conservatively at first. It would -make my financial recovery easier and quicker if I could begin with a -line a little better than five hundred shares. But, anyhow, I realised -that, such as it was, there was my chance to come back. - -I left Dan Williamson’s office and studied the situation in general -and my own problem in particular. It was a bull market. That was as -plain to me as it was to thousands of traders. But my stake consisted -merely of an offer to carry five hundred shares for me. That is, I had -no leeway, limited as I was. I couldn’t afford even a slight setback at -the beginning. I must build up my stake with my very first play. That -initial purchase of mine of five hundred shares must be profitable. I -had to make real money. I knew unless I had sufficient trading capital -I would not be able to use good judgment. Without adequate margins it -would be impossible to take the cold-blooded, dispassionate attitude -toward the game that comes from the ability to afford a few minor -losses such as I often incurred in testing the market before putting -down the big bet. - -I think now that I found myself then at the most critical period of -my career as a speculator. If I failed this time there was no telling -where or when, if ever, I might get another stake for another try. It -was very clear that I simply must wait for the exact psychological -moment. - -I didn’t go near Williamson & Brown’s. I mean, I purposely kept away -from them for six long weeks of steady tape reading. I was afraid -that if I went to the office, knowing that I could buy five hundred -shares, I might be tempted into trading at the wrong time or in the -wrong stock. A trader, in addition to studying basic conditions, -remembering market precedents and keeping in mind the psychology of -the outside public as well as the limitations of his brokers, must -also know himself and provide against his own weaknesses. There is no -need to feel anger over being human. I have come to feel that it is as -necessary to know how to read myself as to know how to read the tape. I -have studied and reckoned on my own reactions to given impulses or to -the inevitable temptations of an active market, quite in the same mood -and spirit as I have considered crop conditions or analysed reports of -earnings. - -So day after day, broke and anxious to resume trading, I sat in front -of a quotation-board in another broker’s office where I couldn’t buy or -sell as much as one share of stock, studying the market, not missing a -single transaction on the tape, watching for the psychological moment -to ring the full-speed-ahead bell. - -By reason of conditions known to the whole world the stock I was most -bullish on in those critical days of early 1915 was Bethlehem Steel. I -was morally certain it was going way up, but in order to make sure that -I would win on my very first play, as I must, I decided to wait until -it crossed par. - -I think I have told you it has been my experience that _whenever a -stock crosses 100 or 200 or 300 for the first time, it nearly always -keeps going up for 30 to 50 points--and after 300 faster than after -100 or 200_. One of my first big coups was in Anaconda, which I bought -when it crossed 200 and sold a day later at 260. My practice of buying -a stock just after it crossed par dated back to my early bucket-shop -days. It is an old trading principle. - -You can imagine how keen I was to get back to trading on my old scale. -I was so eager to begin that I could not think of anything else; but I -held myself in leash. I saw Bethlehem Steel climb, every day, higher -and higher, as I was sure it would, and yet there I was checking my -impulse to run over to Williamson & Brown’s office and buy five hundred -shares. I knew I simply had to make my initial operation as nearly a -cinch as was humanly possible. - -Every point that stock went up meant five hundred dollars I had not -made. The first ten points’ advance meant that I would have been able -to pyramid, and instead of five hundred shares I might now be carrying -one thousand shares that would be earning for me one thousand dollars -a point. But I sat tight and instead of listening to my loud-mouthed -hopes or to my clamorous beliefs I heeded only the level voice of my -experience and the counsel of common sense. Once I got a decent stake -together I could afford to take chances. But without a stake, taking -chances, even slight chances, was a luxury utterly beyond my reach. Six -weeks of patience--but, in the end, a victory for common sense over -greed and hope! - -I really began to waver and sweat blood when the stock got up to 90. -Think of what I had not made by not buying, when I was so bullish. -Well, when it got to 98 I said to myself, “Bethlehem is going through -100, and when it does the roof is going to blow clean off!” The tape -said the same thing more than plainly. In fact, it used a megaphone. -I tell you, I saw _100_ on the tape when the ticker was only printing -_98_. And I knew that wasn’t the voice of my hope or the sight of my -desire, but the assertion of my tape-reading instinct. So I said to -myself, “I can’t wait until it gets through 100. I have to get it now. -It is as good as gone through par.” - -I rushed to Williamson & Brown’s office and put in an order to buy five -hundred shares of Bethlehem Steel. The market was then 98. I got five -hundred shares at 98 to 99. After that she shot right up, and closed -that night, I think, at 114 or 115. I bought five hundred shares more. - -The next day Bethlehem Steel was 145 and I had my stake. But I earned -it. Those six weeks of waiting for the right moment were the most -strenuous and wearing six weeks I ever put in. But it paid me, for I -now had enough capital to trade in fair-sized lots. I never would have -got anywhere just on five hundred shares of stock. - -There is a great deal in starting right, whatever the enterprise may -be, and I did very well after my Bethlehem deal--so well, indeed, -that you would not have believed it was the selfsame man trading. As a -matter of fact I wasn’t the same man, for where I had been harassed and -wrong I was now at ease and right. There were no creditors to annoy and -no lack of funds to interfere with my thinking or with my listening to -the truthful voice of experience, and so I was winning right along. - -All of a sudden, as I was on my way to a sure fortune, we had the -_Lusitania_ break. Every once in a while a man gets a crack like that -in the solar plexus, probably that he may be reminded of the sad fact -that no human being can be so uniformly right on the market as to be -beyond the reach of unprofitable accidents. I have heard people say -that no professional speculator need have been hit very hard by the -news of the torpedoing of the _Lusitania_, and they go on to tell how -they had it long before the Street did. I was not clever enough to -escape by means of advance information, and all I can tell you is that -on account of what I lost through the _Lusitania_ break and one or two -other reverses that I wasn’t wise enough to foresee, I found myself -at the end of 1915 with a balance at my brokers’ of about one hundred -and forty thousand dollars. That was all I actually made, though I was -consistently right on the market throughout the greater part of the -year. - -I did much better during the following year. I was very lucky. I was -rampantly bullish in a wild bull market. Things were certainly coming -my way so that there wasn’t anything to do but to make money. It -made me remember a saying of the late H. H. Rogers, of the Standard -Oil Company, to the effect that there were times when a man could no -more help making money than he could help getting wet if he went out -in a rainstorm without an umbrella. It was the most clearly defined -bull market we ever had. It was plain to everybody that the Allied -purchases of all kinds of supplies here made the United States the most -prosperous nation in the world. We had all the things that no one else -had for sale, and we were fast getting all the cash in the world. -I mean that the wide world’s gold was pouring into this country in -torrents. Inflation was inevitable, and, of course, that meant rising -prices for everything. - -All this was so evident from the first that little or no manipulation -for the rise was needed. That was the reason why the preliminary -work was so much less than in other bull markets. And not only was -the war-bride boom more naturally developed than all others but it -proved unprecedentedly profitable for the general public. That is, the -stock-market winnings during 1915 were more widely distributed than in -any other boom in the history of Wall Street. That the public did not -turn all their paper profits into good hard cash or that they did not -long keep what profits they actually took was merely history repeating -itself. Nowhere does history indulge in repetitions so often or so -uniformly as in Wall Street. When you read contemporary accounts of -booms or panics the one thing that strikes you most forcibly is how -little either stock speculation or stock speculators to-day differ from -yesterday. The game does not change and neither does human nature. - -I went along with the rise in 1916. I was as bullish as the next man, -but of course I kept my eyes open. I knew, as everybody did, that there -must be an end, and I was on the watch for warning signals. I wasn’t -particularly interested in guessing from which quarter the tip would -come and so I didn’t stare at just one spot. I was not, and I never -have felt that I was, wedded indissolubly to one or the other side of -the market. That a bull market has added to my bank account or a bear -market has been particularly generous I do not consider sufficient -reason for sticking to the bull or the bear side after I receive the -get-out warning. _A man does not swear eternal allegiance to either the -bull or the bear side. His concern lies with being right._ - -_And there is another thing to remember, and that is that a market -does not culminate in one grand blaze of glory. Neither does it end -with a sudden reversal of form. A market can and does often cease to -be a bull market long before prices generally begin to break._ My long -expected warning came to me when I noticed that, one after another, -_those stocks which had been the leaders of the market reacted several -points from the top and--for the first time in many months--did not -come back_. Their race evidently was run, and that clearly necessitated -a change in my trading tactics. - -It was simple enough. In a bull market the trend of prices, of course, -is decidedly and definitely upward. Therefore whenever a stock goes -against the general trend you are justified in assuming that there -is something wrong with that particular stock. It is enough for the -experienced trader to perceive that something is wrong. He must not -expect the tape to become a lecturer. His job is to listen for it to -say “Get out!” and not wait for it to submit a legal brief for approval. - -As I said before, _I noticed that stocks which had been the leaders -of the wonderful advance had ceased to advance. They dropped six or -seven points and stayed there. At the same time the rest of the market -kept on advancing under new standard bearers._ Since nothing wrong had -developed with the companies themselves, the reason had to be sought -elsewhere. Those stocks had gone with the current for months. When they -ceased to do so, though the bull tide was still running strong, it -meant that for those particular stocks the bull market was over. For -the rest of the list the tendency was still decidedly upward. - -There was no need to be perplexed into inactivity, for there were -really no cross currents. I did not turn bearish on the market then, -because the tape didn’t tell me to do so. The end of the bull market -had not come, though it was within hailing distance. Pending its -arrival there was still bull money to be made. _Such being the case, -I merely turned bearish on the stocks which had stopped advancing and -as the rest of the market had rising power behind it I both bought and -sold._ - -The leaders that had ceased to lead I sold. I put out a short line of -five thousand shares in each of them; and then I went long of the new -leaders. The stocks I was short of didn’t do much, but my long stocks -kept on rising. When finally these in turn ceased to advance I sold -them out and went short--five thousand shares of each. By this time I -was more bearish than bullish, because obviously the next big money was -going to be made on the down side. While I felt certain that the bear -market had really begun before the bull market had really ended, I knew -the time for being a rampant bear was not yet. There was no sense in -being more royalist than the king; especially in being so too soon. The -tape merely said that patrolling parties from the main bear army had -dashed by. Time to get ready. - -I kept on both buying and selling until after about a month’s trading -I had out a short line of sixty thousand shares--five thousand shares -each in a dozen different stocks which earlier in the year had been the -public’s favourites because they had been the leaders of the great bull -market. It was not a very heavy line; but don’t forget that neither was -the market definitely bearish. - -Then one day the entire market became quite weak and prices of all -stocks began to fall. When I had a profit of at least four points in -each and every one of the twelve stocks that I was short of, I knew -that I was right. The tape told me it was now safe to be bearish, so I -promptly doubled up. - -I had my position. I was short of stocks in a market that now was -plainly a bear market. There wasn’t any need for me to push things -along. The market was bound to go my way, and, knowing that, I could -afford to wait. After I doubled up I didn’t make another trade for a -long time. About seven weeks after I put out my full line, we had the -famous “leak,” and stocks broke badly. It was said that somebody had -advance news from Washington that President Wilson was going to issue -a message that would bring back the dove of peace to Europe in a hurry. -Of course the war-bride boom was started and kept up by the World War, -and peace was a bear item. When one of the cleverest traders on the -floor was accused of profiting by advance information he simply said he -had sold stocks not on any news but because he considered that the bull -market was overripe. I myself had doubled my line of shorts seven weeks -before. - -On the news the market broke badly and I naturally covered. It was the -only play possible. _When something happens on which you did not count -when you made your plans it behooves you to utilise the opportunity -that a kindly fate offers you._ For one thing, on a bad break like -that you have a big market, one that you can turn around in, and that -is the time to turn your paper profits into real money. Even in a bear -market a man cannot always cover one hundred and twenty thousand shares -of stock without putting up the price on himself. He must wait for the -market that will allow him to buy that much at no damage to his profit -as it stands him on paper. - -I should like to point out that I was not counting on that particular -break at that particular time for that particular reason. But, as I -have told you before, my experience of thirty years as a trader is that -such _accidents are usually along the line of least resistance on_ -which I base my position in the market. Another thing to bear in mind -is this: _Never try to sell at the top._ It isn’t wise. _Sell after a -reaction if there is no rally._ - -I cleared about three million dollars in 1916 by being bullish as long -as the bull market lasted and then by being bearish when the bear -market started. As I said before, a man does not have to marry one side -of the market till death do them part. - -That winter I went South, to Palm Beach, as I usually do for a -vacation, because I am very fond of salt-water fishing. I was short -of stocks and wheat, and both lines showed me a handsome profit. There -wasn’t anything to annoy me and I was having a good time. Of course -unless I go to Europe I cannot really be out of touch with the stock or -commodities markets. For instance, in the Adirondacks I have a direct -wire from my broker’s office to my house. - -In Palm Beach I used to go to my broker’s branch office regularly. -I noticed that cotton, in which I had no interest, was strong and -rising. About that time--this was in 1917--I heard a great deal about -the efforts that President Wilson was making to bring about peace. The -reports came from Washington, both in the shape of press dispatches and -private advice to friends in Palm Beach. That is the reason why one -day I got the notion that the course of the various markets reflected -confidence in Mr. Wilson’s success. With peace supposedly close at -hand, stocks and wheat ought to go down and cotton up. I was all set as -far as stocks and wheat went, but I had not done anything in cotton in -some time. - -At 2:20 that afternoon I did not own a single bale, but at 2:25 my -belief that peace was impending made me buy fifteen thousand bales as -a starter. I proposed to follow my old system of trading--that is, of -buying my full line--which I have already described to you. - -That very afternoon, after the market closed, we got the Unrestricted -Warfare note. There wasn’t anything to do except to wait for the market -to open the next day. I recall that at Gridley’s that night one of the -greatest captains of industry in the country was offering to sell any -amount of United States Steel at five points below the closing price -that afternoon. There were several Pittsburgh millionaires within -hearing. Nobody took the big man’s offer. They knew there was bound to -be a whopping big break at the opening. - -Sure enough, the next morning the stock and commodity markets were in -an uproar, as you can imagine. Some stocks opened eight points below -the previous night’s close. To me that meant a heaven-sent opportunity -to cover all my shorts profitably. As I said before, _in a bear -market it is always wise to cover if complete demoralisation suddenly -develops_. That is the only way, if you swing a good-sized line, of -turning a big paper profit into real money both quickly and without -regrettable reductions. For instance, I was short fifty thousand shares -of United States Steel alone. Of course I was short of other stocks, -and when I saw I had the market to cover in, I did. My profits amounted -to about one and a half million dollars. It was not a chance to -disregard. - -Cotton, of which I was long fifteen thousand bales, bought in the last -half hour of the trading the previous afternoon, opened down five -hundred points. Some break! It meant an overnight loss of three hundred -and seventy-five thousand dollars. While it was perfectly clear that -the only wise play in stocks and wheat was to cover on the break I was -not so clear as to what I ought to do in cotton. There were various -things to consider, and while I always take my loss the moment I am -convinced I am wrong, I did not like to take that loss that morning. -Then I reflected that I had gone South to have a good time fishing -instead of perplexing myself over the course of the cotton market. And, -moreover, I had taken such big profits in my wheat and in stocks that -I decided to take my loss in cotton. I would figure that my profit had -been a little more than one million instead of over a million and a -half. It was all a matter of bookkeeping, as promoters are apt to tell -you when you ask too many questions. - -If I hadn’t bought that cotton just before the market closed the day -before, I would have saved that four hundred thousand dollars. It shows -you how quickly a man may lose big money on a moderate line. My main -position was absolutely correct and I benefited by an accident of a -nature diametrically opposite to the considerations that led me to -take the position I did in stocks and wheat. Observe, please, that the -speculative line of least resistance again demonstrated its value to -a trader. Prices went as I expected, notwithstanding the unexpected -market factor introduced by the German note. If things had turned out -as I had figured I would have been 100 per cent right in all three of -my lines, for with peace stocks and wheat would have gone down and -cotton would have gone kiting up. I would have cleaned up in all three. -Irrespective of peace or war, I was right in my position on the stock -market and in wheat and that is why the unlooked-for event helped. -In cotton I based my play on something that might happen outside -of the market--that is, I bet on Mr. Wilson’s success in his peace -negotiations. It was the German military leaders who made me lose the -cotton bet. - -When I returned to New York early in 1917 I paid back all the money -I owed, which was over a million dollars. It was a great pleasure to -me to pay my debts. I might have paid it back a few months earlier, -but I didn’t for a very simple reason. I was trading actively and -successfully and I needed all the capital I had. I owed it to myself as -well as to the men I considered my creditors to take every advantage of -the wonderful markets we had in 1915 and 1916. I knew that I would make -a great deal of money and I wasn’t worrying because I was letting them -wait a few months longer for money many of them never expected to get -back. I did not wish to pay off my obligations in driblets or to one -man at a time, but in full to all at once. So as long as the market was -doing all it could for me I just kept on trading on as big a scale as -my resources permitted. - -I wished to pay interest, but all those creditors who had signed -releases positively refused to accept it. The man I paid off the last -of all was the chap I owed the eight hundred dollars to, who had made -my life a burden and had upset me until I couldn’t trade. I let him -wait until he heard that I had paid off all the others. Then he got his -money. I wanted to teach him to be considerate the next time somebody -owed him a few hundreds. - -And that is how I came back. - -After I paid off my debts in full I put a pretty fair amount into -annuities. I made up my mind I wasn’t going to be strapped and -uncomfortable and minus a stake ever again. Of course, after I married -I put some money in trust for my wife. And after the boy came I put -some in trust for him. - -The reason I did this was not alone the fear that the stock market -might take it away from me, but because I knew that a man will spend -anything he can lay his hands on. By doing what I did my wife and child -are safe from me. - -More than one man I know has done the same thing, but has coaxed his -wife to sign off when he needed the money, and he has lost it. But I -have fixed it up so that no matter what I want or what my wife wants, -that trust holds. It is absolutely safe from all attacks by either of -us; safe from my market needs; safe even from a devoted wife’s love. -I’m taking no chances! - - - - -_XV_ - - -Among the hazards of speculation the happening of the unexpected--I -might even say of the unexpectable--ranks high. _There are certain -chances that the most prudent man is justified in taking--chances -that he must take if he wishes to be more than a mercantile mollusk._ -Normal business hazards are no worse than the risks a man runs when -he goes out of his house into the street or sets out on a railroad -journey. When I lose money by reason of some development which nobody -could foresee I think no more vindictively of it than I do of an -inconveniently timed storm. Life itself from the cradle to the grave is -a gamble and what happens to me because I do not possess the gift of -second sight I can bear undisturbed. But there have been times in my -career as a speculator when I have both been right and played square -and nevertheless I have been cheated out of my earnings by the sordid -unfairness of unsportsmanlike opponents. - -Against misdeeds by crooks, cowards and crowds a quick-thinking or -far-sighted businessman can protect himself. I have never gone up -against downright dishonesty except in a bucket shop or two because -even there honesty was the best policy; the big money was in being -square and not in welshing. I have never thought it good business to -play any game in any place where it was necessary to keep an eye on -the dealer because he was likely to cheat if unwatched. But against -the whining welsher the decent man is powerless. Fair play is fair -play. I could tell you a dozen instances where I have been the victim -of my own belief in the sacredness of the pledged word or of the -inviolability of a gentlemen’s agreement. I shall not do so because no -useful purpose can be served thereby. - -Fiction writers, clergymen and women are fond of alluding to the floor -of the Stock Exchange as a boodlers’ battlefield and to Wall Street’s -daily business as a fight. It is quite dramatic but utterly misleading. -I do not think that my business is strife and contest. I never -fight either individuals or speculative cliques. I merely differ in -opinion--that is, in my reading of basic conditions. What playwrights -call battles of business are not fights between human beings. They are -merely tests of business vision. _I try to stick to facts and facts -only, and govern my actions accordingly. That is Bernard M. Baruch’s -recipe for success in wealth-winning._ Sometimes I do not see the -facts--all the facts--clearly enough or early enough; or else I do not -reason logically. Whenever any of these things happen I lose. I am -wrong. And it always costs me money to be wrong. - -No reasonable man objects to paying for his mistakes. There are no -preferred creditors in mistake-making and no exceptions or exemptions. -But I object to losing money when I am right. I do not mean, either, -those deals that have cost me money because of sudden changes in the -rules of some particular exchange. I have in mind certain hazards of -speculation that from time to time remind a man that no profit should -be counted safe until it is deposited in your bank to your credit. - -After the Great War broke out in Europe there began the rise in the -prices of commodities that was to be expected. It was as easy to -foresee that as to foresee war inflation. Of course the general advance -continued as the war prolonged itself. As you may remember, I was busy -“coming back” in 1915. The boom in stocks was there and it was my duty -to utilise it. My safest, easiest and quickest big play was in the -stock market, and I was lucky, as you know. - -By July, 1917, I not only had been able to pay off all my debts but was -quite a little to the good besides. This meant that I now had the time, -the money and the inclination to consider trading in commodities as -well as in stocks. For many years I have made it my practice to study -all the markets. The advance in commodity prices over the pre-war level -ranged from 100 to 400 per cent. There was only one exception, and that -was coffee. Of course there was a reason for this. The breaking out -of the war meant the closing up of European markets and huge cargoes -were sent to this country, which was the one big market. That led in -time to an enormous surplus of raw coffee here, and that, in turn, kept -the price low. Why, when I first began to consider its speculative -possibilities coffee was actually selling below pre-war prices. If the -reasons for this anomaly were plain, no less plain was it that the -active and increasingly efficient operation by the German and Austrian -submarines must mean an appalling reduction in the number of ships -available for commercial purposes. This eventually in turn must lead -to dwindling imports of coffee. With reduced receipts and an unchanged -consumption the surplus stocks must be absorbed, and when that happened -the price of coffee must do what the prices of all other commodities -had done, which was, go way up. - -It didn’t require a Sherlock Holmes to size up the situation. Why -everybody did not buy coffee I cannot tell you. When I decided to -buy it I did not consider it a speculation. It was much more of an -investment. I knew it would take time to cash in, but I knew also -that it was bound to yield a good profit. That made it a conservative -investment operation--a banker’s act rather than a gambler’s play. - -I started my buying operations in the winter of 1917. I took quite -a lot of coffee. The market, however, did nothing to speak of. It -continued inactive and as for the price, it did not go up as I had -expected. The outcome of it all was that I simply carried my line to -no purpose for nine long months. My contracts expired then and I sold -out all my options. I took a whopping big loss on that deal and yet I -was sure my views were sound. I had been clearly wrong in the matter of -time, but I was confident that coffee must advance as all commodities -had done, so that no sooner had I sold out my line than I started in to -buy again. I bought three times as much coffee as I had so unprofitably -carried during those nine disappointing months. Of course I bought -deferred options--for as long a time as I could get. - -I was not so wrong now. As soon as I had taken on my trebled line the -market began to go up. People everywhere seemed to realise all of a -sudden what was bound to happen in the coffee market. It began to -look as if my investment was going to return me a mighty good rate of -interest. - -The sellers of the contracts I held were roasters, mostly of German -names and affiliations, who had bought the coffee in Brazil confidently -expecting to bring it to this country. But there were no ships to bring -it, and presently they found themselves in the uncomfortable position -of having no end of coffee down there and being heavily short of it to -me up here. - -Please bear in mind that I first became bullish on coffee while the -price was practically at a pre-war level, and don’t forget that after I -bought it I carried it the greater part of a year and then took a big -loss on it. The punishment for being wrong is to lose money. The reward -for being right is to make money. Being clearly right and carrying a -big line, I was justified in expecting to make a killing. It would not -take much of an advance to make my profit satisfactory to me, for I was -carrying several hundred thousand bags. I don’t like to talk about my -operations in figures because sometimes they sound rather formidable -and people might think I was boasting. As a matter of fact I trade -in accordance to my means and always leave myself an ample margin -of safety. In this instance I was conservative enough. The reason I -bought options so freely was because I couldn’t see how I could lose. -Conditions were in my favour. I had been made to wait a year, but now I -was going to be paid both for my waiting and for being right. I could -see the profit coming--fast. There wasn’t any cleverness about it. It -was simply that I wasn’t blind. - -Coming sure and fast, that profit of millions! But it never reached -me. No; it wasn’t side-tracked by a sudden change in conditions. The -market did not experience an abrupt reversal of form. Coffee did not -pour into the country. What happened? The unexpectable! What had never -happened in anybody’s experience; what I therefore had no reason -to guard against. I added a new one to the long list of hazards of -speculation that I must always keep before me. It was simply that the -fellows who had sold me the coffee, the shorts, knew what was in store -for them, and in their efforts to squirm out of the position into which -they had sold themselves, devised a new way of welshing. They rushed to -Washington for help, and got it. - -Perhaps you remember that the Government had evolved various plans -for preventing further profiteering in necessities. You know how -most of them worked. Well, the philanthropic coffee shorts appeared -before the Price Fixing Committee of the War Industries Board--I -think that was the official designation--and made a patriotic appeal -to that body to protect the American breakfaster. They asserted that -a professional speculator, one Lawrence Livingston, had cornered, -or was about to corner, coffee. If his speculative plans were not -brought to naught he would take advantage of the conditions created -by the war and the American people would be forced to pay exorbitant -prices for their daily coffee. It was unthinkable to the patriots who -had sold me cargoes of coffee they couldn’t find ships for, that one -hundred millions of Americans, more or less, should pay tribute to -conscienceless speculators. They represented the coffee trade, not the -coffee gamblers, and they were willing to help the Government curb -profiteering actual or prospective. - -Now I have a horror of whiners and I do not mean to intimate that -the Price Fixing Committee was not doing its honest best to curb -profiteering and wastefulness. But that need not stop me from -expressing the opinion that the committee could not have gone very -deeply into the particular problem of the coffee market. They fixed -on a maximum price for raw coffee and also fixed a time limit for -closing out all existing contracts. This decision meant, of course, -that the Coffee Exchange would have to go out of business. There was -only one thing for me to do and I did it, and that was to sell out my -contracts. Those profits of millions that I had deemed as certain to -come my way as any I ever made failed completely to materialise. I was -and am as keen as anybody against the profiteer in the necessaries of -life, but at the time the Price Fixing Committee made their ruling on -coffee, all other commodities were selling at from 250 to 400 per cent -above pre-war prices while raw coffee was actually below the average -prevailing for some years before the war. I can’t see that it made any -real difference who held the coffee. The price was bound to advance; -and the reason for that was not the operations of conscienceless -speculators, but the dwindling surplus for which the diminishing -importations were responsible, and they in turn were affected -exclusively by the appalling destruction of the world’s ships by the -German submarines. The committee did not wait for coffee to start; they -clamped on the brakes. - -As a matter of policy and of expediency it was a mistake to force the -Coffee Exchange to close just then. If the committee had let coffee -alone the price undoubtedly would have risen for the reasons I have -already stated, which had nothing to do with any alleged corner. -But the high price--which need not have been exorbitant--would have -been an incentive to attract supplies to this market. I have heard -Mr. Bernard M. Baruch say that the War Industries Board took into -consideration this factor--the insuring of a supply--in fixing prices, -and for that reason some of the complaints about the high limit on -certain commodities were unjust. When the Coffee Exchange resumed -business, later on, coffee sold at twenty-three cents. The American -people paid that price because of the small supply, and the supply -was small because the price had been fixed too low, at the suggestion -of philanthropic shorts, to make it possible to pay the high ocean -freights and thus insure continued importations. - -I have always thought that my coffee deal was the most legitimate of -all my trades in commodities. I considered it more of an investment -than a speculation. I was in it over a year. If there was any gambling -it was done by the patriotic roasters with German names and ancestry. -They had coffee in Brazil and they sold it to me in New York. The Price -Fixing Committee fixed the price of the only commodity that had not -advanced. They protected the public against profiteering before it -started, but not against the inevitable higher prices that followed. -Not only that, but even when green coffee hung around nine cents a -pound, roasted coffee went up with everything else. It was only the -roasters who benefited. If the price of green coffee had gone up two or -three cents a pound it would have meant several millions for me. And it -wouldn’t have cost the public as much as the later advance did. - -Post-mortems in speculation are a waste of time. They get you nowhere. -But this particular deal has a certain educational value. It was as -pretty as any I ever went into. The rise was so sure, so logical, -that I figured that I simply couldn’t help making several millions of -dollars. But I didn’t. - -On two other occasions I have suffered from the action of exchange -committees making rulings that changed trading rules without warning. -But in those cases my own position, while technically right, was not -quite so sound commercially as in my coffee trade. You cannot be dead -sure of anything in a speculative operation. It was the experience I -have just told you that made me add the unexpectable to the unexpected -in my list of hazards. - -After the coffee episode I was so successful in other commodities -and on the short side of the stock market, that I began to suffer -from silly gossip. The professionals in Wall Street and the -newspaper writers got the habit of blaming me and my alleged raids -for the inevitable breaks in prices. At times my selling was called -unpatriotic--whether I was really selling or not. The reason for -exaggerating the magnitude and the effect of my operations, I suppose, -was the need to satisfy the public’s insatiable demand for reasons for -each and every price movement. - -As I have said a thousand times, no manipulation can put stocks down -and keep them down. There is nothing mysterious about this. The reason -is plain to everybody who will take the trouble to think about it -half a minute. Suppose an operator raided a stock--that is, put the -price down to a level below its real value--what would inevitably -happen? Why, the raider would at once be up against the best kind of -inside buying. The people who know what a stock is worth will always -buy it when it is selling at bargain prices. _If the insiders are not -able to buy, it will be because general conditions are against their -free command of their own resources, and such conditions are not bull -conditions._ When people speak about raids the inference is that the -raids are unjustified; almost criminal. But selling a stock down to -a price much below what it is worth is mighty dangerous business. It -is well to bear in mind that a raided stock that fails to rally is -not getting much inside buying and where there is a raid--that is, -unjustified short selling--there is usually apt to be inside buying; -and when there is that, the price does not stay down. I should say -that in ninety-nine cases out of a hundred, so-called raids are really -legitimate declines, accelerated at times but not primarily caused by -the operations of a professional trader, however big a line he may be -able to swing. - -The theory that most of the sudden declines or particular sharp breaks -are the results of some plunger’s operations probably was invented -as an easy way of supplying reasons to those speculators who, being -nothing but blind gamblers, will believe anything that is told them -rather than do a little thinking. The raid excuse for losses that -unfortunate speculators so often receive from brokers and financial -gossipers is really an inverted tip. The difference lies in this: A -bear tip is distinct, positive advice to sell short. But the inverted -tip--that is, the explanation that does not explain--serves merely to -keep you from wisely selling short. _The natural tendency when a stock -breaks badly is to sell it. There is a reason--an unknown reason but a -good reason; therefore, get out._ But it is not wise to get out when -the break is the result of a raid by an operator, because the moment he -stops the price must rebound. Inverted tips! - - - - -_XVI_ - - -Tips! How people want tips! They crave not only to get them but to -give them. There is greed involved, and vanity. It is very amusing, -at times, to watch really intelligent people fish for them. And the -tip-giver need not hesitate about the quality, for the tip-seeker -is not really after good tips, but after any tip. If it makes good, -fine! If it doesn’t, better luck with the next. I am thinking of the -average customer of the average commission house. There is a type of -promoter or manipulator that believes in tips first, last and all the -time. A good flow of tips is considered by him as a sort of sublimated -publicity work, the best merchandising dope in the world, for, since -tip-seekers and tip-takers are invariably tip-passers, tip-broadcasting -becomes a sort of endless-chain advertising. The tipster-promoter -labours under the delusion that no human being breathes who can resist -a tip if properly delivered. He studies the art of handing them out -artistically. - -I get tips by the hundreds every day from all sorts of people. I’ll -tell you a story about Borneo Tin. You remember when the stock was -brought out? It was at the height of the boom. The promoter’s pool had -taken the advice of a very clever banker and decided to float the new -company in the open market at once instead of letting an underwriting -syndicate take its time about it. It was good advice. The only mistake -the members of the pool made came from inexperience. They did not know -what the stock market was capable of doing during a crazy boom and at -the same time they were not intelligently liberal. They were agreed -on the need of marking up the price in order to market the stock, but -they started the trading at a figure at which the traders and the -speculative pioneers could not buy it without misgivings. - -By rights the promoters ought to have got stuck with it, but in the -wild bull market their hoggishness turned out to be rank conservatism. -The public was buying anything that was adequately tipped. Investments -were not wanted. The demand was for easy money; for the sure gambling -profit. Gold was pouring into this country through the huge purchases -of war material. They tell me that the promoters, while making their -plans for bringing out Borneo stock, marked up the opening price three -different times before their first transaction was officially recorded -for the benefit of the public. - -I had been approached to join the pool and I had looked into it but I -didn’t accept the offer because if there is any market manoeuvring to -do, I like to do it myself. I trade on my own information and follow my -own methods. When Borneo Tin was brought out, knowing what the pool’s -resources were and what they had planned to do, and also knowing what -the public was capable of, I bought ten thousand shares during the -first hour of the first day. Its market début was successful at least -to that extent. As a matter of fact the promoters found the demand so -active that they decided it would be a mistake to lose so much stock -so soon. They found out that I had acquired my ten thousand shares -about at the same time that they found out that they would probably -be able to sell every share they owned if they merely marked up the -price twenty-five or thirty points. They therefore concluded that the -profit on my ten thousand shares would take too big a chunk out of the -millions they felt were already as good as banked. So they actually -ceased their bull operations and tried to shake me out. But I simply -sat tight. They gave me up as a bad job because they didn’t want the -market to get away from them, and then they began to put up the price, -without losing any more stock than they could help. - -They saw the crazy height that other stocks rose to and they began to -think in billions. Well, when Borneo Tin got up to 120 I let them have -my ten thousand shares. It checked the rise and the pool managers let -up on their jacking-up process. On the next general rally they again -tried to make an active market for it and disposed of quite a little, -but the merchandising proved to be rather expensive. Finally they -marked it up to 150. But the bloom was off the bull market for keeps, -so the pool was compelled to market what stock it could on the way down -to those people who love to buy after a good reaction, on the fallacy -that a stock that has once sold at 150 must be cheap at 130 and a great -bargain at 120. Also, they passed the tip to the floor traders, who -often are able to make a temporary market, and later to the commission -houses. Every little helped and the pool was using every device known. -The trouble was that the time for bulling stocks had passed. The -suckers had swallowed other hooks. The Borneo bunch didn’t or wouldn’t -see it. - -I was down in Palm Beach with my wife. One day I made a little -money at Gridley’s and when I got home I gave Mrs. Livingston a -five-hundred-dollar bill out of it. It was a curious coincidence, but -that same night she met at a dinner the president of the Borneo Tin -Company, a Mr. Wisenstein, who had become the manager of the stock -pool. We didn’t learn until some time afterward that this Wisenstein -deliberately manœuvred so that he sat next to Mrs. Livingston at -dinner. - -He laid himself out to be particularly nice to her and talked most -entertainingly. In the end he told her, very confidentially, “Mrs. -Livingston, I’m going to do something I’ve never done before. I am very -glad to do it because you know exactly what it means.” He stopped and -looked at Mrs. Livingston anxiously, to make sure she was not only -wise but discreet. She could read it on his face, plain as print. But -all she said was, “Yes.” - -“Yes, Mrs. Livingston. It has been a very great pleasure to meet you -and your husband, and I want to prove that I am sincere in saying this -because I hope to see a great deal of both of you. I am sure I don’t -have to tell you that what I am going to say is strictly confidential!” -Then he whispered, “If you will buy some Borneo Tin you will make a -great deal of money.” - -“Do you think so?” she asked. - -“Just before I left the hotel,” he said, “I received some cables with -news that won’t be known to the public for several days at least. I am -going to gather in as much of the stock as I can. If you get some at -the opening to-morrow you will be buying it at the same time and at -the same price as I. I give you my word that Borneo Tin will surely -advance. You are the only person that I have told this to. Absolutely -the only one!” - -She thanked him and then she told him that she didn’t know anything -about speculating in stocks. But he assured her it wasn’t necessary for -her to know any more than he had told her. To make sure she heard it -correctly he repeated his advice to her: - -“All you have to do is to buy as much Borneo Tin as you wish. I can -give you my word that if you do you will not lose a cent. I’ve never -before told a woman--or a man, for that matter--to buy anything in my -life. But I am so sure the stock won’t stop this side of 200 that I’d -like you to make some money. I can’t buy all the stock myself, you -know, and if somebody besides myself is going to benefit by the rise -I’d rather it was you than some stranger. Much rather! I’ve told you in -confidence because I know you won’t talk about it. Take my word for it, -Mrs. Livingston, and buy Borneo Tin!” - -He was very earnest about it and succeeded in so impressing her that -she began to think she had found an excellent use for the five hundred -dollars I had given her that afternoon. That money hadn’t cost me -anything and was outside of her allowance. In other words, it was easy -money to lose if the luck went against her. But he had said she would -surely win. It would be nice to make money on her own hook--and tell me -all about it afterwards. - -Well, sir, the very next morning before the market opened she went into -Harding’s office and said to the manager: - -“Mr. Haley, I want to buy some stock, but I don’t want it to go in my -regular account because I don’t wish my husband to know anything about -it until I’ve made some money. Can you fix it for me?” - -Haley, the manager, said, “Oh, yes. We can make it a special account. -What’s the stock and how much of it do you want to buy?” - -She gave him the five hundred dollars and told him, “Listen, please. -I do not wish to lose more than this money. If that goes I don’t want -to owe you anything; and remember, I don’t want Mr. Livingston to know -anything about this. Buy me as much Borneo Tin as you can for the -money, at the opening.” - -Haley took the money and told her he’d never say a word to a soul, and -bought her a hundred shares at the opening. I think she got it at 108. -The stock was very active that day and closed at an advance of three -points. Mrs. Livingston was so delighted with her exploit that it was -all she could do to keep from telling me all about it. - -It so happened that I had been getting more and more bearish on the -general market. The unusual activity in Borneo Tin drew my attention to -it. I didn’t think the time was right for any stock to advance, much -less one like that. I had decided to begin my bear operations that very -day, and I started by selling about ten thousand shares of Borneo. If I -had not I rather think the stock would have gone up five or six points -instead of three. - -On the very next day I sold two thousand shares at the opening and two -thousand shares just before the close, and the stock broke to 102. - -Haley, the manager of Harding Brothers’ Palm Beach Branch, was waiting -for Mrs. Livingston to call there on the third morning. She usually -strolled in about eleven to see how things were, if I was doing -anything. - -Haley took her aside and said, “Mrs. Livingston, if you want me to -carry that hundred shares of Borneo Tin for you you will have to give -me more margin.” - -“But I haven’t any more,” she told him. - -“I can transfer it to your regular account,” he said. - -“No,” she objected, “because that way L.L. would learn about it.” - -“But the account already shows a loss of--” he began. - -“But I told you distinctly I didn’t want to lose more than the five -hundred dollars. I didn’t even want to lose that,” she said. - -“I know, Mrs. Livingston, but I didn’t want to sell it without -consulting you, and now unless you authorise me to hold it I’ll have to -let it go.” - -“But it did so nicely the day I bought it,” she said, “that I didn’t -believe it would act this way so soon. Did you?” - -“No,” answered Haley, “I didn’t.” They have to be diplomatic in -brokers’ offices. - -“What’s gone wrong with it, Mr. Haley?” - -Haley knew, but he could not tell her without giving me away, and a -customer’s business is sacred. So he said, “I don’t hear anything -special about it, one way or the other. There she goes! That’s low for -the move!” and he pointed to the quotation board. - -Mrs. Livingston gazed at the sinking stock and cried: “Oh, Mr. Haley! I -don’t want to lose my five hundred dollars! What shall I do?” - -“I don’t know, Mrs. Livingston, but if I were you I’d ask Mr. -Livingston.” - -“Oh, no! He doesn’t want me to speculate on my own hook. He told me -so. He’ll buy or sell stock for me, if I ask him, but I’ve never before -done trading that he did not know all about. I wouldn’t dare tell him.” - -“That’s all right,” said Haley soothingly. “He is a wonderful trader -and he’ll know just what to do.” Seeing her shake her head violently he -added devilishly: “Or else you put up a thousand or two to take care of -your Borneo.” - -The alternative decided her then and there. She hung about the office, -but as the market got weaker and weaker she came over to where I sat -watching the board and told me she wanted to speak to me. We went into -the private office and she told me the whole story. So I just said to -her: “You foolish little girl, you keep your hands off this deal.” - -She promised that she would, and so I gave her back her five hundred -dollars and she went away happy. The stock was par by that time. - -I saw what had happened. Wisenstein was an astute person. He figured -that Mrs. Livingston would tell me what he had told her and I’d study -the stock. He knew that activity always attracted me and I was known to -swing a pretty fair line. I suppose he thought I’d buy ten or twenty -thousand shares. - -It was one of the most cleverly planned and artistically propelled -tips I’ve ever heard of. But it went wrong. It had to. In the first -place, the lady had that very day received an unearned five hundred -dollars and was therefore in a much more venturesome mood than usual. -She wished to make some money all by herself, and womanlike dramatised -the temptation so attractively that it was irresistible. She knew how I -felt about stock speculation as practised by outsiders, and she didn’t -dare mention the matter to me. Wisenstein didn’t size up her psychology -right. - -He also was utterly wrong in his guess about the kind of trader I -was. I never take tips and I was bearish on the entire market. The -tactics that he thought would prove effective in inducing me to buy -Borneo--that is, the activity and the three-point rise--were precisely -what made me pick Borneo as a starter when I decided to sell the entire -market. - -After I heard Mrs. Livingston’s story I was keener than ever to sell -Borneo. Every morning at the opening and every afternoon just before -closing I let him have some stock regularly, until I saw a chance to -take in my shorts at a handsome profit. - -It has always seemed to me the height of damfoolishness to trade on -tips. I suppose I am not built the way a tip-taker is. I sometimes -think that tip-takers are like drunkards. There are some who can’t -resist the craving and always look forward to those jags which they -consider indispensable to their happiness. It is so easy to open your -ears and let the tip in. To be told precisely what to do to be happy -in such a manner that you can easily obey is the next nicest thing to -being happy--which is a mighty long first step toward the fulfilment of -your heart’s desire. It is not so much greed made blind by eagerness as -it is hope bandaged by the unwillingness to do any thinking. - -And it is not only among the outside public that you find inveterate -tip-takers. The professional trader on the floor of the New York Stock -Exchange is quite as bad. I am definitely aware that no end of them -cherish mistaken notions of me because I never give anybody tips. If -I told the average man, “Sell yourself five thousand Steel!” he would -do it on the spot. But if I tell him I am quite bearish on the entire -market and give him my reasons in detail, he finds trouble in listening -and after I’m done talking he will glare at me for wasting his time -expressing my views on general conditions instead of giving him a -direct and specific tip, like a real philanthropist of the type that is -so abundant in Wall Street--the sort who loves to put millions into the -pockets of friends, acquaintances and utter strangers alike. - -The belief in miracles that all men cherish is born of immoderate -indulgence in hope. There are people who go on hope sprees periodically -and we all know the chronic hope drunkard that is held up before us as -an exemplary optimist. Tip-takers are all they really are. - -I have an acquaintance, a member of the New York Stock Exchange, who -was one of those who thought I was a selfish, cold-blooded pig because -I never gave tips or put friends into things. One day--this was some -years ago--he was talking to a newspaper man who casually mentioned -that he had had it from a good source that G.O.H. was going up. My -broker friend promptly bought a thousand shares and saw the price -decline so quickly that he was out thirty-five hundred dollars before -he could stop his loss. He met the newspaper man a day or two later, -while he was still sore. - -“That was a hell of a tip you gave me,” he complained. - -“What tip was that?” asked the reporter, who did not remember. - -“About G.O.H. You said you had it from a good source.” - -“So I did. A director of the company who is a member of the finance -committee told me.” - -“Which of them was it?” asked the broker vindictively. - -“If you must know,” answered the newspaper man, “it was your own -father-in-law, Mr. Westlake.” - -“Why in Hades didn’t you tell me you meant him!” yelled the broker. -“You cost me thirty-five hundred dollars!” He didn’t believe in family -tips. The farther away the source the purer the tip. - -Old Westlake was a rich and successful banker and promoter. He ran -across John W. Gates one day. Gates asked him what he knew. “If you -will act on it I’ll give you a tip. If you won’t I’ll save my breath,” -answered old Westlake grumpily. - -“Of course I’ll act on it,” promised Gates cheerfully. - -“Sell Reading! There is a sure twenty-five points in it, and possibly -more. But twenty-five absolutely certain,” said Westlake impressively. - -“I’m much obliged to you,” and Bet-you-a-million Gates shook hands -warmly and went away in the direction of his broker’s office. - -Westlake had specialized on Reading. He knew all about the company and -stood in with the insiders so that the market for the stock was an open -book to him and everybody knew it. Now he was advising the Western -plunger to go short of it. - -Well, Reading never stopped going up. It rose something like one -hundred points in a few weeks. One day old Westlake ran smack up -against John W. in the Street, but he made out he hadn’t seen him and -was walking on. John W. Gates caught up with him, his face all smiles -and held out his hand. Old Westlake shook it dazedly. - -“I want to thank you for that tip you gave me on Reading,” said Gates. - -“I didn’t give you any tip,” said Westlake, frowning. - -“Sure you did. And it was a Jim Hickey of a tip too. I made sixty -thousand dollars.” - -“Made sixty thousand dollars?” - -“Sure! Don’t you remember? You told me to sell Reading; so I bought it! -I’ve always made money coppering your tips, Westlake,” said John W. -Gates pleasantly. “Always!” - -Old Westlake looked at the bluff Westerner and presently remarked -admiringly, “Gates, what a rich man I’d be if I had your brains!” - -The other day I met Mr. W. A. Rogers, the famous cartoonist, whose -Wall Street drawings brokers so greatly admire. His daily cartoons in -the New York _Herald_ for years gave pleasure to thousands. Well, he -told me a story. It was just before we went to war with Spain. He was -spending an evening with a broker friend. When he left he picked up his -derby hat from the rack, at least he thought it was his hat, for it was -the same shape and fitted him perfectly. - -The Street at that time was thinking and talking of nothing but war -with Spain. Was there to be one or not? If it was to be war the market -would go down; not so much on our own selling as on pressure from -European holders of our securities. If peace, it would be a cinch to -buy stocks, as there had been considerable declines prompted by the -sensational clamorings of the yellow papers. Mr. Rogers told me the -rest of the story as follows: - -“My friend, the broker, at whose house I had been the night before, -stood in the Exchange the next day anxiously debating in his mind which -side of the market to play. He went over the pros and cons, but it -was impossible to distinguish which were rumors and which were facts. -There was no authentic news to guide him. At one moment he thought war -was inevitable, and on the next he almost convinced himself that it -was utterly unlikely. His perplexity must have caused a rise in his -temperature, for he took off his derby to wipe his fevered brow. He -couldn’t tell whether he should buy or sell. - -“He happened to look inside of his hat. There in gold letters was -the word WAR. That was all the hunch he needed. Was it not a tip -from Providence via my hat? So he sold a raft of stock, war was duly -declared, he covered on the break and made a killing.” And then W. A. -Rogers finished, “I never got back that hat!” - -But the prize tip story of my collection concerns one of the most -popular members of the New York Stock Exchange, J. T. Hood. One day -another floor trader, Bert Walker, told him that he had done a good -turn to a prominent director of the Atlantic & Southern. In return the -grateful insider told him to buy all the A. & S. he could carry. The -directors were going to do something that would put the stock up at -least twenty-five points. All the directors were not in the deal, but -the majority would be sure to vote as wanted. - -Bert Walker concluded that the dividend rate was going to be raised. He -told his friend Hood and they each bought a couple of thousand shares -of A. & S. The stock was very weak, before and after they bought, but -Hood said that was obviously intended to facilitate accumulation by -the inside clique, headed by Bert’s grateful friend. - -On the following Thursday, after the market closed, the directors of -the Atlantic & Southern met and passed the dividend. The stock broke -six points in the first six minutes of trading Friday morning. - -Bert Walker was sore as a pup. He called on the grateful director, who -was broken-hearted about it and very penitent. He said that he had -forgotten that he had told Walker to buy. That was the reason he had -neglected to call him up to tell him of a change in the plans of the -dominant faction in the board. The remorseful director was so anxious -to make up that he gave Bert another tip. He kindly explained that a -couple of his colleagues wanted to get cheap stock and against his -judgment resorted to coarse work. He had to yield to win their votes. -But now that they all had accumulated their full lines there was -nothing to stop the advance. It was a double-riveted, lead-pipe cinch -to buy A. & S. now. - -Bert not only forgave him but shook hands warmly with the high -financier. Naturally he hastened to find his friend and fellow-victim, -Hood, to impart the glad tidings to him. They were going to make a -killing. The stock had been tipped for a rise before and they bought. -But now it was fifteen points lower. That made it a cinch. So they -bought five thousand shares, joint account. - -As if they had rung a bell to start it, the stock broke badly on -what quite obviously was inside selling. Two specialists cheerfully -confirmed the suspicion. Hood sold out their five thousand shares. When -he got through Bert Walker said to him, “If that blankety-blank blanker -hadn’t gone to Florida day before yesterday I’d lick the stuffing out -of him. Yes, I would. But you come with me.” - -“Where to?” asked Hood. - -“To the telegraph office. I want to send that skunk a telegram that -he’ll never forget. Come on.” - -Hood went on. Bert led the way to the telegraph office. There, carried -away by his feelings--they had taken quite a loss on the five thousand -shares--he composed a masterpiece of vituperation. He read it to Hood -and finished, “That will come pretty near to showing him what I think -of him.” - -He was about to slide it toward the waiting clerk when Hood said, “Hold -on, Bert!” - -“What’s the matter?” - -“I wouldn’t send it,” advised Hood earnestly. - -“Why not?” snapped Bert. - -“It will make him sore as the dickens.” - -“That’s what we want, isn’t it?” said Bert, looking at Hood in surprise. - -But Hood shook his head disapprovingly and said in all seriousness, -“We’ll never get another tip from him if you send that telegram!” - -A professional trader actually said that. Now what’s the use of talking -about sucker tip-takers? Men do not take tips because they are bally -asses but because they like those hope cocktails I spoke of. Old Baron -Rothschild’s recipe for wealth winning applies with greater force than -ever to speculation. Somebody asked him if making money in the Bourse -was not a very difficult matter, and he replied that, on the contrary, -he thought it was very easy. - -“That is because you are so rich,” objected the interviewer. - -“Not at all. I have found an easy way and I stick to it. I simply -cannot help making money. I will tell you my secret if you wish. It is -this: _I never buy at the bottom and I always sell too soon_.” - -Investors are a different breed of cats. Most of them go in strong for -inventories and statistics of earnings and all sorts of mathematical -data, as though that meant facts and certainties. _The human factor -is minimised as a rule._ Very few people like to buy into a one-man -business. But the wisest investor I ever knew was a man who began by -being a Pennsylvania Dutchman and followed it up by coming to Wall -Street and seeing a great deal of Russell Sage. - -He was a great investigator, an indefatigable Missourian. He believed -in asking his own questions and in doing his seeing with his own eyes. -He had no use for another man’s spectacles. This was years ago. It -seems he held quite a little Atchison. Presently he began to hear -disquieting reports about the company and its management. He was told -that Mr. Reinhart, the president, instead of being the marvel he was -credited with being, in reality was a most extravagant manager whose -recklessness was fast pushing the company into a mess. There would be -the deuce to pay on the inevitable day of reckoning. - -This was precisely the kind of news that was as the breath of life -to the Pennsylvania Dutchman. He hurried over to Boston to interview -Mr. Reinhart and ask him a few questions. The questions consisted of -repeating the accusations he had heard and then asking the president of -the Atchison, Topeka & Santa Fe Railroad if they were true. - -Mr. Reinhart not only denied the allegations emphatically but said -even more: He proceeded to prove by figures that the allegators -were malicious liars. The Pennsylvania Dutchman had asked for exact -information and the president gave it to him, showing him what the -company was doing and how it stood financially, to a cent. - -The Pennsylvania Dutchman thanked President Reinhart, returned to New -York and promptly sold all his Atchison holdings. A week or so later he -used his idle funds to buy a big lot of Delaware, Lackawanna & Western. - -Years afterward we were talking of lucky swaps and he cited his own -case. He explained what prompted him to make it. - -“You see,” he said, “I noticed that President Reinhart, when he wrote -down figures, took sheets of letter paper from a pigeonhole in his -mahogany roll-top desk. It was fine heavy linen paper with beautifully -engraved letterheads in two colors. It was not only very expensive -but worse--it was unnecessarily expensive. He would write a few -figures on a sheet to show me exactly what the company was earning on -certain divisions or to prove how they were cutting down expenses or -reducing operating costs, and then he would crumple up the sheet of -the expensive paper and throw it in the waste-basket. Pretty soon he -would want to impress me with the economies they were introducing and -he would reach for a fresh sheet of the beautiful notepaper with the -engraved letterheads in two colors. A few figures--and bingo, into the -waste-basket! More money wasted without a thought. It struck me that -if the president was that kind of a man he would scarcely be likely -to insist upon having or rewarding economical assistants. I therefore -decided to believe the people who had told me the management was -extravagant instead of accepting the president’s version and I sold -what Atchison stock I held. - -“It so happened that I had occasion to go to the offices of the -Delaware, Lackawanna & Western a few days later. Old Sam Sloan was the -president. His office was the nearest to the entrance and his door -was wide open. It was always open. Nobody could walk into the general -offices of the D.L.&W. in those days and not see the president of the -company seated at his desk. Any man could walk in and do business with -him right off, if he had any business to do. The financial reporters -used to tell me that they never had to beat around the bush with old -Sam Sloan, but would ask their questions and get a straight yes or -no from him, no matter what the stock-market exigencies of the other -directors might be. - -“When I walked in I saw the old man was busy. I thought at first that -he was opening his mail, but after I got inside close to the desk I saw -what he was doing. I learned afterwards that it was his daily custom to -do it. After the mail was sorted and open, instead of throwing away the -empty envelopes he had them gathered up and taken to his office. In -his leisure moments he would rip the envelope all around. That gave him -two bits of paper, each with one clean blank side. He would pile these -up and then he would have them distributed about, to be used in lieu of -scratch pads for such figuring as Reinhart had done for me on engraved -notepaper. No waste of empty envelopes and no waste of the president’s -idle moments. Everything utilised. - -“It struck me that if that was the kind of man the D.L.&W. had for -president, the company was managed economically in all departments. The -president would see to that! Of course I knew the company was paying -regular dividends and had a good property. I bought all the D.L.&W. -stock I could. Since that time the capital stock has been doubled -and quadrupled. My annual dividends amount to as much as my original -investment. I still have my D.L.&W. And Atchison went into the hands of -a receiver a few months after I saw the president throwing sheet after -sheet of linen paper with engraved letterheads in two colors into the -waste-basket to prove to me with figures that he was not extravagant.” - -And the beauty of that story is that it is true and that no other stock -that the Pennsylvania Dutchman could have bought would have proved to -be so good an investment as D.L.&W. - - - - -_XVII_ - - -One of my most intimate friends is very fond of telling stories about -what he calls my hunches. He is forever ascribing to me powers that -defy analysis. He declares I merely follow blindly certain mysterious -impulses and thereby get out of the stock market at precisely the -right time. His pet yarn is about a black cat that told me, at his -breakfast-table, to sell a lot of stock I was carrying, and that after -I got the pussy’s message I was grouchy and nervous until I sold every -share I was long of. I got practically the top prices of the movement, -which of course strengthened the hunch theory of my hard-headed friend. - -I had gone to Washington to endeavor to convince a few Congressmen that -there was no wisdom in taxing us to death and I wasn’t paying much -attention to the stock market. My decision to sell out my line came -suddenly, hence my friend’s yarn. - -I admit that I do get irresistible impulses at times to do certain -things in the market. It doesn’t matter whether I am long or short of -stocks. I must get out. I am uncomfortable until I do. I myself think -that what happens is that I see a lot of warning-signals. Perhaps not -a single one may be sufficiently clear or powerful to afford me a -positive, definite reason for doing what I suddenly feel like doing. -Probably that is all there is to what they call “ticker-sense” that -old traders say James R. Keene had so strongly developed and other -operators before him. Usually, I confess, the warning turns out to be -not only sound but timed to the minute. But in this particular instance -there was no hunch. The black cat had nothing to do with it. What he -tells everybody about my getting up so grumpy that morning I suppose -can be explained--if I in truth was grouchy--by my disappointment. I -knew I was not convincing the Congressman I talked to and the Committee -did not view the problem of taxing Wall Street as I did. I wasn’t -trying to arrest or evade taxation on stock transactions but to suggest -a tax that I as an experienced stock operator felt was neither unfair -nor unintelligent. I didn’t want Uncle Sam to kill the goose that -could lay so many golden eggs with fair treatment. Possibly my lack of -success not only irritated me but made me pessimistic over the future -of an unfairly taxed business. But I’ll tell you exactly what happened. - -At the beginning of the bull market I thought well of the outlook in -both the Steel trade and the Copper market and I therefore felt bullish -on stocks of both groups. So I started to accumulate some of them. -I began by buying 5000 shares of Utah Copper and stopped because it -didn’t act right. That is, it did not behave as it should have behaved -to make me feel I was wise in buying it. I think the price was around -114. I also started to buy United States Steel at almost the same -price. I bought in all 20,000 shares the first day because it did act -right. I followed the method I have described before. - -Steel continued to act right and I therefore continued to accumulate -it until I was carrying 72,000 shares of it in all. But my holdings of -Utah Copper consisted of my initial purchase. I never got above the -5000 shares. Its behaviour did not encourage me to do more with it. - -Everybody knows what happened. We had a big bull movement. I knew -the market was going up. General conditions were favourable. Even -after stocks had gone up extensively and my paper profit was not to -be sneezed at, the tape kept trumpeting: _Not yet! Not yet!_ When I -arrived in Washington the tape was still saying that to me. Of course, -I had no intention of increasing my line at that late day, even though -I was still bullish. At the same time, the market was plainly going my -way and there was no occasion for me to sit in front of a quotation -board all day, in hourly expectation of getting a tip to get out. -Before the clarion call to retreat came--barring an utterly unexpected -catastrophe, of course--the market would hesitate or otherwise prepare -me for a reversal of the speculative situation. That was the reason why -I went blithely about my business with my Congressman. - -At the same time, prices kept going up and that meant that the end of -the bull market was drawing nearer. I did not look for the end on any -fixed date. That was something quite beyond my power to determine. But -I needn’t tell you that I was on the watch for the tip-off. I always -am, anyhow. It has become a matter of business habit with me. - -I cannot swear to it but I rather suspect that the day before I sold -out, seeing the high prices made me think of the magnitude of my -paper profit as well as of the line I was carrying and, later on, of my -vain efforts to induce our legislators to deal fairly and intelligently -by Wall Street. That was probably the way and the time the seed was -sown within me. The subconscious mind worked on it all night. In the -morning I thought of the market and began to wonder how it would act -that day. When I went down to the office I saw not so much that prices -were still higher and that I had a satisfying profit but that there -was a great big market with a tremendous power of absorption. I could -sell any amount of stock in that market; and, of course, when a man -is carrying his full line of stocks, he must be on the watch for an -opportunity to change his paper profit into actual cash. He should try -to lose as little of the profit as possible in the swapping. Experience -has taught me that a man can always find an opportunity to make his -profits real and that this opportunity usually comes at the end of the -move. That isn’t tape-reading or a hunch. - -Of course, when I found that morning a market in which I could sell -out all my stocks without any trouble I did so. When you are selling -out it is no wiser or braver to sell fifty shares than fifty thousand; -but fifty shares you can sell in the dullest market without breaking -the price and fifty thousand shares of a single stock is a different -proposition. I had seventy-two thousand shares of U.S. Steel. This may -not seem a colossal line, but you can’t always sell that much without -losing some of that profit that looks so nice on paper when you figure -it out and that hurts as much to lose as if you actually had it safe in -the bank. - -I had a total profit of about $1,500,000 and I grabbed it while the -grabbing was good. But that wasn’t the principal reason for thinking -that I did the right thing in selling out when I did. The market proved -it for me and that was indeed a source of satisfaction for me. It was -this way: I succeeded in selling my entire line of seventy-two thousand -shares of U.S. Steel at a price which averaged me just one point from -the top of the day and of the movement. It proved that I was right, to -the minute. But when, on the very same hour of the very same day I came -to sell my 5000 shares of Utah Copper, the price broke five points. -Please recall that I began buying both stocks at the same time and that -I acted wisely in increasing my line of U.S. Steel from twenty thousand -shares to seventy-two thousand, and equally wisely in not increasing -my line of Utah from the original 5000 shares. The reason why I didn’t -sell out my Utah Copper before was that I was bullish on the copper -trade and it was a bull market in stocks and I didn’t think that Utah -would hurt me much even if I didn’t make a killing in it. But as for -hunches, there weren’t any. - -The training of a stock trader is like a medical education. The -physician has to spend long years learning anatomy, physiology, materia -medica and collateral subjects by the dozen. He learns the theory -and then proceeds to devote his life to the practice. He observes and -classifies all sorts of pathological phenomena. He learns to diagnose. -If his diagnosis is correct--and that depends upon the accuracy of -his observation--he ought to do pretty well in his prognosis, always -keeping in mind, of course, that human fallibility and the utterly -unforeseen will keep him from scoring 100 per cent of bull’s-eyes. -And then, as he gains in experience, he learns not only to do the -right thing but to do it instantly, so that many people will think he -does it instinctively. It really isn’t automatism. It is that he has -diagnosed the case according to his observations of such cases during -a period of many years; and, naturally, after he has diagnosed it, he -can only treat it in the way that experience has taught him is the -proper treatment. You can transmit knowledge--that is, your particular -collection of card-indexed facts--but not your experience. _A man may -know what to do and lose money--if he doesn’t do it quickly enough._ - -Observation, experience, memory and mathematics--these are what the -successful trader must depend on. He must not only observe accurately -but remember at all times what he has observed. He cannot bet on -the unreasonable or on the unexpected, however strong his personal -convictions may be about man’s unreasonableness or however certain -he may feel that the unexpected happens very frequently. He must bet -always on probabilities--that is, try to anticipate them. Years of -practice at the game, of constant study, of always remembering, enable -the trader to act on the instant when the unexpected happens as well as -when the expected comes to pass. - -A man can have great mathematical ability and an unusual power of -accurate observation and yet fail in speculation unless he also -possesses _the experience and the memory_. And then, like the physician -who keeps up with the advances of science, _the wise trader never -ceases to study general conditions, to keep track of developments -everywhere that are likely to affect or influence the course of the -various markets_. After years at the game it becomes a habit to keep -posted. He acts almost automatically. He requires the invaluable -professional attitude and that enables him to beat the game--at times! -This difference between the professional and the amateur or occasional -trader cannot be overemphasised. I find, for instance, that memory -and mathematics help me very much. Wall Street makes its money on a -mathematical basis. I mean, _it makes its money by dealing with facts -and figures_. - -When I said that a trader has to keep posted to the minute and that he -must take a purely professional attitude toward all markets and all -developments, I merely meant to emphasise again that hunches and the -mysterious ticker-sense haven’t so much to do with success. Of course, -it often happens that an experienced trader acts so quickly that he -hasn’t time to give all his reasons in advance--but nevertheless they -are good and sufficient reasons, because they are based on facts -collected by him in his years of working and thinking and seeing things -from the angle of the professional, to whom everything that comes -to his mill is grist. Let me illustrate what I mean by professional -attitude. - -I keep track of the commodities markets, always. It is a habit of -years. As you know, the Government reports indicated a winter wheat -crop about the same as last year and a bigger spring wheat crop than -in 1921. The condition was much better and we probably would have an -earlier harvest than usual. When I got the figures of condition and -I saw what we might expect in the way of yield--mathematics--I also -thought at once of the coal miner’s strike and the railroad shopmen’s -strike. I couldn’t help thinking of them because my mind always thinks -of all developments that have a bearing on the markets. It instantly -struck me that the strike which had already affected the movement of -freight everywhere must affect wheat prices adversely. I figured this -way: There was bound to be considerable delay in moving winter wheat -to market by reason of the strike-crippled transportation facilities, -and by the time those improved the spring wheat crop would be ready to -move. That meant that when the railroads were able to move wheat in -quantity they would be bringing in both crops together--the delayed -winter and the early spring wheat--and that would mean a vast quantity -of wheat pouring into the market at one fell swoop. Such being the -facts of the case--the obvious probabilities--the traders, who would -know and figure as I did, would not bull wheat for a while. They would -not feel like buying it unless the price declined to such figures as -made the purchase of wheat a good investment. With no buying power in -the market, the price ought to go down. Thinking the way I did I must -find whether I was right or not. As old Pat Hearne used to remark, “You -can’t tell till you bet.” Between being bearish and selling there is no -need to waste time. - -_Experience has taught me that the way a market behaves is an excellent -guide for an operator to follow. It is like taking a patient’s -temperature and pulse or noting the colour of the eyeballs and the -coating of the tongue._ - -Now, ordinarily a man ought to be able to buy or sell a million bushels -of wheat within a range of ¼ cent. On this day when I sold the 250,000 -bushels to test the market for timeliness, the price went down ¼ cent. -Then, since the reaction did not definitely tell me all I wished to -know, I sold another quarter of a million bushels. I noticed that it -was taken in driblets; that is, the buying was in lots of 10,000 or -15,000 bushels instead of being taken in two or three transactions -which would have been the normal way. In addition to the homeopathic -buying the price went down 1¼ cents on my selling. Now, I need not -waste my time pointing out that the way in which the market took my -wheat and the disproportionate decline on my selling told me that there -was no buying power there. Such being the case, what was the only -thing to do? Of course, to sell a lot more. Following the dictates -of experience may possibly fool you, now and then. But not following -them invariably makes an ass of you. So I sold 2,000,000 bushels and -the price went down some more. A few days later the market’s behaviour -practically compelled me to sell an additional 2,000,000 bushels and -the price declined further still; a few days later wheat started to -break badly and slumped off 6 cents a bushel. And it didn’t stop there. -It has been going down, with short-lived rallies. - -Now, I didn’t follow a hunch. Nobody gave me a tip. It was my habitual -or professional mental attitude toward the commodities markets that -gave me the profit and that attitude came from my years at this -business. I study because my business is to trade. The moment the tape -told me that I was on the right track my business duty was to increase -my line. I did. That is all there is to it. - -I have found that experience is apt to be a steady dividend payer in -this game and that observation gives you the best tips of all. The -behaviour of a certain stock is all you need at times. You observe it. -Then experience shows you how to profit by variations from the usual, -that is, from the probable. For example, we know _that all stocks do -not move one way together but that all the stocks of a group will move -up in a bull market and down in a bear market_. This is a common-place -of speculation. It is the commonest of all self-given tips and the -commission houses are well aware of it and pass it on to any customer -who has not thought of it himself; I mean, the advice to trade in those -stocks which have lagged behind other stocks of the same group. Thus, -if U.S. Steel goes up, it is logically assumed that it is only a matter -of time when Crucible or Republic or Bethlehem will follow suit. Trade -conditions and prospects should work alike with all stocks of a group -and the prosperity should be shared by all. On the theory, corroborated -by experience times without number, that every dog has his day in the -market, the public will buy A.B. Steel because it has not advanced -while C.D. Steel and X.Y. Steel have gone up. - -I never buy a stock even in a bull market, if it doesn’t act as it -ought to act in that kind of market. I have sometimes bought a stock -during an undoubted bull market and found out that other stocks in the -same group were not acting bullishly and I have sold out my stock. Why? -_Experience tells me that it is not wise to buck against what I may -call the manifest group-tendency._ I cannot expect to play certainties -only. I must reckon on probabilities--and anticipate them. An old -broker once said to me: “If I am walking along a railroad track and -I see a train coming toward me at sixty miles an hour, do I keep on -walking on the ties? Friend, I sidestep. And I don’t even pat myself on -the back for being so wise and prudent.” - -Last year, after the general bull movement was well under way, I -noticed that one stock in a certain group was not going with the rest -of the group, though the group with that one exception was going with -the rest of the market. I was long a very fair amount of Blackwood -Motors. Everybody knew that the company was doing a very big business. -The price was rising from one to three points a day and the public -was coming in more and more. This naturally centered attention on the -group and all the various motor stocks began to go up. One of them, -however, persistently held back and that was Chester. It lagged behind -the others so that it was not long before it made people talk. The low -price of Chester and its apathy was contrasted with the strength and -activity in Blackwood and other motor stocks and the public logically -enough listened to the touts and tipsters and wise-acres and began to -buy Chester on the theory that it must presently move up with the rest -of the group. - -Instead of going on this moderate public buying, Chester actually -declined. Now, it would have been no job to put it up in that bull -market, considering that Blackwood, a stock of the same group, was one -of the sensational leaders of the general advance and we were hearing -nothing but the wonderful improvement in the demand for automobiles of -all kinds and the record output. - -It was thus plain that the inside clique in Chester were not doing any -of the things that inside cliques invariably do in a bull market. For -this failure to do the usual thing there might be two reasons. Perhaps -the insiders did not put it up because they wished to accumulate more -stock before advancing the price. But this was an untenable theory if -you analysed the volume and character of the trading in Chester. The -other reason was that they did not put it up because they were afraid -of getting stock if they tried to. - -When the men who ought to want a stock don’t want it, why should I want -it? I figured that no matter how prosperous other automobile companies -might be, it was a cinch to sell Chester short. _Experiences had taught -me to beware of buying a stock that refuses to follow the group-leader._ - -I easily established the fact that not only there was no inside -buying but that there was actually inside selling. There were other -symptomatic warnings against buying Chester, though all I required was -its inconsistent market behaviour. It was again the tape that tipped -me off and that was why I sold Chester short. One day, not very long -afterward, the stock broke wide open. Later on we learned--officially, -as it were--that insiders had indeed been selling it, knowing full -well that the condition of the company was not good. The reason, as -usual, was disclosed after the break. But the warning came before the -break. _I don’t look out for the breaks; I look out for the warnings._ -I didn’t know what was the trouble with Chester; neither did I follow a -hunch. I merely knew that something must be wrong. - -Only the other day we had what the newspapers called a sensational -movement in Guiana Gold. After selling on the Curb at 50 or close to -it, it was listed on the Stock Exchange. It started there at around 35, -began to go down and finally broke 20. - -Now, I’d never have called that break sensational because it was fully -to be expected. If you had asked you could have learned the history of -the company. No end of people knew it. It was told to me as follows: A -syndicate was formed consisting of a half dozen extremely well-known -capitalists and a prominent banking house. One of the members was the -head of the Belle Isle Exploration Company, which advanced Guiana over -$10,000,000 cash and received in return bonds and 250,000 shares out -of a total of one million shares of the Guiana Gold Mining Company. -The stock went on a dividend basis and it was mighty well advertised. -The Belle Isle people thought it well to cash in and they gave a call -on their 250,000 shares to the bankers, who arranged to try to market -that stock and some of their own holdings as well. They thought of -entrusting the market manipulation to a professional whose fee was to -be one third of the profits from the sale of the 250,000 shares above -36. I understand that the agreement was drawn up and ready to be signed -but at the last moment the bankers decided to undertake the marketing -themselves and save the fee. So they organized an inside pool. The -bankers had a call on the Belle Isle holdings of 250,000 at 36. They -put this in at 41. That is, insiders paid their own banking colleagues -a 5-point profit to start with. I don’t know whether they knew it or -not. - -It is perfectly plain that to the bankers the operation had every -semblance of a cinch. We had run into a bull market and the stocks of -the group to which Guiana Gold belonged were among the market leaders. -The company was making big profits and paying regular dividends. This -together with the high character of the sponsors made the public regard -Guiana almost as an investment stock. I was told that about 400,000 -shares were sold to the public all the way up to 47. - -The gold group was very strong. But presently Guiana began to sag. -It declined ten points. That was all right if the pool was marketing -stock. But pretty soon the Street began to hear that things were not -altogether satisfactory and the property was not bearing out the high -expectations of the promoters. Then, of course, the reason for the -decline became plain. But before the reason was known I had the warning -and had taken steps to test the market for Guiana. The stock was acting -pretty much as Chester Motors did. I sold Guiana. The price went down. -I sold more. The price went still lower. The stock was repeating the -performance of Chester and of a dozen other stocks whose clinical -history I remembered. The tape plainly told me that there was something -wrong--something that kept insiders from buying it--insiders who knew -exactly why they should not buy their own stock in a bull market. On -the other hand, outsiders, who did not know, were now buying because -having sold at 45 and higher the stock looked cheap at 35 and lower. -The dividend was still being paid. The stock was a bargain. - -Then the news came. It reached me, as important market news often does, -before it reached the public. But the confirmation of the reports of -striking barren rock instead of rich ore merely gave me the reason for -the earlier inside selling. I myself didn’t sell on the news. I had -sold long before, on the stock’s behaviour. My concern with it was -not philosophical. I am a trader and therefore looked for one sign: -Inside buying. There wasn’t any. I didn’t have to know why the insiders -did not think enough of their own stock to buy it on the decline. It -was enough that their market plans plainly did not include further -manipulation for the rise. That made it a cinch to sell the stock -short. The public had bought almost a half million shares and the only -change in ownership possible was from one set of ignorant outsiders who -would sell in the hope of stopping losses to another set of ignorant -outsiders who might buy in the hope of making money. - -I am not telling you this to moralise on the public’s losses through -their buying of Guiana or on my profit through my selling of it, but -to emphasise how important the study of group-behaviourism is and how -its lessons are disregarded by inadequately equipped traders, big and -little. And it is not only in the stock market that the tape warns you. -It blows the whistle quite as loudly in commodities. - -I had an interesting experience in cotton. I was bearish on stocks and -put out a moderate short line. At the same time I sold cotton short; -50,000 bales. My stock deal proved profitable and I neglected my -cotton. The first thing I knew I had a loss of $250,000 on my 50,000 -bales. As I said, my stock deal was so interesting and I was doing -so well in it that I did not wish to take my mind off it. Whenever I -thought of cotton I just said to myself: “I’ll wait for a reaction and -cover.” The price would react a little but before I could decide to -take my loss and cover, the price would rally again, and go higher than -ever. So I’d decide again to wait a little and I’d go back to my stock -deal and confine my attention to that. Finally I closed out my stocks -at a very handsome profit and went away to Hot Springs for a rest and a -holiday. - -That really was the first time that I had my mind free to deal with the -problem of my losing deal in cotton. The trade had gone against me. -There were times when it almost looked as if I might win out. I noticed -that whenever anybody sold heavily there was a good reaction. But -almost instantly the price would rally and make a new high for the move. - -Finally, by the time I had been in Hot Springs a few days, I was a -million to the bad and no let up in the rising tendency. I thought -over all I had done and had not done and I said to myself: “I must be -wrong!” With me to feel that I am wrong and to decide to get out are -practically one process. So I covered, at a loss of about one million. - -The next morning I was playing golf and not thinking of anything else. -I had made my play in cotton. I had been wrong. I had paid for being -wrong and the receipted bill was in my pocket. I had no more concern -with the cotton market than I have at this moment. When I went back -to the hotel for luncheon I stopped at the broker’s office and took a -look at the quotations. I saw that cotton had gone off 50 points. That -wasn’t anything. But I also noticed that it had not rallied as it had -been in the habit of doing for weeks, as soon as the pressure of the -particular selling that had depressed it eased up. This had indicated -that the line of least resistance was upward and it had cost me a -million to shut my eyes to it. - -Now, however, the reason that had made me cover at a big loss was no -longer a good reason since there had not been the usual prompt and -vigorous rally. So I sold 10,000 bales and waited. Pretty soon the -market went off 50 points. I waited a little while longer. There was no -rally. I had got pretty hungry by now, so I went into the dining-room -and ordered my luncheon. Before the waiter could serve it, I jumped up, -went to the broker’s office, I saw that there had been no rally and so -I sold 10,000 bales more. I waited a little and had the pleasure of -seeing the price decline 40 points more. That showed me I was trading -correctly so I returned to the dining-room ate my luncheon and went -back to the broker’s. There was no rally in cotton that day. That very -night I left Hot Springs. - -It was all very well to play golf but I had been wrong in cotton in -selling when I did and in covering when I did. So I simply had to get -back on the job and be where I could trade in comfort. The way the -market took my first ten thousand bales made me sell the second ten -thousand, and the way the market took the second made me certain the -turn had come. It was the difference in behaviour. - -Well, I reached Washington and went to my brokers’ office there, which -was in charge of my old friend Tucker. While I was there the market -went down some more. I was more confident of being right now than I had -been of being wrong before. So I sold 40,000 bales and the market went -off 75 points. It showed that there was no support there. That night -the market closed still lower. The old buying power was plainly gone. -There was no telling at what level that power would again develop, but -I felt confident of the wisdom of my position. The next morning I left -Washington for New York by motor. There was no need to hurry. - -When we got to Philadelphia I drove to a broker’s office. I saw that -there was the very dickens to pay in the cotton market. Prices had -broken badly and there was a small-sized panic on. I didn’t wait to get -to New York. I called up my brokers on the long distance and I covered -my shorts. As soon as I got my reports and found that I had practically -made up my previous loss, I motored on to New York without having to -stop en route to see any more quotations. - -Some friends who were with me in Hot Springs talk to this day of -the way I jumped up from the luncheon table to sell that second lot -of 10,000 bales. But again that clearly was not a hunch. It was an -impulse that came from the conviction that the time to sell cotton -had now come, however great my previous mistake had been. I had to -take advantage of it. It was my chance. The subconscious mind probably -went on working, reaching conclusions for me. The decision to sell in -Washington was the result of my observation. My years of experience in -trading told me that the line of least resistance had changed from up -to down. - -I bore the cotton market no grudge for taking a million dollars out of -me and I did not hate myself for making a mistake of that calibre any -more than I felt proud for covering in Philadelphia and making up my -loss. My trading mind concerns itself with trading problems and I think -I am justified in asserting that I made up my first loss because I had -the experience and the memory. - - - - -_XVIII_ - - -History repeats itself all the time in Wall Street. Do you remember a -story I told you about covering my shorts at the time Stratton had corn -cornered? Well, another time I used practically the same tactics in the -stock market. The stock was Tropical Trading. I have made money bulling -it and also bearing it. It always was an active stock and a favourite -with adventurous traders. The inside coterie has been accused time and -again by the newspapers of being more concerned over the fluctuations -in the stock than with encouraging permanent investment in it. The -other day one of the ablest brokers I know asserted that not even -Daniel Drew in Erie or H. O. Havemeyer in Sugar developed so perfect a -method for milking the market for a stock as President Mulligan and his -friends have done in Tropical Trading. Many times they have encouraged -the bears to sell TT short and then have proceeded to squeeze them with -business-like thoroughness. There was no more vindictiveness about the -process than is felt by a hydraulic press--or no more squeamishness, -either. - -Of course, there have been people who have spoken about certain -“unsavory incidents” in the market career of TT stock. But I dare -say these critics were suffering from the squeezing. Why do the room -traders, who have suffered so often from the loaded dice of the -insiders, continue to go up against the game? Well, for one thing they -like action and they certainly get it in Tropical Trading. No prolonged -spells of dullness. No reasons asked or given. No time wasted. No -patience strained by waiting for the tipped movement to begin. Always -enough stock to go around--except when the short interest is big enough -to make the scarcity worthwhile. One born every minute! - -It so happened some time ago that I was in Florida on my usual winter -vacation. I was fishing and enjoying myself without any thought of the -markets excepting when we received a batch of newspapers. One morning -when the semi-weekly mail came in I looked at the stock quotations and -saw that Tropical Trading was selling at 155. The last time I’d seen a -quotation in it, I think, was around 140. My opinion was that we were -going into a bear market and I was biding my time before going short of -stocks. But there was no mad rush. That was why I was fishing and out -of hearing of the ticker. I knew that I’d be back home when the real -call came. In the meanwhile nothing that I did or failed to do would -hurry matters a bit. - -The behaviour of Tropical Trading was the outstanding feature of the -market, according to the newspapers I got that morning. It served to -crystallise my general bearishness because I thought it particularly -asinine for the insiders to run up the price of TT in the face of the -heaviness of the general list. There are times when the milking process -must be suspended. What is abnormal is seldom a desirable factor in -a trader’s calculations and it looked to me as if the marking up of -that stock were a capital blunder. Nobody can make blunders of that -magnitude with impunity; not in the stock market. - -After I got through reading the newspapers I went back to my fishing -but I kept thinking of what the insiders in Tropical Trading were -trying to do. That they were bound to fail was as certain as that a man -is bound to smash himself if he jumps from the roof of a twenty-story -building without a parachute. I couldn’t think of anything else and -finally I gave up trying to fish and sent off a telegram to my brokers -to sell 2000 shares of TT at the market. After that I was able to go -back to my fishing. I did pretty well. - -That afternoon I received the reply to my telegram by special courier. -My brokers reported that they had sold the 2000 shares of Tropical -Trading at 153. So far so good. I was selling short on a declining -market, which was as it should be. But I could not fish any more. I was -too far away from a quotation board. I discovered this after I began -to think of all the reasons why Tropical Trading should go down with -the rest of the market instead of going up on inside manipulation. I -therefore left my fishing camp and returned to Palm Beach; or, rather, -to the direct wire to New York. - -The moment I got to Palm Beach and saw what the misguided insiders -were still trying to do, I let them have a second lot of 2000 TT. Back -came the report and I sold another 2000 shares. The market behaved -excellently. That is, it declined on my selling. Everything being -satisfactory I went out and had a chair ride. But I wasn’t happy. The -more I thought the unhappier it made me to think that I hadn’t sold -more. So back I went to the broker’s office and sold another 2000 -shares. - -I was happy only when I was selling that stock. Presently I was short -10,000 shares. Then I decided to return to New York. I had business to -do now. My fishing I would do some other time. - -When I arrived in New York I made it a point to get a line on the -company’s business, actual and prospective. What I learned strengthened -my conviction that the insiders had been worse than reckless in jacking -up the price at a time when such an advance was not justified either by -the tone of the general market or by the company’s earnings. - -The rise, illogical and ill-timed though it was, had developed some -public following and this doubtless encouraged the insiders to pursue -their unwise tactics. Therefore I sold more stock. The insiders ceased -their folly. So I tested the market again and again, in accordance with -my trading methods, until finally I was short 30,000 shares of the -stock of the Tropical Trading Company. By then the price was 133. - -I had been warned that the TT insiders knew the exact whereabouts of -every stock certificate in the Street and the precise dimensions and -identity of the short interest as well as other facts of tactical -importance. They were able men and shrewd traders. Altogether it was -a dangerous combination to go up against. But facts are facts and the -strongest of all allies are conditions. - -Of course, on the way down from 153 to 133 the short interest had grown -and the public that buys on reactions began to argue as usual: That -stock had been considered a good purchase at 153 and higher. Now 20 -points lower, it was necessarily a much better purchase. Same stock; -same dividend rate; same officers; same business. Great bargain! - -The public’s purchases reduced the floating supply and the insiders, -knowing that a lot of room traders were short, thought the time -propitious for a squeezing. The price was duly run up to 150. I daresay -there was plenty of covering but I stayed pat. Why shouldn’t I? The -insiders might know that a short line of 30,000 shares had not been -taken in but why should that frighten me? The reasons that had impelled -me to begin selling at 153 and keep at it on the way down to 133, not -only still existed but were stronger than ever. The insiders might -desire to force me to cover but they adduced no convincing arguments. -Fundamental conditions were fighting for me. It was not difficult to -be both fearless and patient. A speculator must have faith in himself -and in his judgment. The late Dickson G. Watts, ex-President of the -New York Cotton Exchange and famous author of “Speculation as a Fine -Art,” says that courage in a speculator is merely confidence to act on -the decision of his mind. With me, I cannot fear to be wrong because -I never think I am wrong until I am proven wrong. In fact, I am -uncomfortable unless I am capitalising my experience. The course of -the market at a given time does not necessarily prove me wrong. It is -the character of the advance--or of the decline--that determines for me -the correctness or the fallacy of my market position. I can only rise -by knowledge. If I fall it must be by my own blunders. - -There was nothing in the character of the rally from 133 to 150 to -frighten me into covering and presently the stock, as was to be -expected, started down again. It broke 140 before the inside clique -began to give it support. Their buying was coincident with a flood -of bull rumors about the stock. The company, we heard, was making -perfectly fabulous profits, and the earnings justified an increase in -the regular dividend rate. Also, the short interest was said to be -perfectly huge and the squeeze of the century was about to be inflicted -on the bear party in general and in particular on a certain operator -who was more than over-extended. I couldn’t begin to tell you all I -heard as they ran the price up ten points. - -The manipulation did not seem particularly dangerous to me but when -the price touched 149 I decided that it was not wise to let the Street -accept as true all the bull statements that were floating around. Of -course, there was nothing that I or any other rank outsider could say -that would carry conviction either to the frightened shorts or to -those credulous customers of commission houses that trade on hearsay -tips. The most effective retort courteous is that which the tape alone -can print. People will believe that when they will not believe an -affidavit from any living man, much less one from a chap who is short -30,000 shares. So I used the same tactics that I did at the time of the -Stratton corner in corn, when I sold oats to make the traders bearish -on corn. Experience and memory again. - -When the insiders jacked up the price of Tropical Trading with a view -to frightening the shorts I didn’t try to check the rise by selling -that stock. I was already short 30,000 shares of it which was as big -a percentage of the floating supply as I thought wise to be short of. -I did not propose to put my head into the noose so obligingly held -open for me--the second rally was really an urgent invitation. What I -did when TT touched 149 was to sell about 10,000 shares of Equatorial -Commercial Corporation. This company owned a large block of Tropical -Trading. - -Equatorial Commercial, which was not as active a stock as TT, broke -badly on my selling, as I had foreseen; and, of course, my purpose was -achieved. When the traders--and the customers of the commission houses -who had listened to the uncontradicted bull dope on TT--saw that the -rise in Tropical synchronised with heavy selling and a sharp break in -Equatorial, they naturally concluded that the strength of TT was merely -a smoke-screen--a manipulated advance obviously designed to facilitate -inside liquidation in Equatorial Commercial, which was largest holder -of TT stock. It must be both long stock and inside stock in Equatorial, -because no outsider would dream of selling so much short stock at the -very moment when Tropical Trading was so very strong. So they sold -Tropical Trading and checked the rise in that stock, the insiders -very properly not wishing to take all the stock that was pressed for -sale. The moment the insiders took away their support the price of TT -declined. The traders and principal commission houses now sold some -Equatorial also and I took in my short line in that at a small profit. -I hadn’t sold it to make money out of the operation but to check the -rise in TT. - -Time and again the Tropical Trading insiders and their hard-working -publicity man flooded the Street with all manner of bull items and -tried to put up the price. And every time they did I sold Equatorial -Commercial short and covered it with TT reacted and carried EC with -it. It took the wind out of the manipulators’ sails. The price of TT -finally went down to 125 and the short interest really grew so big that -the insiders were enabled to run it up 20 or 25 points. This time it -was a legitimate enough drive against an over-extended short interest; -but while I foresaw the rally I did not cover, not wishing to lose my -position. Before Equatorial Commercial could advance in sympathy with -the rise in TT I sold a raft of it short--with the usual results. This -gave the lie to the bull talk in TT which had got quite boisterous -after the latest sensational rise. - -By this time the general market had grown quite weak. As I told you, -it was the conviction that we were in a bear market that started me -selling TT short in the fishing-camp in Florida. I was short of quite a -few other stocks but TT was my pet. Finally, general conditions proved -too much for the inside clique to defy and TT hit the toboggan slide. -It went below 120 for the first time in years; then below 110; below -par; and still I did not cover. One day when the entire market was -extremely weak Tropical Trading broke 90 and on the demoralisation I -covered. Same old reason! I had the opportunity--the big market and the -weakness and the excess of sellers over buyers. I may tell you, even -at the risk of appearing to be monotonously bragging of my cleverness, -that I took in my 30,000 shares of TT at practically the lowest prices -of the movement. But I wasn’t thinking of covering at the bottom. I was -intent on turning my paper profits into cash without losing much of the -profit in the changing. - -I stood pat throughout because I knew my position was sound. I wasn’t -bucking the trend of the market or going against basic conditions but -the reverse, and that was what made me so sure of the failure of an -over-confident inside clique. What they tried to do others had tried -before and it had always failed. The frequent rallies, even when I knew -as well as anybody that they were due, could not frighten me. I knew -I’d do much better in the end by staying pat than by trying to cover to -put out a new short line at a higher price. By sticking to the position -that I felt was right I made over a million dollars. I was not indebted -to hunches or to skillful tape reading or to stubborn courage. It was a -dividend declared by my faith in my judgment and not by my cleverness -or by my vanity. Knowledge is power and power need not fear lies--not -even when the tape prints them. The retraction follows pretty quickly. - -A year later, TT was jacked up again to 150 and hung around there for -a couple of weeks. The entire market was entitled to a good reaction -for it had risen uninterruptedly and it did not bull any longer. I -know because I tested it. Now, the group to which TT belonged had been -suffering from very poor business and I couldn’t see anything to bull -those stocks on anyhow, even if the rest of the market were due for a -rise, which it wasn’t. So I began to sell Tropical Trading. I intended -to put out 10,000 shares in all. The price broke on my selling. I -couldn’t see that there was any support whatever. Then suddenly, the -character of the buying changed. - -I am not trying to make myself out a wizard when I assure you that I -could tell the moment support came in. It instantly struck me that if -the insiders in that stock, who never felt a moral obligation to keep -the price up, were now buying the stock in the face of a declining -general market there must be a reason. They were not ignorant asses nor -philanthropists nor yet bankers concerned with keeping the price up to -sell more securities over the counter. The price rose notwithstanding -my selling and the selling of others. At 153 I covered my 10,000 shares -and at 156 I actually went long because by that time the tape told me -the line of least resistance was upward. I was bearish on the general -market but I was confronted by a trading condition in a certain stock -and not by a speculative theory in general. The price went out of -sight, above 200. It was the sensation of the year. I was flattered by -reports spoken and printed that I had been squeezed out of eight or -nine millions of dollars. As a matter of fact, instead of being short -I was long of TT all the way up. In fact, I held on a little too long -and let some of my paper profits get away. Do you wish to know why I -did? Because I thought the TT insiders would naturally do what I would -have done had I been in their place. But that was something I had no -business to think because my business is to trade--that is, to stick to -the facts before me and not to what I think other people ought to do. - - - - -_XIX_ - - -I do not know when or by whom the word “manipulation” was first used -in connection with what really are no more than common merchandising -processes applied to the sale in bulk of securities on the Stock -Exchange. Rigging the market to facilitate cheap purchases of a stock -which it is desired to accumulate is also manipulation. But it is -different. It may not be necessary to stoop to illegal practices, -but it would be difficult to avoid doing what some would think -illegitimate. How are you going to buy a big block of a stock in a -bull market without putting up the price on yourself? That would be -the problem. How can it be solved? It depends upon so many things that -you can’t give a general solution unless you say: possibly by means -of very adroit manipulation. For instance? Well, it would depend upon -conditions. You can’t give any closer answer than that. - -I am profoundly interested in all phases of my business, and of course -I learn from the experience of others as well as from my own. But it -is very difficult to learn how to manipulate stocks to-day from such -yarns as are told of an afternoon in the brokers’ offices after the -close. Most of the tricks, devices and expedients of bygone days are -obsolete and futile; or illegal and impracticable. Stock Exchange -rules and conditions have changed, and the story--even the accurately -detailed story--of what Daniel Drew or Jacob Little or Jay Gould could -do fifty or seventy-five years ago is scarcely worth listening to. -The manipulator to-day has no more need to consider what they did -and how they did it than a cadet at West Point need study archery as -practiced by the ancients in order to increase his working knowledge of -ballistics. - -On the other hand there is profit in studying the human factors--the -ease with which human beings believe what it pleases them to believe; -and how they allow themselves--indeed, urge themselves--to be -influenced by their cupidity or by the dollar-cost of the average man’s -carelessness. Fear and hope remain the same; therefore the study of -the psychology of speculators is as valuable as it ever was. Weapons -change, but strategy remains strategy, on the New York Stock Exchange -as on the battlefield. I think the clearest summing up of the whole -thing was expressed by Thomas F. Woodlock when he declared: “The -principles of successful stock speculation are based on the supposition -that people will continue in the future to make the mistakes that they -have made in the past.” - -In booms, which is when the public is in the market in the greatest -numbers, there is never any need of subtlety, so there is no sense of -wasting time discussing either manipulation or speculation during such -times; it would be like trying to find the difference in raindrops -that are falling synchronously on the same roof across the street. The -sucker has always tried to get something for nothing, and the appeal -in all booms is always frankly to the gambling instinct aroused by -cupidity and spurred by a pervasive prosperity. People who look for -easy money invariably pay for the privilege of proving conclusively -that it cannot be found on this sordid earth. At first, when I listened -to the accounts of old-time deals and devices I used to think that -people were more gullible in the 1860’s and ’70’s than in the 1900’s. -But I was sure to read in the newspapers that very day or the next -something about the latest Ponzi or the bust-up of some bucketing -broker and about the millions of sucker money gone to join the silent -majority of vanished savings. - -When I first came to New York there was a great fuss made about wash -sales and matched orders, for all that such practices were forbidden -by the Stock Exchange. At times the washing was too crude to deceive -anyone. The brokers had no hesitation in saying that “the laundry -was active” whenever anybody tried to wash up some stock or other, -and, as I have said before, more than once they had what were frankly -referred to as “bucket-shop drives,” when a stock was offered down two -or three points in a jiffy just to establish the decline on the tape -and wipe up the myriad shoe-string traders who were long of the stock -in the bucket shops. As for matched orders, they were always used -with some misgivings by reason of the difficulty of coordinating and -synchronising operations by brokers, all such business being against -Stock Exchange rules. A few years ago a famous operator canceled the -selling but not the buying part of his matched orders, and the result -was that an innocent broker ran up the price twenty-five points or so -in a few minutes, only to see it break with equal celerity as soon as -his buying ceased. The original intention was to create an appearance -of activity. Bad business, playing with such unreliable weapons. You -see, you can’t take your best brokers into your confidence--not if you -want them to remain members of the New York Stock Exchange. Then also, -the taxes have made all practices involving fictitious transactions -much more expensive than they used to be in the old times. - -The dictionary definition of manipulation includes corners. Now, a -corner might be the result of manipulation or it might be the result of -competitive buying, as, for instance, the Northern Pacific corner on -May 9, 1901, which certainly was not manipulation. The Stutz corner was -expensive to everybody concerned, both in money and in prestige. And it -was not a deliberately engineered corner, at that. - -As a matter of fact very few of the great corners were profitable to -the engineers of them. Both Commodore Vanderbilt’s Harlem corners -paid big, but the old chap deserved the millions he made out of a -lot of short sports, crooked legislators and aldermen who tried to -double-cross him. On the other hand, Jay Gould lost in his Northwestern -corner. Deacon S. V. White made a million in his Lackawanna corner, -but Jim Keene dropped a million in the Hannibal & St. Joe deal. The -financial success of a corner of course depends upon the marketing of -the accumulated holdings at higher than cost, and the short interest -has to be of some magnitude for that to happen easily. - -I used to wonder why corners were so popular among the big operators of -a half-century ago. They were men of ability and experience, wide-awake -and not prone to childlike trust in the philanthropy of their fellow -traders. Yet they used to get stung with an astonishing frequency. A -wise old broker told me that all the big operators of the ’60’s and -’70’s had one ambition, and that was to work a corner. In many cases -this was the offspring of vanity; in others, of the desire for revenge. -At all events, to be pointed out as the man who had successfully -cornered this or the other stock was in reality recognition of brains, -boldness and boodle. It gave the cornerer the right to be haughty. He -accepted the plaudits of his fellows as fully earned. It was more than -the prospective money profit that prompted the engineers of corners to -do their damnedest. It was the vanity complex asserting itself among -cold-blooded operators. - -Dog certainly ate dog in those days with relish and ease. I think I -told you before that I have managed to escape being squeezed more than -once, not because of the possession of a mysterious ticker-sense but -because I can generally tell the moment the character of the buying in -the stock makes it imprudent for me to be short of it. This I do by -common-sense tests, which must have been tried in the old times also. -Old Daniel Drew used to squeeze the boys with some frequency and make -them pay high prices for the Erie “sheers” they had sold short to him. -He was himself squeezed by Commodore Vanderbilt in Erie, and when old -Drew begged for mercy the Commodore grimly quoted the Great Bear’s own -deathless distich: - - _He that sells what isn’t hisn - Must buy it back or go to prisn._ - -Wall Street remembers very little of an operator who for more than a -generation was one of its Titans. His chief claim to immortality seems -to be the phrase “watering stock.” - -Addison G. Jerome was the acknowledged king of the Public Board in -the spring of 1863. His market tips, they tell me, were considered as -good as cash in bank. From all accounts he was a great trader and made -millions. He was liberal, to the point of extravagance and had a great -following in the Street--until Henry Keep, known as William the Silent, -squeezed him out of all his millions in the Old Southern corner. Keep, -by the way, was the brother-in-law of Gov. Roswell P. Flower. - -In most of the old corners the manipulation consisted chiefly of not -letting the other man know that you were cornering the stock which he -was variously invited to sell short. It therefore was aimed chiefly -at fellow professionals, for the general public does not take kindly -to the short side of the account. The reasons that prompted these -wise professionals to put out short lines in such stocks were pretty -much the same as prompts them to do the same thing to-day. Apart from -the selling by faith-breaking politicians in the Harlem corner of the -Commodore, I gather from the stories I have read that the professional -traders sold the stock because it was too high. And the reason they -thought it was too high was that it never before had sold so high; and -that made it too high to buy; and if it was too high to buy it was -just right to sell. That sounds pretty modern, doesn’t it? They were -thinking of the price, and the Commodore was thinking of the value! -And so, for years afterwards, old-timers tell me that people used to -say, “He went short of Harlem!” whenever they wished to describe abject -poverty. - -Many years ago I happened to be speaking to one of Jay Gould’s old -brokers. He assured me earnestly that Mr. Gould not only was a most -unusual man--it was of him that old Daniel Drew shiveringly remarked, -“His touch is Death!”--but that he was head and shoulders above all -other manipulators past and present. He must have been a financial -wizard indeed to have done what he did; there can be no question of -that. Even at this distance I can see that he had an amazing knack for -adapting himself to new conditions, and that is valuable in a trader. -He varied his methods of attack and defense without a pang because he -was more concerned with the manipulation of properties than with stock -speculation. He manipulated for investment rather than for a market -turn. He early saw that the big money was in owning the railroads -instead of rigging their securities on the floor of the Stock Exchange. -He utilised the stock market of course. But I suspect it was because -that was the quickest and easiest way to quick and easy money and he -needed many millions, just as old Collis P. Huntington was always -hard up because he always needed twenty or thirty millions more than -the bankers were willing to lend him. Vision without money means -heartaches; with money, it means achievement; and that means power; and -that means money; and that means achievement; and so on, over and over -and over. - -Of course manipulation was not confined to the great figures of those -days. There were scores of minor manipulators. I remember a story an -old broker told me about the manners and morals of the early ’60’s. He -said: - -“The earliest recollection I have of Wall Street is of my first visit -to the financial district. My father had some business to attend to -there and for some reason or other took me with him. We came down -Broadway and I remember turning off at Wall Street. We walked down -Wall and just as we came to Broad or, rather, Nassau Street, to the -corner where the Bankers’ Trust Company’s building now stands, I saw -a crowd following two men. The first was walking eastward, trying to -look unconcerned. He was followed by the other, a red-faced man who -was wildly waving his hat with one hand and shaking the other fist in -the air. He was yelling to beat the band: ‘Shylock! Shylock! What’s -the price of money? Shylock! Shylock!’ I could see heads sticking out -of windows. They didn’t have skyscrapers in those days, but I was sure -the second- and third-story rubbernecks would tumble out. My father -asked what was the matter, and somebody answered something I didn’t -hear. I was too busy keeping a death clutch on my father’s hand so -that the jostling wouldn’t separate us. The crowd was growing, as -street crowds do, and I wasn’t comfortable. Wild-eyed men came running -down from Nassau Street and up from Broad as well as east and west on -Wall Street. After we finally got out of the jam my father explained -to me that the man who was shouting ‘Shylock’ was So-and-So. I have -forgotten the name, but he was the biggest operator in clique stocks -in the city and was understood to have made--and lost--more money than -any other man in Wall Street with the exception of Jacob Little. I -remember Jacob Little’s name because I thought it was a funny name for -a man to have. The other man, the Shylock, was a notorious locker-up -of money. His name has also gone from me. But I remember he was tall -and thin and pale. In those days the cliques used to lock up money by -borrowing it or, rather, by reducing the amount available to Stock -Exchange borrowers. They would borrow it and get a certified check. -They wouldn’t actually take the money out and use it. Of course that -was rigging. It was a form of manipulation, I think.” - -I agree with the old chap. It was a phase of manipulation that we don’t -have nowadays. - - - - -_XX_ - - -I myself never spoke to any of the great stock manipulators that the -Street still talks about. I don’t mean leaders; I mean manipulators. -They were all before my time, although when I first came to New York, -_James R. Keene, greatest of them all_, was in his prime. But I was -a mere youngster then, exclusively concerned with duplicating, in a -reputable broker’s office, the success I had enjoyed in the bucket -shops of my native city. And, then, too, at the time Keene was busy -with the U.S. Steel stocks--his manipulative masterpiece--I had no -experience with manipulation, no real knowledge of it or of its value -or meaning, and, for that matter, no great need of such knowledge. -If I thought about it at all I suppose I must have regarded it as a -well-dressed form of thimble-rigging, of which the lowbrow form was -such tricks as had been tried on me in the bucket shops. Such talk as I -since have heard on the subject has consisted in great part of surmises -and suspicions; of guesses rather than intelligent analyses. - -More than one man who knew him well has told me that Keene was the -boldest and most brilliant operator that ever worked in Wall Street. -That is saying a great deal, for there have been some great traders. -Their names are now all but forgotten, but nevertheless they were kings -in their day--for a day! They were pulled up out of obscurity into the -sunlight of financial fame by the ticker tape--and the little paper -ribbon didn’t prove strong enough to keep them suspended there long -enough for them to become historical fixtures. At all events Keene was -by all odds the best manipulator of his day--and it was a long and -exciting day. - -He capitalized his knowledge of the game, his experience as an operator -and his talents when he sold his services to the Havemeyer brothers, -who wanted him to develop a market for the Sugar stocks. He was broke -at the time or he would have continued to trade on his own hook; and -he was some plunger! He was successful with Sugar; made the shares -trading favourites, and that made them easily vendible. After that, he -was asked time and again to take charge of pools. I am told that in -these pool operations he never asked nor accepted a fee, but paid for -his share like the other members of the pool. The market conduct of -the stock, of course, was exclusively in his charge. Often there was -talk of treachery--on both sides. His feud with the Whitney-Ryan clique -arose from such accusations. It is not difficult for a manipulator to -be misunderstood by his associates. They don’t see his needs as he -himself does. I know this from my own experience. - -It is a matter of regret that Keene did not leave an accurate record -of his greatest exploit--the successful manipulation of the U.S. -Steel shares in the spring of 1901. As I understand it, Keene never -had an interview with J. P. Morgan about it. Morgan’s firm dealt with -or through Talbot J. Taylor & Co., at whose office Keene made his -headquarters. Talbot Taylor was Keene’s son-in-law. I am assured that -Keene’s fee for his work consisted of the pleasure he derived from the -work. That he made millions trading in the market he helped to put -up that spring is well known. He told a friend of mine that in the -course of a few weeks he sold in the open market for the underwriters’ -syndicate more than seven hundred and fifty thousand shares. Not bad -when you consider two things: That they were new and untried stocks of -a corporation whose capitalization was greater than the entire debt of -the United States at that time; and second, that men like D. G. Reid, -W. B. Leeds, the Moore brothers, Henry Phipps, H. C. Frick and the -other Steel magnates also sold hundreds of thousands of shares to the -public at the same time in the same market that Keene helped to create. - -Of course, general conditions favoured him. Not only actual business -but sentiment and his unlimited financial backing made possible his -success. What we had was not merely a big bull market but a boom and a -state of mind not likely to be seen again. The undigested-securities -panic came later, when Steel common, which Keene had marked up to 55 in -1901, sold at 10 in 1903 and at 8⅞ in 1904. - -We can’t analyse Keene’s manipulative campaigns. His books are not -available; the adequately detailed record is nonexistent. For example, -it would be interesting to see how he worked in Amalgamated Copper. -H. H. Rogers and William Rockefeller had tried to dispose of their -surplus stock in the market and had failed. Finally they asked Keene -to market their line, and he agreed. Bear in mind that H. H. Rogers -was one of the ablest business men of his day in Wall Street and that -William Rockefeller was the boldest speculator of the entire Standard -Oil coterie. They had practically unlimited resources and vast prestige -as well as years of experience in the stock-market game. And yet they -had to go to Keene. I mention this to show you that there are some -tasks which it requires a specialist to perform. Here was a widely -touted stock, sponsored by America’s greatest capitalists, that could -not be sold except at a great sacrifice of money and prestige. Rogers -and Rockefeller were intelligent enough to decide that Keene alone -might help them. - -Keene began to work at once. He had a bull market to work in and sold -two hundred and twenty thousand shares of Amalgamated at around par. -After he disposed of the insiders’ line the public kept on buying and -the price went ten points higher. Indeed the insiders got bullish on -the stock they had sold when they saw how eagerly the public was taking -it. There was a story that Rogers actually advised Keene to go long -of Amalgamated. It is scarcely credible that Rogers meant to unload on -Keene. He was too shrewd a man not to know that Keene was no bleating -lamb. Keene worked as he always did--that is, _doing his big selling -on the way down after the big rise_. Of course his tactical moves were -directed by his needs and by the minor currents that changed from day -to day. In the stock market, as in warfare, it is well to keep in mind -the difference between strategy and tactics. - -One of Keene’s confidential men--he is the best fly fisherman I -know--told me only the other day that during the Amalgamated campaign -Keene would find himself almost out of stock one day--that is, out -of the stock he had been forced to take in marking up the price; and -on the next day he would buy back thousands of shares. On the day -after that, he would sell on balance. Then he would leave the market -absolutely alone, to see how it would take care of itself and also to -accustom it to do so. When it came to the actual marketing of the line -he did what I told you: he sold it on the way down. The trading public -is always looking for a rally, and, besides, there is the covering by -the shorts. - -The man who was closest to Keene during that deal told me that after -Keene sold the Rogers-Rockefeller line for something like twenty or -twenty-five million dollars in cash Rogers sent him a check for two -hundred thousand. This reminds you of the millionaire’s wife who gave -the Metropolitan Opera House scrub-woman fifty cents reward for finding -the one-hundred-thousand-dollar pearl necklace. Keene sent the check -back with a polite note saying he was not a stock broker and that he -was glad to have been of some service to them. They kept the check -and wrote him that they would be glad to work with him again. Shortly -after that it was that H. H. Rogers gave Keene the friendly tip to buy -Amalgamated at around 130! - -A brilliant operator, James R. Keene! His private secretary told me -that when the market was going his way Mr. Keene was irascible; and -those who knew him say his irascibility was expressed in sardonic -phrases that lingered long in the memory of his hearers. But when he -was losing he was in the best of humour, a polished man of the world, -agreeable, epigrammatic, interesting. - -He had in superlative degree the qualities of mind that are associated -with successful speculators anywhere. That he did not argue with the -tape is plain. He was utterly fearless but never reckless. He could and -did turn in a twinkling, if he found he was wrong. - -Since his day there have been so many changes in Stock Exchange rules -and so much more rigorous enforcement of old rules, so many new taxes -on stock sales and profits, and so on, that the game seems different. -Devices that Keene could use with skill and profit can no longer be -utilised. Also, we are assured, the business morality of Wall Street is -on a higher plane. Nevertheless it is fair to say that in any period -of our financial history Keene would have been a great manipulator -because he was a great stock operator and knew the game of speculation -from the ground up. He achieved what he did because conditions at the -time permitted him to do so. He would have been as successful in his -undertakings in 1922 as he was in 1901 or in 1876, when he first came -to New York from California and made nine million dollars in two years. -There are men whose gait is far quicker than the mob’s. They are bound -to lead--no matter how much the mob changes. - -As a matter of fact, the change is by no means as radical as you’d -imagine. The rewards are not so great, for it is no longer pioneer -work and therefore it is not pioneer’s pay. But in certain respects -manipulation is easier than it was; in other ways much harder than in -Keene’s day. - -There is no question that advertising is an art, and manipulation -is the art of advertising through the medium of the tape. The tape -should tell the story the manipulator wishes its readers to see. The -truer the story the more convincing it is bound to be, and the more -convincing it is the better the advertising is. A manipulator to-day, -for instance, has not only to make a stock look strong but also to make -it be strong. Manipulation therefore must be based on sound trading -principles. That is what made Keene such a marvellous manipulator; he -was a consummate trader to begin with. - -The word “manipulation” has come to have an ugly sound. It needs an -alias. I do not think there is anything so very mysterious or crooked -about the process itself when it has for an object the selling of -a stock in bulk, provided, of course, that such operations are not -accompanied by misrepresentation. There is little question that a -manipulator necessarily seeks his buyers among speculators. He turns to -men who are looking for big returns on their capital and are therefore -willing to run a greater than normal business risk. I can’t have much -sympathy for the man who, knowing this, nevertheless blames others for -his own failure to make easy money. He is a devil of a clever fellow -when he wins. But when he loses money the other fellow was a crook; a -manipulator! In such moments and from such lips the word connotes the -use of marked cards. But this is not so. - -Usually the object of manipulation is to develop marketability--that -is, the ability to dispose of fair-sized blocks at some price at any -time. Of course a pool, by reason of a reversal of general market -conditions, may find itself unable to sell except at a sacrifice too -great to be pleasing. They then may decide to employ a professional, -believing that his skill and experience will enable him to conduct an -orderly retreat instead of suffering an appalling rout. - -You will notice that I do not speak of manipulation designed to permit -considerable accumulation of a stock as cheaply as possible, as, for -instance, in buying for control, because this does not happen often -nowadays. - -When Jay Gould wished to cinch his control of Western Union and decided -to buy a big block of the stock, Washington E. Connor, who had not been -seen on the floor of the Stock Exchange for years, suddenly showed -up in person at the Western Union Post. He began to bid for Western -Union. The traders to a man laughed--at his stupidity in thinking them -so simple--and they cheerfully sold him all the stock he wanted to buy. -It was too raw a trick, to think he could put up the price by acting as -though Mr. Gould wanted to buy Western Union. Was that manipulation? I -think I can only answer that by saying “No; and yes!” - -In the majority of cases the object of manipulation is, as I said, to -sell stock to the public at the best possible price. It is not alone -a question of selling but of distributing. It is obviously better in -every way for a stock to be held by a thousand people than by one -man--better for the market in it. So it is not alone the sale at a good -price but the character of the distribution that a manipulator must -consider. - -There is no sense in marking up the price to a very high level if you -cannot induce the public to take it off your hands later. Whenever -inexperienced manipulators try to unload at the top and fail, -old-timers look mighty wise and tell you that you can lead a horse -to water but you cannot make him drink. Original devils! As a matter -of fact, it is well to remember a rule of manipulation, a rule that -Keene and his able predecessors well knew. It is this: _Stocks are -manipulated to the highest point possible and then sold to the public -on the way down_. - -Let me begin at the beginning. Assume that there is some one--an -underwriting syndicate or a pool or an individual--that has a block -of stock which it is desired to sell at the best price possible. It -is a stock duly listed on the New York Stock Exchange. The best place -for selling it ought to be the open market, and the best buyer ought -to be the general public. The negotiations for the sale are in charge -of a man. He--or some present or former associate--has tried to sell -the stock on the Stock Exchange and has not succeeded. He is--or soon -becomes--sufficiently familiar with stock-market operations to realise -that more experience and greater aptitude for the work are needed than -he possesses. He knows personally or by hearsay several men who have -been successful in their handling of similar deals, and he decides to -avail himself of their professional skill. He seeks one of them as he -would seek a physician if he were ill or an engineer if he needed that -kind of expert. - -Suppose he has heard of me as a man who knows the game. Well, I take it -that he tries to find out all he can about me. He then arranges for an -interview, and in due time calls at my office. - -Of course, the chances are that I know about the stock and what it -represents. It is my business to know. That is how I make my living. My -visitor tells me what he and his associates wish to do, and asks me to -undertake the deal. - -It is then my turn to talk. I ask for whatever information I deem -necessary to give me a clear understanding of what I am asked to -undertake. I determine the value and estimate the market possibilities -of that stock. That and my reading of current conditions in turn help -me to gauge the likelihood of success for the proposed operation. - -If my information inclines me to a favourable view I accept the -proposition and tell him then and there what my terms will be for -my services. If he in turn accepts my terms--the honorarium and the -conditions--I begin my work at once. - -I generally ask and receive calls on a block of stock. I insist upon -graduated calls as the fairest to all concerned. The price of the call -begins at a little below the prevailing market price and goes up; say, -for example, that I get calls on one hundred thousand shares and the -stock is quoted at 40. I begin with a call for some thousands of shares -at 35, another at 37, another at 40, and at 45 and 50, and so on up to -75 or 80. - -If as the result of my professional work--my manipulation--the price -goes up, and if at the highest level there is a good demand for the -stock so that I can sell fair-sized blocks of it I of course call the -stock. I am making money; but so are my clients making money. This is -as it should be. If my skill is what they are paying for they ought to -get value. Of course, there are times when a pool may be wound up at a -loss, but that is seldom, for I do not undertake the work unless I see -my way clear to a profit. This year I was not so fortunate in one or -two deals, and I did not make a profit. There are reasons, but that is -another story, to be told later--perhaps. - -The first step in a bull movement in a stock is to advertise the fact -that there is a bull movement on. Sounds silly, doesn’t it? Well, think -a moment. It isn’t as silly as it sounded, is it? The most effective -way to advertise what, in effect, are your honourable intentions is -to make the stock active and strong. After all is said and done, _the -greatest publicity agent in the wide world is the ticker, and by far -the best advertising medium is the tape_. I do not need to put out any -literature for my clients. I do not have to inform the daily press as -to the value of the stock or to work the financial reviews for notices -about the company’s prospects. Neither do I have to get a following. -I accomplish all these highly desirable things by merely making the -stock active. _When there is activity there is a synchronous demand -for explanations_; and that means, of course, that the necessary -reasons--for publication--supply themselves without the slightest aid -from me. - -Activity is all that the floor traders ask. They will buy or sell any -stock at any level if only there is a free market for it. They will -deal in thousands of shares wherever they see activity, and their -aggregate capacity is considerable. It necessarily happens that they -constitute the manipulator’s first crop of buyers. They will follow -you all the way up and they thus are a great help at all the stages -of the operation. I understand that James R. Keene used habitually to -employ the most active of the room traders, both to conceal the source -of the manipulation and also because he knew that they were by far -the best business-spreaders and tip-distributors. He often gave calls -to them--verbal calls--above the market, so that they might do some -helpful work before they could cash in. He made them earn their profit. -To get a professional following I myself have never had to do more -than to make a stock active. Traders don’t ask for more. It is well, -of course, to remember that these professionals on the floor of the -Exchange buy stocks with the intention of selling them at a profit. -They do not insist on its being a big profit; but it must be a quick -profit. - -I make the stock active in order to draw the attention of speculators -to it, for the reasons I have given. I buy it and I sell it and the -traders follow suit. The selling pressure is not apt to be strong where -a man has as much speculatively held stock sewed up--in calls--as I -insist on having. The buying, therefore, prevails over the selling, and -the public follows the lead not so much of the manipulator as of the -room traders. It comes in as a buyer. This highly desirable demand I -fill--that is, I sell stock on balance. If the demand is what it ought -to be it will absorb more than the amount of stock I was compelled to -accumulate in the earlier stages of the manipulation; and when this -happens I sell the stock short--that is, technically. In other words, -I sell more stock than I actually hold. It is perfectly safe for me to -do so since I am really selling against my calls. Of course, when the -demand from the public slackens, the stock ceases to advance. Then I -wait. - -Say, then, that the stock has ceased to advance. There comes a weak -day. The entire market may develop a reactionary tendency or some -sharp-eyed trader may perceive that there are no buying orders to speak -of in my stock, and he sells it, and his fellows follow. Whatever -the reason may be, my stock starts to go down. Well, I begin to buy -it. I give it the support that a stock ought to have if it is in -good odour with its own sponsors. And more: I am able to support it -without accumulating it--that is, without increasing the amount I -shall have to sell later on. Observe that I do this without decreasing -my financial resources. Of course what I am really doing is covering -stock I sold short at higher prices when the demand from the public -or from the traders or from both enabled me to do it. It is always -well to make it plain to the traders--and to the public, also--that -there is a demand for the stock on the way down. That tends to check -both reckless short selling by the professionals and liquidation by -frightened holders--which is the selling you usually see when a stock -gets weaker and weaker, which in turn is what a stock does when it is -not supported. These covering purchases of mine constitute what I call -the stabilising process. - -As the market broadens I of course sell stock on the way up, but -never enough to check the rise. This is in strict accordance with -my stabilising plans. It is obvious that the more stock I sell on a -reasonable and orderly advance the more I encourage the conservative -speculators, who are more numerous than the reckless room traders; -and in addition the more support I shall be able to give to the stock -on the inevitable weak days. By always being short I always am in a -position to support the stock without danger to myself. As a rule I -begin my selling at a price that will show me a profit. But I often -sell without having a profit, simply to create or to increase what I -may call my riskless buying power. My business is not alone to put up -the price or to sell a big block of stock for a client but to make -money for myself. That is why I do not ask my clients to finance my -operations. My fee is contingent upon my success. - -Of course what I have described is not my invariable practice. I -neither have nor adhere to an inflexible system. I modify my terms and -conditions according to circumstances. - -A stock which it is desired to distribute should be manipulated to the -highest possible point and then sold. I repeat this both because it is -fundamental and because the public apparently believes that the selling -is all done at the top. Sometimes a stock gets waterlogged, as it -were; it doesn’t go up. That is the time to sell. The price naturally -will go down on your selling rather further than you wish, but you can -generally nurse it back. As long as a stock that I am manipulating -goes up on my buying I know I am hunky, and if need be I buy it with -confidence and use my own money without fear--precisely as I would any -other stock that acts the same way. It is the line of least resistance. -You remember my trading theories about that line, don’t you? Well, -when the price line of least resistance is established I follow it, -not because I am manipulating that particular stock at that particular -moment but because I am a stock operator at all times. - -When my buying does not put the stock up I stop buying and then proceed -to sell it down; and that also is exactly what I would do with that -same stock if I did not happen to be manipulating it. The principal -marketing of the stock, as you know, is done on the way down. _It is -perfectly astonishing how much stock a man can get rid of on a decline._ - -I repeat that at no time during the manipulation do I forget to be a -stock trader. My problems as a manipulator, after all, are the same -that confront me as an operator. All manipulation comes to an end when -the manipulator cannot make a stock do what he wants it to do. _When -the stock you are manipulating doesn’t act as it should, quit. Don’t -argue with the tape. Do not seek to lure the profit back. Quit while -the quitting is good--and cheap._ - - - - -_XXI_ - - -I am well aware that all these generalities do not sound especially -impressive. Generalities seldom do. Possibly I may succeed better if I -give a concrete example. I’ll tell you how I marked up the price of a -stock 30 points, and in so doing accumulated only seven thousand shares -and developed a market that would absorb almost any amount of stock. - -It was Imperial Steel. The stock had been brought out by reputable -people and it had been fairly well tipped as a property of value. About -30 per cent of the capital stock was placed with the general public -through various Wall Street houses, but there had been no significant -activity in the shares after they were listed. From time to time -somebody would ask about it and one or another insider--members of the -original underwriting syndicate--would say that the company’s earnings -were better than expected and the prospects more than encouraging. -This was true enough and very good as far as it went, but not exactly -thrilling. The speculative appeal was absent, and from the investor’s -point of view the price stability and dividend permanency of the -stock were not yet demonstrated. It was a stock that never behaved -sensationally. It was so gentlemanly that no corroborative rise ever -followed the insiders’ eminently truthful reports. On the other hand, -neither did the price decline. - -Imperial Steel remained unhonoured and unsung and untipped, content to -be one of those stocks that don’t go down because nobody sells and that -nobody sells because nobody likes to go short of a stock that is not -well distributed; the seller is too much at the mercy of the loaded-up -inside clique. Similarly, there is no inducement to buy such a stock. -To the investor Imperial Steel therefore remained a speculation. To the -speculator it was a dead one--the kind that makes an investor of you -against your will by the simple expedient of falling into a trance the -moment you go long of it. The chap who is compelled to lug a corpse a -year or two always loses more than the original cost of the deceased; -he is sure to find himself tied up with it when some really good things -come his way. - -One day the foremost member of the Imperial Steel syndicate, acting for -himself and associates, came to see me. They wished to create a market -for the stock, of which they controlled the undistributed 70 per cent. -They wanted me to dispose of their holdings at better prices than they -thought they would obtain if they tried to sell in the open market. -They wanted to know on what terms I would undertake the job. - -I told him that I would let him know in a few days. Then I looked into -the property. I had experts go over the various departments of the -company--industrial, commercial and financial. They made reports to me -which were unbiased. I wasn’t looking for the good or the bad points, -but for the facts, such as they were. - -The reports showed that it was a valuable property. The prospects -justified purchases of the stock at the prevailing market price--if -the investor were willing to wait a little. Under the circumstances -an advance in the price would in reality be the commonest and most -legitimate of all market movements--to wit, the process of discounting -the future. There was therefore no reason that I could see why I should -not conscientiously and confidently undertake the bull manipulation of -Imperial Steel. - -I let my man know my mind and he called at my office to talk the deal -over in detail. I told him what my terms were. For my services I asked -no cash, but calls on one hundred thousand shares of the Imperial Steel -stock. The price of the calls ran up from 70 to 100. That may seem like -a big fee to some. But they should consider that the insiders were -certain they themselves could not sell one hundred thousand shares, or -even fifty thousand shares, at 70. There was no market for the stock. -All the talk about wonderful earnings and excellent prospects had not -brought in buyers, not to any great extent. In addition, I could not -get my fee in cash without my clients first making some millions of -dollars. What I stood to make was not an exorbitant selling commission. -It was a fair contingent fee. - -Knowing that the stock had real value and that general market -conditions were bullish and therefore favourable for an advance in all -good stocks, I figured that I ought to do pretty well. My clients were -encouraged by the opinions I expressed, agreed to my terms at once, and -the deal began with pleasant feelings all around. - -I proceeded to protect myself as thoroughly as I could. The syndicate -owned or controlled about 70 per cent of the outstanding stock. I -had them deposit their 70 per cent under a trust agreement. I didn’t -propose to be used as a dumping ground for the big holders. With the -majority holdings thus securely tied up, I still had 30 per cent of -scattered holdings to consider, but that was a risk I had to take. -Experienced speculators do not expect ever to engage in utterly -riskless ventures. As a matter of fact, it was not much more likely -that all the untrusteed stock would be thrown on the market at one -fell swoop than that all the policyholders of a life-insurance company -would die at the same hour, the same day. There are unprinted actuarial -tables of stock-market risks as well as of human mortality. - -Having protected myself from some of the avoidable dangers of a -stock-market deal of that sort, I was ready to begin my campaign. Its -objective was to make my calls valuable. To do this I must put up the -price and develop a market in which I could sell one hundred thousand -shares--the stock in which I held options. - -The first thing I did was to find out how much stock was likely to come -on the market on an advance. This was easily done through my brokers, -who had no trouble in ascertaining what stock was for sale at or a -little above the market. I don’t know whether the specialists told them -what orders they had on their books or not. The price was nominally 70, -but I could not have sold one thousand shares at that price. I had no -evidence of even a moderate demand at that figure or even a few points -lower. I had to go by what my brokers found out. But it was enough to -show me how much stock there was for sale and how little was wanted. - -As soon as I had a line on these points I quietly took all the stock -that was for sale at 70 and higher. When I say “I” you will understand -that I mean my brokers. The sales were for account of some of the -minority holders because my clients naturally had cancelled whatever -selling orders they might have given out before they tied up their -stock. - -I didn’t have to buy very much stock. Moreover, I knew that the right -kind of advance would bring in other buying orders--and, of course, -selling orders also. - -I didn’t give bull tips on Imperial Steel to anybody. I didn’t have -to. My job was to seek directly to influence sentiment by the best -possible kind of publicity. I do not say that there should never -be bull propaganda. It is as legitimate and indeed as desirable to -advertise the value of a new stock as to advertise the value of woolens -or shoes or automobiles. Accurate and reliable information should be -given by the public. But what I meant was that the tape did all that -was needed for my purpose. As I said before, the reputable newspapers -always try to print explanations for market movements. It is news. -Their readers demand to know not only what happens in the stock market -but why it happens. Therefore without the manipulator lifting a finger -the financial writers will print all the available information and -gossip, and also analyse the reports of earnings, trade condition and -outlook; in short, whatever may throw light on the advance. Whenever a -newspaperman or an acquaintance asks my opinion of a stock and I have -one I do not hesitate to express it. I do not volunteer advice and -I never give tips, but I have nothing to gain in my operations from -secrecy. At the same time I realise that the best of all tipsters, the -most persuasive of all salesmen, is the tape. - -When I had absorbed all the stock that was for sale at 70 and a little -higher I relieved the market of that pressure, and naturally that made -clear for trading purposes the line of least resistance in Imperial -Steel. It was manifestly upward. The moment that fact was perceived -by the observant traders on the floor they logically assumed that -the stock was in for an advance the extent of which they could not -know; but they knew enough to begin buying. Their demand for Imperial -Steel, created exclusively by the obviousness of the stock’s rising -tendency--the tape’s infallible bull tip!--I promptly filled. I sold to -the traders the stock that I had bought from the tired-out holders at -the beginning. Of course this selling was judiciously done; I contented -myself with supplying the demand. I was not forcing my stock on the -market and I did not want too rapid an advance. It wouldn’t have been -good business to sell out the half of my one hundred thousand shares at -that stage of the proceedings. My job was to make a market on which I -might sell my entire line. - -But even though I sold only as much as the traders were anxious to buy, -the market was temporarily deprived of my own buying power, which I had -hitherto exerted steadily. In due course the traders’ purchases ceased -and the price stopped rising. As soon as that happened there began the -selling by disappointed bulls or by those traders whose reasons for -buying disappeared the instant the rising tendency was checked. But I -was ready for this selling, and on the way down I bought back the stock -I had sold to the traders a couple of points higher. This buying of -stock I knew was bound to be sold in turn checked the downward course; -and when the price stopped going down the selling orders stopped coming -in. - -I then began all over again. I took all the stock that was for sale on -the way up--it wasn’t very much--and the price began to rise a second -time; from a higher starting point than 70. _Don’t_ forget that on the -way down there are many holders who wish to heaven they had sold theirs -but won’t do it three or four points from the top. Such speculators -always vow they will surely sell out if there is a rally. They put in -their orders to sell on the way up, and then they change their minds -with the change in the stock’s price-trend. Of course there is always -profit taking from safe-playing quick runners to whom a profit is -always a profit to be taken. - -All I had to do after that was to repeat the process; alternately -buying and selling; but always working higher. - -Sometimes, after you have taken all the stock that is for sale, it -pays to rush up the price sharply, to have what might be called little -bull flurries in the stock you are manipulating. It is excellent -advertising, because it makes talk and also brings in both the -professional traders and that portion of the speculating public that -likes action. It is, I think, a large portion. I did that in Imperial -Steel, and whatever demand was created by those spurts I supplied. -My selling always kept the upward movement within bounds both as to -extent and as to speed. In buying on the way down and selling on the -way up I was doing more than marking up the price: I was developing the -marketability of Imperial Steel. - -After I began my operations in it there never was a time when a -man could not buy or sell the stock freely; I mean by this, buy or -sell a reasonable amount without causing over-violent fluctuations -in the price. The fear of being left high and dry if he bought, or -squeezed to death if he sold, was gone. The gradual spread among the -professionals and the public of a belief in the permanence of the -market for Imperial Steel had much to do with creating confidence in -the movement; and, of course, the activity also put an end to a lot of -other objections. The result was that after buying and selling a good -many thousands of shares I succeeded in making the stocks sell at par. -At one hundred dollars a share everybody wanted to buy Imperial Steel. -Why not? Everybody now knew that it was a good stock; that it had been -and still was a bargain. The proof was the rise. A stock that could go -thirty points from 70 could go up thirty more from par. That is the way -a good many argued. - -In the course of marking up the price those thirty points I accumulated -only seven thousand shares. The price on this line averaged me almost -exactly 85. That meant a profit of fifteen points on it; but, of -course, my entire profit, still on paper, was much more. It was a safe -enough profit, for I had a market for all I wanted to sell. The stock -would sell higher on judicious manipulation and I had graduated calls -on one hundred thousand shares beginning at 70 and ending at 100. - -Circumstances prevented me from carrying out certain plans of mine for -converting my paper profits into good hard cash. It had been, if I do -say so myself, a beautiful piece of manipulation, strictly legitimate -and deservedly successful. The property of the company was valuable -and the stock was not dear at the higher price. One of the members of -the original syndicate developed a desire to secure the control of the -property--a prominent banking house with ample resources. The control -of a prosperous and growing concern like the Imperial Steel Corporation -is possibly more valuable to a banking firm than to individual -investors. At all events, this firm made me an offer for all my options -on the stock. It meant an enormous profit for me, and I instantly took -it. I am always willing to sell out when I can do so in a lump at a -good profit. I was quite content with what I made out of it. - -Before I disposed of my calls on the hundred thousand shares I learned -that these bankers had employed more experts to make a still more -thorough examination of the property. Their reports showed enough to -bring me in the offer I got. I kept several thousand shares of the -stock for investment. I believe in it. - -There wasn’t anything about my manipulation of Imperial Steel that -wasn’t normal and sound. As long as the price went up on my buying I -knew I was O.K. The stock never got waterlogged, as a stock sometimes -does. When you find that it fails to respond adequately to your buying -you don’t need any better tip to sell. You know that if there is any -value to a stock and general market conditions are right you can always -nurse it back after a decline, no matter if it’s twenty points. But I -never had to do anything like that in Imperial Steel. - -In my manipulation of stocks I never lose sight of basic trading -principles. Perhaps you wonder why I repeat this or why I keep on -harping on the fact that I never argue with the tape or lose my temper -at the market because of its behaviour. You would think--wouldn’t -you?--that shrewd men who have made millions in their own business and -in addition have successfully operated in Wall Street at times would -realise the wisdom of playing the game dispassionately. Well, you would -be surprised at the frequency with which some of our most successful -promoters behave like peevish women because the market does not act the -way they wish it to act. They seem to take it as a personal slight, and -they proceed to lose money by first losing their temper. - -There has been much gossip about a disagreement between John Prentiss -and myself. People have been led to expect a dramatic narrative of a -stock-market deal that went wrong or some double-crossing that cost -me--or him--millions; or something of that sort. Well, it wasn’t. - -Prentiss and I had been friendly for years. He had given me at various -times information that I was able to utilise profitably, and I had -given him advice which he may or may not have followed. If he did he -saved money. - -He was largely instrumental in the organisation and promotion of the -Petroleum Products Company. After a more or less successful market -début general conditions changed for the worse and the new stock did -not fare as well as Prentiss and his associates had hoped. When basic -conditions took a turn for the better Prentiss formed a pool and began -operations in Pete Products. - -I cannot tell you anything about his technique. He didn’t tell me how -he worked and I didn’t ask him. But it was plain that notwithstanding -his Wall Street experience and his undoubted cleverness, whatever it -was he did proved of little value and it didn’t take the pool long -to find out that they couldn’t get rid of much stock. He must have -tried everything he knew, because a pool manager does not ask to be -superseded by an outsider unless he feels unequal to the task, and that -is the last thing the average man likes to admit. At all events he came -to me and after some friendly preliminaries he said he wanted me to -take charge of the market for Pete Products and dispose of the pool’s -holdings, which amounted to a little over one hundred thousand shares. -The stock was selling at 102 to 103. - -The thing looked dubious to me and I declined his proposition with -thanks. But he insisted that I accept. He put it on personal grounds, -so that in the end I consented. I constitutionally dislike to identify -myself with enterprises in the success of which I cannot feel -confidence, but I also think a man owes something to his friends and -acquaintances. I said I would do my best, but I told him I did not feel -very cocky about it and I enumerated the adverse factors that I would -have to contend with. But all Prentiss said to that was that he wasn’t -asking me to guarantee millions in profits to the pool. He was sure -that if I took hold I’d make out well enough to satisfy any reasonable -being. - -Well, there I was, engaged in doing something against my own judgment. -I found, as I feared, a pretty tough state of affairs, due in great -measure to Prentiss’ own mistakes while he was manipulating the stock -for account of the pool. But the chief factor against me was time. -I was convinced that we were rapidly approaching the end of a bull -swing and therefore that the improvement in the market, which had so -encouraged Prentiss, would prove to be merely a short-lived rally. I -feared that the market would turn definitely bearish before I could -accomplish much with Pete Products. However, I had given my promise and -I decided to work as hard as I knew how. - -I started to put up the price. I had moderate success. I think I ran it -up to 107 or thereabouts, which was pretty fair, and I was even able to -sell a little stock on balance. It wasn’t much, but I was glad not to -have increased the pool’s holdings. There were a lot of people not in -the pool who were just waiting for a small rise to dump their stock, -and I was a godsend to them. Had general conditions been better I also -would have done better. It was too bad that I wasn’t called in earlier. -All I could do now, I felt, was to get out with as little loss as -possible to the pool. - -I sent for Prentiss and told him my views. But he started to object. I -then explained to him why I took the position I did. I said: “Prentiss, -I can feel very plainly the pulse of the market. There is no follow-up -in your stock. It is no trick to see just what the public’s reaction is -to my manipulation. Listen: When Pete Products is made as attractive to -traders as possible and you give it all the support needed at all times -and notwithstanding all that you find that the public leaves it alone -you may be sure that there is something wrong, not with the stock but -with the market. There is absolutely no use in trying to force matters. -You are bound to lose if you do. A pool manager should be willing to -buy his own stock when he has company. But when he is the only buyer in -the market he’d be an ass to buy it. For every five thousand shares I -buy the public ought to be willing or able to buy five thousand more. -But I certainly am not going to do all the buying. If I did, all I -would succeed in doing would be to get soaked with a lot of long stock -that I don’t want. There is only one thing to do, and that is to sell. -And the only way to sell is to sell.” - -“You mean, sell for what you can get?” asked Prentiss. - -“Right!” I said. I could see he was getting ready to object. “If I am -to sell the pool’s stock at all you can make up your mind that the -price is going to break through par and----” - -“Oh, no! Never!” he yelled. You’d have imagined I was asking him to -join a suicide club. - -“Prentiss,” I said to him, “it is a cardinal principle of stock -manipulation to put up a stock in order to sell it. But you don’t sell -in bulk on the advance. You can’t. The big selling is done on the way -down from the top. I cannot put up your stock to 125 or 130. I’d like -to, but it can’t be done. So you will have to begin your selling from -this level. In my opinion all stocks are going down, and Petroleum -Products isn’t going to be the one exception. It is better for it to -go down now on the pool’s selling than for it to break next month on -selling by some one else. It will go down anyhow.” - -I can’t see that I said anything harrowing, but you could have heard -his howls in China. He simply wouldn’t listen to such a thing. It would -never do. It would play the dickens with the stock’s record, to say -nothing of inconvenient possibilities at the banks where the stock was -held as collateral on loans, and so on. - -I told him again that in my judgment nothing in the world could prevent -Pete Products from breaking fifteen or twenty points, because the -entire market was headed that way, and I once more said it was absurd -to expect his stock to be a dazzling exception. But again my talk went -for nothing. He insisted that I support the stock. - -Here was a shrewd business man, one of the most successful promoters of -the day, who had made millions in Wall Street deals and knew much more -than the average man about the game of speculation, actually insisting -on supporting a stock in an incipient bear market. It was his stock, -to be sure, but it was nevertheless bad business. So much so that it -went against the grain and I again began to argue with him. But it was -no use. He insisted on putting in supporting orders. - -Of course when the general market got weak and the decline began in -earnest Pete Products went with the rest. Instead of selling I actually -bought stock for the insiders’ pool--by Prentiss’ orders. - -The only explanation is that Prentiss did not believe the bear market -was right on top of us. I myself was confident that the bull market -was over. I had verified my first surmise by tests not alone in Pete -Products but in other stocks as well. I didn’t wait for the bear market -to announce its safe arrival before I started selling. Of course I -didn’t sell a share of Pete Products, though I was short of other -stocks. - -The Pete Products pool, as I expected, was hung up with all they held -to begin with and with all they had to take in their futile effort to -hold up the price. In the end they did liquidate; but at much lower -figures than they would have got if Prentiss had let me sell when and -as I wished. It could not be otherwise. But Prentiss still thinks he -was right--or says he does. I understand he says the reason I gave him -the advice I did was that I was short of other stocks and the general -market was going up. It implies, of course, that the break in Pete -Products that would have resulted from selling out the pool’s holdings -at any price would have helped my bear position in other stocks. - -That is all tommyrot. I was not bearish because I was short of stocks. -I was bearish because that was the way I sized up the situation, and -I sold stocks short only after I turned bearish. There never is much -money in doing things wrong end to; not in the stock market. My plan -for selling the pool’s stock was based on what the experience of twenty -years told me alone was feasible and therefore wise. Prentiss ought to -have been enough of a trader to see it as plainly as I did. It was too -late to try to do anything else. - -I suppose Prentiss shares the delusion of thousands of outsiders who -think a manipulator can do anything. He can’t. The biggest thing Keene -did was his manipulation of U.S. Steel common and preferred in the -spring of 1901. He succeeded not because he was clever and resourceful -and not because he had a syndicate of the richest men in the country -back of him. He succeeded partly because of those reasons but chiefly -because the general market was right and the public’s state of mind was -right. - -It isn’t good business for a man to act against the teachings of -experience and against common sense. But the suckers in Wall Street are -not all outsiders. Prentiss’ grievance against me is what I have just -told you. He feels sore because I did my manipulation not as I wanted -to but as he asked me to. - -There isn’t anything mysterious or underhanded or crooked about -manipulation designed to sell a stock in bulk provided such -operations are not accompanied by deliberate misrepresentations. -Sound manipulation must be based on sound trading principles. People -lay great stress on old-time practices, such as wash sales. But I -can assure you that the mere mechanics of deception count for very -little. The difference between stock-market manipulation and the -over-the-counter sale of stocks and bonds is in the character of the -clientele rather than in the character of the appeal. J. P. Morgan -& Co. sell an issue of bonds to the public--that is, to investors. -A manipulator disposes of a block of stock to the public--that is, -to speculators. An investor looks for safety, for permanence of the -interest return on the capital he invests. The speculator looks for a -quick profit. - -The manipulator necessarily finds his primary market among -speculators--who are willing to run a greater than normal business risk -so long as they have a reasonable chance to get a big return on their -capital. I myself never have believed in blind gambling. I may plunge -or I may buy one hundred shares. But in either case I must have a -reason for what I do. - -I distinctly remember how I got into the game of manipulation--that -is, in the marketing of stocks for others. It gives me pleasure to -recall it because it shows so beautifully the professional Wall Street -attitude toward stock-market operations. It happened after I had “come -back”--that is, after my Bethlehem Steel trade in 1915 started me on -the road to financial recovery. - -I traded pretty steadily and had very good luck. I have never sought -newspaper publicity, but neither have I gone out of my way to hide -myself. At the same time, you know that professional Wall Street -exaggerates both the successes and the failures of whichever operator -happens to be active; and, of course, the newspapers hear about him -and print rumors. I have been broke so many times, according to -the gossips, or have made so many millions, according to the same -authorities, that my only reaction to such reports is to wonder how and -where they are born. And how they grow! I have had broker friend after -broker friend bring the same story to me, a little changed each time, -improved, more circumstantial. - -All this preface is to tell you how I first came to undertake the -manipulation of a stock for someone else. The stories the newspapers -printed of how I had paid back in full the millions I owed did the -trick. My plungings and my winnings were so magnified by the newspapers -that I was talked about in Wall Street. The day was past when an -operator swinging a line of two hundred thousand shares of stock could -dominate the market. But, as you know, the public always desires to -find successors to the old leaders. It was Mr. Keene’s reputation -as a skillful stock operator, a winner of millions on his own hook, -that made promoters and banking houses apply to him for selling large -blocks of securities. In short, his services as manipulator were in -demand because of the stories the Street had heard about his previous -successes as a trader. - -But Keene was gone--passed on to that heaven where he once said he -wouldn’t stay a moment unless he found Sysonby there waiting for -him. Two or three other men who made stock-market history for a few -months had relapsed into the obscurity of prolonged inactivity. I -refer particularly to certain of those plunging Westerners who came to -Wall Street in 1901 and after making many millions out of their Steel -holdings remained in Wall Street. They were in reality superpromoters -rather than operators of the Keene type. But they were extremely able, -extremely rich and extremely successful in the securities of the -companies which they and their friends controlled. They were not really -great manipulators, like Keene or Governor Flower. Still, the Street -found in them plenty to gossip about and they certainly had a following -among the professionals and the sportier commission houses. After they -ceased to trade actively the Street found itself without manipulators; -at least, it couldn’t read about them in the newspapers. - -You remember the big bull market that began when the Stock Exchange -resumed business in 1915. As the market broadened and the Allies’ -purchases in this country mounted into billions we ran into a boom. -As far as manipulation went, it wasn’t necessary for anybody to lift -a finger to create an unlimited market for a war bride. Scores of men -made millions by capitalizing contracts or even promises of contracts. -They became successful promoters, either with the aid of friendly -bankers or by bringing out their companies on the Curb market. The -public bought anything that was adequately touted. - -When the bloom wore off the boom, some of these promoters found -themselves in need of help from experts in stock salesmanship. When the -public is hung up with all kinds of securities, some of them purchased -at higher prices, it is not an easy task to dispose of untried stocks. -_After a boom the public is positive that nothing is going up. It -isn’t that buyers become more discriminating, but that the blind buying -is over. It is the state of mind that has changed. Prices don’t even -have to go down to make people pessimistic. It is enough if the market -gets dull and stays dull for a time._ - -In every boom companies are formed primarily if not exclusively to take -advantage of the public’s appetite for all kinds of stocks. Also there -are belated promotions. The reason why promoters make that mistake -is that being human they are unwilling to see the end of the boom. -Moreover, it is good business to take chances when the possible profit -is big enough. _The top is never in sight when the vision is vitiated -by hope._ The average man sees a stock that nobody wanted at twelve -dollars or fourteen dollars a share suddenly advance to thirty--which -surely is the top--until it rises to fifty. That is absolutely the -end of the rise. Then it goes to sixty; to seventy; to seventy-five. -It then becomes a certainty that this stock, which a few weeks ago -was selling for less than fifteen, can’t go any higher. But it goes -to eighty; and to eighty-five. Whereupon the average man, who never -thinks of values but of prices, and is not governed in his actions by -conditions but by fears, takes the easiest way--he stops thinking that -there must be a limit to the advances. That is why those outsiders who -are wise enough not to buy at the top make up for it by not taking -profits. The big money in booms is always made first by the public--on -paper. And it remains on paper. - - - - -_XXII_ - - -One day Jim Barnes, who not only was one of my principal brokers but -an intimate friend as well, called on me. He said he wanted me to do -him a great favour. He never before had talked that way, and so I asked -him to tell me what the favour was, hoping it was something I could do, -for I certainly wished to oblige him. He then told me that his firm was -interested in a certain stock; in fact, they had been the principal -promoters of the company and had placed the greater part of the stock. -Circumstances had arisen that made it imperative for them to market a -rather large block. Jim wanted me to undertake to do the marketing for -him. The stock was Consolidated Stove. - -I did not wish to have anything to do with it for various reasons. -But Barnes, to whom I was under some obligations, insisted on the -personal-favour phase of the matter, which alone could overcome my -objections. He was a good fellow, a friend, and his firm, I gathered, -was pretty heavily involved, so in the end I consented to do what I -could. - -It has always seemed to me that the most picturesque point of -difference between the war boom and other booms was the part that was -played by a type new in stock-market affairs--the boy banker. - -The boom was stupendous and its origins and causes were plainly to -be grasped by all. But at the same time the greatest banks and trust -companies in the country certainly did all they could to help make -millionaires overnight of all sorts and conditions of promoters and -munition makers. It got so that all a man had to do was to say that -he had a friend who was a friend of a member of one of the Allied -commissions and he would be offered all the capital needed to carry out -the contracts he had not yet secured. I used to hear incredible stories -of clerks becoming presidents of companies doing a business of millions -of dollars on money borrowed from trusting trust companies, and of -contracts that left a trail of profits as they passed from man to man. -A flood of gold was pouring into this country from Europe and the banks -had to find ways of impounding it. - -The way business was done might have been regarded with misgivings by -the old, but there didn’t seem to be so many of them about. The fashion -for gray-haired presidents of banks was all very well in tranquil -times, but youth was the chief qualification in these strenuous times. -The banks certainly did make enormous profits. - -Jim Barnes and his associates, enjoying the friendship and confidence -of the youthful president of the Marshall National Bank, decided to -consolidate three well-known stove companies and sell the stock of the -new company to the public that for months had been buying any old thing -in the way of engraved stock certificates. - -One trouble was that the stove business was so prosperous that all -three companies were actually earning dividends on their common stock -for the first time in their history. Their principal stockholders did -not wish to part with the control. There was a good market for their -stocks on the Curb; and they had sold as much as they cared to part -with and they were content with things as they were. Their individual -capitalisation was too small to justify big market movements, and that -is where Jim Barnes’ firm came in. It pointed out that the consolidated -company must be big enough to list on the Stock Exchange, where the -new shares could be made more valuable than the old ones. It is an -old device in Wall Street--to change the colour of the certificates -in order to make them more valuable. Say a stock ceases to be easily -vendible at war. Well, sometimes by quadrupling the stock you may make -the new shares sell at 30 or 35. This is equivalent to 120 or 140 for -the old stock--a figure it never could have reached. - -It seems that Barnes and his associates succeeded in inducing some -of their friends who held speculatively some blocks of Gray Stove -Company--a large concern--to come into the consolidation on the basis -of four shares of Consolidated for each share of Gray. Then the Midland -and the Western followed their big sister and came in on the basis of -share for share. Theirs had been quoted on the Curb at around 25 to 30, -and the Gray, which was better known and paid dividends, hung around -125. - -In order to raise the money to buy out those holders who insisted upon -selling for cash, and also to provide additional working capital for -improvements and promotion expenses, it became necessary to raise a few -millions. So Barnes saw the president of his bank, who kindly lent his -syndicate three million five hundred thousand dollars. The collateral -was one hundred thousand shares of the newly organised corporation. The -syndicate assured the president, or so I was told, that the price would -not go below 50. It would be a very profitable deal as there was big -value there. - -The promoters’ first mistake was in the matter of timeliness. The -saturation point for new stock issues had been reached by the market, -and they should have seen it. But even then they might have made a fair -profit after all if they had not tried to duplicate the unreasonable -killings which other promoters had made at the very height of the boom. - -Now you must not run away with the notion that Jim Barnes and his -associates were fools or inexperienced kids. They were shrewd men. All -of them were familiar with Wall Street methods and some of them were -exceptionally successful stock traders. But they did rather more than -merely overestimate the public’s buying capacity. After all, that -capacity was something that they could determine only by actual tests. -Where they erred more expensively was in expecting the bull market -to last longer than it did. I suppose the reason was that these same -men had met with such great and particularly with such quick success -that they didn’t doubt they’d be all through with the deal before the -bull market turned. They were all well known and had a considerable -following among the professional traders and the wire houses. - -The deal was extremely well advertised. The newspapers certainly were -generous with their space. The older concerns were identified with the -stove industry of America and their product was known the world over. -It was a patriotic amalgamation and there was a heap of literature in -the daily papers about the world conquests. The markets of Asia, Africa -and South America were as good as cinched. - -The directors of the company were all men whose names were familiar -to all readers of the financial pages. The publicity work was so well -handled and the promises of unnamed insiders as to what the price was -going to do were so definite and convincing that a great demand for the -new stock was created. The result was that when the books were closed -it was found that the stock which was offered to the public at fifty -dollars a share had been oversubscribed by 25 per cent. - -Think of it! The best the promoters should have expected was to -succeed in selling the new stock at that price after weeks of work and -after putting up the price to 75 or higher in order to average 50. -At that, it meant an advance of about 100 per cent in the old prices -of the stocks of the constituent companies. That was the crisis and -they did not meet it as it should have been met. It shows you that -every business has its own needs. General wisdom is less valuable -than specific savvy. The promoters, delighted by the unexpected -oversubscription, concluded that the public was ready to pay any price -for any quantity of that stock. And they actually were stupid enough -to underallot the stock. After the promoters made up their minds to be -hoggish they should have tried to be intelligently hoggish. - -What they should have done, of course, was to allot the stock in full. -That would have made them short to the extent of 25 per cent of the -total amount offered for subscription to the public, and that, of -course, would have enabled them to support the stock when necessary -and at no cost to themselves. Without any effort on their part they -would have been in the strong strategic position that I always try to -find myself in when I am manipulating a stock. They could have kept the -price from sagging, thereby inspiring confidence in the new stock’s -stability and in the underwriting syndicate back of it. They should -have remembered that their work was not over when they sold the stock -offered to the public. That was only a part of what they had to market. - -They thought they had been very successful, but it was not long before -the consequences of their two capital blunders became apparent. The -public did not buy any more of the new stock, because the entire market -developed reactionary tendencies. The insiders got cold feet and did -not support Consolidated Stove; and if insiders don’t buy their own -stock on recessions, who should? The absence of inside support is -generally accepted as a pretty good bear tip. - -There is no need to go into statistical details. The price of -Consolidated Stove fluctuated with the rest of the market, but it never -went above the initial market quotations, which were only a fraction -above 50. Barnes and his friends in the end had to come in as buyers -in order to keep it above 40. Not to have supported that stock at the -outset of its market career was regrettable. But not to have sold all -the stock the public subscribed for was much worse. - -At all events, the stock was duly listed on the New York Stock Exchange -and the price of it duly kept sagging until it nominally stood at 37. -And it stood there because Jim Barnes and his associates had to keep it -there because their bank had loaned them thirty-five dollars a share -on one hundred thousand shares. If the bank ever tried to liquidate -that loan there was no telling what the price would break to. The -public that had been eager to buy it at 50, now didn’t care for it at -37, and probably wouldn’t want it at 27. - -As time went on the banks’ excesses in the matter of extensions -of credits made people think. The day of the boy banker was over. -The banking business appeared to be on the ragged edge of suddenly -relapsing into conservatism. Intimate friends were now asked to pay off -loans, for all the world as though they had never played golf with the -president. - -There was no need to threaten on the lender’s part or to plead for -more time on the borrower’s. The situation was highly uncomfortable -for both. The bank, for example, with which my friend Jim Barnes did -business, was still kindly disposed. But it was a case of “For heaven’s -sake take up that loan or we’ll all be in a dickens of a mess!” - -The character of the mess and its explosive possibilities were -enough to make Jim Barnes come to me to ask me to sell the -one hundred thousand shares for enough to pay off the bank’s -three-million-five-hundred-thousand-dollar loan. Jim did not now expect -to make a profit on that stock. If the syndicate only made a small loss -on it they would be more than grateful. - -It seemed a hopeless task. The general market was neither active nor -strong, though at times there were rallies, when everybody perked up -and tried to believe the bull swing was about to resume. - -The answer I gave Barnes was that I’d look into the matter and let him -know under what conditions I’d undertake the work. Well, I did look -into it. I didn’t analyse the company’s last annual report. My studies -were confined to the stock-market phases of the problem. I was not -going to tout the stock for a rise on its earnings or its prospects, -but to dispose of that block in the open market. All I considered was -what should, could or might help or hinder me in that task. - -I discovered for one thing that there was too much stock held by too -few people--that is, too much for safety and far too much for comfort. -Clifton P. Kane & Co., bankers and brokers, members of the New York -Stock Exchange, were carrying seventy thousand shares. They were -intimate friends of Barnes and had been influential in effecting the -consolidation, as they had made a specialty of stove stocks for years. -Their customers had been let into the good thing. Ex-Senator Samuel -Gordon, who was the special partner in his nephews’ firm, Gordon Bros., -was the owner of a second block of seventy thousand shares; and the -famous Joshua Wolff had sixty thousand shares. This made a total of -two hundred thousand shares of Consolidated Stove held by this handful -of veteran Wall Street professionals. They did not need any kind -person to tell them when to sell their stock. If I did anything in the -manipulating line calculated to bring in public buying--that is to say, -if I made the stock strong and active--I could see Kane and Gordon -and Wolff unloading, and not in homeopathic doses either. The vision -of their two hundred thousand shares Niagaraing into the market was -not exactly entrancing. Don’t forget that the cream was off the bull -movement and that no overwhelming demand was going to be manufactured -by my operations, however skillfully conducted they might be. Jim -Barnes had no illusions about the job he was modestly sidestepping in -my favour. He had given me a waterlogged stock to sell on a bull market -that was about to breathe its last. Of course there was no talk in the -newspapers about the ending of the bull market, but I knew it, and Jim -Barnes knew it, and you bet the bank knew it. - -Still, I had given Jim my word, so I sent for Kane, Gordon and Wolff. -Their two hundred thousand shares was the sword of Damocles. I thought -I’d like to substitute a steel chain for the hair. The easiest way, -it seemed to me, was by some sort of reciprocity agreement. If they -helped me passively by holding off while I sold the bank’s one hundred -thousand shares, I would help them actively by trying to make a -market for all of us to unload on. As things were, they couldn’t sell -one-tenth of their holdings without having Consolidated Stove break -wide open, and they knew it so well that they had never dreamed of -trying. All I asked of them was judgment in timing the selling and an -intelligent unselfishness in order not to be unintelligently selfish. -It never pays to be a dog in the manger in Wall Street or anywhere -else. I desired to convince them that premature or ill-considered -unloading would prevent complete unloading. Time urged. - -I hoped my proposition would appeal to them because they were -experienced Wall Street men and had no illusions about the actual -demand for Consolidated Stove. Clifton P. Kane was the head of a -prosperous commission house with branches in eleven cities and -customers by the hundreds. His firm had acted as managers for more than -one pool in the past. - -Senator Gordon, who held seventy thousand shares, was an exceedingly -wealthy man. His name was as familiar to the readers of the -metropolitan press as though he had been sued for breach of promise by -a sixteen-year-old manicurist possessing a five-thousand-dollar mink -coat and one hundred and thirty-two letters from the defendant. He had -started his nephews in business as brokers and he was a special partner -in their firm. He had been in dozens of pools. He had inherited a large -interest in the Midland Stove Company and he got one hundred thousand -shares of Consolidated Stove for it. He had been carrying enough to -disregard Jim Barnes’ wild bull tips and had cashed in on thirty -thousand shares before the market petered out on him. He told a friend -later that he would have sold more only the other big holders, who were -old and intimate friends, pleaded with him not to sell any more, and -out of regard for them he stopped. Besides which, as I said, he had no -market to unload on. - -The third man was Joshua Wolff. He was probably the best know of all -the traders. For twenty years everybody had know him as one of the -plungers on the floor. In bidding up stocks or offering them down he -had few equals, for ten or twenty thousand shares meant no more to him -than two or three hundred. Before I came to New York I had heard of him -as a plunger. He was then trailing with a sporting coterie that played -a no limit game, whether on the race track or in the stock market. - -They used to accuse him of being nothing but a gambler, but he had real -ability and a strongly developed aptitude for the speculative game. At -the same time his reputed indifference to highbrow pursuits made him -the hero of numberless anecdotes. One of the most highly circulated of -the yarns was that Joshua was a guest at what he called a swell dinner -and by some oversight of the hostess several of the other guests began -to discuss literature before they could be stopped. - -A girl who sat next to Josh and had not heard him use his mouth except -for masticating purposes, turned to him and looking anxious to hear the -great financier’s opinion asked him, “Oh, Mr. Wolff, what do you think -of Balzac?” - -Josh politely ceased to masticate, swallowed and answered, “I never -trade in them Curb stocks!” - -Such were the three largest individual holders of Consolidated Stove. -When they came over to see me I told them that if they formed a -syndicate to put up some cash and gave me a call on their stock at a -little above the market I would do what I could to make a market. They -promptly asked me how much money would be required. - -I answered, “You’ve had that stock a long time and you can’t do a thing -with it. Between the three of you you’ve got two hundred thousand -shares, and you know very well that you haven’t the slightest chance -of getting rid of it unless you make a market for it. It’s got be some -market to absorb what you’ve got to give it, and it will be wise to -have enough cash to pay for whatever stock it may be necessary to buy -at first. It’s no use to begin and then have to stop because there -isn’t enough money. I suggest that you form a syndicate and raise six -millions in cash. Then give the syndicate a call on your two hundred -thousand shares at 40 and put all your stock in escrow. If everything -goes well you chaps will get rid of your dead pet and the syndicate -will make some money.” - -As I told you before, there had been all sorts of rumours about my -stock-market winnings. I suppose that helped, for nothing succeeds like -success. At all events, I didn’t have to do much explaining to these -chaps. They knew exactly how far they’d get if they tried to play a -lone hand. They thought mine was a good plan. When they went away they -said they would form the syndicate at once. - -They didn’t have much trouble in inducing a lot of their friends to -join them. I suppose they spoke with more assurance than I had of the -syndicate’s profits. From all I heard they really believed it, so -theirs were no conscienceless tips. At all events the syndicate was -formed in a couple of days. Kane, Gordon and Wolff gave calls on the -two hundred thousand shares at 40 and I saw to it that the stock itself -was put in escrow, so that none of it would come out on the market -if I should put up the price. I had to protect myself. More than one -promising deal has failed to pan out as expected because the members -of the pool or clique failed to keep faith with one another. Dog has -no foolish prejudices against eating dog in Wall Street. At the time -the second American Steel and Wire Company was brought out the insiders -accused one another of breach of faith and trying to unload. There had -been a gentlemen’s agreement between John W. Gates and his pals and -the Seligmans and their banking associates. Well, I heard somebody in -a broker’s office reciting this quatrain, which was said to have been -composed by John W. Gates: - - _The tarantula jumped on the centipede’s back - And chortled with ghoulish glee: - “I’ll poison this murderous son of a gun. - If I don’t he’ll poison me!”_ - -Mind you, I do not mean for one moment to imply that any of my friends -in Wall Street would even dream of double-crossing me in a stock deal. -But on general principles it is just as well to provide for any and all -contingencies. It’s plain sense. - -After Wolff and Kane and Gordon told me that they had formed their -syndicate to put up six millions in cash there was nothing for me to do -but wait for the money to come in. I had urged the vital need of haste. -Nevertheless the money came in driblets. I think it took four or five -installments. I don’t know what the reason was, but I remember that I -had to send out an S O S call to Wolff and Kane and Gordon. - -That afternoon I got some big checks that brought the cash in my -possession to about four million dollars and the promise of the rest -in a day or two. It began to look as though the syndicate might do -something before the bull market passed away. At best it would be no -cinch, and the sooner I began work the better. The public had not been -particularly keen about new market movements in inactive stocks. But -a man could do a great deal to arouse interest in any stock with four -millions in cash. It was enough to absorb all the probable offerings. -If time urged, as I had said, there was no sense in waiting for the -other two millions. The sooner the stock got up to 50 the better for -the syndicate. That was obvious. - -The next morning at the opening I was surprised to see that there were -unusually heavy dealings in Consolidated Stove. As I told you before, -the stock had been waterlogged for months. The price had been pegged at -37, Jim Barnes taking good care not to let it go any lower on account -of the big bank loan at 35. But as for going any higher, he’d as soon -expect to see the Rock of Gibraltar shimmying across the Strait as to -see Consolidated Stove do any climbing on the tape. - -Well, sir, this morning there was quite a demand for the stock, and the -price went up to 39. In the first hour of the trading the transactions -were heavier than for the whole previous half year. It was the -sensation of the day and affected bullishly the entire market. I heard -afterwards that nothing else was talked about in the customers’ rooms -of the commission houses. - -I didn’t know what it meant, but it didn’t hurt my feelings any to see -Consolidated Stove perk up. As a rule I do not have to ask about any -unusual movement in any stock because my friends on the floor--brokers -who do business for me, as well as personal friends among the room -traders--keep me posted. They assume I’d like to know and they -telephone me any news or gossip they pick up. On this day all I heard -was that there was unmistakable inside buying in Consolidated Stove. -There wasn’t any washing. It was all genuine. The purchasers took all -the offerings from 37 to 39 and when importuned for reasons or begged -for a tip, flatly refused to give any. This made the wily and watchful -traders conclude that there was something doing; something big. When a -stock goes up on buying by insiders who refuse to encourage the world -at large to follow suit the ticker hounds begin to wonder aloud when -the official notice will be given out. - -I didn’t do anything myself. I watched and wondered and kept track of -the transactions. But on the next day the buying was not only greater -in volume but more aggressive in character. The selling orders that had -been on the specialists’ books for months at above the pegged price of -37 were absorbed without any trouble, and not enough new selling orders -came in to check the rise. Naturally, up went the price. It crossed 40. -Presently it touched 42. - -The moment it touched that figure I felt that I was justified in -starting to sell the stock the bank held as collateral. Of course I -figured that the price would go down on my selling, but if my average -on the entire line was 37 I’d have no fault to find. I knew what the -stock was worth and I had gathered some idea of the vendibility from -the months of inactivity. Well, sir, I let them have stock carefully -until I had got rid of thirty thousand shares. And the advance was not -checked! - -That afternoon I was told the reason for that opportune but mystifying -rise. It seems that the floor traders had been tipped off after the -close the night before and also the next morning before the opening, -that I was bullish as blazes on Consolidated Stove and was going to -rush the price right up fifteen or twenty points without a reaction, as -was my custom--that is, my custom according to people who never kept my -books. The tipster in chief was no less a personage than Joshua Wolff. -It was his own inside buying that started the rise of the day before. -His cronies among the floor traders were only too willing to follow his -tip, for he knew too much to give wrong steers to his fellows. - -As a matter of fact, there was not so much stock pressing on the market -as had been feared. Consider that I had tied up three hundred thousand -shares and you will realize that the old fears had been well founded. -It now proved less of a job than I had anticipated to put up the stock. -After all, Governor Flower was right. Whenever he was accused of -manipulating his firm’s specialties, like Chicago Gas, Federal Steel or -B. R. T., he used to say: “The only way I know of making a stock go up -is to buy it.” That also was the floor traders’ only way, and the price -responded. - -On the next day, before breakfast, I read in the morning papers what -was read by thousands and what undoubtedly was sent over the wires to -hundreds of branches and out-of-town offices, and that was that Larry -Livingston was about to begin active bull operations in Consolidated -Stove. The additional details differed. One version had it that I had -formed an insiders’ pool and was going to punish the over-extended -short interest. Another hinted at dividend announcements in the near -future. Another reminded the world that what I usually did to a stock -I was bullish on was something to remember. Still another accused the -company of concealing its assets in order to permit accumulation by -insiders. And all of them agreed that the rise hadn’t fairly started. - -By the time I reached my office and read my mail before the market -opened I was made aware that the Street was flooded with red-hot tips -to buy Consolidated Stove at once. My telephone bell kept ringing and -the clerk who answered the calls heard the same question asked in -one form or another a hundred times that morning: Was it true that -Consolidated Stove was going up? I must say that Joshua Wolff and Kane -and Gordon--and possibly Jim Barnes--handled that little tipping job -mighty well. - -I had no idea that I had such a following. Why, that morning the buying -orders came in from all over the country--orders to buy thousands of -shares of a stock that nobody wanted at any price three days before. -And don’t forget that, as a matter of fact, all that the public had to -go by was my newspaper reputation as a successful plunger; something -for which I had to thank an imaginative reporter or two. - -Well, sir, on that, the third day of the rise, I sold Consolidated -Stove; and on the fourth day and the fifth; and the first thing I -knew I had sold for Jim Barnes the one hundred thousand shares of -stock which the Marshall National Bank held as collateral on the -three-million-five-hundred-thousand-dollar loan that needed paying -off. If the most successful manipulation consists of that in which the -desired end is gained at the least possible cost to the manipulator, -the Consolidated Stove deal is by all means the most successful of my -Wall Street career. Why, at no time did I have to take any stock. I -didn’t have to buy first in order to sell the more easily later on. -I did not put up the price to the highest possible point and then -begin my real selling. I didn’t even do my principal selling on -the way down, but on the way up. It was like a dream of Paradise to -find an adequate buying power created for you without your stirring -a finger to bring it about, particularly when you were in a hurry. I -once heard a friend of Governor Flower’s say that in one of the great -bull-leader’s operations for the account of a pool in B. R. T. the pool -sold fifty thousand shares of the stock at a profit, but Flower & Co. -got commissions on more than two hundred and fifty thousand shares and -W. P. Hamilton says that to distribute two hundred and twenty thousand -shares of Amalgamated Copper, James R. Keene must have traded in at -least seven hundred thousand shares of the stock during the necessary -manipulation. Some commission bill! Think of that and then consider -that the only commissions that I had to pay were the commissions on the -one hundred thousand shares I actually sold for Jim Barnes. I call that -some saving. - -Having sold what I had engaged to sell for my friend Jim, and all the -money the syndicate had agreed to raise not having been sent in, and -feeling no desire to buy back any of the stock I had sold, I rather -think I went away somewhere for a short vacation. I do not remember -exactly. But I do remember very well that I let the stock alone and -that it was not long before the price began to sag. One day, when the -entire market was weak, some disappointed bull wanted to get rid of his -Consolidated Stove in a hurry, and on his offerings the stock broke -below the call price, which was 40. Nobody seemed to want any of it. As -I told you before, I wasn’t bullish on the general situation and that -made me more grateful than ever for the miracle that had enabled me to -dispose of the one hundred thousand shares without having to put the -price up twenty or thirty points in a week, as the kindly tipsters had -prophesied. - -Finding no support, the price developed a habit of declining regularly -until one day it broke rather badly and touched 32. That was the lowest -that had ever been recorded for it, for, as you will remember, Jim -Barnes and the original syndicate had pegged it at 37 in order not to -have their one hundred thousand shares dumped on the market by the bank. - -I was in my office that day peacefully studying the tape when Joshua -Wolff was announced. I said I would see him. He rushed in. He is not a -very large man, but he certainly seemed all swelled up--with anger, as -I instantly discovered. - -He ran to where I stood by the ticker and yelled, “Hey? What the -devil’s the matter?” - -“Have a chair, Mr. Wolff,” I said politely and sat down myself to -encourage him to talk calmly. - -“I don’t want any chair! I want to know what it means!” he cried at the -top of his voice. - -“What does what mean?” - -“What in hell are you doing to it?” - -“What am I doing to what?” - -“That stock! That stock!” - -“What stock?” I asked him. - -But that only made him see red, for he shouted, “Consolidated Stove! -What are you doing to it?” - -“Nothing! Absolutely nothing. What’s wrong?” I said. - -He stared at me fully five seconds before he exploded: “Look at the -price! Look at it!” - -He certainly was angry. So I got up and looked at the tape. - -I said, “The price of it is now 31¼.” - -“Yeh! Thirty-one and a quarter, and I’ve got a raft of it.” - -“I know you have sixty thousand shares. You have had it a long time, -because when you originally bought your Gray Stove----” - -But he didn’t let me finish. He said, “But I bought a lot more. Some of -it cost me as high as 40! And I’ve got it yet!” - -He was glaring at me so hostilely that I said, “I didn’t tell you to -buy it.” - -“You didn’t what?” - -“I didn’t tell you to load up with it.” - -“I didn’t say you did. But you were going to put it up----” - -“Why was I?” I interrupted. - -He looked at me, unable to speak for anger. When he found his voice -again, he said, “You were going to put it up. You had the money to buy -it.” - -“Yes. But I didn’t buy a share,” I told him. - -That was the last straw. - -“You didn’t buy a share, and you had over four millions in cash to buy -with? You didn’t buy any?” - -“Not a share!” I repeated. - -He was so mad by now that he couldn’t talk plainly. Finally he managed -to say, “What kind of a game do you call that?” - -He was inwardly accusing me of all sorts of unspeakable crimes. I sure -could see a long list of them in his eyes. It made me say to him: “What -you really mean to ask me, Wolff, is, why I didn’t buy from you above -50 the stock you bought below 40. Isn’t that it?” - -“No, it isn’t. You had a call at 40 and four millions in cash to put up -the price with.” - -“Yes, but I didn’t touch the money and the syndicate has not lost a -cent by my operations.” - -“Look here, Livingston--” he began. - -But I didn’t let him say any more. - -“You listen to me, Wolff. You knew that the two hundred thousand shares -you and Gordon and Kane held were tied up, and that there wouldn’t be -an awful lot of floating stock to come on the market if I put up the -price, as I’d have to do for two reasons: The first to make a market -for the stock; and the second to make a profit out of the call at 40. -But you weren’t satisfied to get 40 for the sixty thousand shares you’d -been lugging for months or with your share of the syndicate profits, if -any; so you decided to take on a lot of stock under 40 to unload on me -when I put the price up with the syndicate’s money, as you were sure -I meant to do. You’d buy before I did and you’d unload before I did; -in all probability I’d be the one to unload on. I suspect you figured -on my having to put the price up to 60. It was such a cinch that you -probably bought ten thousand shares strictly for unloading purposes, -and to make sure somebody held the bag if I didn’t, you tipped off -everybody in the United States, Canada and Mexico without thinking -of my added difficulties. All your friends knew what I was supposed -to do. Between their buying and mine you were going to be all hunky. -Well, your intimate friends to whom you gave the tip passed it on to -their friends after they had bought their lines, and the third stratum -of tip-takers planned to supply the fourth, fifth and possibly sixth -strata of suckers, so that when I finally came to do some selling I’d -find myself anticipated by a few thousands of wise speculators. It was -a friendly thought, that notion of yours, Wolff. You can’t imagine -how surprised I was when Consolidated Stove began to go up before I -even thought of buying a single share; or how grateful, either, when -the underwriting syndicate sold one hundred thousand shares around 40 -to the people who were going to sell those same shares to me at 50 or -60. I sure was a sucker not to use the four millions to make money for -them, wasn’t I? The cash was supplied to buy stock with, but only if I -thought it necessary to do so. Well, I didn’t.” - -Joshua had been in Wall Street long enough not to let anger interfere -with business. He cooled off as he heard me, and when I was through -talking he said in a friendly tone of voice, “Look here, Larry, old -chap, what shall we do?” - -“Do whatever you please.” - -“Aw, be a sport. What would you do if you were in our place?” - -“If I were in your place,” I said solemnly, “do you know what I’d do?” - -“What?” - -“I’d sell out!” I told him. - -He looked at me a moment, and without another word turned on his heel -and walked out of my office. He’s never been in it since. - -Not long after that, Senator Gordon also called. He, too, was quite -peevish and blamed me for their troubles. Then Kane joined the anvil -chorus. They forgot that their stock had been unsalable in bulk when -they formed the syndicate. All they could remember was that I didn’t -sell their holdings when I had the syndicate’s millions and the stock -was active at 44, and that now it was 30 and dull as dishwater. To -their way of thinking I should have sold out at a good fat profit. - -Of course they also cooled down in due time. The syndicate wasn’t out -a cent and the main problem remained unchanged: to sell their stock. A -day or two later they came back and asked me to help them out. Gordon -was particularly insistent, and in the end I made them put in their -pooled stock at 25½. My fee for my services was to be one-half of -whatever I got above that figure. The last sale had been at about 30. - -There I was with their stock to liquidate. Given general market -conditions and specifically the behaviour of Consolidated Stove, there -was only one way to do it, and that was, of course, to sell on the way -down and without first trying to put up the price, and I certainly -would have got stock by the ream on the way up. But on the way down -I could reach those buyers who always argue that a stock is cheap -when it sells fifteen or twenty points below the top of the movement, -particularly when that top is a matter of recent history. A rally is -due, in their opinion. After seeing Consolidated Stove sell up to close -to 44 it sure looked like a good thing below 30. - -It worked out as always. Bargain hunters bought it in sufficient volume -to enable me to liquidate the pool’s holdings. But do you think that -Gordon or Wolff or Kane felt any gratitude? Not a bit of it. They are -still sore at me, or so their friends tell me. They often tell people -how I did them. They cannot forgive me for not putting up the price on -myself, as they expected. - -As a matter of fact I never would have been able to sell the bank’s -hundred thousand shares if Wolff and the rest had not passed around -those red-hot bull tips of theirs. If I had worked as I usually -do--that is, in a logical natural way--I would have had to take -whatever price I could get. I told you we ran into a declining market. -The only way to sell on such a market is to sell not necessarily -recklessly but really regardless of price. No other way was possible, -but I suppose they do not believe this. They are still angry. I am not. -Getting angry doesn’t get a man anywhere. More than once it has been -borne in on me that a speculator who loses his temper is a goner. In -this case there was no aftermath to the grouches. But I’ll tell you -something curious. One day Mrs. Livingston went to a dressmaker who had -been warmly recommended to her. The woman was competent and obliging -and had a very pleasing personality. At the third or fourth visit, when -the dressmaker felt less like a stranger, she said to Mrs. Livingston: -“I hope Mr. Livingston puts up Consolidated Stove soon. We have some -that we bought because we were told he was going to put it up, and we’d -always heard that he was very successful in all his deals.” - -I tell you it isn’t pleasant to think that innocent people may have -lost money following a tip of that sort. Perhaps you understand why I -never give any myself. That dressmaker made me feel that in the matter -of grievances I had a real one against Wolff. - - - - -_XXIII_ - - -Speculation in stocks will never disappear. It isn’t desirable that -it should. It cannot be checked by warnings as to its dangers. You -cannot prevent people from guessing wrong no matter how able or how -experienced they may be. Carefully laid plans will miscarry because the -unexpected and even the unexpectable will happen. Disaster may come -from a convulsion of nature or from the weather, from your own greed -or from some man’s vanity; from fear or from uncontrolled hope. But -apart from what one might call his natural foes, a speculator in stocks -has to contend with certain practices or abuses that are indefensible -normally as well as commercially. - -As I look back and consider what were the common practices twenty-five -years ago when I first came to Wall Street, I have to admit that there -have been many changes for the better. The old-fashioned bucket shops -are gone, though bucketeering “brokerage” houses still prosper at the -expense of men and women who persist in playing the game of getting -rich quick. The Stock Exchange is doing excellent work not only in -getting after these out-and-out swindlers but in insisting upon strict -adherence to its rules by its own members. Many wholesome regulations -and restrictions are now strictly enforced but there is still room for -improvement. The ingrained conservatism of Wall Street rather than -ethical callousness is to blame for the persistence of certain abuses. - -Difficult as profitable stock speculation always has been it is -becoming even more difficult every day. It was not so long ago when a -real trader could have a good working knowledge of practically every -stock on the list. In 1901, when J. P. Morgan brought out the United -States Steel Corporation, which was merely a consolidation of lesser -consolidations most of which were less than two years old, the Stock -Exchange had 275 stocks on its list and about 100 in its “unlisted -department”; and this included a lot that a chap didn’t have to know -anything about because they were small issues, or inactive by reason -of being minority or guaranteed stocks and therefore lacking in -speculative attractions. In fact, an overwhelming majority were stocks -in which there had not been a sale in years. Today there are about 900 -stocks on the regular list and in our recent active markets about 600 -separate issues were traded in. Moreover, the old groups or classes -of stocks were easier to keep track of. They not only were fewer but -the capitalization was smaller and the news a trader had to be on the -lookout for did not cover so wide a field. But today, a man is trading -in everything; almost every industry in the world is represented. It -requires more time and more work to keep posted and to that extent -speculation has become much more difficult for those who operate -intelligently. - -There are many thousands of people who buy and sell stocks -speculatively but the number of those who speculate profitably is -small. As the public always is “in” the market to some extent, -it follows that there are losses by the public all the time. The -speculator’s deadly enemies are: Ignorance, greed, fear and hope. All -the statute books in the world and all the rules of all the Exchanges -on earth cannot eliminate these from the human animal. Accidents which -knock carefully conceived plans skyhigh also are beyond regulation by -bodies of cold-blooded economists or warm-hearted philanthropists. -There remains another source of loss and that is, deliberate -misinformation as distinguished from straight tips. And because it is -apt to come to a stock trader variously disguised and camouflaged, it -is the more insidious and dangerous. - -The average outsider, of course, trades either on tips or on rumours, -spoken or printed, direct or implied. Against ordinary tips you cannot -guard. For instance, a lifelong friend sincerely desires to make you -rich by telling you what he has done, that is, to buy or sell some -stock. His intent is good. If the tip goes wrong what can you do? Also -against the professional or crooked tipster the public is protected to -about the same extent that he is against gold-bricks or wood-alcohol. -But against the typical Wall Street rumours, the speculating public -has neither protection nor redress. Wholesale dealers in securities, -manipulators, pools and individuals resort to various devices to aid -them in disposing of their surplus holdings at the best possible -prices. The circulation of bullish items by the newspapers and the -tickers is the most pernicious of all. - -Get the slips of the financial news-agencies any day and it will -surprise you to see how many statements of an implied semi-official -nature they print. The authority is some “leading insider” or “a -prominent director” or “a high official” or someone “in authority” who -presumably knows what he is talking about. Here are today’s slips. I -pick an item at random. Listen to this: “A leading banker says it is -too early yet to expect a declining market.” - -Did a leading banker really say that and if he said it why did he say -it? Why does he not allow his name to be printed? Is he afraid that -people will believe him if he does? - -Here is another one about a company the stock of which has been active -this week. This time the man who makes the statement is a “prominent -director.” Now which--if any--of the company’s dozen directors is doing -the talking? It is plain that by remaining anonymous nobody can be -blamed for any damage that may be done by the statement. - -Quite apart from the intelligent study of speculation everywhere the -trader in stocks must consider certain facts in connection with the -game in Wall Street. In addition to trying to determine how to make -money one must also try to keep from losing money. It is almost as -important to know what not to do as to know what should be done. It -is therefore well to remember that manipulation of some sort enters -into practically all advances in individual stocks and that such -advances are engineered by insiders with one object in view and one -only and that is to sell at the best profit possible. However, the -average broker’s customer believes himself to be a business man from -Missouri if he insists upon being told why a certain stock goes up. -Naturally, the manipulators “explain” the advance in a way calculated -to facilitate distribution. I am firmly convinced that the public’s -losses would be greatly reduced if no anonymous statements of a bullish -nature were allowed to be printed. I mean statements calculated to make -the public buy or hold stocks. - -The overwhelming majority of the bullish articles printed on the -authority of unnamed directors or insiders convey unreliable and -misleading impressions to the public. The public loses many millions of -dollars every year by accepting such statements as semi-official and -therefore trustworthy. - -Say for example that a company has gone through a period of depression -in its particular line of business. The stock is inactive. The -quotation represents the general and presumably accurate belief of its -actual value. If the stock were too cheap at that level somebody would -know it and buy it and it would advance. If too dear somebody would -know enough to sell it and the price would decline. As nothing happens -one way or another nobody talks about it or does anything. - -The turn comes in the line of business the company is engaged in. Who -are the first to know it, the insiders or the public? You can bet it -isn’t the public. What happens next? Why, if the improvement continues -the earnings will increase and the company will be in position to -resume dividends on the stock; or, if dividends were not discontinued, -to pay a higher rate. That is, the value of the stock will increase. - -Say that the improvement keeps up. Does the management make public -that glad fact? Does the president tell the stockholders? Does a -philanthropic director come out with a signed statement for the benefit -of that part of the public that reads the financial page in the -newspapers and the slips of the news agencies? Does some modest insider -pursuing his usual policy of anonymity come out with an unsigned -statement to the effect that the company’s future is most promising? -Not this time. Not a word is said by anyone and no statement whatever -is printed by newspapers or tickers. - -The value-making information is carefully kept from the public while -the now taciturn “prominent insiders” go into the market and buy all -the cheap stock they can lay their hands on. As this well-informed -but unostentatious buying keeps on, the stock rises. The financial -reporters, knowing that the insiders ought to know the reason for the -rise, ask questions. The unanimously anonymous insiders unanimously -declare that they have no news to give out. They do not know that there -is any warrant for the rise. Sometimes they even state that they are -not particularly concerned with the vagaries of the stock market or the -actions of stock speculators. - -The rise continues and there comes a happy day when those who know have -all the stock they want or can carry. The Street at once begins to hear -all kinds of bullish rumours. The tickers tell the traders “on good -authority” that the company has definitely turned the corner. The same -modest director who did not wish his name used when he said he knew -no warrant for the rise in the stock is now quoted--of course not by -name--as saying that the stockholders have every reason to feel greatly -encouraged over the outlook. - -Urged by the deluge of bullish news items the public begins to buy -the stock. These purchases help to put the price still higher. In due -course the predictions of the uniformly unnamed directors come true -and the company resumes dividend payments; or increases the rate, as -the case may be. With that the bullish items multiply. They not only -are more numerous than ever but much more enthusiastic. A “leading -director,” asked point blank for a statement of conditions, informs -the world that the improvement is more than keeping up. A “prominent -insider,” after much coaxing, is finally induced by a news-agency -to confess that the earnings are nothing short of phenomenal. A -“well-known banker,” who is affiliated in a business way with the -company, is made to say that the expansion in the volume of sales -is simply unprecedented in the history of the trade. If not another -order came in the company would run night and day for heaven knows how -many months. A “member of the finance committee,” in a double-leaded -manifesto, expresses his astonishment at the public’s astonishment over -the stock’s rise. The only astonishing thing is the stock’s moderation -in the climbing line. Anybody who will analyse the forthcoming annual -report can easily figure how much more than the market-price the -book-value of the stock is. But in no instance is the name of the -communicative philanthropist given. - -As long as the earnings continue good and the insiders do not discern -any sign of a let up in the company’s prosperity they sit on the stock -they bought at the low prices. There is nothing to put the price -down, so why should they sell? But the moment there is a turn for the -worse in the company’s business, what happens? Do they come out with -statements or warnings or the faintest of hints? Not much. The trend -is now downward. Just as they bought without any flourish of trumpets -when the company’s business turned for the better, they now silently -sell. On this inside selling the stock naturally declines. Then the -public begins to get the familiar “explanations.” A “leading insider” -asserts that everything is O.K. and the decline is merely the result of -selling by bears who are trying to affect the general market. If on -one fine day, after the stock has been declining for some time, there -should be a sharp break, the demand for “reasons” or “explanations” -becomes clamorous. Unless somebody says something the public will fear -the worst. So the news-tickers now print something like this: “When -we asked a prominent director of the company to explain the weakness -in the stock, he replied that the only conclusion he could arrive at -was that the decline today was caused by a bear drive. Underlying -conditions are unchanged. The business of the company was never better -than at present and the probabilities are that unless something -entirely unforeseen happens in the meanwhile, there will be an increase -in the rate at the next dividend meeting. The bear party in the market -has become aggressive and the weakness in the stock was clearly a raid -intended to dislodge weakly held stock.” The news-tickers, wishing to -give good measure, as likely as not will go on to state that they are -“reliably informed” that most of the stock bought on the day’s decline -was taken by inside interests and that the bears will find that they -have sold themselves into a trap. There will be a day of reckoning. - -In addition to the losses sustained by the public through believing -bullish statements and buying stocks, there are the losses that come -through being dissuaded from selling out. The next best thing to -having people buy the stock the “prominent insider” wishes to sell -is to prevent people from selling the same stock when he does not -wish to support or accumulate it. What is the public to believe after -reading the statement of the “prominent director?” What can the average -outsider think? Of course, that the stock should never have gone down; -that it was forced down by bear-selling and that as soon as the bears -stop the insiders will engineer a punitive advance during which the -shorts will be driven to cover at high prices. The public properly -believes this because it is exactly what would happen if the decline -had in truth been caused by a bear raid. - -The stock in question, notwithstanding all the threats or promises of a -tremendous squeeze of the over-extended short interest, does not rally. -It keeps on going down. It can’t help it. There has been too much stock -fed to the market from the inside to be digested. - -And this inside stock that has been sold by the “prominent directors” -and “leading insiders” becomes a football among the professional -traders. It keeps on going down. There seems to be no bottom for it. -The insiders knowing that trade conditions will adversely affect the -company’s future earnings do not dare to support that stock until the -next turn for the better in the company’s business. Then there will be -inside buying and inside silence. - -I have done my share of trading and have kept fairly well posted on -the stock market for many years and I can say that I do not recall -an instance when a bear raid caused a stock to decline extensively. -What was called bear raiding was nothing but selling based on accurate -knowledge of real conditions. But it would not do to say that the stock -declined on inside selling or on inside non-buying. Everybody would -hasten to sell and when everybody sells and nobody buys there is the -dickens to pay. - -The public ought to grasp firmly this one point: That the real reason -for a protracted decline is never bear raiding. When a stock keeps on -going down you can bet there is something wrong with it, either with -the market for it or with the company. If the decline were unjustified -the stock would soon sell below its real value and that would bring in -buying that would check the decline. As a matter of fact, the only time -a bear can make big money selling a stock is when that stock is too -high. And you can gamble your last cent on the certainty that insiders -will not proclaim that fact to the world. - -Of course, the classic example is the New Haven. Everybody knows today -what only a few knew at the time. The stock sold at 255 in 1902 and -was the premier railroad investment of New England. A man in that -part of the country measured his respectability and standing in the -community by his holdings of it. If somebody had said that the company -was on the road to insolvency he would not have been sent to jail -for saying it. They would have clapped him in an insane asylum with -other lunatics. But when a new and aggressive president was placed in -charge by Mr. Morgan and the débâcle began, it was not clear from the -first that the new policies would land the road where it did. But as -property after property began to be saddled in the Consolidated Road -at inflated prices, a few clear sighted observers began to doubt the -wisdom of the _Mellen_ policies. A trolley system was bought for two -million and sold to the New Haven for $10,000,000; whereupon a reckless -man or two committed lèse majesté by saying that the management was -acting recklessly. Hinting that not even the New Haven could stand such -extravagance was like impugning the strength of Gibraltar. - -Of course, the first to see breakers ahead were the insiders. They -became aware of the real condition of the company and they reduced -their holdings of the stock. On their selling as well as on their -non-support, the price of New England’s gilt-edged railroad stock began -to yield. Questions were asked, and explanations were demanded as -usual; and the usual explanations were promptly forthcoming. “Prominent -insiders” declared that there was nothing wrong that they knew of and -that the decline was due to reckless bear selling. So the “investors” -of New England kept their holdings of New York, New Haven & Hartford -stock. Why shouldn’t they? Didn’t insiders say there was nothing wrong -and cry bear selling? Didn’t dividends continue to be declared and paid? - -In the meantime the promised squeeze of the bears did not come but -new low records did. The insider selling became more urgent and less -disguised. Nevertheless public spirited men in Boston were denounced as -stock-jobbers and demagogues for demanding a genuine explanation for -the stock’s deplorable decline that meant appalling losses to everybody -in New England who had wanted a safe investment and a steady dividend -payer. - -That historic break from $255 to $12 a share never was and never -could have been a bear drive. It was not started and it was not kept -up by bear operations. The insiders sold right along and always at -higher prices than they could have done if they had told the truth or -allowed the truth to be told. It did not matter whether the price was -250 or 200 or 150 or 100 or 50 or 25, it still was too high for that -stock, and the insiders knew it and the public did not. The public -might profitably consider the disadvantages under which it labours -when it tries to make money buying and selling the stock of a company -concerning whose affairs only a few men are in position to know the -whole truth. - -The stocks which have had the worst breaks in the past 20 years did -not decline on bear raiding. But the easy acceptance of that form of -explanation has been responsible for losses by the public amounting to -millions upon millions of dollars. It has kept people from selling who -did not like the way his stock was acting and would have liquidated -if they had not expected the price to go right back after the bears -stopped their raiding. I used to hear Keene blamed in the old days. -Before him they used to accuse Charley Woerishoffer or Addison Cammack. -Later on I became the stock excuse. - -I recall the case of Intervale Oil. There was a pool in it that put the -stock up and found some buyers on the advance. The manipulators ran the -price to 50. There the pool sold and there was a quick break. The usual -demand for explanations followed. Why was Intervale so weak? Enough -people asked this question to make the answer important news. One of -the financial news tickers called up the brokers who knew the most -about Intervale Oil’s advance and ought to be equally well posted as -to the decline. What did these brokers, members of the bull pool, say -when the news agency asked them for a reason that could be printed and -sent broadcast over the country? Why, that Larry Livingston was raiding -the market! And that wasn’t enough. They added that they were going to -“get” him. But of course, the Intervale pool continued to sell. The -stock only stood then about $12 a share and they could sell it down to -10 or lower and their average selling price would still be above cost. - -It was wise and proper for insiders to sell on the decline. But for -outsiders who had paid 35 or 40, it was a different matter. Reading -what the tickers printed there outsiders held on and waited for Larry -Livingston to get what was coming to him at the hands of the indignant -inside pool. - -In a bull market and particularly in booms the public at first makes -money which it later loses simply by overstaying the bull market. This -talk of “bear raids” helps them to overstay. The public should beware -of explanations that explain only what unnamed insiders wish the public -to believe. - - - - -_XXIV_ - - -The public always wants to be told. That is what makes tip-giving and -tip-taking universal practices. It is proper that brokers should give -their customers trading advice through the medium of their market -letters as well as by word of mouth. But brokers should not dwell too -strongly on actual conditions because the course of the market is -always from six to nine months ahead of actual conditions. Today’s -earnings do not justify brokers in advising their customers to buy -stocks unless there is some assurance that six or nine months from -today the business outlook will warrant the belief that the same rate -of earnings will be maintained. If on looking that far ahead you can -see, reasonably clearly, that conditions are developing which will -change the present actual power, the argument about stocks being cheap -today will disappear. The trader must look far ahead, but the broker -is concerned with getting commissions now; hence the inescapable -fallacy of the average market letter. Brokers make their living out -of commissions from the public and yet they will try to induce the -public through their market letters or by word of mouth to buy the same -stocks in which they have received selling orders from insiders or -manipulators. - -It often happens that an insider goes to the head of a brokerage -concern and says: “I wish you’d make a market in which to dispose of -50,000 shares of my stock.” - -The broker asks for further details. Let us say that the quoted price -of that stock is 50. The insider tells him: “I will give you calls on -5000 shares at 45 and 5000 shares every point up for the entire fifty -thousand shares. I also will give you a put on 50,000 shares at the -market.” - -Now, this is pretty easy money for the broker, if he has a large -following and of course this is precisely the kind of broker the -insider seeks. A house with direct wires to branches and connections -in various parts of the country can usually get a large following in -a deal of that kind. Remember that in any event the broker is playing -absolutely safe by reason of the put. If he can get his public to -follow he will be able to dispose of his entire line at a big profit in -addition to his regular commissions. - -I have in mind the exploits of an “insider” who is well-known in Wall -Street. - -He will call up the head customers’ man of a large brokerage house. At -times he goes even further and calls up one of the junior partners of -the firm. He will say something like this: - -“Say, old man, I want to show you that I appreciate what you have done -for me at various times. I am going to give you a chance to make some -real money. We are forming a new company to absorb the assets of one -of our companies and we’ll take over that stock at a big advance over -present quotations. I’m going to send in to you 500 shares of Bantam -Shops at $65. The stock is now quoted at 72.” - -The grateful insider tells the thing to a dozen of the headmen in -various big brokerage houses. Now since these recipients of the -insider’s bounty are in Wall Street what are they going to do when they -get that stock that already shows them a profit? Of course, advise -every man and woman they can reach to buy that stock. The kind donor -knew this. They will help to create a market in which the kind insider -can sell his good things at high prices to the poor public. - -There are other devices of stock-selling promoters that should be -barred. The Exchanges should not allow trading in listed stocks that -are offered outside to the public on the partial payment plan. To have -the price officially quoted gives a sort of sanction to any stock. -Moreover, the official evidence of a free market, and at times the -difference in prices, is all the inducement needed. - -Another common selling device that costs the unthinking public many -millions of dollars and sends nobody to jail because it is perfectly -legal, is that of increasing the capital stock exclusively by reason of -market exigencies. The process does not really amount to much more than -changing the color of the stock certificates. - -The juggling whereby 2 or 4 or even 10 shares of new stock are given in -exchange for one of the old, is usually prompted by a desire to make -the old merchandise easily vendible. The old price was $1 per pound -package and hard to move. At 25 cents for a quarter-pound box it might -go better; and perhaps at 27 or 30 cents. - -Why does not the public ask why the stock is made easy to buy? It is a -case of the Wall Street philanthropist operating again, but the wise -trader bewares of the Greeks bearing gifts. It is all the warning -needed. The public disregards it and loses millions of dollars annually. - -The law punishes whoever originates or circulates rumors calculated to -affect adversely the credit or business of individuals or corporations, -that is, that tend to depress the values of securities by influencing -the public to sell. Originally, the chief intention may have been to -reduce the danger of panic by punishing anyone who doubted aloud the -solvency of banks in times of stress. But of course, it serves also to -protect the public against selling stocks below their real value. In -other words the law of the land punishes the disseminator of bearish -items of that nature. - -How is the public protected against the danger of buying stocks above -their real value? Who punishes the distributor of unjustified bullish -news items? Nobody; and yet, the public loses more money buying stocks -on anonymous inside advice when they are too high than it does selling -out stocks below their value as a consequence of bearish advice during -so-called “raids.” - -If a law were passed that would punish bull liars as the law now -punishes bear liars, I believe the public would save millions. - -Naturally, promoters, manipulators and other beneficiaries of anonymous -optimism will tell you that anyone who trades on rumors and unsigned -statements has only himself to blame for his losses. One might as well -argue that any one who is silly enough to be a drug addict is not -entitled to protection. - -The Stock Exchange should help. It is vitally interested in protecting -the public against unfair practices. If a man in position to know -wishes to make the public accept his statements of fact or even his -opinions, let him sign his name. Signing bullish items would not -necessarily make them true. But it would make the “insiders” and -“directors” more careful. - -The public ought always to keep in mind the elementals of stock -trading. When a stock is going up no elaborate explanation is needed -as to why it is going up. It takes continuous buying to make a stock -keep on going up. As long as it does so, with only small and natural -reactions from time to time, it is a pretty safe proposition to trail -along with it. But if after a long steady rise a stock turns and -gradually begins to go down, with only occasional small rallies, it is -obvious that the line of least resistance has changed from upward to -downward. Such being the case why should any one ask for explanations? -There are probably very good reasons why it should go down, but these -reasons are known only to a few people who either keep those reasons to -themselves, or else actually tell the public that the stock is cheap. -The nature of the game as it is played is such that the public should -realise that the truth cannot be told by the few who know. - -Many of the so-called statements attributed to “insiders” or officials -have no basis in fact. Sometimes the insiders are not even asked to -make a statement, anonymous or signed. These stories are invented by -somebody or other who has a large interest in the market. At a certain -stage of an advance in the market-price of a security the big insiders -are not averse to getting the help of the professional element to trade -in that stock. But while the insider might tell the big plunger the -right time to buy, you can bet he will never tell when is the time -to sell. That puts the big professional in the same position as the -public, only he has to have a market big enough for him to get out on. -Then is when you get the most misleading “information.” Of course, -there are certain insiders who cannot be trusted at any stage of the -game. As a rule the men who are the head of big corporations may act in -the market upon their inside knowledge, but they don’t actually tell -lies. They merely say nothing, for they have discovered that there are -times when silence is golden. - -I have said many times and cannot say it too often that the experience -of years as a stock operator has convinced me that no man can -consistently and continuously beat the stock market though he may -make money in individual stocks on certain occasions. No matter how -experienced a trader is the possibility of his making losing plays is -always present because speculation cannot be made 100 per cent safe. -Wall Street professionals know that acting on “inside” tips will break -a man more quickly than famine, pestilence, crop failures, political -readjustments or what might be called normal accidents. There is no -asphalt boulevard to success in Wall Street or anywhere else. Why -additionally block traffic? - - - - -Transcriber’s Notes - - -Punctuation and spelling were made consistent when a predominant -preference was found in the original book; otherwise they were not -changed. Inconsistent hyphenation was not changed. - -Simple typographical errors were corrected; unbalanced quotation -marks were remedied when the change was obvious, and otherwise left -unbalanced. - -The illustration on the title page is the publisher’s logo. - -Page 224: “they were afraid of getting stock if they tried to” was -printed that way; “stock” may be a typographic error for “stuck”. - - - - - -End of Project Gutenberg's Reminscences of a Stock Operator, by Edwin Lefevre - -*** END OF THIS PROJECT GUTENBERG EBOOK REMINSCENCES OF A STOCK OPERATOR *** - -***** This file should be named 60979-0.txt or 60979-0.zip ***** -This and all associated files of various formats will be found in: - http://www.gutenberg.org/6/0/9/7/60979/ - -Produced by Charlie Howard and the Online Distributed -Proofreading Team at http://www.pgdp.net - -Updated editions will replace the previous one--the old editions will -be renamed. - -Creating the works from print editions not protected by U.S. copyright -law means that no one owns a United States copyright in these works, -so the Foundation (and you!) can copy and distribute it in the United -States without permission and without paying copyright -royalties. Special rules, set forth in the General Terms of Use part -of this license, apply to copying and distributing Project -Gutenberg-tm electronic works to protect the PROJECT GUTENBERG-tm -concept and trademark. Project Gutenberg is a registered trademark, -and may not be used if you charge for the eBooks, unless you receive -specific permission. If you do not charge anything for copies of this -eBook, complying with the rules is very easy. You may use this eBook -for nearly any purpose such as creation of derivative works, reports, -performances and research. They may be modified and printed and given -away--you may do practically ANYTHING in the United States with eBooks -not protected by U.S. copyright law. Redistribution is subject to the -trademark license, especially commercial redistribution. - -START: FULL LICENSE - -THE FULL PROJECT GUTENBERG LICENSE -PLEASE READ THIS BEFORE YOU DISTRIBUTE OR USE THIS WORK - -To protect the Project Gutenberg-tm mission of promoting the free -distribution of electronic works, by using or distributing this work -(or any other work associated in any way with the phrase "Project -Gutenberg"), you agree to comply with all the terms of the Full -Project Gutenberg-tm License available with this file or online at -www.gutenberg.org/license. - -Section 1. General Terms of Use and Redistributing Project -Gutenberg-tm electronic works - -1.A. By reading or using any part of this Project Gutenberg-tm -electronic work, you indicate that you have read, understand, agree to -and accept all the terms of this license and intellectual property -(trademark/copyright) agreement. If you do not agree to abide by all -the terms of this agreement, you must cease using and return or -destroy all copies of Project Gutenberg-tm electronic works in your -possession. If you paid a fee for obtaining a copy of or access to a -Project Gutenberg-tm electronic work and you do not agree to be bound -by the terms of this agreement, you may obtain a refund from the -person or entity to whom you paid the fee as set forth in paragraph -1.E.8. - -1.B. "Project Gutenberg" is a registered trademark. It may only be -used on or associated in any way with an electronic work by people who -agree to be bound by the terms of this agreement. There are a few -things that you can do with most Project Gutenberg-tm electronic works -even without complying with the full terms of this agreement. See -paragraph 1.C below. There are a lot of things you can do with Project -Gutenberg-tm electronic works if you follow the terms of this -agreement and help preserve free future access to Project Gutenberg-tm -electronic works. See paragraph 1.E below. - -1.C. The Project Gutenberg Literary Archive Foundation ("the -Foundation" or PGLAF), owns a compilation copyright in the collection -of Project Gutenberg-tm electronic works. Nearly all the individual -works in the collection are in the public domain in the United -States. If an individual work is unprotected by copyright law in the -United States and you are located in the United States, we do not -claim a right to prevent you from copying, distributing, performing, -displaying or creating derivative works based on the work as long as -all references to Project Gutenberg are removed. Of course, we hope -that you will support the Project Gutenberg-tm mission of promoting -free access to electronic works by freely sharing Project Gutenberg-tm -works in compliance with the terms of this agreement for keeping the -Project Gutenberg-tm name associated with the work. You can easily -comply with the terms of this agreement by keeping this work in the -same format with its attached full Project Gutenberg-tm License when -you share it without charge with others. - -1.D. The copyright laws of the place where you are located also govern -what you can do with this work. Copyright laws in most countries are -in a constant state of change. If you are outside the United States, -check the laws of your country in addition to the terms of this -agreement before downloading, copying, displaying, performing, -distributing or creating derivative works based on this work or any -other Project Gutenberg-tm work. The Foundation makes no -representations concerning the copyright status of any work in any -country outside the United States. - -1.E. Unless you have removed all references to Project Gutenberg: - -1.E.1. The following sentence, with active links to, or other -immediate access to, the full Project Gutenberg-tm License must appear -prominently whenever any copy of a Project Gutenberg-tm work (any work -on which the phrase "Project Gutenberg" appears, or with which the -phrase "Project Gutenberg" is associated) is accessed, displayed, -performed, viewed, copied or distributed: - - This eBook is for the use of anyone anywhere in the United States and - most other parts of the world at no cost and with almost no - restrictions whatsoever. You may copy it, give it away or re-use it - under the terms of the Project Gutenberg License included with this - eBook or online at www.gutenberg.org. If you are not located in the - United States, you'll have to check the laws of the country where you - are located before using this ebook. - -1.E.2. If an individual Project Gutenberg-tm electronic work is -derived from texts not protected by U.S. copyright law (does not -contain a notice indicating that it is posted with permission of the -copyright holder), the work can be copied and distributed to anyone in -the United States without paying any fees or charges. If you are -redistributing or providing access to a work with the phrase "Project -Gutenberg" associated with or appearing on the work, you must comply -either with the requirements of paragraphs 1.E.1 through 1.E.7 or -obtain permission for the use of the work and the Project Gutenberg-tm -trademark as set forth in paragraphs 1.E.8 or 1.E.9. - -1.E.3. If an individual Project Gutenberg-tm electronic work is posted -with the permission of the copyright holder, your use and distribution -must comply with both paragraphs 1.E.1 through 1.E.7 and any -additional terms imposed by the copyright holder. Additional terms -will be linked to the Project Gutenberg-tm License for all works -posted with the permission of the copyright holder found at the -beginning of this work. - -1.E.4. Do not unlink or detach or remove the full Project Gutenberg-tm -License terms from this work, or any files containing a part of this -work or any other work associated with Project Gutenberg-tm. - -1.E.5. Do not copy, display, perform, distribute or redistribute this -electronic work, or any part of this electronic work, without -prominently displaying the sentence set forth in paragraph 1.E.1 with -active links or immediate access to the full terms of the Project -Gutenberg-tm License. - -1.E.6. You may convert to and distribute this work in any binary, -compressed, marked up, nonproprietary or proprietary form, including -any word processing or hypertext form. However, if you provide access -to or distribute copies of a Project Gutenberg-tm work in a format -other than "Plain Vanilla ASCII" or other format used in the official -version posted on the official Project Gutenberg-tm web site -(www.gutenberg.org), you must, at no additional cost, fee or expense -to the user, provide a copy, a means of exporting a copy, or a means -of obtaining a copy upon request, of the work in its original "Plain -Vanilla ASCII" or other form. Any alternate format must include the -full Project Gutenberg-tm License as specified in paragraph 1.E.1. - -1.E.7. Do not charge a fee for access to, viewing, displaying, -performing, copying or distributing any Project Gutenberg-tm works -unless you comply with paragraph 1.E.8 or 1.E.9. - -1.E.8. You may charge a reasonable fee for copies of or providing -access to or distributing Project Gutenberg-tm electronic works -provided that - -* You pay a royalty fee of 20% of the gross profits you derive from - the use of Project Gutenberg-tm works calculated using the method - you already use to calculate your applicable taxes. The fee is owed - to the owner of the Project Gutenberg-tm trademark, but he has - agreed to donate royalties under this paragraph to the Project - Gutenberg Literary Archive Foundation. Royalty payments must be paid - within 60 days following each date on which you prepare (or are - legally required to prepare) your periodic tax returns. Royalty - payments should be clearly marked as such and sent to the Project - Gutenberg Literary Archive Foundation at the address specified in - Section 4, "Information about donations to the Project Gutenberg - Literary Archive Foundation." - -* You provide a full refund of any money paid by a user who notifies - you in writing (or by e-mail) within 30 days of receipt that s/he - does not agree to the terms of the full Project Gutenberg-tm - License. You must require such a user to return or destroy all - copies of the works possessed in a physical medium and discontinue - all use of and all access to other copies of Project Gutenberg-tm - works. - -* You provide, in accordance with paragraph 1.F.3, a full refund of - any money paid for a work or a replacement copy, if a defect in the - electronic work is discovered and reported to you within 90 days of - receipt of the work. - -* You comply with all other terms of this agreement for free - distribution of Project Gutenberg-tm works. - -1.E.9. If you wish to charge a fee or distribute a Project -Gutenberg-tm electronic work or group of works on different terms than -are set forth in this agreement, you must obtain permission in writing -from both the Project Gutenberg Literary Archive Foundation and The -Project Gutenberg Trademark LLC, the owner of the Project Gutenberg-tm -trademark. Contact the Foundation as set forth in Section 3 below. - -1.F. - -1.F.1. Project Gutenberg volunteers and employees expend considerable -effort to identify, do copyright research on, transcribe and proofread -works not protected by U.S. copyright law in creating the Project -Gutenberg-tm collection. Despite these efforts, Project Gutenberg-tm -electronic works, and the medium on which they may be stored, may -contain "Defects," such as, but not limited to, incomplete, inaccurate -or corrupt data, transcription errors, a copyright or other -intellectual property infringement, a defective or damaged disk or -other medium, a computer virus, or computer codes that damage or -cannot be read by your equipment. - -1.F.2. LIMITED WARRANTY, DISCLAIMER OF DAMAGES - Except for the "Right -of Replacement or Refund" described in paragraph 1.F.3, the Project -Gutenberg Literary Archive Foundation, the owner of the Project -Gutenberg-tm trademark, and any other party distributing a Project -Gutenberg-tm electronic work under this agreement, disclaim all -liability to you for damages, costs and expenses, including legal -fees. YOU AGREE THAT YOU HAVE NO REMEDIES FOR NEGLIGENCE, STRICT -LIABILITY, BREACH OF WARRANTY OR BREACH OF CONTRACT EXCEPT THOSE -PROVIDED IN PARAGRAPH 1.F.3. YOU AGREE THAT THE FOUNDATION, THE -TRADEMARK OWNER, AND ANY DISTRIBUTOR UNDER THIS AGREEMENT WILL NOT BE -LIABLE TO YOU FOR ACTUAL, DIRECT, INDIRECT, CONSEQUENTIAL, PUNITIVE OR -INCIDENTAL DAMAGES EVEN IF YOU GIVE NOTICE OF THE POSSIBILITY OF SUCH -DAMAGE. - -1.F.3. LIMITED RIGHT OF REPLACEMENT OR REFUND - If you discover a -defect in this electronic work within 90 days of receiving it, you can -receive a refund of the money (if any) you paid for it by sending a -written explanation to the person you received the work from. If you -received the work on a physical medium, you must return the medium -with your written explanation. The person or entity that provided you -with the defective work may elect to provide a replacement copy in -lieu of a refund. If you received the work electronically, the person -or entity providing it to you may choose to give you a second -opportunity to receive the work electronically in lieu of a refund. If -the second copy is also defective, you may demand a refund in writing -without further opportunities to fix the problem. - -1.F.4. Except for the limited right of replacement or refund set forth -in paragraph 1.F.3, this work is provided to you 'AS-IS', WITH NO -OTHER WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING BUT NOT -LIMITED TO WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PURPOSE. - -1.F.5. Some states do not allow disclaimers of certain implied -warranties or the exclusion or limitation of certain types of -damages. If any disclaimer or limitation set forth in this agreement -violates the law of the state applicable to this agreement, the -agreement shall be interpreted to make the maximum disclaimer or -limitation permitted by the applicable state law. The invalidity or -unenforceability of any provision of this agreement shall not void the -remaining provisions. - -1.F.6. INDEMNITY - You agree to indemnify and hold the Foundation, the -trademark owner, any agent or employee of the Foundation, anyone -providing copies of Project Gutenberg-tm electronic works in -accordance with this agreement, and any volunteers associated with the -production, promotion and distribution of Project Gutenberg-tm -electronic works, harmless from all liability, costs and expenses, -including legal fees, that arise directly or indirectly from any of -the following which you do or cause to occur: (a) distribution of this -or any Project Gutenberg-tm work, (b) alteration, modification, or -additions or deletions to any Project Gutenberg-tm work, and (c) any -Defect you cause. - -Section 2. Information about the Mission of Project Gutenberg-tm - -Project Gutenberg-tm is synonymous with the free distribution of -electronic works in formats readable by the widest variety of -computers including obsolete, old, middle-aged and new computers. It -exists because of the efforts of hundreds of volunteers and donations -from people in all walks of life. - -Volunteers and financial support to provide volunteers with the -assistance they need are critical to reaching Project Gutenberg-tm's -goals and ensuring that the Project Gutenberg-tm collection will -remain freely available for generations to come. In 2001, the Project -Gutenberg Literary Archive Foundation was created to provide a secure -and permanent future for Project Gutenberg-tm and future -generations. To learn more about the Project Gutenberg Literary -Archive Foundation and how your efforts and donations can help, see -Sections 3 and 4 and the Foundation information page at -www.gutenberg.org - - - -Section 3. Information about the Project Gutenberg Literary Archive Foundation - -The Project Gutenberg Literary Archive Foundation is a non profit -501(c)(3) educational corporation organized under the laws of the -state of Mississippi and granted tax exempt status by the Internal -Revenue Service. The Foundation's EIN or federal tax identification -number is 64-6221541. Contributions to the Project Gutenberg Literary -Archive Foundation are tax deductible to the full extent permitted by -U.S. federal laws and your state's laws. - -The Foundation's principal office is in Fairbanks, Alaska, with the -mailing address: PO Box 750175, Fairbanks, AK 99775, but its -volunteers and employees are scattered throughout numerous -locations. Its business office is located at 809 North 1500 West, Salt -Lake City, UT 84116, (801) 596-1887. Email contact links and up to -date contact information can be found at the Foundation's web site and -official page at www.gutenberg.org/contact - -For additional contact information: - - Dr. Gregory B. Newby - Chief Executive and Director - gbnewby@pglaf.org - -Section 4. Information about Donations to the Project Gutenberg -Literary Archive Foundation - -Project Gutenberg-tm depends upon and cannot survive without wide -spread public support and donations to carry out its mission of -increasing the number of public domain and licensed works that can be -freely distributed in machine readable form accessible by the widest -array of equipment including outdated equipment. Many small donations -($1 to $5,000) are particularly important to maintaining tax exempt -status with the IRS. - -The Foundation is committed to complying with the laws regulating -charities and charitable donations in all 50 states of the United -States. Compliance requirements are not uniform and it takes a -considerable effort, much paperwork and many fees to meet and keep up -with these requirements. We do not solicit donations in locations -where we have not received written confirmation of compliance. To SEND -DONATIONS or determine the status of compliance for any particular -state visit www.gutenberg.org/donate - -While we cannot and do not solicit contributions from states where we -have not met the solicitation requirements, we know of no prohibition -against accepting unsolicited donations from donors in such states who -approach us with offers to donate. - -International donations are gratefully accepted, but we cannot make -any statements concerning tax treatment of donations received from -outside the United States. U.S. laws alone swamp our small staff. - -Please check the Project Gutenberg Web pages for current donation -methods and addresses. Donations are accepted in a number of other -ways including checks, online payments and credit card donations. To -donate, please visit: www.gutenberg.org/donate - -Section 5. General Information About Project Gutenberg-tm electronic works. - -Professor Michael S. Hart was the originator of the Project -Gutenberg-tm concept of a library of electronic works that could be -freely shared with anyone. For forty years, he produced and -distributed Project Gutenberg-tm eBooks with only a loose network of -volunteer support. - -Project Gutenberg-tm eBooks are often created from several printed -editions, all of which are confirmed as not protected by copyright in -the U.S. unless a copyright notice is included. Thus, we do not -necessarily keep eBooks in compliance with any particular paper -edition. - -Most people start at our Web site which has the main PG search -facility: www.gutenberg.org - -This Web site includes information about Project Gutenberg-tm, -including how to make donations to the Project Gutenberg Literary -Archive Foundation, how to help produce our new eBooks, and how to -subscribe to our email newsletter to hear about new eBooks. - diff --git a/old/60979-0.zip b/old/60979-0.zip Binary files differdeleted file mode 100644 index 8c2d6eb..0000000 --- a/old/60979-0.zip +++ /dev/null diff --git a/old/60979-h.zip b/old/60979-h.zip Binary files differdeleted file mode 100644 index a36ca2f..0000000 --- a/old/60979-h.zip +++ /dev/null diff --git a/old/60979-h/60979-h.htm b/old/60979-h/60979-h.htm deleted file mode 100644 index a4e8571..0000000 --- a/old/60979-h/60979-h.htm +++ /dev/null @@ -1,12962 +0,0 @@ -<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Strict//EN" - "http://www.w3.org/TR/xhtml1/DTD/xhtml1-strict.dtd"> -<html xmlns="http://www.w3.org/1999/xhtml" xml:lang="en" lang="en"> - <head> - <meta http-equiv="Content-Type" content="text/html;charset=utf-8" /> - <meta http-equiv="Content-Style-Type" content="text/css" /> - <title> - The Project Gutenberg eBook of Reminiscences of a Stock Operator, by Edwin Lefevre. - </title> - <link rel="coverpage" href="images/cover.jpg" /> - <style type="text/css"> - -body { - margin-left: 2.5em; - margin-right: 2.5em; -} - -h1, h2 { - text-align: center; - clear: both; - margin-top: 2.5em; - margin-bottom: 1em; -} - -h1 {line-height: 1.5;} - -h2+p {margin-top: 1.5em;} - -.transnote h2 { - margin-top: .5em; - margin-bottom: 1em; -} - -p { - text-indent: 1.75em; - margin-top: .51em; - margin-bottom: .24em; - text-align: justify; -} -.center p {text-align: center; text-indent: 0;} -p.center {text-indent: 0;} - -.p1 {margin-top: 1em;} -.p2 {margin-top: 2em;} -.p4 {margin-top: 4em;} -.b1 {margin-bottom: 1em;} -.vspace {line-height: 1.5;} - -.in0 {text-indent: 0;} -.r10 {padding-left: 10em;} - -.smaller {font-size: 85%;} -.larger {font-size: 125%;} -.large {font-size: 150%;} -.xxlarge {font-size: 200%;} - -.center {text-align: center;} - -.smcap {font-variant: small-caps;} -.smcap.smaller {font-size: 75%;} -.firstword {font-variant: small-caps;} - -.bold {font-weight: bold;} - -hr { - width: 33%; - margin-top: 4em; - margin-bottom: 4em; - margin-left: 33%; - margin-right: auto; - clear: both; -} - -table { - margin-left: auto; - margin-right: auto; - max-width: 15em; width: auto; - border-collapse: collapse; -} - -.tdr, .tdr1 { - text-align: right; - vertical-align: bottom; - padding: 0 2em .75em 6em; - white-space: nowrap; -} -.tdr1 {padding-left: 0;} - -.pagenum { - position: absolute; - right: 4px; - text-indent: 0em; - text-align: right; - font-size: 70%; - font-weight: normal; - font-variant: normal; - font-style: normal; - letter-spacing: normal; - line-height: normal; - color: #acacac; - border: 1px solid #acacac; - background: #ffffff; - padding: 1px 2px; -} - -.figcenter { - margin: 2em auto 2em auto; - text-align: center; - page-break-inside: avoid; - max-width: 100%; -} - -img { - padding: 0; - max-width: 100%; - height: auto; -} - -blockquote { - margin-left: 5%; - margin-right: 5%; - font-size: 95%; -} - -.poem-container { - text-align: center; - font-size: 98%; -} - -.poem { - display: inline-block; - text-align: left; - margin-left: 0; -} - -.poem br {display: none;} - -.poem .stanza{padding: 0.5em 0;} - -.poem span.i0 {display: block; margin-left: 0em; padding-left: 3em; text-indent: -3em;} -.poem span.i2 {display: block; margin-left: 1em; padding-left: 3em; text-indent: -3em;} - -.transnote { - background-color: #999999; - border: thin dotted; - font-family: sans-serif, serif; - margin-left: 5%; - margin-right: 5%; - margin-top: 4em; - margin-bottom: 2em; - padding: 1em; -} -.covernote {visibility: hidden; display: none;} - -.wspace {word-spacing: .3em;} - -span.locked {white-space:nowrap;} - -@media print, handheld -{ - h1, .chapter, .newpage {page-break-before: always;} - h1.nobreak, h2.nobreak, .nobreak {page-break-before: avoid; padding-top: 0;} - - p { - margin-top: .5em; - text-align: justify; - margin-bottom: .25em; - } -} - -@media handheld -{ - body {margin: 0;} - - hr { - margin-top: .1em; - margin-bottom: .1em; - visibility: hidden; - color: white; - width: .01em; - display: none; - } - - blockquote {margin: 1.5em 3% 1.5em 3%;} - - .poem-container {text-align: left; margin-left: 5%;} - .poem {display: block;} - .poem .stanza {page-break-inside: avoid;} - - .transnote { - page-break-inside: avoid; - margin-left: 2%; - margin-right: 2%; - margin-top: 1em; - margin-bottom: 1em; - padding: .5em; - } - - .covernote {visibility: visible; display: block; text-align: center;} -} - </style> - </head> - -<body> - - -<pre> - -Project Gutenberg's Reminscences of a Stock Operator, by Edwin Lefevre - -This eBook is for the use of anyone anywhere in the United States and most -other parts of the world at no cost and with almost no restrictions -whatsoever. You may copy it, give it away or re-use it under the terms of -the Project Gutenberg License included with this eBook or online at -www.gutenberg.org. If you are not located in the United States, you'll have -to check the laws of the country where you are located before using this ebook. - -Title: Reminscences of a Stock Operator - -Author: Edwin Lefevre - -Release Date: December 20, 2019 [EBook #60979] - -Language: English - -Character set encoding: UTF-8 - -*** START OF THIS PROJECT GUTENBERG EBOOK REMINSCENCES OF A STOCK OPERATOR *** - - - - -Produced by Charlie Howard and the Online Distributed -Proofreading Team at http://www.pgdp.net - - - - - - -</pre> - - -<div class="transnote"><p class="center large">Transcriber’s Note</p> -<p class="center">Table of Contents created by Transcriber and -placed in the Public Domain.</p> - -<p class="covernote">Cover created by Transcriber and placed in the Public Domain.</p> -</div> - -<h1>REMINISCENCES<br /> -OF A<br /> -STOCK OPERATOR</h1> - -<hr /> - -<div class="newpage p4 center vspace wspace"> -<p class="xxlarge bold"> -REMINISCENCES<br /> -OF A<br /> -STOCK OPERATOR</p> - -<p class="p2 large">By Edwin Lefevre</p> - -<p class="p1 larger"><i>with a new Introduction by</i><br /> -Benton W. Davis</p> - -<div class="figcenter" style="max-width: 5.5em;"> -<img src="images/logo.png" width="88" height="79" alt="Publisher's logo" /> -</div> - -<p class="p1">American Research Council · Larchmont, New York</p> -</div> - -<hr /> - -<div class="newpage p4 center smaller"> -<p class="wspace">Copyright © 1923 by George H. Doran Company</p> - -<p class="wspace">All Rights Reserved</p> - -<p class="wspace">Reprinted by arrangement with Doubleday & Company, Inc.</p> - -<p>Library of Congress Catalog Card Number: 64-23364<br /> -Printed in the United States of America</p> -</div> - -<hr /> - -<p class="newpage p4 center"> -To<br /> -Jesse Lauriston Livermore -</p> - -<hr /> - -<div class="chapter"> -<h2 id="CONTENTS">CONTENTS</h2> -</div> - -<table id="toc" summary="Contents"> -<tr><td class="tdr1">I</td><td class="tdr"><a href="#I">1</a></td></tr> -<tr><td class="tdr1">II</td><td class="tdr"><a href="#II">14</a></td></tr> -<tr><td class="tdr1">III</td><td class="tdr"><a href="#III">30</a></td></tr> -<tr><td class="tdr1">IV</td><td class="tdr"><a href="#IV">39</a></td></tr> -<tr><td class="tdr1">V</td><td class="tdr"><a href="#V">55</a></td></tr> -<tr><td class="tdr1">VI</td><td class="tdr"><a href="#VI">67</a></td></tr> -<tr><td class="tdr1">VII</td><td class="tdr"><a href="#VII">80</a></td></tr> -<tr><td class="tdr1">VIII</td><td class="tdr"><a href="#VIII">87</a></td></tr> -<tr><td class="tdr1">IX</td><td class="tdr"><a href="#IX">100</a></td></tr> -<tr><td class="tdr1">X</td><td class="tdr"><a href="#X">117</a></td></tr> -<tr><td class="tdr1">XI</td><td class="tdr"><a href="#XI">131</a></td></tr> -<tr><td class="tdr1">XII</td><td class="tdr"><a href="#XII">144</a></td></tr> -<tr><td class="tdr1">XIII</td><td class="tdr"><a href="#XIII">160</a></td></tr> -<tr><td class="tdr1">XIV</td><td class="tdr"><a href="#XIV">173</a></td></tr> -<tr><td class="tdr1">XV</td><td class="tdr"><a href="#XV">190</a></td></tr> -<tr><td class="tdr1">XVI</td><td class="tdr"><a href="#XVI">199</a></td></tr> -<tr><td class="tdr1">XVII</td><td class="tdr"><a href="#XVII">215</a></td></tr> -<tr><td class="tdr1">XVIII</td><td class="tdr"><a href="#XVIII">230</a></td></tr> -<tr><td class="tdr1">XIX</td><td class="tdr"><a href="#XIX">238</a></td></tr> -<tr><td class="tdr1">XX</td><td class="tdr"><a href="#XX">245</a></td></tr> -<tr><td class="tdr1">XXI</td><td class="tdr"><a href="#XXI">257</a></td></tr> -<tr><td class="tdr1">XXII</td><td class="tdr"><a href="#XXII">273</a></td></tr> -<tr><td class="tdr1">XXIII</td><td class="tdr"><a href="#XXIII">293</a></td></tr> -<tr><td class="tdr1">XXIV</td><td class="tdr"><a href="#XXIV">304</a></td></tr> -</table> - -<hr /> - -<div class="chapter"> -<h2 id="I"><i>I</i><span class="pagenum" id="Page_1">1</span></h2> -</div> - -<p class="in0"><span class="firstword">I went to work</span> when I was just out of grammar school. I -got a job as quotation-board boy in a stock-brokerage office. -I was quick at figures. At school I did three years of arithmetic -in one. I was particularly good at mental arithmetic. -As quotation-board boy I posted the numbers on the big -board in the customers’ room. One of the customers usually -sat by the ticker and called out the prices. They couldn’t -come too fast for me. I have always remembered figures. No -trouble at all.</p> - -<p>There were plenty of other employes in that office. Of -course I made friends with the other fellows, but the work I -did, if the market was active, kept me too busy from ten -<span class="smcap smaller">A.M.</span> to three <span class="smcap smaller">P.M.</span> to let me do much talking. I don’t care for -it, anyhow, during business hours.</p> - -<p>But a busy market did not keep me from thinking about -the work. Those quotations did not represent prices of stocks -to me, so many dollars per share. They were numbers. Of -course, they meant something. They were always changing. -It was all I had to be interested in—the changes. Why did -they change? I didn’t know. I didn’t care. I didn’t think -about that. I simply saw that they changed. That was all I -had to think about five hours every day and two on Saturdays: -that they were always changing.</p> - -<p>That is how I first came to be interested in the behaviour -of prices. I had a very good memory for figures. I could remember -in detail how the prices had acted on the previous<span class="pagenum" id="Page_2">2</span> -day, just before they went up or down. My fondness for -mental arithmetic came in very handy.</p> - -<p>I noticed that in advances as well as declines, stock prices -were apt to show certain habits, so to speak. There was no -end of parallel cases and these made precedents to guide me. -I was only fourteen, but after I had taken hundreds of observations -in my mind I found myself testing their accuracy, -comparing the behaviour of stocks to-day with other days. It -was not long before I was anticipating movements in prices. -My only guide, as I say, was their past performances. I carried -the “dope sheets” in my mind. I looked for stock prices -to run on form. I had “clocked” them. You know what I mean.</p> - -<p>You can spot, for instance, where the buying is only a trifle -better than the selling. A battle goes on in the stock market -and the tape is your telescope. You can depend upon it seven -out of ten cases.</p> - -<p>Another lesson I learned early is that there is nothing new -in Wall Street. There can’t be because speculation is as old -as the hills. Whatever happens in the stock market to-day has -happened before and will happen again. I’ve never forgotten -that. I suppose I really manage to remember when and how -it happened. The fact that I remember that way is my way -of capitalizing experience.</p> - -<p>I got so interested in my game and so anxious to anticipate -advances and declines in all the active stocks that I got a -little book. I put down my observations in it. It was not a -record of imaginary transactions such as so many people -keep merely to make or lose millions of dollars without getting -the swelled head or going to the poorhouse. It was -rather a sort of record of my hits and misses, and next to the -determination of probable movements I was most interested -in verifying whether I had observed accurately; in other -words, whether I was right.</p> - -<p>Say that after studying every fluctuation of the day in an -active stock I would conclude that it was behaving as it always -did before it broke eight or ten points. Well, I would<span class="pagenum" id="Page_3">3</span> -jot down the stock and the price on Monday, and remembering -past performances I would write down what it ought to -do on Tuesday and Wednesday. Later I would check up with -actual transcriptions from the tape.</p> - -<p>That is how I first came to take an interest in the message -of the tape. The fluctuations were from the first associated -in my mind with upward or downward movements. Of -course there is always a reason for fluctuations, but the tape -does not concern itself with the why and wherefore. It -doesn’t go into explanations. I didn’t ask the tape why when -I was fourteen, and I don’t ask it to-day, at forty. The -reason for what a certain stock does to-day may not be -known for two or three days, or weeks, or months. But what -the dickens does that matter? Your business with the tape -is now—not to-morrow. The reason can wait. But you must -act instantly or be left. Time and again I see this happen. -You’ll remember that Hollow Tube went down three points -the other day while the rest of the market rallied sharply. -That was the fact. On the following Monday you saw that -the directors passed the dividend. That was the reason. They -knew what they were going to do, and even if they didn’t -sell the stock themselves they at least didn’t buy it. There -was no inside buying; no reason why it should not break.</p> - -<p>Well, I kept up my little memorandum book perhaps six -months. Instead of leaving for home the moment I was -through with my work, I’d jot down the figures I wanted -and would study the changes, always looking for the repetitions -and parallelisms of behaviour—learning to read the -tape, although I was not aware of it at the time.</p> - -<p>One day one of the office boys—he was older than I—came -to me where I was eating my lunch and asked me on -the quiet if I had any money.</p> - -<p>“Why do you want to know?” I said.</p> - -<p>“Well,” he said, “I’ve got a dandy tip on Burlington. I’m -going to play it if I can get somebody to go in with me.”</p> - -<p>“How do you mean, play it?” I asked. To me the only<span class="pagenum" id="Page_4">4</span> -people who played or could play tips were the customers—old -jiggers with oodles of dough. Why, it cost hundreds, even -thousands of dollars, to get into the game. It was like owning -your private carriage and having a coachman who wore a -silk hat.</p> - -<p>“That’s what I mean; play it!” he said. “How much you -got?”</p> - -<p>“How much you need?”</p> - -<p>“Well, I can trade in five shares by putting up $5.”</p> - -<p>“How are you going to play it?”</p> - -<p>“I’m going to buy all the Burlington the bucket shop will -let me carry with the money I give him for margin,” he said. -“It’s going up sure. It’s like picking up money. We’ll double -ours in a jiffy.”</p> - -<p>“Hold on!” I said to him, and pulled out my little dope -book.</p> - -<p>I wasn’t interested in doubling my money, but in his saying -that Burlington was going up. If it was, my note-book -ought to show it. I looked. Sure enough, Burlington, according -to my figuring, was acting as it usually did before it went -up. I had never bought or sold anything in my life, and I -never gambled with the other boys. But all I could see was -that this was a grand chance to test the accuracy of my -work, of my hobby. It struck me at once that if my dope -didn’t work in practice there was nothing in the theory of it -to interest anybody. So I gave him all I had, and with our -pooled resources he went to one of the near-by bucket shops -and bought some Burlington. Two days later we cashed in. I -made a profit of $3.12.</p> - -<p>After that first trade, I got to speculating on my own hook -in the bucket shops. I’d go during my lunch hour and buy or -sell—it never made any difference to me. I was playing a -system and not a favorite stock or backing opinions. All I -knew was the arithmetic of it. As a matter of fact, mine was -the ideal way to operate in a bucket shop, where all that a<span class="pagenum" id="Page_5">5</span> -trader does is to bet on fluctuations as they are printed by -the ticker on the tape.</p> - -<p>It was not long before I was taking much more money out -of the bucket shops than I was pulling down from my job in -the brokerage office. So I gave up my position. My folks objected, -but they couldn’t say much when they saw what I -was making. I was only a kid and office-boy wages were not -very high. I did mighty well on my own hook.</p> - -<p>I was fifteen when I had my first thousand and laid the -cash in front of my mother—all made in the bucket shops in -a few months, besides what I had taken home. My mother -carried on something awful. She wanted me to put it away -in the savings bank out of reach of temptation. She said it -was more money than she ever heard any boy of fifteen had -made, starting with nothing. She didn’t quite believe it was -real money. She used to worry and fret about it. But I didn’t -think of anything except that I could keep on proving my -figuring was right. That’s all the fun there is—being right by -using your head. If I was right when I tested my convictions -with ten shares I would be ten times more right if I traded -in a hundred shares. That is all that having more margin -meant to me—I was right more emphatically. More courage? -No! No difference! If all I have is ten dollars and I risk it, I -am much braver than when I risk a million, if I have another -million salted away.</p> - -<p>Anyhow, at fifteen I was making a good living out of the -stock market. I began in the smaller bucket shops, where the -man who traded in twenty shares at a clip was suspected of -being John W. Gates in disguise or J. P. Morgan traveling -incognito. Bucket shops in those days seldom lay down on -their customers. They didn’t have to. There were other ways -of parting customers from their money, even when they -guessed right. The business was tremendously profitable. -When it was conducted legitimately—I mean straight, as far -as the bucket shop went—the fluctuations took care of the -shoestrings. It doesn’t take much of a reaction to wipe out a<span class="pagenum" id="Page_6">6</span> -margin of only three quarters of a point. Also, no welsher -could ever get back in the game. Wouldn’t have any trade.</p> - -<p>I didn’t have a following. I kept my business to myself. It -was a one-man business, anyhow. It was my head, wasn’t it? -Prices either were going the way I doped them out, without -any help from friends or partners, or they were going the -other way, and nobody could stop them out of kindness to -me. I couldn’t see where I needed to tell my business to anybody -else. I’ve got friends, of course, but my business has -always been the same—a one-man affair. That is why I have -always played a lone hand.</p> - -<p>As it was, it didn’t take long for the bucket shops to get -sore on me for beating them. I’d walk in and plank down my -margin, but they’d look at it without making a move to grab -it. They’d tell me there was nothing doing. That was the -time they got to calling me the Boy Plunger. I had to be -changing brokers all the time, going from one bucket shop to -another. It got so that I had to give a fictitious name. I’d -begin light, only fifteen or twenty shares. At times, when -they got suspicious, I’d lose on purpose at first and then sting -them proper. Of course after a while they’d find me too -expensive and they’d tell me to take myself and my business -elsewhere and not interfere with the owners’ dividends.</p> - -<p>Once, when the big concern I’d been trading with for -months shut down on me I made up my mind to take a little -more of their money away from them. That bucket shop had -branches all over the city, in hotel lobbies, and in near-by -towns. I went to one of the hotel branches and asked the -manager a few questions and finally got to trading. But as -soon as I played an active stock my especial way he began -to get messages from the head office asking who it was that -was operating. The manager told me what they asked him -and I told him my name was Edward Robinson, of Cambridge. -He telephoned the glad news to the big chief. But -the other end wanted to know what I looked like. When the -manager told me that I said to him, “Tell him I am a short<span class="pagenum" id="Page_7">7</span> -fat man with dark hair and a bushy beard!” But he described -me instead, and then he listened and his face got red and he -hung up and told me to beat it.</p> - -<p>“What did they say to you?” I asked him politely.</p> - -<p>“They said, ‘You blankety-blank fool, didn’t we tell you to -take no business from Larry Livingston? And you deliberately -let him trim us out of $700!’” He didn’t say what else -they told him.</p> - -<p>I tried the other branches one after another, but they all -got to know me, and my money wasn’t any good in any of -their offices. I couldn’t even go in to look at the quotations -without some of the clerks making cracks at me. I tried to get -them to let me trade at long intervals by dividing my visits -among them all. But that didn’t work.</p> - -<p>Finally there was only one left to me and that was the -biggest and richest of all—the Cosmopolitan Stock Brokerage -Company.</p> - -<p>The Cosmopolitan was rated as A-1 and did an enormous -business. It had branches in every manufacturing town in -New England. They took my trading all right, and I bought -and sold stocks and made and lost money for months, but in -the end it happened with them as usual. They didn’t refuse -my business point-blank, as the small concerns had. Oh, not -because it wasn’t sportsmanship, but because they knew it -would give them a black eye to publish the news that they -wouldn’t take a fellow’s business just because that fellow -happened to make a little money. But they did the next -worse thing—that is, they made me put up a three-point -margin and compelled me to pay a premium at first of a half -point, then a point, and finally, a point and a half. Some -handicap, that! How? Easy! Suppose Steel was selling at 90 -and you bought it. Your ticket read, normally: “<em>Bot ten Steel -at 90⅛.</em>” If you put up a point margin it meant that if it broke -89¼ you were wiped out automatically. In a bucket shop the -customer is not importuned for more margin or put to the<span class="pagenum" id="Page_8">8</span> -painful necessity of telling his broker to sell for anything he -can get.</p> - -<p>But when the Cosmopolitan tacked on that premium they -were hitting below the belt. It meant that if the price was 90 -when I bought, instead of making my ticket: “<em>Bot Steel at -90⅛</em>,” it read: “<em>Bot Steel at 91⅛</em>.” Why, that stock could advance -a point and a quarter after I bought it and I’d still be -losing money if I closed the trade. And by also insisting that -I put up a three-point margin at the very start they reduced -my trading capacity by two-thirds. Still, that was the only -bucket shop that would take my business at all, and I had to -accept their terms or quit trading.</p> - -<p>Of course I had my ups and downs, but was a winner on -balance. However, the Cosmopolitan people were not satisfied -with the awful handicap they had tacked on me, which -should have been enough to beat anybody. They tried to -double-cross me. They didn’t get me. I escaped because of -one of my hunches.</p> - -<p>The Cosmopolitan, as I said, was my last resort. It was the -richest bucket shop in New England, and as a rule they put -no limit on a trade. I think I was the heaviest individual -trader they had—that is, of the steady, every-day customers. -They had a fine office and the largest and completest quotation -board I have ever seen anywhere. It ran along the whole -length of the big room and every imaginable thing was -quoted. I mean stocks dealt in on the New York and Boston -Stock Exchanges, cotton, wheat, provisions, metals—everything -that was bought and sold in New York, Chicago, -Boston and Liverpool.</p> - -<p>You know how they traded in bucket shops. You gave your -money to a clerk and told him what you wished to buy or -sell. He looked at the tape or the quotation board and took -the price from there—the last one, of course. He also put -down the time on the ticket so that it almost read like a -regular broker’s report—that is, that they had bought or -sold for you so many shares of such a stock at such a price at<span class="pagenum" id="Page_9">9</span> -such a time on such a day and how much money they received -from you. When you wished to close your trade you -went to the clerk—the same or another, it depended on the -shop—and you told him. He took the last price or if the -stock had not been active he waited for the next quotation -that came out on the tape. He wrote that price and the time -on your ticket, O.K.’d it and gave it back to you, and then -you went to the cashier and got whatever cash it called for. -Of course, when the market went against you and the price -went beyond the limit set by your margin, your trade automatically -closed itself and your ticket became one more -scrap of paper.</p> - -<p>In the humbler bucket shops, where people were allowed -to trade in as little as five shares, the tickets were little -slips—different colors for buying and selling—and at times, as -for instance in boiling bull markets, the shops would be hard -hit because all the customers were bulls and happened to be -right. Then the bucket shop would deduct both buying and -selling commissions and if you bought a stock at 20 the -ticket would read 20¼. You thus had only ¾, of a point’s run -for your money.</p> - -<p>But the Cosmopolitan was the finest in New England. It -had thousands of patrons and I really think I was the only -man they were afraid of. Neither the killing premium nor the -three-point margin they made me put up reduced my trading -much. I kept on buying and selling as much as they’d -let me. I sometimes had a line of 5000 shares.</p> - -<p>Well, on the day the thing happened that I am going to -tell you, I was short thirty-five hundred shares of Sugar. I -had seven big pink tickets for five hundred shares each. The -Cosmopolitan used big slips with a blank space on them -where they could write down additional margin. Of course, -the bucket shops never ask for more margin. The thinner the -shoestring the better for them, for their profit lies in your -being wiped. In the smaller shops if you wanted to margin -your trade still further they’d make out a new ticket, so they<span class="pagenum" id="Page_10">10</span> -could charge you the buying commission and only give you -a run of ¾ of a point on each point’s decline, for they figured -the selling commission also exactly as if it were a new trade.</p> - -<p>Well, this day I remember I had up over $10,000 in -margins.</p> - -<p>I was only twenty when I first accumulated ten thousand -dollars in cash. And you ought to have heard my mother. -You’d have thought that ten thousand dollars in cash was -more than anybody carried around except old John D., and -she used to tell me to be satisfied and go into some regular -business. I had a hard time convincing her that I was not -gambling, but making money by figuring. But all she could -see was that ten thousand dollars was a lot of money and all -I could see was more margin.</p> - -<p>I had put out my 3500 shares of Sugar at 105¼. There was -another fellow in the room, Henry Williams, who was short -2500 shares. I used to sit by the ticker and call out the quotations -for the board boy. The price behaved as I thought it -would. It promptly went down a couple of points and paused -a little to get its breath before taking another dip. The -general market was pretty soft and everything looked promising. -Then all of a sudden I didn’t like the way Sugar was -doing its hesitating. I began to feel uncomfortable. I -thought I ought to get out of the market. Then it sold at 103—that -was low for the day—but instead of feeling more confident -I felt more uncertain. I knew something was wrong -somewhere, but I couldn’t spot it exactly. But if something -was coming and I didn’t know where from, I couldn’t be on -my guard against it. That being the case I’d better be out -of the market.</p> - -<p>You know, I don’t do things blindly. I don’t like to. I never -did. Even as a kid I had to know why I should do certain -things. But this time I had no definite reason to give to myself, -and yet I was so uncomfortable that I couldn’t stand it. -I called to a fellow I knew, Dave Wyman, and said to him: -“Dave, you take my place here. I want you to do something<span class="pagenum" id="Page_11">11</span> -for me. Wait a little before you call out the next price of -Sugar, will you?”</p> - -<p>He said he would, and I got up and gave him my place by -the ticker so he could call out the prices for the boy. I took -my seven Sugar tickets out of my pocket and walked over to -the counter, to where the clerk was who marked the tickets -when you closed your trades. But I didn’t really know why -I should get out of the market, so I just stood there, leaning -against the counter, my tickets in my hand so that the clerk -couldn’t see them. Pretty soon I heard the clicking of a telegraph -instrument and I saw Tom Burnham, the clerk, turn -his head quickly and listen. Then I felt that something -crooked was hatching, and I decided not to wait any longer. -Just then Dave Wyman by the ticker, began: “Su—” and -quick as a flash I slapped my tickets on the counter in front -of the clerk and yelled, “Close Sugar!” before Dave had -finished calling the price. So, of course, the house had to -close my Sugar at the last quotation. What Dave called -turned out to be 103 again.</p> - -<p>According to my dope Sugar should have broken 103 by -now. The engine wasn’t hitting right. I had the feeling that -there was a trap in the neighbourhood. At all events, the -telegraph instrument was now going like mad and I noticed -that Tom Burnham, the clerk, had left my tickets unmarked -where I laid them, and was listening to the clicking as if he -were waiting for something. So I yelled at him: “Hey, Tom, -what in hell are you waiting for? Mark the price on these -tickets—103! Get a gait on!”</p> - -<p>Everybody in the room heard me and began to look -toward us and ask what was the trouble, for, you see, while -the Cosmopolitan had never laid down, there was no telling, -and a run on a bucket shop can start like a run on a bank. If -one customer gets suspicious the others follow suit. So Tom -looked sulky, but came over and marked my tickets “Closed -at 103” and shoved the seven of them over toward me. He -sure had a sour face.</p> - -<p><span class="pagenum" id="Page_12">12</span> -Say, the distance from Tom’s place to the cashier’s cage -wasn’t over eight feet. But I hadn’t got to the cashier to get -my money when Dave Wyman by the ticker yelled excitedly: -“Gosh! Sugar, 108!” But it was too late; so I just -laughed and called over to Tom, “It didn’t work that time, -did it, old boy?”</p> - -<p>Of course, it was a put-up job. Henry Williams and I together -were short six thousand shares of Sugar. That bucket -shop had my margin and Henry’s, and there may have been -a lot of other Sugar shorts in the office; possibly eight or ten -thousand shares in all. Suppose they had $20,000 in Sugar -margins. That was enough to pay the shop to thimblerig the -market on the New York Stock Exchange and wipe us out. -In the old days whenever a bucket shop found itself loaded -with too many bulls on a certain stock it was a common -practice to get some broker to wash down the price of that -particular stock far enough to wipe out all the customers -that were long of it. This seldom cost the bucket shop more -than a couple of points on a few hundred shares, and they -made thousands of dollars.</p> - -<p>That was what the Cosmopolitan did to get me and Henry -Williams and the other Sugar shorts. Their brokers in New -York ran up the price to 108. Of course it fell right back, but -Henry and a lot of others were wiped out. Whenever there -was an unexplained sharp drop which was followed by instant -recovery, the newspapers in those days used to call it -a bucket-shop drive.</p> - -<p>And the funniest thing was that not later than ten days -after the Cosmopolitan people tried to double-cross me a -New York operator did them out of over seventy thousand -dollars. This man, who was quite a market factor in his day -and a member of the New York Stock Exchange, made a -great name for himself as a bear during the Bryan panic of -’96. He was forever running up against Stock Exchange rules -that kept him from carrying out some of his plans at the expense -of his fellow members. One day he figured that there<span class="pagenum" id="Page_13">13</span> -would be no complaints from either the Exchange or the -police authorities if he took from the bucket shops of the -land some of their ill-gotten gains. In the instance I speak of -he sent thirty-five men to act as customers. They went to the -main office and to the bigger branches. On a certain day at a -fixed hour the agents all bought as much of a certain stock -as the managers would let them. They had instructions to -sneak out at a certain profit. Of course what he did was to -distribute bull tips on that stock among his cronies and then -he went in to the floor of the Stock Exchange and bid up the -price, helped by the room traders, who thought he was a -good sport. Being careful to pick out the right stock for that -work, there was no trouble in putting up the price three or -four points. His agents at the bucket shops cashed in as -prearranged.</p> - -<p>A fellow told me the originator cleaned up seventy thousand -dollars net, and his agents made their expenses and -their pay besides. He played that game several times all -over the country, punishing the bigger bucket shops of New -York, Boston, Philadelphia, Chicago, Cincinnati and St. -Louis. One of his favorite stocks was Western Union, because -it was so easy to move a semiactive stock like that a few -points up or down. His agents bought it at a certain figure, -sold at two points profit, went short and took three points -more. By the way, I read the other day that that man died, -poor and obscure. If he had died in 1896 he would have got -at least a column on the first page of every New York paper. -As it was he got two lines on the fifth.</p> - -<hr /> - -<p><span class="pagenum" id="Page_14">14</span></p> - -<div class="chapter"> -<h2 id="II"><i>II</i></h2> -</div> - -<p class="in0"><span class="firstword">Between the discovery</span> that the Cosmopolitan Stock -Brokerage Company was ready to beat me by foul means if -the killing handicap of a three-point margin and a point-and-a-half -premium didn’t do it, and hints that they didn’t -want my business anyhow, I soon made up my mind to go -to New York, where I could trade in the office of some -member of the New York Stock Exchange. I didn’t want any -Boston branch, where the quotations had to be telegraphed. -I wanted to be close to the original source. I came to New -York at the age of 21, bringing with me all I had, twenty-five -hundred dollars.</p> - -<p>I told you I had ten thousand dollars when I was twenty, -and my margin on that Sugar deal was over ten thousand. -But I didn’t always win. My plan of trading was sound -enough and won oftener than it lost. If I had stuck to it I’d -have been right perhaps as often as seven out of ten times. -<em>In fact, I always made money when I was sure I was right -before I began. What beat me was not having brains enough -to stick to my own game—that is, to play the market only -when I was satisfied that precedents favored my play.</em> There -is a time for all things, but I didn’t know it. And that is precisely -what beats so many men in Wall Street who are very -far from being in the main sucker class. There is the plain -fool, who does the wrong thing at all times everywhere, but -there is the Wall Street fool, who thinks he must trade all the -time. No man can always have adequate reasons for buying<span class="pagenum" id="Page_15">15</span> -or selling stocks daily—or sufficient knowledge to make his -play an intelligent play.</p> - -<p>I proved it. Whenever I read the tape by the light of experience -I made money, but when I made a plain fool play -I had to lose. I was no exception, was I? There was the huge -quotation board staring me in the face, and the ticker going -on, and people trading and watching their tickets turn into -cash or into waste paper. Of course I let the craving for excitement -get the better of my judgment. In a bucket shop -where your margin is a shoestring you don’t play for long -pulls. You are wiped too easily and quickly. The desire for -constant action irrespective of underlying conditions is responsible -for many losses in Wall Street even among the -professionals, who feel that they must take home some -money every day, as though they were working for regular -wages. I was only a kid, remember. [I did not know then -what I learned later, what made me fifteen years later, wait -two long weeks and see a stock on which I was very bullish -go up thirty points before I felt that it was safe to buy it. I -was broke and was trying to get back, and I couldn’t afford -to play recklessly. I had to be right, and so I waited.] That -was in 1915. It’s a long story. I’ll tell it later in its proper -place. Now let’s go on from where after years of practice at -beating them I let the bucket shops take away most of my -winnings.</p> - -<p>And with my eyes wide open, to boot! And it wasn’t the -only period of my life when I did it, either. A stock operator -has to fight a lot of expensive enemies within himself. Anyhow, -I came to New York with twenty-five hundred dollars. -There were no bucket shops here that a fellow could trust. -The Stock Exchange and the police between them had succeeded -in closing them up pretty tight. Besides, I wanted to -find a place where the only limit to my trading would be the -size of my stake. I didn’t have much of one, but I didn’t expect -it to stay little forever. The main thing at the start was -to find a place where I wouldn’t have to worry about getting<span class="pagenum" id="Page_16">16</span> -a square deal. So I went to a New York Stock Exchange -house that had a branch at home where I knew some of the -clerks. They have long since gone out of business. I wasn’t -there long, didn’t like one of the partners, and then I went -to A. R. Fullerton & Co. Somebody must have told them -about my early experiences, because it was not long before -they all got to calling me the Boy Trader. I’ve always looked -young. It was a handicap in some ways but it compelled me -to fight for my own because so many tried to take advantage -of my youth. The chaps at the bucket shops seeing what a -kid I was, always thought I was a fool for luck and that -was the only reason why I beat them so often.</p> - -<p>Well, it wasn’t six months before I was broke. I was a -pretty active trader and had a sort of reputation as a winner. -I guess my commissions amounted to something. I ran up -my account quite a little, but, of course, in the end I lost. I -played carefully; but I had to lose. I’ll tell you the reason: -it was my remarkable success in the bucket shops!</p> - -<p>I could beat the game my way only in a bucket shop, -where I was betting on fluctuations. My tape reading had to -do with that exclusively. When I bought the price was there -on the quotation board, right in front of me. Even before I -bought I knew exactly the price I’d have to pay for my stock. -And I always could sell on the instant. I could scalp successfully, -because I could move like lightning. [I could follow up -my luck or cut my loss in a second.] Sometimes, for instance, -I was certain a stock would move at least a point. Well, I -didn’t have to hog it, I could put up a point margin and -double my money in a jiffy; or I’d take half a point. On one -or two hundred shares a day, that wouldn’t be bad at the -end of the month, what?</p> - -<p>The practical trouble with that arrangement, of course, -was that even if the bucket shop had the resources to stand -a big steady loss, they wouldn’t do it. They wouldn’t have a -customer around the place who had the bad taste to win all -the time.</p> - -<p><span class="pagenum" id="Page_17">17</span> -At all events, what was a perfect system for trading in -bucket shops didn’t work in Fullerton’s office. There I was -actually buying and selling stocks. The price of Sugar on the -tape might be 105 and I could see a three-point drop coming. -As a matter of fact, at the very moment the ticker was -printing 105 on the tape the real price on the floor of the -Exchange might be 104 or 103. By the time my order to sell -a thousand shares got to Fullerton’s floor man to execute, the -price might be still lower. I couldn’t tell at what price I had -put out my thousand shares until I got a report from the -clerk. When I surely would have made three thousand on -the same transaction in a bucket shop I might not make a -cent in a Stock Exchange house. Of course, I have taken an -extreme case, but the fact remains that in A. R. Fullerton’s -office the tape always talked ancient history to me, as far as -my system of trading went, and I didn’t realise it.</p> - -<p>And then, too, if my order was fairly big my own sale -would tend further to depress the price. In the bucket shop -I didn’t have to figure on the effect of my own trading. I lost -in New York because the game was altogether different. It -was not that I now was playing it legitimately that made me -lose, but that I was playing it ignorantly. I have been told -that I am a good reader of the tape. But reading the tape -like an expert did not save me. I might have made out a -great deal better if I had been on the floor myself, a room -trader. In a particular crowd perhaps I might have adapted -my system to the conditions immediately before me. But, of -course, if I had got to operating on such a scale as I do now, -for instance, the system would have equally failed me, on -account of the effect of my own trading on prices.</p> - -<p>In short, I did not know the game of stock speculation. I -knew a part of it, a rather important part, which has been -very valuable to me at all times. But if with all I had I still -lost, what chance does the green outsider have of winning, -or, rather, of cashing in?</p> - -<p>It didn’t take me long to realise that there was something<span class="pagenum" id="Page_18">18</span> -wrong with my play, but I couldn’t spot the exact trouble. -There were times when my system worked beautifully, and -then, all of a sudden, nothing but one swat after another. I -was only twenty-two, remember; not that I was so stuck on -myself that I didn’t want to know just where I was at fault, -but that at that age nobody knows much of anything.</p> - -<p>The people in the office were very nice to me. I couldn’t -plunge as I wanted to because of their margin requirements, -but old A. R. Fullerton and the rest of the firm were so kind -to me that after six months of active trading I not only lost -all I had brought and all that I had made there but I even -owed the firm a few hundreds.</p> - -<p>There I was, a mere kid, who had never before been away -from home, flat broke; but I knew there wasn’t anything -wrong with me; only with my play. I don’t know whether I -make myself plain, but I never lose my temper over the -stock market. I never argue with the tape. Getting sore at -the market doesn’t get you anywhere.</p> - -<p>I was so anxious to resume trading that I didn’t lose a -minute, but went to old man Fullerton and said to him, -“Say, A. R., lend me five hundred dollars.”</p> - -<p>“What for?” says he.</p> - -<p>“I’ve got to have some money.”</p> - -<p>“What for?” he says again.</p> - -<p>“For margin, of course,” I said.</p> - -<p>“Five hundred dollars?” he said, and frowned. “You know -they’d expect you to keep up a 10 per cent margin, and that -means one thousand dollars on one hundred shares. Much -better to give you a credit——”</p> - -<p>“No,” I said, “I don’t want a credit here. I already owe the -firm something. What I want is for you to lend me five -hundred dollars so I can go out and get a roll and come -back.”</p> - -<p>“How are you going to do it?” asked old A. R.</p> - -<p>“I’ll go and trade in a bucket shop,” I told him.</p> - -<p>“Trade here,” he said.</p> - -<p><span class="pagenum" id="Page_19">19</span> -“No,” I said. “I’m not sure yet I can beat the game in this -office, but I am sure I can take money out of the bucket -shops. I know that game. I have a notion that I know just -where I went wrong here.”</p> - -<p>He let me have it, and I went out of that office where the -Boy Terror of the Bucket Shops, as they called him, had lost -his pile. I couldn’t go back home because the shops there -would not take my business. New York was out of the question; -there weren’t any doing business at that time. They tell -me that in the 90’s Broad Street and New Street were full of -them. But there weren’t any when I needed them in my -business. So after some thinking I decided to go to St. Louis. -I had heard of two concerns there that did an enormous -business all through the Middle West. Their profits must -have been huge. They had branch offices in dozens of towns. -In fact I had been told that there were no concerns in the -East to compare with them for volume of business. They ran -openly and the best people traded there without any qualms. -A fellow even told me that the owner of one of the concerns -was a vice-president of the Chamber of Commerce but that -couldn’t have been in St. Louis. At any rate, that is where I -went with my five hundred dollars to bring back a stake to -use as margin in the office of A. R. Fullerton & Co., members -of the New York Stock Exchange.</p> - -<p>When I got to St. Louis I went to the hotel, washed up -and went out to find the bucket shops. One was the J. G. -Dolan Company, and the other was H. S. Teller & Co. I knew -I could beat them. I was going to play dead safe—carefully -and conservatively. My one fear was that somebody might -recognize me and give me away, because the bucket shops -all over the country had heard of the Boy Trader. They are -like gambling houses and get all the gossip of the profesh.</p> - -<p>Dolan was nearer than Teller, and I went there first. I was -hoping I might be allowed to do business a few days before -they told me to take my trade somewhere else. I walked in. -It was a whopping big place and there must have been at<span class="pagenum" id="Page_20">20</span> -least a couple of hundred people there staring at the quotations. -I was glad, because in such a crowd I stood a better -chance of being unnoticed. I stood and watched the board -and looked them over carefully until I picked out the stock -for my initial play.</p> - -<p>I looked around and saw the order-clerk at the window -where you put down your money and get your ticket. He -was looking at me so I walked up to him and asked, “Is this -where you trade in cotton and wheat?”</p> - -<p>“Yes, sonny,” says he.</p> - -<p>“Can I buy stocks too?”</p> - -<p>“You can if you have the cash,” he said.</p> - -<p>“Oh, I got that all right, all right,” I said like a boasting -boy.</p> - -<p>“You have, have you?” he says with a smile.</p> - -<p>“How much stock can I buy for one hundred dollars?” I -asked, peeved-like.</p> - -<p>“One hundred; if you got the hundred.”</p> - -<p>“I got the hundred. Yes; and two hundred too!” I told him.</p> - -<p>“Oh, my!” he said.</p> - -<p>“Just you buy me two hundred shares,” I said sharply.</p> - -<p>“Two hundred what?” he asked, serious now. It was -business.</p> - -<p>I looked at the board again as if to guess wisely and told -him, “Two hundred Omaha.”</p> - -<p>“All right!” he said. He took my money, counted it and -wrote out the ticket.</p> - -<p>“What’s your name?” he asked me, and I answered, “Horace -Kent.”</p> - -<p>He gave me the ticket and I went away and sat down -among the customers to wait for the roll to grow. I got quick -action and I traded several times that day. On the next day -too. In two days I made twenty-eight hundred dollars, and I -was hoping they’d let me finish the week out. At the rate I -was going, that wouldn’t be so bad. Then I’d tackle the other<span class="pagenum" id="Page_21">21</span> -shop, and if I had similar luck there I’d go back to New -York with a wad I could do something with.</p> - -<p>On the morning of the third day, when I went to the window, -bashful-like, to buy five hundred B.R.T. the clerk said -to me, “Say, Mr. Kent, the boss wants to see you.”</p> - -<p>I knew the game was up. But I asked him, “What does he -want to see me about?”</p> - -<p>“I don’t know.”</p> - -<p>“Where is he?”</p> - -<p>“In his private office. Go in that way.” And he pointed -to a door.</p> - -<p>I went in. Dolan was sitting at his desk. He swung around -and said, “Sit down, Livingston.”</p> - -<p>He pointed to a chair. My last hope vanished. I don’t -know how he discovered who I was; perhaps from the hotel -register.</p> - -<p>“What do you want to see me about?” I asked him.</p> - -<p>“Listen, kid. I ain’t got nothin’ agin yeh, see? Nothin’ at -all. See?”</p> - -<p>“No, I don’t see,” I said.</p> - -<p>He got up from his swivel chair. He was a whopping big -guy. He said to me, “Just come over here, Livingston, will -yeh?” and he walked to the door. He opened it and then he -pointed to the customers in the big room.</p> - -<p>“D’yeh see them?” he asked me.</p> - -<p>“See what?”</p> - -<p>“Them guys. Take a look at ’em, kid. There’s three hundred -of ’em! Three hundred suckers! They feed me and -my family. See? Three hundred suckers! Then yeh come -in, and in two days yeh cop more than I get out of the three -hundred in two weeks. That ain’t business, kid—not for -me! I ain’t got nothin’ agin yeh. Yer welcome to what -ye’ve got. But yeh don’t any more. There ain’t any here -for yeh!”</p> - -<p>“Why, I——”</p> - -<p>“That’s all. I seen yeh come in day before yesterday, and<span class="pagenum" id="Page_22">22</span> -I didn’t like yer looks. On the level, I didn’t. I spotted yeh -for a ringer. I called in that jackass there”—he pointed to the -guilty clerk—“and asked what you’d done; and when he told -me I said to him: ‘I don’t like that guy’s looks. He’s a -ringer!’ And that piece of cheese says: ‘Ringer my eye, boss! -His name is Horace Kent, and he’s a rah-rah boy playing at -being used to long pants. He’s all right!’ Well, I let him have -his way. That blankety-blank cost me twenty-eight hundred -dollars. I don’t grudge it yeh, my boy. But the safe is -locked for yeh.”</p> - -<p>“Look here—” I began.</p> - -<p>“You look here, Livingston,” he said. “I’ve heard all about -yeh. I make my money coppering suckers’ bets, and yeh -don’t belong here. I aim to be a sport and yer welcome to -what yeh pried off’n us. But more of that would make me a -sucker, now that I know who yeh are. So toddle along, -sonny!”</p> - -<p>I left Dolan’s place with my twenty-eight hundred dollars’ -profit. Teller’s place was in the same block. I had found out -that Teller was a very rich man who also ran up a lot of pool -rooms. I decided to go to his bucket shop. I wondered -whether it would be wise to start moderately and work up to -a thousand shares or to begin with a plunge, on the theory -that I might not be able to trade more than one day. They -get wise mighty quick when they’re losing and I did want to -buy one thousand B.R.T. I was sure I could take four or -five points out of it. But if they got suspicious or if too many -customers were long of that stock they might not let me -trade at all. I thought perhaps I’d better scatter my trades at -first and begin small.</p> - -<p>It wasn’t as big a place as Dolan’s, but the fixtures were -nicer and evidently the crowd was of a better class. This -suited me down to the ground and I decided to buy my one -thousand B.R.T. So I stepped up to the proper window -and said to the clerk, “I’d like to buy some B.R.T. What’s -the limit?”</p> - -<p><span class="pagenum" id="Page_23">23</span> -“There’s no limit,” said the clerk. “You can buy all you -please—if you’ve got the money.”</p> - -<p>“Buy fifteen hundred shares,” I says, and took my roll from -my pocket while the clerk starts to write the ticket.</p> - -<p>Then I saw a red-headed man just shove that clerk away -from the counter. He leaned across and said to me, “Say, -Livingston, you go back to Dolan’s. We don’t want your -business.”</p> - -<p>“Wait until I get my ticket,” I said. “I just bought a little -B.R.T.”</p> - -<p>“You get no ticket here,” he said. By this time other clerks -had got behind him and were looking at me. “Don’t ever -come here to trade. We don’t take your business. Understand?”</p> - -<p>There was no sense in getting mad or trying to argue, so -I went back to the hotel, paid my bill and took the first train -back to New York. It was tough. I wanted to take back -some real money and that Teller wouldn’t let me make even -one trade.</p> - -<p>I got back to New York, paid Fullerton his five hundred, -and started trading again with the St. Louis money. I had -good and bad spells, but I was doing better than breaking -even. After all, I didn’t have much to unlearn; only to grasp -the one fact that there was more to the game of stock -speculation than I had considered before I went to Fullerton’s -office to trade. I was like one of those puzzle fans, doing -the crossword puzzles in the Sunday supplement. He isn’t -satisfied until he gets it. Well, I certainly wanted to find the -solution to my puzzle. I thought I was done with trading in -bucket shops. But I was mistaken.</p> - -<p>About a couple of months after I got back to New York an -old jigger came into Fullerton’s office. He knew A.R. Somebody -said they’d once owned a string of race horses together. -It was plain he’d seen better days. I was introduced -to old McDevitt. He was telling the crowd about a bunch of -Western race-track crooks who had just pulled off some<span class="pagenum" id="Page_24">24</span> -skin game out in St. Louis. The head devil, he said, was a -pool-room owner by the name of Teller.</p> - -<p>“What Teller?” I asked him.</p> - -<p>“Hi Teller; H. S. Teller.”</p> - -<p>“I know that bird,” I said.</p> - -<p>“He’s no good,” said McDevitt.</p> - -<p>“He’s worse than that,” I said, “and I have a little matter -to settle with him.”</p> - -<p>“Meaning how?”</p> - -<p>“The only way I can hit any of the short sports is through -their pocketbook. I can’t touch him in St. Louis just now, -but some day I will.” And I told McDevitt my grievance.</p> - -<p>“Well,” says old Mac, “he tried to connect here in New -York and couldn’t make it, so he’s opened a place in Hoboken. -The word’s gone out that there is no limit to the play -and that the house roll has got the Rock of Gibraltar faded -to the shadow of a bantam flea.”</p> - -<p>“What sort of a place?” I thought he meant pool room.</p> - -<p>“Bucket shop,” said McDevitt.</p> - -<p>“Are you sure it’s open?”</p> - -<p>“Yes; I’ve seen several fellows who’ve told me about it.”</p> - -<p>“That’s only hearsay,” I said. “Can you find out positively -if it’s running, and also how heavy they’ll really let a man -trade?”</p> - -<p>“Sure, sonny,” said McDevitt. “I’ll go myself to-morrow -morning, and come back and tell you.”</p> - -<p>He did. It seems Teller was already doing a big business -and would take all he could get. This was on Friday. The -market had been going up all that week—this was twenty -years ago, remember—and it was a cinch the bank statement -on Saturday would show a big decrease in the surplus reserve. -That would give the conventional excuse to the big -room traders to jump on the market and try to shake out -some of the weak commission-house accounts. There would -be the usual reactions in the last half hour of the trading, -particularly in stocks in which the public had been the most<span class="pagenum" id="Page_25">25</span> -active. Those, of course, also would be the very stocks that -Teller’s customers would be most heavily long of, and the -shop might be glad to see some short selling in them. There -is nothing so nice as catching the suckers both ways; and -nothing so easy—with one-point margins.</p> - -<p>That Saturday morning I chased over to Hoboken to the -Teller place. They had fitted up a big customers’ room with -a dandy quotation board and a full force of clerks and a -special policeman in gray. There were about twenty-five -customers.</p> - -<p>I got talking to the manager. He asked me what he could -do for me and I told him nothing; that a fellow could make -much more money at the track on account of the odds and -the freedom to bet your whole roll and stand to win thousands -in minutes instead of piking for chicken feed in stocks -and having to wait days, perhaps. He began to tell me how -much safer the stock-market game was, and how much some -of their customers made—you’d have sworn it was a regular -broker who actually bought and sold your stocks on the Exchange—and -how if a man only traded heavy he could make -enough to satisfy anybody. He must have thought I was -headed for some pool room and he wanted a whack at my -roll before the ponies nibbled it away, for he said I ought to -hurry up as the market closed at twelve o’clock on Saturdays. -That would leave me free to devote the entire afternoon to -other pursuits. I might have a bigger roll to carry to the track -with me—if I picked the right stocks.</p> - -<p>I looked as if I didn’t believe him, and he kept on buzzing -me. I was watching the clock. At 11:15 I said, “All right,” -and I began to give him selling orders in various stocks. I -put up two thousand dollars in cash, and he was very glad to -get it. He told me he thought I’d make a lot of money and -hoped I’d come in often.</p> - -<p>It happened just as I figured. <em>The traders hammered the -stocks in which they figured they would uncover the most -stops, and, sure enough, prices slid off. I closed out my trades<span class="pagenum" id="Page_26">26</span> -just before the rally of the last five minutes on the usual -traders’ covering.</em></p> - -<p>There was fifty-one hundred dollars coming to me. I went -to cash in.</p> - -<p>“I’m glad I dropped in,” I said to the manager, and gave -him my tickets.</p> - -<p>“Say,” he says to me, “I can’t give you all of it. I wasn’t -looking for such a run. I’ll have it here for you Monday -morning, sure as blazes.”</p> - -<p>“All right. But first I’ll take all you have in the house,” -I said.</p> - -<p>“You’ve got to let me pay off the little fellows,” he said. -“I’ll give you back what you put up, and anything that’s left. -Wait till I cash the other tickets.” So I waited while he paid -off the winners. Oh, I knew my money was safe. Teller -wouldn’t welsh with the office doing such a good business. -And if he did, what else could I do better than to take all he -had then and there? I got my own two thousand dollars and -about eight hundred dollars besides, which was all he had in -the office. I told him I’d be there Monday morning. He -swore the money would be waiting for me.</p> - -<p>I got to Hoboken a little before twelve on Monday. I saw -a fellow talking to the manager that I had seen in the St. -Louis office the day Teller told me to go back to Dolan. I -knew at once that the manager had telegraphed to the home -office and they’d sent up one of their men to investigate the -story. Crooks don’t trust anybody.</p> - -<p>“I came for the balance of my money,” I said to the -manager.</p> - -<p>“Is this the man?” asked the St. Louis chap.</p> - -<p>“Yes,” said the manager, and took a bunch of yellow backs -from his pocket.</p> - -<p>“Hold on!” said the St. Louis fellow to him and then turns -to me, “Say, Livingston, didn’t we tell you we didn’t want -your business?”</p> - -<p>“Give me my money first,” I said to the manager, and he<span class="pagenum" id="Page_27">27</span> -forked over two thousands, four five-hundreds and three -hundreds.</p> - -<p>“What did you say?” I said to St. Louis.</p> - -<p>“We told you we didn’t want you to trade in our place.”</p> - -<p>“Yes,” I said; “that’s why I came.”</p> - -<p>“Well, don’t come any more. Keep away!” he snarled at -me. The private policeman in gray came over, casual-like. -St. Louis shook his fist at the manager and yelled: “You -ought to’ve known better, you poor boob, than to let this guy -get into you. He’s Livingston. You had your orders.”</p> - -<p>“Listen, you,” I said to the St. Louis man. “This isn’t St. -Louis. You can’t pull off any trick here, like your boss did -with Belfast Boy.”</p> - -<p>“You keep away from this office! You can’t trade here!” -he yells.</p> - -<p>“If I can’t trade here nobody else is going to,” I told him. -“You can’t get away with that sort of stuff here.”</p> - -<p>Well, St. Louis changed his tune at once.</p> - -<p>“Look here, old boy,” he said, all fussed up, “do us a favor. -Be reasonable! You know we can’t stand this every day. The -old man’s going to hit the ceiling when he hears who it was. -Have a heart, Livingston!”</p> - -<p>“I’ll go easy,” I promised.</p> - -<p>“Listen to reason, won’t you? For the love of Pete, keep -away! Give us a chance to get a good start. We’re new -here. Will you?”</p> - -<p>“I don’t want any of this high-and-mighty business the -next time I come,” I said, and left him talking to the manager -at the rate of a million a minute. I’d got some money -out of them for the way they treated me in St. Louis. There -wasn’t any sense in my getting hot or trying to close them up. -I went back to Fullerton’s office and told McDevitt what had -happened. Then I told him that if it was agreeable to him -I’d like to have him go to Teller’s place and begin trading in -twenty or thirty share lots, to get them used to him. Then,<span class="pagenum" id="Page_28">28</span> -the moment I saw a good chance to clean up big, I’d telephone -him and he could plunge.</p> - -<p>I gave McDevitt a thousand dollars and he went to Hoboken -and did as I told him. He got to be one of the regulars. -Then one day when I thought I saw a break impending I -slipped Mac the word and he sold all they’d let him. I -cleared twenty-eight hundred dollars that day, after giving -Mac his rake-off and paying expenses, and I suspect Mac -put down a little bet of his own besides. Less than a month -after that, Teller closed his Hoboken branch. The police got -busy. And, anyhow, it didn’t pay, though I only traded -twice. We ran into a crazy bull market when stocks didn’t -react enough to wipe out even the one-point margins, and, -of course, all the customers were bulls and winning and -pyramiding. No end of bucket shops busted all over the -country.</p> - -<p>Their game has changed. Trading in the old-fashioned -bucket shop had some decided advantages over speculating -in a reputable broker’s office. For one thing the automatic -closing out of your trade when the margin reached the exhaustion -point was the best kind of stop-loss order. You -couldn’t get stung for more than you had put up and there -was no danger of rotten execution of orders, and so on. In -New York the shops never were as liberal with their patrons -as I’ve heard they were in the West. Here they used to limit -the possible profit on certain stocks of the football order to -two points. Sugar and Tennessee Coal and Iron were among -these. No matter if they moved ten points in ten minutes -you could only make two on one ticket. They figured that -otherwise the customer was getting too big odds; he stood to -lose one dollar and to make ten. And then there were times -when all the shops, including the biggest, refused to take -orders on certain stocks. In 1900, on the day before Election -Day, when it was foregone conclusion that McKinley would -win, not a shop in the land let its customers buy stocks. The -election odds were 3 to 1 on McKinley. By buying stocks on<span class="pagenum" id="Page_29">29</span> -Monday you stood to make from three to six points or more. -A man could bet on Bryan and buy stocks and make sure -money. The bucket shops refused orders all that day.</p> - -<p>If it hadn’t been for their refusing to take my business -I never would have stopped trading with them. And then I -never would have learned that there was much more to the -game of stock speculation than to play for fluctuations of a -few points.</p> - -<hr /> - -<p><span class="pagenum" id="Page_30">30</span></p> - -<div class="chapter"> -<h2 id="III"><i>III</i></h2> -</div> - -<p class="in0"><span class="firstword">It takes a man</span> a long time to learn all the lessons of all his -mistakes. They say there are two sides to everything. But -there is only one side to the stock market; and it is not the -bull side or the bear side, but the right side. It took me -longer to get that general principle fixed firmly in my mind -than it did most of the more technical phases of the game -of stock speculation.</p> - -<p>I have heard of people who amuse themselves conducting -imaginary operations in the stock market to prove with imaginary -dollars how right they are. Sometimes these ghost -gamblers make millions. It is very easy to be a plunger that -way. It is like the old story of the man who was going to -fight a duel the next day.</p> - -<p>His second asked him, “Are you a good shot?”</p> - -<p>“Well,” said the duelist, “I can snap the stem of a wineglass -at twenty paces,” and he looked modest.</p> - -<p>“That’s all very well,” said the unimpressed second. “But -can you snap the stem of the wineglass while the wineglass -is pointing a loaded pistol straight at your heart?”</p> - -<p>With me I must back my opinions with my money. My -losses have taught me that I must not begin to advance until -I am sure I shall not have to retreat. But if I cannot advance -I do not move at all. I do not mean by this that a man should -not limit his losses when he is wrong. He should. But that -should not breed indecision. All my life I have made mistakes, -but in losing money I have gained experience and accumulated<span class="pagenum" id="Page_31">31</span> -a lot of valuable don’ts. I have been flat broke -several times, but my loss has never been a total loss. Otherwise, -I wouldn’t be here now. I always knew I would have -another chance and that I would not make the same mistake -a second time. I believed in myself.</p> - -<p>A man must believe in himself and his judgment if he expects -to make a living at this game. That is why I don’t believe -in tips. If I buy stocks on Smith’s tip I must sell -those same stocks on Smith’s tip. I am depending on him. -Suppose Smith is away on a holiday when the selling time -comes around? No, sir, nobody can make big money on -what someone else tells him to do. <em>I know from experience -that nobody can give me a tip or a series of tips that will -make more money for me than my own judgment. It took me -five years to learn to play the game intelligently enough to -make big money when I was right.</em></p> - -<p>I didn’t have as many interesting experiences as you might -imagine. I mean, the process of learning how to speculate -does not seem very dramatic at this distance. I went broke -several times, and that is never pleasant, but the way I lost -money is the way everybody loses money who loses money -in Wall Street. Speculation is a hard and trying business, and -a speculator must be on the job all the time or he’ll soon -have no job to be on.</p> - -<p>My task, as I should have known after my early reverses at -Fullerton’s, was very simple: To look at speculation from -another angle. But I didn’t know that there was much more -to the game than I could possibly learn in the bucket shops. -There I thought I was beating the game when in reality I -was only beating the shop. At the same time the tape-reading -ability that trading in bucket-shops developed in me and -the training of my memory have been extremely valuable. -Both of these things came easy to me. I owe my early success -as a trader to them and not to my brains or knowledge, because -my mind was untrained and my ignorance was colossal.<span class="pagenum" id="Page_32">32</span> -The game taught me the game. And it didn’t spare the -rod while teaching.</p> - -<p>I remember my very first day in New York. I told you -how the bucket shops, by refusing to take my business, drove -me to seek a reputable commission house. One of the boys in -the office where I got my first job was working for Harding -Brothers, members of the New York Stock Exchange. I arrived -in this city in the morning, and before one o’clock -that same day I had opened an account with the firm and -was ready to trade.</p> - -<p>I didn’t explain to you how natural it was for me to -trade there exactly as I had done in the bucket shops, where -all I did was to bet on fluctuations and catch small but sure -changes in prices. Nobody offered to point out the essential -differences or set me right. If somebody had told me my -method would not work I nevertheless would have tried it -out to make sure for myself, for when I am wrong only one -thing convinces me of it, and that is, to lose money. And I -am only right when I make money. That is speculating.</p> - -<p>They were having some pretty lively times those days and -the market was very active. That always cheers up a fellow. -I felt at home right away. There was the old familiar quotation -board in front of me, talking a language that I had -learned before I was fifteen years old. There was a boy doing -exactly the same thing I used to do in the first office I ever -worked in. There were the customers—same old bunch—looking -at the board or standing by the ticket calling out the -prices and talking about the market. The machinery was to -all appearances the same machinery that I was used to. The -atmosphere was the atmosphere I had breathed since I had -made my first stock-market money—$3.12 in Burlington. The -same kind of ticker and the same kind of traders, therefore -the same kind of game. And remember, I was only twenty-two. -I suppose I thought I knew the game from A to Z. Why -shouldn’t I?</p> - -<p>I watched the board and saw something that looked good<span class="pagenum" id="Page_33">33</span> -to me. It was behaving right. I bought a hundred at 84. I got -out at 85 in less than a half hour. Then I saw something else -I liked, and I did the same thing; took three-quarters of a -point net within a very short time. I began well, didn’t I?</p> - -<p>Now mark this: On that, my first day as a customer of a -reputable Stock Exchange house, and only two hours of it at -that, I traded in eleven hundred shares of stock, jumping -in and out. And the net result of the day’s operations was -that I lost exactly eleven hundred dollars. That is to say, on -my first attempt, nearly one-half of my stake went up the -flue. And remember, some of the trades showed me a profit. -But I quit eleven hundred dollars minus for the day.</p> - -<p>It didn’t worry me, because I couldn’t see where there was -anything wrong with me. My moves, also, were right -enough, and if I had been trading in the old Cosmopolitan -shop I’d have broken better than even. That the machine -wasn’t as it ought to be, my eleven hundred vanished dollars -plainly told me. But as long as the machinist was all -right there was no need to stew. Ignorance at twenty-two -isn’t a structural defect.</p> - -<p>After a few days I said to myself, “I can’t trade this way -here. The ticker doesn’t help as it should!” But I let it go -at that without getting down to bed rock. I kept it up, -having good days and bad days, until I was cleaned out. I -went to old Fullerton and got him to stake me to five hundred -dollars. And I came back from St. Louis, as I told you, -with money I took out of the bucket shops there—a game I -could always beat.</p> - -<p>I played more carefully and did better for a while. As soon -as I was in easy circumstances I began to live pretty well. I -made friends and had a good time. I was not quite twenty-three, -remember; all alone in New York with easy money in -my pockets and the belief in my heart that I was beginning -to understand the new machine.</p> - -<p>I was making allowances for the actual execution of my -orders on the floor of the Exchange, and moving more cautiously.<span class="pagenum" id="Page_34">34</span> -But I was still sticking to the tape—that is, I was -still ignoring general principles; and as long as I did that I -could not spot the exact trouble with my game.</p> - -<p>We ran into the big boom of 1901 and I made a great deal -of money—that is, for a boy. You remember those times? -The prosperity of the country was unprecedented. We not -only ran into an era of industrial consolidations and combinations -of capital that beat anything we had had up to -that time, but the public went stock mad. In previous flush -times, I have heard, Wall Street used to brag of -two-hundred-and-fifty-thousand-share -days, when securities of a par -value of twenty-five million dollars changed hands. But in -1901 we had a three-million-share day. Everybody was making -money. The steel crowd came to town, a horde of millionaires -with no more regard for money than drunken sailors. -The only game that satisfied them was the stock market. -We had some of the biggest high rollers the Street ever saw: -John W. Gates, of ‘Bet-you-a-million’ fame, and his friends, -like John A. Drake, Loyal Smith, and the rest; the Reid-Leeds-Moore -crowd, who sold part of their steel holdings and -with the proceeds bought in the open market the actual -majority of the stock of the great Rock Island system; and -Schwab and Frick and Phipps and the Pittsburg coterie; to -say nothing of scores of men who were lost in the shuffle but -would have been called great plungers at any other time. A -fellow could buy and sell all the stock there was. Keene -made a market for the U.S. Steel shares. A broker sold one -hundred thousand shares in a few minutes. A wonderful -time! And there were some wonderful winnings. And no -taxes to pay on stock sales! And no day of reckoning in -sight.</p> - -<p>Of course, after a while, I heard a lot of calamity howling -and the old stagers said everybody—except themselves—had -gone crazy. But everybody except themselves was making -money. I knew, of course, there must be a limit to the advances -and an end to the crazy buying of A.O.T.—Any Old<span class="pagenum" id="Page_35">35</span> -Thing—and I got bearish. But every time I sold I lost -money, and if it hadn’t been that I ran darn quick I’d have -lost a heap more. I looked for a break, but I was playing -safe—making money when I bought and chipping it out -when I sold short—so that I wasn’t profiting by the boom as -much as you’d think when you consider how heavily I used -to trade, even as a boy.</p> - -<p>There was one stock that I wasn’t short of, and that was -Northern Pacific. My tape reading came in handy. I thought -most stocks had been bought to a standstill, but Little Nipper -behaved as if it were going still higher. We know now -that both the common and the preferred were being steadily -absorbed by the Kuhn-Loeb-Harriman combination. Well, I -was long a thousand shares of Northern Pacific common, and -held it against the advice of everybody in the office. When it -got to about 110 I had thirty points profit, and I grabbed it. -It made my balance at my brokers’ nearly fifty thousand -dollars, the greatest amount of money I had been able to accumulate -up to that time. It wasn’t so bad for a chap who -had lost every cent trading in that selfsame office a few -months before.</p> - -<p>If you remember, the Harriman crowd notified Morgan -and Hill of their intention to be represented in the Burlington-Great -Northern-Northern Pacific combination, and then -the Morgan people at first instructed Keene to buy fifty -thousand shares of N.P. to keep the control in their possession. -I have heard that Keene told Robert Bacon to make the -order one hundred and fifty thousand shares and the bankers -did. At all events, Keene sent one of his brokers, Eddie Norton, -into the N.P. crowd and he bought one hundred thousand -shares of the stock. This was followed by another order, -I think, of fifty thousand shares additional, and the famous -corner followed. After the market closed on May 8, 1901, the -whole world knew that a battle of financial giants was on. -No two such combinations of capital had ever opposed each<span class="pagenum" id="Page_36">36</span> -other in this country. Harriman against Morgan; an irresistible -force meeting an immovable object.</p> - -<p>There I was on the morning of May ninth with nearly fifty -thousand dollars in cash and no stocks. As I told you, I had -been very bearish for some days, and here was my chance -at last. I knew what would happen—an awful break and -then some wonderful bargains. There would be a quick recovery -and big profits—for those who had picked up the -bargains. It didn’t take Sherlock Holmes to figure this out. -We were going to have an opportunity to catch them coming -and going, not only for big money but for sure money.</p> - -<p>Everything happened as I had foreseen. I was dead right -and—I lost every cent I had! I was wiped out by something -that was unusual. If the unusual never happened there -would be no difference in people and then there wouldn’t be -any fun in life. The game would become merely a matter of -addition and subtraction. It would make of us a race of -bookkeepers with plodding minds. It’s the guessing that develops -a man’s brain power. Just consider what you have to -do to guess right.</p> - -<p>The market fairly boiled, as I had expected. The transactions -were enormous and the fluctuations unprecedented -in extent. I put in a lot of selling orders at the market. When -I saw the opening prices I had a fit, the breaks were so -awful. My brokers were on the job. They were as competent -and conscientious as any; but by the time they executed my -orders the stocks had broken twenty points more. The tape -was way behind the market and reports were slow in coming -in by reason of the awful rush of business. When I found out -that the stocks I had ordered sold when the tape said the -price was, say, 100 and they got mine off at 80, making a -total decline of thirty or forty points from the previous -night’s close, it seemed to me that I was putting out shorts -at a level that made the stocks I sold the very bargains I had -planned to buy. The market was not going to drop right<span class="pagenum" id="Page_37">37</span> -through to China. So I decided instantly to cover my shorts -and go long.</p> - -<p>My brokers bought; not at the level that had made me -turn, but at the prices prevailing in the Stock Exchange -when their floor man got my orders. They paid an average of -fifteen points more than I had figured on. A loss of thirty-five -points in one day was more than anybody could stand.</p> - -<p>The ticker beat me by lagging so far behind the market. I -was accustomed to regarding the tape as the best little friend -I had because I bet according to what it told me. But this -time the tape double-crossed me. The divergence between -the printed and the actual prices undid me. It was the -sublimation of my previous unsuccess, the selfsame thing -that had beaten me before. It seems so obvious now that -tape reading is not enough, irrespective of the brokers’ execution, -that I wonder why I didn’t then see both my trouble -and the remedy for it.</p> - -<p>I did worse than not see it; I kept on trading, in and out, -regardless of the execution. You see, I never could trade -with a limit. I must take my chances with the market. -That is what I am trying to beat—the market, not the -particular price. When I think I should sell, I sell. When I -think stocks will go up, I buy. My adherence to that general -principle of speculation saved me. To have traded at limited -prices simply would have been my old bucket-shop method -inefficiently adapted for use in a reputable commission -broker’s office. I would never have learned to know what -stock speculation is, but would have kept on betting on what -a limited experience told me was a sure thing.</p> - -<p>Whenever I did try to limit the prices in order to minimize -the disadvantages of trading at the market when the ticker -lagged, I simply found that the market got away from me. -This happened so often that I stopped trying. I can’t tell you -how it came to take me so many years to learn that instead -of placing piking bets on what the next few quotations were<span class="pagenum" id="Page_38">38</span> -going to be, my game was to anticipate what was going to -happen in a big way.</p> - -<p>After my May ninth mishap I plugged along, using a modified -but still defective method. If I hadn’t made money some -of the time I might have acquired market wisdom quicker. -But I was making enough to enable me to live well. I liked -friends and a good time. I was living down the Jersey Coast -that summer, like hundreds of prosperous Wall Street men. -My winnings were not quite enough to offset both my losses -and my living expenses.</p> - -<p>I didn’t keep on trading the way I did through stubbornness. -I simply wasn’t able to state my own problem to myself, -and, of course, it was utterly hopeless to try to solve it. -I harp on this topic so much to show what I had to go -through before I got to where I could really make money. -My old shotgun and BB shot could not do the work of a -high-power repeating rifle against big game.</p> - -<p>Early that fall I not only was cleaned out again but I was -so sick of the game I could no longer beat that I decided to -leave New York and try something else some other place. I -had been trading since my fourteenth year. I had made my -first thousand dollars when I was a kid of fifteen, and my -first ten thousand before I was twenty-one. I had made and -lost a ten-thousand-dollar stake more than once. In New -York I had made thousands and lost them. I got up to fifty -thousand dollars and two days later that went. I had no -other business and knew no other game. After several years -I was back where I began. No—worse, for I had acquired -habits and a style of living that required money; though that -part didn’t bother me as much as being wrong so consistently.</p> - -<hr /> - -<p><span class="pagenum" id="Page_39">39</span></p> - -<div class="chapter"> -<h2 id="IV"><i>IV</i></h2> -</div> - -<p class="in0"><span class="firstword">Well, I went home.</span> But the moment I was back I knew -that I had but one mission in life and that was to get a -stake and go back to Wall Street. That was the only place -in the country where I could trade heavily. Some day, when -my game was all right, I’d need such a place. When a man is -right he wants to get all that is coming to him for being -right.</p> - -<p>I didn’t have much hope, but, of course, I tried to get into -the bucket shops again. There were fewer of them and some -of them were run by strangers. Those who remembered me -wouldn’t give me a chance to show them whether I had -gone back as a trader or not. I told them the truth, that I had -lost in New York whatever I had made at home; that I didn’t -know as much as I used to think I did; and that there was no -reason why it should not now be good business for them to -let me trade with them. But they wouldn’t. And the new -places were unreliable. Their owners thought twenty shares -was as much as a gentleman ought to buy if he had any -reason to suspect he was going to guess right.</p> - -<p>I needed the money and the bigger shops were taking in -plenty of it from their regular customers. I got a friend of -mine to go into a certain office and trade. I just sauntered in -to look them over. I again tried to coax the order clerk to accept -a small order, even if it was only fifty shares. Of course -he said no. I had rigged up a code with this friend so that -he would buy or sell when and what I told him. But that<span class="pagenum" id="Page_40">40</span> -only made me chicken feed. Then the office began to grumble -about taking my friend’s orders. Finally one day he tried -to sell a hundred St. Paul and they shut down on him.</p> - -<p>We learned afterward that one of the customers saw us -talking together outside and went in and told the office, and -when my friend went up to the order clerk to sell that hundred -St. Paul the guy said:</p> - -<p>“We’re not taking any selling orders in St. Paul, not from -you.”</p> - -<p>“Why, what’s the matter, Joe?” asked my friend.</p> - -<p>“Nothing doing, that’s all,” answered Joe.</p> - -<p>“Isn’t that money any good? Look it over. It’s all there.” -And my friend passed over the hundred—my hundred—in -tens. He tried to look indignant and I was looking unconcerned; -but most of the other customers were getting close -to the combatants, as they always did when there was loud -talking or the slightest semblance of a scrap between the -shop and any customer. They wanted to get a line on the -merits of the case in order to get a line on the solvency of the -concern.</p> - -<p>The clerk, Joe, who was a sort of assistant manager, came -out from behind his cage, walked up to my friend, looked at -him and then looked at me.</p> - -<p>“It’s funny,” he said slowly—“it’s damned funny that you -never do a single thing here when your friend Livingston -isn’t around. You just sit and look at the board by the hour. -Never a peep. But after he comes in you get busy all of a -sudden. Maybe you are acting for yourself; but not in this -office any more. We don’t fall for Livingston tipping you -off.”</p> - -<p>Well, that stopped my board money. But I had made a -few hundred more than I had spent and I wondered how I -could use them, for the need of making enough money to -go back to New York with was more urgent than ever. I felt -that I would do better the next time. I had had time to think -calmly of some of my foolish plays; and then, one can see<span class="pagenum" id="Page_41">41</span> -the whole better when one sees it from a little distance. The -immediate problem was to make the new stake.</p> - -<p>One day I was in a hotel lobby, talking to some fellows I -knew, who were pretty steady traders. Everybody was talking -stock market. I made the remark that nobody could beat -the game on account of the rotten execution he got from his -brokers, especially when he traded at the market, as I did.</p> - -<p>A fellow piped up and asked me what particular brokers I -meant.</p> - -<p>I said, “The best in the land,” and he asked who might -they be. I could see he wasn’t going to believe I ever dealt -with first-class houses.</p> - -<p>But I said, “I mean, any member of the New York Stock -Exchange. It isn’t that they are crooked or careless, but -when a man gives an order to buy at the market he never -knows what that stock is going to cost him until he gets a -report from the brokers. There are more moves of one or two -points than of ten and fifteen. But the outside trader can’t -catch the small rises or drops because of the execution. I’d -rather trade in a bucket shop any day in the week, if they’d -only let a fellow trade big.”</p> - -<p>The man who had spoken to me I had never seen before. -His name was Roberts. He seemed very friendly disposed. -He took me aside and asked me if I had ever traded in any -of the other exchanges, and I said no. He said he knew some -houses that were members of the Cotton Exchange and the -Produce Exchange and the smaller stock exchanges. These -firms were very careful and paid special attention to the execution. -He said that they had confidential connections with -the biggest and smartest houses on the New York Stock Exchange -and through their personal pull and by guaranteeing -a business of hundreds of thousands of shares a month they -got much better service than an individual customer could -get.</p> - -<p>“They really cater to the small customer,” he said. “They -make a specialty of out-of-town business and they take just<span class="pagenum" id="Page_42">42</span> -as much pains with a ten-share order as they do with one for -ten thousand. They are very competent and honest.”</p> - -<p>“Yes. But if they pay the Stock Exchange house the regular -eighth commission, where do they come in?”</p> - -<p>“Well, they are supposed to pay the eighth. But—you -know!” He winked at me.</p> - -<p>“Yes,” I said. “But the one thing a Stock Exchange firm -will not do is to split commissions. The governors would -rather a member committed murder, arson and bigamy than -to do business for outsiders for less than a kosher eighth. -The very life of the Stock Exchange depends upon their not -violating that one rule.”</p> - -<p>He must have seen that I had talked with Stock Exchange -people, for he said, “Listen! Every now and then one of those -pious Stock Exchange houses is suspended for a year for violating -that rule, isn’t it? There are ways and ways of rebating -so nobody can squeal.” He probably saw unbelief in -my face, for he went on: “And besides, on certain kinds of -business we—I mean, these wire houses—charge a thirty-second -extra, in addition to the eighth commission. They are -very nice about it. They never charge the extra commission -except in unusual cases, and then only if the customer has -an inactive account. It wouldn’t pay them, you know, otherwise. -They aren’t in business exclusively for their health.”</p> - -<p>By that time I knew he was touting for some phony brokers.</p> - -<p>“Do you know any reliable house of that kind?” I asked -him.</p> - -<p>“I know the biggest brokerage firm in the United States,” -he said. “I trade there myself. They have branches in seventy-eight -cities in the United States and Canada. They do an -enormous business. And they couldn’t very well do it year in -and year out if they weren’t strictly on the level, could they?”</p> - -<p>“Certainly not,” I agreed. “Do they trade in the same -stocks that are dealt in on the New York Stock Exchange?”</p> - -<p>“Of course; and on the curb and on any other exchange in<span class="pagenum" id="Page_43">43</span> -this country, or Europe. They deal in wheat, cotton, provisions; -anything you want. They have correspondents -everywhere and memberships in all the exchanges, either in -their own name or on the quiet.”</p> - -<p>I knew by that time, but I thought I’d lead him on.</p> - -<p>“Yes,” I said, “but that does not alter the fact that the orders -have to be executed by somebody, and nobody living -can guarantee how the market will be or how close the -ticker’s prices are to the actual prices on the floor of the Exchange. -By the time a man gets the quotation here and he -hands in an order and it’s telegraphed to New York, some -valuable time has gone. I might better go back to New York -and lose my money there in respectable company.”</p> - -<p>“I don’t know anything about losing money; our customers -don’t acquire that habit. They make money. We take care -of that.”</p> - -<p>“Your customers?”</p> - -<p>“Well, I take an interest in the firm, and if I can turn some -business their way I do so because they’ve always treated -me white and I’ve made a good deal of money through them. -If you wish I’ll introduce you to the manager.”</p> - -<p>“What’s the name of the firm?” I asked him.</p> - -<p>He told me. I had heard about them. They ran ads in all -the papers, calling attention to the great profits made by -those customers who followed their inside information on active -stocks. That was the firm’s great specialty. They were -not a regular bucket shop, but bucketeers, alleged brokers -who bucketed their orders but nevertheless went through an -elaborate camouflage to convince the world that they were -regular brokers engaged in a legitimate business. They were -one of the oldest of that class firms.</p> - -<p>They were the prototype at that time of the same sort of -brokers that went broke this year by the dozen. The general -principles and methods were the same, though the particular -devices for fleecing the public differed somewhat,<span class="pagenum" id="Page_44">44</span> -certain details having been changed when the old tricks became -too well known.</p> - -<p>These people used to send out tips to buy or sell a certain -stock—hundreds of telegrams advising the instant purchase -of a certain stock and hundreds recommending other customers -to sell the same stock, on the old racing-tipster plan. -Then orders to buy and sell would come in. The firm would -buy and sell, say, a thousand of that stock through a reputable -Stock Exchange firm and get a regular report on it. This -report they would show to any doubting Thomas who was -impolite enough to speak about bucketing customers’ orders.</p> - -<p>They also used to form discretionary pools in the office -and as a great favor allowed their customers to authorize -them, in writing, to trade with the customer’s money and in -the customer’s name, as they in their judgment deemed best. -That way the most cantankerous customer had no legal redress -when the money disappeared. They’d bull a stock, on -paper, and put the customers in and then they’d execute one -of the old-fashioned bucket-shop drives and wipe out hundreds -of shoe-string margins. They did not spare anyone, -women, school-teachers and old men being their best bet.</p> - -<p>“I’m sore on all brokers,” I told the tout. “I’ll have to think -this over,” and I left him so he wouldn’t talk any more to me.</p> - -<p>I inquired about this firm. I learned that they had hundreds -of customers and although there were the usual stories -I did not find any case of a customer not getting his money -from them if he won any. The difficulty was in finding anybody -who had ever won in that office; but I did. Things -seemed to be going their way just then, and that meant that -they probably would not welsh if a trade went against them. -Of course most concerns of that kind eventually go broke. -There are times when there are regular epidemics of bucketeering -bankruptcies, like the old-fashioned runs on several -banks after one of them goes up. The customers of the others -get frightened and they run to take their money out. But<span class="pagenum" id="Page_45">45</span> -there are plenty of retired bucket-shop keepers in this country.</p> - -<p>Well, I heard nothing alarming about the tout’s firm except -that they were on the make, first, last and all the time, and -that they were not always truthful. Their specialty was trimming -suckers who wanted to get rich quick. But they always -asked their customers’ permission, in writing, to take their -rolls away from them.</p> - -<p>One chap I met did tell me a story about seeing six hundred -telegrams go out one day advising customers to get -aboard a certain stock and six hundred telegrams to other -customers strongly urging them to sell that same stock, at -once.</p> - -<p>“Yes, I know the trick,” I said to the chap who was telling -me.</p> - -<p>“Yes,” he said. “But the next day they sent telegrams to the -same people advising them to close out their interest in -everything and buy—or sell—another stock. I asked the -senior partner, who was in the office, ‘Why do you do that? -The first part I understand. Some of your customers are -bound to make money on paper for a while, even if they and -the others eventually lose. But by sending out telegrams like -this you simply kill them all. What’s the big idea?’</p> - -<p>“‘Well,’ he said, ‘the customers are bound to lose their -money anyhow, no matter what they buy, or how or where -or when. When they lose their money I lose the customers. -Well, I might as well get as much of their money as I can—and -then look for a new crop.’”</p> - -<p>Well, I admit frankly that I wasn’t concerned with the -business ethics of the firm. I told you I felt sore on the Teller -concern and how it tickled me to get even with them. But I -didn’t have any such feeling about this firm. They might be -crooks or they might not be as black as they were painted. I -did not propose to let them do any trading for me, or follow -their tips or believe their lies. My one concern was with getting -together a stake and returning to New York to trade in<span class="pagenum" id="Page_46">46</span> -fair amounts in an office where you did not have to be afraid -the police would raid the joint, as they did the bucket shops, -or see the postal authorities swoop down and tie up your -money so that you’d be lucky to get eight cents on the dollar -a year and a half later.</p> - -<p>Anyhow, I made up my mind that I would see what trading -advantages of this firm offered over what you might call -the legitimate brokers. I didn’t have much money to put up -as margin, and firms that bucketed orders were naturally -much more liberal in that respect, so that a few hundred -dollars went much further in their offices.</p> - -<p>I went down to their place and had a talk with the manager -himself. When he found out that I was an old trader -and had formerly had accounts in New York with Stock -Exchange houses and that I had lost all I took with me he -stopped promising to make a million a minute for me if I let -them invest my savings. He figured that I was a permanent -sucker, the ticker-hound kind that always plays and always -loses; a steady-income provider for brokers, whether they -were the kind that bucket your orders or modestly content -themselves with the commissions.</p> - -<p>I just told the manager that what I was looking for was -decent execution, because I always traded at the market and -I didn’t want to get reports that showed a difference of a -half or a whole point from the ticker price.</p> - -<p>He assured me on his word of honor that they would do -whatever I thought was right. They wanted my business because -they wanted to show me what high-class brokering -was. They had in their employ the best talent in the business. -In fact, they were famous for their execution. If there was -any difference between the ticker price and the report it was -always in favor of the customer, though of course they didn’t -guarantee that. If I opened an account with them I could -buy and sell at the price which came over the wire, they were -so confident of their brokers.</p> - -<p>Naturally that meant that I could trade there to all intents<span class="pagenum" id="Page_47">47</span> -and purposes as though I were in a bucket shop—that is, -they’d let me trade at the next quotation. I didn’t want to -appear too anxious, so I shook my head and told him I -guessed I wouldn’t open an account that day, but I’d let him -know. He urged me strongly to begin right way as it was a -good market to make money in. It was—for them; a dull -market with prices seesawing slightly, just the kind to get -customers in and then wipe them out with a sharp drive in -the tipped stock. I had some trouble in getting away.</p> - -<p>I had given him my name and address, and that very same -day I began to get prepaid telegrams and letters urging me -to get aboard of some stock or other in which they said they -knew an inside pool was operating for a fifty-point rise.</p> - -<p>I was busy going around and finding out all I could about -several other brokerage concerns of the same bucketing kind. -It seemed to me that if I could be sure of getting my winnings -out of their clutches the only way of my getting together -some real money was to trade in these near bucket -shops.</p> - -<p>When I had learned all I could I opened accounts with -three firms. I had taken a small office and had direct wires -run to the three brokers.</p> - -<p>I traded in a small way so they wouldn’t get frightened off -at the very start. I made money on balance and they were -not slow in telling me that they expected real business from -customers who had direct wires to their offices. They did not -hanker for pikers. They figured that the more I did the more -I’d lose, and the more quickly I was wiped out the more -they’d make. It was a sound enough theory when you consider -that these people necessarily dealt with averages and -the average customer was never long-lived, financially speaking. -A busted customer can’t trade. A half-crippled customer -can whine and insinuate things and make trouble of one or -another kind that hurts business.</p> - -<p>I also established a connection with a local firm that had -a direct wire to its New York correspondent, who were also<span class="pagenum" id="Page_48">48</span> -members of the New York Stock Exchange. I had a stock -ticker put in and I began to trade conservatively. As I told -you, it was pretty much like trading in bucket shops, only it -was a little slower.</p> - -<p>It was a game that I could beat, and I did. I never got it -down to such a fine point that I could win ten times out of -ten; but I won on balance, taking it week in and week out. I -was again living pretty well, but always saving something, to -increase the stake that I was to take back to Wall Street. I -got a couple of wires into two more of these bucketing -brokerage houses, making five in all—and, of course, my -good firm.</p> - -<p>There were times when my plans went wrong and my -stocks did not run true to form, but they did the opposite of -what they should have done if they had kept up their regard -for precedent. But they did not hit me very hard—they -couldn’t, with my shoestring margins. My relations with my -brokers were friendly enough. Their accounts and records -did not always agree with mine, and the differences uniformly -happened to be against me. Curious coincidence—not! -But I fought for my own and usually had my way in the -end. They always had the hope of getting away from me -what I had taken from them. They regarded my winnings as -temporary loans, I think.</p> - -<p>They really were not sporty, being in the business to make -money by hook or by crook instead of being content with the -house percentage. Since suckers always lose money when -they gamble in stocks—they never really speculate—you’d -think these fellows would run what you might call a legitimate -illegitimate business. But they didn’t. “Copper your customers -and grow rich” is an old and true adage, but they did -not seem ever to have heard of it and didn’t stop at plain -bucketing.</p> - -<p>Several times they tried to double-cross me with the old -tricks. They caught me a couple of times because I wasn’t -looking. They always did that when I had taken no more<span class="pagenum" id="Page_49">49</span> -than my usual line. I accused them of being short sports or -worse, but they denied it and it ended by my going back to -trading as usual. The beauty of doing business with a crook -is that he always forgives you for catching him, so long as -you don’t stop doing business with him. It’s all right as far -as he is concerned. He is willing to meet you more than half-way. -Magnanimous souls!</p> - -<p>Well, I made up my mind that I couldn’t afford to have -the normal rate of increase of my stake impaired by crooks’ -tricks, so I decided to teach them a lesson. I picked out some -stock that after having been a speculative favorite had become -inactive. Water-logged. If I had taken one that never -had been active they would have suspected my play. I gave -out buying orders on this stock to my five bucketeering -brokers. When the orders were taken and they were waiting -for the next quotation to come out on the tape I sent in an -order through my Stock Exchange house to sell a hundred -shares of that particular stock at the market. I urgently asked -for quick action. Well, you can imagine what happened -when the selling order got to the floor of the Exchange; a -dull inactive stock that a commission house with out-of-town -connections wanted to sell in a hurry. Somebody got cheap -stock. But the transaction as it would be printed on the tape -was the price that I would pay on my five buying orders. I -was long on balance four hundred shares of that stock at a -low figure. The wire house asked me what I’d heard, and I -said I had a tip on it. Just before the close of the market I -sent an order to my reputable house to buy back that hundred -shares, and not waste any time; that I didn’t want to be -short under any circumstances; and I didn’t care what they -paid. So they wired to New York and the order to buy that -hundred quick resulted in a sharp advance. I of course had -put in selling orders for the five hundred shares that my -friends had bucketed. It worked very satisfactorily.</p> - -<p>Still, they didn’t mend their ways, and so I worked that -trick on them several times. I did not dare punish them as<span class="pagenum" id="Page_50">50</span> -severely as they deserved, seldom more than a point or two -on a hundred shares. But it helped to swell my little hoard -that I was saving for my next Wall Street venture. I sometimes -varied the process by selling some stock short, without -overdoing it. I was satisfied with my six or eight hundred -clear for each crack.</p> - -<p>One day the stunt worked so well that it went far beyond -all calculations for a ten-point swing. I wasn’t looking for it. -As a matter of fact it so happened that I had two hundred -shares instead of my usual hundred at one broker’s, though -only a hundred in the four other shops. That was too much -of a good thing—for them. They were sore as pups about it -and they began to say things over the wires. So I went and -saw the manager, the same man who had been so anxious to -get my account, and so forgiving every time I caught him -trying to put something over on me. He talked pretty big -for a man in his position.</p> - -<p>“That was a fictitious market for that stock, and we won’t -pay you a damned cent!” he swore.</p> - -<p>“It wasn’t a fictitious market when you accepted my -order to buy. You let me in then, all right, and now you’ve -got to let me out. You can’t get around that for fairness, can -you?”</p> - -<p>“Yes, I can!” he yelled. “I can prove that somebody put -up a job.”</p> - -<p>“Who put up a job?” I asked.</p> - -<p>“Somebody!”</p> - -<p>“Who did they put it up on?” I asked.</p> - -<p>“Some friends of yours were in it as sure as pop,” he said.</p> - -<p>But I told him, “You know very well that I play a lone -hand. Everybody in this town knows that. They’ve known it -ever since I started trading in stocks. Now I want to give -you some friendly advice: you just send and get that money -for me. I don’t want to be disagreeable. Just do what I tell -you.”</p> - -<p>“I won’t pay it. It was a rigged-up transaction,” he yelled.</p> - -<p><span class="pagenum" id="Page_51">51</span> -I got tired of his talk. So I told him: “You’ll pay it to me -right now and here.”</p> - -<p>Well, he blustered a little more and accused me flatly of -being the guilty thimblerigger; but he finally forked over the -cash. The others were not so rambunctious. In one office the -manager had been studying these inactive-stock plays of -mine and when he got my order he actually bought the stock -for me and then some for himself in the Little Board, and he -made some money. These fellows didn’t mind being sued by -customers on charges of fraud, as they generally had a good -technical legal defense ready. But they were afraid I’d attach -the furniture—the money in the bank I couldn’t because they -took care not to have any funds exposed to that danger. It -would not hurt them to be known as pretty sharp, but to get -a reputation for welshing was fatal. For a customer to lose -money at his broker’s is no rare event. But for a customer to -make money and then not get it is the worst crime on the -speculators’ statute books.</p> - -<p>I got my money from all; but that ten-point jump put an -end to the pleasing pastime of skinning skinners. They were -on the lookout for the little trick that they themselves had -used to defraud hundreds of poor customers. I went back to -my regular trading; but the market wasn’t always right for -my system—that is, limited as I was by the size of the orders -they would take, I couldn’t make a killing.</p> - -<p>I had been at it over a year, during which I used every -device that I could think of to make money trading in those -wire houses. I had lived very comfortably, bought an automobile -and didn’t limit myself about my expenses. I had to -make a stake, but I also had to live while I was doing it. If -my position on the market was right I couldn’t spend as -much as I made, so that I’d always be saving some. If I was -wrong I didn’t make any money and therefore couldn’t -spend. As I said, I had saved up a fair-sized roll, and there -wasn’t so much money to be made in the five wire houses; -so I decided to return to New York.</p> - -<p><span class="pagenum" id="Page_52">52</span> -I had my own automobile and I invited a friend of mine -who also was a trader to motor to New York with me. He -accepted and we started. We stopped at New Haven for -dinner. At the hotel I met an old trading acquaintance, and -among other things he told me there was a shop in town that -had a wire and was doing a pretty good business.</p> - -<p>We left the hotel on our way to New York, but I drove by -the street where the bucket shop was to see what the outside -looked like. We found it and couldn’t resist the temptation -to stop and have a look at the inside. It wasn’t very sumptuous, -but the old blackboard was there, and the customers, -and the game was on.</p> - -<p>The manager was a chap who looked as if he had been an -actor or a stump speaker. He was very impressive. He’d say -good morning as though he had discovered the morning’s -goodness after ten years of searching for it with a microscope -and was making you a present of the discovery as well as of -the sky, the sun and the firm’s bank roll. He saw us come up -in the sporty-looking automobile, and as both of us were -young and careless—I don’t suppose I looked twenty—he -naturally concluded we were a couple of Yale boys. I didn’t -tell him we weren’t. He didn’t give me a chance, but began -delivering a speech. He was very glad to see us. Would we -have a comfortable seat? The market, we would find, was -philanthropically inclined that morning; in fact, clamoring -to increase the supply of collegiate pocket money, of which -no intelligent undergraduate ever had a sufficiency since the -dawn of historic time. But here and now, by the beneficence -of the ticker, a small initial investment would return thousands. -More pocket money than anybody could spend was -what the stock market yearned to yield.</p> - -<p>Well, I thought it would be a pity not to do as the nice -man of the bucket shop was so anxious to have us do, so I -told him I would do as he wished, because I had heard that -lots of people made lots of money in the stock market.</p> - -<p><span class="pagenum" id="Page_53">53</span> -I began to trade, very conservatively, but increasing the -line as I won. My friend followed me.</p> - -<p>We stayed overnight in New Haven and the next morning -found us at the hospitable shop at five minutes to ten. The -orator was glad to see us, thinking his turn would come that -day. But I cleaned up within a few dollars of fifteen hundred. -The next morning when we dropped in on the great orator, -and handed him an order to sell five hundred Sugar he hesitated, -but finally accepted it—in silence! The stock broke -over a point and I closed out and gave him the ticket. There -was exactly five hundred dollars coming to me in profits, and -my five hundred dollar margin. He took twenty fifties from -the safe, counted them three times very slowly, then he -counted them again in front of me. It looked as if his fingers -were sweating mucilage the way the notes seemed to stick -to him, but finally he handed the money to me. He folded -his arms, bit his lower lip, kept it bit, and stared at the top -of a window behind me.</p> - -<p>I told him I’d like to sell two hundred Steel. But he never -stirred. He didn’t hear me. I repeated my wish, only I made -it three hundred shares. He turned his head. I waited for the -speech. But all he did was to look at me. Then he smacked -his lips and swallowed—as if he was going to start an attack -on fifty years of political misrule by the unspeakable grafters -of the opposition.</p> - -<p>Finally he waved his hand toward the yellow-backs in my -hand and said, “Take away that bauble!”</p> - -<p>“Take away what?” I said. I hadn’t quite understood what -he was driving at.</p> - -<p>“Where are you going, student?” He spoke very impressively.</p> - -<p>“New York,” I told him.</p> - -<p>“That’s right,” he said, nodding about twenty times. “That -is ex-actly right. You are going away from here all right, -because now I know two things—two, student! I know what -you are not, and I know what you are. Yes! Yes! Yes!”</p> - -<p><span class="pagenum" id="Page_54">54</span> -“Is that so?” I said very politely.</p> - -<p>“Yes. You two—” He paused; and then he stopped being -in Congress and snarled: “You two are the biggest sharks in -the United States of America! Students? Ye-eh! You must be -Freshmen! Ye-eh!”</p> - -<p>We left him talking to himself. He probably didn’t mind -the money so much. No professional gambler does. It’s all -in the game and the luck’s bound to turn. It was his being -fooled in us that hurt his pride.</p> - -<p>That is how I came back to Wall Street for a third attempt. -I had been studying, of course, trying to locate the exact -trouble with my system that had been responsible for my -defeats in A. R. Fullerton & Co.’s office. I was twenty when I -made my first ten thousand, and I lost that. But I knew how -and why—because I traded out of season all the time; because -when I couldn’t play according to my system, which -was based on study and experience, I went in and gambled. -I hoped to win, instead of knowing that I ought to win on -form. When I was about twenty-two I ran up my stake to -fifty thousand dollars; I lost it on May ninth. But I knew -exactly why and how. It was the laggard tape and the unprecedented -violence of the movements that awful day. But -I didn’t know why I had lost after my return from St. Louis -or after the May ninth panic. I had theories—that is, remedies -for some of the faults that I thought I found in my play. -But I needed actual practice.</p> - -<p>There is nothing like losing all you have in the world for -teaching you what not to do. And when you know what not -to do in order not to lose money, you begin to learn what to -do in order to win. Did you get that? <em>You begin to learn!</em></p> - -<hr /> - -<p><span class="pagenum" id="Page_55">55</span></p> - -<div class="chapter"> -<h2 id="V"><i>V</i></h2> -</div> - -<p class="in0"><span class="firstword">The average ticker hound</span>—or, as they used to call him, -tape-worm—goes wrong, I suspect, as much from over-specialization -as from anything else. It means a highly expensive -inelasticity. After all, the game of speculation isn’t -all mathematics or set rules, however rigid the main laws -may be. Even in my tape reading something enters that is -more than mere arithmetic. There is what I call the behavior -of a stock, actions that enable you to judge whether or not -it is going to proceed in accordance with the precedents -that your observation has noted. If a stock doesn’t act right -don’t touch it; because, being unable to tell precisely what is -wrong, you cannot tell which way it is going. No diagnosis, -no prognosis. No prognosis, no profit.</p> - -<p>It is a very old thing, this of noting the behavior of a stock -and studying its past performances. When I first came to -New York there was a broker’s office where a Frenchman -used to talk about his chart. At first I thought he was a sort -of pet freak kept by the firm because they were good-natured. -Then I learned that he was a persuasive and most impressive -talker. He said that the only thing that didn’t lie because it -simply couldn’t was mathematics. By means of his curves he -could forecast market movements. Also he could analyse -them, and tell, for instance, why Keene did the right thing -in his famous Atchison preferred bull manipulation, and -later why he went wrong in his Southern Pacific pool. At -various times one or another of the professional traders tried<span class="pagenum" id="Page_56">56</span> -the Frenchman’s system—and then went back to their old -unscientific methods of making a living. Their hit-or-miss -system was cheaper, they said. I heard that the Frenchman -said Keene admitted that the chart was 100 per cent right -but claimed that the method was too slow for practical use -in an active market.</p> - -<p>Then there was one office where a chart of the daily movement -of prices was kept. It showed at a glance just what -each stock had done for months. By comparing individual -curves with the general market curve and keeping in mind -certain rules the customers could tell whether the stock on -which they got an unscientific tip to buy was fairly entitled -to a rise. They used the chart as a sort of complementary -tipster. To-day there are scores of commission houses where -you find trading charts. They come ready-made from the -offices of statistical experts and include not only stocks but -commodities.</p> - -<p>I should say that a chart helps those who can read it or -rather who can assimilate what they read. The average chart -reader, however, is apt to become obsessed with the notion -that the dips and peaks and primary and secondary movements -are all there is to stock speculation. If he pushes his -confidence to its logical limit he is bound to go broke. There -is an extremely able man, a former partner of a well-known -Stock Exchange house, who is really a trained mathematician. -He is a graduate of a famous technical school. He devised -charts based upon a very careful and minute study of -the behaviour of prices in many markets—stocks, bonds, -grain, cotton, money, and so on. He went back years and -years and traced the correlations and seasonal movements—oh, -everything. He used his charts in his stock trading for -years. What he really did was to take advantage of some -highly intelligent averaging. They tell me he won regularly—until -the World War knocked all precedents into a cocked -hat. I heard that he and his large following lost millions before -they desisted. But not even a world war can keep the<span class="pagenum" id="Page_57">57</span> -stock market from being a bull market when conditions are -bullish, or a bear market when conditions are bearish. And -all a man needs to know to make money is to appraise -conditions.</p> - -<p>I didn’t mean to get off the track like that, but I can’t help -it when I think of my first few years in Wall Street. I know -now what I did not know then, and I think of the mistakes -of my ignorance because those are the very mistakes that -the average stock speculator makes year in and year out.</p> - -<p>After I got back to New York to try for the third time to -beat the market in a Stock Exchange house I traded quite -actively. I didn’t expect to do as well as I did in the bucket -shops, but I thought that after a while I would do much -better because I would be able to swing a much heavier line. -Yet, I can see now that my main trouble was my failure to -grasp the vital difference between stock gambling and stock -speculation. Still, by reason of my seven years’ experience in -reading the tape and a certain natural aptitude for the game, -my stake was earning not indeed a fortune but a very high -rate of interest. I won and lost as before, but I was winning -on balance. The more I made the more I spent. This is the -usual experience with most men. No, not necessarily with -easy-money pickers, but with every human being who is not -a slave of the hoarding instinct. Some men, like old Russell -Sage, have the money-making and the money-hoarding instinct -equally well developed, and of course they die disgustingly -rich.</p> - -<p>The game of beating the market exclusively interested me -from ten to three every day, and after three, the game of -living my life. Don’t misunderstand me. I never allowed -pleasure to interfere with business. When I lost it was because -I was wrong and not because I was suffering from dissipation -or excesses. There never were any shattered nerves -or rum-shaken limbs to spoil my game. I couldn’t afford anything -that kept me from feeling physically and mentally fit. -Even now I am usually in bed by ten. As a young man I<span class="pagenum" id="Page_58">58</span> -never kept late hours, because I could not do business properly -on insufficient sleep. I was doing better than breaking -even and that is why I didn’t think there was any need to -deprive myself of the good things of life. The market was -always there to supply them. I was acquiring the confidence -that comes to a man from a professionally dispassionate attitude -toward his own method of providing bread and butter -for himself.</p> - -<p>The first change I made in my play was in the matter of -time. I couldn’t wait for the sure thing to come along and -then take a point or two out of it as I could in the bucket -shops. I had to start much earlier if I wanted to catch the -move in Fullerton’s office. In other words, I had to study -what was going to happen; to anticipate stock movements. -That sounds asininely commonplace, but you know what I -mean. It was the change in my own attitude toward the -game that was of supreme importance to me. It taught me, -little by little, the essential difference between betting on -fluctuations and anticipating inevitable advances and declines, -between gambling and speculating.</p> - -<p>I had to go further back than an hour in my studies of the -market—which was something I never would have learned -to do in the biggest bucket shop in the world. I interested -myself in trade reports and railroad earnings and financial -and commercial statistics. Of course I loved to trade heavily -and they called me the Boy Plunger; but I also liked to study -the moves. I never thought that anything was irksome if it -helped me to trade more intelligently. Before I can solve a -problem I must state it to myself. When I think I have found -the solution I must prove I am right. I know of only one way -to prove it; and that is, with my own money.</p> - -<p>Slow as my progress seems now, I suppose I learned as -fast as I possibly could, considering that I was making money -on balance. If I had lost oftener perhaps it might have -spurred me to more continuous study. I certainly would have -had more mistakes to spot. But I am not sure of the exact<span class="pagenum" id="Page_59">59</span> -value of losing, for if I had lost more I would have lacked -the money to test out the improvements in my methods of -trading.</p> - -<p>Studying my winning plays in Fullerton’s office I discovered -that although I often was 100 per cent right on the -market—that is, in my diagnosis of conditions and general -trend—I was not making as much money as my market -“rightness” entitled me to. Why wasn’t I?</p> - -<p>There was as much to learn from partial victory as from -defeat.</p> - -<p>For instance, I had been bullish from the very start of a -bull market, and I had backed my opinion by buying stocks. -An advance followed, as I had clearly foreseen. So far, all -very well. But what else did I do? Why, I listened to the -elder statesmen and curbed my youthful impetuousness. I -made up my mind to be wise and play carefully, conservatively. -Everybody knew that the way to do that was to take -profits and buy back your stocks on reactions. And that is -precisely what I did, or rather what I tried to do; for I often -took profits and waited for a reaction that never came. And -I saw my stock go kiting up ten points more and I sitting -there with my four-point profit safe in my conservative -pocket. <em>They say you never grow poor taking profits. No, -you don’t. But neither do you grow rich taking a four-point -profit in a bull market.</em></p> - -<p>Where I should have made twenty thousand dollars I -made two thousand. That was what my conservatism did -for me. About the time I discovered what a small percentage -of what I should have made I was getting I discovered something -else, and that is that suckers differ among themselves -according to the degree of experience.</p> - -<p>The tyro knows nothing, and everybody, including himself, -knows it. But the next, or second, grade thinks he -knows a great deal and makes others feel that way too. He -is the experienced sucker, who has studied—not the market -itself but a few remarks about the market made by a still<span class="pagenum" id="Page_60">60</span> -higher grade of suckers. The second-grade sucker knows -how to keep from losing his money in some of the ways that -get the raw beginner. It is this semisucker rather than the -100 per cent article who is the real all-the-year-round support -of the commission houses. He lasts about three and a -half years on an average, as compared with a single season -of from three to thirty weeks, which is the usual Wall Street -life of a first offender. It is naturally the semisucker who is -always quoting the famous trading aphorisms and the various -rules of the game. <em>He knows all the don’ts that ever fell -from the oracular lips of the old stagers—excepting the -principal one, which is: Don’t be a sucker!</em></p> - -<p><em>This semisucker is the type that thinks he has cut his wisdom -teeth because he loves to buy on declines.</em> He waits for -them. He measures his bargains by the number of points it -has sold off from the top. In big bull markets the plain unadulterated -sucker, utterly ignorant of rules and precedents, -buys blindly because he hopes blindly. He makes most of the -money—until one of the healthy reactions takes it away from -him at one fell swoop. But the Careful Mike sucker does -what I did when I thought I was playing the game intelligently—according -to the intelligence of others. I knew I -needed to change my bucket-shop methods and I thought I -was solving my problem with any change, particularly one -that assayed high gold values according to the experienced -traders among the customers.</p> - -<p>Most—let us call ’em customers—are alike. You find very -few who can truthfully say that Wall Street doesn’t owe them -money. In Fullerton’s there were the usual crowd. All grades! -Well, there was one old chap who was not like the others. -To begin with, he was a much older man. Another thing was -that he never volunteered advice and never bragged of his -winnings. He was a great hand for listening very attentively -to the others. He did not seem very keen to get tips—that is, -he never asked the talkers what they’d heard or what they -knew. But when somebody gave him one he always thanked<span class="pagenum" id="Page_61">61</span> -the tipster very politely. Sometimes he thanked the tipster -again—when the tip turned out O.K. But if it went wrong he -never whined, so that nobody could tell whether he followed -it or let it slide by. It was a legend of the office that the old -jigger was rich and could swing quite a line. But he wasn’t -donating much to the firm in the way of commissions; at least -not that anyone could see. His name was Partridge, but they -nicknamed him Turkey behind his back, because he was so -thick-chested and had a habit of strutting about the various -rooms, with the point of his chin resting on his breast.</p> - -<p>The customers, who were all eager to be shoved and forced -into doing things so as to lay the blame for failure on others, -used to go to old Partridge and tell him what some friend of -a friend of an insider had advised them to do in a certain -stock. They would tell him what they had not done with the -tip so he would tell them what they ought to do. But whether -the tip they had was to buy or to sell, the old chap’s answer -was always the same.</p> - -<p>The customer would finish the tale of his perplexity and -then ask: “What do you think I ought to do?”</p> - -<p>Old Turkey would cock his head to one side, contemplate -his fellow customer with a fatherly smile, and finally he -would say very impressively, “You know, it’s a bull market!”</p> - -<p>Time and again I heard him say, “Well, this is a bull market, -you know!” as though he were giving to you a priceless -talisman wrapped up in a million-dollar accident-insurance -policy. And of course I did not get his meaning.</p> - -<p>One day a fellow named Elmer Harwood rushed into the -office, wrote out an order and gave it to the clerk. Then he -rushed over to where Mr. Partridge was listening politely to -John Fanning’s story of the time he overheard Keene give -an order to one of his brokers and all that John made was a -measly three points on a hundred shares and of course the -stock had to go up twenty-four points in three days right -after John sold out. It was at least the fourth time that John<span class="pagenum" id="Page_62">62</span> -had told him that tale of woe, but old Turkey was smiling as -sympathetically as if it was the first time he heard it.</p> - -<p>Well, Elmer made for the old man and, without a word of -apology to John Fanning, told Turkey, “Mr. Partridge, I have -just sold my Climax Motors. My people say the market is -entitled to a reaction and that I’ll be able to buy it back -cheaper. So you’d better do likewise. That is, if you’ve still -got yours.”</p> - -<p>Elmer looked suspiciously at the man to whom he had -given the original tip to buy. The amateur, or gratuitous, -tipster always thinks he owns the receiver of his tip body -and soul, even before he knows how the tip is going to turn -out.</p> - -<p>“Yes, Mr. Harwood, I still have it. Of course!” said Turkey -gratefully. It was nice of Elmer to think of the old chap.</p> - -<p>“Well, now is the time to take your profit and get in again -on the next dip,” said Elmer, as if he had just made out the -deposit slip for the old man. Failing to perceive enthusiastic -gratitude in the beneficiary’s face, Elmer went on: “I have -just sold every share I owned!”</p> - -<p>From his voice and manner you would have conservatively -estimated it at ten thousand shares.</p> - -<p>But Mr. Partridge shook his head regretfully and whined, -“No! No! I can’t do that!”</p> - -<p>“What?” yelled Elmer.</p> - -<p>“I simply can’t!” said Mr. Partridge. He was in great -trouble.</p> - -<p>“Didn’t I give you the tip to buy it?”</p> - -<p>“You did, Mr. Harwood, and I am very grateful to you. -Indeed, I am, sir. But——”</p> - -<p>“Hold on! Let me talk! And didn’t that stock go up seven -points in ten days? Didn’t it?”</p> - -<p>“It did, and I am much obliged to you, my dear boy. But -I couldn’t think of selling that stock.”</p> - -<p>“You couldn’t?” asked Elmer, beginning to look doubtful -himself. It is a habit with most tip givers to be tip takers.</p> - -<p><span class="pagenum" id="Page_63">63</span> -“No, I couldn’t.”</p> - -<p>“Why not?” And Elmer drew nearer.</p> - -<p>“Why, this is a bull market!” The old fellow said it as -though he had given a long and detailed explanation.</p> - -<p>“That’s all right,” said Elmer, looking angry because of his -disappointment. “I know this is a bull market as well as you -do. But you’d better slip them that stock of yours and buy it -back on the reaction. You might as well reduce the cost to -yourself.”</p> - -<p>“My dear boy,” said old Partridge, in great distress—“my -dear boy, <em>if I sold that stock now I’d lose my position; and -then where would I be</em>?”</p> - -<p>Elmer Harwood threw up his hands, shook his head and -walked over to me to get sympathy: “Can you beat it?” he -asked me in a stage whisper. “I ask you!”</p> - -<p>I didn’t say anything. So he went on: “I give him a tip on -Climax Motors. He buys five hundred shares. He’s got seven -points’ profit and I advise him to get out and buy ’em back -on the reaction that’s overdue even now. And what does he -say when I tell him? He says that if he sells he’ll lose his job. -What do you know about that?”</p> - -<p>“I beg your pardon, Mr. Harwood; I didn’t say I’d lose my -job,” cut in old Turkey. “I said I’d lose my position. And -when you are as old as I am and you’ve been through as -many booms and panics as I have, you’ll know that to lose -your position is something nobody can afford; not even -John D. Rockefeller. I hope the stock reacts and that you -will be able to repurchase your line at a substantial concession, -sir. But I myself can only trade in accordance with the -experience of many years. I paid a high price for it and I -don’t feel like throwing away a second tuition fee. But I am -as much obliged to you as if I had the money in the bank. -It’s a bull market, you know.” And he strutted away, leaving -Elmer dazed.</p> - -<p>What old Mr. Partridge said did not mean much to me -until I began to think about my own numerous failures to<span class="pagenum" id="Page_64">64</span> -make as much money as I ought to when I was so right on -the general market. The more I studied the more I realized -how wise that old chap was. He had evidently suffered from -the same defect in his young days and knew his own human -weaknesses. He would not lay himself open to a temptation -that experience had taught him was hard to resist and had -always proved expensive to him, as it was to me.</p> - -<p>I think it was a long step forward in my education when -I realized at last that when old Mr. Partridge kept on telling -the other customers, “Well, you know this is a bull market!” -he really meant to tell them that the big money was not in -the individual fluctuations but in the main movements—that -is, not in reading the tape but in sizing up the entire market -and its trend.</p> - -<p>And right here let me say one thing: After spending many -years in Wall Street and after making and losing millions of -dollars I want to tell you this: <em>It never was my thinking that</em> -made the big money for me. <em>It was always my sitting.</em> Got -that? My sitting tight! <em>It is no trick at all to be right on the -market. You always find lots of early bulls in bull markets -and early bears in bear markets.</em> I’ve known many men who -were right at exactly the right time, and began buying or -selling stocks when prices were at the very level which -should show the greatest profit. And their experience invariably -matched mine—that is, they made no real money out -of it. Men who can both be right and sit tight are uncommon. -I found it one of the hardest things to learn. But it is only -after a stock operator has firmly grasped this that he can -make big money. It is literally true that millions come easier -to a trader after he knows how to trade than hundreds did -in the days of his ignorance.</p> - -<p>The reason is that a man may see straight and clearly and -yet become impatient or doubtful <em>when the market takes its -time about doing as he figured it must do</em>. That is why so -many men in Wall Street, who are not at all in the sucker -class, not even in the third grade, nevertheless lose money.<span class="pagenum" id="Page_65">65</span> -The market does not beat them. They beat themselves, because -though they have brains <em>they cannot sit tight</em>. Old -Turkey was dead right in doing and saving what he did. He -had not only the courage of his convictions but the intelligent -patience to sit tight.</p> - -<p>Disregarding the big swing and trying to jump in and out -was fatal to me. <em>Nobody can catch all the fluctuations.</em> In a -bull market your game is to buy and hold until you believe -that the bull market is near its end. To do this you must -study the general conditions and not tips or special factors -affecting individual stocks. Then get out of all your stocks; -get out for keeps! Wait until you see—or if you prefer, until -you think you see—the turn of the market; the beginning of -a reversal of general conditions. You have to use your brains -and your vision to do this; otherwise my advice would be as -idiotic as to tell you to buy cheap and sell dear. <em>One of the -most helpful things that anybody can learn is to give up trying -to catch the last eighth—or the first. These two are the -most</em> expensive eighths in the world. They have cost stock -traders, in the aggregate, enough millions of dollars to build -a concrete highway across the continent.</p> - -<p>Another thing I noticed in studying my plays in Fullerton’s -office after I began to trade less unintelligently was that my -initial operations seldom showed me a loss. That naturally -made me decide to start big. It gave me confidence in my -own judgment before I allowed it to be vitiated by the advice -of others or even by my own impatience at times. Without -faith in his own judgment no man can go very far in this -game. That is about all I have learned—to study general -conditions, <em>to take a position and stick to it. I can wait without -a twinge of impatience. I can see a setback without being -shaken, knowing that it is only temporary.</em> I have been short -one hundred thousand shares and I have seen a big rally -coming. I have figured—and figured correctly—that such a -rally as I felt was inevitable, and even wholesome, would -make a difference of one million dollars in my paper profits.<span class="pagenum" id="Page_66">66</span> -And I nevertheless have stood pat and seen half my paper -profit wiped out, without once considering the advisability -of covering my shorts to put them out again on the rally. I -knew that if I did I might lose my position and with it the -certainty of a big killing. It is the big swing that makes the -big money for you.</p> - -<p>If I learned all this so slowly it was because I learned by -my mistakes, <em>and some time always elapses between making -a mistake and realizing it</em>, and more time between realizing -it and exactly determining it. But at the same time I was -faring pretty comfortably and was very young, so that I -made up in other ways. Most of my winnings were still made -in part through my tape reading because the kind of markets -we were having lent themselves fairly well to my method. I -was not losing either as often or as irritatingly as in the beginning -of my New York experiences. It wasn’t anything to -be proud of, when you think that I had been broke three -times in less than two years. And as I told you, being broke -is a very efficient educational agency.</p> - -<p>I was not increasing my stake very fast because I lived up -to the handle all the time. I did not deprive myself of many -of the things that a fellow of my age and tastes would want. -I had my own automobile and I could not see any sense in -skimping on living when I was taking it out of the market. -The ticker only stopped Sundays and holidays, which was as -it should be. Every time I found the reason for a loss or the -why and how of another mistake, I added a brand-new -<em>Don’t!</em> to my schedule of assets. And the nicest way to capitalize -my increasing assets was by not cutting down on my -living expenses. Of course I had some amusing experiences -and some that were not so amusing, but if I told them all in -detail I’d never finish. As a matter of fact, the only incidents -that I remember without special effort are those that taught -me something of definite value to me in my trading; something -that added to my store of knowledge of the game—and -of myself!</p> - -<hr /> - -<p><span class="pagenum" id="Page_67">67</span></p> - -<div class="chapter"> -<h2 id="VI"><i>VI</i></h2> -</div> - -<p class="in0"><span class="firstword">In the spring of</span> 1906 I was in Atlantic City for a short vacation. -I was out of stocks and was thinking only of having a -change of air and a nice rest. By the way, I had gone back -to my first brokers, Harding Brothers, and my account had -got to be pretty active. I could swing three or four thousand -shares. That wasn’t much more than I had done in the old -Cosmopolitan shop when I was barely twenty years of age. -But there was some difference between my one-point margin -in the bucket shop and the margin required by brokers who -actually bought or sold stocks for my account on the New -York Stock Exchange.</p> - -<p>You may remember the story I told you about that time -when I was short thirty-five hundred Sugar in the Cosmopolitan -and I had a hunch something was wrong and I’d -better close the trade? Well, I have often had that curious -feeling. As a rule, I yield to it. But at times I have pooh-poohed -the idea and have told myself that it was simply -asinine to follow any of these sudden blind impulses to reverse -my position. I have ascribed my hunch to a state of -nerves resulting from too many cigars or insufficient sleep or -a torpid liver or something of that kind. When I have argued -myself into disregarding my impulse and have stood pat I -have always had cause to regret it. A dozen instances occur to -me when I did not sell as per hunch, and the next day I’d go -downtown and the market would be strong, or perhaps even -advance, and I’d tell myself how silly it would have been to<span class="pagenum" id="Page_68">68</span> -obey the blind impulse to sell. But on the following day -there would be a pretty bad drop. Something had broken -loose somewhere and I’d have made money by not being so -wise and logical. The reason plainly was not physiological -but psychological.</p> - -<p>I want to tell you only about one of them because of what -it did for me. It happened when I was having that little -vacation in Atlantic City in the spring of 1906. I had a friend -with me who also was a customer of Harding Brothers. I had -no interest in the market one way or another and was enjoying -my rest. I can always give up trading to play, unless of -course it is an exceptionally active market in which my commitments -are rather heavy. It was a bull market, as I remember -it. The outlook was favorable for general business and -the stock market had slowed down but the tone was firm -and all indications pointed to higher prices.</p> - -<p>One morning after we had breakfasted and had finished -reading all the New York morning papers, and had got tired -of watching the sea gulls picking up clams and flying up -with them twenty feet in the air and dropping them on the -hard wet sand to open them for their breakfast, my friend -and I started up the Boardwalk. That was the most exciting -thing we did in the daytime.</p> - -<p>It was not noon yet, and we walked up slowly to kill time -and breathe the salt air. Harding Brothers had a branch -office on the Boardwalk and we used to drop in every morning -and see how they’d opened. It was more force of habit -than anything else, for I wasn’t doing anything.</p> - -<p>The market, we found, was strong and active. My friend, -who was quite bullish, was carrying a moderate line purchased -several points lower. He began to tell me what an -obviously wise thing it was to hold stocks for much higher -prices. I wasn’t paying enough attention to him to take the -trouble to agree with him. I was looking over the quotation -board, noting the changes—they were mostly advances—until -I came to Union Pacific. I got a feeling that I ought to<span class="pagenum" id="Page_69">69</span> -sell it. I can’t tell you more. I just felt like selling it. I asked -myself why I should feel like that, and I couldn’t find any -reason whatever for going short of UP.</p> - -<p>I stared at the last price on the board until I couldn’t see -any figures or any board or anything else, for that matter. -All I knew was that I wanted to sell Union Pacific and I -couldn’t find out why I wanted to.</p> - -<p>I must have looked queer, for my friend, who was standing -alongside of me, suddenly nudged me and asked, “Hey, -what’s the matter?”</p> - -<p>“I don’t know,” I answered.</p> - -<p>“Going to sleep?” he said.</p> - -<p>“No,” I said. “I am not going to sleep. What I am going -to do is to sell that stock.” I had always made money following -my hunches.</p> - -<p>I walked over to a table where there were some blank -order pads. My friend followed me. I wrote out an order to -sell a thousand Union Pacific at the market and handed it -to the manager. He was smiling when I wrote it and when -he took it. But when he read the order he stopped smiling -and looked at me.</p> - -<p>“Is this right?” he asked me. But I just looked at him and -he rushed it over to the operator.</p> - -<p>“What are you doing?” asked my friend.</p> - -<p>“I’m selling it!” I told him.</p> - -<p>“Selling what?” he yelled at me. If he was a bull how could -I be a bear? Something was wrong.</p> - -<p>“A thousand UP.,” I said.</p> - -<p>“Why?” he asked me in great excitement.</p> - -<p>I shook my head, meaning I had no reason. But he must -have thought I’d got a tip, because he took me by the arm -and led me outside into the hall, where we could be out of -sight and hearing of the other customers and rubbering -chairwarmers.</p> - -<p>“What did you hear?” he asked me.</p> - -<p>He was quite excited. UP. was one of his pets and he was<span class="pagenum" id="Page_70">70</span> -bullish on it because of its earnings and its prospects. But he -was willing to take a bear tip on it at second hand.</p> - -<p>“Nothing!” I said.</p> - -<p>“You didn’t?” He was skeptical and showed it plainly.</p> - -<p>“I didn’t hear a thing.”</p> - -<p>“Then why in blazes are you selling?”</p> - -<p>“I don’t know,” I told him. I spoke gospel truth.</p> - -<p>“Oh, come across, Larry,” he said.</p> - -<p>He knew it was my habit to know why I traded. I had -sold a thousand shares of Union Pacific. I must have a very -good reason to sell that much stock in the face of the strong -market.</p> - -<p>“I don’t know,” I repeated. “I just feel that something is -going to happen.”</p> - -<p>“What’s going to happen?”</p> - -<p>“I don’t know. I can’t give you any reason. All I know is -that I want to sell that stock. And I’m going to let ’em have -another thousand.”</p> - -<p>I walked back into the office and gave an order to sell a -second thousand. If I was right in selling the first thousand -I ought to have out a little more.</p> - -<p>“What could possibly happen?” persisted my friend, who -couldn’t make up his mind to follow my lead. If I’d told him -that I had heard UP. was going down he’d have sold it without -asking me from whom I’d heard it or why. “What could -possibly happen?” he asked again.</p> - -<p>“A million things could happen. But I can’t promise you -that any of them will. I can’t give you any reasons and I -can’t tell fortunes,” I told him.</p> - -<p>“Then you’re crazy,” he said. “Stark crazy, selling that -stock without rime or reason. You don’t know why you want -to sell it?”</p> - -<p>“I don’t know why I want to sell it. I only know I do -want to,” I said. “I want to, like everything.” The urge was -so strong that I sold another thousand.</p> - -<p>That was too much for my friend. He grabbed me by the<span class="pagenum" id="Page_71">71</span> -arm and said, “Here! Let’s get out of this place before you -sell the entire capital stock.”</p> - -<p>I had sold as much as I needed to satisfy my feeling, so I -followed him without waiting for a report on the last two -thousand shares. It was a pretty good jag of stock for me to -sell even with the best of reasons. It seemed more than -enough to be short of without any reason whatever, particularly -when the entire market was so strong and there was -nothing in sight to make anybody think of the bear side. But -I remembered that on previous occasions when I had the -same urge to sell and didn’t do it I always had reasons to -regret it.</p> - -<p>I have told some of these stories to friends, and some of -them tell me it isn’t a hunch but the subconscious mind, -which is the creative mind, at work. That is the mind which -makes artists do things without their knowing how they -came to do them. Perhaps with me it was the cumulative -effect of a lot of little things individually insignificant but -collectively powerful. Possibly my friend’s unintelligent bullishness -aroused a spirit of contradiction and I picked on UP. -because it had been touted so much. I can’t tell you what -the cause or motive for hunches may be. All I know is that -I went out of the Atlantic City branch office of Harding -Brothers short three thousand Union Pacific in a rising -market, and I wasn’t worried a bit.</p> - -<p>I wanted to know what price they’d got for my last two -thousand shares. So after luncheon we walked up to the -office. I had the pleasure of seeing that the general market -was strong and Union Pacific higher.</p> - -<p>“I see your finish,” said my friend. You could see he was -glad he hadn’t sold any.</p> - -<p>The next day the general market went up some more and -I heard nothing but cheerful remarks from my friend. But I -felt sure I had done right to sell UP., and I never get impatient -when I feel I am right. What’s the sense? That afternoon -Union Pacific stopped climbing, and toward the end of<span class="pagenum" id="Page_72">72</span> -the day began to go off. Pretty soon it got down to a point -below the level of the average of my three thousand shares. -I felt more positive than ever that I was on the right side, -and since I felt that way I naturally had to sell some more. -So, toward the close, I sold an additional two thousand -shares.</p> - -<p>There I was, short five thousand shares of UP. on a hunch. -That was as much as I could sell in Harding’s office with the -margin I had up. It was too much stock for me to be short -of, on a vacation; so I gave up the vacation and returned to -New York that very night. There was no telling what might -happen and I thought I’d better be Johnny-on-the-spot. -There I could move quickly if I had to.</p> - -<p>The next day we got the news of the San Francisco earthquake. -It was an awful disaster. But the market opened -down only a couple of points. <em>The bull forces were at work, -and the public never is independently responsive to news. -You see that all the time. If there is a solid bull foundation, -for instance, whether or not what the papers call bull -manipulation is going on the same time, certain news items -fail to have the effect they would have if the Street was -bearish.</em> It is all in the state of sentiment at the time. In -this case the Street did not appraise the extent of the catastrophe -because it didn’t wish to. Before the day was over -prices came back.</p> - -<p>I was short five thousand shares. The blow had fallen, but -my stock hadn’t. My hunch was of the first water, but my -bank account wasn’t growing; not even on paper. The friend -who had been in Atlantic City with me when I put out my -short line in UP. was glad and sad about it.</p> - -<p>He told me: “That was some hunch, kid. But, say, when -the talent and the money are all on the bull side what’s the -use of bucking against them? They are bound to win out.”</p> - -<p>“Give them time,” I said. I meant prices. I wouldn’t cover -because I knew the damage was enormous and the Union<span class="pagenum" id="Page_73">73</span> -Pacific would be one of the worst sufferers. <em>But it was exasperating -to see the blindness of the Street.</em></p> - -<p>“Give ’em time and your skin will be where all the other -bear hides are stretched out in the sun, drying,” he assured -me.</p> - -<p>“What would you do?” I asked him. “Buy UP. on the -strength of the millions of dollars of damage suffered by the -Southern Pacific and other lines? Where are the earnings for -dividends going to come from after they pay for all they’ve -lost? The best you can say is that the trouble may not be as -bad as it is painted. But is that a reason for buying the -stocks of the roads chiefly affected? Answer me that.”</p> - -<p>But all my friend said was: “Yes, that listens fine. But I -tell you, the market doesn’t agree with you. The tape doesn’t -lie, does it?”</p> - -<p>“<em>It doesn’t always tell the truth on the instant</em>,” <em>I said.</em></p> - -<p>“Listen. A man was talking to Jim Fisk a little before -Black Friday, giving ten good reasons why gold ought to go -down for keeps. He got so encouraged by his own words -that he ended by telling Fisk that he was going to sell a few -million. And Jim Fisk just looked at him and said, “Go -ahead! Do! Sell it short and invite me to your funeral.”</p> - -<p>“Yes,” I said; “and if that chap had sold it short, look at -the killing he would have made! Sell some UP. yourself.”</p> - -<p>“Not I! I’m the kind that thrives best on not rowing -against wind and tide.”</p> - -<p>On the following day, when fuller reports came in, the -market began to slide off, but even then not as violently as -it should. Knowing that nothing under the sun could stave -off a substantial break I doubled up and sold five thousand -shares. Oh, by that time it was plain to most people, and my -brokers were willing enough. It wasn’t reckless of them or -of me, not the way I sized up the market. On the day following, -the market began to go for fair. There was the dickens -to pay. Of course I pushed my luck for all it was worth. I<span class="pagenum" id="Page_74">74</span> -doubled up again and sold ten thousand shares more. It was -the only play possible.</p> - -<p>I wasn’t thinking of anything except that I was right—100 -per cent right—and that this was a heaven-sent opportunity. -It was up to me to take advantage of it. I sold more. Did I -think that with such a big line of shorts out, it wouldn’t take -much of a rally to wipe out my paper profits and possibly my -principal? I don’t know whether I thought of that or not, but -if I did it didn’t carry much weight with me. I wasn’t plunging -recklessly. I was really playing conservatively. There -was nothing that anybody could do to undo the earthquake, -was there? They couldn’t restore the crumpled buildings -overnight, free, gratis, for nothing, could they? All the -money in the world couldn’t help much in the next few -hours, could it?</p> - -<p>I was not betting blindly. I wasn’t a crazy bear. I wasn’t -drunk with success or thinking that because Frisco was -pretty well wiped off the map the entire country was headed -for the scrap heap. No, indeed! I didn’t look for a panic. -Well, the next day I cleaned up. I made two hundred and -fifty thousand dollars. It was my biggest winnings up to that -time. It was all made in a few days. The Street paid no -attention to the earthquake the first day or two. They’ll tell -you that it was because the first despatches were not so -alarming, but I think it was because it took so long to change -the point of view of the public toward the securities markets. -Even the professional traders for the most part were slow -and shortsighted.</p> - -<p>I have no explanation to give you, either scientific or -childish. I am telling you what I did, and why, and what -came of it. I was much less concerned with the mystery of -the hunch than with the fact that I got a quarter of a million -out of it. It meant that I could now swing a much bigger -line than ever, if or when the time came for it.</p> - -<p>That summer I went to Saratoga Springs. It was supposed -to be a vacation for me, but I kept an eye on the market. To<span class="pagenum" id="Page_75">75</span> -begin with, I wasn’t so tired that it bothered me to think -about it. And then, everybody I knew up there had or had -had an active interest in it. We naturally talked about it. I -have noticed that there is quite a difference between talking -and trading. Some of these chaps remind you of the bold -clerk who talks to his cantankerous employer as to a yellow -dog—when he tells you about it.</p> - -<p>Harding Brothers had a branch office in Saratoga. Many -of their customers were there. But the real reason, I suppose, -was the advertising value. Having a branch office in a resort -is simply high-class billboard advertising. I used to drop in -and sit around with the rest of the crowd. The manager was -a very nice chap from the New York office who was there to -give the glad hand to friends and strangers and, if possible, -to get business. It was a wonderful place for tips—all kinds -of tips, horse-race, stock-market, and waiters’. The office -knew I didn’t take any, so the manager didn’t come and -whisper confidentially in my ear what he’d just got on the -q. t. from the New York office. He simply passed over the -telegrams, saying, “This is what they’re sending out,” or -something of the kind.</p> - -<p>Of course I watched the market. With me, to look at the -quotation board and to read the signs is one process. My -good friend Union Pacific, I noticed, looked like going up. -<em>The price was high, but the stock acted as if it were being -accumulated.</em> I watched it a couple of days without trading -in it, and the more I watched it the more convinced I became -that it was being bought on balance by somebody who -was no piker, somebody who not only had a big bank roll -but knew what was what. Very clever accumulation, I -thought.</p> - -<p>As soon as I was sure of this I naturally began to buy it, -at about 160. It kept on acting all hunky, and so I kept on -buying it, five hundred shares at a clip. <em>The more I bought -the stronger it got, without any spurt, and I was feeling very -comfortable.</em> I couldn’t see any reason why that stock<span class="pagenum" id="Page_76">76</span> -shouldn’t go up a great deal more; not with what I read on -the tape.</p> - -<p>All of a sudden the manager came to me and said they’d -got a message from New York—they had a direct wire of -course—asking if I was in the office, and when they answered -yes, another came saying: “Keep him there. Tell him -Mr. Harding wants to speak to him.”</p> - -<p>I said I’d wait, and bought five hundred shares more of -UP. I couldn’t imagine what Harding could have to say to -me. I didn’t think it was anything about business. My margin -was more than ample for what I was buying. Pretty soon -the manager came and told me that Mr. Harding wanted me -on the long-distance telephone.</p> - -<p>“Hello, Ed,” I said.</p> - -<p>But he said, “What the devil’s the matter with you? Are -you crazy?”</p> - -<p>“Are you?” I said.</p> - -<p>“What are you doing?” he asked.</p> - -<p>“What do you mean?”</p> - -<p>“Buying all that stock.”</p> - -<p>“Why, isn’t my margin all right?”</p> - -<p>“It isn’t a case of margin, but of being a plain sucker.”</p> - -<p>“I don’t get you.”</p> - -<p>“Why are you buying all that Union Pacific?”</p> - -<p>“It’s going up,” I said.</p> - -<p>“Going up, hell! Don’t you know that the insiders are -feeding it out to you? You’re just about the easiest mark up -there. You’d have more fun losing it on the ponies. Don’t -let them kid you.”</p> - -<p>“Nobody is kidding me,” I told him. “I haven’t talked to -a soul about it.”</p> - -<p>But he came back at me: “You can’t expect a miracle to -save you every time you plunge into that stock. Get out -while you’ve still got a chance,” he said. “It’s a crime to be -long of that stock at this level—when these highbinders are -shoveling it out by the ton.”</p> - -<p><span class="pagenum" id="Page_77">77</span> -“The tape says they’re buying it,” I insisted.</p> - -<p>“Larry, I got heart disease when your orders began to -come in. For the love of Mike, don’t be a sucker. Get out! -Right away. It’s liable to bust wide open any minute. I’ve -done my duty. Good-by!” And he hung up.</p> - -<p>Ed Harding was a very clever chap, unusually well-informed -and a real friend, disinterested and kind-hearted. -And what was even more, I knew he was in position to hear -things. All I had to go by, in my purchases of UP., was my -years of studying the behaviour of stocks and my perception -of certain symptoms which experience had taught me usually -accompanied a substantial rise. <em>I don’t know what happened -to me, but I suppose I must have concluded that my tape -reading told me the stock was being absorbed simply because -very clever manipulation by the insiders made the tape -tell a story that wasn’t true.</em> Possibly I was impressed by the -pains Ed Harding took to stop me from making what he was -so sure would be a colossal mistake on my part. Neither his -brains nor his motives were to be questioned. Whatever it -was that made me decide to follow his advice, I cannot tell -you; but follow it, I did.</p> - -<p>I sold out all my Union Pacific. <em>Of course if it was unwise -to be long of it, it was equally unwise not to be short of it. So -after I got rid of my long stock I sold four thousand shares -short. I put out most of it around 162.</em></p> - -<p>The next day the directors of the Union Pacific Company -declared a 10 per cent dividend on the stock. At first nobody -in Wall Street believed it. It was too much like the desperate -manœuvre of cornered gamblers. All the newspapers -jumped on the directors. But while the Wall Street -talent hesitated to act the market boiled over. Union Pacific -led, and on huge transactions made a new high-record price. -Some of the room traders made fortunes in an hour and I remember -later hearing about a rather dull-witted specialist -who made a mistake that put three hundred and fifty thousand -dollars in his pocket. He sold his seat the following<span class="pagenum" id="Page_78">78</span> -week and became a gentleman farmer the following month.</p> - -<p>Of course I realised, the moment I heard the news of the -declaration of the unprecedented 10 per cent dividend, that -I got what I deserved for disregarding the voice of experience -and listening to the voice of a tipster. <em>My own convictions -I had set aside for the suspicions of a friend, simply because -he was disinterested and as a rule knew what he was -doing.</em></p> - -<p>As soon as I saw Union Pacific making new high records -I said to myself, “This is no stock for me to be short of.”</p> - -<p>All I had in the world was up as margin in Harding’s -office. I was neither cheered nor made stubborn by the -knowledge of that fact. What was plain was that I had read -the tape accurately and that I had been a ninny to let Ed -Harding shake my own resolution. There was no sense in -recriminations, because I had no time to lose; and besides, -what’s done is done. So I gave an order to take in my shorts. -The stock was around 165 when I sent in that order to buy in -the four thousand UP. at the market. I had a three-point loss -on it at that figure. Well, my brokers paid 172 and 174 for -some of it before they were through. I found when I got my -reports that Ed Harding’s kindly intentioned interference -cost me forty thousand dollars. <em>A low price for a man to pay -for not having the courage of his own convictions! It was a -cheap lesson.</em></p> - -<p>I wasn’t worried, because the tape said still higher prices. -It was an unusual move and there were no precedents for the -action of the directors, but I did this time what I thought -I ought to do. As soon as I had given the first order to buy -four thousand shares to cover my shorts I decided to profit -by what the tape indicated and so I went along. I bought -four thousand shares and held that stock until the next -morning. Then I got out. I not only made up the forty thousand -dollars I had lost but about fifteen thousand besides. If -Ed Harding hadn’t tried to save me money I’d have made a -killing. But he did me a very great service, for it was the lesson<span class="pagenum" id="Page_79">79</span> -of that episode that, I firmly believe, <em>completed</em> my education -as a trader.</p> - -<p>It was not that all I needed to learn was not to take tips -but follow my own inclination. <em>It was that I gained confidence -in myself and I was able finally to shake off the old -method of trading.</em> That Saratoga experience was my last -haphazard, hit-or-miss operation. From then on I began to -think of basic conditions instead of individual stocks. I promoted -myself to a higher grade in the hard school of speculation. -It was a long and difficult step to take.</p> - -<hr /> - -<p><span class="pagenum" id="Page_80">80</span></p> - -<div class="chapter"> -<h2 id="VII"><i>VII</i></h2> -</div> - -<p class="in0"><span class="firstword">I never hesitate</span> to tell a man that I am bullish or bearish. -But I do not tell people to buy or sell any particular stock. -In a bear market all stocks go down and in a bull market they -go up. I don’t mean of course that in a bear market caused -by a war, ammunition shares do not go up. I speak in a general -sense. But the average man doesn’t wish to be told that -it is a bull or a bear market. What he desires is to be told -specifically which particular stock to buy or sell. He wants -to get something for nothing. He does not wish to work. He -doesn’t even wish to have to think. It is too much bother -to have to count the money that he picks up from the -ground.</p> - -<p>Well, I wasn’t that lazy, but I found it easier to think of -individual stocks than of the general market and therefore of -individual fluctuations rather than of general movements. <em>I -had to change and I did.</em></p> - -<p><em>People don’t seem to grasp easily the fundamentals of -stock trading. I have often said that to buy on a rising market -is the most comfortable way of buying stocks. Now, the -point is not so much to buy as cheap as possible or go short -at top prices, but to buy or sell at the right time. When I am -bearish and I sell a stock, each sale must be at a lower level -than the previous sale. When I am buying, the reverse is -true. I must buy on rising scale. I don’t buy long stock on a -scale down, I buy on a scale up.</em></p> - -<p>Let us suppose, for example, that I am buying some stock.<span class="pagenum" id="Page_81">81</span> -<em>I’ll buy two thousand shares at 110. If the stock goes up to -111 after I buy it I am, at least temporarily, right in my -operation, because it is a point higher; it shows me a profit. -Well, because I am right I go in and buy another two thousand -shares.</em> If the market is still rising I buy a third lot of two -thousand shares. Say the price goes up to 114. I think it is -enough for the time being. I now have a trading basis to -work from. I am long six thousand shares at an average -of 111¾, and the stock is selling at 114. I won’t buy any -more just then. I wait and see. I figure that at some stage -of the rise there is going to be a reaction. I want to see how -the market takes care of itself after that reaction. It will -probably react to where I got my third lot. Say that after -going higher it falls back to 112¼, and then rallies. Well, -just as it goes back to 113¾ I shoot an order to buy four -thousand—at the market of course. Well, if I get that four -thousand at 113¾ I know something is wrong and I’ll give a -testing order—that is, I’ll sell one thousand shares to see how -the market takes it. But suppose that of the order to buy the -four thousand shares that I put in when the price was 113¾ -I get two thousand at 114 and five hundred at 114½ and the -rest on the way up so that for the last five hundred I pay -115½. Then I know I am right. It is the way I get the four -thousand shares that tells me whether I am right in buying -that particular stock at that particular time—<em>for of course I -am working on the assumption that I have checked up general -conditions pretty well and they are bullish. I never want -to buy stocks too cheap or too easily.</em></p> - -<p>I remember a story I heard about Deacon S. V. White -when he was one of the big operators of the Street. He was a -very fine old man, clever as they make them, and brave. He -did some wonderful things in his day, from all I’ve heard.</p> - -<p>It was in the old days when Sugar was one of the most -continuous purveyors of fireworks in the market. H. O. -Havemeyer, president of the company, was in the heyday of -his power. I gather from talks with the old-timers that<span class="pagenum" id="Page_82">82</span> -H.O. and his following had all the resources of cash and -cleverness necessary to put through successfully any deal in -their own stock. They tell me that Havemeyer trimmed -more small professional traders in that stock than any other -insider in any other stock. As a rule, the floor traders are -more likely to thwart the insiders’ game than help it.</p> - -<p>One day a man who knew Deacon White rushed into the -office all excited and said, “Deacon, you told me if I ever got -any good information to come to you at once with it and if -you used it you’d carry me for a few hundred shares.” He -paused for breath and for confirmation.</p> - -<p>The deacon looked at him in that meditative way he had -and said, “I don’t know whether I ever told you exactly that -or not, but I am willing to pay for information that I can -use.”</p> - -<p>“Well, I’ve got it for you.”</p> - -<p>“Now, that’s nice,” said the deacon, so mildly that the man -with the info swelled up and said, “Yes, sir, deacon.” Then -he came closer so nobody else would hear and said, “H. O. -Havemeyer is buying Sugar.”</p> - -<p>“Is he?” asked the deacon quite calmly.</p> - -<p>It peeved the informant, who said impressively: “Yes, sir. -Buying all he can get, deacon.”</p> - -<p>“My friend, are you sure?” asked old S.V.</p> - -<p>“Deacon, I know it for a positive fact. The old inside -gang are buying all they can lay their hands on. It’s got -something to do with the tariff and there’s going to be a killing -in the common. It will cross the preferred. And that -means a sure thirty points for a starter.”</p> - -<p>“D’you really think so?” And the old man looked at him -over the top of the old-fashioned silver-rimmed spectacles -that he had put on to look at the tape.</p> - -<p>“Do I think so? No, I don’t think so; I know so. Absolutely! -Why, deacon, when H. O. Havemeyer and his friends -buy Sugar as they’re doing now they’re never satisfied with -anything less than forty points net. I shouldn’t be surprised<span class="pagenum" id="Page_83">83</span> -to see the market get away from them any minute and -shoot up before they’ve got their full lines. There ain’t as -much of it kicking around the brokers’ offices as there was a -month ago.”</p> - -<p>“He’s buying Sugar, eh?” repeated the deacon absently.</p> - -<p>“Buying it? Why, he’s scooping it in as fast as he can -without putting up the price on himself.”</p> - -<p>“So?” said the deacon. That was all.</p> - -<p>But it was enough to nettle the tipster, and he said, “Yes, -sir-ree! And I call that very good information. Why, it’s -absolutely straight.”</p> - -<p>“Is it?”</p> - -<p>“Yes; and it ought to be worth a whole lot. Are you going -to use it?”</p> - -<p>“Oh, yes. I’m going to use it.”</p> - -<p>“When?” asked the information bringer suspiciously.</p> - -<p>“Right away.” And the deacon called: “Frank!” It was -the first name of his shrewdest broker, who was then in the -adjoining room.</p> - -<p>“Yes, sir,” said Frank.</p> - -<p>“I wish you’d go over to the Board and sell ten thousand -Sugar.”</p> - -<p>“Sell?” yelled the tipster. There was such suffering in his -voice that Frank, who had started out at a run, halted in his -tracks.</p> - -<p>“Why, yes,” said the deacon mildly.</p> - -<p>“But I told you H. O. Havemeyer was buying it!”</p> - -<p>“I know you did, my friend,” said the deacon calmly; and -turning to the broker: “Make haste, Frank!”</p> - -<p>The broker rushed out to execute the order and the tipster -turned red.</p> - -<p>“I came in here,” he said furiously, “with the best information -I ever had. I brought it to you because I thought you -were my friend, and square. I expected you to act on it—”</p> - -<p>“I am acting on it,” interrupted the deacon in a tranquillising -voice.</p> - -<p><span class="pagenum" id="Page_84">84</span> -“But I told you H.O. and his gang were buying!”</p> - -<p>“That’s right. I heard you.”</p> - -<p>“Buying! Buying! I said buying!” shrieked the tipster.</p> - -<p>“Yes, buying! That is what I understood you to say,” the -deacon assured him. He was standing by the ticker, looking -at the tape.</p> - -<p>“But you are selling it.”</p> - -<p>“Yes; ten thousand shares.” And the deacon nodded. -“Selling it, of course.”</p> - -<p>He stopped talking to concentrate on the tape and the -tipster approached to see what the deacon saw, for the old -man was very foxy. While he was looking over the deacon’s -shoulder a clerk came in with a slip, obviously the report -from Frank. The deacon barely glanced at it. He had seen -on the tape how his order had been executed.</p> - -<p>It made him say to the clerk, “Tell him to sell another ten -thousand Sugar.”</p> - -<p>“Deacon, I swear to you that they really are buying the -stock!”</p> - -<p>“Did Mr. Havemeyer tell you?” asked the deacon quietly.</p> - -<p>“Of course not! He never tells anybody anything. He -would not bat an eyelid to help his best friend make a nickel. -But I know this is true.”</p> - -<p>“Do not allow yourself to become excited, my friend.” And -the deacon held up a hand. He was looking at the tape. The -tip-bringer said, bitterly:</p> - -<p>“If I had known you were going to do the opposite of -what I expected I’d never have wasted your time or mine. -But I am not going to feel glad when you cover that stock at -an awful loss. I’m sorry for you, deacon. Honest! If you’ll -excuse me I’ll go elsewhere and act on my own information.”</p> - -<p>“I’m acting on it. I think I know a little about the market; -not as much, perhaps, as you and your friend H. O. Havemeyer, -but still a little. What I am doing is what my experience -tells me is the wise thing to do with that information -you brought me. After a man has been in Wall Street as long<span class="pagenum" id="Page_85">85</span> -as I have he is grateful for anybody who feels sorry for him. -Remain calm, my friend.”</p> - -<p>The man just stared at the deacon, for whose judgment -and nerve he had great respect.</p> - -<p>Pretty soon the clerk came in again and handed a report to -the deacon, who looked at it and said: “Now tell him to buy -thirty thousand Sugar. Thirty thousand!”</p> - -<p>The clerk hurried away and the tipster just grunted and -looked at the old gray fox.</p> - -<p>“My friend,” the deacon explained kindly, “I did not doubt -that you were telling me the truth as you saw it. But even -if I had heard H. O. Havemeyer tell you himself, I still -would have acted as I did. For there was only one way to -find out if anybody was buying the stock in the way you -said H. O. Havemeyer and his friends were buying it, and -that was to do what I did. The first ten thousand shares went -fairly easily. It was not quite conclusive. But the second ten -thousand was absorbed by a market that did not stop rising. -The way the twenty thousand shares were taken by somebody -proved to me that somebody was in truth willing to -take all the stock that was offered. It doesn’t particularly -matter at this point who that particular somebody may be. -So I have covered my shorts and am long ten thousand -shares, and I think that your information was good as far as -it went.”</p> - -<p>“And how far does it go?” asked the tipster.</p> - -<p>“You have five hundred shares in this office at the average -price of the ten thousand shares,” said the deacon. “Good -day, my friend. Be calm the next time.”</p> - -<p>“Say, deacon,” said the tipster, “won’t you please sell mine -when you sell yours? I don’t know as much as I thought -I did.”</p> - -<p>That’s the theory. <em>That is why I never buy stocks cheap.</em> -Of course I always try to buy effectively—in such a way as to -help my side of the market. When it comes to selling stocks,<span class="pagenum" id="Page_86">86</span> -it is plain that nobody can sell unless somebody wants those -stocks.</p> - -<p>If you operate on a large scale you will have to bear that -in mind all the time. A man studies conditions, plans his -operations carefully and proceeds to act. He swings a pretty -fair line and he accumulates a big profit—on paper. Well, -that man can’t sell at will. You can’t expect the market to -absorb fifty thousand shares of one stock as easily as it does -one hundred. He will have to wait until he has a market -there to take it. There comes the time when he thinks the -requisite buying power is there. When that opportunity -comes he must seize it. As a rule he will have been waiting -for it. <em>He has to sell when he can, not when he wants to.</em> To -learn the time, he has to watch and test. It is no trick to tell -when the market can take what you give it. But in starting a -movement it is unwise to take on your full line unless you are -convinced that conditions are exactly right. <em>Remember that -stocks are never too high for you to begin buying or too low -to begin selling. But after the initial transaction, don’t make -a second unless the first shows you a profit. Wait and watch.</em> -That is where your tape reading comes in—to enable you to -decide as to the proper time for beginning. <em>Much depends -upon beginning at exactly the right time.</em> It took me years to -realize the importance of this. It also cost me some hundreds -of thousands of dollars.</p> - -<p>I don’t mean to be understood as advising persistent pyramiding. -<em>A man can pyramid and make big money that he -couldn’t make if he didn’t pyramid; of course.</em> But what I -meant to say was this: Suppose a man’s line is five hundred -shares of stock. I say that he ought not to buy it all at once; -not if he is speculating. If he is merely gambling the only -advice I have to give him is, don’t!</p> - -<p>Suppose he buys his first hundred, and that promptly -shows him a loss. Why should he go to work and get more -stock? He ought to see at once that he is in wrong; at least -temporarily.</p> - -<hr /> - -<p><span class="pagenum" id="Page_87">87</span></p> - -<div class="chapter"> -<h2 id="VIII"><i>VIII</i></h2> -</div> - -<p class="in0"><span class="firstword">The Union Pacific incident</span> in Saratoga in the summer -of 1906 made me more independent than ever of tips and -talk—that is, of the opinions and surmises and suspicions of -other people, however friendly or however able they might -be personally. Events, not vanity, proved for me that I could -read the tape more accurately than most of the people about -me. I also was better equipped than the average customer of -Harding Brothers in that I was utterly free from speculative -prejudices. The bear side doesn’t appeal to me any more -than the bull side, or vice versa. My one steadfast prejudice -is against being wrong.</p> - -<p>Even as a lad I always got my own meanings out of such -facts as I observed. It is the only way in which the meaning -reaches me. I cannot get out of facts what somebody tells me -to get. They are my facts, don’t you see? If I believe something -you can be sure it is because I simply must. When I am -long of stocks it is because my reading of conditions has -made me bullish. But you find many people, reputed to be -intelligent, who are bullish because they have stocks. I do -not allow my possessions—or my prepossessions either—to -do any thinking for me. That is why I repeat that I never argue -with the tape. To be angry at the market because it unexpectedly -or even illogically goes against you is like getting -mad at your lungs because you have pneumonia.</p> - -<p>I had been gradually approaching the full realization of -how much more than tape reading there was to stock<span class="pagenum" id="Page_88">88</span> -speculation. Old man Partridge’s insistence on the vital importance -of being continuously bullish in a bull market -doubtless made my mind dwell on the need above all other -things of determining the kind of market a man is trading in. -<em>I began to realize that the big money must necessarily be in -the big swing. Whatever might seem to give a big swing its -initial impulse, the fact is that its continuance is not the result -of manipulations by pools or artifice by financiers, but -depends upon basic conditions. And no matter who opposes -it, the swing must inevitably run as far and as fast and as -long as the impelling forces determine.</em></p> - -<p>After Saratoga I began to see more clearly—perhaps I -should say more maturely—that since the entire list moves -in accordance with the main current there was not so much -need as I had imagined to study individual plays or the -behaviour of this or the other stock. Also, by thinking of the -swing a man was not limited in his trading. He could buy or -sell the entire list. In certain stocks a short line is dangerous -after a man sells more than a certain percentage of the capital -stock, the amount depending on how, where and by -whom the stock is held. But he could sell a million shares of -the general list—if he had the price—without the danger of -being squeezed. A great deal of money used to be made periodically -by insiders in the old days out of the shorts and -their carefully fostered fears of corners and squeezes.</p> - -<p><em>Obviously the thing to do was to be bullish in a bull market -and bearish in a bear market.</em> Sounds silly, doesn’t it? -But I had to grasp that general principle firmly before I saw -that to put it into practice really meant to anticipate probabilities. -It took me a long time to learn to trade on those -lines. But in justice to myself I must remind you that up to -then I had never had a big enough stake to speculate that -way. A big swing will mean big money if your line is big, -and to be able to swing a big line you need a big balance at -your broker’s.</p> - -<p>I always had—or felt that I had—to make my daily bread<span class="pagenum" id="Page_89">89</span> -out of the stock market. It interfered with my efforts to -increase the stake available for the more profitable but -slower and therefore more immediately expensive method -of trading on swings.</p> - -<p>But not only did my confidence in myself grow stronger -but my brokers ceased to think of me as a sporadically lucky -Boy Plunger. They had made a great deal out of me in commissions, -but now I was in a fair way to become their star -customer and as such to have a value beyond the actual volume -of my trading. <em>A customer who makes money is an asset -to any broker’s office.</em></p> - -<p>The moment I ceased to be satisfied with merely studying -the tape I ceased to concern myself exclusively with the -daily fluctuations in specific stocks, and when that happened -I simply had to study the game from a different angle. I -worked back from the quotation to first principles; from -price-fluctuations to basic conditions.</p> - -<p>Of course I had been reading the daily dope regularly for -a long time. All traders do. But much of it was gossip, some -of it deliberately false, and the rest merely the personal -opinion of the writers. The reputable weekly reviews when -they touched upon underlying conditions were not entirely -satisfactory to me. The point of view of the financial editors -was not mine as a rule. It was not a vital matter for them to -marshal their facts and draw their conclusions from them, -but it was for me. Also there was a vast difference in our appraisal -of the element of time. <em>The analysis of the week that -had passed was less important to me than the forecast of the -weeks that were to come.</em></p> - -<p>For years I had been the victim of an unfortunate combination -of inexperience, youth and insufficient capital. But -now I felt the elation of a discoverer. My new attitude toward -the game explained my repeated failures to make big -money in New York. But now with adequate resources, experience -and confidence, I was in such a hurry to try the new -key that I did not notice that there was another lock on the<span class="pagenum" id="Page_90">90</span> -door—<em>a time lock!</em> It was a perfectly natural oversight. I had -to pay the usual tuition—a good whack per each step forward.</p> - -<p>I studied the situation in 1906 and I thought that the -money outlook was particularly serious. Much actual wealth -the world over had been destroyed. Everybody must sooner -or later feel the pinch, and therefore nobody would be in -position to help anybody. It would not be the kind of hard -times that comes from the swapping of a house worth ten -thousand dollars for a carload of race horses worth eight -thousand dollars. It was the complete destruction of the -house by fire and of most of the horses by a railroad wreck. -It was good hard cash that went up in cannon smoke in the -Boer War, and the millions spent for feeding nonproducing -soldiers in South Africa meant no help from British investors -as in the past. Also, the earthquake and the fire in San Francisco -and other disasters touched everybody—manufacturers, -farmers, merchants, labourers and millionaires. The -railroads must suffer greatly. I figured that nothing could -stave off one peach of a smash. <em>Such being the case there -was but one thing to do—sell stocks!</em></p> - -<p>I told you I had already observed that my initial transaction, -after I made up my mind which way I was going to -trade, was apt to show me a profit. And now when I decided -to sell I plunged. Since we undoubtedly were entering upon -a genuine bear market I was sure I should make the biggest -killing of my career.</p> - -<p>The market went off. Then it came back. It shaded off and -then it began to advance steadily. My paper profits vanished -and paper losses grew. One day it looked as if not a bear -would be left to tell the tale of the strictly genuine bear market. -<em>I couldn’t stand the gaff. I covered. It was just as well. -If I hadn’t I wouldn’t have had enough to buy a postal -card. I lost most of my fur, but it was better to live to fight -another day.</em></p> - -<p>I had made a mistake. But where? I was bearish in a<span class="pagenum" id="Page_91">91</span> -bear market. That was wise. I had sold stocks short. That -was proper. <em>I had sold them too soon. That was costly. My -position was right but my play was wrong.</em> However, every -day brought the market nearer to the inevitable smash. So I -waited and when the rally began to falter and pause I let -them have as much stock as my sadly diminished margins -permitted. <em>I was right this time—for exactly one whole day</em>, -for on the next there was another rally. Another big bite out -of yours truly! So I read the tape and covered and waited. -In due course I sold again—and again they went down -promisingly and then they rudely rallied.</p> - -<p>It looked as if the market were doing its best to make me -go back to my old and simple ways of bucket-shop trading. -<em>It was the first time I had worked with a definite forward-looking -plan embracing the entire market instead of one or -two stocks.</em> I figured that I must win if I held out. Of -course at that time I had not developed my system of -placing my bets or I would have put out my short line on a -declining market, as I explained to you the last time. I would -not then have lost so much of my margin. <em>I would have been -wrong but not hurt.</em> You see, I had observed certain facts -but had not learned to co-ordinate them. My incomplete observation -not only did not help but actually hindered.</p> - -<p><em>I have always found it profitable to study my mistakes.</em> -Thus I eventually discovered that it was all very well not to -lose your bear position in a bear market, but that at all times -the tape should be read to determine the propitiousness of -the time for operating. If you begin right you will not see -your profitable position seriously menaced; and then you will -find no trouble in sitting tight.</p> - -<p>Of course to-day I have greater confidence in the accuracy -of my observations—in which neither hopes nor hobbies -play any part—and also I have greater facilities for verifying -my facts as well as for variously testing the correctness of -my views. But in 1906 the succession of rallies dangerously -impaired my margins.</p> - -<p><span class="pagenum" id="Page_92">92</span> -I was nearly twenty-seven years old. I had been at the -game twelve years. <em>But the first time I traded because of a -crisis that was still to come I found that I had been using a -telescope.</em> Between my first glimpse of the storm cloud and -the time for cashing in on the big break the stretch was evidently -so much greater than I had thought that I began to -wonder whether I really saw what I thought I saw so clearly. -<em>We had had many warnings and sensational ascensions in -call-money rates.</em> Still some of the great financiers talked -hopefully—at least to newspaper reporters—and the ensuing -rallies in the stock market gave the lie to the calamity -howlers. Was I fundamentally wrong in being bearish or -merely temporarily wrong in having begun to sell short too -soon?</p> - -<p>I decided that I began too soon, but that I really couldn’t -help it. Then the market began to sell off. That was my -opportunity. I sold all I could, and then stocks rallied again, -to quite a level.</p> - -<p>It cleaned me out.</p> - -<p>There I was—right and busted!</p> - -<p>I tell you it was remarkable. What happened was this: -I looked ahead and saw a big pile of dollars. Out of it stuck -a sign. It had “Help yourself,” on it, in huge letters. Beside -it stood a cart with “Lawrence Livingston Trucking Corporation” -painted on its side. I had a brand-new shovel in -my hand. There was not another soul in sight, so I had no -competition in the gold-shoveling, which is one beauty of -seeing the dollar-heap ahead of others. The people who -might have seen it if they had stopped to look were just then -looking at baseball games instead, or motoring or buying -houses to be paid for with the very dollars that I saw. That -was the first time that I had seen big money ahead, and I -naturally started toward it on the run. Before I could reach -the dollar-pile my wind went back on me and I fell to the -ground. The pile of dollars was still there, but I had lost the -shovel, and the wagon was gone. So much for sprinting too<span class="pagenum" id="Page_93">93</span> -soon! I was too eager to prove to myself that I had seen real -dollars and not a mirage. I saw, and knew that I saw. Thinking -about the reward for my excellent sight kept me from -considering the distance to the dollar-heap. I <em>should have -walked and not sprinted.</em></p> - -<p>That is what happened. I didn’t wait to determine -whether or not the time was right for plunging on the bear -side. On the one occasion when I should have invoked the -aid of my tape-reading I didn’t do it. That is how I came to -learn that even <em>when one is properly bearish at the very beginning -of a bear market it is well not to begin selling in -bulk until there is no danger of the engine back-firing</em>.</p> - -<p>I had traded in a good many thousands of shares at Harding’s -office in all those years, and, moreover, the firm had -confidence in me and our relations were of the pleasantest. I -think they felt that I was bound to be right again very -shortly and they knew that with my habit of pushing my -luck all I needed was a start and I’d more than recover what -I had lost. They had made a great deal of money out of my -trading and they would make more. So there was no trouble -about my being able to trade there again as long as my -credit stood high.</p> - -<p>The succession of spankings I had received made me less -aggressively cocksure; perhaps I should say less careless, for -of course I knew I was just so much nearer to the smash. -All I could do was wait watchfully, as I should have done -before plunging. It wasn’t a case of locking the stable after -the horse was stolen. I simply had to be sure, the next time I -tried. <em>If a man didn’t make mistakes he’d own the world in a -month. But if he didn’t profit by his mistakes he wouldn’t -own a blessed thing.</em></p> - -<p>Well, sir, one fine morning I came downtown feeling cocksure -once more. There wasn’t any doubt this time. I had -read an advertisement in the financial pages of all the newspapers -that was the high sign I hadn’t had the sense to wait -for before plunging. It was the announcement of a new issue<span class="pagenum" id="Page_94">94</span> -of stock by the Northern Pacific and Great Northern roads. -The payments were to be made on the installment plan for -the convenience of the stockholders. This consideration was -something new in Wall Street. It struck me as more than -ominous.</p> - -<p>For years the unfailing bull item on Great Northern preferred -had been the announcement that another melon was -to be cut, said melon consisting of the right of the lucky -stockholders to subscribe at par to a new issue of Great -Northern stock. These rights were valuable, since the market -price was always way above par. But now <em>the money market</em> -was such that the most powerful banking houses in the -country were none too sure the stockholders would be able -to pay cash for the bargain. And Great Northern preferred -was selling at about 330!</p> - -<p>As soon as I got to the office I told Ed Harding, “The time -to sell is right now. This is when I should have begun. Just -look at that ad, will you?”</p> - -<p>He had seen it. I pointed out what the bankers’ confession -amounted to in my opinion, but he couldn’t quite see -the big break right on top of us. He thought it better to wait -before putting out a very big short line by reason of the -market’s habit of having big rallies. If I waited prices might -be lower, but the operation would be safer.</p> - -<p>“Ed,” I said to him, “the longer the delay in starting the -sharper the break will be when it does start. That ad is a -signed confession on the part of the bankers. What they fear -is what I hope. This is a sign for us to get aboard the bear -wagon. It is all we needed. If I had ten million dollars I’d -stake every cent of it this minute.”</p> - -<p>I had to do some more talking and arguing. He wasn’t -content with the only inferences a sane man could draw -from that amazing advertisement. It was enough for me, but -not for most of the people in the office. I sold a little; too -little.</p> - -<p>A few days later St. Paul very kindly came out with an<span class="pagenum" id="Page_95">95</span> -announcement of an issue of its own; either stocks or notes, -I forget which. But that doesn’t matter. What mattered then -was that I noticed the moment I read it that the date of payment -was set ahead of the Great Northern and Northern -Pacific payments, which had been announced earlier. It was -as plain as though they had used a megaphone that grand -old St. Paul was trying to beat the other two railroads to -what little money there was floating around in Wall Street. -The St. Paul’s bankers quite obviously feared that there -wasn’t enough for all three and they were not saying, “After -you, my dear Alphonse!” If money already was that scarce—and -you bet the bankers knew—what would it be later? The -railroads needed it desperately. It wasn’t there. What was -the answer?</p> - -<p>Sell ’em! Of course! The public, with their eyes fixed on -the stock market, saw little—that week. The wise stock -operators saw much—that year. That was the difference.</p> - -<p>For me, that was the end of doubt and hesitation. I made -up my mind for keeps then and there. That same morning I -began what really was my first campaign along the lines that -I have since followed. I told Harding what I thought and -how I stood, and he made no objections to my selling Great -Northern preferred at around 330, and other stocks at high -prices. I profited by my earlier and costly mistakes and sold -more intelligently.</p> - -<p>My reputation and my credit were reestablished in a jiffy. -That is the beauty of being right in a broker’s office, whether -by accident or not. But this time I was cold-bloodedly right, -not because of a hunch or from skillful reading of the tape, -but as a result of my analysis of conditions affecting the -stock market in general. I wasn’t guessing. I was anticipating -the inevitable. It did not call for any courage to sell stocks. I -simply could not see anything but lower prices, and I had -to act on it, didn’t I? What else could I do?</p> - -<p>The whole list was soft as mush. Presently there was a -rally and people came to me to warn me that the end of the<span class="pagenum" id="Page_96">96</span> -decline had been reached. The big fellows, knowing the -short interest to be enormous, had decided to squeeze the -stuffing out of the bears, and so forth. It would set us pessimists -back a few millions. It was a cinch that the big fellows -would have no mercy. I used to thank these kindly counsellors. -I wouldn’t even argue, because then they would have -thought that I wasn’t grateful for the warnings.</p> - -<p>The friend who had been in Atlantic City with me was in -agony. He could understand the hunch that was followed -by the earthquake. He couldn’t disbelieve in such agencies, -since I had made a quarter of a million by intelligently -obeying my blind impulse to sell Union Pacific. He even said -it was Providence working in its mysterious way to make me -sell stocks when he himself was bullish. And he could understand -my second UP. trade in Saratoga because he could -understand any deal that involved one stock, on which the -tip definitely fixed the movement in advance, either up or -down. But this thing of predicting that all stocks were -bound to go down used to exasperate him. What did that -kind of dope do anybody? How in blazes could a gentleman -tell what to do?</p> - -<p>I recalled old Partridge’s favourite remark—“Well, this is -a bull market, you know”—as though that were tip enough -for anybody who was wise enough; as in truth it was. It was -very curious how, after suffering tremendous losses from a -break of fifteen or twenty points, people who were still -hanging on, welcomed a three-point rally and were certain -the bottom had been reached and complete recovery begun.</p> - -<p>One day my friend came to me and asked me, “Have you -covered?”</p> - -<p>“Why should I?” I said.</p> - -<p>“For the best reason in the world.”</p> - -<p>“What reason is that?”</p> - -<p>“To make money. They’ve touched bottom and what goes -down must come up. Isn’t that so?”</p> - -<p>“Yes,” I answered. “First they sink to the bottom. Then<span class="pagenum" id="Page_97">97</span> -they come up; but not right away. They’ve got to be good -and dead a couple of days. It isn’t time for these corpses to -rise to the surface. They are not quite dead yet.”</p> - -<p>An old-timer heard me. He was one of those chaps that -are always reminded of something. He said that William R. -Travers, who was bearish, once met a friend who was bullish. -They exchanged market views and the friend said, “Mr. -Travers, how can you be bearish with the market so stiff?” -and Travers retorted, “Yes! Th-the s-s-stiffness of d-death!” -It was Travers who went to the office of a company and -asked to be allowed to see the books. The clerk asked him, -“Have you an interest in this company?” and Travers answered, -“I sh-should s-say I had! I’m sh-short t-t-twenty -thousand sh-shares of the stock!”</p> - -<p>Well, the rallies grew feebler and feebler. I was pushing -my luck for all I was worth. Every time I sold a few thousand -shares of Great Northern preferred the price broke -several points. I felt out weak spots elsewhere and let ’em -have a few. All yielded, with one impressive exception; and -that was Reading.</p> - -<p>When everything else hit the toboggan slide Reading -stood like the Rock of Gibraltar. Everybody said the stock -was cornered. It certainly acted like it. They used to tell me -it was plain suicide to sell Reading short. There were people -in the office who were now as bearish on everything as I -was. But when anybody hinted at selling Reading they -shrieked for help. I myself had sold some short and was -standing pat on it. At the same time I naturally preferred to -seek and hit the soft spots instead of attacking the more -strongly protected specialties. My tape reading found easier -money for me in other stocks.</p> - -<p>I heard a great deal about the Reading bull pool. It was a -mighty strong pool. To begin with they had a lot of low-priced -stock, so that their average was actually below the -prevailing level, according to friends who told me. Moreover, -the principal members of the pool had close connections<span class="pagenum" id="Page_98">98</span> -of the friendliest character with the banks whose -money they were using to carry their huge holdings of Reading. -As long as the price stayed up the bankers’ friendship -was staunch and steadfast. One pool member’s paper profit -was upward of three millions. That allowed for some decline -without causing fatalities. No wonder the stock stood up and -defied the bears. Every now and then the room traders -looked at the price, smacked their lips and proceeded to -test it with a thousand shares or two. They could not dislodge -a share, so they covered and went looking elsewhere -for easier money. Whenever I looked at it I also sold a little -more—just enough to convince myself that I was true to my -new trading principles and wasn’t playing favourites.</p> - -<p>In the old days the strength of Reading might have fooled -me. The tape kept on saying, “Leave it alone!” But my -reason told me differently. I was anticipating a general -break, and there were not going to be any exceptions, pool -or no pool.</p> - -<p>I have always played a lone hand. I began that way in the -bucket shops and have kept it up. It is the way my mind -works. I have to do my own seeing and my own thinking. -But I can tell you after the market began to go my way I felt -for the first time in my life that I had allies—the strongest -and truest in the world: underlying conditions. They were -helping me with all their might. Perhaps they were a trifle -slow at times bringing up the reserves, but they were dependable, -provided I did not get too impatient. I was not -pitting my tape-reading knack or my hunches against -chance. The inexorable logic of events was making money -for me.</p> - -<p>The thing was to be right; to know it and to act accordingly. -General conditions, my true allies, said “Down!” and -Reading disregarded the command. It was an insult to us. It -began to annoy me to see Reading holding firmly, as though -everything was serene. It ought to be the best short sale -in the entire list because it had not gone down and the pool<span class="pagenum" id="Page_99">99</span> -was carrying a lot of stock that it would not be able to carry -when the money stringency grew more pronounced. Some -day the bankers’ friends would fare no better than the -friendless public. The stock must go with the others. If -Reading didn’t decline, then my theory was wrong; I was -wrong; facts were wrong; logic was wrong.</p> - -<p>I figured that the price held because the Street was afraid -to sell it. So one day I gave to two brokers each an order to -sell four thousand shares, at the same time.</p> - -<p>You ought to have seen that cornered stock, that it was -sure suicide to go short of, take a headlong dive when those -competitive orders struck it. I let ’em have a few thousand -more. The price was 111 when I started selling it. Within a -few minutes I took in my entire short line at 92.</p> - -<p>I had a wonderful time after that, and in <em>February of 1907 -I cleaned up</em>. Great Northern preferred had gone down sixty -or seventy points, and other stocks in proportion. <em>I had made -a good bit, but the reason I cleaned up was that I figured -that the decline had discounted the immediate future.</em> I -looked for a fair recovery, but I wasn’t bullish enough to play -for a turn. I wasn’t going to lose my position entirely. The -market would not be right for me to trade in for a while. The -first ten thousand I made in the bucket shops <em>I lost because I -traded in and out of season, every day, whether or not conditions -were right. I wasn’t making that mistake twice.</em> Also, -don’t forget that I had gone broke a little while before because -I had seen this break too soon and started selling before -it was time. Now when I had a big profit I wanted to -cash in so that I could feel I had been right. The rallies had -broken me before. I wasn’t going to let the next rally wipe -me out. Instead of sitting tight I went to Florida. I love fishing -and I needed a rest. I could get both down there. And -besides, there are direct wires between Wall Street and Palm -Beach.</p> - -<hr /> - -<p><span class="pagenum" id="Page_100">100</span></p> - -<div class="chapter"> -<h2 id="IX"><i>IX</i></h2> -</div> - -<p class="in0"><span class="firstword">I cruised off the coast</span> of Florida. The fishing was good. -I was out of stocks. My mind was easy. I was having a fine -time. One day off Palm Beach some friends came alongside -in a motor boat. One of them brought a newspaper with him. -I hadn’t looked at one in some days and had not felt any desire -to see one. I was not interested in any news it might -print. But I glanced over the one my friend brought to the -yacht, and I saw that the market had had a big rally; ten -points and more.</p> - -<p>I told my friends that I would go ashore with them. Moderate -rallies from time to time were reasonable. But the bear -market was not over; and here was Wall Street or the fool -public or desperate bull interests disregarding monetary conditions -and marking up prices beyond reason or letting somebody -else do it. It was too much for me. I simply had to take -a look at the market. I didn’t know what I might or might -not do. But I knew that my pressing need was the sight of -the quotation board.</p> - -<p>My brokers, Harding Brothers, had a branch office in Palm -Beach. When I walked in I found there a lot of chaps I -knew. Most of them were talking bullish. They were of the -type that trade on the tape and want quick action. Such -traders don’t care to look ahead very far because they don’t -need to with their style of play. I told you how I’d got to be -known in the New York office as the Boy Plunger. Of course -people always magnify a fellow’s winnings and the size of the<span class="pagenum" id="Page_101">101</span> -line he swings. The fellows in the office had heard that I had -made a killing in New York on the bear side and they now -expected that I again would plunge on the short side. They -themselves thought the rally would go to a good deal -further, but they rather considered it my duty to fight it.</p> - -<p>I had come down to Florida on a fishing trip. I had been -under a pretty severe strain and I needed my holiday. But -the moment I saw how far the recovery in prices had gone I -no longer felt the need of a vacation. I had not thought of -just what I was going to do when I came ashore. But now I -knew I must sell stocks. I was right, and I must prove it in -my old and only way—by saying it with money. To sell the -general list would be a proper, prudent, profitable and even -patriotic action.</p> - -<p>The first thing I saw on the quotation board was that Anaconda -was on the point of crossing 300. It had been going up -by leaps and bounds and there was apparently an aggressive -bull party in it. It was an old trading theory of mine that -when a stock crosses <em>100 or 200 or 300 for the first time the -price does not stop at the even figure but goes a good deal -higher, so that if you buy it as soon as it crosses the line it is -almost certain to show you a profit</em>. Timid people don’t like -to buy a stock at a new high record. But I had the history of -such movements to guide me.</p> - -<p>Anaconda was only quarter stock—that is, the par of the -shares was only twenty-five dollars. It took four hundred -shares of it to equal the usual one hundred shares of other -stocks, the par value of which was one hundred dollars. I -figured that when it crossed 300 it ought to keep on going -and probably touch 340 in a jiffy.</p> - -<p>I was bearish, remember, but I was also a tape-reading -trader. I knew Anaconda, if it went the way I figured, would -move very quickly. Whatever moves fast always appeals to -me. I have learned patience and how to sit tight, but my -personal preference is for fleet movements, and Anaconda -certainly was no sluggard. My buying it because it crossed<span class="pagenum" id="Page_102">102</span> -300 was prompted by the desire, always strong in me, of confirming -my observations.</p> - -<p>Just then the tape was saying that the buying was stronger -than the selling, and therefore the general rally might easily -go a bit further. It would be prudent to wait before going -short. Still I might as well pay myself wages for waiting. This -would be accomplished by taking a quick thirty points out -of Anaconda. Bearish on the entire market and bullish on -that one stock! So I bought thirty-two thousand shares of -Anaconda—that is, eight thousand full shares. It was a nice -little flyer but I was sure of my premises and I figured that -the profit would help to swell the margin available for bear -operations later on.</p> - -<p>On the next day the telegraph wires were down on account -of a storm up North or something of the sort. I was in -Harding’s office waiting for news. The crowd was chewing -the rag and wondering all sorts of things, as stock traders -will when they can’t trade. Then we got a quotation—the -only one that day: Anaconda, 292.</p> - -<p>There was a chap with me, a broker I had met in New -York. He knew I was long eight thousand full shares and I -suspect that he had some of his own, for when we got that -one quotation he certainly had a fit. He couldn’t tell whether -the stock at that very moment had gone off another ten -points or not. The way Anaconda had gone up it wouldn’t -have been anything unusual for it to break twenty points. -But I said to him, “Don’t you worry, John. It will be all right -to-morrow.” That was really the way I felt. But he looked at -me and shook his head. He knew better. He was that kind. -So I laughed, and I waited in the office in case some quotation -trickled through. But no, sir. That one was all we got: -Anaconda, 292. It meant a paper loss to me of nearly one -hundred thousand dollars. I had wanted quick action. Well, -I was getting it.</p> - -<p>The next day the wires were working and we got the -quotations as usual. Anaconda opened at 298 and went up<span class="pagenum" id="Page_103">103</span> -to 302¾, but pretty soon it began to fade away. Also, the rest -of the market was not acting just right for a further rally. I -made up my mind that if Anaconda went back to 301 I must -consider the whole thing a fake movement. On a legitimate -advance the price should have gone to 310 without stopping. -If instead it reacted it meant that precedents had failed me -and I was wrong; <em>and the only thing to do when a man is -wrong is to be right by ceasing to be wrong</em>. I had bought -eight thousand full shares in expectation of a thirty or forty -point rise. It would not be my first mistake; nor my last.</p> - -<p>Sure enough, Anaconda fell back to 301. The moment it -touched that figure I sneaked over to the telegraph operator—they -had a direct wire to the New York office—and I said -to him, “Sell all my Anaconda, eight thousand shares.” I said -it in a low voice. I didn’t want anybody else to know what I -was doing.</p> - -<p>He looked up at me almost in horror. But I nodded and -said, “All I’ve got!”</p> - -<p>“Surely, Mr. Livingston, you don’t mean at the market?” -and he looked as if he was going to lose a couple of millions -of his own through bum execution by a careless broker. But I -just told him, “Sell it! Don’t argue about it!”</p> - -<p>The two Black boys, Jim and Ollie, were in the office, out -of hearing of the operator and myself. They were big traders -who had come originally from Chicago, where they had been -famous plungers in wheat, and were now heavy traders on -the New York Stock Exchange. They were very wealthy and -were high rollers for fair.</p> - -<p>As I left the telegraph operator to go back to my seat in -front of the quotation board Oliver Black nodded to me and -smiled.</p> - -<p>“You’ll be sorry, Larry,” he said.</p> - -<p>I stopped and asked him, “What do you mean?”</p> - -<p>“To-morrow you’ll be buying it back.”</p> - -<p>“Buying what back?” I said. I hadn’t told a soul except the -telegraph operator.</p> - -<p><span class="pagenum" id="Page_104">104</span> -“Anaconda,” he said. “You’ll be paying 320 for it. That -wasn’t a good move of yours, Larry.” And he smiled again.</p> - -<p>“What wasn’t?” And I looked innocent.</p> - -<p>“Selling your eight thousand Anaconda at the market; in -fact, insisting on it,” said Ollie Black.</p> - -<p>I knew that he was supposed to be very clever and always -traded on inside news. But how he knew my business so accurately -was beyond me. I was sure the office hadn’t given -me away.</p> - -<p>“Ollie, how do you know that?” I asked him.</p> - -<p>He laughed and told me: “I got it from Charlie Kratzer.” -That was the telegraph operator.</p> - -<p>“But he never budged from his place,” I said.</p> - -<p>“I couldn’t hear you and him whispering,” he chuckled. -“But I heard every word of the message he sent to the New -York office for you. I learned telegraphy years ago after I -had a big row over a mistake in a message. Since then when -I do what you did just now—give an order by word of mouth -to an operator—I want to be sure the operator sends the message -as I give it to him. I know what he sends in my name. -But you will be sorry you sold that Anaconda. It’s going to -500.”</p> - -<p>“Not this trip, Ollie,” I said.</p> - -<p>He stared at me and said, “You’re pretty cocky about it.”</p> - -<p>“Not I; the tape,” I said. There wasn’t any ticker there so -there wasn’t any tape. But he knew what I meant.</p> - -<p>“I’ve heard of those birds,” he said, “who look at the tape -and instead of seeing prices they see a railroad time-table of -the arrival and departure of stocks. But they were in padded -cells where they couldn’t hurt themselves.”</p> - -<p>I didn’t answer him anything because about that time the -boy brought me a memorandum. They had sold five thousand -shares at 299¾. I knew our quotations were a little behind the -market. The price on the board at Palm Beach when I gave -the operator the order to sell was 301. I felt so certain that at -that very moment the price at which the stock was actually<span class="pagenum" id="Page_105">105</span> -selling on the Stock Exchange in New York was less, that if -anybody had offered to take the stock off my hands at 296 -I’d have been tickled to death to accept. What happened -shows you that I am right in never trading at limits. Suppose -I had limited my selling price to 300? I’d never have got it -off. No, sir! <em>When you want to get out, get out.</em></p> - -<p>Now, my stock cost me about 300. They got off five hundred -shares—full shares, of course—at 299¾. The next thousand -they sold at 299⅝. Then a hundred at ½; two hundred at -⅜ and two hundred at ¼. The last of my stock went at 298¾. It -took Harding’s cleverest floor man fifteen minutes to get rid -of that last one hundred shares. They didn’t want to crack it -wide open.</p> - -<p>The moment I got the report of the sale of the last of my -long stock I started to do what I had really come ashore to -do—that is, to sell stocks. I simply had to. There was the -market after its outrageous rally, begging to be sold. Why, -people were beginning to talk bullish again. The course of -the market, however, told me that the rally had run its -course. It was safe to sell them. It did not require reflection.</p> - -<p>The next day Anaconda opened below 296. Oliver Black, -who was waiting for a further rally, had come down early to -be Johnny-on-the-spot when the stock crossed 320. I don’t -know how much of it he was long of or whether he was long -of it all. But he didn’t laugh when he saw the opening prices, -nor later in the day when the stock broke still more and the -report came back to us in Palm Beach that there was no -market for it at all.</p> - -<p>Of course that was all the confirmation any man needed. -My growing paper profit kept reminding me that I was right, -hour by hour. Naturally I sold some more stocks. Everything! -It was a bear market. They were all going down. The next -day was Friday, Washington’s Birthday. I couldn’t stay in -Florida and fish because I had put out a very fair short line, -for me. I was needed in New York. Who needed me? I did!<span class="pagenum" id="Page_106">106</span> -Palm Beach was too far, too remote. Too much valuable time -was lost telegraphing back and forth.</p> - -<p>I left Palm Beach for New York. On Monday I had to lie -in St. Augustine three hours, waiting for a train. There was a -broker’s office there, and naturally I had to see how the market -was acting while I was waiting. Anaconda had broken -several points since the last trading day. As a matter of fact, -it didn’t stop going down until the big break that fall.</p> - -<p>I got to New York and traded on the bear side for about -four months. The market had frequent rallies as before, and -I kept covering and putting them out again. I didn’t, strictly -speaking, sit tight. Remember, I had lost every cent of the -three hundred thousand dollars I made out of the San -Francisco earthquake break. I had been right, and nevertheless -had gone broke. I was now playing safe—because after -being down a man enjoys being up, even if he doesn’t quite -make the top. <em>The way to make money is to make it. The -way to make big money is to be right at exactly the right -time.</em> In this business a man has to think of both theory and -practice. A speculator must not be merely a student, he must -be both a student and a speculator.</p> - -<p>I did pretty well, even if I can now see where my campaign -was tactically inadequate. When summer came the -market got dull. It was a cinch that there would be nothing -doing in a big way until well along in the fall. Everybody I -knew had gone or was going to Europe. I thought that -would be a good move for me. So I cleaned up. When I -sailed for Europe I was a trifle more than three-quarters of a -million to the good. To me that looked like some balance.</p> - -<p>I was in Aix-les-Bains enjoying myself. I had earned my -vacation. It was good to be in a place like that with plenty of -money and friends and acquaintances and everybody intent -upon having a good time. Not much trouble about having -that, in Aix. Wall Street was so far away that I never thought -about it, and that is more than I could say of any resort in -the United States. I didn’t have to listen to talk about the<span class="pagenum" id="Page_107">107</span> -stock market. I didn’t need to trade. I had enough to last me -quite a long time, and besides, when I got back I knew what -to do to make much more than I could spend in Europe that -summer.</p> - -<p>One day I saw in the Paris <i>Herald</i> a dispatch from New -York that Smelters had declared an extra dividend. They had -run the price of the stock and the entire market had come -back quite strong. Of course that changed everything for me -in Aix. The news simply meant that the bull cliques were -still fighting desperately against conditions—against common -sense and against common honesty, for they knew what -was coming and were resorting to such schemes to put up -the market in order to unload stocks before the storm struck -them. It is possible they really did not believe the danger -was as serious or as close at hand as I thought. <em>The big men -of the Street are as prone to be wishful thinkers as the politicians -or the plain suckers. I myself can’t work that way.</em> In -a speculator such an attitude is fatal. Perhaps a manufacturer -of securities or a promoter of new enterprises can afford -to indulge in hope-jags.</p> - -<p>At all events, I knew that all bull manipulation was foredoomed -to failure in that bear market. The instant I read the -dispatch I knew there was only one thing to do to be comfortable, -and that was to sell Smelters short. Why, the insiders -as much as begged me on their knees to do it, when they -increased the dividend rate on the verge of a money panic. It -was as infuriating as the old “dares” of your boyhood. They -dared me to sell that particular stock short.</p> - -<p>I cabled some selling orders in Smelter and advised my -friends in New York to go short of it. When I got my report -from the brokers I saw the price they got was six points below -the quotations I had seen in the Paris Herald. It shows -you what the situation was.</p> - -<p>My plans had been to return to Paris at the end of the -month and about three weeks later sail for New York, but as -soon as I received the cabled reports from my brokers I went<span class="pagenum" id="Page_108">108</span> -back to Paris. The same day I arrived I called at the steamship -offices and found there was a fast boat leaving for New -York the next day. I took it.</p> - -<p>There I was, back in New York, almost a month ahead of -my original plans, because it was the most comfortable place -to be short of the market in. I had well over half a million in -cash available for margins. My return was not due to my -being bearish but to my being logical.</p> - -<p>I sold more stocks. <em>As money got tighter call-money rates -went higher and prices of stocks lower.</em> I had foreseen it. At -first, my foresight broke me. But now I was right and prospering. -However, the real joy was in the consciousness that -as a trader I was at last on the right track. I still had much -to learn but I knew what to do. No more floundering, no more -half-right methods. <em>Tape reading was an important part of -the game; so was beginning at the right time; so was sticking -to your position. But my greatest discovery was that a man -must study general conditions, to size them so as to be able -to anticipate probabilities.</em> In short, I had learned that I had -to work for my money. I was no longer betting blindly or -concerned with mastering the technic of the game, but with -earning my successes by hard study and clear thinking. I -also found out that nobody was immune from the danger of -making sucker plays. And for a sucker play a man gets sucker -pay; for the paymaster is on the job and never loses the pay -envelope that is coming to you.</p> - -<p>Our office made a great deal of money. My own operations -were so successful that they began to be talked about and, -of course, were greatly exaggerated. I was credited with -starting the breaks in various stocks. People I didn’t know by -name used to come and congratulate me. They all thought -the most wonderful thing was the money I had made. They -did not say a word about the time when I first talked bearish -to them and they thought I was a crazy bear with a stock-market -loser’s vindictive grouch. That I had foreseen the -money troubles was nothing. That my brokers’ bookkeeper<span class="pagenum" id="Page_109">109</span> -had used a third of a drop of ink on the credit side of the -ledger under my name was a marvellous achievement to -them.</p> - -<p>Friends used to tell me that in various offices the Boy -Plunger in Harding Brothers’ office was quoted as making -all sorts of threats against the bull cliques that had tried to -mark up prices of various stocks long after it was plain that -the market was bound to seek a much lower level. To this -day they talk of my raids.</p> - -<p>From the latter part of September on, the money market -was megaphoning warnings to the entire world. But a belief -in miracles kept people from selling what remained of their -speculative holdings. Why a broker told me a story the first -week of October that made me feel almost ashamed of my -moderation.</p> - -<p>You remember that money loans used to be made on the -floor of the Exchange around the Money Post. Those brokers -who had received notice from their banks to pay call loans -knew in a general way how much money they would have to -borrow afresh. And of course the banks knew their position -so far as loanable funds were concerned, and those which -had money to loan would send it to the Exchange. This bank -money was handled by a few brokers whose principal business -was time loans. At about noon the renewal rate for the -day was posted. Usually this represented a fair average of -the loans made up to that time. Business was as a rule transacted -openly by bids and offers, so that everyone knew what -was going on. Between noon and about two o’clock there -was ordinarily not much business done in money, but after -delivery time—namely, 2:15 <span class="smcap smaller">P.M.</span>—brokers would know exactly -what their cash position for the day would be, and they -were able either to go to the Money Post and lend the balances -that they had over or to borrow what they required. -This business also was done openly.</p> - -<p>Well, sometime early in October the broker I was telling -you about came to me and told me that brokers were getting<span class="pagenum" id="Page_110">110</span> -so they didn’t go to the Money Post when they had money -to loan. The reason was that members of a couple of well-known -commission houses were on watch there, ready to -snap up any offerings of money. Of course no lender who -offered money publicly could refuse to lend to these firms. -They were solvent and the collateral was good enough. But -the trouble was that once these firms borrowed money on -call there was no prospect of the lender getting that money -back. They simply said they couldn’t pay it back and the -lender would willy-nilly have to renew the loan. So any -Stock Exchange house that had money to loan to its fellows -used to send its men about the floor instead of to the Post, -and they would whisper to good friends, “Want a hundred?” -meaning, “Do you wish to borrow a hundred thousand dollars?” -The money brokers who acted for the banks presently -adopted the same plan, and it was a dismal sight to watch -the Money Post. Think of it!</p> - -<p>Why, he also told me that it was a matter of Stock Exchange -etiquette in those October days for the borrower to -make his own rate of interest. You see, it fluctuated between -100 and 150 per cent per annum. I suppose by letting the -borrower fix the rate the lender in some strange way didn’t -feel so much like a usurer. But you bet he got as much as the -rest. The lender naturally did not dream of not paying a high -rate. He played fair and paid whatever the others did. What -he needed was the money and was glad to get it.</p> - -<p>Things got worse and worse. <em>Finally there came the awful -day of reckoning for the bulls and the optimists and the -wishful thinkers and those vast hordes that, dreading the -pain of a small loss at the beginning, were now about to -suffer total amputation—without anaesthetics.</em> A day I shall -never forget, October 24, 1907.</p> - -<p>Reports from the money crowd early indicated that borrowers -would have to pay whatever the lenders saw fit to ask. -There wouldn’t be enough to go around. That day the money -crowd was much larger than usual. When delivery time came<span class="pagenum" id="Page_111">111</span> -that afternoon there must have been a hundred brokers -around the Money Post, each hoping to borrow the money -that his firm urgently needed. Without money they must sell -what stocks they were carrying on margin—sell at any price -they could get in a market where buyers were as scarce as -money—and just then there was not a dollar in sight.</p> - -<p>My friend’s partner was as bearish as I was. The firm -therefore did not have to borrow, but my friend, the broker -I told you about, fresh from seeing the haggard faces around -the Money Post, came to me. He knew I was heavily short of -the entire market.</p> - -<p>He said, “My God, Larry! I don’t know what’s going to -happen. I never saw anything like it. It can’t go on. Something -has got to give. It looks to me as if everybody is busted -right now. You can’t sell stocks, and there is absolutely no -money in there.”</p> - -<p>“How do you mean?” I asked.</p> - -<p>But what he answered was, “Did you ever hear of the classroom -experiment of the mouse in a glass-bell when they -begin to pump the air out of the bell? You can see the poor -mouse breathe faster and faster, its sides heaving like over-worked -bellows, trying to get enough oxygen out of the decreasing -supply in the bell. You watch it suffocate till its eyes -almost pop out of their sockets, gasping, dying. Well, that is -what I think of when I see the crowd at the Money Post! No -money anywhere, and you can’t liquidate stocks because -there is nobody to buy them. The whole Street is broke at -this very moment, if you ask me!”</p> - -<p>It made me think. I had seen a smash coming, but not, I -admit, the worst panic in our history. It might not be profitable -to anybody—if it went much further.</p> - -<p>Finally it became plain that there was no use in waiting at -the Post for money. There wasn’t going to be any. Then hell -broke loose.</p> - -<p>The president of the Stock Exchange, Mr. R. H. Thomas, -so I heard later in the day, knowing that every house in the<span class="pagenum" id="Page_112">112</span> -Street was headed for disaster, went out in search of succour. -He called on James Stillman, president of the National City -Bank, the richest bank in the United States. Its boast was -that it never loaned money at a higher rate than 6 per cent.</p> - -<p>Stillman heard what the president of the New York Stock -Exchange had to say. Then he said, “Mr. Thomas, we’ll have -to go and see Mr. Morgan about this.”</p> - -<p>The two men, hoping to stave off the most disastrous panic -in our financial history, went together to the office of J. P. -Morgan & Co. and saw Mr. Morgan, Mr. Thomas laid the -case before him. The moment he got through speaking Mr. -Morgan said, “Go back to the Exchange and tell them that -there will be money for them.”</p> - -<p>“Where?”</p> - -<p>“At the banks!”</p> - -<p>So strong was the faith of all men in Mr. Morgan in those -critical times that Thomas didn’t wait for further details but -rushed back to the floor of the Exchange to announce the -reprieve to his death-sentenced fellow members.</p> - -<p>Then, before half past two in the afternoon, J. P. Morgan -sent John T. Atterbury, of Van Emburgh & Atterbury, who -was known to have close relations with J. P. Morgan & Co., -into the money crowd. My friend said that the old broker -walked quickly to the Money Post. He raised his hand like -an exhorter at a revival meeting. The crowd, that at first had -been calmed down somewhat by President Thomas’ announcement, -was beginning to fear that the relief plans had -miscarried and the worst was still to come. But when they -looked at Mr. Atterbury’s face and saw him raise his hand -they promptly petrified themselves.</p> - -<p>In the dead silence that followed, Mr. Atterbury said, “I -am authorized to lend ten million dollars. Take it easy! There -will be enough for everybody!”</p> - -<p>Then he began. Instead of giving to each borrower the -name of the lender he simply jotted down the name of the -borrower and the amount of the loan and told the borrower,<span class="pagenum" id="Page_113">113</span> -“You will be told where your money is.” He meant the name -of the bank from which the borrower would get the money -later.</p> - -<p>I heard a day or two later that Mr. Morgan simply sent -word to the frightened bankers of New York that they must -provide the money the Stock Exchange needed.</p> - -<p>“But we haven’t got any. We’re loaned up to the hilt,” the -banks protested.</p> - -<p>“You’ve got your reserves,” snapped J. P.</p> - -<p>“But we’re already below the legal limit,” they howled.</p> - -<p>“Use them! That’s what reserves are for!” And the banks -obeyed and invaded the reserves to the extent of about -twenty million dollars. It saved the stock market. The bank -panic didn’t come until the following week. He was a man, -J. P. Morgan was. They don’t come much bigger.</p> - -<p>That was the day I remember most vividly of all the days -of my life as a stock operator. It was the day when my winnings -exceeded one million dollars. It marked the successful -ending of my first deliberately planned trading campaign. -What I had foreseen had come to pass. But more than all -these things was this: a wild dream of mine had been -realised. I had been king for a day!</p> - -<p>I’ll explain, of course. After I had been in New York a -couple of years I used to cudgel my brains trying to determine -the exact reason why I couldn’t beat in a Stock Exchange -house in New York the game that I had beaten as a -kid of fifteen in a bucket shop in Boston. I knew that some -day I would find out what was wrong and I would stop being -wrong. I would then have not alone the will to be right but -the knowledge to insure my being right. And that would -mean power.</p> - -<p>Please do not misunderstand me. It was not a deliberate -dream of grandeur or a futile desire born of overweening -vanity. It was rather a sort of feeling that the same old stock -market that so baffled me in Fullerton’s office and in Harding’s<span class="pagenum" id="Page_114">114</span> -would one day eat out of my hand. I just felt that such -a day would come. And it did—October 24, 1907.</p> - -<p>The reason why I say it is this: That morning a broker -who had done a lot of business for my brokers and knew that -I had been plunging on the bear side rode down in the company -of one of the partners of the foremost banking house in -the Street. My friend told the banker how heavily I had been -trading, for I certainly pushed my luck to the limit. What is -the use of being right unless you get all the good possible out -of it.</p> - -<p>Perhaps the broker exaggerated to make his story sound -important. Perhaps I had more of a following than I knew. -Perhaps the banker knew far better than I how critical the -situation was. At all events, my friend said to me: “He listened -with great interest to what I told him you said the -market was going to do when the real selling began, after -another push or two. When I got through he said he might -have something for me to do later in the day.”</p> - -<p>When the commission houses found out there was not a -cent to be had at any price I knew the time had come. I sent -brokers into the various crowds. Why, at one time there -wasn’t a single bid for Union Pacific. Not at any price! Think -of it! And in other stocks the same thing. No money to hold -stocks and nobody to buy them.</p> - -<p>I had enormous paper profits and the certainty that all -that I had to do to smash prices still more was to send in -orders to sell ten thousand shares each of Union Pacific and -of a half dozen other good dividend-paying stocks and what -would follow would be simply hell. It seemed to me that the -panic that would be precipitated would be of such an intensity -and character that the board of governors would deem -it advisable to close the Exchange, as was done in August, -1914, when the World War broke out.</p> - -<p>It would mean greatly increased profits on paper. It might -also mean an inability to convert those profits into actual -cash. But there were other things to consider, and one was<span class="pagenum" id="Page_115">115</span> -that a further break would retard the recovery that I was beginning -to figure on, the compensating improvement after -all that blood-letting. Such a panic would do much harm to -the country generally.</p> - -<p>I made up my mind that since it was unwise and unpleasant -to continue actively bearish it was illogical for me to -stay short. So I turned and began to buy.</p> - -<p>It wasn’t long after my brokers began to buy in for me—and, -by the way, I got bottom prices—that the banker sent -for my friend.</p> - -<p>“I have sent for you,” he said, “because I want you to go -instantly to your friend Livingston and say to him that we -hope he will not sell any more stocks to-day. The market -can’t stand much more pressure. As it is, it will be an immensely -difficult task to avert a devastating panic. Appeal to -your friend’s patriotism. This is a case where a man has to -work for the benefit of all. Let me know at once what he -says.”</p> - -<p>My friend came right over and told me. He was very tactful. -I suppose he thought that having planned to smash the -market I would consider his request as equivalent to throwing -away the chance to make about ten million dollars. He -knew I was sore on some of the big guns for the way they -had acted trying to land the public with a lot of stock when -they knew as well as I did what was coming.</p> - -<p>As a matter of fact, the big men were big sufferers and lots -of the stocks I bought at the very bottom were in famous -financial names. I didn’t know it at the time, but it did not -matter. I had practically covered all my shorts and it seemed -to me there was a chance to buy stocks cheap and help the -needed recovery in prices at the same time—if nobody hammered -the market.</p> - -<p>So I told my friend, “Go back and tell Mr. Blank that I -agree with them and that I fully realised the gravity of the -situation even before he sent for you. I not only will not sell -any more stocks to-day, but I am going in and buy as much<span class="pagenum" id="Page_116">116</span> -as I can carry.” And I kept my word. I bought one hundred -thousand shares that day, for the long account. I did not sell -another stock short for nine months.</p> - -<p>That is why I said to friends that my dream had come true -and that I had been king for a moment. The stock market at -one time that day certainly was at the mercy of anybody -who wanted to hammer it. I do not suffer from delusions of -grandeur; in fact you know how I feel about being accused -of raiding the market and about the way my operations are -exaggerated by the gossip of the Street.</p> - -<p>I came out of it in fine shape. The newspapers said that -Larry Livingston, the Boy Plunger, had made several millions. -Well, I was worth over one million after the close of -business that day. But my biggest winnings were not in dollars -but in the intangibles: I had been right, I had looked -ahead and followed a clear-cut plan. I had learned what a -man must do in order to make big money; I was permanently -out of the gambler class; I had at last learned to trade intelligently -in a big way. It was a day of days for me.</p> - -<hr /> - -<p><span class="pagenum" id="Page_117">117</span></p> - -<div class="chapter"> -<h2 id="X"><i>X</i></h2> -</div> - -<p class="in0"><span class="firstword">The recognition</span> of our own mistakes should not benefit us -any more than the study of our successes. But there is a -natural tendency in all men to avoid punishment. When you -associate certain mistakes with a licking, you do not hanker -for a second dose, and, of course, all stock-market mistakes -wound you in two tender spots—your pocketbook and your -vanity. But I will tell you something curious: A stock speculator -sometimes makes mistakes and knows that he is making -them. And after he makes them he will ask himself why he -made them; and after thinking over it cold-bloodedly a long -time after the pain of punishment is over he may learn how -he came to make them, and when, and at what particular -point of his trade; but not why. And then he simply calls -himself names and lets it go at that.</p> - -<p>Of course, if a man is both wise and lucky, he will not -make the same mistake twice. But he will make any one of -the ten thousand brothers or cousins of the original. The -Mistake family is so large that there is always one of them -around when you want to see what you can do in the fool-play -line.</p> - -<p>To tell you about the first of my million-dollar mistakes I -shall have to go back to this time when I first became a millionaire, -right after the big break of October, 1907. As far as -my trading went, having a million merely meant more reserves. -Money does not give a trader more comfort, because, -rich or poor, he can make mistakes and it is never comfortable<span class="pagenum" id="Page_118">118</span> -to be wrong. And when a millionaire is right his -money is merely one of his several servants. Losing money -is the least of my troubles. <em>A loss never bothers me after I -take it. I forget it overnight. But being wrong—not taking -the loss—that is what does the damage to the pocketbook -and to the soul.</em> You remember Dickson G. Watts’ story about -the man who was so nervous that a friend asked him what -was the matter.</p> - -<p>“I can’t sleep,” answered the nervous one.</p> - -<p>“Why not?” asked the friend.</p> - -<p>“I am carrying so much cotton that I can’t sleep thinking -about it. It is wearing me out. What can I do?”</p> - -<p>“Sell down to the sleeping point,” answered the friend.</p> - -<p>As a rule a man adapts himself to conditions so quickly -that he loses the perspective. He does not feel the difference -much—that is, he does not vividly remember how it felt not -to be a millionaire. He only remembers that there were -things he could not do that he can do now. It does not take -a reasonably young and normal man very long to lose the -habit of being poor. It requires a little longer to forget that -he used to be rich. I suppose that is because money creates -needs or encourages their multiplication. I mean that after a -man makes money in the stock market he very quickly loses -the habit of not spending. But after he loses his money it -takes him a long time to lose the habit of spending.</p> - -<p>After I took in my shorts and went long in October, 1907, -I decided to take it easy for a while. I bought a yacht and -planned to go off on a cruise in Southern waters. I am crazy -about fishing and I was due to have the time of my life. I -looked forward to it and expected to go any day. But I did -not. The market wouldn’t let me.</p> - -<p><em>I always have traded in commodities as well as in stocks.</em> -I began as a youngster in the bucket shops. I studied those -markets for years, though perhaps not so assiduously as the -stock market. As a matter of fact, <em>I would rather play commodities -than stocks</em>. There is no question about their greater<span class="pagenum" id="Page_119">119</span> -legitimacy, as it were. It partakes more of the nature of a -commercial venture than trading in stocks does. A man can -approach it as he might any mercantile problem. It may be -possible to use fictitious arguments for or against a certain -trend in a commodity market; but success will be only temporary, -<em>for in the end the facts are bound to prevail</em>, so that a -trader gets dividends on study and observation, as he does in -a regular business. He can watch and weigh conditions and -he knows as much about it as anyone else. He need not guard -against inside cliques. Dividends are not unexpectedly -passed or increased overnight in the cotton market or in -wheat or corn. <em>In the long run commodity prices are governed -but by one law—the economic law of demand and -supply.</em> The business of the trader in commodities is simply -to get facts about the demand and the supply, present and -prospective. He does not indulge in guesses about a dozen -things as he does in stocks. It always appealed to me—trading -in commodities.</p> - -<p>Of course the same things happen in all speculative markets. -The message of the tape is the same. That will be perfectly -plain to anyone who will take the trouble to think. He -will find if he asks himself questions and considers conditions, -that the answers will supply themselves directly. But -people never take the trouble to ask questions, leave alone -seeking answers. The average American is from Missouri -everywhere and at all times except when he goes to the brokers’ -offices and looks at the tape, whether it is stocks or commodities. -The one game of all games that really requires -study before making a play is the one he goes into without -his usual highly intelligent preliminary and precautionary -doubts. <em>He will risk half his fortune in the stock market with -less reflection than he devotes to the selection of a medium-priced -automobile.</em></p> - -<p>This matter of tape reading is not so complicated as it appears. -Of course you need experience. But it is even more -important to keep certain fundamentals in mind. To read<span class="pagenum" id="Page_120">120</span> -the tape is not to have your fortune told. The tape does not -tell you how much you will surely be worth next Thursday -at 1:35 <span class="smcap smaller">P.M.</span> The object of reading the tape is to ascertain, -first, how and, next, when to trade—that is, whether it is -wiser to buy than to sell. It works exactly the same for stocks -as for cotton or wheat or corn or oats.</p> - -<p>You watch the market—that is, the course of prices as recorded -by the tape—with one object: to determine the direction—that -is, the price tendency. Prices, we know, will move -either up or down according to the resistance they encounter. -For purposes of easy explanation we will say that -<em>prices, like everything else, move along the line of least resistance</em>. -They will do whatever comes easiest, therefore they -will go up if there is less resistance to an advance than to a -decline; and vice versa.</p> - -<p>Nobody should be puzzled as to whether a market is a -bull market or a bear market after it fairly starts. The trend -is evident to a man who has an open mind and reasonably -clear sight, for it is never wise for a speculator to fit his facts -to his theories. Such a man will, or ought to, know whether -it is a bull or a bear market, and if he knows that he knows -whether to buy or to sell. It is therefore at the very inception -of the movement that a man needs to know whether to -buy or to sell.</p> - -<p>Let us say, for example, that the market, as it usually does -in those between-swings times, fluctuates within a range of -ten points; up to 130 and down to 120. It may look very weak -at the bottom; or, on the way up, after a rise of eight or ten -points, it may look as strong as anything. A man ought not -to be led into trading by tokens. <em>He should wait until the -tape tells him that the time is ripe. As a matter of fact, millions -upon millions of dollars have been lost by men who -bought stocks because they looked cheap or sold them because -they looked dear. The speculator is not an investor. -His object is not to secure a steady return on his money at a -good rate of interest, but to profit by either a rise or a fall in<span class="pagenum" id="Page_121">121</span> -the price of whatever he may be speculating in. Therefore -the thing to determine is the speculative line of least resistance -at the moment of trading; and what he should wait for -is the moment when that line defines itself, because that is -his signal to get busy.</em></p> - -<p>Reading the tape merely enables him to see that at 130 -the selling had been stronger than the buying and a reaction -in the price logically followed. Up to the point where the -selling prevailed over the buying, superficial students of the -tape may conclude that the price is not going to stop short -of 150, and they buy. But after the reaction begins to hold -on, or sell out at a small loss, or they go short and talk bearish. -But at 120 there is stronger resistance to the decline. The -buying prevails over the selling, there is a rally and the -shorts cover. The public is so often whipsawed that one -marvels at their persistence in not learning their lesson.</p> - -<p>Eventually something happens that increases the power of -either the upward or the downward force and the point of -greatest resistance moves up or down—that is, the buying at -130 will for the first time be stronger than the selling, or the -selling at 120 be stronger than the buying. The price will -break through the old barrier or movement-limit and go on. -As a rule, there is always a crowd of traders who are short at -120 because it looked so weak, or long at 130 because it looked -so strong, and, when the market goes against them they are -forced, after a while, either to change their minds and turn -or to close out. In either event they help to define even more -clearly the price line of least resistance. Thus the intelligent -trader who has patiently waited to determine this line will -enlist the aid of fundamental trade conditions and also of the -force of the trading of that part of the community that happened -to guess wrong and must now rectify mistakes. Such -corrections tend to push prices along the line of least resistance.</p> - -<p>And right here I will say that, though I do not give it as a -mathematical certainty or as an axiom of speculation, my<span class="pagenum" id="Page_122">122</span> -experience has been that accidents—that is, the unexpected -or unforeseen—have always helped me in my market position -whenever the latter has been based upon my determination -of the line of least resistance. Do you remember that -Union Pacific episode at Saratoga that I told you about? -Well, I was long because I found out that the line of least -resistance was upward. I should have stayed long instead of -letting my broker tell me that insiders were selling stocks. It -didn’t make any difference what was going on in the directors’ -minds. That was something I couldn’t possibly know. -But I could and did know that the tape said: “Going up!” -And then came the unexpected raising of the dividend rate -and the thirty-point rise in the stock. At 164 prices looked -mighty high, but as I told you before, <em>stocks are never too -high to buy or too low to sell</em>. <em>The price</em>, per se, <em>has nothing -to do with establishing my line of least resistance.</em></p> - -<p>You will find in actual practice that if you trade as I have -indicated any important piece of news given out between -the closing of one market and the opening of another is usually -in harmony with the line of least resistance. <em>The trend -has been established before the news is published, and in -bull markets bear items are ignored and bull news exaggerated, -and vice versa.</em> Before the war broke out the market -was in a very weak condition. There came the proclamation -of Germany’s submarine policy. I was short one hundred and -fifty thousand shares of stock, not because I knew the news -was coming, but because I was going along the line of least -resistance. What happened came out of a clear sky, as far as -my play was concerned. Of course I took advantage of the -situation and I covered my shorts that day.</p> - -<p>It sounds very easy to say that all you have to do is to -watch the tape, establish your resistance points and be ready -to trade along the line of least resistance as soon as you have -determined it. <em>But in actual practice a man has to guard -against many things, and most of all against himself</em>—that is, -against human nature. That is the reason why I say that the<span class="pagenum" id="Page_123">123</span> -man who is right always has two forces working in his favor—<em>basic -conditions and the men who are wrong</em>. <em>In a bull -market bear factors are ignored.</em> That is human nature, and -yet human beings profess astonishment at it. People will tell -you that the wheat crop has gone to pot because there has -been bad weather in one or two sections and some farmers -have been ruined. When the entire crop is gathered and all -the farmers in all the wheat-growing sections begin to take -their wheat to the elevators the bulls are surprised at the -smallness of the damage. They discover that they merely -have helped the bears.</p> - -<p>When a man makes his play in a commodity market he -must not permit himself set opinions. He must have an open -mind and flexibility. <em>It is not wise to disregard the message -of the tape, no matter what your opinion of crop conditions -or of the probable demand may be.</em> I recall how I missed a -big play just by trying to anticipate the starting signal. I felt -so sure of conditions that I thought it was not necessary to -wait for the line of least resistance to define itself. I even -thought I might help it arrive, because it looked as if it -merely needed a little assistance.</p> - -<p>I was very bullish on cotton. It was hanging around -twelve cents, running up and down within a moderate range. -It was in one of those in-between places and I could see it. -I knew I really ought to wait. But I got to thinking that if I -gave it a little push it would go beyond the upper resistance -point.</p> - -<p>I bought fifty thousand bales. Sure enough, it moved up. -And sure enough, as soon as I stopped buying it stopped -going up. Then it began to settle back to where it was when -I began buying it. I got out and it stopped going down. I -thought I was now much nearer the starting signal, and -presently I thought I’d start it myself again. I did. The same -thing happened. I bid it up, only to see it go down when I -stopped. I did this four or five times until I finally quit in -disgust. It cost me about two hundred thousand dollars. I<span class="pagenum" id="Page_124">124</span> -was done with it. It wasn’t very long after that when it began -to go up and never stopped till it got to a price that -would have meant a killing for me—if I hadn’t been in such -a great hurry to start.</p> - -<p>This experience has been the experience of so many -traders so many times that I can give this rule: <em>In a narrow -market, when prices are not getting anywhere to speak of -but move within a narrow range, there is no sense in trying -to anticipate what the next big movement is going to be—up -or down.</em> The thing to do is to watch the market, read -the tape to determine the limits of the get-nowhere prices, -and make up your mind that you will not take an interest -until the price breaks through the limit in either direction. -A speculator must concern himself with making money out -of the market and not with insisting that the tape must agree -with him. Never argue with it or ask it for reasons or explanations. -<em>Stock-market post-mortems don’t pay dividends.</em></p> - -<p>Not so long ago I was with a party of friends. They got to -talking wheat. Some of them were bullish and others bearish. -Finally they asked me what I thought. Well, I had been -studying the market for some time. I knew they did not -want any statistics or analyses of conditions. So I said: “If -you want to make some money out of wheat I can tell you -how to do it.”</p> - -<p>They all said they did and I told them, “If you are sure -you wish to make money in wheat just you watch it. Wait. -The moment it crosses $1.20 buy it and you will get a nice -quick play in it!”</p> - -<p>“Why not buy it now, at $1,14?” one of the party asked.</p> - -<p>“Because I don’t know yet that it is going up at all.”</p> - -<p>“Then why buy it at $1.20? It seems a mighty high price.”</p> - -<p>“Do you wish to gamble blindly in the hope of getting a -great big profit or do you wish to speculate intelligently -and get a smaller but much more probable profit?”</p> - -<p>They all said they wanted the smaller but surer profit, so -I said, “Then do as I tell you. If it crosses $1.20 buy.”</p> - -<p><span class="pagenum" id="Page_125">125</span> -As I told you, I had watched it a long time. For months -it sold between $1.10 and $1.20, getting nowhere in particular. -Well, sir, one day it closed at above $1.19. I got -ready for it. Sure enough the next day it opened at $1.20½, -and I bought. It went to $1.21, to $1.22, to $1.23, to $1.25, -and I went with it.</p> - -<p>Now I couldn’t have told you at the time just what was -going on. I didn’t get any explanations about its behaviour -during the course of the limited fluctuations. I couldn’t tell -whether the breaking through the limit would be up -through $1.20 or down through $1.10, though I suspected -it would be up because there was not enough wheat in the -world for a big break in prices.</p> - -<p>As a matter of fact, it seems Europe had been buying -quietly and a lot of traders had gone short of it at around -$1.19. Owing to the European purchases and other causes, -a lot of wheat had been taken out of the market, so that -finally the big movement got started. The price went beyond -the $1.20 mark. That was all the point I had and it -was all I needed. I knew that when it crossed $1.20 it would -be because the upward movement at last had gathered force -to push it over the limit and something had to happen. In -other words, by crossing $1.20 the line of least resistance of -wheat prices was established. It was a different story then.</p> - -<p>I remember that one day was a holiday with us and all -our markets were closed. Well, in Winnipeg wheat opened -up six cents a bushel. When our market opened on the -following day, it also was up six cents a bushel. The price -just went along the line of least resistance.</p> - -<p>What I have told you gives you the essence of my trading -system as based on studying the tape. I merely learn the -way prices are most probably going to move. I check up my -own trading by additional tests, to determine the psychological -moment. <em>I do that by watching the way the price -acts after I begin.</em></p> - -<p>It is surprising how many experienced traders there are<span class="pagenum" id="Page_126">126</span> -who look incredulous when I tell them that when I buy -stocks for a rise I like to pay top prices and when I sell I -must sell low or not at all. It would not be so difficult to -make money if a trader always stuck to his speculative guns—that -is, waited for the line of least resistance to define itself -and began buying only when the tape said up or selling -only when it said down. <em>He should accumulate his line on -the way up.</em> Let him buy one-fifth of his full line. If that -does not show him a profit he must not increase his holdings -because he has obviously begun wrong; he is wrong temporarily -and there is no profit in being wrong at any time. The -same tape that said <span class="smcap smaller">UP</span> did not necessarily lie merely because -it is now saying <span class="smcap smaller">NOT YET</span>.</p> - -<p>In cotton I was very successful in my trading for a long -time. I had my theory about it and I absolutely lived up to -it. Suppose I had decided that my line would be forty to -fifty thousand bales. Well, I would study the tape as I told -you, watching for an opportunity either to buy or to sell. -Suppose the line of least resistance indicated a bull movement. -Well, I would buy ten thousand bales. After I got -through buying that, if the market <em>went up ten points over -my initial purchase price, I would take on another ten thousand -bales</em>. Same thing. Then, if I could get twenty points’ -profit, or one dollar a bale, I would buy twenty thousand -more. That would give me my line—my basis for my trading. -But if after buying the first ten or twenty thousand -bales, it showed me a loss, out I’d go. I was wrong. It might -be I was only temporarily wrong. But as I have said before -<em>it doesn’t pay to start wrong in anything</em>.</p> - -<p>What I accomplished by sticking to my system was that -I always had a line of cotton in every real movement. In -the course of accumulating my full line I might chip out -fifty or sixty thousand dollars in these feeling-out plays of -mine. This looks like a very expensive testing, but it wasn’t. -After the real movement started, how long would it take -me to make up the fifty thousand dollars I had dropped in<span class="pagenum" id="Page_127">127</span> -order to make sure that I began to load up at exactly the -right time? No time at all! <em>It always pays a man to be right -at the right time.</em></p> - -<p>As I think I also said before, this describes what I may -call my system for placing my bets. It is simple arithmetic -to prove that it is a wise thing to have the big bet down -only when you win, and when you lose to lose only a small -exploratory bet, as it were. If a man trades in the way I -have described, he will always be in the profitable position -of being able to cash in on the big bet.</p> - -<p>Professional traders have always had some system or -other based upon their experience and governed either by -their attitude toward speculation or by their desires. I remember -I met an old gentleman in Palm Beach whose -name I did not catch or did not at once identify. I knew he -had been in the Street for years, way back in Civil War -times, and somebody told me that he was a very wise old -codger who had gone through so many booms and panics -that he was always saying there was nothing new under the -sun and least of all in the stock market.</p> - -<p>The old fellow asked me a lot of questions. When I got -through telling him about my usual practice in trading he -nodded and said, “Yes! Yes! You’re right. The way you’re -built, the way your mind runs, makes your system a good -system for you. It comes easy for you to practice what you -preach, because the money you bet is the least of your -cares. I recollect Pat Hearne. Ever hear of him? Well, he -was a very well-known sporting man and he had an account -with us. Clever chap and nervy. He made money in stocks, -and that made people ask him for advice. He would never -give any. If they asked him point-blank for his opinion -about the wisdom of their commitments he used a favorite -race-track maxim of his: ‘You can’t tell till you bet.’ He -traded in our office. He would buy one hundred shares of -some active stock and when, or if, it went up 1 per cent he -would buy another hundred. On another point’s advance,<span class="pagenum" id="Page_128">128</span> -another hundred shares; and so on. He used to say he -wasn’t playing the game to make money for others and -therefore he would put in a stop-loss order one point below -the price of his last purchase. When the price kept going -up he simply moved up his stop with it. On a 1 per cent -reaction he was stopped out. He declared he did not see -any sense in losing more than one point, whether it came -out of his original margin or out of his paper profits.</p> - -<p>“You know, a professional gambler is not looking for long -shots, but for sure money. Of course long shots are fine -when they come in. In the stock market Pat wasn’t after -tips or playing to catch twenty-points-a-week advances, -but sure money in sufficient quantity to provide him with -a good living. Of all the thousands of outsiders that I have -run across in Wall Street, Pat Hearne was the only one who -saw in stock speculation merely a game of chance like faro -or roulette, but, nevertheless, had the sense to stick to a -relatively sound betting method.</p> - -<p>“After Hearne’s death one of our customers who had always -traded with Pat and used his system made over one -hundred thousand dollars in Lackawanna. Then he switched -over to some other stock and because he had made a big -stake he thought he need not stick to Pat’s way. When a -reaction came, instead of cutting short his losses he let them -run—as though they were profits. Of course every cent -went. When he finally quit he owed us several thousand -dollars.</p> - -<p>“He hung around for two or three years. He kept the fever -long after the cash had gone; but we did not object as long -as he behaved himself. I remember that he used to admit -freely that he had been ten thousand kinds of an ass not to -stick to Pat Hearne’s style of play. Well, one day he came -to me greatly excited and asked me to let him sell some -stock short in our office. He was a nice enough chap who -had been a good customer in his day and I told him I personally -would guarantee his account for one hundred shares.</p> - -<p><span class="pagenum" id="Page_129">129</span> -“He sold short one hundred shares of Lake Shore. That -was the time Bill Travers hammered the market, in 1875. -My friend Roberts put out that Lake Shore at exactly the -right time and kept selling it on the way down as he had -been wont to do in the old successful days before he forsook -Pat Hearne’s system and instead listened to hope’s -whispers.</p> - -<p>“Well, sir, in four days of successful pyramiding, Roberts’ -account showed him a profit of fifteen thousand dollars. Observing -that he had not put in a stop-loss order I spoke to -him about it and he told me that the break hadn’t fairly begun -and he wasn’t going to be shaken out by any one-point -reaction. This was in August. Before the middle of September -he borrowed ten dollars from me for a baby carriage—his -fourth. He did not stick to his own proved system. -That’s the trouble with most of them,” and the old fellow -shook his head at me.</p> - -<p>And he was right. I sometimes think that speculation must -be an unnatural sort of business, because I find that the -average speculator has arrayed against him his own nature. -The weaknesses that all men are prone to are fatal to success -in speculation—usually those very weaknesses that -make him likable to his fellows or that he himself particularly -guards against in those other ventures of his where -they are not nearly so dangerous as when he is trading in -stocks or commodities.</p> - -<p><em>The speculator’s chief enemies are always boring from -within. It is inseparable from human nature to hope and to -fear.</em> In speculation when the market goes against you you -hope that every day will be the last day—and you lose more -than you should had you not listened to hope—to the same -ally that is so potent a success-bringer to empire builders and -pioneers, big and little. And when the market goes your way -you become fearful that the next day will take away your -profit, and you get out—too soon. <em>Fear keeps you from making -as much money as you ought to.</em> The successful trader<span class="pagenum" id="Page_130">130</span> -has to fight these two deep-seated instincts. He has to reverse -what you might call his natural impulses. <em>Instead of -hoping he must fear; instead of fearing he must hope.</em> He -must fear that his loss may develop into a much bigger loss, -and hope that his profit may become a big profit. <em>It is absolutely -wrong to gamble in stocks the way the average man -does.</em></p> - -<p>I have been in the speculative game ever since I was fourteen. -It is all I have ever done. I think I know what I am -talking about. And the conclusion that I have reached after -nearly thirty years of constant trading, both on a shoestring -and with millions of dollars back of me, is this: A man may -beat a stock or a group at a certain time, but no man living -can beat the stock market! A man may make money out of -individual deals in cotton or grain, but no man can beat the -cotton market or the grain market. It’s like the track. A man -may beat a horse race, but he cannot beat horse racing.</p> - -<p>If I knew how to make these statements stronger or more -emphatic I certainly would. It does not make any difference -what anybody says to the contrary. I know I am right in -saying these are incontrovertible statements.</p> - -<hr /> - -<p><span class="pagenum" id="Page_131">131</span></p> - -<div class="chapter"> -<h2 id="XI"><i>XI</i></h2> -</div> - -<p class="in0"><span class="firstword">And now</span> I’ll get back to October, 1907. I bought a yacht -and made all preparations to leave New York for a cruise in -Southern waters. I am really daffy about fishing and this -was the time when I was going to fish to my heart’s content -from my own yacht, going wherever I wished whenever I -felt like it. Everything was ready. I had made a killing in -stocks, but at the last moment corn held me back.</p> - -<p>I must explain that before the money panic which gave -me my first million I had been trading in grain at Chicago. -I was short ten million bushels of wheat and ten million -bushels of corn. I had studied the grain markets for a long -time and was as bearish on corn and wheat as I had been -on stocks.</p> - -<p>Well, they both started down, but while wheat kept on -declining the biggest of all the Chicago operators—I’ll call -him Stratton—took it into his head to run a corner in corn. -After I cleaned up in stocks and was ready to go South on -my yacht I found that wheat showed me a handsome profit, -but in corn Stratton had run up the price and I had quite -a loss.</p> - -<p>I knew there was much more corn in the country than the -price indicated. The law of demand and supply worked as -always. But the demand came chiefly from Stratton and the -supply was not coming at all, because there was an acute -congestion in the movement of corn. I remember that I used -to pray for a cold spell that would freeze the impassable<span class="pagenum" id="Page_132">132</span> -roads and enable the farmers to bring their corn into the -market. But no such luck.</p> - -<p>There I was, waiting to go on my joyously planned fishing -trip and that loss in corn holding me back. I couldn’t go -away with the market as it was. Of course Stratton kept -pretty close tabs on the short interest. He knew he had me, -and I knew it quite as well as he did. But, as I said, I was -hoping I might convince the weather that it ought to get -busy and help me. Perceiving that neither the weather nor -any other kindly wonder-worker was paying any attention -to my needs I studied how I might work out of my difficulty -by my own efforts.</p> - -<p>I closed out my line of wheat at a good profit. But the -problem in corn was infinitely more difficult. If I could have -covered my ten million bushels at the prevailing prices I instantly -and gladly would have done so, large though the -loss would have been. But, of course, the moment I started -to buy in my corn Stratton would be on the job as squeezer -in chief, and I no more relished running up the price on -myself by reason of my own purchases than cutting my own -throat with my own knife.</p> - -<p>Strong though corn was, my desire to go fishing was even -stronger, so it was up to me to find a way out at once. I -must conduct a strategic retreat. I must buy back the ten -million bushels I was short of and in so doing keep down -my loss as much as I possibly could.</p> - -<p>It so happened that Stratton at that time was also running -a deal in oats and had the market pretty well sewed up. I -had kept track of all the grain markets in the way of crop -news and pit gossip, and I heard that the powerful Armour -interests were not friendly, marketwise, to Stratton. Of -course I knew that Stratton would not let me have the corn -I needed except at his own price, but the moment I heard -the rumors about Armour being against Stratton it occurred -to me that I might look to the Chicago traders for aid. The -only way in which they could possibly help me was for them<span class="pagenum" id="Page_133">133</span> -to sell me the corn that Stratton wouldn’t. The rest was easy.</p> - -<p>First, I put in orders to buy five hundred thousand -bushels of corn every eighth of a cent down. After these -orders were in I gave to each of four houses an order to sell -simultaneously fifty thousand bushels of oats at the market. -That, I figured, ought to make a quick break in oats. Knowing -how the traders’ minds worked, it was a cinch that they -would instantly think that Armour was gunning for -Stratton. Seeing the attack opened in oats they would logically -conclude that the next break would be in corn and they -would start to sell it. If that corner in corn was busted, the -pickings would be fabulous.</p> - -<p>My dope on the psychology of the Chicago traders was -absolutely correct. When they saw oats breaking on the -scattered selling they promptly jumped on corn and sold it -with great enthusiasm. I was able to buy six million bushels -of corn in the next ten minutes. The moment I found that -their selling of corn ceased I simply bought in the other four -million bushels at the market. Of course that made the price -go up again, but the net result of my manœuvre was that I -covered the entire line of ten million bushels within one-half -cent of the price prevailing at the time I started to cover -on the traders’ selling. The two hundred thousand bushels -of oats that I sold short to start the traders’ selling of corn I -covered at a loss of only three thousand dollars. That was -pretty cheap bear bait. The profits I had made in wheat -offset so much of my deficit in corn that my total loss on all -my grain trades that time was only twenty-five thousand -dollars. Afterwards corn went up twenty-five cents a bushel. -Stratton undoubtedly had me at his mercy. If I had set -about buying my ten million bushels of corn without bothering -to think of the price there is no telling what I would -have had to pay.</p> - -<p>A man can’t spend years at one thing and not acquire a -habitual attitude towards it quite unlike that of the average -beginner. The difference distinguishes the professional from<span class="pagenum" id="Page_134">134</span> -the amateur. It is the way a man looks at things that makes -or loses money for him in the speculative markets. The -public has the dilettante’s point of view toward his own -effort. The ego obtrudes itself unduly and the thinking -therefore is not deep or exhaustive. The professional concerns -himself with doing the right thing rather than with -making money, knowing that the profit takes care of itself -if the other things are attended to. A trader gets to play the -game as the professional billiard player does—that is, he -looks far ahead instead of considering the particular shot -before him. It gets to be an instinct to play for position.</p> - -<p>I remember hearing a story about Addison Cammack that -illustrates very nicely what I wish to point out. From all I -have heard, I am inclined to think that <em>Cammack</em> was one -of the ablest stock traders the Street ever saw. He was not -a chronic bear as many believe, but he felt the greater appeal -of trading on the bear side, of utilizing in his behalf the -two great human factors of hope and fear. He is credited -with coining the warning: “Don’t sell stocks when the sap is -running up the trees!” and the old-timers tell me that his -biggest winnings were made on the bull side, so that it is -plain he did not play prejudices but conditions. At all -events, he was a consummate trader. It seems that once—this -was way back at the tag end of a bull market—Cammack -was bearish, and J. Arthur Joseph, the financial writer -and raconteur, knew it. The market, however, was not only -strong but still rising, in response to prodding by the bull -leaders and optimistic reports by the newspapers. Knowing -what use a trader like Cammack could make of bearish information, -Joseph rushed to Cammack’s office one day with -glad tidings.</p> - -<p>“Mr. Cammack, I have a very good friend who is a transfer -clerk in the St. Paul office and he has just told me something -which I think you ought to know.”</p> - -<p>“What is it?” asked Cammack listlessly.</p> - -<p>“You’ve turned, haven’t you? You are bearish now?” asked<span class="pagenum" id="Page_135">135</span> -Joseph, to make sure. If Cammack wasn’t interested he -wasn’t going to waste precious ammunition.</p> - -<p>“Yes. What’s the wonderful information?”</p> - -<p>“I went around to the St. Paul office to-day, as I do in my -news-gathering rounds two or three times a week, and my -friend there said to me: ‘The Old Man is selling stock.’ He -meant William Rockefeller. ‘Is he really, Jimmy?’ I said to -him, and he answered, ‘Yes; he is selling fifteen hundred -shares every three-eighths of a point up. I’ve been transferring -the stock for two or three days now.’ I didn’t lose any -time, but came right over to tell you.”</p> - -<p>Cammack was not easily excited, and, moreover, was so -accustomed to having all manner of people rush madly into -his office with all manner of news, gossip, rumors, tips and -lies that he had grown distrustful of them all. He merely -said now, “Are you sure you heard right, Joseph?”</p> - -<p>“Am I sure? Certainly I am sure! Do you think I am -deaf?” said Joseph.</p> - -<p>“Are you sure of your man?”</p> - -<p>“Absolutely!” declared Joseph. “I’ve known him for years. -He has never lied to me. He wouldn’t! No object! I know -he is absolutely reliable and I’d stake my life on what he -tells me. I know him as well as I know anybody in this world—a -great deal better than you seem to know me, after all -these years.”</p> - -<p>“Sure of him, eh?” And Cammack again looked at Joseph. -Then he said, “Well, you ought to know.” He called his -broker, W. B. Wheeler. Joseph expected to hear him give an -order to sell at least fifty thousand shares of St. Paul. William -Rockefeller was disposing of his holdings in St. Paul, taking -advantage of the strength of the market. Whether it was investment -stock or speculative holdings was irrelevant. The -one important fact was that the best stock trader of the -Standard Oil crowd was getting out of St. Paul. What would -the average man have done if he had received the news -from a trustworthy source? No need to ask.</p> - -<p><span class="pagenum" id="Page_136">136</span> -But Cammack, the ablest bear operator of his day, who -was bearish on the market just then, said to his broker, -“Billy, go over to the board and buy fifteen hundred St. Paul -every three-eighths up.” The stock was then in the nineties.</p> - -<p>“Don’t you mean sell?” interjected Joseph hastily. He was -no novice in Wall Street, but he was thinking of the market -from the point of view of the newspaper man and, incidentally, -of the general public. The price certainly ought to -go down on the news of inside selling. And there was no -better inside selling than Mr. William Rockefeller’s. The -Standard Oil getting out and Cammack buying! It couldn’t -be!</p> - -<p>“No,” said Cammack; “I mean buy!”</p> - -<p>“Don’t you believe me?”</p> - -<p>“Yes!”</p> - -<p>“Don’t you believe my information?”</p> - -<p>“Yes.”</p> - -<p>“Aren’t you bearish?”</p> - -<p>“Yes.”</p> - -<p>“Well, then?”</p> - -<p>“That’s why I’m buying. Listen to me now: You keep -in touch with that reliable friend of yours and the moment -the scaled selling stops, let me know. Instantly! Do you understand?”</p> - -<p>“Yes,” said Joseph, and went away, not quite sure he could -fathom Cammack’s motives in buying William Rockefeller’s -stock. It was the knowledge that Cammack was bearish on -the entire market that made his manœuvre so difficult to explain. -However, Joseph saw his friend the transfer clerk and -told him he wanted to be tipped off when the Old Man got -through selling. Regularly twice a day Joseph called on his -friend to inquire.</p> - -<p>One day the transfer clerk told him, “There isn’t any more -stock coming from the Old Man.” Joseph thanked him and -ran to Cammack’s office with the information.</p> - -<p>Cammack listened attentively, turned to Wheeler and<span class="pagenum" id="Page_137">137</span> -asked, “Billy, how much St. Paul have we got in the office?” -Wheeler looked it up and reported that they had accumulated -about sixty thousand shares.</p> - -<p>Cammack, being bearish, had been putting out short lines -in the other Grangers as well as in various other stocks, even -before he began to buy St. Paul. He was now heavily short -of the market. He promptly ordered Wheeler to sell the sixty -thousand shares of St. Paul that they were long of, and more -besides. He used his long holdings of St. Paul as a lever to -depress the general list and greatly benefit his operations for -a decline.</p> - -<p>St. Paul didn’t stop on that move until it reached forty-four -and Cammack made a killing in it. He played his cards -with consummate skill and profited accordingly. The point -I would make is his habitual attitude toward trading. He -didn’t have to reflect. He saw instantly what was far more -important to him than his profit on that one stock. He saw -that he had providentially been offered an opportunity to -begin his big bear operations not only at the proper time but -with a proper initial push. The St. Paul tip made him buy -instead of sell because he saw at once that it gave him a vast -supply of the best ammunition for his bear campaign.</p> - -<p>To get back to myself. After I closed my trade in wheat -and corn I went South in my yacht. I cruised about in -Florida waters, having a grand old time. The fishing was -great. Everything was lovely. I didn’t have a care in the -world and I wasn’t looking for any.</p> - -<p>One day I went ashore at Palm Beach. I met a lot of Wall -Street friends and others. They were all talking about the -most picturesque cotton speculator of the day. A report from -New York had it that Percy Thomas had lost every cent. It -wasn’t a commercial bankruptcy; merely the rumor of the -world-famous operator’s second Waterloo in the cotton market.</p> - -<p>I had always felt a great admiration for him. The first -I ever heard of him was through the newspapers at the time<span class="pagenum" id="Page_138">138</span> -of the failure of the Stock Exchange house of Sheldon & -Thomas, when Thomas tried to corner cotton. Sheldon, who -did not have the vision or the courage of his partner, got -cold feet on the very verge of success. At least, so the Street -said at the time. At all events, instead of making a killing -they made one of the most sensational failures in years. I -forget how many millions. The firm was wound up and -Thomas went to work alone. He devoted himself exclusively -to cotton and it was not long before he was on his feet again. -He paid off his creditors in full with interest—debts he was -not legally obliged to discharge—and withal had a million -dollars left to himself. His comeback in the cotton market -was in its way as remarkable as Deacon S. V. White’s famous -stock-market exploit of paying off one million dollars in one -year. Thomas’ pluck and brains made me admire him immensely.</p> - -<p>Everybody in Palm Beach was talking about the collapse -of Thomas’ deal in March cotton. You know how the talk -goes—and grows; the amount of misinformation and exaggeration -and improvements that you hear. Why, I’ve seen -a rumor about myself grow so that the fellow who started it -did not recognize it when it came back to him in less than -twenty-four hours, swollen with new and picturesque details.</p> - -<p>The news of Percy Thomas’ latest misadventure turned -my mind from the fishing to the cotton market. I got files of -the trade papers and read them to get a line on conditions. -When I got back to New York I gave myself up to studying -the market. Everybody was bearish and everybody was selling -July cotton. You know how people are. I suppose it is -the contagion of example that makes a man do something -because everybody around him is doing the same thing. Perhaps -it is some phase or variety in the herd instinct. In any -case it was, in the opinion of hundreds of traders, the wise -and proper thing to sell July cotton—and so safe too! You -couldn’t call that general selling reckless; the word is too<span class="pagenum" id="Page_139">139</span> -conservative. The traders simply saw one side to the market -and a great big profit. They certainly expected a collapse in -prices.</p> - -<p>I saw all this, of course, and it struck me that the chaps -who were short didn’t have a terrible lot of time to cover in. -The more I studied the situation the clearer I saw this, until -I finally decided to buy July cotton. I went to work and -quickly bought one hundred thousand bales. I experienced -no trouble in getting it because it came from so many sellers. -It seemed to me that I could have offered a reward of one -million dollars for the capture, dead or alive, of a single -trader who was not selling July cotton and nobody would -have claimed it.</p> - -<p>I should say this was in the latter part of May. I kept -buying more and they kept on selling it to me until I had -picked up all the floating contracts and I had one hundred -and twenty thousand bales. A couple of days after I had -bought the last of it it began to go up. Once it started the -market was kind enough to keep on doing very well indeed—that -is, it went up from forty to fifty points a day.</p> - -<p>One Saturday—this was about ten days after I began -operations—the price began to creep up. I did not know -whether there was any more July cotton for sale. It was up -to me to find out, so I waited until the last ten minutes. At -that time, I knew, it was usual for those fellows to be short -and if the market closed up for the day they would be safely -hooked. So I sent in four different orders to buy five thousand -bales each, at the market, at the same time. That ran -the price up thirty points and the shorts were doing their -best to wriggle away. The market closed at the top. All I -did, remember, was to buy that last twenty thousand bales.</p> - -<p>The next day was Sunday. But on Monday, Liverpool was -due to open up twenty points to be on a parity with the advance -in New York. Instead, it came fifty points higher. That -meant that Liverpool had exceeded our advance by 100 per -cent. I had nothing to do with the rise in that market. This<span class="pagenum" id="Page_140">140</span> -showed me that my deductions had been sound and that I -was trading along the line of least resistance. At the same -time I was not losing sight of the fact that I had a whopping -big line to dispose of. A market may advance sharply or rise -gradually and yet not possess the power to absorb more -than a certain amount of selling.</p> - -<p>Of course the Liverpool cables made our own market -wild. But I noticed the higher it went the scarcer July cotton -seemed to be. I wasn’t letting go any of mine. Altogether -that Monday was an exciting and not very cheerful day for -the bears; but for all that, I could detect no signs of impending -bear panic; no beginnings of a blind stampede to -cover. And I had one hundred and forty thousand bales for -which I must find a market.</p> - -<p>On Tuesday morning as I was walking to my office I met -a friend at the entrance of the building.</p> - -<p>“That was quite a story in the <i>World</i> this morning,” he -said with a smile.</p> - -<p>“What story?” I asked.</p> - -<p>“What? Do you mean to tell me you haven’t seen it?”</p> - -<p>“I never see the <i>World</i>,” I said. “What is the story?”</p> - -<p>“Why, it’s all about you. It says you’ve got July cotton -cornered.”</p> - -<p>“I haven’t seen it,” I told him and left him. I don’t know -whether he believed me or not. He probably thought it was -highly inconsiderate of me not to tell him whether it was -true or not.</p> - -<p>When I got to the office I sent out for a copy of the paper. -Sure enough, there it was, on the front page, in big headlines:</p> - -<blockquote> - -<p class="p1 b1 center larger">JULY COTTON CORNERED BY LARRY LIVINGSTON</p></blockquote> - -<p>Of course I knew at once that the article would play the -dickens with the market. If I had deliberately studied ways -and means of disposing of my one hundred and forty thousand<span class="pagenum" id="Page_141">141</span> -bales to the best advantage I couldn’t have hit upon a -better plan. It would not have been possible to find one. -That article at that very moment was being read all over -the country either in the <i>World</i> or in other papers quoting -it. It had been cabled to Europe. That was plain from the -Liverpool prices. That market was simply wild. No wonder, -with such news.</p> - -<p>Of course I knew what New York would do, and what I -ought to do. The market here opened at ten o’clock. At ten -minutes after ten I did not own any cotton. I let them have -every one of my one hundred and forty thousand bales. For -most of my line I received what proved to be the top prices -of the day. The traders made the market for me. All I really -did was to see a heaven-sent opportunity to get rid of my -cotton. I grasped it because I couldn’t help it. What else -could I do?</p> - -<p>The problem that I knew would take a great deal of hard -thinking to solve was thus solved for me by an accident. If -the <i>World</i> had not published that article I never would have -been able to dispose of my line without sacrificing the -greater portion of my paper profits. Selling one hundred -and forty thousand bales of cotton without sending the price -down was a trick beyond my powers. But the <i>World</i> story -turned it for me very nicely.</p> - -<p>Why the <i>World</i> published it I cannot tell you. I never -knew. I suppose the writer was tipped off by some friend in -the cotton market and he thought he was printing a scoop. I -didn’t see him or anybody from the <i>World</i>. I didn’t know it -was printed that morning until after nine o’clock; and if it -had not been for my friend calling my attention to it I would -not have know it then.</p> - -<p>Without it I wouldn’t have had a market <em>big</em> enough to -unload in. That is one trouble about trading on a large scale. -You cannot sneak out as you can when you pike along. You -cannot always sell out when you wish or when you think it -wise. You have to get out when you can; when you have a -market that will absorb your entire line. Failure to grasp<span class="pagenum" id="Page_142">142</span> -the opportunity to get out may cost you millions. You cannot -hesitate. If you do you are lost. Neither can you try -stunts like running up the price on the bears by means of -competitive buying, for you may thereby reduce the absorbing -capacity. And I want to tell you that perceiving -your opportunity is not as easy as it sounds. A man must be -on the lookout so alertly that when his chance sticks in its -head at his door he must grab it.</p> - -<p>Of course not everybody knew about my fortunate accident. -In Wall Street, and, for that matter, everywhere else, -any accident that makes big money for a man is regarded -with suspicion. When the accident is unprofitable it is never -considered an accident but the logical outcome of your hoggishness -or of the swelled head. But when there is a profit -they call it loot and talk about how well unscrupulousness -fares, and how ill conservatism and decency.</p> - -<p>It was not only the <em>evil-minded shorts</em> smarting under -punishment brought about by their own recklessness who -accused me of having deliberately planned the coup. Other -people thought the same thing.</p> - -<p>One of the biggest men in cotton in the entire world met -me a day or two later and said, “That was certainly the slickest -deal you ever put over, Livingston. I was wondering how -much you were going to lose when you came to market that -line of yours. You knew this market was not big enough to -take more than fifty or sixty thousand bales without selling -off, and how you were going to work off the rest and not -lose all your paper profits was beginning to interest me. I -didn’t think of your scheme. It certainly was slick.”</p> - -<p>“I had nothing to do with it,” I assured him as earnestly -as I could.</p> - -<p>But all he did was to repeat: “Mighty slick, my boy. -Mighty slick! Don’t be so modest!”</p> - -<p>It was after that deal that some of the papers referred to -me as the Cotton King. But, as I said, I really was not entitled -to that crown. It is not necessary to tell you that there<span class="pagenum" id="Page_143">143</span> -is not enough money in the United States to buy the -columns of the New York <i>World</i> or enough personal pull to -secure the publication of a story like that. It gave me an -utterly unearned reputation that time.</p> - -<p>But I have not told this story to moralize on the crowns -that are sometimes pressed down upon the brows of undeserving -traders or to emphasize the need of seizing the -opportunity, no matter where or how it comes. My object -merely was to account for the vast amount of newspaper -notoriety that came to me as a result of my deal in July -cotton. If it hadn’t been for the newspapers I never would -have met that remarkable man, Percy Thomas.</p> - -<hr /> - -<p><span class="pagenum" id="Page_144">144</span></p> - -<div class="chapter"> -<h2 id="XII"><i>XII</i></h2> -</div> - -<p class="in0"><span class="firstword">Not long</span> after I closed my July cotton deal more successfully -than I had expected I received by mail a request for -an interview. The letter was signed by Percy Thomas. Of -course I immediately answered that I’d be glad to see him -at my office at any time he cared to call. The next day he -came.</p> - -<p>I had long admired him. His name was a household word -wherever men took an interest in growing or buying or -selling cotton. In Europe as well as all over this country -people quoted <em>Percy Thomas’</em> opinions to me. I remember -once at a Swiss resort talking to a Cairo banker who was interested -in cotton growing in Egypt in association with the -late Sir Ernest Cassel. When he heard I was from New York -he immediately asked me about Percy Thomas, whose market -reports he received and read with unfailing regularity.</p> - -<p>Thomas, I always thought, went about his business scientifically. -He was a true speculator, a thinker with the vision -of a dreamer and the courage of a fighting man—an unusually -well-informed man, who knew both the theory and -the practice of trading in cotton. He loved to hear and to express -ideas and theories and abstractions, and at the same -time there was mighty little about the practical side of the -cotton market or the psychology of cotton traders that he -did not know, for he had been trading for years and had -made and lost vast sums.</p> - -<p>After the failure of his old Stock Exchange firm of Sheldon<span class="pagenum" id="Page_145">145</span> -& Thomas he went it alone. Inside of two years he came -back, almost spectacularly. I remember reading in the <i>Sun</i> -that the first thing he did when he got back on his feet -financially was to pay off his old creditors in full, and the -next was to hire an expert to study and determine for him -how he had best invest a million dollars. This expert examined -the properties and analysed the reports of several companies -and then recommended the purchase of Delaware & -Hudson stock.</p> - -<p>Well, after having failed for millions and having come -back with more millions, Thomas was cleaned out as the -result of his deal in March Cotton. There wasn’t much time -wasted after he came to see me. He proposed that we form -a working alliance. Whatever information he got he would -immediately turn over to me before passing it on to the -public. My part would be to do the actual trading, for which -he said I had a special genius and he hadn’t.</p> - -<p>That did not appeal to me for a number of reasons. I told -him frankly that I did not think I could run in double harness -and wasn’t keen about trying to learn. But he insisted -that it would be an ideal combination until I said flatly that I -did not want to have anything to do with influencing other -people to trade.</p> - -<p>“If I fool myself,” I told him, “I alone suffer and I pay -the bill at once. There are no drawn-out payments or unexpected -annoyances. I play a lone hand by choice and also -because it is the wisest and cheapest way to trade. I get my -pleasure out of matching my brains against the brains of -other traders—men whom I have never seen and never -talked to and never advised to buy or sell and never expect -to meet or know. When I make money I make it backing my -own opinions. I don’t sell them or capitalise them. If I made -money in any other way I would imagine I had not earned it. -Your proposition does not interest me because I am interested -in the game only as I play it for myself and in my own way.”</p> - -<p>He said he was sorry I felt the way I did, and tried to<span class="pagenum" id="Page_146">146</span> -convince me that I was wrong in rejecting his plan. But I -stuck to my views. The rest was a pleasant talk. I told him -I knew he would “come back” and that I would consider it a -privilege if he would allow me to be of financial assistance to -him. But he said he could not accept any loans from me. -Then he asked me about my July deal and I told him all -about it; how I had gone into it and how much cotton I -bought and the price and other details. We chatted a little -more and then he went away.</p> - -<p>When I said to you some time ago that a speculator has -a host of enemies, many of whom successfully bore from -within, I had in mind my many mistakes. I have learned -that a man may possess an original mind and a lifelong habit -of independent thinking and withal be vulnerable to attacks -by a persuasive personality. I am fairly immune from the -commoner speculative ailments, such as greed and fear and -hope. But being an ordinary man I find I can err with great -ease.</p> - -<p>I ought to have been on my guard at this particular time -because not long before that I had had an experience that -proved how easily a man may be talked into doing something -against his judgment and even against his wishes. It -happened in Harding’s office. I had a sort of private office—a -room that they let me occupy by myself—and nobody was -supposed to get to me during market hours without my consent. -I didn’t wish to be bothered and, as I was trading on a -very large scale and my account was fairly profitable, I was -pretty well guarded.</p> - -<p>One day just after the market closed I heard somebody -say, “Good afternoon, Mr. Livingston.”</p> - -<p>I turned and saw an utter stranger—a chap of about -thirty-five. I could not understand how he’d got in, but -there he was. I concluded his business with me had passed -him. But I didn’t say anything. I just looked at him and -pretty soon he said, “I came to see you about that Walter -Scott,” and he was off.</p> - -<p><span class="pagenum" id="Page_147">147</span> -He was a book agent. Now, he was not particularly pleasing -of manner or skillful of speech. Neither was he especially -attractive to look at. But he certainly had personality. -He talked and I thought I listened. But I do not know -what he said. I don’t think I ever knew, not even at the time. -When he finished his monologue he handed me first his -fountain pen and then a blank form, which I signed. It was -a contract to take a set of Scott’s works for five hundred dollars.</p> - -<p>The moment I signed I came to. But he had the contract -safe in his pocket. I did not want the books. I had no place -for them. They weren’t of any use whatever to me. I had -nobody to give them to. Yet I had agreed to buy them for -five hundred dollars.</p> - -<p>I am so accustomed to losing money that I never think -first of that phase of my mistakes. It is always the play itself, -the reason why. In the first place I wish to know my own -limitations and habits of thought. Another reason is that I -do not wish to make the same mistake a second time. <em>A man -can excuse his mistakes only by capitalising them to his subsequent -profit.</em></p> - -<p>Well, having made a five-hundred dollar mistake but not -yet having localised the trouble, I just looked at the fellow -to size him up as a first step. I’ll be hanged if he didn’t actually -smile at me—an understanding little smile! He -seemed to read my thoughts. I somehow knew that I did not -have to explain anything to him; he knew it without my telling -him. So I skipped the explanations and the preliminaries -and asked him, “How much commission will you get on that -five hundred dollar order?”</p> - -<p>He promptly shook his head and said, “I can’t do it! -Sorry!”</p> - -<p>“How much do you get?” I persisted.</p> - -<p>“A third. But I can’t do it!” he said.</p> - -<p>“A third of five hundred dollars is one hundred and sixty-six -dollars and sixty-six cents. I’ll give you two hundred<span class="pagenum" id="Page_148">148</span> -dollars cash if you give me back that signed contract.” And -to prove it I took the money out of my pocket.</p> - -<p>“I told you I couldn’t do it,” he said.</p> - -<p>“Do all of your customers make the same offer to you?” I -asked.</p> - -<p>“No,” he answered.</p> - -<p>“Then why were you so sure that I was going to make it?”</p> - -<p>“It is what your type of sport would do. You are a first-class -loser and that makes you a first-class business man. I -am much obliged to you, but I can’t do it.”</p> - -<p>“Now tell me why you do not wish to make more than -your commission?”</p> - -<p>“It isn’t that exactly,” he said. “I am not working just for -the commission.”</p> - -<p>“What are you working for then?”</p> - -<p>“For the commission and the record,” he answered.</p> - -<p>“What record?”</p> - -<p>“Mine.”</p> - -<p>“What are you driving at?”</p> - -<p>“Do you work for money alone?” he asked me.</p> - -<p>“Yes,” I said.</p> - -<p>“No.” And he shook his head. “No, you don’t. You -wouldn’t get enough fun out of it. You certainly do not work -merely to add a few more dollars to your bank account and -you are not in Wall Street because you like easy money. You -get your fun some other way. Well, same here.”</p> - -<p>I did not argue but asked him, “And how do you get your -fun?”</p> - -<p>“Well,” he confessed, “we’ve all got a weak spot.”</p> - -<p>“And what’s yours?”</p> - -<p>“Vanity,” he said.</p> - -<p>“Well,” I told him, “you’ve succeeded in getting me to sign -on. Now I want to sign off, and I am paying you two hundred -dollars for ten minutes’ work. Isn’t that enough for -your pride?”</p> - -<p>“No,” he answered. “You see, all the rest of the bunch<span class="pagenum" id="Page_149">149</span> -have been working Wall Street for months and failed to -make expenses. They said it was the fault of the goods and -the territory. So the office sent for me to prove that the fault -was with their salesmanship and not with the books or the -place. They were working on a 25 per cent commission. I -was in Cleveland, where I sold eighty-two sets in two weeks. -I am here to sell a certain number of sets not only to people -who did not buy from the other agents but to people they -couldn’t even get to see. That’s why they give me 33⅓ per -cent.”</p> - -<p>“I can’t quite figure out how you sold me that set.”</p> - -<p>“Why,” he said consolingly, “I sold J. P. Morgan a set.”</p> - -<p>“No, you didn’t,” I said.</p> - -<p>He wasn’t angry. He simply said, “Honest, I did.”</p> - -<p>“A set of Walter Scott to J. P. Morgan, who not only has -some fine editions but probably the original manuscripts of -some of the novels as well?”</p> - -<p>“Well, here’s his John Hancock.” And he promptly flashed -on me a contract signed by J. P. Morgan himself. It might -not have been Mr. Morgan’s signature, but it did not occur -to me to doubt it at the time. Didn’t he have mine in his -pocket? All I felt was curiosity. So I asked him, “How did -you get past the librarian?”</p> - -<p>“I didn’t see any librarian. I saw the Old Man himself. -In the office.”</p> - -<p>“That’s too much!” I said. Everybody knew that it was -much harder to get into Mr. Morgan’s private office empty -handed than into the White House with a parcel that ticked -like an alarm clock.</p> - -<p>But he declared, “I did.”</p> - -<p>“But how did you get into his office?”</p> - -<p>“How did I get into yours?” he retorted.</p> - -<p>“I don’t know. You tell me,” I said.</p> - -<p>“Well, the way I got into Morgan’s office and the way I -got into yours are the same. I just talked to the fellow at the -door whose business it was not to let me in. And the way<span class="pagenum" id="Page_150">150</span> -I got Morgan to sign was the same way I got you to sign. -You weren’t signing a contract for a set of books. You just -took the fountain pen I gave you and did what I asked you -to do with it. No difference. Same as you.”</p> - -<p>“And is that really Morgan’s signature?” I asked him, -about three minutes late with my skepticism.</p> - -<p>“Sure! He learned how to write his name when he was a -boy.”</p> - -<p>“And that’s all there is to it?”</p> - -<p>“That’s all,” he answered. “I know exactly what I am -doing. That’s all the secret there is. I am much obliged -to you. Good day, Mr. Livingston.” And he started to go -out.</p> - -<p>“Hold on,” I said. “I’m bound to have you make an even -two hundred dollars out of me.” And I handed him thirty-five -dollars.</p> - -<p>He shook his head. Then: “No,” he said. “I can’t do -that. But I can do this!” And he took the contract from his -pocket, tore it in two and gave me the pieces.</p> - -<p>I counted two hundred dollars and held the money before -him, but he again shook his head.</p> - -<p>“Isn’t that what you meant?” I said.</p> - -<p>“No.”</p> - -<p>“Then, why did you tear up the contract?”</p> - -<p>“Because you did not whine, but took it as I would have -taken it myself had I been in your place.”</p> - -<p>“But I offered you the two hundred dollars of my own -accord,” I said.</p> - -<p>“I know; but money isn’t everything.”</p> - -<p>Something in his voice made me say, “You’re right; it isn’t. -And now what do you really want me to do for you?”</p> - -<p>“You’re quick, aren’t you?” he said. “Do you really want -to do something for me?”</p> - -<p>“Yes,” I told him, “I do. But whether I will or not depends -what it is you have in mind.”</p> - -<p>“Take me with you into Mr. Ed Harding’s office and tell<span class="pagenum" id="Page_151">151</span> -him to let me talk to him three minutes by the clock. Then -leave me alone with him.”</p> - -<p>I shook my head and said, “He is a good friend of mine.”</p> - -<p>“He’s fifty years old and a stock broker,” said the book -agent.</p> - -<p>That was perfectly true, so I took him into Ed’s office. I -did not hear anything more from or about that book agent. -But one evening some weeks later when I was going uptown -I ran across him in a Sixth Avenue L train. He raised his hat -very politely and I nodded back. He came over and asked -me, “How do you do, Mr. Livingston? And how is Mr. -Harding?”</p> - -<p>“He’s well. Why do you ask?” I felt he was holding back -a story.</p> - -<p>“I sold him two thousand dollars’ worth of books that day -you took me in to see him.”</p> - -<p>“He never said a word to me about it,” I said.</p> - -<p>“No; that kind doesn’t talk about it.”</p> - -<p>“What kind doesn’t talk?”</p> - -<p>“The kind that never makes mistakes on account of its -being bad business to make them. That kind always knows -what he wants and nobody can tell him different. That is the -kind that’s educating my children and keeps my wife in -good humor. You did me a good turn, Mr. Livingston. I expected -it when I gave up the two hundred dollars you were -so anxious to present to me.”</p> - -<p>“And if Mr. Harding hadn’t given you an order?”</p> - -<p>“Oh, but I knew he would. I had found out what kind of -man he was. He was a cinch.”</p> - -<p>“Yes. But if he hadn’t bought any books?” I persisted.</p> - -<p>“I’d have come back to you and sold you something. Good -day, Mr. Livingston. I am going to see the mayor.” And -he got up as we pulled up at Park Place.</p> - -<p>“I hope you sell him ten sets,” I said. His Honor was a -Tammany man.</p> - -<p>“I’m a Republican, too,” he said, and went out, not hastily,<span class="pagenum" id="Page_152">152</span> -but leisurely, confident that the train would wait. And it did.</p> - -<p>I have told you this story in such detail because it concerned -a remarkable man who made me buy what I did not -wish to buy. He was the first man who did that to me. There -never should have been a second, but there was. You can -never bank on there being but one remarkable salesman in -the world or on complete immunization from the influence -of personality.</p> - -<p>When Percy Thomas left my office, after I had pleasantly -but definitely declined to enter into a working alliance with -him, I would have sworn that our business paths would -never cross. I was not sure I’d ever see him again. But on -the very next day he wrote me a letter thanking me for my -offers of help and inviting me to come and see him. I -answered that I would. He wrote again. I called.</p> - -<p>I got to see a great deal of him. It was always a pleasure -for me to listen to him, he knew so much and he expressed -his knowledge so interestingly. I think he is the most magnetic -man I ever met.</p> - -<p>We talked of many things, for he is a widely read man -with an amazing grasp of many subjects and a remarkable -gift for interesting generalization. The wisdom of his speech -is impressive; and as for plausibility, he hasn’t an equal. I -have heard many people accuse Percy Thomas of many -things, including insincerity, but I sometimes wonder if his -remarkable plausibility does not come from the fact that he -first convinces himself so thoroughly as to acquire thereby a -greatly increased power to convince others.</p> - -<p>Of course we talked about market matters at great length. -I was not bullish on cotton, but he was. I could not see the -bull side at all, but he did. He brought up so many facts and -figures that I ought to have been overwhelmed, but I wasn’t. -I couldn’t disprove them because I could not deny their authenticity, -but they did not shake my belief in what I read -for myself. But he kept at it until I no longer felt sure of my -own information as gathered from the trade papers and the<span class="pagenum" id="Page_153">153</span> -dailies. That meant I couldn’t set the market with my own -eyes. A man cannot be convinced against his own convictions, -but he can be talked into a state of uncertainty and indecision, -which is even worse, for that means that he cannot -trade with confidence and comfort.</p> - -<p>I cannot say that I got all mixed up, exactly, but I lost my -poise; or rather, I ceased to do my own thinking. I cannot -give you in detail the various steps by which I reached the -state of mind that was to prove so costly to me. I think -it was his assurances of the accuracy of his figures, which -were exclusively his, and the undependability of mine, -which were not exclusively mine, but public property. He -harped on the utter reliability, as proved time and again, of -all his ten thousand correspondents throughout the South. -In the end I came to read conditions as he himself read -them—because we were both reading from the same page -of the same book, held by him before my eyes. He has a -logical mind. Once I accepted his facts it was a cinch that -my own conclusions, derived from his facts, would agree -with his own.</p> - -<p>When he began his talks with me about the cotton situation -I not only was bearish but I was short of the market. -Gradually, as I began to accept his facts and figures, I began -to fear I had been basing my previous position on misinformation. -Of course I could not feel that way and not -cover. And once I had covered because Thomas made me -think I was wrong, I simply had to go long. It is the way my -mind works. You know, I have done nothing in my life but -trade in stocks and commodities. I naturally think that if it -is wrong to be bearish it must be right to be a bull. And if it -is right to be a bull it is imperative to buy. As my old Palm -Beach friend said Pat Hearne used to say, “You can’t tell till -you bet!” I must prove whether I am right on the market or -not; and the proofs are to be read only in my brokers’ statements -at the end of the month.</p> - -<p>I started in to buy cotton and in a jiffy I had my usual<span class="pagenum" id="Page_154">154</span> -line, about sixty thousand bales. It was the most asinine play -of my career. Instead of standing or falling by my own observation -and deductions I was merely playing another -man’s game. It was eminently fitting that my silly plays -should not end with that. I not only bought when I had no -business to be bullish but I didn’t accumulate my line in accordance -with the promptings of experience. I wasn’t trading -right. Having listened, I was lost.</p> - -<p>The market was not going my way. I am never afraid or -impatient when I am sure of my position. But the market -didn’t act the way it should have acted had Thomas been -right. Having taken the first wrong step I took the second -and the third, and of course it muddled me all up. I allowed -myself to be persuaded not only into not taking my loss but -into holding up the market. That is a style of play foreign -to my nature and contrary to my trading principles and -theories. Even as a boy in the bucket shops I had known -better. But I was not myself. I was another man—a Thomasized -person.</p> - -<p>I not only was long of cotton but I was carrying a heavy -line of wheat. That was doing famously and showed me -a handsome profit. My fool efforts to bolster up cotton had -increased my line to about one hundred and fifty thousand -bales. I may tell you that about this time I was not feeling -very well. I don’t say this to furnish an excuse for my blunders, -but merely to state a pertinent fact. I remember I went -to Bayshore for a rest.</p> - -<p>While there I did some thinking. It seemed to me that my -speculative commitments were overlarge. I am not timid as -a rule, but I got to feeling nervous and that made me decide -to lighten my load. To do this I must clean up either the -cotton or the wheat.</p> - -<p>It seems incredible that knowing the game as well as I -did and with an experience of twelve or fourteen years of -speculating in stocks and commodities <em>I did precisely the -wrong thing</em>. <em>The cotton showed me a loss and I kept it. The<span class="pagenum" id="Page_155">155</span> -wheat showed me a profit and I sold it out.</em> It was an utterly -foolish play, but all I can say in extenuation is that it wasn’t -really my deal, but Thomas’. <em>Of all speculative blunders -there are few greater than trying to average a losing game.</em> -My cotton deal proved it to the hilt a little later. <em>Always sell -what shows you a loss and keep what shows you a profit.</em> -That was so obviously the wise thing to do and was so well -known to me that even now I marvel at myself for doing the -reverse.</p> - -<p>And so I sold my wheat, deliberately cut short my profit -in it. After I got out of it the price went up twenty cents a -bushel without stopping. If I had kept it I might have taken -a profit of about eight million dollars. And having decided -to keep on with the losing proposition I bought more cotton!</p> - -<p>I remember very clearly how every day I would buy cotton, -more cotton. And why do you think I bought it? To -keep the price from going down! If that isn’t a supersucker -play, what is? I simply kept putting up more and more -money—more money to lose eventually. My brokers and my -intimate friends couldn’t understand it; and they don’t to -this day. Of course if the deal had turned out differently I -would have been a wonder. More than once I was warned -against placing too much reliance on Percy Thomas’ brilliant -analyses. To this I paid no heed, but kept on buying cotton -to keep it from going down. I was even buying it in Liverpool. -I accumulated four hundred and forty thousand bales -before I realized what I was doing. And then it was too late. -So I sold out my line.</p> - -<p>I lost nearly all that I had made out of all my other deals -in stocks and commodities. I was not completely cleaned -out, but I had left fewer hundreds of thousands than I had -millions before I met my brilliant friend Percy Thomas. For -me of all men to violate all the laws that experience had -taught me to observe in order to prosper was more than -asinine.</p> - -<p><em>To learn that a man can make foolish plays for no reason<span class="pagenum" id="Page_156">156</span> -whatever was a valuable lesson.</em> It cost me millions to learn -that another dangerous enemy to a trader is his susceptibility -to the urgings of a magnetic personality when -plausibly expressed by a brilliant mind. It has always -seemed to me, however, that I might have learned my lesson -quite as well if the cost had been only one million. But Fate -does not always let you fix the tuition fee. She delivers the -educational wallop and presents her own bill, knowing you -have to pay it, no matter what the amount may be. Having -learned what folly I was capable of I closed that particular -incident. Percy Thomas went out of my life.</p> - -<p>There I was, with more than nine-tenths of my stake, as -Jim Fisk used to say, gone where the woodbine twineth—up -the spout. I had been a millionaire rather less than a year. -My millions I had made by using brains, helped by luck. I -had lost them by reversing the process. I sold my two yachts -and was decidedly less extravagant in my manner of living.</p> - -<p>But that one blow wasn’t enough. Luck was against me. I -ran up first against illness and then against the urgent need -of two hundred thousand dollars in cash. A few months before -that sum would have been nothing at all; but now it -meant almost the entire remnant of my fleet-winged fortune. -I had to supply the money and the question was: Where -would I get it? I didn’t want to take it out of the balance I -kept at my brokers’ because if I did I wouldn’t have much of -a margin left for my own trading; and I needed trading facilities -more than ever if I was to win back my millions -quickly. There was only one alternative that I could see, -and that was to take it out of the stock market!</p> - -<p>Just think of it! If you know much about the average -customer of the average commission house you will agree -with me that the hope of making the stock market pay your -bill is one of the most prolific sources of loss in Wall Street. -You will chip out all you have if you adhere to your determination.</p> - -<p>Why, in Harding’s office one winter a little bunch of high<span class="pagenum" id="Page_157">157</span> -flyers spent thirty or forty thousand dollars for an overcoat—and -not one of them lived to wear it. It so happened that -a prominent floor trader—who since has become world-famous -as one of the dollar-a-year men—came down to the -Exchange wearing a fur overcoat lined with sea otter. In -those days, before furs went up sky high, that coat was -valued at only ten thousand dollars. Well, one of the chaps -in Harding’s office, Bob Keown, decided to get a coat lined -with Russian sable. He priced one uptown. The cost was -about the same, ten thousand dollars.</p> - -<p>“That’s the devil of a lot of money,” objected one of the -fellows.</p> - -<p>“Oh, fair! Fair!” admitted Bob Keown amiably. “About -a week’s wages—unless you guys promise to present it to -me as a slight but sincere token of the esteem in which you -hold the nicest man in the office. Do I hear the presentation -speech? No? Very well. I shall let the stock market buy it -for me!”</p> - -<p>“Why do you want a sable coat?” asked Ed Harding.</p> - -<p>“It would look particularly well on a man of my inches,” -replied Bob, drawing himself up.</p> - -<p>“And how did you say you were going to pay for it?” -asked Jim Murphy, who was the star tip-chaser of the -office.</p> - -<p>“By a judicious investment of a temporary character, -James. That’s how,” answered Bob, who knew that Murphy -merely wanted a tip.</p> - -<p>Sure enough, Jimmy asked, “What stock are you going to -buy?”</p> - -<p>“Wrong as usual, friend. This is no time to buy anything. -I propose to sell five thousand Steel. It ought to go down ten -points at the least. I’ll just take two and a half points net. -That is conservative, isn’t it?”</p> - -<p>“What do you hear about it?” asked Murphy eagerly. He -was a tall thin man with black hair and a hungry look, due<span class="pagenum" id="Page_158">158</span> -to his never going out to lunch for fear of missing something -on the tape.</p> - -<p>“I hear that coat’s the most becoming I ever planned to -get.” He turned to Harding and said, “Ed, sell five thousand -U.S. Steel common at the market. To-day, darling!”</p> - -<p>He was a plunger, Bob was, and liked to indulge in -humorous talk. It was his way of letting the world know that -he had an iron nerve. He sold five thousand Steel, and the -stock promptly went up. Not being half as big an ass as he -seemed when he talked, Bob stopped his loss at one and a -half points and confided to the office that the New York -climate was too benign for fur coats. They were unhealthy -and ostentatious. The rest of the fellows jeered. But it was -not long before one of them bought some Union Pacific to -pay for the coat. He lost eighteen hundred dollars and said -sables were all right for the outside of a woman’s wrap, but -not for the inside of a garment intended to be worn by a -modest and intelligent man.</p> - -<p>After that, one after another of the fellows tried to coax -the market to pay for that coat. One day I said I would buy -it to keep the office from going broke. But they all said that -it wasn’t a sporting thing to do; that if I wanted the coat for -myself I ought to let the market give it to me. But Ed -Harding strongly approved of my intention and that same -afternoon I went to the furrier’s to buy it. I found out that a -man from Chicago had bought it the week before.</p> - -<p>That was only one case. There isn’t a man in Wall Street -who has not lost money trying to make the market pay for -an automobile or a bracelet or a motor boat or a painting. I -could build a huge hospital with the birthday presents that -the tight-fisted stock market has refused to pay for. In fact, -of all hoodoos in Wall Street I think the resolve to induce -the stock market to act as a fairy godmother is the busiest -and most persistent.</p> - -<p>Like all well-authenticated hoodoos this has its reason for -being. What does a man do when he sets out to make the<span class="pagenum" id="Page_159">159</span> -stock market pay for a sudden need? Why, he merely hopes. -He gambles. He therefore runs much greater risks than he -would if he were speculating intelligently, in accordance -with opinions or beliefs logically arrived at after a dispassionate -study of underlying conditions. To begin with, he is -after an immediate profit. He cannot afford to wait. The -market must be nice to him at once if at all. He flatters himself -that he is not asking more than to place an even-money -bet. Because he is prepared to run quick—say, stop his loss -at two points when all he hopes to make is two points—he -hugs the fallacy that he is merely taking a fifty-fifty chance. -Why, I’ve known men to lose thousands of dollars on such -trades, particularly on purchases made at the height of a -bull market just before a moderate reaction. It certainly is -no way to trade.</p> - -<p>Well, that crowning folly of my career as a stock operator -was the last straw. It beat me. I lost what little my cotton -deal had left me. It did even more harm, for I kept on trading—and -losing. I persisted in thinking that the stock market -must perforce make money for me in the end. But the -only end in sight was the end of my resources. I went into -debt, not only to my principal brokers but to other houses -that accepted business from me without my putting up an -adequate margin. I not only got in debt but I stayed in debt -from then on.</p> - -<hr /> - -<p><span class="pagenum" id="Page_160">160</span></p> - -<div class="chapter"> -<h2 id="XIII"><i>XIII</i></h2> -</div> - -<p class="in0"><span class="firstword">There I was,</span> once more broke, which was bad, and dead -wrong in my trading, which was a sight worse. I was sick, -nervous, upset and unable to reason calmly. That is, I was -in the frame of mind in which no speculator should be -when he is trading. Everything went wrong with me. Indeed, -I began to think that I could not recover my departed -sense of proportion. Having grown accustomed to swinging -a big line—say, more than a hundred thousand shares of -stock—I feared I would not show good judgment trading in -a small way. It scarcely seemed worthwhile being right -when all you carried was a hundred shares of stock. After -the habit of taking a big profit on a big line I wasn’t sure I -would know when to take my profit on a small line. I can’t -describe to you how weaponless I felt.</p> - -<p>Broke again and incapable of assuming the offensive -vigorously. In debt and wrong! After all those long years of -successes, tempered by mistakes that really served to pave -the way for greater successes, I was now worse off than -when I began in the bucket shops. I had learned a great deal -about the game of stock speculation, but I had not learned -quite so much about the play of human weaknesses. There -is no mind so machinelike that you can depend upon it to -function with equal efficiency at all times. I now learned -that I could not trust myself to remain equally unaffected by -men and misfortunes at all times.</p> - -<p>Money losses have never worried me in the slightest. But<span class="pagenum" id="Page_161">161</span> -other troubles could and did. I studied my disaster in detail -and of course found no difficulty in seeing just where I had -been silly. I spotted the exact time and place. A man must -know himself thoroughly if he is going to make a good job -out of trading in the speculative markets. To know what I -was capable of in the line of folly was a long educational -step. I sometimes think that no price is too high for a speculator -to pay to learn that which will keep him from getting -the swelled head. A great many smashes by brilliant men -can be traced directly to the swelled head—an expensive -disease everywhere to everybody, but particularly in Wall -Street to a speculator.</p> - -<p>I was not happy in New York, feeling the way I did. I -didn’t want to trade, because I wasn’t in good trading trim. -I decided to go away and seek a stake elsewhere. The -change of scene could help me to find myself again, I -thought. So once more I left New York, beaten by the game -of speculation. I was worse than broke, since I owed over -one hundred thousand dollars spread among various brokers.</p> - -<p>I went to Chicago and there found a stake. It was not a -very substantial stake, but that merely meant that I would -need a little more time to win back my fortune. A house that -I once had done business with had faith in my ability as a -trader and they were willing to prove it by allowing me to -trade in their office in a small way.</p> - -<p>I began very conservatively. I don’t know how I might -have fared had I stayed there. But one of the most remarkable -experiences in my career cut short my stay in Chicago. -It is an almost incredible story.</p> - -<p>One day I got a telegram from Lucius Tucker. I had -known him when he was the office manager of a Stock Exchange -firm that I had at times given some business to, but -I had lost track of him. The telegram read:</p> - -<blockquote> - -<p class="center">Come to New York at once.<br /> -<span class="r10"><span class="smcap">L. Tucker.</span></span></p> -</blockquote> - -<p><span class="pagenum" id="Page_162">162</span> -I knew that he knew from mutual friends how I was fixed -and therefore it was certain he had something up his sleeve. -At the same time I had no money to throw away on an unnecessary -trip to New York; so instead of doing what he -asked me to do I got him on the long distance.</p> - -<p>“I got your telegram,” I said. “What does it mean?”</p> - -<p>“It means that a big banker in New York wants to see -you,” he answered.</p> - -<p>“Who is it?” I asked. I couldn’t imagine who it could be.</p> - -<p>“I’ll tell you when you come to New York. No use otherwise.”</p> - -<p>“You say he wants to see me?”</p> - -<p>“He does.”</p> - -<p>“What about?”</p> - -<p>“He’ll tell you in person if you give him a chance,” said -Lucius.</p> - -<p>“Can’t you write me?”</p> - -<p>“No.”</p> - -<p>“Then tell me more plainly,” I said.</p> - -<p>“I don’t want to.”</p> - -<p>“Look here, Lucius,” I said, “just tell me this much: Is this -a fool trip?”</p> - -<p>“Certainly not. It will be to your advantage to come.”</p> - -<p>“Can’t you give me an inkling?”</p> - -<p>“No,” he said. “It wouldn’t be fair to him. And besides, -I don’t know just how much he wants to do for you. But take -my advice: Come, and come quick.”</p> - -<p>“Are you sure it is I that he wishes to see?”</p> - -<p>“Nobody else but you will do. Better come, I tell you. -Telegraph me what train you take and I’ll meet you at the -station.”</p> - -<p>“Very well,” I said, and hung up.</p> - -<p>I didn’t like quite so much mystery, but I knew that -Lucius was friendly and that he must have a good reason for -talking the way he did. I wasn’t faring so sumptuously in -Chicago that it would break my heart to leave it. At the<span class="pagenum" id="Page_163">163</span> -rate I was trading it would be a long time before I could -get together enough money to operate on the old scale.</p> - -<p>I came back to New York, not knowing what would happen. -Indeed, more than once during the trip I feared nothing -at all would happen and that I’d be out my railroad fare and -my time. I could not guess that I was about to have the most -curious experience of my entire life.</p> - -<p>Lucius met me at the station and did not waste any time -in telling me that he had sent for me at the urgent request of -Mr. Daniel Williamson, of the well-known Stock Exchange -house of Williamson & Brown. Mr. Williamson told Lucius -to tell me that he had a business proposition to make to me -that he was sure I would accept since it would be very -profitable for me. Lucius swore he didn’t know what the -proposition was. The character of the firm was a guaranty -that nothing improper would be demanded of me.</p> - -<p>Dan Williamson was the senior member of the firm, which -was founded by Egbert Williamson way back in the ’70’s. -There was no Brown and hadn’t been one in the firm for -years. The house had been, very prominent in Dan’s father’s -time and Dan had inherited a considerable fortune and -didn’t go after much outside business. They had one customer -who was worth a hundred average customers and that -was Alvin Marquand, Williamson’s brother-in-law, who in -addition to being a director in a dozen banks and trust companies -was the president of the great Chesapeake and Atlantic -Railroad system. He was the most picturesque personality -in the railroad world after James J. Hill, and was the -spokesman and dominant member of the powerful banking -coterie known as the Fort Dawson gang. He was worth -from fifty million to five hundred million dollars, the estimate -depending upon the state of the speaker’s liver. When -he died they found out that he was worth two hundred and -fifty million dollars, all made in Wall Street. So you see he -was some customer.</p> - -<p>Lucius told me he had just accepted a position with Williamson<span class="pagenum" id="Page_164">164</span> -& Brown—one that was made for him. He was supposed -to be a sort of circulating general business getter. The -firm was after a general commission business and Lucius had -induced Mr. Williamson to open a couple of branch offices, -one in one of the big hotels uptown and the other in Chicago. -I rather gathered that I was going to be offered a position -in the latter place, possibly as office manager, which -was something I would not accept. I didn’t jump on Lucius -because I thought I’d better wait until the offer was made -before I refused it.</p> - -<p>Lucius took me into Mr. Williamson’s private office, introduced -me to his chief and left the room in a hurry, as though -he wished to avoid being called as witness in a case in which -he knew both parties. I prepared to listen and then to say -no.</p> - -<p>Mr. Williamson was very pleasant. He was a thorough -gentleman, with polished manners and a kindly smile. I -could see that he made friends easily and kept them. Why -not? He was healthy and therefore good-humored. He had -slathers of money and therefore could not be suspected of -sordid motives. These things, together with his education -and social training, made it easy for him to be not only polite -but friendly, and not only friendly but helpful.</p> - -<p>I said nothing. I had nothing to say and, besides, I always -let the other man have his say in full before I do any talking. -Somebody told me that the late James Stillman, president of -the National City Bank—who, by the way, was an intimate -friend of Williamson’s—made it his practice to listen in -silence, with an impassive face, to anybody who brought a -proposition to him. After the man got through Mr. Stillman -continued to look at him, as though the man had not finished. -So the man, feeling urged to say something more, did -so. Simply by looking and listening Stillman often made the -man offer terms much more advantageous to the bank than -he had meant to offer when he began to speak.</p> - -<p>I don’t keep silent just to induce people to offer a better<span class="pagenum" id="Page_165">165</span> -bargain, but because I like to know all the facts of the case. -By letting a man have his say in full you are able to decide -at once. It is a great time-saver. It averts debates and prolonged -discussions that get nowhere. Nearly every business -proposition that is brought to me can be settled, as far as my -participation in it is concerned, by my saying yes or no. But -I cannot say yes or no right off unless I have the complete -proposition before me.</p> - -<p>Dan Williamson did the talking and I did the listening. -He told me he had heard a great deal about my operations -in the stock market and how he regretted that I had gone -outside of my bailiwick and come a cropper in cotton. Still -it was to my bad luck that he owed the pleasure of that -interview with me. He thought my forte was the stock -market, that I was born for it and that I should not stray -from it.</p> - -<p>“And that is the reason, Mr. Livingston,” he concluded -pleasantly, “why we wish to do business with you.”</p> - -<p>“Do business how?” I asked him.</p> - -<p>“Be your brokers,” he said. “My firm would like to do your -stock business.”</p> - -<p>“I’d like to give it to you,” I said, “but I can’t.”</p> - -<p>“Why not?” he asked.</p> - -<p>“I haven’t any money,” I answered.</p> - -<p>“That part is all right,” he said with a friendly smile. “I’ll -furnish it.” He took out a pocket checkbook, wrote out a -check for twenty-five thousand dollars to my order, and gave -it to me.</p> - -<p>“What’s this for?” I asked.</p> - -<p>“For you to deposit in your own bank. You will draw your -own checks. I want you to do your trading in our office. I -don’t care whether you win or lose. If that money goes I will -give you another personal check. So you don’t have to be so -very careful with this one. See?”</p> - -<p>I knew that the firm was too rich and prosperous to need -anybody’s business, much less to give a fellow the money to<span class="pagenum" id="Page_166">166</span> -put up as margin. And then he was so nice about it! Instead -of giving me a credit with the house he gave me the actual -cash, so that he alone knew where it came from, the only -string being that if I traded I should do so through his firm. -And then the promise that there would be more if that went! -Still, there must be a reason.</p> - -<p>“What’s the idea?” I asked him.</p> - -<p>“The idea is simply that we want to have a customer in -this office who is known as a big active trader. Everybody -knows that you swing a big line on the short side, which is -what I particularly like about you. You are known as a -plunger.”</p> - -<p>“I still don’t get it,” I said.</p> - -<p>“I’ll be frank with you, Mr. Livingston. We have two or -three very wealthy customers who buy and sell stocks in a -big way. I don’t want the Street to suspect them of selling -long stock every time we sell ten or twenty thousand shares -of any stock. If the Street knows that you are trading in our -office it will not know whether it is your short selling or the -other customers’ long stock that is coming on the market.”</p> - -<p>I understood at once. He wanted to cover up his brother-in-law’s -operations with my reputation as a plunger! It so -happened that I had made my biggest killing on the bear -side a year and a half before, and, of course, the Street gossips -and the stupid rumor-mongers had acquired the habit -of blaming me for every decline in prices. To this day when -the market is very weak they say I am raiding it.</p> - -<p>I didn’t have to reflect. I saw at a glance that Dan Williamson -was offering me a chance to come back and come -back quickly. I took the check, banked it, opened an account -with his firm and began trading. It was a good active market, -broad enough for a man not to have to stick to one or -two specialties. I had begun to fear, as I told you, that I had -lost the knack of hitting it right. But it seems I hadn’t. In -three weeks’ time I had made a profit of one hundred and<span class="pagenum" id="Page_167">167</span> -twelve thousand dollars out of the twenty-five thousand that -Dan Williamson lent me.</p> - -<p>I went to him and said, “I’ve come to pay you back that -twenty-five thousand dollars.”</p> - -<p>“No, no!” he said and waved me away exactly as if I had -offered him a castor-oil cocktail. “No, no, my boy. Wait until -your account amounts to something. Don’t think about it -yet. You’ve only got chicken feed there.”</p> - -<p>There is where I made the mistake that I have regretted -more than any other I ever made in my Wall Street career. -It was responsible for long and dreary years of suffering. I -should have insisted on his taking the money. I was on my -way to a bigger fortune than I had lost and walking pretty -fast. For three weeks my average profit was 150 per cent per -week. From then on my trading would be on a steadily increasing -scale. But instead of freeing myself from all obligation -I let him have his way and did not compel him to accept -the twenty-five thousand dollars. Of course, since he -didn’t draw out the twenty-five thousand dollars he had -advanced me I felt I could not very well draw out my profit. -I was very grateful to him, but I am so constituted that I -don’t like to owe money or favours. I can pay the money -back with money, but the favours and kindnesses I must pay -back in kind—and you are apt to find these moral obligations -mighty high priced at times. Moreover there is no -statute of limitations.</p> - -<p>I left the money undisturbed and resumed my trading. I -was getting on very nicely. I was recovering my poise and I -was sure it would not be very long before I should get back -into my 1907 stride. Once I did that, all I’d ask for would -be for the market to hold out a little while and I’d more than -make up my losses. But making or not making the money -was not bothering me much. What made me happy was that -I was losing the habit of being wrong, of not being myself. -It had played havoc with me for months but I had learned -my lesson.</p> - -<p><span class="pagenum" id="Page_168">168</span> -Just about that time I turned bear and I began to sell -short several railroad stocks. Among them was Chesapeake -& Atlantic. I think I put out a short line in it; about eight -thousand shares.</p> - -<p>One morning when I got downtown Dan Williamson -called me into his private office before the market opened -and said to me: “Larry, don’t do anything in Chesapeake & -Atlantic just now. That was a bad play of yours, selling eight -thousand short. I covered it for you this morning in London -and went long.”</p> - -<p>I was sure Chesapeake & Atlantic was going down. The -tape told it to me quite plainly; and besides I was bearish on -the whole market, not violently or insanely bearish, but -enough to feel comfortable with a moderate short line out. I -said to Williamson, “What did you do that for? I am bearish -on the whole market and they are all going lower.”</p> - -<p>But he just shook his head and said, “I did it because I -happen to know something about Chesapeake & Atlantic -that you couldn’t know. My advice to you is not to sell that -stock short until I tell you it is safe to do so.”</p> - -<p>What could I do? That wasn’t an asinine tip. It was advice -that came from the brother-in-law of the chairman of the -board of directors. Dan was not only Alvin Marquand’s -closest friend but he had been kind and generous to me. He -had shown his faith in me and confidence in my word. I -couldn’t do less than to thank him. And so my feelings again -won over my judgment and I gave in. To subordinate my -judgment to his desires was the undoing of me. Gratitude is -something a decent man can’t help feeling, but it is for a fellow -to keep it from completely tying him up. The first thing -I knew I not only had lost all my profit but I owed the firm -one hundred and fifty thousand dollars besides. I felt pretty -badly about it, but Dan told me not to worry.</p> - -<p>“I’ll get you out of this hole,” he promised. “I know I will. -But I can only do it if you let me. You will have to stop doing -business on your own hook. I can’t be working for you<span class="pagenum" id="Page_169">169</span> -and then have you completely undo all my work in your -behalf. Just lay off the market and give me a chance to make -some money for you. Won’t you, Larry?”</p> - -<p>Again I ask you: What could I do? I thought of his kindliness -and I could not do anything that might be construed -as lacking in appreciation. I had grown to like him. He was -very pleasant and friendly. I remember that all I got from -him was encouragement. He kept on assuring me that everything -would come out O.K. One day, perhaps six months -later, he came to me with a pleased smile and gave me some -credit slips.</p> - -<p>“I told you I would pull you out of that hole,” he said, -“and I have.” And then I discovered that not only had he -wiped out the debt entirely but I had a small credit balance -besides.</p> - -<p>I think I could have run that up without much trouble, for -the market was right, but he said to me, “I have bought you -ten thousand shares of Southern Atlantic.” That was another -road controlled by his brother-in-law, Alvin Marquand, who -also ruled the market destinies of the stock.</p> - -<p>When a man does for you what Dan Williamson did for -me you can’t say anything but “Thank you”—no matter -what your market views may be. You may be sure you’re -right, but as Pat Hearne used to say: “You can’t tell till you -bet!” and Dan Williamson had bet for me—with his money.</p> - -<p>Well, Southern Atlantic went down and stayed down and -I lost, I forget how much, on my ten thousand shares before -Dan sold me out. I owed him more than ever. But you never -saw a nicer or less importunate creditor in your life. Never a -whimper from him. Instead, encouraging words and admonitions -not to worry about it. In the end the loss was -made up for me in the same generous but mysterious way.</p> - -<p>He gave no details whatever. They were all numbered -accounts. Dan Williamson would just say to me, “We made -up your Southern Atlantic loss with profits on this other -deal,” and he’d tell me how he had sold seventy-five hundred<span class="pagenum" id="Page_170">170</span> -shares of some other stock and made a nice thing out of it. I -can truthfully say that I never knew a blessed thing about -those trades of mine until I was told that the indebtedness -was wiped out.</p> - -<p>After that happened several times I began to think, and I -got to look at my case from a different angle. Finally I -tumbled. It was plain that I had been used by Dan Williamson. -It made me angry to think it, but still angrier that I had -not tumbled to it quicker. As soon as I had gone over the -whole thing in my mind I went to Dan Williamson, told him -I was through with the firm, and I quit the office of Williamson -& Brown. I had no words with him or any of his partners. -What good would that have done me? But I will admit that -I was sore—at myself quite as much as at Williamson & -Brown.</p> - -<p>The loss of the money didn’t bother me. Whenever I have -lost money in the stock market I have always considered that -I have learned something; that if I have lost money I have -gained experience, so that the money really went for a tuition -fee. A man has to have experience and he has to pay -for it. But there was something that hurt a whole lot in that -experience of mine in Dan Williamson’s office, and that was -the loss of a great opportunity. The money a man loses is -nothing; he can make it up. But opportunities such as I had -then do not come every day.</p> - -<p>The market, you see, had been a fine trading market. I -was right; I mean, I was reading it accurately. The opportunity -to make millions was there. But I allowed my gratitude -to interfere with my play. I tied my own hands. I had -to do what Dan Williamson in his kindness wished done. -Altogether it was more unsatisfactory than doing business -with a relative. Bad business!</p> - -<p>And that wasn’t the worst thing about it. It was that after -that there was practically no opportunity for me to make big -money. The market flattened out. Things drifted from bad -to worse. I not only lost all I had but got into debt again—more -heavily than ever. Those were long lean years, 1911,<span class="pagenum" id="Page_171">171</span> -1912, 1913 and 1914. There was no money to be made. The -opportunity simply wasn’t there and so I was worse off than -ever.</p> - -<p>It isn’t uncomfortable to lose when the loss is not accompanied -by a poignant vision of what might have been. That -was precisely what I could not keep my mind from dwelling -on, and of course it unsettled me further. I learned that the -weaknesses to which a speculator is prone are almost numberless. -It was proper for me as a man to act the way I did -in Dan Williamson’s office, but it was improper and unwise -for me as a speculator to allow myself to be influenced by -any consideration to act against my own judgment. <i xml:lang="fr" lang="fr">Noblesse -oblige</i>—but not in the stock market, because the tape is not -chivalrous and moreover does not reward loyalty. I realise -that I couldn’t have acted differently. I couldn’t make myself -over just because I wished to trade in the stock market. -But business is business always, and my business as a speculator -is to back my own judgment always.</p> - -<p>It was a very curious experience. I’ll tell you what I think -happened. Dan Williamson was perfectly sincere in what he -told me when he first saw me. Every time his firm did a few -thousand shares in any one stock the Street jumped at the -conclusion that Alvin Marquand was buying or selling. He -was the big trader of the office, to be sure, and he gave this -firm all his business; and he was one of the best and biggest -traders they have ever had in Wall Street. Well, I was to be -used as a smoke screen, particularly for Marquand’s selling.</p> - -<p>Alvin Marquand fell sick shortly after I went in. His ailment -was early diagnosed as incurable, and Dan Williamson -of course knew it long before Marquand himself did. That -is why Dan covered my Chesapeake & Atlantic stock. He -had begun to liquidate some of his brother-in-law’s speculative -holdings of that and other stocks.</p> - -<p>Of course when Marquand died the estate had to liquidate -his speculative and semispeculative lines, and by that -time we had run into a bear market. By tying me up the way -he did, Dan was helping the estate a whole lot. I do not<span class="pagenum" id="Page_172">172</span> -speak boastfully when I say that I was a very heavy trader -and that I was dead right in my views on the stock market. -I know that Williamson remembered my successful operations -in the bear market of 1907 and he couldn’t afford to -run the risk of having me at large. Why, if I had kept on the -way I was going I’d have made so much money that by the -time he was trying to liquidate part of Alvin Marquand’s -estate I would have been trading in hundreds of thousands -of shares. As an active bear I would have done damage running -into the millions of dollars to the Marquand heirs, for -Alvin left only a little over a couple of hundred millions.</p> - -<p>It was much cheaper for them to let me get into debt and -then to pay off the debt than to have me in some other office -operating actively on the bear side. That is precisely what I -would have been doing but for my feeling that I must not be -outdone in decency by Dan Williamson.</p> - -<p>I have always considered this the most interesting and -most unfortunate of all my experiences as a stock operator. -As a lesson it cost me a disproportionately high price. It put -off the time of my recovery several years. I was young -enough to wait with patience for the strayed millions to -come back. But five years is a long time for a man to be poor. -Young or old, it is not to be relished. I could do without the -yachts a great deal easier than I could without a market to -come back on. The greatest opportunity of a lifetime was -holding before my very nose the purse I had lost. I could -not put out my hand and reach for it. A very shrewd boy, -that Dan Williamson; as slick as they make them; farsighted, -ingenious, daring. He is a thinker, has imagination, detects -the vulnerable spot in any man and can plan cold-bloodedly -to hit it. He did his own sizing up and soon doped out just -what to do to me in order to reduce me to complete inoffensiveness -in the market. He did not actually do me out of any -money. On the contrary, he was to all appearances extremely -nice about it. He loved his sister, Mrs. Marquand, and he -did his duty toward her as he saw it.</p> - -<hr /> - -<p><span class="pagenum" id="Page_173">173</span></p> - -<div class="chapter"> -<h2 id="XIV"><i>XIV</i></h2> -</div> - -<p class="in0"><span class="firstword">It has always rankled</span> in my mind that after I left Williamson -& Brown’s office the cream was off the market. We -ran smack into a long moneyless period; four mighty lean -years. There was not a penny to be made. As Billy Henriquez -once said, “It was the kind of market in which not -even a skunk could make a scent.”</p> - -<p>It looked to me as though I was in Dutch with destiny. It -might have been the plan of Providence to chasten me, but -really I had not been filled with such pride as called for a -fall. I had not committed any of those speculative sins which -a trader must expiate on the debtor side of the account. I -was not guilty of a typical sucker play. What I had done, or, -rather, what I had left undone, was something for which I -would have received praise and not blame—north of Forty-second -Street. In Wall Street it was absurd and costly. But -by far the worst thing about it was the tendency it had to -make a man a little less inclined to permit himself human -feelings in the ticker district.</p> - -<p>I left Williamson’s and tried other brokers’ offices. In -every one of them I lost money. It served me right, because -I was trying to force the market into giving me what it -didn’t have to give—to wit, opportunities for making money. -I did not find any trouble in getting credit, because those -who knew me had faith in me. You can get an idea of how -strong their confidence was when I tell you that when I -finally stopped trading on credit I owed well over one million -dollars.</p> - -<p><span class="pagenum" id="Page_174">174</span> -The trouble was not that I had lost my grip but that during -those four wretched years the opportunities for making -money simply didn’t exist. Still I plugged along, trying to -make a stake and succeeding only in increasing my indebtedness. -After I ceased trading on my own hook because I -wouldn’t owe my friends any more money I made a living -handling accounts for people who believed I knew the game -well enough to beat it even in a dull market. For my services -I received a percentage of the profits—when there were any. -That is how I lived. Well, say that is how I sustained life.</p> - -<p>Of course, I didn’t always lose, but I never made enough -to allow me materially to reduce what I owed. Finally, as -things got worse, I felt the beginnings of discouragement for -the first time in my life.</p> - -<p>Everything seemed to have gone wrong with me. I did not -go about bewailing the descent from millions and yachts to -debts and the simple life. I didn’t enjoy the situation, but I -did not fill up with self-pity. I did not propose to wait patiently -for time and Providence to bring about the cessation -of my discomforts. I therefore studied my problem. It was -plain that the only way out of my troubles was by making -money. To make money I needed merely to trade successfully. -I had so traded before and I must do so once more. -More than once in the past I had run up a shoestring into -hundreds of thousands. Sooner or later the market would -offer me an opportunity.</p> - -<p>I convinced myself that whatever was wrong was wrong -with me and not with the market. Now what could be the -trouble with me? I asked myself that question in the same -spirit in which I always study the various phases of my -trading problems. I thought about it calmly and came to the -conclusion that my main trouble came from worrying over -the money I owed. I was never free from the mental discomfort -of it. I must explain to you that it was not mere consciousness -of my indebtedness. Any business man contracts -debts in the course of his regular business. Most of my debts<span class="pagenum" id="Page_175">175</span> -were really nothing but business debts, due to what were unfavourable -business conditions for me, and no worse than a -merchant suffers from, for instance, when there is an unusually -prolonged spell of unseasonable weather.</p> - -<p>Of course as time went on and I could not pay I began to -feel less philosophical about my debts. I’ll explain: I owed -over a million dollars—all of it stock-market losses, remember. -Most of my creditors were very nice and didn’t bother -me; but there were two who did bedevil me. They used to -follow me around. Every time I made a winning each of -them was Johnny-on-the-spot, wanting to know all about it -and insisting on getting theirs right off. One of them, to -whom I owed eight hundred dollars, threatened to sue me, -seize my furniture, and so forth. I can’t conceive why he -thought I was concealing assets, unless it was that I didn’t -quite look like a stage hobo about to die of destitution.</p> - -<p>As I studied the problem I saw that it wasn’t a case that -called for reading the tape but for reading my own self. I -quite cold-bloodedly reached the conclusion that I would -never be able to accomplish anything useful so long as I was -worried, and it was equally plain that I should be worried so -long as I owed money. I mean, as long as any creditor had -the power to vex me or to interfere with my coming back by -insisting upon being paid before I could get a decent stake -together. This was all so obviously true that I said to myself, -“I must go through bankruptcy.” What else could relieve my -mind?</p> - -<p>It sounds both easy and sensible, doesn’t it? But it was -more than unpleasant, I can tell you. I hated to do it. I hated -to put myself in a position to be misunderstood or misjudged. -I myself never cared much for money. I never -thought enough of it to consider it worthwhile lying for. -But I knew that everybody didn’t feel that way. Of course I -also knew that if I got on my feet again I’d pay everybody -off, for the obligation remained. But unless I was able to<span class="pagenum" id="Page_176">176</span> -trade in the old way I’d never be able to pay back that million.</p> - -<p>I nerved myself and went to see my creditors. It was a -mighty difficult thing for me to do, for all that most of them -were personal friends or old acquaintances.</p> - -<p>I explained the situation quite frankly to them. I said: “I -am not going to take this step because I don’t wish to pay -you but because, in justice to both myself and you, I must -put myself in a position to make money. I have been thinking -of this solution off and on for over two years, but I -simply didn’t have the nerve to come out and say so frankly -to you. It would have been infinitely better for all of us if I -had. It all simmers down to this: I positively cannot be my -old self while I am harassed or upset by these debts. I have -decided to do now what I should have done a year ago. I -have no other reason than the one I have just given you.”</p> - -<p>What the first man said was to all intents and purposes -what all of them said. He spoke for his firm.</p> - -<p>“Livingston,” he said, “we understand. We realise your -position perfectly. I’ll tell you what we’ll do: we’ll just give -you a release. Have your lawyer prepare any kind of paper -you wish, and we’ll sign it.”</p> - -<p>That was in substance what all my big creditors said. That -is one side of Wall Street for you. It wasn’t merely careless -good nature or sportsmanship. It was also a mighty intelligent -decision, for it was clearly good business. I appreciated -both the good will and the business gumption.</p> - -<p>These creditors gave me a release on debts amounting to -over a million dollars. But there were the two minor creditors -who wouldn’t sign off. One of them was the eight-hundred-dollar -man I told you about. I also owed sixty thousand -dollars to a brokerage firm which had gone into bankruptcy, -and the receivers, who didn’t know me from Adam, -were on my neck early and late. Even if they had been -disposed to follow the example set by my largest creditors -I don’t suppose the court would have let them sign off. At<span class="pagenum" id="Page_177">177</span> -all events my schedule of bankruptcy amounted to only -about one hundred thousand dollars; though, as I said, I -owed well over a million.</p> - -<p>It was extremely disagreeable to see the story in the newspapers. -I had always paid my debts in full and this new experience -was most mortifying to me. I knew I’d pay off -everybody some day if I lived, but everybody who read the -article wouldn’t know it. I was ashamed to go out after I saw -the report in the newspapers. But it all wore off presently -and I cannot tell you how intense was my feeling of relief to -know that I wasn’t going to be harried any more by people -who didn’t understand how a man must give his entire mind -to his business—if he wishes to succeed in stock speculation.</p> - -<p>My mind now being free to take up trading with some -prospect of success, unvexed by debts, the next step was to -get another stake. The Stock Exchange had been closed from -July thirty-first to the middle of December, 1914, and Wall -Street was in the dumps. There hadn’t been any business -whatever in a long time. I owed all my friends. I couldn’t -very well ask them to help me again just because they had -been so pleasant and friendly to me, when I knew that nobody -was in a position to do much for anybody.</p> - -<p>It was a mighty difficult task, getting a decent stake, for -with the closing of the Stock Exchange there was nothing -that I could ask any broker to do for me. I tried in a couple -of places. No use.</p> - -<p>Finally I went to see Dan Williamson. This was in February, -1915. I told him that I had rid myself of the mental -incubus of debt and I was ready to trade as of old. You will -recall that when he needed me he offered me the use of -twenty-five thousand dollars without my asking him.</p> - -<p>Now that I needed him he said, “When you see something -that looks good to you and you want to buy five hundred -shares go ahead and it will be all right.”</p> - -<p>I thanked him and went away. He had kept me from making -a great deal of money and the office had made a lot in<span class="pagenum" id="Page_178">178</span> -commissions from me. I admit I was a little sore to think that -Williamson & Brown didn’t give me a decent stake. I intended -to trade conservatively at first. It would make my -financial recovery easier and quicker if I could begin with a -line a little better than five hundred shares. But, anyhow, I -realised that, such as it was, there was my chance to come -back.</p> - -<p>I left Dan Williamson’s office and studied the situation in -general and my own problem in particular. It was a bull -market. That was as plain to me as it was to thousands of -traders. But my stake consisted merely of an offer to carry -five hundred shares for me. That is, I had no leeway, limited -as I was. I couldn’t afford even a slight setback at the beginning. -I must build up my stake with my very first play. That -initial purchase of mine of five hundred shares must be -profitable. I had to make real money. I knew unless I had -sufficient trading capital I would not be able to use good -judgment. Without adequate margins it would be impossible -to take the cold-blooded, dispassionate attitude toward the -game that comes from the ability to afford a few minor losses -such as I often incurred in testing the market before putting -down the big bet.</p> - -<p>I think now that I found myself then at the most critical -period of my career as a speculator. If I failed this time there -was no telling where or when, if ever, I might get another -stake for another try. It was very clear that I simply must -wait for the exact psychological moment.</p> - -<p>I didn’t go near Williamson & Brown’s. I mean, I purposely -kept away from them for six long weeks of steady -tape reading. I was afraid that if I went to the office, knowing -that I could buy five hundred shares, I might be tempted -into trading at the wrong time or in the wrong stock. A -trader, in addition to studying basic conditions, remembering -market precedents and keeping in mind the psychology -of the outside public as well as the limitations of his brokers, -must also know himself and provide against his own weaknesses.<span class="pagenum" id="Page_179">179</span> -There is no need to feel anger over being human. I -have come to feel that it is as necessary to know how to read -myself as to know how to read the tape. I have studied and -reckoned on my own reactions to given impulses or to the -inevitable temptations of an active market, quite in the same -mood and spirit as I have considered crop conditions or -analysed reports of earnings.</p> - -<p>So day after day, broke and anxious to resume trading, I -sat in front of a quotation-board in another broker’s office -where I couldn’t buy or sell as much as one share of stock, -studying the market, not missing a single transaction on the -tape, watching for the psychological moment to ring the -full-speed-ahead bell.</p> - -<p>By reason of conditions known to the whole world the -stock I was most bullish on in those critical days of early -1915 was Bethlehem Steel. I was morally certain it was going -way up, but in order to make sure that I would win on -my very first play, as I must, I decided to wait until it -crossed par.</p> - -<p>I think I have told you it has been my experience that -<em>whenever a stock crosses 100 or 200 or 300 for the first time, -it nearly always keeps going up for 30 to 50 points—and after -300 faster than after 100 or 200</em>. One of my first big coups -was in Anaconda, which I bought when it crossed 200 and -sold a day later at 260. My practice of buying a stock just -after it crossed par dated back to my early bucket-shop days. -It is an old trading principle.</p> - -<p>You can imagine how keen I was to get back to trading on -my old scale. I was so eager to begin that I could not think -of anything else; but I held myself in leash. I saw Bethlehem -Steel climb, every day, higher and higher, as I was sure -it would, and yet there I was checking my impulse to run -over to Williamson & Brown’s office and buy five hundred -shares. I knew I simply had to make my initial operation as -nearly a cinch as was humanly possible.</p> - -<p>Every point that stock went up meant five hundred dollars<span class="pagenum" id="Page_180">180</span> -I had not made. The first ten points’ advance meant that I -would have been able to pyramid, and instead of five hundred -shares I might now be carrying one thousand shares -that would be earning for me one thousand dollars a point. -But I sat tight and instead of listening to my loud-mouthed -hopes or to my clamorous beliefs I heeded only the level -voice of my experience and the counsel of common sense. -Once I got a decent stake together I could afford to take -chances. But without a stake, taking chances, even slight -chances, was a luxury utterly beyond my reach. Six weeks -of patience—but, in the end, a victory for common sense -over greed and hope!</p> - -<p>I really began to waver and sweat blood when the stock -got up to 90. Think of what I had not made by not buying, -when I was so bullish. Well, when it got to 98 I said to myself, -“Bethlehem is going through 100, and when it does the -roof is going to blow clean off!” The tape said the same thing -more than plainly. In fact, it used a megaphone. I tell you, -I saw <em>100</em> on the tape when the ticker was only printing <em>98</em>. -And I knew that wasn’t the voice of my hope or the sight of -my desire, but the assertion of my tape-reading instinct. So -I said to myself, “I can’t wait until it gets through 100. I -have to get it now. It is as good as gone through par.”</p> - -<p>I rushed to Williamson & Brown’s office and put in an -order to buy five hundred shares of Bethlehem Steel. The -market was then 98. I got five hundred shares at 98 to 99. -After that she shot right up, and closed that night, I think, at -114 or 115. I bought five hundred shares more.</p> - -<p>The next day Bethlehem Steel was 145 and I had my -stake. But I earned it. Those six weeks of waiting for the -right moment were the most strenuous and wearing six -weeks I ever put in. But it paid me, for I now had enough -capital to trade in fair-sized lots. I never would have got -anywhere just on five hundred shares of stock.</p> - -<p>There is a great deal in starting right, whatever the enterprise -may be, and I did very well after my Bethlehem deal—so<span class="pagenum" id="Page_181">181</span> -well, indeed, that you would not have believed it was the -selfsame man trading. As a matter of fact I wasn’t the same -man, for where I had been harassed and wrong I was now at -ease and right. There were no creditors to annoy and no lack -of funds to interfere with my thinking or with my listening -to the truthful voice of experience, and so I was winning -right along.</p> - -<p>All of a sudden, as I was on my way to a sure fortune, we -had the <i>Lusitania</i> break. Every once in a while a man gets a -crack like that in the solar plexus, probably that he may be -reminded of the sad fact that no human being can be so uniformly -right on the market as to be beyond the reach of unprofitable -accidents. I have heard people say that no professional -speculator need have been hit very hard by the news -of the torpedoing of the <i>Lusitania</i>, and they go on to tell -how they had it long before the Street did. I was not clever -enough to escape by means of advance information, and all -I can tell you is that on account of what I lost through the -<i>Lusitania</i> break and one or two other reverses that I wasn’t -wise enough to foresee, I found myself at the end of 1915 -with a balance at my brokers’ of about one hundred and -forty thousand dollars. That was all I actually made, though -I was consistently right on the market throughout the -greater part of the year.</p> - -<p>I did much better during the following year. I was very -lucky. I was rampantly bullish in a wild bull market. Things -were certainly coming my way so that there wasn’t anything -to do but to make money. It made me remember a saying of -the late H. H. Rogers, of the Standard Oil Company, to the -effect that there were times when a man could no more help -making money than he could help getting wet if he went out -in a rainstorm without an umbrella. It was the most clearly -defined bull market we ever had. It was plain to everybody -that the Allied purchases of all kinds of supplies here made -the United States the most prosperous nation in the world. -We had all the things that no one else had for sale, and we<span class="pagenum" id="Page_182">182</span> -were fast getting all the cash in the world. I mean that -the wide world’s gold was pouring into this country in torrents. -Inflation was inevitable, and, of course, that meant -rising prices for everything.</p> - -<p>All this was so evident from the first that little or no -manipulation for the rise was needed. That was the reason -why the preliminary work was so much less than in other -bull markets. And not only was the war-bride boom more -naturally developed than all others but it proved unprecedentedly -profitable for the general public. That is, the stock-market -winnings during 1915 were more widely distributed -than in any other boom in the history of Wall Street. That -the public did not turn all their paper profits into good hard -cash or that they did not long keep what profits they actually -took was merely history repeating itself. Nowhere does -history indulge in repetitions so often or so uniformly as in -Wall Street. When you read contemporary accounts of -booms or panics the one thing that strikes you most forcibly -is how little either stock speculation or stock speculators to-day -differ from yesterday. The game does not change and -neither does human nature.</p> - -<p>I went along with the rise in 1916. I was as bullish as the -next man, but of course I kept my eyes open. I knew, as -everybody did, that there must be an end, and I was on the -watch for warning signals. I wasn’t particularly interested -in guessing from which quarter the tip would come and so -I didn’t stare at just one spot. I was not, and I never have -felt that I was, wedded indissolubly to one or the other side -of the market. That a bull market has added to my bank -account or a bear market has been particularly generous I -do not consider sufficient reason for sticking to the bull or -the bear side after I receive the get-out warning. <em>A man does -not swear eternal allegiance to either the bull or the bear -side. His concern lies with being right.</em></p> - -<p><em>And there is another thing to remember, and that is that -a market does not culminate in one grand blaze of glory.<span class="pagenum" id="Page_183">183</span> -Neither does it end with a sudden reversal of form. A market -can and does often cease to be a bull market long before -prices generally begin to break.</em> My long expected warning -came to me when I noticed that, one after another, <em>those -stocks which had been the leaders of the market reacted -several points from the top and—for the first time in many -months—did not come back</em>. Their race evidently was run, -and that clearly necessitated a change in my trading tactics.</p> - -<p>It was simple enough. In a bull market the trend of prices, -of course, is decidedly and definitely upward. Therefore -whenever a stock goes against the general trend you are justified -in assuming that there is something wrong with that -particular stock. It is enough for the experienced trader to -perceive that something is wrong. He must not expect the -tape to become a lecturer. His job is to listen for it to say -“Get out!” and not wait for it to submit a legal brief for approval.</p> - -<p>As I said before, <em>I noticed that stocks which had been the -leaders of the wonderful advance had ceased to advance. -They dropped six or seven points and stayed there. At the -same time the rest of the market kept on advancing under -new standard bearers.</em> Since nothing wrong had developed -with the companies themselves, the reason had to be sought -elsewhere. Those stocks had gone with the current for -months. When they ceased to do so, though the bull tide -was still running strong, it meant that for those particular -stocks the bull market was over. For the rest of the list the -tendency was still decidedly upward.</p> - -<p>There was no need to be perplexed into inactivity, for -there were really no cross currents. I did not turn bearish on -the market then, because the tape didn’t tell me to do so. -The end of the bull market had not come, though it was -within hailing distance. Pending its arrival there was still -bull money to be made. <em>Such being the case, I merely turned -bearish on the stocks which had stopped advancing and as<span class="pagenum" id="Page_184">184</span> -the rest of the market had rising power behind it I both -bought and sold.</em></p> - -<p>The leaders that had ceased to lead I sold. I put out a -short line of five thousand shares in each of them; and then -I went long of the new leaders. The stocks I was short of -didn’t do much, but my long stocks kept on rising. When -finally these in turn ceased to advance I sold them out and -went short—five thousand shares of each. By this time I was -more bearish than bullish, because obviously the next big -money was going to be made on the down side. While I felt -certain that the bear market had really begun before the -bull market had really ended, I knew the time for being a -rampant bear was not yet. There was no sense in being more -royalist than the king; especially in being so too soon. The -tape merely said that patrolling parties from the main bear -army had dashed by. Time to get ready.</p> - -<p>I kept on both buying and selling until after about a -month’s trading I had out a short line of sixty thousand -shares—five thousand shares each in a dozen different stocks -which earlier in the year had been the public’s favourites because -they had been the leaders of the great bull market. It -was not a very heavy line; but don’t forget that neither was -the market definitely bearish.</p> - -<p>Then one day the entire market became quite weak and -prices of all stocks began to fall. When I had a profit of at -least four points in each and every one of the twelve stocks -that I was short of, I knew that I was right. The tape told -me it was now safe to be bearish, so I promptly doubled up.</p> - -<p>I had my position. I was short of stocks in a market that -now was plainly a bear market. There wasn’t any need for -me to push things along. The market was bound to go my -way, and, knowing that, I could afford to wait. After I -doubled up I didn’t make another trade for a long time. -About seven weeks after I put out my full line, we had the -famous “leak,” and stocks broke badly. It was said that -somebody had advance news from Washington that President<span class="pagenum" id="Page_185">185</span> -Wilson was going to issue a message that would bring -back the dove of peace to Europe in a hurry. Of course the -war-bride boom was started and kept up by the World War, -and peace was a bear item. When one of the cleverest -traders on the floor was accused of profiting by advance -information he simply said he had sold stocks not on any -news but because he considered that the bull market was -overripe. I myself had doubled my line of shorts seven -weeks before.</p> - -<p>On the news the market broke badly and I naturally -covered. It was the only play possible. <em>When something -happens on which you did not count when you made your -plans it behooves you to utilise the opportunity that a kindly -fate offers you.</em> For one thing, on a bad break like that you -have a big market, one that you can turn around in, and that -is the time to turn your paper profits into real money. Even -in a bear market a man cannot always cover one hundred -and twenty thousand shares of stock without putting up the -price on himself. He must wait for the market that will allow -him to buy that much at no damage to his profit as it stands -him on paper.</p> - -<p>I should like to point out that I was not counting on that -particular break at that particular time for that particular -reason. But, as I have told you before, my experience of -thirty years as a trader is that such <em>accidents are usually -along the line of least resistance on</em> which I base my position -in the market. Another thing to bear in mind is this: <em>Never -try to sell at the top.</em> It isn’t wise. <em>Sell after a reaction if -there is no rally.</em></p> - -<p>I cleared about three million dollars in 1916 by being -bullish as long as the bull market lasted and then by being -bearish when the bear market started. As I said before, a -man does not have to marry one side of the market till death -do them part.</p> - -<p>That winter I went South, to Palm Beach, as I usually do -for a vacation, because I am very fond of salt-water fishing.<span class="pagenum" id="Page_186">186</span> -I was short of stocks and wheat, and both lines showed me -a handsome profit. There wasn’t anything to annoy me and -I was having a good time. Of course unless I go to Europe -I cannot really be out of touch with the stock or commodities -markets. For instance, in the Adirondacks I have -a direct wire from my broker’s office to my house.</p> - -<p>In Palm Beach I used to go to my broker’s branch office -regularly. I noticed that cotton, in which I had no interest, -was strong and rising. About that time—this was in 1917—I -heard a great deal about the efforts that President Wilson -was making to bring about peace. The reports came from -Washington, both in the shape of press dispatches and -private advice to friends in Palm Beach. That is the reason -why one day I got the notion that the course of the various -markets reflected confidence in Mr. Wilson’s success. With -peace supposedly close at hand, stocks and wheat ought to -go down and cotton up. I was all set as far as stocks and -wheat went, but I had not done anything in cotton in some -time.</p> - -<p>At 2:20 that afternoon I did not own a single bale, but at -2:25 my belief that peace was impending made me buy -fifteen thousand bales as a starter. I proposed to follow my -old system of trading—that is, of buying my full line—which -I have already described to you.</p> - -<p>That very afternoon, after the market closed, we got the -Unrestricted Warfare note. There wasn’t anything to do except -to wait for the market to open the next day. I recall -that at Gridley’s that night one of the greatest captains of -industry in the country was offering to sell any amount of -United States Steel at five points below the closing price -that afternoon. There were several Pittsburgh millionaires -within hearing. Nobody took the big man’s offer. They knew -there was bound to be a whopping big break at the opening.</p> - -<p>Sure enough, the next morning the stock and commodity -markets were in an uproar, as you can imagine. Some stocks -opened eight points below the previous night’s close. To me<span class="pagenum" id="Page_187">187</span> -that meant a heaven-sent opportunity to cover all my shorts -profitably. As I said before, <em>in a bear market it is always -wise to cover if complete demoralisation suddenly develops</em>. -That is the only way, if you swing a good-sized line, of turning -a big paper profit into real money both quickly and -without regrettable reductions. For instance, I was short -fifty thousand shares of United States Steel alone. Of course -I was short of other stocks, and when I saw I had the market -to cover in, I did. My profits amounted to about one and a -half million dollars. It was not a chance to disregard.</p> - -<p>Cotton, of which I was long fifteen thousand bales, -bought in the last half hour of the trading the previous afternoon, -opened down five hundred points. Some break! It -meant an overnight loss of three hundred and seventy-five -thousand dollars. While it was perfectly clear that the only -wise play in stocks and wheat was to cover on the break I -was not so clear as to what I ought to do in cotton. There -were various things to consider, and while I always take my -loss the moment I am convinced I am wrong, I did not like -to take that loss that morning. Then I reflected that I had -gone South to have a good time fishing instead of perplexing -myself over the course of the cotton market. And, moreover, -I had taken such big profits in my wheat and in stocks -that I decided to take my loss in cotton. I would figure that -my profit had been a little more than one million instead of -over a million and a half. It was all a matter of bookkeeping, -as promoters are apt to tell you when you ask too many -questions.</p> - -<p>If I hadn’t bought that cotton just before the market -closed the day before, I would have saved that four hundred -thousand dollars. It shows you how quickly a man may lose -big money on a moderate line. My main position was absolutely -correct and I benefited by an accident of a nature -diametrically opposite to the considerations that led me to -take the position I did in stocks and wheat. Observe, please, -that the speculative line of least resistance again demonstrated<span class="pagenum" id="Page_188">188</span> -its value to a trader. Prices went as I expected, notwithstanding -the unexpected market factor introduced by -the German note. If things had turned out as I had figured -I would have been 100 per cent right in all three of my lines, -for with peace stocks and wheat would have gone down and -cotton would have gone kiting up. I would have cleaned up -in all three. Irrespective of peace or war, I was right in my -position on the stock market and in wheat and that is why -the unlooked-for event helped. In cotton I based my play -on something that might happen outside of the market—that -is, I bet on Mr. Wilson’s success in his peace negotiations. -It was the German military leaders who made me lose -the cotton bet.</p> - -<p>When I returned to New York early in 1917 I paid back -all the money I owed, which was over a million dollars. It -was a great pleasure to me to pay my debts. I might have -paid it back a few months earlier, but I didn’t for a very -simple reason. I was trading actively and successfully and I -needed all the capital I had. I owed it to myself as well as -to the men I considered my creditors to take every advantage -of the wonderful markets we had in 1915 and 1916. I -knew that I would make a great deal of money and I wasn’t -worrying because I was letting them wait a few months -longer for money many of them never expected to get back. -I did not wish to pay off my obligations in driblets or to one -man at a time, but in full to all at once. So as long as the -market was doing all it could for me I just kept on trading -on as big a scale as my resources permitted.</p> - -<p>I wished to pay interest, but all those creditors who had -signed releases positively refused to accept it. The man I -paid off the last of all was the chap I owed the eight -hundred dollars to, who had made my life a burden and had -upset me until I couldn’t trade. I let him wait until he heard -that I had paid off all the others. Then he got his money. I -wanted to teach him to be considerate the next time somebody -owed him a few hundreds.</p> - -<p><span class="pagenum" id="Page_189">189</span> -And that is how I came back.</p> - -<p>After I paid off my debts in full I put a pretty fair amount -into annuities. I made up my mind I wasn’t going to be -strapped and uncomfortable and minus a stake ever again. -Of course, after I married I put some money in trust for my -wife. And after the boy came I put some in trust for him.</p> - -<p>The reason I did this was not alone the fear that the stock -market might take it away from me, but because I knew that -a man will spend anything he can lay his hands on. By doing -what I did my wife and child are safe from me.</p> - -<p>More than one man I know has done the same thing, but -has coaxed his wife to sign off when he needed the money, -and he has lost it. But I have fixed it up so that no matter -what I want or what my wife wants, that trust holds. It is -absolutely safe from all attacks by either of us; safe from -my market needs; safe even from a devoted wife’s love. I’m -taking no chances!</p> - -<hr /> - -<p><span class="pagenum" id="Page_190">190</span></p> - -<div class="chapter"> -<h2 id="XV"><i>XV</i></h2> -</div> - -<p class="in0"><span class="firstword">Among the hazards</span> of speculation the happening of the -unexpected—I might even say of the unexpectable—ranks -high. <em>There are certain chances that the most prudent man -is justified in taking—chances that he must take if he wishes -to be more than a mercantile mollusk.</em> Normal business hazards -are no worse than the risks a man runs when he goes -out of his house into the street or sets out on a railroad journey. -When I lose money by reason of some development -which nobody could foresee I think no more vindictively of -it than I do of an inconveniently timed storm. Life itself -from the cradle to the grave is a gamble and what happens -to me because I do not possess the gift of second sight I can -bear undisturbed. But there have been times in my career -as a speculator when I have both been right and played -square and nevertheless I have been cheated out of my earnings -by the sordid unfairness of unsportsmanlike opponents.</p> - -<p>Against misdeeds by crooks, cowards and crowds a quick-thinking -or far-sighted businessman can protect himself. I -have never gone up against downright dishonesty except in -a bucket shop or two because even there honesty was the -best policy; the big money was in being square and not in -welshing. I have never thought it good business to play any -game in any place where it was necessary to keep an eye on -the dealer because he was likely to cheat if unwatched. But -against the whining welsher the decent man is powerless. -Fair play is fair play. I could tell you a dozen instances<span class="pagenum" id="Page_191">191</span> -where I have been the victim of my own belief in the -sacredness of the pledged word or of the inviolability of a -gentlemen’s agreement. I shall not do so because no useful -purpose can be served thereby.</p> - -<p>Fiction writers, clergymen and women are fond of alluding -to the floor of the Stock Exchange as a boodlers’ battlefield -and to Wall Street’s daily business as a fight. It is quite -dramatic but utterly misleading. I do not think that my -business is strife and contest. I never fight either individuals -or speculative cliques. I merely differ in opinion—that is, in -my reading of basic conditions. What playwrights call battles -of business are not fights between human beings. They -are merely tests of business vision. <em>I try to stick to facts and -facts only, and govern my actions accordingly. That is Bernard -M. Baruch’s recipe for success in wealth-winning.</em> -Sometimes I do not see the facts—all the facts—clearly -enough or early enough; or else I do not reason logically. -Whenever any of these things happen I lose. I am wrong. -And it always costs me money to be wrong.</p> - -<p>No reasonable man objects to paying for his mistakes. -There are no preferred creditors in mistake-making and no -exceptions or exemptions. But I object to losing money when -I am right. I do not mean, either, those deals that have cost -me money because of sudden changes in the rules of some -particular exchange. I have in mind certain hazards of -speculation that from time to time remind a man that no -profit should be counted safe until it is deposited in your -bank to your credit.</p> - -<p>After the Great War broke out in Europe there began the -rise in the prices of commodities that was to be expected. It -was as easy to foresee that as to foresee war inflation. Of -course the general advance continued as the war prolonged -itself. As you may remember, I was busy “coming back” in -1915. The boom in stocks was there and it was my duty to -utilise it. My safest, easiest and quickest big play was in the -stock market, and I was lucky, as you know.</p> - -<p><span class="pagenum" id="Page_192">192</span> -By July, 1917, I not only had been able to pay off all my -debts but was quite a little to the good besides. This meant -that I now had the time, the money and the inclination to -consider trading in commodities as well as in stocks. For -many years I have made it my practice to study all the -markets. The advance in commodity prices over the pre-war -level ranged from 100 to 400 per cent. There was only one -exception, and that was coffee. Of course there was a reason -for this. The breaking out of the war meant the closing up -of European markets and huge cargoes were sent to this -country, which was the one big market. That led in time to -an enormous surplus of raw coffee here, and that, in turn, -kept the price low. Why, when I first began to consider its -speculative possibilities coffee was actually selling below -pre-war prices. If the reasons for this anomaly were plain, no -less plain was it that the active and increasingly efficient -operation by the German and Austrian submarines must -mean an appalling reduction in the number of ships available -for commercial purposes. This eventually in turn must -lead to dwindling imports of coffee. With reduced receipts -and an unchanged consumption the surplus stocks must be -absorbed, and when that happened the price of coffee must -do what the prices of all other commodities had done, which -was, go way up.</p> - -<p>It didn’t require a Sherlock Holmes to size up the situation. -Why everybody did not buy coffee I cannot tell you. -When I decided to buy it I did not consider it a speculation. -It was much more of an investment. I knew it would take -time to cash in, but I knew also that it was bound to yield a -good profit. That made it a conservative investment operation—a -banker’s act rather than a gambler’s play.</p> - -<p>I started my buying operations in the winter of 1917. I -took quite a lot of coffee. The market, however, did nothing -to speak of. It continued inactive and as for the price, it did -not go up as I had expected. The outcome of it all was that -I simply carried my line to no purpose for nine long months.<span class="pagenum" id="Page_193">193</span> -My contracts expired then and I sold out all my options. I -took a whopping big loss on that deal and yet I was sure my -views were sound. I had been clearly wrong in the matter of -time, but I was confident that coffee must advance as all -commodities had done, so that no sooner had I sold out my -line than I started in to buy again. I bought three times as -much coffee as I had so unprofitably carried during those -nine disappointing months. Of course I bought deferred -options—for as long a time as I could get.</p> - -<p>I was not so wrong now. As soon as I had taken on my -trebled line the market began to go up. People everywhere -seemed to realise all of a sudden what was bound to happen -in the coffee market. It began to look as if my investment -was going to return me a mighty good rate of interest.</p> - -<p>The sellers of the contracts I held were roasters, mostly -of German names and affiliations, who had bought the coffee -in Brazil confidently expecting to bring it to this country. -But there were no ships to bring it, and presently they found -themselves in the uncomfortable position of having no end -of coffee down there and being heavily short of it to me up -here.</p> - -<p>Please bear in mind that I first became bullish on coffee -while the price was practically at a pre-war level, and don’t -forget that after I bought it I carried it the greater part of -a year and then took a big loss on it. The punishment for -being wrong is to lose money. The reward for being right is -to make money. Being clearly right and carrying a big line, -I was justified in expecting to make a killing. It would not -take much of an advance to make my profit satisfactory to -me, for I was carrying several hundred thousand bags. I -don’t like to talk about my operations in figures because -sometimes they sound rather formidable and people might -think I was boasting. As a matter of fact I trade in accordance -to my means and always leave myself an ample margin -of safety. In this instance I was conservative enough. The -reason I bought options so freely was because I couldn’t see<span class="pagenum" id="Page_194">194</span> -how I could lose. Conditions were in my favour. I had been -made to wait a year, but now I was going to be paid both -for my waiting and for being right. I could see the profit -coming—fast. There wasn’t any cleverness about it. It was -simply that I wasn’t blind.</p> - -<p>Coming sure and fast, that profit of millions! But it never -reached me. No; it wasn’t side-tracked by a sudden change -in conditions. The market did not experience an abrupt reversal -of form. Coffee did not pour into the country. What -happened? The unexpectable! What had never happened in -anybody’s experience; what I therefore had no reason to -guard against. I added a new one to the long list of hazards -of speculation that I must always keep before me. It was -simply that the fellows who had sold me the coffee, the -shorts, knew what was in store for them, and in their efforts -to squirm out of the position into which they had sold themselves, -devised a new way of welshing. They rushed to -Washington for help, and got it.</p> - -<p>Perhaps you remember that the Government had evolved -various plans for preventing further profiteering in necessities. -You know how most of them worked. Well, the philanthropic -coffee shorts appeared before the Price Fixing -Committee of the War Industries Board—I think that was -the official designation—and made a patriotic appeal to that -body to protect the American breakfaster. They asserted -that a professional speculator, one Lawrence Livingston, -had cornered, or was about to corner, coffee. If his speculative -plans were not brought to naught he would take -advantage of the conditions created by the war and the -American people would be forced to pay exorbitant prices -for their daily coffee. It was unthinkable to the patriots who -had sold me cargoes of coffee they couldn’t find ships for, -that one hundred millions of Americans, more or less, should -pay tribute to conscienceless speculators. They represented -the coffee trade, not the coffee gamblers, and they were<span class="pagenum" id="Page_195">195</span> -willing to help the Government curb profiteering actual or -prospective.</p> - -<p>Now I have a horror of whiners and I do not mean to intimate -that the Price Fixing Committee was not doing its -honest best to curb profiteering and wastefulness. But that -need not stop me from expressing the opinion that the committee -could not have gone very deeply into the particular -problem of the coffee market. They fixed on a maximum -price for raw coffee and also fixed a time limit for closing out -all existing contracts. This decision meant, of course, that -the Coffee Exchange would have to go out of business. -There was only one thing for me to do and I did it, and that -was to sell out my contracts. Those profits of millions that I -had deemed as certain to come my way as any I ever made -failed completely to materialise. I was and am as keen as -anybody against the profiteer in the necessaries of life, but -at the time the Price Fixing Committee made their ruling on -coffee, all other commodities were selling at from 250 to 400 -per cent above pre-war prices while raw coffee was actually -below the average prevailing for some years before the war. -I can’t see that it made any real difference who held the -coffee. The price was bound to advance; and the reason for -that was not the operations of conscienceless speculators, -but the dwindling surplus for which the diminishing importations -were responsible, and they in turn were affected -exclusively by the appalling destruction of the world’s ships -by the German submarines. The committee did not wait for -coffee to start; they clamped on the brakes.</p> - -<p>As a matter of policy and of expediency it was a mistake -to force the Coffee Exchange to close just then. If the committee -had let coffee alone the price undoubtedly would -have risen for the reasons I have already stated, which had -nothing to do with any alleged corner. But the high price—which -need not have been exorbitant—would have been an -incentive to attract supplies to this market. I have heard Mr. -Bernard M. Baruch say that the War Industries Board took<span class="pagenum" id="Page_196">196</span> -into consideration this factor—the insuring of a supply—in -fixing prices, and for that reason some of the complaints -about the high limit on certain commodities were unjust. -When the Coffee Exchange resumed business, later on, -coffee sold at twenty-three cents. The American people paid -that price because of the small supply, and the supply was -small because the price had been fixed too low, at the suggestion -of philanthropic shorts, to make it possible to pay the -high ocean freights and thus insure continued importations.</p> - -<p>I have always thought that my coffee deal was the most -legitimate of all my trades in commodities. I considered it -more of an investment than a speculation. I was in it over a -year. If there was any gambling it was done by the patriotic -roasters with German names and ancestry. They had coffee -in Brazil and they sold it to me in New York. The Price Fixing -Committee fixed the price of the only commodity that -had not advanced. They protected the public against profiteering -before it started, but not against the inevitable -higher prices that followed. Not only that, but even when -green coffee hung around nine cents a pound, roasted coffee -went up with everything else. It was only the roasters who -benefited. If the price of green coffee had gone up two or -three cents a pound it would have meant several millions for -me. And it wouldn’t have cost the public as much as the -later advance did.</p> - -<p>Post-mortems in speculation are a waste of time. They -get you nowhere. But this particular deal has a certain educational -value. It was as pretty as any I ever went into. The -rise was so sure, so logical, that I figured that I simply -couldn’t help making several millions of dollars. But I didn’t.</p> - -<p>On two other occasions I have suffered from the action of -exchange committees making rulings that changed trading -rules without warning. But in those cases my own position, -while technically right, was not quite so sound commercially -as in my coffee trade. You cannot be dead sure of anything -in a speculative operation. It was the experience I have just<span class="pagenum" id="Page_197">197</span> -told you that made me add the unexpectable to the unexpected -in my list of hazards.</p> - -<p>After the coffee episode I was so successful in other commodities -and on the short side of the stock market, that I -began to suffer from silly gossip. The professionals in Wall -Street and the newspaper writers got the habit of blaming -me and my alleged raids for the inevitable breaks in prices. -At times my selling was called unpatriotic—whether I was -really selling or not. The reason for exaggerating the magnitude -and the effect of my operations, I suppose, was the -need to satisfy the public’s insatiable demand for reasons -for each and every price movement.</p> - -<p>As I have said a thousand times, no manipulation can put -stocks down and keep them down. There is nothing mysterious -about this. The reason is plain to everybody who will -take the trouble to think about it half a minute. Suppose an -operator raided a stock—that is, put the price down to a -level below its real value—what would inevitably happen? -Why, the raider would at once be up against the best kind -of inside buying. The people who know what a stock is -worth will always buy it when it is selling at bargain prices. -<em>If the insiders are not able to buy, it will be because general -conditions are against their free command of their own resources, -and such conditions are not bull conditions.</em> When -people speak about raids the inference is that the raids are -unjustified; almost criminal. But selling a stock down to a -price much below what it is worth is mighty dangerous business. -It is well to bear in mind that a raided stock that fails -to rally is not getting much inside buying and where there -is a raid—that is, unjustified short selling—there is usually -apt to be inside buying; and when there is that, the price -does not stay down. I should say that in ninety-nine cases -out of a hundred, so-called raids are really legitimate declines, -accelerated at times but not primarily caused by the operations -of a professional trader, however big a line he may be -able to swing.</p> - -<p><span class="pagenum" id="Page_198">198</span> -The theory that most of the sudden declines or particular -sharp breaks are the results of some plunger’s operations -probably was invented as an easy way of supplying reasons -to those speculators who, being nothing but blind gamblers, -will believe anything that is told them rather than do a little -thinking. The raid excuse for losses that unfortunate speculators -so often receive from brokers and financial gossipers -is really an inverted tip. The difference lies in this: A bear -tip is distinct, positive advice to sell short. But the inverted -tip—that is, the explanation that does not explain—serves -merely to keep you from wisely selling short. <em>The natural -tendency when a stock breaks badly is to sell it. There is a -reason—an unknown reason but a good reason; therefore, -get out.</em> But it is not wise to get out when the break is the -result of a raid by an operator, because the moment he stops -the price must rebound. Inverted tips!</p> - -<hr /> - -<p><span class="pagenum" id="Page_199">199</span></p> - -<div class="chapter"> -<h2 id="XVI"><i>XVI</i></h2> -</div> - -<p class="in0"><span class="firstword">Tips!</span> How people want tips! They crave not only to get -them but to give them. There is greed involved, and vanity. -It is very amusing, at times, to watch really intelligent -people fish for them. And the tip-giver need not hesitate -about the quality, for the tip-seeker is not really after good -tips, but after any tip. If it makes good, fine! If it doesn’t, -better luck with the next. I am thinking of the average -customer of the average commission house. There is a type -of promoter or manipulator that believes in tips first, last -and all the time. A good flow of tips is considered by him as -a sort of sublimated publicity work, the best merchandising -dope in the world, for, since tip-seekers and tip-takers are -invariably tip-passers, tip-broadcasting becomes a sort of -endless-chain advertising. The tipster-promoter labours under -the delusion that no human being breathes who can -resist a tip if properly delivered. He studies the art of handing -them out artistically.</p> - -<p>I get tips by the hundreds every day from all sorts of -people. I’ll tell you a story about Borneo Tin. You remember -when the stock was brought out? It was at the height of the -boom. The promoter’s pool had taken the advice of a very -clever banker and decided to float the new company in the -open market at once instead of letting an underwriting syndicate -take its time about it. It was good advice. The only -mistake the members of the pool made came from inexperience. -They did not know what the stock market was capable<span class="pagenum" id="Page_200">200</span> -of doing during a crazy boom and at the same time they -were not intelligently liberal. They were agreed on the need -of marking up the price in order to market the stock, but -they started the trading at a figure at which the traders and -the speculative pioneers could not buy it without misgivings.</p> - -<p>By rights the promoters ought to have got stuck with it, -but in the wild bull market their hoggishness turned out to -be rank conservatism. The public was buying anything that -was adequately tipped. Investments were not wanted. The -demand was for easy money; for the sure gambling profit. -Gold was pouring into this country through the huge purchases -of war material. They tell me that the promoters, -while making their plans for bringing out Borneo stock, -marked up the opening price three different times before -their first transaction was officially recorded for the benefit -of the public.</p> - -<p>I had been approached to join the pool and I had looked -into it but I didn’t accept the offer because if there is any -market manoeuvring to do, I like to do it myself. I trade on -my own information and follow my own methods. When -Borneo Tin was brought out, knowing what the pool’s resources -were and what they had planned to do, and also -knowing what the public was capable of, I bought ten thousand -shares during the first hour of the first day. Its market -début was successful at least to that extent. As a matter of -fact the promoters found the demand so active that they -decided it would be a mistake to lose so much stock so soon. -They found out that I had acquired my ten thousand shares -about at the same time that they found out that they would -probably be able to sell every share they owned if they -merely marked up the price twenty-five or thirty points. -They therefore concluded that the profit on my ten thousand -shares would take too big a chunk out of the millions -they felt were already as good as banked. So they actually -ceased their bull operations and tried to shake me out. But -I simply sat tight. They gave me up as a bad job because<span class="pagenum" id="Page_201">201</span> -they didn’t want the market to get away from them, and -then they began to put up the price, without losing any -more stock than they could help.</p> - -<p>They saw the crazy height that other stocks rose to and -they began to think in billions. Well, when Borneo Tin got -up to 120 I let them have my ten thousand shares. It -checked the rise and the pool managers let up on their jacking-up -process. On the next general rally they again tried to -make an active market for it and disposed of quite a little, -but the merchandising proved to be rather expensive. Finally -they marked it up to 150. But the bloom was off the -bull market for keeps, so the pool was compelled to market -what stock it could on the way down to those people who -love to buy after a good reaction, on the fallacy that a stock -that has once sold at 150 must be cheap at 130 and a great -bargain at 120. Also, they passed the tip to the floor traders, -who often are able to make a temporary market, and later -to the commission houses. Every little helped and the pool -was using every device known. The trouble was that the -time for bulling stocks had passed. The suckers had -swallowed other hooks. The Borneo bunch didn’t or -wouldn’t see it.</p> - -<p>I was down in Palm Beach with my wife. One day I made -a little money at Gridley’s and when I got home I gave Mrs. -Livingston a five-hundred-dollar bill out of it. It was a curious -coincidence, but that same night she met at a dinner the -president of the Borneo Tin Company, a Mr. Wisenstein, -who had become the manager of the stock pool. We didn’t -learn until some time afterward that this Wisenstein deliberately -manœuvred so that he sat next to Mrs. Livingston -at dinner.</p> - -<p>He laid himself out to be particularly nice to her and -talked most entertainingly. In the end he told her, very confidentially, -“Mrs. Livingston, I’m going to do something I’ve -never done before. I am very glad to do it because you know -exactly what it means.” He stopped and looked at Mrs.<span class="pagenum" id="Page_202">202</span> -Livingston anxiously, to make sure she was not only wise -but discreet. She could read it on his face, plain as print. -But all she said was, “Yes.”</p> - -<p>“Yes, Mrs. Livingston. It has been a very great pleasure -to meet you and your husband, and I want to prove that I -am sincere in saying this because I hope to see a great deal -of both of you. I am sure I don’t have to tell you that what I -am going to say is strictly confidential!” Then he whispered, -“If you will buy some Borneo Tin you will make a great -deal of money.”</p> - -<p>“Do you think so?” she asked.</p> - -<p>“Just before I left the hotel,” he said, “I received some -cables with news that won’t be known to the public for -several days at least. I am going to gather in as much of the -stock as I can. If you get some at the opening to-morrow -you will be buying it at the same time and at the same price -as I. I give you my word that Borneo Tin will surely advance. -You are the only person that I have told this to. -Absolutely the only one!”</p> - -<p>She thanked him and then she told him that she didn’t -know anything about speculating in stocks. But he assured -her it wasn’t necessary for her to know any more than he -had told her. To make sure she heard it correctly he repeated -his advice to her:</p> - -<p>“All you have to do is to buy as much Borneo Tin as you -wish. I can give you my word that if you do you will not -lose a cent. I’ve never before told a woman—or a man, for -that matter—to buy anything in my life. But I am so sure -the stock won’t stop this side of 200 that I’d like you to make -some money. I can’t buy all the stock myself, you know, and -if somebody besides myself is going to benefit by the rise I’d -rather it was you than some stranger. Much rather! I’ve told -you in confidence because I know you won’t talk about it. -Take my word for it, Mrs. Livingston, and buy Borneo Tin!”</p> - -<p>He was very earnest about it and succeeded in so impressing -her that she began to think she had found an excellent<span class="pagenum" id="Page_203">203</span> -use for the five hundred dollars I had given her that afternoon. -That money hadn’t cost me anything and was outside -of her allowance. In other words, it was easy money to lose -if the luck went against her. But he had said she would -surely win. It would be nice to make money on her own -hook—and tell me all about it afterwards.</p> - -<p>Well, sir, the very next morning before the market opened -she went into Harding’s office and said to the manager:</p> - -<p>“Mr. Haley, I want to buy some stock, but I don’t want it -to go in my regular account because I don’t wish my husband -to know anything about it until I’ve made some money. -Can you fix it for me?”</p> - -<p>Haley, the manager, said, “Oh, yes. We can make it a -special account. What’s the stock and how much of it do -you want to buy?”</p> - -<p>She gave him the five hundred dollars and told him, -“Listen, please. I do not wish to lose more than this money. -If that goes I don’t want to owe you anything; and remember, -I don’t want Mr. Livingston to know anything about -this. Buy me as much Borneo Tin as you can for the money, -at the opening.”</p> - -<p>Haley took the money and told her he’d never say a word -to a soul, and bought her a hundred shares at the opening. I -think she got it at 108. The stock was very active that day -and closed at an advance of three points. Mrs. Livingston -was so delighted with her exploit that it was all she could -do to keep from telling me all about it.</p> - -<p>It so happened that I had been getting more and more -bearish on the general market. The unusual activity in -Borneo Tin drew my attention to it. I didn’t think the time -was right for any stock to advance, much less one like that. -I had decided to begin my bear operations that very day, -and I started by selling about ten thousand shares of Borneo. -If I had not I rather think the stock would have gone up -five or six points instead of three.</p> - -<p>On the very next day I sold two thousand shares at the<span class="pagenum" id="Page_204">204</span> -opening and two thousand shares just before the close, and -the stock broke to 102.</p> - -<p>Haley, the manager of Harding Brothers’ Palm Beach -Branch, was waiting for Mrs. Livingston to call there on the -third morning. She usually strolled in about eleven to see -how things were, if I was doing anything.</p> - -<p>Haley took her aside and said, “Mrs. Livingston, if you -want me to carry that hundred shares of Borneo Tin for you -you will have to give me more margin.”</p> - -<p>“But I haven’t any more,” she told him.</p> - -<p>“I can transfer it to your regular account,” he said.</p> - -<p>“No,” she objected, “because that way L.L. would learn -about it.”</p> - -<p>“But the account already shows a loss of—” he began.</p> - -<p>“But I told you distinctly I didn’t want to lose more than -the five hundred dollars. I didn’t even want to lose that,” -she said.</p> - -<p>“I know, Mrs. Livingston, but I didn’t want to sell it without -consulting you, and now unless you authorise me to hold -it I’ll have to let it go.”</p> - -<p>“But it did so nicely the day I bought it,” she said, “that -I didn’t believe it would act this way so soon. Did you?”</p> - -<p>“No,” answered Haley, “I didn’t.” They have to be diplomatic -in brokers’ offices.</p> - -<p>“What’s gone wrong with it, Mr. Haley?”</p> - -<p>Haley knew, but he could not tell her without giving me -away, and a customer’s business is sacred. So he said, “I -don’t hear anything special about it, one way or the other. -There she goes! That’s low for the move!” and he pointed to -the quotation board.</p> - -<p>Mrs. Livingston gazed at the sinking stock and cried: “Oh, -Mr. Haley! I don’t want to lose my five hundred dollars! -What shall I do?”</p> - -<p>“I don’t know, Mrs. Livingston, but if I were you I’d ask -Mr. Livingston.”</p> - -<p>“Oh, no! He doesn’t want me to speculate on my own<span class="pagenum" id="Page_205">205</span> -hook. He told me so. He’ll buy or sell stock for me, if I -ask him, but I’ve never before done trading that he did not -know all about. I wouldn’t dare tell him.”</p> - -<p>“That’s all right,” said Haley soothingly. “He is a wonderful -trader and he’ll know just what to do.” Seeing her -shake her head violently he added devilishly: “Or else you -put up a thousand or two to take care of your Borneo.”</p> - -<p>The alternative decided her then and there. She hung -about the office, but as the market got weaker and weaker -she came over to where I sat watching the board and told -me she wanted to speak to me. We went into the private -office and she told me the whole story. So I just said to her: -“You foolish little girl, you keep your hands off this deal.”</p> - -<p>She promised that she would, and so I gave her back her -five hundred dollars and she went away happy. The stock -was par by that time.</p> - -<p>I saw what had happened. Wisenstein was an astute person. -He figured that Mrs. Livingston would tell me what he -had told her and I’d study the stock. He knew that activity -always attracted me and I was known to swing a pretty fair -line. I suppose he thought I’d buy ten or twenty thousand -shares.</p> - -<p>It was one of the most cleverly planned and artistically -propelled tips I’ve ever heard of. But it went wrong. It -had to. In the first place, the lady had that very day received -an unearned five hundred dollars and was therefore -in a much more venturesome mood than usual. She wished -to make some money all by herself, and womanlike dramatised -the temptation so attractively that it was irresistible. -She knew how I felt about stock speculation as practised by -outsiders, and she didn’t dare mention the matter to me. -Wisenstein didn’t size up her psychology right.</p> - -<p>He also was utterly wrong in his guess about the kind of -trader I was. I never take tips and I was bearish on the entire -market. The tactics that he thought would prove effective -in inducing me to buy Borneo—that is, the activity and<span class="pagenum" id="Page_206">206</span> -the three-point rise—were precisely what made me pick -Borneo as a starter when I decided to sell the entire market.</p> - -<p>After I heard Mrs. Livingston’s story I was keener than -ever to sell Borneo. Every morning at the opening and every -afternoon just before closing I let him have some stock regularly, -until I saw a chance to take in my shorts at a handsome -profit.</p> - -<p>It has always seemed to me the height of damfoolishness -to trade on tips. I suppose I am not built the way a tip-taker -is. I sometimes think that tip-takers are like drunkards. -There are some who can’t resist the craving and always look -forward to those jags which they consider indispensable to -their happiness. It is so easy to open your ears and let the -tip in. To be told precisely what to do to be happy in such -a manner that you can easily obey is the next nicest thing to -being happy—which is a mighty long first step toward the -fulfilment of your heart’s desire. It is not so much greed -made blind by eagerness as it is hope bandaged by the unwillingness -to do any thinking.</p> - -<p>And it is not only among the outside public that you find -inveterate tip-takers. The professional trader on the floor of -the New York Stock Exchange is quite as bad. I am definitely -aware that no end of them cherish mistaken notions -of me because I never give anybody tips. If I told the average -man, “Sell yourself five thousand Steel!” he would do it -on the spot. But if I tell him I am quite bearish on the entire -market and give him my reasons in detail, he finds trouble in -listening and after I’m done talking he will glare at me for -wasting his time expressing my views on general conditions -instead of giving him a direct and specific tip, like a real -philanthropist of the type that is so abundant in Wall Street—the -sort who loves to put millions into the pockets of -friends, acquaintances and utter strangers alike.</p> - -<p>The belief in miracles that all men cherish is born of immoderate -indulgence in hope. There are people who go on -hope sprees periodically and we all know the chronic hope<span class="pagenum" id="Page_207">207</span> -drunkard that is held up before us as an exemplary optimist. -Tip-takers are all they really are.</p> - -<p>I have an acquaintance, a member of the New York Stock -Exchange, who was one of those who thought I was a selfish, -cold-blooded pig because I never gave tips or put friends -into things. One day—this was some years ago—he was -talking to a newspaper man who casually mentioned that he -had had it from a good source that G.O.H. was going up. My -broker friend promptly bought a thousand shares and saw -the price decline so quickly that he was out thirty-five hundred -dollars before he could stop his loss. He met the newspaper -man a day or two later, while he was still sore.</p> - -<p>“That was a hell of a tip you gave me,” he complained.</p> - -<p>“What tip was that?” asked the reporter, who did not remember.</p> - -<p>“About G.O.H. You said you had it from a good source.”</p> - -<p>“So I did. A director of the company who is a member -of the finance committee told me.”</p> - -<p>“Which of them was it?” asked the broker vindictively.</p> - -<p>“If you must know,” answered the newspaper man, “it was -your own father-in-law, Mr. Westlake.”</p> - -<p>“Why in Hades didn’t you tell me you meant him!” yelled -the broker. “You cost me thirty-five hundred dollars!” He -didn’t believe in family tips. The farther away the source the -purer the tip.</p> - -<p>Old Westlake was a rich and successful banker and promoter. -He ran across John W. Gates one day. Gates asked -him what he knew. “If you will act on it I’ll give you a tip. -If you won’t I’ll save my breath,” answered old Westlake -grumpily.</p> - -<p>“Of course I’ll act on it,” promised Gates cheerfully.</p> - -<p>“Sell Reading! There is a sure twenty-five points in it, -and possibly more. But twenty-five absolutely certain,” said -Westlake impressively.</p> - -<p>“I’m much obliged to you,” and Bet-you-a-million Gates<span class="pagenum" id="Page_208">208</span> -shook hands warmly and went away in the direction of his -broker’s office.</p> - -<p>Westlake had specialized on Reading. He knew all about -the company and stood in with the insiders so that the market -for the stock was an open book to him and everybody -knew it. Now he was advising the Western plunger to go -short of it.</p> - -<p>Well, Reading never stopped going up. It rose something -like one hundred points in a few weeks. One day old Westlake -ran smack up against John W. in the Street, but he -made out he hadn’t seen him and was walking on. John W. -Gates caught up with him, his face all smiles and held out -his hand. Old Westlake shook it dazedly.</p> - -<p>“I want to thank you for that tip you gave me on Reading,” -said Gates.</p> - -<p>“I didn’t give you any tip,” said Westlake, frowning.</p> - -<p>“Sure you did. And it was a Jim Hickey of a tip too. I -made sixty thousand dollars.”</p> - -<p>“Made sixty thousand dollars?”</p> - -<p>“Sure! Don’t you remember? You told me to sell Reading; -so I bought it! I’ve always made money coppering your -tips, Westlake,” said John W. Gates pleasantly. “Always!”</p> - -<p>Old Westlake looked at the bluff Westerner and presently -remarked admiringly, “Gates, what a rich man I’d be if I had -your brains!”</p> - -<p>The other day I met Mr. W. A. Rogers, the famous cartoonist, -whose Wall Street drawings brokers so greatly admire. -His daily cartoons in the New York <i>Herald</i> for years -gave pleasure to thousands. Well, he told me a story. It was -just before we went to war with Spain. He was spending an -evening with a broker friend. When he left he picked up his -derby hat from the rack, at least he thought it was his hat, -for it was the same shape and fitted him perfectly.</p> - -<p>The Street at that time was thinking and talking of -nothing but war with Spain. Was there to be one or not? If -it was to be war the market would go down; not so much on<span class="pagenum" id="Page_209">209</span> -our own selling as on pressure from European holders of our -securities. If peace, it would be a cinch to buy stocks, as -there had been considerable declines prompted by the sensational -clamorings of the yellow papers. Mr. Rogers told me -the rest of the story as follows:</p> - -<p>“My friend, the broker, at whose house I had been the -night before, stood in the Exchange the next day anxiously -debating in his mind which side of the market to play. He -went over the pros and cons, but it was impossible to distinguish -which were rumors and which were facts. There -was no authentic news to guide him. At one moment he -thought war was inevitable, and on the next he almost convinced -himself that it was utterly unlikely. His perplexity -must have caused a rise in his temperature, for he took off -his derby to wipe his fevered brow. He couldn’t tell whether -he should buy or sell.</p> - -<p>“He happened to look inside of his hat. There in gold -letters was the word WAR. That was all the hunch he -needed. Was it not a tip from Providence via my hat? So he -sold a raft of stock, war was duly declared, he covered on -the break and made a killing.” And then W. A. Rogers finished, -“I never got back that hat!”</p> - -<p>But the prize tip story of my collection concerns one of -the most popular members of the New York Stock Exchange, -J. T. Hood. One day another floor trader, Bert Walker, told -him that he had done a good turn to a prominent director of -the Atlantic & Southern. In return the grateful insider told -him to buy all the A. & S. he could carry. The directors were -going to do something that would put the stock up at least -twenty-five points. All the directors were not in the deal, but -the majority would be sure to vote as wanted.</p> - -<p>Bert Walker concluded that the dividend rate was going -to be raised. He told his friend Hood and they each bought -a couple of thousand shares of A. & S. The stock was very -weak, before and after they bought, but Hood said that was<span class="pagenum" id="Page_210">210</span> -obviously intended to facilitate accumulation by the inside -clique, headed by Bert’s grateful friend.</p> - -<p>On the following Thursday, after the market closed, the -directors of the Atlantic & Southern met and passed the -dividend. The stock broke six points in the first six minutes -of trading Friday morning.</p> - -<p>Bert Walker was sore as a pup. He called on the grateful -director, who was broken-hearted about it and very penitent. -He said that he had forgotten that he had told Walker -to buy. That was the reason he had neglected to call him up -to tell him of a change in the plans of the dominant faction -in the board. The remorseful director was so anxious to -make up that he gave Bert another tip. He kindly explained -that a couple of his colleagues wanted to get cheap stock -and against his judgment resorted to coarse work. He had to -yield to win their votes. But now that they all had accumulated -their full lines there was nothing to stop the advance. -It was a double-riveted, lead-pipe cinch to buy A. & -S. now.</p> - -<p>Bert not only forgave him but shook hands warmly with -the high financier. Naturally he hastened to find his friend -and fellow-victim, Hood, to impart the glad tidings to him. -They were going to make a killing. The stock had been -tipped for a rise before and they bought. But now it was -fifteen points lower. That made it a cinch. So they bought -five thousand shares, joint account.</p> - -<p>As if they had rung a bell to start it, the stock broke badly -on what quite obviously was inside selling. Two specialists -cheerfully confirmed the suspicion. Hood sold out their five -thousand shares. When he got through Bert Walker said -to him, “If that blankety-blank blanker hadn’t gone to Florida -day before yesterday I’d lick the stuffing out of him. Yes, -I would. But you come with me.”</p> - -<p>“Where to?” asked Hood.</p> - -<p>“To the telegraph office. I want to send that skunk a telegram -that he’ll never forget. Come on.”</p> - -<p><span class="pagenum" id="Page_211">211</span> -Hood went on. Bert led the way to the telegraph office. -There, carried away by his feelings—they had taken quite a -loss on the five thousand shares—he composed a masterpiece -of vituperation. He read it to Hood and finished, “That -will come pretty near to showing him what I think of him.”</p> - -<p>He was about to slide it toward the waiting clerk when -Hood said, “Hold on, Bert!”</p> - -<p>“What’s the matter?”</p> - -<p>“I wouldn’t send it,” advised Hood earnestly.</p> - -<p>“Why not?” snapped Bert.</p> - -<p>“It will make him sore as the dickens.”</p> - -<p>“That’s what we want, isn’t it?” said Bert, looking at -Hood in surprise.</p> - -<p>But Hood shook his head disapprovingly and said in all -seriousness, “We’ll never get another tip from him if you -send that telegram!”</p> - -<p>A professional trader actually said that. Now what’s the -use of talking about sucker tip-takers? Men do not take tips -because they are bally asses but because they like those -hope cocktails I spoke of. Old Baron Rothschild’s recipe for -wealth winning applies with greater force than ever to -speculation. Somebody asked him if making money in the -Bourse was not a very difficult matter, and he replied that, -on the contrary, he thought it was very easy.</p> - -<p>“That is because you are so rich,” objected the interviewer.</p> - -<p>“Not at all. I have found an easy way and I stick to it. I -simply cannot help making money. I will tell you my secret -if you wish. It is this: <em>I never buy at the bottom and I -always sell too soon</em>.”</p> - -<p>Investors are a different breed of cats. Most of them go -in strong for inventories and statistics of earnings and all -sorts of mathematical data, as though that meant facts and -certainties. <em>The human factor is minimised as a rule.</em> Very -few people like to buy into a one-man business. But the -wisest investor I ever knew was a man who began by being<span class="pagenum" id="Page_212">212</span> -a Pennsylvania Dutchman and followed it up by coming to -Wall Street and seeing a great deal of Russell Sage.</p> - -<p>He was a great investigator, an indefatigable Missourian. -He believed in asking his own questions and in doing his -seeing with his own eyes. He had no use for another man’s -spectacles. This was years ago. It seems he held quite a -little Atchison. Presently he began to hear disquieting reports -about the company and its management. He was told -that Mr. Reinhart, the president, instead of being the marvel -he was credited with being, in reality was a most extravagant -manager whose recklessness was fast pushing the company -into a mess. There would be the deuce to pay on the inevitable -day of reckoning.</p> - -<p>This was precisely the kind of news that was as the breath -of life to the Pennsylvania Dutchman. He hurried over to -Boston to interview Mr. Reinhart and ask him a few questions. -The questions consisted of repeating the accusations -he had heard and then asking the president of the Atchison, -Topeka & Santa Fe Railroad if they were true.</p> - -<p>Mr. Reinhart not only denied the allegations emphatically -but said even more: He proceeded to prove by figures that -the allegators were malicious liars. The Pennsylvania Dutchman -had asked for exact information and the president gave -it to him, showing him what the company was doing and -how it stood financially, to a cent.</p> - -<p>The Pennsylvania Dutchman thanked President Reinhart, -returned to New York and promptly sold all his Atchison -holdings. A week or so later he used his idle funds to buy a -big lot of Delaware, Lackawanna & Western.</p> - -<p>Years afterward we were talking of lucky swaps and he -cited his own case. He explained what prompted him to -make it.</p> - -<p>“You see,” he said, “I noticed that President Reinhart, -when he wrote down figures, took sheets of letter paper from -a pigeonhole in his mahogany roll-top desk. It was fine heavy -linen paper with beautifully engraved letterheads in two<span class="pagenum" id="Page_213">213</span> -colors. It was not only very expensive but worse—it was unnecessarily -expensive. He would write a few figures on a -sheet to show me exactly what the company was earning on -certain divisions or to prove how they were cutting down -expenses or reducing operating costs, and then he would -crumple up the sheet of the expensive paper and throw it in -the waste-basket. Pretty soon he would want to impress me -with the economies they were introducing and he would -reach for a fresh sheet of the beautiful notepaper with the -engraved letterheads in two colors. A few figures—and -bingo, into the waste-basket! More money wasted without a -thought. It struck me that if the president was that kind of -a man he would scarcely be likely to insist upon having or -rewarding economical assistants. I therefore decided to believe -the people who had told me the management was extravagant -instead of accepting the president’s version and I -sold what Atchison stock I held.</p> - -<p>“It so happened that I had occasion to go to the offices of -the Delaware, Lackawanna & Western a few days later. Old -Sam Sloan was the president. His office was the nearest to -the entrance and his door was wide open. It was always -open. Nobody could walk into the general offices of the -D.L.&W. in those days and not see the president of the company -seated at his desk. Any man could walk in and do -business with him right off, if he had any business to do. The -financial reporters used to tell me that they never had to -beat around the bush with old Sam Sloan, but would ask -their questions and get a straight yes or no from him, no -matter what the stock-market exigencies of the other directors -might be.</p> - -<p>“When I walked in I saw the old man was busy. I thought -at first that he was opening his mail, but after I got inside -close to the desk I saw what he was doing. I learned afterwards -that it was his daily custom to do it. After the mail -was sorted and open, instead of throwing away the empty -envelopes he had them gathered up and taken to his office.<span class="pagenum" id="Page_214">214</span> -In his leisure moments he would rip the envelope all around. -That gave him two bits of paper, each with one clean blank -side. He would pile these up and then he would have them -distributed about, to be used in lieu of scratch pads for such -figuring as Reinhart had done for me on engraved notepaper. -No waste of empty envelopes and no waste of the -president’s idle moments. Everything utilised.</p> - -<p>“It struck me that if that was the kind of man the -D.L.&W. had for president, the company was managed -economically in all departments. The president would see to -that! Of course I knew the company was paying regular -dividends and had a good property. I bought all the -D.L.&W. stock I could. Since that time the capital stock has -been doubled and quadrupled. My annual dividends amount -to as much as my original investment. I still have my D.L.&W. -And Atchison went into the hands of a receiver a few -months after I saw the president throwing sheet after sheet -of linen paper with engraved letterheads in two colors into -the waste-basket to prove to me with figures that he was not -extravagant.”</p> - -<p>And the beauty of that story is that it is true and that no -other stock that the Pennsylvania Dutchman could have -bought would have proved to be so good an investment as -D.L.&W.</p> - -<hr /> - -<p><span class="pagenum" id="Page_215">215</span></p> - -<div class="chapter"> -<h2 id="XVII"><i>XVII</i></h2> -</div> - -<p class="in0"><span class="firstword">One of my most intimate friends</span> is very fond of telling -stories about what he calls my hunches. He is forever ascribing -to me powers that defy analysis. He declares I -merely follow blindly certain mysterious impulses and -thereby get out of the stock market at precisely the right -time. His pet yarn is about a black cat that told me, at his -breakfast-table, to sell a lot of stock I was carrying, and that -after I got the pussy’s message I was grouchy and nervous -until I sold every share I was long of. I got practically the -top prices of the movement, which of course strengthened -the hunch theory of my hard-headed friend.</p> - -<p>I had gone to Washington to endeavor to convince a few -Congressmen that there was no wisdom in taxing us to death -and I wasn’t paying much attention to the stock market. My -decision to sell out my line came suddenly, hence my -friend’s yarn.</p> - -<p>I admit that I do get irresistible impulses at times to do -certain things in the market. It doesn’t matter whether I am -long or short of stocks. I must get out. I am uncomfortable -until I do. I myself think that what happens is that I see -a lot of warning-signals. Perhaps not a single one may be -sufficiently clear or powerful to afford me a positive, definite -reason for doing what I suddenly feel like doing. Probably -that is all there is to what they call “ticker-sense” that old -traders say James R. Keene had so strongly developed and -other operators before him. Usually, I confess, the warning<span class="pagenum" id="Page_216">216</span> -turns out to be not only sound but timed to the minute. But -in this particular instance there was no hunch. The black cat -had nothing to do with it. What he tells everybody about -my getting up so grumpy that morning I suppose can be explained—if -I in truth was grouchy—by my disappointment. -I knew I was not convincing the Congressman I talked to -and the Committee did not view the problem of taxing Wall -Street as I did. I wasn’t trying to arrest or evade taxation on -stock transactions but to suggest a tax that I as an experienced -stock operator felt was neither unfair nor unintelligent. -I didn’t want Uncle Sam to kill the goose that could -lay so many golden eggs with fair treatment. Possibly my -lack of success not only irritated me but made me pessimistic -over the future of an unfairly taxed business. But I’ll tell -you exactly what happened.</p> - -<p>At the beginning of the bull market I thought well of the -outlook in both the Steel trade and the Copper market and I -therefore felt bullish on stocks of both groups. So I started -to accumulate some of them. I began by buying 5000 shares -of Utah Copper and stopped because it didn’t act right. That -is, it did not behave as it should have behaved to make me -feel I was wise in buying it. I think the price was around -114. I also started to buy United States Steel at almost the -same price. I bought in all 20,000 shares the first day because -it did act right. I followed the method I have described -before.</p> - -<p>Steel continued to act right and I therefore continued to -accumulate it until I was carrying 72,000 shares of it in all. -But my holdings of Utah Copper consisted of my initial purchase. -I never got above the 5000 shares. Its behaviour -did not encourage me to do more with it.</p> - -<p>Everybody knows what happened. We had a big bull -movement. I knew the market was going up. General conditions -were favourable. Even after stocks had gone up extensively -and my paper profit was not to be sneezed at, the -tape kept trumpeting: <em>Not yet! Not yet!</em> When I arrived in<span class="pagenum" id="Page_217">217</span> -Washington the tape was still saying that to me. Of course, -I had no intention of increasing my line at that late day, -even though I was still bullish. At the same time, the market -was plainly going my way and there was no occasion for me -to sit in front of a quotation board all day, in hourly expectation -of getting a tip to get out. Before the clarion call to retreat -came—barring an utterly unexpected catastrophe, of -course—the market would hesitate or otherwise prepare me -for a reversal of the speculative situation. That was the -reason why I went blithely about my business with my Congressman.</p> - -<p>At the same time, prices kept going up and that meant -that the end of the bull market was drawing nearer. I did -not look for the end on any fixed date. That was something -quite beyond my power to determine. But I needn’t tell you -that I was on the watch for the tip-off. I always am, anyhow. -It has become a matter of business habit with me.</p> - -<p>I cannot swear to it but I rather suspect that the day before -I sold out, seeing the high prices made me think of the -magnitude of my paper profit as well as of the line I was -carrying and, later on, of my vain efforts to induce our legislators -to deal fairly and intelligently by Wall Street. That was -probably the way and the time the seed was sown within -me. The subconscious mind worked on it all night. In the -morning I thought of the market and began to wonder how -it would act that day. When I went down to the office I saw -not so much that prices were still higher and that I had a -satisfying profit but that there was a great big market with -a tremendous power of absorption. I could sell any amount -of stock in that market; and, of course, when a man is carrying -his full line of stocks, he must be on the watch for an -opportunity to change his paper profit into actual cash. He -should try to lose as little of the profit as possible in the -swapping. Experience has taught me that a man can always -find an opportunity to make his profits real and that this opportunity<span class="pagenum" id="Page_218">218</span> -usually comes at the end of the move. That isn’t -tape-reading or a hunch.</p> - -<p>Of course, when I found that morning a market in which -I could sell out all my stocks without any trouble I did so. -When you are selling out it is no wiser or braver to sell fifty -shares than fifty thousand; but fifty shares you can sell in the -dullest market without breaking the price and fifty thousand -shares of a single stock is a different proposition. I had -seventy-two thousand shares of U.S. Steel. This may not -seem a colossal line, but you can’t always sell that much -without losing some of that profit that looks so nice on paper -when you figure it out and that hurts as much to lose as if -you actually had it safe in the bank.</p> - -<p>I had a total profit of about $1,500,000 and I grabbed it -while the grabbing was good. But that wasn’t the principal -reason for thinking that I did the right thing in selling out -when I did. The market proved it for me and that was indeed -a source of satisfaction for me. It was this way: I succeeded -in selling my entire line of seventy-two thousand -shares of U.S. Steel at a price which averaged me just one -point from the top of the day and of the movement. It -proved that I was right, to the minute. But when, on the -very same hour of the very same day I came to sell my -5000 shares of Utah Copper, the price broke five points. -Please recall that I began buying both stocks at the same -time and that I acted wisely in increasing my line of U.S. -Steel from twenty thousand shares to seventy-two thousand, -and equally wisely in not increasing my line of Utah from -the original 5000 shares. The reason why I didn’t sell out my -Utah Copper before was that I was bullish on the copper -trade and it was a bull market in stocks and I didn’t think -that Utah would hurt me much even if I didn’t make a killing -in it. But as for hunches, there weren’t any.</p> - -<p>The training of a stock trader is like a medical education. -The physician has to spend long years learning anatomy, -physiology, materia medica and collateral subjects by the<span class="pagenum" id="Page_219">219</span> -dozen. He learns the theory and then proceeds to devote his -life to the practice. He observes and classifies all sorts of -pathological phenomena. He learns to diagnose. If his diagnosis -is correct—and that depends upon the accuracy of his -observation—he ought to do pretty well in his prognosis, -always keeping in mind, of course, that human fallibility -and the utterly unforeseen will keep him from scoring 100 -per cent of bull’s-eyes. And then, as he gains in experience, -he learns not only to do the right thing but to do it instantly, -so that many people will think he does it instinctively. It -really isn’t automatism. It is that he has diagnosed the case -according to his observations of such cases during a period -of many years; and, naturally, after he has diagnosed it, he -can only treat it in the way that experience has taught him -is the proper treatment. You can transmit knowledge—that -is, your particular collection of card-indexed facts—but not -your experience. <em>A man may know what to do and lose -money—if he doesn’t do it quickly enough.</em></p> - -<p>Observation, experience, memory and mathematics—these -are what the successful trader must depend on. He -must not only observe accurately but remember at all times -what he has observed. He cannot bet on the unreasonable -or on the unexpected, however strong his personal convictions -may be about man’s unreasonableness or however certain -he may feel that the unexpected happens very frequently. -He must bet always on probabilities—that is, try -to anticipate them. Years of practice at the game, of constant -study, of always remembering, enable the trader to act on -the instant when the unexpected happens as well as when -the expected comes to pass.</p> - -<p>A man can have great mathematical ability and an unusual -power of accurate observation and yet fail in speculation -unless he also possesses <em>the experience and the memory</em>. -And then, like the physician who keeps up with the advances -of science, <em>the wise trader never ceases to study -general conditions, to keep track of developments everywhere<span class="pagenum" id="Page_220">220</span> -that are likely to affect or influence the course of the -various markets</em>. After years at the game it becomes a habit -to keep posted. He acts almost automatically. He requires -the invaluable professional attitude and that enables him to -beat the game—at times! This difference between the professional -and the amateur or occasional trader cannot be -overemphasised. I find, for instance, that memory and mathematics -help me very much. Wall Street makes its money on -a mathematical basis. I mean, <em>it makes its money by dealing -with facts and figures</em>.</p> - -<p>When I said that a trader has to keep posted to the minute -and that he must take a purely professional attitude toward -all markets and all developments, I merely meant to emphasise -again that hunches and the mysterious ticker-sense -haven’t so much to do with success. Of course, it often happens -that an experienced trader acts so quickly that he -hasn’t time to give all his reasons in advance—but nevertheless -they are good and sufficient reasons, because they are -based on facts collected by him in his years of working and -thinking and seeing things from the angle of the professional, -to whom everything that comes to his mill is grist. -Let me illustrate what I mean by professional attitude.</p> - -<p>I keep track of the commodities markets, always. It is a -habit of years. As you know, the Government reports indicated -a winter wheat crop about the same as last year and a -bigger spring wheat crop than in 1921. The condition was -much better and we probably would have an earlier harvest -than usual. When I got the figures of condition and I saw -what we might expect in the way of yield—mathematics—I -also thought at once of the coal miner’s strike and the railroad -shopmen’s strike. I couldn’t help thinking of them because -my mind always thinks of all developments that have -a bearing on the markets. It instantly struck me that the -strike which had already affected the movement of freight -everywhere must affect wheat prices adversely. I figured this -way: There was bound to be considerable delay in moving<span class="pagenum" id="Page_221">221</span> -winter wheat to market by reason of the strike-crippled -transportation facilities, and by the time those improved the -spring wheat crop would be ready to move. That meant that -when the railroads were able to move wheat in quantity -they would be bringing in both crops together—the delayed -winter and the early spring wheat—and that would mean a -vast quantity of wheat pouring into the market at one fell -swoop. Such being the facts of the case—the obvious probabilities—the -traders, who would know and figure as I did, -would not bull wheat for a while. They would not feel like -buying it unless the price declined to such figures as made -the purchase of wheat a good investment. With no buying -power in the market, the price ought to go down. Thinking -the way I did I must find whether I was right or not. As old -Pat Hearne used to remark, “You can’t tell till you bet.” -Between being bearish and selling there is no need to waste -time.</p> - -<p><em>Experience has taught me that the way a market behaves -is an excellent guide for an operator to follow. It is like -taking a patient’s temperature and pulse or noting the colour -of the eyeballs and the coating of the tongue.</em></p> - -<p>Now, ordinarily a man ought to be able to buy or sell a -million bushels of wheat within a range of ¼ cent. On this -day when I sold the 250,000 bushels to test the market for -timeliness, the price went down ¼ cent. Then, since the reaction -did not definitely tell me all I wished to know, I sold -another quarter of a million bushels. I noticed that it was -taken in driblets; that is, the buying was in lots of 10,000 or -15,000 bushels instead of being taken in two or three transactions -which would have been the normal way. In addition -to the homeopathic buying the price went down 1¼ cents on -my selling. Now, I need not waste my time pointing out that -the way in which the market took my wheat and the disproportionate -decline on my selling told me that there was -no buying power there. Such being the case, what was the -only thing to do? Of course, to sell a lot more. Following the<span class="pagenum" id="Page_222">222</span> -dictates of experience may possibly fool you, now and then. -But not following them invariably makes an ass of you. -So I sold 2,000,000 bushels and the price went down some -more. A few days later the market’s behaviour practically -compelled me to sell an additional 2,000,000 bushels and -the price declined further still; a few days later wheat -started to break badly and slumped off 6 cents a bushel. -And it didn’t stop there. It has been going down, with short-lived -rallies.</p> - -<p>Now, I didn’t follow a hunch. Nobody gave me a tip. It -was my habitual or professional mental attitude toward the -commodities markets that gave me the profit and that attitude -came from my years at this business. I study because -my business is to trade. The moment the tape told me that I -was on the right track my business duty was to increase my -line. I did. That is all there is to it.</p> - -<p>I have found that experience is apt to be a steady dividend -payer in this game and that observation gives you the best -tips of all. The behaviour of a certain stock is all you need -at times. You observe it. Then experience shows you how to -profit by variations from the usual, that is, from the probable. -For example, we know <em>that all stocks do not move one -way together but that all the stocks of a group will move up -in a bull market and down in a bear market</em>. This is a common-place -of speculation. It is the commonest of all self-given -tips and the commission houses are well aware of it -and pass it on to any customer who has not thought of it -himself; I mean, the advice to trade in those stocks which -have lagged behind other stocks of the same group. Thus, if -U.S. Steel goes up, it is logically assumed that it is only a -matter of time when Crucible or Republic or Bethlehem will -follow suit. Trade conditions and prospects should work -alike with all stocks of a group and the prosperity should be -shared by all. On the theory, corroborated by experience -times without number, that every dog has his day in the<span class="pagenum" id="Page_223">223</span> -market, the public will buy A.B. Steel because it has not -advanced while C.D. Steel and X.Y. Steel have gone up.</p> - -<p>I never buy a stock even in a bull market, if it doesn’t act -as it ought to act in that kind of market. I have sometimes -bought a stock during an undoubted bull market and found -out that other stocks in the same group were not acting bullishly -and I have sold out my stock. Why? <em>Experience tells -me that it is not wise to buck against what I may call the -manifest group-tendency.</em> I cannot expect to play certainties -only. I must reckon on probabilities—and anticipate them. -An old broker once said to me: “If I am walking along a -railroad track and I see a train coming toward me at sixty -miles an hour, do I keep on walking on the ties? Friend, I -sidestep. And I don’t even pat myself on the back for being -so wise and prudent.”</p> - -<p>Last year, after the general bull movement was well under -way, I noticed that one stock in a certain group was not -going with the rest of the group, though the group with that -one exception was going with the rest of the market. I was -long a very fair amount of Blackwood Motors. Everybody -knew that the company was doing a very big business. The -price was rising from one to three points a day and the public -was coming in more and more. This naturally centered attention -on the group and all the various motor stocks began -to go up. One of them, however, persistently held back and -that was Chester. It lagged behind the others so that it -was not long before it made people talk. The low price of -Chester and its apathy was contrasted with the strength and -activity in Blackwood and other motor stocks and the public -logically enough listened to the touts and tipsters and wise-acres -and began to buy Chester on the theory that it must -presently move up with the rest of the group.</p> - -<p>Instead of going on this moderate public buying, Chester -actually declined. Now, it would have been no job to put it -up in that bull market, considering that Blackwood, a stock -of the same group, was one of the sensational leaders of the<span class="pagenum" id="Page_224">224</span> -general advance and we were hearing nothing but the -wonderful improvement in the demand for automobiles of -all kinds and the record output.</p> - -<p>It was thus plain that the inside clique in Chester were -not doing any of the things that inside cliques invariably do -in a bull market. For this failure to do the usual thing there -might be two reasons. Perhaps the insiders did not put it up -because they wished to accumulate more stock before advancing -the price. But this was an untenable theory if you -analysed the volume and character of the trading in Chester. -The other reason was that they did not put it up because -they were afraid of getting stock if they tried to.</p> - -<p>When the men who ought to want a stock don’t want it, -why should I want it? I figured that no matter how prosperous -other automobile companies might be, it was a cinch to -sell Chester short. <em>Experiences had taught me to beware of -buying a stock that refuses to follow the group-leader.</em></p> - -<p>I easily established the fact that not only there was no inside -buying but that there was actually inside selling. There -were other symptomatic warnings against buying Chester, -though all I required was its inconsistent market behaviour. -It was again the tape that tipped me off and that was why -I sold Chester short. One day, not very long afterward, the -stock broke wide open. Later on we learned—officially, as it -were—that insiders had indeed been selling it, knowing full -well that the condition of the company was not good. The -reason, as usual, was disclosed after the break. But the warning -came before the break. <em>I don’t look out for the breaks; -I look out for the warnings.</em> I didn’t know what was the -trouble with Chester; neither did I follow a hunch. I merely -knew that something must be wrong.</p> - -<p>Only the other day we had what the newspapers called a -sensational movement in Guiana Gold. After selling on the -Curb at 50 or close to it, it was listed on the Stock Exchange. -It started there at around 35, began to go down and finally -broke 20.</p> - -<p><span class="pagenum" id="Page_225">225</span> -Now, I’d never have called that break sensational because -it was fully to be expected. If you had asked you could have -learned the history of the company. No end of people knew -it. It was told to me as follows: A syndicate was formed consisting -of a half dozen extremely well-known capitalists and -a prominent banking house. One of the members was the -head of the Belle Isle Exploration Company, which advanced -Guiana over $10,000,000 cash and received in return -bonds and 250,000 shares out of a total of one million shares -of the Guiana Gold Mining Company. The stock went on a -dividend basis and it was mighty well advertised. The Belle -Isle people thought it well to cash in and they gave a call on -their 250,000 shares to the bankers, who arranged to try to -market that stock and some of their own holdings as well. -They thought of entrusting the market manipulation to a -professional whose fee was to be one third of the profits -from the sale of the 250,000 shares above 36. I understand -that the agreement was drawn up and ready to be signed -but at the last moment the bankers decided to undertake the -marketing themselves and save the fee. So they organized an -inside pool. The bankers had a call on the Belle Isle holdings -of 250,000 at 36. They put this in at 41. That is, insiders paid -their own banking colleagues a 5-point profit to start with. I -don’t know whether they knew it or not.</p> - -<p>It is perfectly plain that to the bankers the operation had -every semblance of a cinch. We had run into a bull market -and the stocks of the group to which Guiana Gold belonged -were among the market leaders. The company was making -big profits and paying regular dividends. This together with -the high character of the sponsors made the public regard -Guiana almost as an investment stock. I was told that about -400,000 shares were sold to the public all the way up to 47.</p> - -<p>The gold group was very strong. But presently Guiana -began to sag. It declined ten points. That was all right if -the pool was marketing stock. But pretty soon the Street -began to hear that things were not altogether satisfactory<span class="pagenum" id="Page_226">226</span> -and the property was not bearing out the high expectations -of the promoters. Then, of course, the reason for the decline -became plain. But before the reason was known I had -the warning and had taken steps to test the market for -Guiana. The stock was acting pretty much as Chester -Motors did. I sold Guiana. The price went down. I sold -more. The price went still lower. The stock was repeating -the performance of Chester and of a dozen other stocks -whose clinical history I remembered. The tape plainly told -me that there was something wrong—something that kept -insiders from buying it—insiders who knew exactly why -they should not buy their own stock in a bull market. On the -other hand, outsiders, who did not know, were now buying -because having sold at 45 and higher the stock looked cheap -at 35 and lower. The dividend was still being paid. The stock -was a bargain.</p> - -<p>Then the news came. It reached me, as important market -news often does, before it reached the public. But the confirmation -of the reports of striking barren rock instead of -rich ore merely gave me the reason for the earlier inside selling. -I myself didn’t sell on the news. I had sold long before, -on the stock’s behaviour. My concern with it was not philosophical. -I am a trader and therefore looked for one sign: Inside -buying. There wasn’t any. I didn’t have to know why the -insiders did not think enough of their own stock to buy it on -the decline. It was enough that their market plans plainly did -not include further manipulation for the rise. That made it -a cinch to sell the stock short. The public had bought almost -a half million shares and the only change in ownership -possible was from one set of ignorant outsiders who would -sell in the hope of stopping losses to another set of ignorant -outsiders who might buy in the hope of making money.</p> - -<p>I am not telling you this to moralise on the public’s losses -through their buying of Guiana or on my profit through my -selling of it, but to emphasise how important the study of -group-behaviourism is and how its lessons are disregarded<span class="pagenum" id="Page_227">227</span> -by inadequately equipped traders, big and little. And it is -not only in the stock market that the tape warns you. It -blows the whistle quite as loudly in commodities.</p> - -<p>I had an interesting experience in cotton. I was bearish on -stocks and put out a moderate short line. At the same time I -sold cotton short; 50,000 bales. My stock deal proved profitable -and I neglected my cotton. The first thing I knew I had -a loss of $250,000 on my 50,000 bales. As I said, my stock -deal was so interesting and I was doing so well in it that I -did not wish to take my mind off it. Whenever I thought -of cotton I just said to myself: “I’ll wait for a reaction and -cover.” The price would react a little but before I could -decide to take my loss and cover, the price would rally again, -and go higher than ever. So I’d decide again to wait a little -and I’d go back to my stock deal and confine my attention -to that. Finally I closed out my stocks at a very handsome -profit and went away to Hot Springs for a rest and a holiday.</p> - -<p>That really was the first time that I had my mind free to -deal with the problem of my losing deal in cotton. The trade -had gone against me. There were times when it almost -looked as if I might win out. I noticed that whenever anybody -sold heavily there was a good reaction. But almost -instantly the price would rally and make a new high for the -move.</p> - -<p>Finally, by the time I had been in Hot Springs a few days, -I was a million to the bad and no let up in the rising tendency. -I thought over all I had done and had not done and -I said to myself: “I must be wrong!” With me to feel that I -am wrong and to decide to get out are practically one -process. So I covered, at a loss of about one million.</p> - -<p>The next morning I was playing golf and not thinking of -anything else. I had made my play in cotton. I had been -wrong. I had paid for being wrong and the receipted bill was -in my pocket. I had no more concern with the cotton market -than I have at this moment. When I went back to the hotel -for luncheon I stopped at the broker’s office and took a look<span class="pagenum" id="Page_228">228</span> -at the quotations. I saw that cotton had gone off 50 points. -That wasn’t anything. But I also noticed that it had not rallied -as it had been in the habit of doing for weeks, as soon -as the pressure of the particular selling that had depressed it -eased up. This had indicated that the line of least resistance -was upward and it had cost me a million to shut my eyes to -it.</p> - -<p>Now, however, the reason that had made me cover at a -big loss was no longer a good reason since there had not -been the usual prompt and vigorous rally. So I sold 10,000 -bales and waited. Pretty soon the market went off 50 points. -I waited a little while longer. There was no rally. I had got -pretty hungry by now, so I went into the dining-room and -ordered my luncheon. Before the waiter could serve it, I -jumped up, went to the broker’s office, I saw that there had -been no rally and so I sold 10,000 bales more. I waited a -little and had the pleasure of seeing the price decline 40 -points more. That showed me I was trading correctly so I -returned to the dining-room ate my luncheon and went back -to the broker’s. There was no rally in cotton that day. That -very night I left Hot Springs.</p> - -<p>It was all very well to play golf but I had been wrong in -cotton in selling when I did and in covering when I did. So I -simply had to get back on the job and be where I could -trade in comfort. The way the market took my first ten thousand -bales made me sell the second ten thousand, and the -way the market took the second made me certain the turn -had come. It was the difference in behaviour.</p> - -<p>Well, I reached Washington and went to my brokers’ -office there, which was in charge of my old friend Tucker. -While I was there the market went down some more. I was -more confident of being right now than I had been of being -wrong before. So I sold 40,000 bales and the market went off -75 points. It showed that there was no support there. That -night the market closed still lower. The old buying power -was plainly gone. There was no telling at what level that<span class="pagenum" id="Page_229">229</span> -power would again develop, but I felt confident of the wisdom -of my position. The next morning I left Washington for -New York by motor. There was no need to hurry.</p> - -<p>When we got to Philadelphia I drove to a broker’s office. -I saw that there was the very dickens to pay in the cotton -market. Prices had broken badly and there was a small-sized -panic on. I didn’t wait to get to New York. I called up my -brokers on the long distance and I covered my shorts. As -soon as I got my reports and found that I had practically -made up my previous loss, I motored on to New York without -having to stop en route to see any more quotations.</p> - -<p>Some friends who were with me in Hot Springs talk to -this day of the way I jumped up from the luncheon table to -sell that second lot of 10,000 bales. But again that clearly -was not a hunch. It was an impulse that came from the conviction -that the time to sell cotton had now come, however -great my previous mistake had been. I had to take advantage -of it. It was my chance. The subconscious mind probably -went on working, reaching conclusions for me. The decision -to sell in Washington was the result of my observation. My -years of experience in trading told me that the line of least -resistance had changed from up to down.</p> - -<p>I bore the cotton market no grudge for taking a million -dollars out of me and I did not hate myself for making a mistake -of that calibre any more than I felt proud for covering -in Philadelphia and making up my loss. My trading mind -concerns itself with trading problems and I think I am justified -in asserting that I made up my first loss because I had -the experience and the memory.</p> - -<hr /> - -<p><span class="pagenum" id="Page_230">230</span></p> - -<div class="chapter"> -<h2 id="XVIII"><i>XVIII</i></h2> -</div> - -<p class="in0"><span class="firstword">History repeats itself</span> all the time in Wall Street. Do you -remember a story I told you about covering my shorts at the -time Stratton had corn cornered? Well, another time I used -practically the same tactics in the stock market. The stock -was Tropical Trading. I have made money bulling it and -also bearing it. It always was an active stock and a favourite -with adventurous traders. The inside coterie has been accused -time and again by the newspapers of being more concerned -over the fluctuations in the stock than with encouraging -permanent investment in it. The other day one of the -ablest brokers I know asserted that not even Daniel Drew in -Erie or H. O. Havemeyer in Sugar developed so perfect a -method for milking the market for a stock as President Mulligan -and his friends have done in Tropical Trading. Many -times they have encouraged the bears to sell TT short and -then have proceeded to squeeze them with business-like -thoroughness. There was no more vindictiveness about the -process than is felt by a hydraulic press—or no more -squeamishness, either.</p> - -<p>Of course, there have been people who have spoken about -certain “unsavory incidents” in the market career of TT -stock. But I dare say these critics were suffering from the -squeezing. Why do the room traders, who have suffered so -often from the loaded dice of the insiders, continue to go up -against the game? Well, for one thing they like action and -they certainly get it in Tropical Trading. No prolonged spells<span class="pagenum" id="Page_231">231</span> -of dullness. No reasons asked or given. No time wasted. No -patience strained by waiting for the tipped movement to -begin. Always enough stock to go around—except when the -short interest is big enough to make the scarcity worthwhile. -One born every minute!</p> - -<p>It so happened some time ago that I was in Florida on my -usual winter vacation. I was fishing and enjoying myself -without any thought of the markets excepting when we -received a batch of newspapers. One morning when the -semi-weekly mail came in I looked at the stock quotations -and saw that Tropical Trading was selling at 155. The last -time I’d seen a quotation in it, I think, was around 140. My -opinion was that we were going into a bear market and I was -biding my time before going short of stocks. But there was -no mad rush. That was why I was fishing and out of hearing -of the ticker. I knew that I’d be back home when the real -call came. In the meanwhile nothing that I did or failed to -do would hurry matters a bit.</p> - -<p>The behaviour of Tropical Trading was the outstanding -feature of the market, according to the newspapers I got that -morning. It served to crystallise my general bearishness because -I thought it particularly asinine for the insiders to run -up the price of TT in the face of the heaviness of the general -list. There are times when the milking process must be suspended. -What is abnormal is seldom a desirable factor in a -trader’s calculations and it looked to me as if the marking up -of that stock were a capital blunder. Nobody can make -blunders of that magnitude with impunity; not in the stock -market.</p> - -<p>After I got through reading the newspapers I went back -to my fishing but I kept thinking of what the insiders in -Tropical Trading were trying to do. That they were bound -to fail was as certain as that a man is bound to smash himself -if he jumps from the roof of a twenty-story building -without a parachute. I couldn’t think of anything else and -finally I gave up trying to fish and sent off a telegram to my<span class="pagenum" id="Page_232">232</span> -brokers to sell 2000 shares of TT at the market. After that I -was able to go back to my fishing. I did pretty well.</p> - -<p>That afternoon I received the reply to my telegram by -special courier. My brokers reported that they had sold the -2000 shares of Tropical Trading at 153. So far so good. I was -selling short on a declining market, which was as it should -be. But I could not fish any more. I was too far away from -a quotation board. I discovered this after I began to think of -all the reasons why Tropical Trading should go down with -the rest of the market instead of going up on inside manipulation. -I therefore left my fishing camp and returned to Palm -Beach; or, rather, to the direct wire to New York.</p> - -<p>The moment I got to Palm Beach and saw what the misguided -insiders were still trying to do, I let them have a second -lot of 2000 TT. Back came the report and I sold another -2000 shares. The market behaved excellently. That is, it -declined on my selling. Everything being satisfactory I went -out and had a chair ride. But I wasn’t happy. The more I -thought the unhappier it made me to think that I hadn’t -sold more. So back I went to the broker’s office and sold -another 2000 shares.</p> - -<p>I was happy only when I was selling that stock. Presently -I was short 10,000 shares. Then I decided to return to New -York. I had business to do now. My fishing I would do some -other time.</p> - -<p>When I arrived in New York I made it a point to get a -line on the company’s business, actual and prospective. What -I learned strengthened my conviction that the insiders had -been worse than reckless in jacking up the price at a time -when such an advance was not justified either by the tone -of the general market or by the company’s earnings.</p> - -<p>The rise, illogical and ill-timed though it was, had developed -some public following and this doubtless encouraged -the insiders to pursue their unwise tactics. Therefore I sold -more stock. The insiders ceased their folly. So I tested the -market again and again, in accordance with my trading<span class="pagenum" id="Page_233">233</span> -methods, until finally I was short 30,000 shares of the stock -of the Tropical Trading Company. By then the price was -133.</p> - -<p>I had been warned that the TT insiders knew the exact -whereabouts of every stock certificate in the Street and the -precise dimensions and identity of the short interest as well -as other facts of tactical importance. They were able men -and shrewd traders. Altogether it was a dangerous combination -to go up against. But facts are facts and the strongest of -all allies are conditions.</p> - -<p>Of course, on the way down from 153 to 133 the short interest -had grown and the public that buys on reactions began -to argue as usual: That stock had been considered a -good purchase at 153 and higher. Now 20 points lower, it -was necessarily a much better purchase. Same stock; same -dividend rate; same officers; same business. Great bargain!</p> - -<p>The public’s purchases reduced the floating supply and -the insiders, knowing that a lot of room traders were short, -thought the time propitious for a squeezing. The price was -duly run up to 150. I daresay there was plenty of covering -but I stayed pat. Why shouldn’t I? The insiders might know -that a short line of 30,000 shares had not been taken in but -why should that frighten me? The reasons that had impelled -me to begin selling at 153 and keep at it on the way down to -133, not only still existed but were stronger than ever. The -insiders might desire to force me to cover but they adduced -no convincing arguments. Fundamental conditions were -fighting for me. It was not difficult to be both fearless and -patient. A speculator must have faith in himself and in his -judgment. The late Dickson G. Watts, ex-President of the -New York Cotton Exchange and famous author of “Speculation -as a Fine Art,” says that courage in a speculator is -merely confidence to act on the decision of his mind. With -me, I cannot fear to be wrong because I never think I am -wrong until I am proven wrong. In fact, I am uncomfortable -unless I am capitalising my experience. The course of the<span class="pagenum" id="Page_234">234</span> -market at a given time does not necessarily prove me wrong. -It is the character of the advance—or of the decline—that -determines for me the correctness or the fallacy of my -market position. I can only rise by knowledge. If I fall it -must be by my own blunders.</p> - -<p>There was nothing in the character of the rally from 133 -to 150 to frighten me into covering and presently the stock, -as was to be expected, started down again. It broke 140 before -the inside clique began to give it support. Their buying -was coincident with a flood of bull rumors about the stock. -The company, we heard, was making perfectly fabulous -profits, and the earnings justified an increase in the regular -dividend rate. Also, the short interest was said to be perfectly -huge and the squeeze of the century was about to be -inflicted on the bear party in general and in particular on a -certain operator who was more than over-extended. I -couldn’t begin to tell you all I heard as they ran the price up -ten points.</p> - -<p>The manipulation did not seem particularly dangerous to -me but when the price touched 149 I decided that it was not -wise to let the Street accept as true all the bull statements -that were floating around. Of course, there was nothing that -I or any other rank outsider could say that would carry conviction -either to the frightened shorts or to those credulous -customers of commission houses that trade on hearsay tips. -The most effective retort courteous is that which the tape -alone can print. People will believe that when they will not -believe an affidavit from any living man, much less one from -a chap who is short 30,000 shares. So I used the same tactics -that I did at the time of the Stratton corner in corn, when I -sold oats to make the traders bearish on corn. Experience -and memory again.</p> - -<p>When the insiders jacked up the price of Tropical Trading -with a view to frightening the shorts I didn’t try to check the -rise by selling that stock. I was already short 30,000 shares -of it which was as big a percentage of the floating supply as -I thought wise to be short of. I did not propose to put my<span class="pagenum" id="Page_235">235</span> -head into the noose so obligingly held open for me—the -second rally was really an urgent invitation. What I did -when TT touched 149 was to sell about 10,000 shares of -Equatorial Commercial Corporation. This company owned -a large block of Tropical Trading.</p> - -<p>Equatorial Commercial, which was not as active a stock -as TT, broke badly on my selling, as I had foreseen; and, of -course, my purpose was achieved. When the traders—and -the customers of the commission houses who had listened to -the uncontradicted bull dope on TT—saw that the rise in -Tropical synchronised with heavy selling and a sharp break -in Equatorial, they naturally concluded that the strength of -TT was merely a smoke-screen—a manipulated advance obviously -designed to facilitate inside liquidation in Equatorial -Commercial, which was largest holder of TT stock. It must -be both long stock and inside stock in Equatorial, because -no outsider would dream of selling so much short stock at -the very moment when Tropical Trading was so very strong. -So they sold Tropical Trading and checked the rise in that -stock, the insiders very properly not wishing to take all the -stock that was pressed for sale. The moment the insiders -took away their support the price of TT declined. The traders -and principal commission houses now sold some Equatorial -also and I took in my short line in that at a small profit. -I hadn’t sold it to make money out of the operation but to -check the rise in TT.</p> - -<p>Time and again the Tropical Trading insiders and their -hard-working publicity man flooded the Street with all manner -of bull items and tried to put up the price. And every -time they did I sold Equatorial Commercial short and covered -it with TT reacted and carried EC with it. It took the -wind out of the manipulators’ sails. The price of TT finally -went down to 125 and the short interest really grew so big -that the insiders were enabled to run it up 20 or 25 points. -This time it was a legitimate enough drive against an over-extended -short interest; but while I foresaw the rally I did -not cover, not wishing to lose my position. Before Equatorial<span class="pagenum" id="Page_236">236</span> -Commercial could advance in sympathy with the rise in TT -I sold a raft of it short—with the usual results. This gave the -lie to the bull talk in TT which had got quite boisterous -after the latest sensational rise.</p> - -<p>By this time the general market had grown quite weak. As -I told you, it was the conviction that we were in a bear market -that started me selling TT short in the fishing-camp in -Florida. I was short of quite a few other stocks but TT was -my pet. Finally, general conditions proved too much for the -inside clique to defy and TT hit the toboggan slide. It went -below 120 for the first time in years; then below 110; below -par; and still I did not cover. One day when the entire market -was extremely weak Tropical Trading broke 90 and on -the demoralisation I covered. Same old reason! I had the opportunity—the -big market and the weakness and the excess -of sellers over buyers. I may tell you, even at the risk of -appearing to be monotonously bragging of my cleverness, -that I took in my 30,000 shares of TT at practically the lowest -prices of the movement. But I wasn’t thinking of covering -at the bottom. I was intent on turning my paper profits into -cash without losing much of the profit in the changing.</p> - -<p>I stood pat throughout because I knew my position was -sound. I wasn’t bucking the trend of the market or going -against basic conditions but the reverse, and that was what -made me so sure of the failure of an over-confident inside -clique. What they tried to do others had tried before and it -had always failed. The frequent rallies, even when I knew -as well as anybody that they were due, could not frighten -me. I knew I’d do much better in the end by staying pat -than by trying to cover to put out a new short line at a -higher price. By sticking to the position that I felt was right -I made over a million dollars. I was not indebted to hunches -or to skillful tape reading or to stubborn courage. It was a -dividend declared by my faith in my judgment and not by -my cleverness or by my vanity. Knowledge is power and -power need not fear lies—not even when the tape prints -them. The retraction follows pretty quickly.</p> - -<p><span class="pagenum" id="Page_237">237</span> -A year later, TT was jacked up again to 150 and hung -around there for a couple of weeks. The entire market was -entitled to a good reaction for it had risen uninterruptedly -and it did not bull any longer. I know because I tested it. -Now, the group to which TT belonged had been suffering -from very poor business and I couldn’t see anything to bull -those stocks on anyhow, even if the rest of the market were -due for a rise, which it wasn’t. So I began to sell Tropical -Trading. I intended to put out 10,000 shares in all. The price -broke on my selling. I couldn’t see that there was any support -whatever. Then suddenly, the character of the buying -changed.</p> - -<p>I am not trying to make myself out a wizard when I assure -you that I could tell the moment support came in. It instantly -struck me that if the insiders in that stock, who never -felt a moral obligation to keep the price up, were now buying -the stock in the face of a declining general market there -must be a reason. They were not ignorant asses nor philanthropists -nor yet bankers concerned with keeping the price -up to sell more securities over the counter. The price rose -notwithstanding my selling and the selling of others. At -153 I covered my 10,000 shares and at 156 I actually went -long because by that time the tape told me the line of least -resistance was upward. I was bearish on the general market -but I was confronted by a trading condition in a certain -stock and not by a speculative theory in general. The price -went out of sight, above 200. It was the sensation of the -year. I was flattered by reports spoken and printed that I -had been squeezed out of eight or nine millions of dollars. -As a matter of fact, instead of being short I was long of TT -all the way up. In fact, I held on a little too long and let -some of my paper profits get away. Do you wish to know -why I did? Because I thought the TT insiders would naturally -do what I would have done had I been in their place. -But that was something I had no business to think because -my business is to trade—that is, to stick to the facts before -me and not to what I think other people ought to do.</p> - -<hr /> - -<p><span class="pagenum" id="Page_238">238</span></p> - -<div class="chapter"> -<h2 id="XIX"><i>XIX</i></h2> -</div> - -<p class="in0"><span class="firstword">I do not know</span> when or by whom the word “manipulation” -was first used in connection with what really are no more -than common merchandising processes applied to the sale in -bulk of securities on the Stock Exchange. Rigging the market -to facilitate cheap purchases of a stock which it is desired -to accumulate is also manipulation. But it is different. -It may not be necessary to stoop to illegal practices, but it -would be difficult to avoid doing what some would think -illegitimate. How are you going to buy a big block of a stock -in a bull market without putting up the price on yourself? -That would be the problem. How can it be solved? It depends -upon so many things that you can’t give a general -solution unless you say: possibly by means of very adroit -manipulation. For instance? Well, it would depend upon -conditions. You can’t give any closer answer than that.</p> - -<p>I am profoundly interested in all phases of my business, -and of course I learn from the experience of others as well as -from my own. But it is very difficult to learn how to manipulate -stocks to-day from such yarns as are told of an afternoon -in the brokers’ offices after the close. Most of the tricks, devices -and expedients of bygone days are obsolete and futile; -or illegal and impracticable. Stock Exchange rules and conditions -have changed, and the story—even the accurately -detailed story—of what Daniel Drew or Jacob Little or Jay -Gould could do fifty or seventy-five years ago is scarcely -worth listening to. The manipulator to-day has no more need<span class="pagenum" id="Page_239">239</span> -to consider what they did and how they did it than a cadet -at West Point need study archery as practiced by the ancients -in order to increase his working knowledge of ballistics.</p> - -<p>On the other hand there is profit in studying the human -factors—the ease with which human beings believe what it -pleases them to believe; and how they allow themselves—indeed, -urge themselves—to be influenced by their cupidity -or by the dollar-cost of the average man’s carelessness. Fear -and hope remain the same; therefore the study of the psychology -of speculators is as valuable as it ever was. Weapons -change, but strategy remains strategy, on the New York -Stock Exchange as on the battlefield. I think the clearest -summing up of the whole thing was expressed by Thomas F. -Woodlock when he declared: “The principles of successful -stock speculation are based on the supposition that people -will continue in the future to make the mistakes that they -have made in the past.”</p> - -<p>In booms, which is when the public is in the market in the -greatest numbers, there is never any need of subtlety, so -there is no sense of wasting time discussing either manipulation -or speculation during such times; it would be like trying -to find the difference in raindrops that are falling synchronously -on the same roof across the street. The sucker -has always tried to get something for nothing, and the appeal -in all booms is always frankly to the gambling instinct -aroused by cupidity and spurred by a pervasive prosperity. -People who look for easy money invariably pay for the -privilege of proving conclusively that it cannot be found on -this sordid earth. At first, when I listened to the accounts of -old-time deals and devices I used to think that people were -more gullible in the 1860’s and ’70’s than in the 1900’s. But -I was sure to read in the newspapers that very day or the -next something about the latest Ponzi or the bust-up of some -bucketing broker and about the millions of sucker money -gone to join the silent majority of vanished savings.</p> - -<p><span class="pagenum" id="Page_240">240</span> -When I first came to New York there was a great fuss -made about wash sales and matched orders, for all that such -practices were forbidden by the Stock Exchange. At times -the washing was too crude to deceive anyone. The brokers -had no hesitation in saying that “the laundry was active” -whenever anybody tried to wash up some stock or other, -and, as I have said before, more than once they had what -were frankly referred to as “bucket-shop drives,” when a -stock was offered down two or three points in a jiffy just to -establish the decline on the tape and wipe up the myriad -shoe-string traders who were long of the stock in the bucket -shops. As for matched orders, they were always used with -some misgivings by reason of the difficulty of coordinating -and synchronising operations by brokers, all such business -being against Stock Exchange rules. A few years ago a famous -operator canceled the selling but not the buying part -of his matched orders, and the result was that an innocent -broker ran up the price twenty-five points or so in a few -minutes, only to see it break with equal celerity as soon as -his buying ceased. The original intention was to create an -appearance of activity. Bad business, playing with such unreliable -weapons. You see, you can’t take your best brokers -into your confidence—not if you want them to remain members -of the New York Stock Exchange. Then also, the taxes -have made all practices involving fictitious transactions -much more expensive than they used to be in the old times.</p> - -<p>The dictionary definition of manipulation includes corners. -Now, a corner might be the result of manipulation or it might -be the result of competitive buying, as, for instance, the -Northern Pacific corner on May 9, 1901, which certainly was -not manipulation. The Stutz corner was expensive to everybody -concerned, both in money and in prestige. And it was -not a deliberately engineered corner, at that.</p> - -<p>As a matter of fact very few of the great corners were -profitable to the engineers of them. Both Commodore Vanderbilt’s -Harlem corners paid big, but the old chap deserved<span class="pagenum" id="Page_241">241</span> -the millions he made out of a lot of short sports, crooked -legislators and aldermen who tried to double-cross him. On -the other hand, Jay Gould lost in his Northwestern corner. -Deacon S. V. White made a million in his Lackawanna -corner, but Jim Keene dropped a million in the Hannibal & -St. Joe deal. The financial success of a corner of course depends -upon the marketing of the accumulated holdings at -higher than cost, and the short interest has to be of some -magnitude for that to happen easily.</p> - -<p>I used to wonder why corners were so popular among the -big operators of a half-century ago. They were men of ability -and experience, wide-awake and not prone to childlike trust -in the philanthropy of their fellow traders. Yet they used to -get stung with an astonishing frequency. A wise old broker -told me that all the big operators of the ’60’s and ’70’s had -one ambition, and that was to work a corner. In many cases -this was the offspring of vanity; in others, of the desire for -revenge. At all events, to be pointed out as the man who had -successfully cornered this or the other stock was in reality -recognition of brains, boldness and boodle. It gave the cornerer -the right to be haughty. He accepted the plaudits of -his fellows as fully earned. It was more than the prospective -money profit that prompted the engineers of corners to do -their damnedest. It was the vanity complex asserting itself -among cold-blooded operators.</p> - -<p>Dog certainly ate dog in those days with relish and ease. -I think I told you before that I have managed to escape being -squeezed more than once, not because of the possession -of a mysterious ticker-sense but because I can generally tell -the moment the character of the buying in the stock makes -it imprudent for me to be short of it. This I do by common-sense -tests, which must have been tried in the old times -also. Old Daniel Drew used to squeeze the boys with some -frequency and make them pay high prices for the Erie -“sheers” they had sold short to him. He was himself squeezed -by Commodore Vanderbilt in Erie, and when old Drew<span class="pagenum" id="Page_242">242</span> -begged for mercy the Commodore grimly quoted the Great -Bear’s own deathless distich:</p> - -<div class="poem-container"> -<div class="poem"><div class="stanza"><i> -<span class="i0">He that sells what isn’t hisn<br /></span> -<span class="i0">Must buy it back or go to prisn.<br /></span></i> -</div></div> -</div> - -<p>Wall Street remembers very little of an operator who for -more than a generation was one of its Titans. His chief claim -to immortality seems to be the phrase “watering stock.”</p> - -<p>Addison G. Jerome was the acknowledged king of the -Public Board in the spring of 1863. His market tips, they tell -me, were considered as good as cash in bank. From all accounts -he was a great trader and made millions. He was -liberal, to the point of extravagance and had a great following -in the Street—until Henry Keep, known as William the -Silent, squeezed him out of all his millions in the Old Southern -corner. Keep, by the way, was the brother-in-law of Gov. -Roswell P. Flower.</p> - -<p>In most of the old corners the manipulation consisted -chiefly of not letting the other man know that you were -cornering the stock which he was variously invited to sell -short. It therefore was aimed chiefly at fellow professionals, -for the general public does not take kindly to the short side -of the account. The reasons that prompted these wise professionals -to put out short lines in such stocks were pretty -much the same as prompts them to do the same thing to-day. -Apart from the selling by faith-breaking politicians in -the Harlem corner of the Commodore, I gather from the -stories I have read that the professional traders sold the -stock because it was too high. And the reason they thought -it was too high was that it never before had sold so high; -and that made it too high to buy; and if it was too high to -buy it was just right to sell. That sounds pretty modern, -doesn’t it? They were thinking of the price, and the Commodore -was thinking of the value! And so, for years afterwards, -old-timers tell me that people used to say, “He went short of -Harlem!” whenever they wished to describe abject poverty.</p> - -<p><span class="pagenum" id="Page_243">243</span> -Many years ago I happened to be speaking to one of Jay -Gould’s old brokers. He assured me earnestly that Mr. Gould -not only was a most unusual man—it was of him that old -Daniel Drew shiveringly remarked, “His touch is Death!”—but -that he was head and shoulders above all other manipulators -past and present. He must have been a financial -wizard indeed to have done what he did; there can be no -question of that. Even at this distance I can see that he had -an amazing knack for adapting himself to new conditions, -and that is valuable in a trader. He varied his methods of -attack and defense without a pang because he was more concerned -with the manipulation of properties than with stock -speculation. He manipulated for investment rather than for -a market turn. He early saw that the big money was in owning -the railroads instead of rigging their securities on the -floor of the Stock Exchange. He utilised the stock market of -course. But I suspect it was because that was the quickest -and easiest way to quick and easy money and he needed -many millions, just as old Collis P. Huntington was always -hard up because he always needed twenty or thirty millions -more than the bankers were willing to lend him. Vision without -money means heartaches; with money, it means achievement; -and that means power; and that means money; and -that means achievement; and so on, over and over and over.</p> - -<p>Of course manipulation was not confined to the great figures -of those days. There were scores of minor manipulators. -I remember a story an old broker told me about the -manners and morals of the early ’60’s. He said:</p> - -<p>“The earliest recollection I have of Wall Street is of my -first visit to the financial district. My father had some business -to attend to there and for some reason or other took me -with him. We came down Broadway and I remember turning -off at Wall Street. We walked down Wall and just as we -came to Broad or, rather, Nassau Street, to the corner where -the Bankers’ Trust Company’s building now stands, I saw a -crowd following two men. The first was walking eastward,<span class="pagenum" id="Page_244">244</span> -trying to look unconcerned. He was followed by the other, a -red-faced man who was wildly waving his hat with one hand -and shaking the other fist in the air. He was yelling to beat -the band: ‘Shylock! Shylock! What’s the price of money? -Shylock! Shylock!’ I could see heads sticking out of windows. -They didn’t have skyscrapers in those days, but I was sure -the second- and third-story rubbernecks would tumble out. -My father asked what was the matter, and somebody answered -something I didn’t hear. I was too busy keeping a -death clutch on my father’s hand so that the jostling -wouldn’t separate us. The crowd was growing, as street -crowds do, and I wasn’t comfortable. Wild-eyed men came -running down from Nassau Street and up from Broad as well -as east and west on Wall Street. After we finally got out of -the jam my father explained to me that the man who was -shouting ‘Shylock’ was So-and-So. I have forgotten the name, -but he was the biggest operator in clique stocks in the city -and was understood to have made—and lost—more money -than any other man in Wall Street with the exception of -Jacob Little. I remember Jacob Little’s name because I -thought it was a funny name for a man to have. The other -man, the Shylock, was a notorious locker-up of money. His -name has also gone from me. But I remember he was tall and -thin and pale. In those days the cliques used to lock up -money by borrowing it or, rather, by reducing the amount -available to Stock Exchange borrowers. They would borrow -it and get a certified check. They wouldn’t actually take the -money out and use it. Of course that was rigging. It was a -form of manipulation, I think.”</p> - -<p>I agree with the old chap. It was a phase of manipulation -that we don’t have nowadays.</p> - -<hr /> - -<p><span class="pagenum" id="Page_245">245</span></p> - -<div class="chapter"> -<h2 id="XX"><i>XX</i></h2> -</div> - -<p class="in0"><span class="firstword">I myself</span> never spoke to any of the great stock manipulators -that the Street still talks about. I don’t mean leaders; I mean -manipulators. They were all before my time, although when -I first came to New York, <em>James R. Keene, greatest of them -all</em>, was in his prime. But I was a mere youngster then, exclusively -concerned with duplicating, in a reputable broker’s -office, the success I had enjoyed in the bucket shops of my -native city. And, then, too, at the time Keene was busy with -the U.S. Steel stocks—his manipulative masterpiece—I had -no experience with manipulation, no real knowledge of it or -of its value or meaning, and, for that matter, no great need -of such knowledge. If I thought about it at all I suppose I -must have regarded it as a well-dressed form of thimble-rigging, -of which the lowbrow form was such tricks as had -been tried on me in the bucket shops. Such talk as I since -have heard on the subject has consisted in great part of surmises -and suspicions; of guesses rather than intelligent analyses.</p> - -<p>More than one man who knew him well has told me that -Keene was the boldest and most brilliant operator that ever -worked in Wall Street. That is saying a great deal, for there -have been some great traders. Their names are now all but -forgotten, but nevertheless they were kings in their day—for -a day! They were pulled up out of obscurity into the sunlight -of financial fame by the ticker tape—and the little -paper ribbon didn’t prove strong enough to keep them suspended<span class="pagenum" id="Page_246">246</span> -there long enough for them to become historical fixtures. -At all events Keene was by all odds the best manipulator -of his day—and it was a long and exciting day.</p> - -<p>He capitalized his knowledge of the game, his experience -as an operator and his talents when he sold his services to -the Havemeyer brothers, who wanted him to develop a -market for the Sugar stocks. He was broke at the time or he -would have continued to trade on his own hook; and he was -some plunger! He was successful with Sugar; made the -shares trading favourites, and that made them easily vendible. -After that, he was asked time and again to take charge -of pools. I am told that in these pool operations he never -asked nor accepted a fee, but paid for his share like the other -members of the pool. The market conduct of the stock, of -course, was exclusively in his charge. Often there was talk -of treachery—on both sides. His feud with the Whitney-Ryan -clique arose from such accusations. It is not difficult -for a manipulator to be misunderstood by his associates. -They don’t see his needs as he himself does. I know this -from my own experience.</p> - -<p>It is a matter of regret that Keene did not leave an accurate -record of his greatest exploit—the successful manipulation -of the U.S. Steel shares in the spring of 1901. As I -understand it, Keene never had an interview with J. P. Morgan -about it. Morgan’s firm dealt with or through Talbot J. -Taylor & Co., at whose office Keene made his headquarters. -Talbot Taylor was Keene’s son-in-law. I am assured that -Keene’s fee for his work consisted of the pleasure he derived -from the work. That he made millions trading in the market -he helped to put up that spring is well known. He told a -friend of mine that in the course of a few weeks he sold in -the open market for the underwriters’ syndicate more than -seven hundred and fifty thousand shares. Not bad when you -consider two things: That they were new and untried stocks -of a corporation whose capitalization was greater than the -entire debt of the United States at that time; and second,<span class="pagenum" id="Page_247">247</span> -that men like D. G. Reid, W. B. Leeds, the Moore brothers, -Henry Phipps, H. C. Frick and the other Steel magnates also -sold hundreds of thousands of shares to the public at the -same time in the same market that Keene helped to create.</p> - -<p>Of course, general conditions favoured him. Not only actual -business but sentiment and his unlimited financial backing -made possible his success. What we had was not merely -a big bull market but a boom and a state of mind not likely -to be seen again. The undigested-securities panic came later, -when Steel common, which Keene had marked up to 55 in -1901, sold at 10 in 1903 and at 8⅞ in 1904.</p> - -<p>We can’t analyse Keene’s manipulative campaigns. His -books are not available; the adequately detailed record is -nonexistent. For example, it would be interesting to see how -he worked in Amalgamated Copper. H. H. Rogers and William -Rockefeller had tried to dispose of their surplus stock -in the market and had failed. Finally they asked Keene to -market their line, and he agreed. Bear in mind that H. H. -Rogers was one of the ablest business men of his day in Wall -Street and that William Rockefeller was the boldest speculator -of the entire Standard Oil coterie. They had practically -unlimited resources and vast prestige as well as years of experience -in the stock-market game. And yet they had to go -to Keene. I mention this to show you that there are some -tasks which it requires a specialist to perform. Here was a -widely touted stock, sponsored by America’s greatest capitalists, -that could not be sold except at a great sacrifice of -money and prestige. Rogers and Rockefeller were intelligent -enough to decide that Keene alone might help them.</p> - -<p>Keene began to work at once. He had a bull market to -work in and sold two hundred and twenty thousand shares -of Amalgamated at around par. After he disposed of the -insiders’ line the public kept on buying and the price went -ten points higher. Indeed the insiders got bullish on the -stock they had sold when they saw how eagerly the public -was taking it. There was a story that Rogers actually advised<span class="pagenum" id="Page_248">248</span> -Keene to go long of Amalgamated. It is scarcely credible -that Rogers meant to unload on Keene. He was too -shrewd a man not to know that Keene was no bleating lamb. -Keene worked as he always did—that is, <em>doing his big selling -on the way down after the big rise</em>. Of course his tactical -moves were directed by his needs and by the minor currents -that changed from day to day. In the stock market, as in -warfare, it is well to keep in mind the difference between -strategy and tactics.</p> - -<p>One of Keene’s confidential men—he is the best fly fisherman -I know—told me only the other day that during the -Amalgamated campaign Keene would find himself almost -out of stock one day—that is, out of the stock he had been -forced to take in marking up the price; and on the next day -he would buy back thousands of shares. On the day after -that, he would sell on balance. Then he would leave the -market absolutely alone, to see how it would take care of -itself and also to accustom it to do so. When it came to the -actual marketing of the line he did what I told you: he sold -it on the way down. The trading public is always looking for -a rally, and, besides, there is the covering by the shorts.</p> - -<p>The man who was closest to Keene during that deal told -me that after Keene sold the Rogers-Rockefeller line for -something like twenty or twenty-five million dollars in cash -Rogers sent him a check for two hundred thousand. This reminds -you of the millionaire’s wife who gave the Metropolitan -Opera House scrub-woman fifty cents reward for finding -the one-hundred-thousand-dollar pearl necklace. Keene sent -the check back with a polite note saying he was not a stock -broker and that he was glad to have been of some service to -them. They kept the check and wrote him that they would -be glad to work with him again. Shortly after that it was -that H. H. Rogers gave Keene the friendly tip to buy Amalgamated -at around 130!</p> - -<p>A brilliant operator, James R. Keene! His private secretary -told me that when the market was going his way Mr. Keene<span class="pagenum" id="Page_249">249</span> -was irascible; and those who knew him say his irascibility -was expressed in sardonic phrases that lingered long in the -memory of his hearers. But when he was losing he was in -the best of humour, a polished man of the world, agreeable, -epigrammatic, interesting.</p> - -<p>He had in superlative degree the qualities of mind that -are associated with successful speculators anywhere. That -he did not argue with the tape is plain. He was utterly fearless -but never reckless. He could and did turn in a twinkling, -if he found he was wrong.</p> - -<p>Since his day there have been so many changes in Stock -Exchange rules and so much more rigorous enforcement of -old rules, so many new taxes on stock sales and profits, and -so on, that the game seems different. Devices that Keene -could use with skill and profit can no longer be utilised. Also, -we are assured, the business morality of Wall Street is on a -higher plane. Nevertheless it is fair to say that in any period -of our financial history Keene would have been a great -manipulator because he was a great stock operator and knew -the game of speculation from the ground up. He achieved -what he did because conditions at the time permitted him -to do so. He would have been as successful in his undertakings -in 1922 as he was in 1901 or in 1876, when he first came -to New York from California and made nine million dollars -in two years. There are men whose gait is far quicker than -the mob’s. They are bound to lead—no matter how much -the mob changes.</p> - -<p>As a matter of fact, the change is by no means as radical -as you’d imagine. The rewards are not so great, for it is no -longer pioneer work and therefore it is not pioneer’s pay. -But in certain respects manipulation is easier than it was; in -other ways much harder than in Keene’s day.</p> - -<p>There is no question that advertising is an art, and manipulation -is the art of advertising through the medium of the -tape. The tape should tell the story the manipulator wishes -its readers to see. The truer the story the more convincing it<span class="pagenum" id="Page_250">250</span> -is bound to be, and the more convincing it is the better the -advertising is. A manipulator to-day, for instance, has not -only to make a stock look strong but also to make it be -strong. Manipulation therefore must be based on sound trading -principles. That is what made Keene such a marvellous -manipulator; he was a consummate trader to begin with.</p> - -<p>The word “manipulation” has come to have an ugly sound. -It needs an alias. I do not think there is anything so very -mysterious or crooked about the process itself when it has -for an object the selling of a stock in bulk, provided, of -course, that such operations are not accompanied by misrepresentation. -There is little question that a manipulator necessarily -seeks his buyers among speculators. He turns to men -who are looking for big returns on their capital and are -therefore willing to run a greater than normal business risk. -I can’t have much sympathy for the man who, knowing this, -nevertheless blames others for his own failure to make easy -money. He is a devil of a clever fellow when he wins. But -when he loses money the other fellow was a crook; a manipulator! -In such moments and from such lips the word connotes -the use of marked cards. But this is not so.</p> - -<p>Usually the object of manipulation is to develop marketability—that -is, the ability to dispose of fair-sized blocks at -some price at any time. Of course a pool, by reason of a reversal -of general market conditions, may find itself unable -to sell except at a sacrifice too great to be pleasing. They -then may decide to employ a professional, believing that -his skill and experience will enable him to conduct an -orderly retreat instead of suffering an appalling rout.</p> - -<p>You will notice that I do not speak of manipulation designed -to permit considerable accumulation of a stock as -cheaply as possible, as, for instance, in buying for control, -because this does not happen often nowadays.</p> - -<p>When Jay Gould wished to cinch his control of Western -Union and decided to buy a big block of the stock, Washington -E. Connor, who had not been seen on the floor of the<span class="pagenum" id="Page_251">251</span> -Stock Exchange for years, suddenly showed up in person at -the Western Union Post. He began to bid for Western -Union. The traders to a man laughed—at his stupidity in -thinking them so simple—and they cheerfully sold him all -the stock he wanted to buy. It was too raw a trick, to think -he could put up the price by acting as though Mr. Gould -wanted to buy Western Union. Was that manipulation? I -think I can only answer that by saying “No; and yes!”</p> - -<p>In the majority of cases the object of manipulation is, as -I said, to sell stock to the public at the best possible price. -It is not alone a question of selling but of distributing. It is -obviously better in every way for a stock to be held by a -thousand people than by one man—better for the market in -it. So it is not alone the sale at a good price but the character -of the distribution that a manipulator must consider.</p> - -<p>There is no sense in marking up the price to a very high -level if you cannot induce the public to take it off your -hands later. Whenever inexperienced manipulators try to -unload at the top and fail, old-timers look mighty wise and -tell you that you can lead a horse to water but you cannot -make him drink. Original devils! As a matter of fact, it is -well to remember a rule of manipulation, a rule that Keene -and his able predecessors well knew. It is this: <em>Stocks are -manipulated to the highest point possible and then sold to -the public on the way down</em>.</p> - -<p>Let me begin at the beginning. Assume that there is some -one—an underwriting syndicate or a pool or an individual—that -has a block of stock which it is desired to sell at the best -price possible. It is a stock duly listed on the New York -Stock Exchange. The best place for selling it ought to be the -open market, and the best buyer ought to be the general -public. The negotiations for the sale are in charge of a man. -He—or some present or former associate—has tried to sell -the stock on the Stock Exchange and has not succeeded. He -is—or soon becomes—sufficiently familiar with stock-market -operations to realise that more experience and greater aptitude<span class="pagenum" id="Page_252">252</span> -for the work are needed than he possesses. He knows -personally or by hearsay several men who have been successful -in their handling of similar deals, and he decides to -avail himself of their professional skill. He seeks one of them -as he would seek a physician if he were ill or an engineer if -he needed that kind of expert.</p> - -<p>Suppose he has heard of me as a man who knows the -game. Well, I take it that he tries to find out all he can about -me. He then arranges for an interview, and in due time calls -at my office.</p> - -<p>Of course, the chances are that I know about the stock -and what it represents. It is my business to know. That is -how I make my living. My visitor tells me what he and his -associates wish to do, and asks me to undertake the deal.</p> - -<p>It is then my turn to talk. I ask for whatever information -I deem necessary to give me a clear understanding of what I -am asked to undertake. I determine the value and estimate -the market possibilities of that stock. That and my reading -of current conditions in turn help me to gauge the likelihood -of success for the proposed operation.</p> - -<p>If my information inclines me to a favourable view I accept -the proposition and tell him then and there what my -terms will be for my services. If he in turn accepts my terms—the -honorarium and the conditions—I begin my work at -once.</p> - -<p>I generally ask and receive calls on a block of stock. I insist -upon graduated calls as the fairest to all concerned. The -price of the call begins at a little below the prevailing market -price and goes up; say, for example, that I get calls on one -hundred thousand shares and the stock is quoted at 40. I -begin with a call for some thousands of shares at 35, another -at 37, another at 40, and at 45 and 50, and so on up to 75 -or 80.</p> - -<p>If as the result of my professional work—my manipulation—the -price goes up, and if at the highest level there is a -good demand for the stock so that I can sell fair-sized blocks<span class="pagenum" id="Page_253">253</span> -of it I of course call the stock. I am making money; but so -are my clients making money. This is as it should be. If my -skill is what they are paying for they ought to get value. Of -course, there are times when a pool may be wound up at a -loss, but that is seldom, for I do not undertake the work unless -I see my way clear to a profit. This year I was not so -fortunate in one or two deals, and I did not make a profit. -There are reasons, but that is another story, to be told later—perhaps.</p> - -<p>The first step in a bull movement in a stock is to advertise -the fact that there is a bull movement on. Sounds silly, -doesn’t it? Well, think a moment. It isn’t as silly as it -sounded, is it? The most effective way to advertise what, in -effect, are your honourable intentions is to make the stock -active and strong. After all is said and done, <em>the greatest -publicity agent in the wide world is the ticker, and by far -the best advertising medium is the tape</em>. I do not need to -put out any literature for my clients. I do not have to inform -the daily press as to the value of the stock or to work the -financial reviews for notices about the company’s prospects. -Neither do I have to get a following. I accomplish all these -highly desirable things by merely making the stock active. -<em>When there is activity there is a synchronous demand for -explanations</em>; and that means, of course, that the necessary -reasons—for publication—supply themselves without the -slightest aid from me.</p> - -<p>Activity is all that the floor traders ask. They will buy or -sell any stock at any level if only there is a free market for -it. They will deal in thousands of shares wherever they see -activity, and their aggregate capacity is considerable. It -necessarily happens that they constitute the manipulator’s -first crop of buyers. They will follow you all the way up and -they thus are a great help at all the stages of the operation. -I understand that James R. Keene used habitually to employ -the most active of the room traders, both to conceal the -source of the manipulation and also because he knew that<span class="pagenum" id="Page_254">254</span> -they were by far the best business-spreaders and tip-distributors. -He often gave calls to them—verbal calls—above -the market, so that they might do some helpful work -before they could cash in. He made them earn their profit. -To get a professional following I myself have never had to -do more than to make a stock active. Traders don’t ask for -more. It is well, of course, to remember that these professionals -on the floor of the Exchange buy stocks with the intention -of selling them at a profit. They do not insist on its -being a big profit; but it must be a quick profit.</p> - -<p>I make the stock active in order to draw the attention of -speculators to it, for the reasons I have given. I buy it and I -sell it and the traders follow suit. The selling pressure is not -apt to be strong where a man has as much speculatively held -stock sewed up—in calls—as I insist on having. The buying, -therefore, prevails over the selling, and the public follows -the lead not so much of the manipulator as of the room traders. -It comes in as a buyer. This highly desirable demand I -fill—that is, I sell stock on balance. If the demand is what it -ought to be it will absorb more than the amount of stock I -was compelled to accumulate in the earlier stages of the -manipulation; and when this happens I sell the stock short—that -is, technically. In other words, I sell more stock than I -actually hold. It is perfectly safe for me to do so since I am -really selling against my calls. Of course, when the demand -from the public slackens, the stock ceases to advance. Then -I wait.</p> - -<p>Say, then, that the stock has ceased to advance. There -comes a weak day. The entire market may develop a reactionary -tendency or some sharp-eyed trader may perceive -that there are no buying orders to speak of in my stock, and -he sells it, and his fellows follow. Whatever the reason may -be, my stock starts to go down. Well, I begin to buy it. I -give it the support that a stock ought to have if it is in good -odour with its own sponsors. And more: I am able to support -it without accumulating it—that is, without increasing the<span class="pagenum" id="Page_255">255</span> -amount I shall have to sell later on. Observe that I do this -without decreasing my financial resources. Of course what -I am really doing is covering stock I sold short at higher -prices when the demand from the public or from the traders -or from both enabled me to do it. It is always well to make -it plain to the traders—and to the public, also—that there is -a demand for the stock on the way down. That tends to -check both reckless short selling by the professionals and -liquidation by frightened holders—which is the selling you -usually see when a stock gets weaker and weaker, which in -turn is what a stock does when it is not supported. These -covering purchases of mine constitute what I call the stabilising -process.</p> - -<p>As the market broadens I of course sell stock on the way -up, but never enough to check the rise. This is in strict accordance -with my stabilising plans. It is obvious that the -more stock I sell on a reasonable and orderly advance the -more I encourage the conservative speculators, who are -more numerous than the reckless room traders; and in addition -the more support I shall be able to give to the stock on -the inevitable weak days. By always being short I always am -in a position to support the stock without danger to myself. -As a rule I begin my selling at a price that will show me a -profit. But I often sell without having a profit, simply to -create or to increase what I may call my riskless buying -power. My business is not alone to put up the price or to -sell a big block of stock for a client but to make money for -myself. That is why I do not ask my clients to finance my -operations. My fee is contingent upon my success.</p> - -<p>Of course what I have described is not my invariable -practice. I neither have nor adhere to an inflexible system. I -modify my terms and conditions according to circumstances.</p> - -<p>A stock which it is desired to distribute should be manipulated -to the highest possible point and then sold. I repeat -this both because it is fundamental and because the public -apparently believes that the selling is all done at the top.<span class="pagenum" id="Page_256">256</span> -Sometimes a stock gets waterlogged, as it were; it doesn’t go -up. That is the time to sell. The price naturally will go down -on your selling rather further than you wish, but you can -generally nurse it back. As long as a stock that I am manipulating -goes up on my buying I know I am hunky, and if need -be I buy it with confidence and use my own money without -fear—precisely as I would any other stock that acts the same -way. It is the line of least resistance. You remember my trading -theories about that line, don’t you? Well, when the price -line of least resistance is established I follow it, not because -I am manipulating that particular stock at that particular -moment but because I am a stock operator at all times.</p> - -<p>When my buying does not put the stock up I stop buying -and then proceed to sell it down; and that also is exactly -what I would do with that same stock if I did not happen to -be manipulating it. The principal marketing of the stock, as -you know, is done on the way down. <em>It is perfectly astonishing -how much stock a man can get rid of on a decline.</em></p> - -<p>I repeat that at no time during the manipulation do I forget -to be a stock trader. My problems as a manipulator, after -all, are the same that confront me as an operator. All manipulation -comes to an end when the manipulator cannot make -a stock do what he wants it to do. <em>When the stock you are -manipulating doesn’t act as it should, quit. Don’t argue with -the tape. Do not seek to lure the profit back. Quit while the -quitting is good—and cheap.</em></p> - -<hr /> - -<p><span class="pagenum" id="Page_257">257</span></p> - -<div class="chapter"> -<h2 id="XXI"><i>XXI</i></h2> -</div> - -<p class="in0"><span class="firstword">I am well aware</span> that all these generalities do not sound -especially impressive. Generalities seldom do. Possibly I may -succeed better if I give a concrete example. I’ll tell you how -I marked up the price of a stock 30 points, and in so doing -accumulated only seven thousand shares and developed a -market that would absorb almost any amount of stock.</p> - -<p>It was Imperial Steel. The stock had been brought out by -reputable people and it had been fairly well tipped as a -property of value. About 30 per cent of the capital stock was -placed with the general public through various Wall Street -houses, but there had been no significant activity in the -shares after they were listed. From time to time somebody -would ask about it and one or another insider—members of -the original underwriting syndicate—would say that the -company’s earnings were better than expected and the prospects -more than encouraging. This was true enough and -very good as far as it went, but not exactly thrilling. The -speculative appeal was absent, and from the investor’s point -of view the price stability and dividend permanency of the -stock were not yet demonstrated. It was a stock that never -behaved sensationally. It was so gentlemanly that no corroborative -rise ever followed the insiders’ eminently truthful -reports. On the other hand, neither did the price decline.</p> - -<p>Imperial Steel remained unhonoured and unsung and untipped, -content to be one of those stocks that don’t go down -because nobody sells and that nobody sells because nobody<span class="pagenum" id="Page_258">258</span> -likes to go short of a stock that is not well distributed; the -seller is too much at the mercy of the loaded-up inside -clique. Similarly, there is no inducement to buy such a stock. -To the investor Imperial Steel therefore remained a speculation. -To the speculator it was a dead one—the kind that -makes an investor of you against your will by the simple -expedient of falling into a trance the moment you go long -of it. The chap who is compelled to lug a corpse a year or -two always loses more than the original cost of the deceased; -he is sure to find himself tied up with it when some really -good things come his way.</p> - -<p>One day the foremost member of the Imperial Steel syndicate, -acting for himself and associates, came to see me. -They wished to create a market for the stock, of which they -controlled the undistributed 70 per cent. They wanted me -to dispose of their holdings at better prices than they -thought they would obtain if they tried to sell in the open -market. They wanted to know on what terms I would undertake -the job.</p> - -<p>I told him that I would let him know in a few days. Then -I looked into the property. I had experts go over the various -departments of the company—industrial, commercial and -financial. They made reports to me which were unbiased. I -wasn’t looking for the good or the bad points, but for the -facts, such as they were.</p> - -<p>The reports showed that it was a valuable property. The -prospects justified purchases of the stock at the prevailing -market price—if the investor were willing to wait a little. -Under the circumstances an advance in the price would in -reality be the commonest and most legitimate of all market -movements—to wit, the process of discounting the future. -There was therefore no reason that I could see why I should -not conscientiously and confidently undertake the bull -manipulation of Imperial Steel.</p> - -<p>I let my man know my mind and he called at my office to -talk the deal over in detail. I told him what my terms were.<span class="pagenum" id="Page_259">259</span> -For my services I asked no cash, but calls on one hundred -thousand shares of the Imperial Steel stock. The price of the -calls ran up from 70 to 100. That may seem like a big fee to -some. But they should consider that the insiders were certain -they themselves could not sell one hundred thousand -shares, or even fifty thousand shares, at 70. There was no -market for the stock. All the talk about wonderful earnings -and excellent prospects had not brought in buyers, not to -any great extent. In addition, I could not get my fee in cash -without my clients first making some millions of dollars. -What I stood to make was not an exorbitant selling commission. -It was a fair contingent fee.</p> - -<p>Knowing that the stock had real value and that general -market conditions were bullish and therefore favourable for -an advance in all good stocks, I figured that I ought to do -pretty well. My clients were encouraged by the opinions I -expressed, agreed to my terms at once, and the deal began -with pleasant feelings all around.</p> - -<p>I proceeded to protect myself as thoroughly as I could. -The syndicate owned or controlled about 70 per cent of the -outstanding stock. I had them deposit their 70 per cent -under a trust agreement. I didn’t propose to be used as a -dumping ground for the big holders. With the majority -holdings thus securely tied up, I still had 30 per cent of scattered -holdings to consider, but that was a risk I had to take. -Experienced speculators do not expect ever to engage in -utterly riskless ventures. As a matter of fact, it was not much -more likely that all the untrusteed stock would be thrown on -the market at one fell swoop than that all the policyholders -of a life-insurance company would die at the same hour, the -same day. There are unprinted actuarial tables of stock-market -risks as well as of human mortality.</p> - -<p>Having protected myself from some of the avoidable dangers -of a stock-market deal of that sort, I was ready to begin -my campaign. Its objective was to make my calls valuable. -To do this I must put up the price and develop a market in<span class="pagenum" id="Page_260">260</span> -which I could sell one hundred thousand shares—the stock -in which I held options.</p> - -<p>The first thing I did was to find out how much stock was -likely to come on the market on an advance. This was easily -done through my brokers, who had no trouble in ascertaining -what stock was for sale at or a little above the market. I -don’t know whether the specialists told them what orders -they had on their books or not. The price was nominally 70, -but I could not have sold one thousand shares at that price. -I had no evidence of even a moderate demand at that figure -or even a few points lower. I had to go by what my brokers -found out. But it was enough to show me how much stock -there was for sale and how little was wanted.</p> - -<p>As soon as I had a line on these points I quietly took all -the stock that was for sale at 70 and higher. When I say “I” -you will understand that I mean my brokers. The sales were -for account of some of the minority holders because my -clients naturally had cancelled whatever selling orders they -might have given out before they tied up their stock.</p> - -<p>I didn’t have to buy very much stock. Moreover, I knew -that the right kind of advance would bring in other buying -orders—and, of course, selling orders also.</p> - -<p>I didn’t give bull tips on Imperial Steel to anybody. I -didn’t have to. My job was to seek directly to influence sentiment -by the best possible kind of publicity. I do not say that -there should never be bull propaganda. It is as legitimate -and indeed as desirable to advertise the value of a new stock -as to advertise the value of woolens or shoes or automobiles. -Accurate and reliable information should be given by the -public. But what I meant was that the tape did all that was -needed for my purpose. As I said before, the reputable -newspapers always try to print explanations for market -movements. It is news. Their readers demand to know not -only what happens in the stock market but why it happens. -Therefore without the manipulator lifting a finger the financial -writers will print all the available information and gossip,<span class="pagenum" id="Page_261">261</span> -and also analyse the reports of earnings, trade condition -and outlook; in short, whatever may throw light on the advance. -Whenever a newspaperman or an acquaintance asks -my opinion of a stock and I have one I do not hesitate to -express it. I do not volunteer advice and I never give tips, -but I have nothing to gain in my operations from secrecy. -At the same time I realise that the best of all tipsters, the -most persuasive of all salesmen, is the tape.</p> - -<p>When I had absorbed all the stock that was for sale at 70 -and a little higher I relieved the market of that pressure, and -naturally that made clear for trading purposes the line of -least resistance in Imperial Steel. It was manifestly upward. -The moment that fact was perceived by the observant traders -on the floor they logically assumed that the stock was in -for an advance the extent of which they could not know; but -they knew enough to begin buying. Their demand for Imperial -Steel, created exclusively by the obviousness of the -stock’s rising tendency—the tape’s infallible bull tip!—I -promptly filled. I sold to the traders the stock that I had -bought from the tired-out holders at the beginning. Of -course this selling was judiciously done; I contented myself -with supplying the demand. I was not forcing my stock on -the market and I did not want too rapid an advance. It -wouldn’t have been good business to sell out the half of my -one hundred thousand shares at that stage of the proceedings. -My job was to make a market on which I might sell -my entire line.</p> - -<p>But even though I sold only as much as the traders were -anxious to buy, the market was temporarily deprived of my -own buying power, which I had hitherto exerted steadily. -In due course the traders’ purchases ceased and the price -stopped rising. As soon as that happened there began the -selling by disappointed bulls or by those traders whose reasons -for buying disappeared the instant the rising tendency -was checked. But I was ready for this selling, and on the -way down I bought back the stock I had sold to the traders<span class="pagenum" id="Page_262">262</span> -a couple of points higher. This buying of stock I knew was -bound to be sold in turn checked the downward course; and -when the price stopped going down the selling orders -stopped coming in.</p> - -<p>I then began all over again. I took all the stock that was -for sale on the way up—it wasn’t very much—and the price -began to rise a second time; from a higher starting point -than 70. <em>Don’t</em> forget that on the way down there are many -holders who wish to heaven they had sold theirs but won’t -do it three or four points from the top. Such speculators always -vow they will surely sell out if there is a rally. They -put in their orders to sell on the way up, and then they -change their minds with the change in the stock’s price-trend. -Of course there is always profit taking from safe-playing -quick runners to whom a profit is always a profit to -be taken.</p> - -<p>All I had to do after that was to repeat the process; alternately -buying and selling; but always working higher.</p> - -<p>Sometimes, after you have taken all the stock that is for -sale, it pays to rush up the price sharply, to have what might -be called little bull flurries in the stock you are manipulating. -It is excellent advertising, because it makes talk and also -brings in both the professional traders and that portion of -the speculating public that likes action. It is, I think, a large -portion. I did that in Imperial Steel, and whatever demand -was created by those spurts I supplied. My selling always -kept the upward movement within bounds both as to extent -and as to speed. In buying on the way down and selling on -the way up I was doing more than marking up the price: I -was developing the marketability of Imperial Steel.</p> - -<p>After I began my operations in it there never was a time -when a man could not buy or sell the stock freely; I mean by -this, buy or sell a reasonable amount without causing over-violent -fluctuations in the price. The fear of being left high -and dry if he bought, or squeezed to death if he sold, was -gone. The gradual spread among the professionals and the<span class="pagenum" id="Page_263">263</span> -public of a belief in the permanence of the market for Imperial -Steel had much to do with creating confidence in the -movement; and, of course, the activity also put an end to a -lot of other objections. The result was that after buying and -selling a good many thousands of shares I succeeded in -making the stocks sell at par. At one hundred dollars a share -everybody wanted to buy Imperial Steel. Why not? Everybody -now knew that it was a good stock; that it had been -and still was a bargain. The proof was the rise. A stock that -could go thirty points from 70 could go up thirty more from -par. That is the way a good many argued.</p> - -<p>In the course of marking up the price those thirty points I -accumulated only seven thousand shares. The price on this -line averaged me almost exactly 85. That meant a profit of -fifteen points on it; but, of course, my entire profit, still on -paper, was much more. It was a safe enough profit, for I had -a market for all I wanted to sell. The stock would sell higher -on judicious manipulation and I had graduated calls on one -hundred thousand shares beginning at 70 and ending at 100.</p> - -<p>Circumstances prevented me from carrying out certain -plans of mine for converting my paper profits into good hard -cash. It had been, if I do say so myself, a beautiful piece of -manipulation, strictly legitimate and deservedly successful. -The property of the company was valuable and the stock -was not dear at the higher price. One of the members of the -original syndicate developed a desire to secure the control -of the property—a prominent banking house with ample resources. -The control of a prosperous and growing concern -like the Imperial Steel Corporation is possibly more valuable -to a banking firm than to individual investors. At all events, -this firm made me an offer for all my options on the stock. It -meant an enormous profit for me, and I instantly took it. I -am always willing to sell out when I can do so in a lump at -a good profit. I was quite content with what I made out of it.</p> - -<p>Before I disposed of my calls on the hundred thousand -shares I learned that these bankers had employed more experts<span class="pagenum" id="Page_264">264</span> -to make a still more thorough examination of the property. -Their reports showed enough to bring me in the offer I -got. I kept several thousand shares of the stock for investment. -I believe in it.</p> - -<p>There wasn’t anything about my manipulation of Imperial -Steel that wasn’t normal and sound. As long as the price -went up on my buying I knew I was O.K. The stock never -got waterlogged, as a stock sometimes does. When you find -that it fails to respond adequately to your buying you don’t -need any better tip to sell. You know that if there is any -value to a stock and general market conditions are right you -can always nurse it back after a decline, no matter if it’s -twenty points. But I never had to do anything like that in -Imperial Steel.</p> - -<p>In my manipulation of stocks I never lose sight of basic -trading principles. Perhaps you wonder why I repeat this or -why I keep on harping on the fact that I never argue with -the tape or lose my temper at the market because of its behaviour. -You would think—wouldn’t you?—that shrewd -men who have made millions in their own business and in -addition have successfully operated in Wall Street at times -would realise the wisdom of playing the game dispassionately. -Well, you would be surprised at the frequency with -which some of our most successful promoters behave like -peevish women because the market does not act the way -they wish it to act. They seem to take it as a personal slight, -and they proceed to lose money by first losing their temper.</p> - -<p>There has been much gossip about a disagreement between -John Prentiss and myself. People have been led to -expect a dramatic narrative of a stock-market deal that went -wrong or some double-crossing that cost me—or him—millions; -or something of that sort. Well, it wasn’t.</p> - -<p>Prentiss and I had been friendly for years. He had given -me at various times information that I was able to utilise -profitably, and I had given him advice which he may or may -not have followed. If he did he saved money.</p> - -<p><span class="pagenum" id="Page_265">265</span> -He was largely instrumental in the organisation and promotion -of the Petroleum Products Company. After a more -or less successful market début general conditions changed -for the worse and the new stock did not fare as well as -Prentiss and his associates had hoped. When basic conditions -took a turn for the better Prentiss formed a pool and -began operations in Pete Products.</p> - -<p>I cannot tell you anything about his technique. He didn’t -tell me how he worked and I didn’t ask him. But it was plain -that notwithstanding his Wall Street experience and his undoubted -cleverness, whatever it was he did proved of little -value and it didn’t take the pool long to find out that they -couldn’t get rid of much stock. He must have tried everything -he knew, because a pool manager does not ask to be -superseded by an outsider unless he feels unequal to the -task, and that is the last thing the average man likes to admit. -At all events he came to me and after some friendly -preliminaries he said he wanted me to take charge of the -market for Pete Products and dispose of the pool’s holdings, -which amounted to a little over one hundred thousand -shares. The stock was selling at 102 to 103.</p> - -<p>The thing looked dubious to me and I declined his proposition -with thanks. But he insisted that I accept. He put it -on personal grounds, so that in the end I consented. I constitutionally -dislike to identify myself with enterprises in the -success of which I cannot feel confidence, but I also think a -man owes something to his friends and acquaintances. I said -I would do my best, but I told him I did not feel very cocky -about it and I enumerated the adverse factors that I would -have to contend with. But all Prentiss said to that was that -he wasn’t asking me to guarantee millions in profits to the -pool. He was sure that if I took hold I’d make out well -enough to satisfy any reasonable being.</p> - -<p>Well, there I was, engaged in doing something against my -own judgment. I found, as I feared, a pretty tough state of -affairs, due in great measure to Prentiss’ own mistakes while<span class="pagenum" id="Page_266">266</span> -he was manipulating the stock for account of the pool. But -the chief factor against me was time. I was convinced that -we were rapidly approaching the end of a bull swing and -therefore that the improvement in the market, which had -so encouraged Prentiss, would prove to be merely a short-lived -rally. I feared that the market would turn definitely -bearish before I could accomplish much with Pete Products. -However, I had given my promise and I decided to work as -hard as I knew how.</p> - -<p>I started to put up the price. I had moderate success. I -think I ran it up to 107 or thereabouts, which was pretty -fair, and I was even able to sell a little stock on balance. It -wasn’t much, but I was glad not to have increased the pool’s -holdings. There were a lot of people not in the pool who -were just waiting for a small rise to dump their stock, and I -was a godsend to them. Had general conditions been better -I also would have done better. It was too bad that I wasn’t -called in earlier. All I could do now, I felt, was to get out -with as little loss as possible to the pool.</p> - -<p>I sent for Prentiss and told him my views. But he started -to object. I then explained to him why I took the position I -did. I said: “Prentiss, I can feel very plainly the pulse of the -market. There is no follow-up in your stock. It is no trick to -see just what the public’s reaction is to my manipulation. -Listen: When Pete Products is made as attractive to traders -as possible and you give it all the support needed at all times -and notwithstanding all that you find that the public leaves -it alone you may be sure that there is something wrong, not -with the stock but with the market. There is absolutely no -use in trying to force matters. You are bound to lose if you -do. A pool manager should be willing to buy his own stock -when he has company. But when he is the only buyer in the -market he’d be an ass to buy it. For every five thousand -shares I buy the public ought to be willing or able to buy -five thousand more. But I certainly am not going to do all -the buying. If I did, all I would succeed in doing would be<span class="pagenum" id="Page_267">267</span> -to get soaked with a lot of long stock that I don’t want. -There is only one thing to do, and that is to sell. And the -only way to sell is to sell.”</p> - -<p>“You mean, sell for what you can get?” asked Prentiss.</p> - -<p>“Right!” I said. I could see he was getting ready to object. -“If I am to sell the pool’s stock at all you can make up your -mind that the price is going to break through par and——”</p> - -<p>“Oh, no! Never!” he yelled. You’d have imagined I was -asking him to join a suicide club.</p> - -<p>“Prentiss,” I said to him, “it is a cardinal principle of stock -manipulation to put up a stock in order to sell it. But you -don’t sell in bulk on the advance. You can’t. The big selling -is done on the way down from the top. I cannot put up your -stock to 125 or 130. I’d like to, but it can’t be done. So you -will have to begin your selling from this level. In my opinion -all stocks are going down, and Petroleum Products isn’t going -to be the one exception. It is better for it to go down -now on the pool’s selling than for it to break next month on -selling by some one else. It will go down anyhow.”</p> - -<p>I can’t see that I said anything harrowing, but you could -have heard his howls in China. He simply wouldn’t listen to -such a thing. It would never do. It would play the dickens -with the stock’s record, to say nothing of inconvenient possibilities -at the banks where the stock was held as collateral -on loans, and so on.</p> - -<p>I told him again that in my judgment nothing in the world -could prevent Pete Products from breaking fifteen or twenty -points, because the entire market was headed that way, and -I once more said it was absurd to expect his stock to be a -dazzling exception. But again my talk went for nothing. He -insisted that I support the stock.</p> - -<p>Here was a shrewd business man, one of the most successful -promoters of the day, who had made millions in Wall -Street deals and knew much more than the average man -about the game of speculation, actually insisting on supporting -a stock in an incipient bear market. It was his stock, to<span class="pagenum" id="Page_268">268</span> -be sure, but it was nevertheless bad business. So much so -that it went against the grain and I again began to argue -with him. But it was no use. He insisted on putting in supporting -orders.</p> - -<p>Of course when the general market got weak and the decline -began in earnest Pete Products went with the rest. -Instead of selling I actually bought stock for the insiders’ -pool—by Prentiss’ orders.</p> - -<p>The only explanation is that Prentiss did not believe the -bear market was right on top of us. I myself was confident -that the bull market was over. I had verified my first surmise -by tests not alone in Pete Products but in other stocks as -well. I didn’t wait for the bear market to announce its safe -arrival before I started selling. Of course I didn’t sell a share -of Pete Products, though I was short of other stocks.</p> - -<p>The Pete Products pool, as I expected, was hung up with -all they held to begin with and with all they had to take in -their futile effort to hold up the price. In the end they did -liquidate; but at much lower figures than they would have -got if Prentiss had let me sell when and as I wished. It -could not be otherwise. But Prentiss still thinks he was right—or -says he does. I understand he says the reason I gave -him the advice I did was that I was short of other stocks and -the general market was going up. It implies, of course, that -the break in Pete Products that would have resulted from -selling out the pool’s holdings at any price would have -helped my bear position in other stocks.</p> - -<p>That is all tommyrot. I was not bearish because I was -short of stocks. I was bearish because that was the way I -sized up the situation, and I sold stocks short only after I -turned bearish. There never is much money in doing things -wrong end to; not in the stock market. My plan for selling -the pool’s stock was based on what the experience of twenty -years told me alone was feasible and therefore wise. Prentiss -ought to have been enough of a trader to see it as plainly as -I did. It was too late to try to do anything else.</p> - -<p><span class="pagenum" id="Page_269">269</span> -I suppose Prentiss shares the delusion of thousands of outsiders -who think a manipulator can do anything. He can’t. -The biggest thing Keene did was his manipulation of U.S. -Steel common and preferred in the spring of 1901. He succeeded -not because he was clever and resourceful and not -because he had a syndicate of the richest men in the country -back of him. He succeeded partly because of those reasons -but chiefly because the general market was right and the -public’s state of mind was right.</p> - -<p>It isn’t good business for a man to act against the teachings -of experience and against common sense. But the suckers -in Wall Street are not all outsiders. Prentiss’ grievance -against me is what I have just told you. He feels sore because -I did my manipulation not as I wanted to but as he -asked me to.</p> - -<p>There isn’t anything mysterious or underhanded or -crooked about manipulation designed to sell a stock in bulk -provided such operations are not accompanied by deliberate -misrepresentations. Sound manipulation must be based on -sound trading principles. People lay great stress on old-time -practices, such as wash sales. But I can assure you that the -mere mechanics of deception count for very little. The difference -between stock-market manipulation and the over-the-counter -sale of stocks and bonds is in the character of the -clientele rather than in the character of the appeal. J. P. -Morgan & Co. sell an issue of bonds to the public—that is, -to investors. A manipulator disposes of a block of stock to -the public—that is, to speculators. An investor looks for -safety, for permanence of the interest return on the capital -he invests. The speculator looks for a quick profit.</p> - -<p>The manipulator necessarily finds his primary market -among speculators—who are willing to run a greater than -normal business risk so long as they have a reasonable -chance to get a big return on their capital. I myself never -have believed in blind gambling. I may plunge or I may buy<span class="pagenum" id="Page_270">270</span> -one hundred shares. But in either case I must have a reason -for what I do.</p> - -<p>I distinctly remember how I got into the game of manipulation—that -is, in the marketing of stocks for others. It gives -me pleasure to recall it because it shows so beautifully the -professional Wall Street attitude toward stock-market operations. -It happened after I had “come back”—that is, after -my Bethlehem Steel trade in 1915 started me on the road to -financial recovery.</p> - -<p>I traded pretty steadily and had very good luck. I have -never sought newspaper publicity, but neither have I gone -out of my way to hide myself. At the same time, you know -that professional Wall Street exaggerates both the successes -and the failures of whichever operator happens to be active; -and, of course, the newspapers hear about him and print -rumors. I have been broke so many times, according to the -gossips, or have made so many millions, according to the -same authorities, that my only reaction to such reports is to -wonder how and where they are born. And how they grow! -I have had broker friend after broker friend bring the same -story to me, a little changed each time, improved, more circumstantial.</p> - -<p>All this preface is to tell you how I first came to undertake -the manipulation of a stock for someone else. The -stories the newspapers printed of how I had paid back in full -the millions I owed did the trick. My plungings and my -winnings were so magnified by the newspapers that I was -talked about in Wall Street. The day was past when an -operator swinging a line of two hundred thousand shares of -stock could dominate the market. But, as you know, the -public always desires to find successors to the old leaders. It -was Mr. Keene’s reputation as a skillful stock operator, a -winner of millions on his own hook, that made promoters -and banking houses apply to him for selling large blocks of -securities. In short, his services as manipulator were in demand<span class="pagenum" id="Page_271">271</span> -because of the stories the Street had heard about his -previous successes as a trader.</p> - -<p>But Keene was gone—passed on to that heaven where he -once said he wouldn’t stay a moment unless he found Sysonby -there waiting for him. Two or three other men who -made stock-market history for a few months had relapsed -into the obscurity of prolonged inactivity. I refer particularly -to certain of those plunging Westerners who came to -Wall Street in 1901 and after making many millions out of -their Steel holdings remained in Wall Street. They were in -reality superpromoters rather than operators of the Keene -type. But they were extremely able, extremely rich and extremely -successful in the securities of the companies which -they and their friends controlled. They were not really great -manipulators, like Keene or Governor Flower. Still, the -Street found in them plenty to gossip about and they certainly -had a following among the professionals and the -sportier commission houses. After they ceased to trade actively -the Street found itself without manipulators; at least, -it couldn’t read about them in the newspapers.</p> - -<p>You remember the big bull market that began when the -Stock Exchange resumed business in 1915. As the market -broadened and the Allies’ purchases in this country mounted -into billions we ran into a boom. As far as manipulation -went, it wasn’t necessary for anybody to lift a finger to create -an unlimited market for a war bride. Scores of men made -millions by capitalizing contracts or even promises of contracts. -They became successful promoters, either with the -aid of friendly bankers or by bringing out their companies -on the Curb market. The public bought anything that was -adequately touted.</p> - -<p>When the bloom wore off the boom, some of these promoters -found themselves in need of help from experts in -stock salesmanship. When the public is hung up with all -kinds of securities, some of them purchased at higher prices, -it is not an easy task to dispose of untried stocks. <em>After a<span class="pagenum" id="Page_272">272</span> -boom the public is positive that nothing is going up. It isn’t -that buyers become more discriminating, but that the blind -buying is over. It is the state of mind that has changed. -Prices don’t even have to go down to make people pessimistic. -It is enough if the market gets dull and stays dull for a -time.</em></p> - -<p>In every boom companies are formed primarily if not -exclusively to take advantage of the public’s appetite for all -kinds of stocks. Also there are belated promotions. The reason -why promoters make that mistake is that being human -they are unwilling to see the end of the boom. Moreover, it -is good business to take chances when the possible profit is -big enough. <em>The top is never in sight when the vision is -vitiated by hope.</em> The average man sees a stock that nobody -wanted at twelve dollars or fourteen dollars a share suddenly -advance to thirty—which surely is the top—until it -rises to fifty. That is absolutely the end of the rise. Then it -goes to sixty; to seventy; to seventy-five. It then becomes a -certainty that this stock, which a few weeks ago was selling -for less than fifteen, can’t go any higher. But it goes to -eighty; and to eighty-five. Whereupon the average man, who -never thinks of values but of prices, and is not governed in -his actions by conditions but by fears, takes the easiest way—he -stops thinking that there must be a limit to the advances. -That is why those outsiders who are wise enough -not to buy at the top make up for it by not taking profits. -The big money in booms is always made first by the public—on -paper. And it remains on paper.</p> - -<hr /> - -<p><span class="pagenum" id="Page_273">273</span></p> - -<div class="chapter"> -<h2 id="XXII"><i>XXII</i></h2> -</div> - -<p class="in0"><span class="firstword">One day</span> Jim Barnes, who not only was one of my principal -brokers but an intimate friend as well, called on me. He -said he wanted me to do him a great favour. He never before -had talked that way, and so I asked him to tell me what the -favour was, hoping it was something I could do, for I certainly -wished to oblige him. He then told me that his firm -was interested in a certain stock; in fact, they had been the -principal promoters of the company and had placed the -greater part of the stock. Circumstances had arisen that -made it imperative for them to market a rather large block. -Jim wanted me to undertake to do the marketing for him. -The stock was Consolidated Stove.</p> - -<p>I did not wish to have anything to do with it for various -reasons. But Barnes, to whom I was under some obligations, -insisted on the personal-favour phase of the matter, which -alone could overcome my objections. He was a good fellow, -a friend, and his firm, I gathered, was pretty heavily involved, -so in the end I consented to do what I could.</p> - -<p>It has always seemed to me that the most picturesque -point of difference between the war boom and other booms -was the part that was played by a type new in stock-market -affairs—the boy banker.</p> - -<p>The boom was stupendous and its origins and causes were -plainly to be grasped by all. But at the same time the greatest -banks and trust companies in the country certainly did -all they could to help make millionaires overnight of all sorts<span class="pagenum" id="Page_274">274</span> -and conditions of promoters and munition makers. It got so -that all a man had to do was to say that he had a friend who -was a friend of a member of one of the Allied commissions -and he would be offered all the capital needed to carry out -the contracts he had not yet secured. I used to hear incredible -stories of clerks becoming presidents of companies -doing a business of millions of dollars on money borrowed -from trusting trust companies, and of contracts that left a -trail of profits as they passed from man to man. A flood of -gold was pouring into this country from Europe and the -banks had to find ways of impounding it.</p> - -<p>The way business was done might have been regarded -with misgivings by the old, but there didn’t seem to be so -many of them about. The fashion for gray-haired presidents -of banks was all very well in tranquil times, but youth was -the chief qualification in these strenuous times. The banks -certainly did make enormous profits.</p> - -<p>Jim Barnes and his associates, enjoying the friendship and -confidence of the youthful president of the Marshall National -Bank, decided to consolidate three well-known stove -companies and sell the stock of the new company to the -public that for months had been buying any old thing in the -way of engraved stock certificates.</p> - -<p>One trouble was that the stove business was so prosperous -that all three companies were actually earning dividends on -their common stock for the first time in their history. Their -principal stockholders did not wish to part with the control. -There was a good market for their stocks on the Curb; and -they had sold as much as they cared to part with and they -were content with things as they were. Their individual -capitalisation was too small to justify big market movements, -and that is where Jim Barnes’ firm came in. It pointed out -that the consolidated company must be big enough to list on -the Stock Exchange, where the new shares could be made -more valuable than the old ones. It is an old device in Wall -Street—to change the colour of the certificates in order to<span class="pagenum" id="Page_275">275</span> -make them more valuable. Say a stock ceases to be easily -vendible at war. Well, sometimes by quadrupling the stock -you may make the new shares sell at 30 or 35. This is equivalent -to 120 or 140 for the old stock—a figure it never could -have reached.</p> - -<p>It seems that Barnes and his associates succeeded in inducing -some of their friends who held speculatively some -blocks of Gray Stove Company—a large concern—to come -into the consolidation on the basis of four shares of Consolidated -for each share of Gray. Then the Midland and the -Western followed their big sister and came in on the basis of -share for share. Theirs had been quoted on the Curb at -around 25 to 30, and the Gray, which was better known and -paid dividends, hung around 125.</p> - -<p>In order to raise the money to buy out those holders who -insisted upon selling for cash, and also to provide additional -working capital for improvements and promotion expenses, -it became necessary to raise a few millions. So Barnes saw -the president of his bank, who kindly lent his syndicate three -million five hundred thousand dollars. The collateral was -one hundred thousand shares of the newly organised corporation. -The syndicate assured the president, or so I was told, -that the price would not go below 50. It would be a very -profitable deal as there was big value there.</p> - -<p>The promoters’ first mistake was in the matter of timeliness. -The saturation point for new stock issues had been -reached by the market, and they should have seen it. But -even then they might have made a fair profit after all if they -had not tried to duplicate the unreasonable killings which -other promoters had made at the very height of the boom.</p> - -<p>Now you must not run away with the notion that Jim -Barnes and his associates were fools or inexperienced kids. -They were shrewd men. All of them were familiar with Wall -Street methods and some of them were exceptionally successful -stock traders. But they did rather more than merely -overestimate the public’s buying capacity. After all, that<span class="pagenum" id="Page_276">276</span> -capacity was something that they could determine only by -actual tests. Where they erred more expensively was in expecting -the bull market to last longer than it did. I suppose -the reason was that these same men had met with such great -and particularly with such quick success that they didn’t -doubt they’d be all through with the deal before the bull -market turned. They were all well known and had a considerable -following among the professional traders and the -wire houses.</p> - -<p>The deal was extremely well advertised. The newspapers -certainly were generous with their space. The older concerns -were identified with the stove industry of America and their -product was known the world over. It was a patriotic amalgamation -and there was a heap of literature in the daily -papers about the world conquests. The markets of Asia, -Africa and South America were as good as cinched.</p> - -<p>The directors of the company were all men whose names -were familiar to all readers of the financial pages. The publicity -work was so well handled and the promises of unnamed -insiders as to what the price was going to do were so -definite and convincing that a great demand for the new -stock was created. The result was that when the books were -closed it was found that the stock which was offered to the -public at fifty dollars a share had been oversubscribed by 25 -per cent.</p> - -<p>Think of it! The best the promoters should have expected -was to succeed in selling the new stock at that price after -weeks of work and after putting up the price to 75 or higher -in order to average 50. At that, it meant an advance of about -100 per cent in the old prices of the stocks of the constituent -companies. That was the crisis and they did not meet it as it -should have been met. It shows you that every business has -its own needs. General wisdom is less valuable than specific -savvy. The promoters, delighted by the unexpected oversubscription, -concluded that the public was ready to pay -any price for any quantity of that stock. And they actually<span class="pagenum" id="Page_277">277</span> -were stupid enough to underallot the stock. After the promoters -made up their minds to be hoggish they should have -tried to be intelligently hoggish.</p> - -<p>What they should have done, of course, was to allot the -stock in full. That would have made them short to the extent -of 25 per cent of the total amount offered for subscription -to the public, and that, of course, would have enabled them -to support the stock when necessary and at no cost to themselves. -Without any effort on their part they would have -been in the strong strategic position that I always try to find -myself in when I am manipulating a stock. They could have -kept the price from sagging, thereby inspiring confidence in -the new stock’s stability and in the underwriting syndicate -back of it. They should have remembered that their work -was not over when they sold the stock offered to the public. -That was only a part of what they had to market.</p> - -<p>They thought they had been very successful, but it was -not long before the consequences of their two capital blunders -became apparent. The public did not buy any more of -the new stock, because the entire market developed reactionary -tendencies. The insiders got cold feet and did not -support Consolidated Stove; and if insiders don’t buy their -own stock on recessions, who should? The absence of inside -support is generally accepted as a pretty good bear tip.</p> - -<p>There is no need to go into statistical details. The price of -Consolidated Stove fluctuated with the rest of the market, -but it never went above the initial market quotations, which -were only a fraction above 50. Barnes and his friends in the -end had to come in as buyers in order to keep it above 40. -Not to have supported that stock at the outset of its market -career was regrettable. But not to have sold all the stock the -public subscribed for was much worse.</p> - -<p>At all events, the stock was duly listed on the New York -Stock Exchange and the price of it duly kept sagging until -it nominally stood at 37. And it stood there because Jim -Barnes and his associates had to keep it there because their<span class="pagenum" id="Page_278">278</span> -bank had loaned them thirty-five dollars a share on one hundred -thousand shares. If the bank ever tried to liquidate that -loan there was no telling what the price would break to. The -public that had been eager to buy it at 50, now didn’t care -for it at 37, and probably wouldn’t want it at 27.</p> - -<p>As time went on the banks’ excesses in the matter of extensions -of credits made people think. The day of the boy -banker was over. The banking business appeared to be on -the ragged edge of suddenly relapsing into conservatism. -Intimate friends were now asked to pay off loans, for all the -world as though they had never played golf with the president.</p> - -<p>There was no need to threaten on the lender’s part or to -plead for more time on the borrower’s. The situation was -highly uncomfortable for both. The bank, for example, with -which my friend Jim Barnes did business, was still kindly -disposed. But it was a case of “For heaven’s sake take up -that loan or we’ll all be in a dickens of a mess!”</p> - -<p>The character of the mess and its explosive possibilities -were enough to make Jim Barnes come to me to ask me to -sell the one hundred thousand shares for enough to pay off -the bank’s three-million-five-hundred-thousand-dollar loan. -Jim did not now expect to make a profit on that stock. If the -syndicate only made a small loss on it they would be more -than grateful.</p> - -<p>It seemed a hopeless task. The general market was neither -active nor strong, though at times there were rallies, when -everybody perked up and tried to believe the bull swing was -about to resume.</p> - -<p>The answer I gave Barnes was that I’d look into the matter -and let him know under what conditions I’d undertake -the work. Well, I did look into it. I didn’t analyse the company’s -last annual report. My studies were confined to the -stock-market phases of the problem. I was not going to tout -the stock for a rise on its earnings or its prospects, but to dispose -of that block in the open market. All I considered was<span class="pagenum" id="Page_279">279</span> -what should, could or might help or hinder me in that task.</p> - -<p>I discovered for one thing that there was too much stock -held by too few people—that is, too much for safety and far -too much for comfort. Clifton P. Kane & Co., bankers and -brokers, members of the New York Stock Exchange, were -carrying seventy thousand shares. They were intimate -friends of Barnes and had been influential in effecting the -consolidation, as they had made a specialty of stove stocks -for years. Their customers had been let into the good thing. -Ex-Senator Samuel Gordon, who was the special partner in -his nephews’ firm, Gordon Bros., was the owner of a second -block of seventy thousand shares; and the famous Joshua -Wolff had sixty thousand shares. This made a total of two -hundred thousand shares of Consolidated Stove held by this -handful of veteran Wall Street professionals. They did not -need any kind person to tell them when to sell their stock. -If I did anything in the manipulating line calculated to bring -in public buying—that is to say, if I made the stock strong -and active—I could see Kane and Gordon and Wolff unloading, -and not in homeopathic doses either. The vision of their -two hundred thousand shares Niagaraing into the market -was not exactly entrancing. Don’t forget that the cream was -off the bull movement and that no overwhelming demand -was going to be manufactured by my operations, however -skillfully conducted they might be. Jim Barnes had no illusions -about the job he was modestly sidestepping in my -favour. He had given me a waterlogged stock to sell on a -bull market that was about to breathe its last. Of course -there was no talk in the newspapers about the ending of the -bull market, but I knew it, and Jim Barnes knew it, and you -bet the bank knew it.</p> - -<p>Still, I had given Jim my word, so I sent for Kane, Gordon -and Wolff. Their two hundred thousand shares was the -sword of Damocles. I thought I’d like to substitute a steel -chain for the hair. The easiest way, it seemed to me, was by -some sort of reciprocity agreement. If they helped me passively<span class="pagenum" id="Page_280">280</span> -by holding off while I sold the bank’s one hundred -thousand shares, I would help them actively by trying to -make a market for all of us to unload on. As things were, -they couldn’t sell one-tenth of their holdings without having -Consolidated Stove break wide open, and they knew it so -well that they had never dreamed of trying. All I asked of -them was judgment in timing the selling and an intelligent -unselfishness in order not to be unintelligently selfish. It -never pays to be a dog in the manger in Wall Street or anywhere -else. I desired to convince them that premature or ill-considered -unloading would prevent complete unloading. -Time urged.</p> - -<p>I hoped my proposition would appeal to them because -they were experienced Wall Street men and had no illusions -about the actual demand for Consolidated Stove. Clifton P. -Kane was the head of a prosperous commission house with -branches in eleven cities and customers by the hundreds. -His firm had acted as managers for more than one pool in -the past.</p> - -<p>Senator Gordon, who held seventy thousand shares, was -an exceedingly wealthy man. His name was as familiar to the -readers of the metropolitan press as though he had been sued -for breach of promise by a sixteen-year-old manicurist possessing -a five-thousand-dollar mink coat and one hundred -and thirty-two letters from the defendant. He had started his -nephews in business as brokers and he was a special partner -in their firm. He had been in dozens of pools. He had inherited -a large interest in the Midland Stove Company and he -got one hundred thousand shares of Consolidated Stove for -it. He had been carrying enough to disregard Jim Barnes’ -wild bull tips and had cashed in on thirty thousand shares -before the market petered out on him. He told a friend later -that he would have sold more only the other big holders, -who were old and intimate friends, pleaded with him not to -sell any more, and out of regard for them he stopped. Besides -which, as I said, he had no market to unload on.</p> - -<p><span class="pagenum" id="Page_281">281</span> -The third man was Joshua Wolff. He was probably the -best know of all the traders. For twenty years everybody had -know him as one of the plungers on the floor. In bidding up -stocks or offering them down he had few equals, for ten or -twenty thousand shares meant no more to him than two or -three hundred. Before I came to New York I had heard of -him as a plunger. He was then trailing with a sporting -coterie that played a no limit game, whether on the race -track or in the stock market.</p> - -<p>They used to accuse him of being nothing but a gambler, -but he had real ability and a strongly developed aptitude for -the speculative game. At the same time his reputed indifference -to highbrow pursuits made him the hero of numberless -anecdotes. One of the most highly circulated of the yarns -was that Joshua was a guest at what he called a swell dinner -and by some oversight of the hostess several of the other -guests began to discuss literature before they could be -stopped.</p> - -<p>A girl who sat next to Josh and had not heard him use his -mouth except for masticating purposes, turned to him and -looking anxious to hear the great financier’s opinion asked -him, “Oh, Mr. Wolff, what do you think of Balzac?”</p> - -<p>Josh politely ceased to masticate, swallowed and answered, -“I never trade in them Curb stocks!”</p> - -<p>Such were the three largest individual holders of Consolidated -Stove. When they came over to see me I told them -that if they formed a syndicate to put up some cash and gave -me a call on their stock at a little above the market I would -do what I could to make a market. They promptly asked me -how much money would be required.</p> - -<p>I answered, “You’ve had that stock a long time and you -can’t do a thing with it. Between the three of you you’ve got -two hundred thousand shares, and you know very well that -you haven’t the slightest chance of getting rid of it unless -you make a market for it. It’s got be some market to absorb -what you’ve got to give it, and it will be wise to have enough<span class="pagenum" id="Page_282">282</span> -cash to pay for whatever stock it may be necessary to buy at -first. It’s no use to begin and then have to stop because there -isn’t enough money. I suggest that you form a syndicate and -raise six millions in cash. Then give the syndicate a call on -your two hundred thousand shares at 40 and put all your -stock in escrow. If everything goes well you chaps will get -rid of your dead pet and the syndicate will make some -money.”</p> - -<p>As I told you before, there had been all sorts of rumours -about my stock-market winnings. I suppose that helped, for -nothing succeeds like success. At all events, I didn’t have to -do much explaining to these chaps. They knew exactly how -far they’d get if they tried to play a lone hand. They thought -mine was a good plan. When they went away they said they -would form the syndicate at once.</p> - -<p>They didn’t have much trouble in inducing a lot of their -friends to join them. I suppose they spoke with more assurance -than I had of the syndicate’s profits. From all I heard -they really believed it, so theirs were no conscienceless tips. -At all events the syndicate was formed in a couple of days. -Kane, Gordon and Wolff gave calls on the two hundred -thousand shares at 40 and I saw to it that the stock itself was -put in escrow, so that none of it would come out on the market -if I should put up the price. I had to protect myself. -More than one promising deal has failed to pan out as expected -because the members of the pool or clique failed to -keep faith with one another. Dog has no foolish prejudices -against eating dog in Wall Street. At the time the second -American Steel and Wire Company was brought out the insiders -accused one another of breach of faith and trying to -unload. There had been a gentlemen’s agreement between -John W. Gates and his pals and the Seligmans and their -banking associates. Well, I heard somebody in a broker’s -office reciting this quatrain, which was said to have been -composed by John W. Gates:</p> - -<p><span class="pagenum" id="Page_283">283</span></p> - -<div class="poem-container"> -<div class="poem"><div class="stanza"><i> -<span class="i0">The tarantula jumped on the centipede’s back<br /></span> -<span class="i2">And chortled with ghoulish glee:<br /></span> -<span class="i0">“I’ll poison this murderous son of a gun.<br /></span> -<span class="i2">If I don’t he’ll poison me!”<br /></span></i> -</div></div> -</div> - -<p>Mind you, I do not mean for one moment to imply that -any of my friends in Wall Street would even dream of -double-crossing me in a stock deal. But on general principles -it is just as well to provide for any and all contingencies. It’s -plain sense.</p> - -<p>After Wolff and Kane and Gordon told me that they had -formed their syndicate to put up six millions in cash there -was nothing for me to do but wait for the money to come in. -I had urged the vital need of haste. Nevertheless the money -came in driblets. I think it took four or five installments. I -don’t know what the reason was, but I remember that I had -to send out an S O S call to Wolff and Kane and Gordon.</p> - -<p>That afternoon I got some big checks that brought the -cash in my possession to about four million dollars and the -promise of the rest in a day or two. It began to look as -though the syndicate might do something before the bull -market passed away. At best it would be no cinch, and the -sooner I began work the better. The public had not been -particularly keen about new market movements in inactive -stocks. But a man could do a great deal to arouse interest in -any stock with four millions in cash. It was enough to absorb -all the probable offerings. If time urged, as I had said, there -was no sense in waiting for the other two millions. The -sooner the stock got up to 50 the better for the syndicate. -That was obvious.</p> - -<p>The next morning at the opening I was surprised to see -that there were unusually heavy dealings in Consolidated -Stove. As I told you before, the stock had been waterlogged -for months. The price had been pegged at 37, Jim Barnes -taking good care not to let it go any lower on account of the -big bank loan at 35. But as for going any higher, he’d as soon -expect to see the Rock of Gibraltar shimmying across the<span class="pagenum" id="Page_284">284</span> -Strait as to see Consolidated Stove do any climbing on the -tape.</p> - -<p>Well, sir, this morning there was quite a demand for the -stock, and the price went up to 39. In the first hour of the -trading the transactions were heavier than for the whole previous -half year. It was the sensation of the day and affected -bullishly the entire market. I heard afterwards that nothing -else was talked about in the customers’ rooms of the commission -houses.</p> - -<p>I didn’t know what it meant, but it didn’t hurt my feelings -any to see Consolidated Stove perk up. As a rule I do not -have to ask about any unusual movement in any stock because -my friends on the floor—brokers who do business for -me, as well as personal friends among the room traders—keep -me posted. They assume I’d like to know and they -telephone me any news or gossip they pick up. On this day -all I heard was that there was unmistakable inside buying -in Consolidated Stove. There wasn’t any washing. It was all -genuine. The purchasers took all the offerings from 37 to 39 -and when importuned for reasons or begged for a tip, flatly -refused to give any. This made the wily and watchful traders -conclude that there was something doing; something big. -When a stock goes up on buying by insiders who refuse to -encourage the world at large to follow suit the ticker hounds -begin to wonder aloud when the official notice will be given -out.</p> - -<p>I didn’t do anything myself. I watched and wondered and -kept track of the transactions. But on the next day the buying -was not only greater in volume but more aggressive in -character. The selling orders that had been on the specialists’ -books for months at above the pegged price of 37 were absorbed -without any trouble, and not enough new selling -orders came in to check the rise. Naturally, up went the -price. It crossed 40. Presently it touched 42.</p> - -<p>The moment it touched that figure I felt that I was justified -in starting to sell the stock the bank held as collateral.<span class="pagenum" id="Page_285">285</span> -Of course I figured that the price would go down on my selling, -but if my average on the entire line was 37 I’d have no -fault to find. I knew what the stock was worth and I had -gathered some idea of the vendibility from the months of -inactivity. Well, sir, I let them have stock carefully until I -had got rid of thirty thousand shares. And the advance was -not checked!</p> - -<p>That afternoon I was told the reason for that opportune -but mystifying rise. It seems that the floor traders had been -tipped off after the close the night before and also the next -morning before the opening, that I was bullish as blazes on -Consolidated Stove and was going to rush the price right up -fifteen or twenty points without a reaction, as was my custom—that -is, my custom according to people who never -kept my books. The tipster in chief was no less a personage -than Joshua Wolff. It was his own inside buying that started -the rise of the day before. His cronies among the floor -traders were only too willing to follow his tip, for he knew -too much to give wrong steers to his fellows.</p> - -<p>As a matter of fact, there was not so much stock pressing -on the market as had been feared. Consider that I had tied -up three hundred thousand shares and you will realize that -the old fears had been well founded. It now proved less of -a job than I had anticipated to put up the stock. After all, -Governor Flower was right. Whenever he was accused of -manipulating his firm’s specialties, like Chicago Gas, Federal -Steel or B. R. T., he used to say: “The only way I know -of making a stock go up is to buy it.” That also was the floor -traders’ only way, and the price responded.</p> - -<p>On the next day, before breakfast, I read in the morning -papers what was read by thousands and what undoubtedly -was sent over the wires to hundreds of branches and out-of-town -offices, and that was that Larry Livingston was about -to begin active bull operations in Consolidated Stove. The -additional details differed. One version had it that I had -formed an insiders’ pool and was going to punish the over-extended<span class="pagenum" id="Page_286">286</span> -short interest. Another hinted at dividend announcements -in the near future. Another reminded the -world that what I usually did to a stock I was bullish on was -something to remember. Still another accused the company -of concealing its assets in order to permit accumulation by -insiders. And all of them agreed that the rise hadn’t fairly -started.</p> - -<p>By the time I reached my office and read my mail before -the market opened I was made aware that the Street was -flooded with red-hot tips to buy Consolidated Stove at once. -My telephone bell kept ringing and the clerk who answered -the calls heard the same question asked in one form or another -a hundred times that morning: Was it true that Consolidated -Stove was going up? I must say that Joshua Wolff -and Kane and Gordon—and possibly Jim Barnes—handled -that little tipping job mighty well.</p> - -<p>I had no idea that I had such a following. Why, that morning -the buying orders came in from all over the country—orders -to buy thousands of shares of a stock that nobody -wanted at any price three days before. And don’t forget that, -as a matter of fact, all that the public had to go by was my -newspaper reputation as a successful plunger; something for -which I had to thank an imaginative reporter or two.</p> - -<p>Well, sir, on that, the third day of the rise, I sold Consolidated -Stove; and on the fourth day and the fifth; and the -first thing I knew I had sold for Jim Barnes the one hundred -thousand shares of stock which the Marshall National Bank -held as collateral on the three-million-five-hundred-thousand-dollar -loan that needed paying off. If the most successful -manipulation consists of that in which the desired end is -gained at the least possible cost to the manipulator, the -Consolidated Stove deal is by all means the most successful -of my Wall Street career. Why, at no time did I have to take -any stock. I didn’t have to buy first in order to sell the more -easily later on. I did not put up the price to the highest possible -point and then begin my real selling. I didn’t even do<span class="pagenum" id="Page_287">287</span> -my principal selling on the way down, but on the way up. -It was like a dream of Paradise to find an adequate buying -power created for you without your stirring a finger to bring -it about, particularly when you were in a hurry. I once heard -a friend of Governor Flower’s say that in one of the great -bull-leader’s operations for the account of a pool in B. R. T. -the pool sold fifty thousand shares of the stock at a profit, -but Flower & Co. got commissions on more than two hundred -and fifty thousand shares and W. P. Hamilton says that -to distribute two hundred and twenty thousand shares of -Amalgamated Copper, James R. Keene must have traded in -at least seven hundred thousand shares of the stock during -the necessary manipulation. Some commission bill! Think of -that and then consider that the only commissions that I had -to pay were the commissions on the one hundred thousand -shares I actually sold for Jim Barnes. I call that some saving.</p> - -<p>Having sold what I had engaged to sell for my friend Jim, -and all the money the syndicate had agreed to raise not having -been sent in, and feeling no desire to buy back any of -the stock I had sold, I rather think I went away somewhere -for a short vacation. I do not remember exactly. But I do -remember very well that I let the stock alone and that it was -not long before the price began to sag. One day, when the -entire market was weak, some disappointed bull wanted to -get rid of his Consolidated Stove in a hurry, and on his offerings -the stock broke below the call price, which was 40. Nobody -seemed to want any of it. As I told you before, I wasn’t -bullish on the general situation and that made me more -grateful than ever for the miracle that had enabled me to -dispose of the one hundred thousand shares without having -to put the price up twenty or thirty points in a week, as the -kindly tipsters had prophesied.</p> - -<p>Finding no support, the price developed a habit of declining -regularly until one day it broke rather badly and -touched 32. That was the lowest that had ever been recorded -for it, for, as you will remember, Jim Barnes and the<span class="pagenum" id="Page_288">288</span> -original syndicate had pegged it at 37 in order not to have -their one hundred thousand shares dumped on the market -by the bank.</p> - -<p>I was in my office that day peacefully studying the tape -when Joshua Wolff was announced. I said I would see him. -He rushed in. He is not a very large man, but he certainly -seemed all swelled up—with anger, as I instantly discovered.</p> - -<p>He ran to where I stood by the ticker and yelled, “Hey? -What the devil’s the matter?”</p> - -<p>“Have a chair, Mr. Wolff,” I said politely and sat down -myself to encourage him to talk calmly.</p> - -<p>“I don’t want any chair! I want to know what it means!” -he cried at the top of his voice.</p> - -<p>“What does what mean?”</p> - -<p>“What in hell are you doing to it?”</p> - -<p>“What am I doing to what?”</p> - -<p>“That stock! That stock!”</p> - -<p>“What stock?” I asked him.</p> - -<p>But that only made him see red, for he shouted, “Consolidated -Stove! What are you doing to it?”</p> - -<p>“Nothing! Absolutely nothing. What’s wrong?” I said.</p> - -<p>He stared at me fully five seconds before he exploded: -“Look at the price! Look at it!”</p> - -<p>He certainly was angry. So I got up and looked at the tape.</p> - -<p>I said, “The price of it is now 31¼.”</p> - -<p>“Yeh! Thirty-one and a quarter, and I’ve got a raft of it.”</p> - -<p>“I know you have sixty thousand shares. You have had it -a long time, because when you originally bought your Gray -Stove——”</p> - -<p>But he didn’t let me finish. He said, “But I bought a lot -more. Some of it cost me as high as 40! And I’ve got it yet!”</p> - -<p>He was glaring at me so hostilely that I said, “I didn’t tell -you to buy it.”</p> - -<p>“You didn’t what?”</p> - -<p>“I didn’t tell you to load up with it.”</p> - -<p>“I didn’t say you did. But you were going to put it up——”</p> - -<p>“Why was I?” I interrupted.<span class="pagenum" id="Page_289">289</span> -He looked at me, unable to speak for anger. When he -found his voice again, he said, “You were going to put it up. -You had the money to buy it.”</p> - -<p>“Yes. But I didn’t buy a share,” I told him.</p> - -<p>That was the last straw.</p> - -<p>“You didn’t buy a share, and you had over four millions -in cash to buy with? You didn’t buy any?”</p> - -<p>“Not a share!” I repeated.</p> - -<p>He was so mad by now that he couldn’t talk plainly. -Finally he managed to say, “What kind of a game do you -call that?”</p> - -<p>He was inwardly accusing me of all sorts of unspeakable -crimes. I sure could see a long list of them in his eyes. It -made me say to him: “What you really mean to ask me, -Wolff, is, why I didn’t buy from you above 50 the stock you -bought below 40. Isn’t that it?”</p> - -<p>“No, it isn’t. You had a call at 40 and four millions in cash -to put up the price with.”</p> - -<p>“Yes, but I didn’t touch the money and the syndicate has -not lost a cent by my operations.”</p> - -<p>“Look here, Livingston—” he began.</p> - -<p>But I didn’t let him say any more.</p> - -<p>“You listen to me, Wolff. You knew that the two hundred -thousand shares you and Gordon and Kane held were tied -up, and that there wouldn’t be an awful lot of floating stock -to come on the market if I put up the price, as I’d have to do -for two reasons: The first to make a market for the stock; -and the second to make a profit out of the call at 40. But you -weren’t satisfied to get 40 for the sixty thousand shares you’d -been lugging for months or with your share of the syndicate -profits, if any; so you decided to take on a lot of stock under -40 to unload on me when I put the price up with the syndicate’s -money, as you were sure I meant to do. You’d buy before -I did and you’d unload before I did; in all probability -I’d be the one to unload on. I suspect you figured on my<span class="pagenum" id="Page_290">290</span> -having to put the price up to 60. It was such a cinch that -you probably bought ten thousand shares strictly for unloading -purposes, and to make sure somebody held the bag if I -didn’t, you tipped off everybody in the United States, -Canada and Mexico without thinking of my added difficulties. -All your friends knew what I was supposed to do. Between -their buying and mine you were going to be all -hunky. Well, your intimate friends to whom you gave the tip -passed it on to their friends after they had bought their -lines, and the third stratum of tip-takers planned to supply -the fourth, fifth and possibly sixth strata of suckers, so that -when I finally came to do some selling I’d find myself anticipated -by a few thousands of wise speculators. It was a -friendly thought, that notion of yours, Wolff. You can’t imagine -how surprised I was when Consolidated Stove began -to go up before I even thought of buying a single share; or -how grateful, either, when the underwriting syndicate sold -one hundred thousand shares around 40 to the people who -were going to sell those same shares to me at 50 or 60. I sure -was a sucker not to use the four millions to make money for -them, wasn’t I? The cash was supplied to buy stock with, -but only if I thought it necessary to do so. Well, I didn’t.”</p> - -<p>Joshua had been in Wall Street long enough not to let -anger interfere with business. He cooled off as he heard me, -and when I was through talking he said in a friendly tone -of voice, “Look here, Larry, old chap, what shall we do?”</p> - -<p>“Do whatever you please.”</p> - -<p>“Aw, be a sport. What would you do if you were in our -place?”</p> - -<p>“If I were in your place,” I said solemnly, “do you know -what I’d do?”</p> - -<p>“What?”</p> - -<p>“I’d sell out!” I told him.</p> - -<p>He looked at me a moment, and without another word -turned on his heel and walked out of my office. He’s never -been in it since.</p> - -<p><span class="pagenum" id="Page_291">291</span> -Not long after that, Senator Gordon also called. He, too, -was quite peevish and blamed me for their troubles. Then -Kane joined the anvil chorus. They forgot that their stock -had been unsalable in bulk when they formed the syndicate. -All they could remember was that I didn’t sell their holdings -when I had the syndicate’s millions and the stock was active -at 44, and that now it was 30 and dull as dishwater. To their -way of thinking I should have sold out at a good fat profit.</p> - -<p>Of course they also cooled down in due time. The syndicate -wasn’t out a cent and the main problem remained unchanged: -to sell their stock. A day or two later they came -back and asked me to help them out. Gordon was particularly -insistent, and in the end I made them put in their -pooled stock at 25½. My fee for my services was to be one-half -of whatever I got above that figure. The last sale had -been at about 30.</p> - -<p>There I was with their stock to liquidate. Given general -market conditions and specifically the behaviour of Consolidated -Stove, there was only one way to do it, and that was, -of course, to sell on the way down and without first trying -to put up the price, and I certainly would have got stock by -the ream on the way up. But on the way down I could reach -those buyers who always argue that a stock is cheap when -it sells fifteen or twenty points below the top of the movement, -particularly when that top is a matter of recent history. -A rally is due, in their opinion. After seeing Consolidated -Stove sell up to close to 44 it sure looked like a good -thing below 30.</p> - -<p>It worked out as always. Bargain hunters bought it in -sufficient volume to enable me to liquidate the pool’s holdings. -But do you think that Gordon or Wolff or Kane felt -any gratitude? Not a bit of it. They are still sore at me, or so -their friends tell me. They often tell people how I did them. -They cannot forgive me for not putting up the price on myself, -as they expected.</p> - -<p>As a matter of fact I never would have been able to sell<span class="pagenum" id="Page_292">292</span> -the bank’s hundred thousand shares if Wolff and the rest -had not passed around those red-hot bull tips of theirs. If I -had worked as I usually do—that is, in a logical natural way—I -would have had to take whatever price I could get. I -told you we ran into a declining market. The only way to -sell on such a market is to sell not necessarily recklessly but -really regardless of price. No other way was possible, but I -suppose they do not believe this. They are still angry. I am -not. Getting angry doesn’t get a man anywhere. More than -once it has been borne in on me that a speculator who loses -his temper is a goner. In this case there was no aftermath to -the grouches. But I’ll tell you something curious. One day -Mrs. Livingston went to a dressmaker who had been warmly -recommended to her. The woman was competent and obliging -and had a very pleasing personality. At the third or -fourth visit, when the dressmaker felt less like a stranger, -she said to Mrs. Livingston: “I hope Mr. Livingston puts up -Consolidated Stove soon. We have some that we bought because -we were told he was going to put it up, and we’d -always heard that he was very successful in all his deals.”</p> - -<p>I tell you it isn’t pleasant to think that innocent people -may have lost money following a tip of that sort. Perhaps -you understand why I never give any myself. That dressmaker -made me feel that in the matter of grievances I had -a real one against Wolff.</p> - -<hr /> - -<p><span class="pagenum" id="Page_293">293</span></p> - -<div class="chapter"> -<h2 id="XXIII"><i>XXIII</i></h2> -</div> - -<p class="in0"><span class="firstword">Speculation in stocks</span> will never disappear. It isn’t desirable -that it should. It cannot be checked by warnings as to -its dangers. You cannot prevent people from guessing wrong -no matter how able or how experienced they may be. Carefully -laid plans will miscarry because the unexpected and -even the unexpectable will happen. Disaster may come from -a convulsion of nature or from the weather, from your own -greed or from some man’s vanity; from fear or from uncontrolled -hope. But apart from what one might call his natural -foes, a speculator in stocks has to contend with certain practices -or abuses that are indefensible normally as well as -commercially.</p> - -<p>As I look back and consider what were the common practices -twenty-five years ago when I first came to Wall Street, -I have to admit that there have been many changes for the -better. The old-fashioned bucket shops are gone, though -bucketeering “brokerage” houses still prosper at the expense -of men and women who persist in playing the game of -getting rich quick. The Stock Exchange is doing excellent -work not only in getting after these out-and-out swindlers -but in insisting upon strict adherence to its rules by its own -members. Many wholesome regulations and restrictions are -now strictly enforced but there is still room for improvement. -The ingrained conservatism of Wall Street rather than -ethical callousness is to blame for the persistence of certain -abuses.</p> - -<p><span class="pagenum" id="Page_294">294</span> -Difficult as profitable stock speculation always has been it -is becoming even more difficult every day. It was not so long -ago when a real trader could have a good working knowledge -of practically every stock on the list. In 1901, when J. -P. Morgan brought out the United States Steel Corporation, -which was merely a consolidation of lesser consolidations -most of which were less than two years old, the Stock Exchange -had 275 stocks on its list and about 100 in its “unlisted -department”; and this included a lot that a chap -didn’t have to know anything about because they were small -issues, or inactive by reason of being minority or guaranteed -stocks and therefore lacking in speculative attractions. In -fact, an overwhelming majority were stocks in which there -had not been a sale in years. Today there are about 900 -stocks on the regular list and in our recent active markets -about 600 separate issues were traded in. Moreover, the old -groups or classes of stocks were easier to keep track of. They -not only were fewer but the capitalization was smaller and -the news a trader had to be on the lookout for did not cover -so wide a field. But today, a man is trading in everything; -almost every industry in the world is represented. It requires -more time and more work to keep posted and to that -extent speculation has become much more difficult for those -who operate intelligently.</p> - -<p>There are many thousands of people who buy and sell -stocks speculatively but the number of those who speculate -profitably is small. As the public always is “in” the market to -some extent, it follows that there are losses by the public all -the time. The speculator’s deadly enemies are: Ignorance, -greed, fear and hope. All the statute books in the world and -all the rules of all the Exchanges on earth cannot eliminate -these from the human animal. Accidents which knock carefully -conceived plans skyhigh also are beyond regulation by -bodies of cold-blooded economists or warm-hearted philanthropists. -There remains another source of loss and that is, -deliberate misinformation as distinguished from straight<span class="pagenum" id="Page_295">295</span> -tips. And because it is apt to come to a stock trader variously -disguised and camouflaged, it is the more insidious and -dangerous.</p> - -<p>The average outsider, of course, trades either on tips or on -rumours, spoken or printed, direct or implied. Against ordinary -tips you cannot guard. For instance, a lifelong friend -sincerely desires to make you rich by telling you what he has -done, that is, to buy or sell some stock. His intent is good. -If the tip goes wrong what can you do? Also against the professional -or crooked tipster the public is protected to about -the same extent that he is against gold-bricks or wood-alcohol. -But against the typical Wall Street rumours, the -speculating public has neither protection nor redress. -Wholesale dealers in securities, manipulators, pools and individuals -resort to various devices to aid them in disposing -of their surplus holdings at the best possible prices. The circulation -of bullish items by the newspapers and the tickers -is the most pernicious of all.</p> - -<p>Get the slips of the financial news-agencies any day and it -will surprise you to see how many statements of an implied -semi-official nature they print. The authority is some “leading -insider” or “a prominent director” or “a high official” -or someone “in authority” who presumably knows what he -is talking about. Here are today’s slips. I pick an item at -random. Listen to this: “A leading banker says it is too early -yet to expect a declining market.”</p> - -<p>Did a leading banker really say that and if he said it why -did he say it? Why does he not allow his name to be printed? -Is he afraid that people will believe him if he does?</p> - -<p>Here is another one about a company the stock of which -has been active this week. This time the man who makes the -statement is a “prominent director.” Now which—if any—of -the company’s dozen directors is doing the talking? It is -plain that by remaining anonymous nobody can be blamed -for any damage that may be done by the statement.</p> - -<p>Quite apart from the intelligent study of speculation<span class="pagenum" id="Page_296">296</span> -everywhere the trader in stocks must consider certain facts -in connection with the game in Wall Street. In addition to -trying to determine how to make money one must also try -to keep from losing money. It is almost as important to know -what not to do as to know what should be done. It is therefore -well to remember that manipulation of some sort enters -into practically all advances in individual stocks and that -such advances are engineered by insiders with one object in -view and one only and that is to sell at the best profit possible. -However, the average broker’s customer believes himself -to be a business man from Missouri if he insists upon -being told why a certain stock goes up. Naturally, the -manipulators “explain” the advance in a way calculated to -facilitate distribution. I am firmly convinced that the public’s -losses would be greatly reduced if no anonymous statements -of a bullish nature were allowed to be printed. I mean statements -calculated to make the public buy or hold stocks.</p> - -<p>The overwhelming majority of the bullish articles printed -on the authority of unnamed directors or insiders convey -unreliable and misleading impressions to the public. The -public loses many millions of dollars every year by accepting -such statements as semi-official and therefore trustworthy.</p> - -<p>Say for example that a company has gone through a -period of depression in its particular line of business. The -stock is inactive. The quotation represents the general and -presumably accurate belief of its actual value. If the stock -were too cheap at that level somebody would know it and -buy it and it would advance. If too dear somebody would -know enough to sell it and the price would decline. As nothing -happens one way or another nobody talks about it or -does anything.</p> - -<p>The turn comes in the line of business the company is engaged -in. Who are the first to know it, the insiders or the -public? You can bet it isn’t the public. What happens next? -Why, if the improvement continues the earnings will increase<span class="pagenum" id="Page_297">297</span> -and the company will be in position to resume dividends -on the stock; or, if dividends were not discontinued, -to pay a higher rate. That is, the value of the stock will -increase.</p> - -<p>Say that the improvement keeps up. Does the management -make public that glad fact? Does the president tell the -stockholders? Does a philanthropic director come out with -a signed statement for the benefit of that part of the public -that reads the financial page in the newspapers and the slips -of the news agencies? Does some modest insider pursuing -his usual policy of anonymity come out with an unsigned -statement to the effect that the company’s future is most -promising? Not this time. Not a word is said by anyone and -no statement whatever is printed by newspapers or tickers.</p> - -<p>The value-making information is carefully kept from the -public while the now taciturn “prominent insiders” go into -the market and buy all the cheap stock they can lay their -hands on. As this well-informed but unostentatious buying -keeps on, the stock rises. The financial reporters, knowing -that the insiders ought to know the reason for the rise, ask -questions. The unanimously anonymous insiders unanimously -declare that they have no news to give out. They do -not know that there is any warrant for the rise. Sometimes -they even state that they are not particularly concerned -with the vagaries of the stock market or the actions of stock -speculators.</p> - -<p>The rise continues and there comes a happy day when -those who know have all the stock they want or can carry. -The Street at once begins to hear all kinds of bullish rumours. -The tickers tell the traders “on good authority” that the -company has definitely turned the corner. The same modest -director who did not wish his name used when he said he -knew no warrant for the rise in the stock is now quoted—of -course not by name—as saying that the stockholders have -every reason to feel greatly encouraged over the outlook.</p> - -<p>Urged by the deluge of bullish news items the public begins<span class="pagenum" id="Page_298">298</span> -to buy the stock. These purchases help to put the price -still higher. In due course the predictions of the uniformly -unnamed directors come true and the company resumes dividend -payments; or increases the rate, as the case may be. -With that the bullish items multiply. They not only are more -numerous than ever but much more enthusiastic. A “leading -director,” asked point blank for a statement of conditions, -informs the world that the improvement is more than keeping -up. A “prominent insider,” after much coaxing, is finally -induced by a news-agency to confess that the earnings are -nothing short of phenomenal. A “well-known banker,” who -is affiliated in a business way with the company, is made to -say that the expansion in the volume of sales is simply unprecedented -in the history of the trade. If not another order -came in the company would run night and day for heaven -knows how many months. A “member of the finance committee,” -in a double-leaded manifesto, expresses his astonishment -at the public’s astonishment over the stock’s rise. The -only astonishing thing is the stock’s moderation in the climbing -line. Anybody who will analyse the forthcoming annual -report can easily figure how much more than the market-price -the book-value of the stock is. But in no instance is -the name of the communicative philanthropist given.</p> - -<p>As long as the earnings continue good and the insiders do -not discern any sign of a let up in the company’s prosperity -they sit on the stock they bought at the low prices. There is -nothing to put the price down, so why should they sell? But -the moment there is a turn for the worse in the company’s -business, what happens? Do they come out with statements -or warnings or the faintest of hints? Not much. The trend is -now downward. Just as they bought without any flourish of -trumpets when the company’s business turned for the better, -they now silently sell. On this inside selling the stock naturally -declines. Then the public begins to get the familiar “explanations.” -A “leading insider” asserts that everything is -O.K. and the decline is merely the result of selling by bears<span class="pagenum" id="Page_299">299</span> -who are trying to affect the general market. If on one fine -day, after the stock has been declining for some time, there -should be a sharp break, the demand for “reasons” or “explanations” -becomes clamorous. Unless somebody says something -the public will fear the worst. So the news-tickers now -print something like this: “When we asked a prominent -director of the company to explain the weakness in the -stock, he replied that the only conclusion he could arrive at -was that the decline today was caused by a bear drive. Underlying -conditions are unchanged. The business of the -company was never better than at present and the probabilities -are that unless something entirely unforeseen happens -in the meanwhile, there will be an increase in the rate -at the next dividend meeting. The bear party in the market -has become aggressive and the weakness in the stock was -clearly a raid intended to dislodge weakly held stock.” The -news-tickers, wishing to give good measure, as likely as not -will go on to state that they are “reliably informed” that -most of the stock bought on the day’s decline was taken by -inside interests and that the bears will find that they have -sold themselves into a trap. There will be a day of reckoning.</p> - -<p>In addition to the losses sustained by the public through -believing bullish statements and buying stocks, there are the -losses that come through being dissuaded from selling out. -The next best thing to having people buy the stock the -“prominent insider” wishes to sell is to prevent people from -selling the same stock when he does not wish to support or -accumulate it. What is the public to believe after reading -the statement of the “prominent director?” What can the -average outsider think? Of course, that the stock should -never have gone down; that it was forced down by bear-selling -and that as soon as the bears stop the insiders will -engineer a punitive advance during which the shorts will be -driven to cover at high prices. The public properly believes -this because it is exactly what would happen if the decline -had in truth been caused by a bear raid.</p> - -<p><span class="pagenum" id="Page_300">300</span> -The stock in question, notwithstanding all the threats or -promises of a tremendous squeeze of the over-extended -short interest, does not rally. It keeps on going down. It -can’t help it. There has been too much stock fed to the -market from the inside to be digested.</p> - -<p>And this inside stock that has been sold by the “prominent -directors” and “leading insiders” becomes a football -among the professional traders. It keeps on going down. -There seems to be no bottom for it. The insiders knowing -that trade conditions will adversely affect the company’s -future earnings do not dare to support that stock until the -next turn for the better in the company’s business. Then -there will be inside buying and inside silence.</p> - -<p>I have done my share of trading and have kept fairly well -posted on the stock market for many years and I can say -that I do not recall an instance when a bear raid caused a -stock to decline extensively. What was called bear raiding -was nothing but selling based on accurate knowledge of real -conditions. But it would not do to say that the stock declined -on inside selling or on inside non-buying. Everybody -would hasten to sell and when everybody sells and nobody -buys there is the dickens to pay.</p> - -<p>The public ought to grasp firmly this one point: That the -real reason for a protracted decline is never bear raiding. -When a stock keeps on going down you can bet there is -something wrong with it, either with the market for it or -with the company. If the decline were unjustified the stock -would soon sell below its real value and that would bring in -buying that would check the decline. As a matter of fact, -the only time a bear can make big money selling a stock is -when that stock is too high. And you can gamble your last -cent on the certainty that insiders will not proclaim that -fact to the world.</p> - -<p>Of course, the classic example is the New Haven. Everybody -knows today what only a few knew at the time. The -stock sold at 255 in 1902 and was the premier railroad investment<span class="pagenum" id="Page_301">301</span> -of New England. A man in that part of the country -measured his respectability and standing in the community -by his holdings of it. If somebody had said that the company -was on the road to insolvency he would not have been sent -to jail for saying it. They would have clapped him in an insane -asylum with other lunatics. But when a new and aggressive -president was placed in charge by Mr. Morgan and -the débâcle began, it was not clear from the first that the -new policies would land the road where it did. But as property -after property began to be saddled in the Consolidated -Road at inflated prices, a few clear sighted observers began -to doubt the wisdom of the <em>Mellen</em> policies. A trolley system -was bought for two million and sold to the New Haven for -$10,000,000; whereupon a reckless man or two committed -lèse majesté by saying that the management was acting -recklessly. Hinting that not even the New Haven could stand -such extravagance was like impugning the strength of -Gibraltar.</p> - -<p>Of course, the first to see breakers ahead were the insiders. -They became aware of the real condition of the company -and they reduced their holdings of the stock. On their -selling as well as on their non-support, the price of New -England’s gilt-edged railroad stock began to yield. Questions -were asked, and explanations were demanded as usual; and -the usual explanations were promptly forthcoming. “Prominent -insiders” declared that there was nothing wrong that -they knew of and that the decline was due to reckless bear -selling. So the “investors” of New England kept their holdings -of New York, New Haven & Hartford stock. Why -shouldn’t they? Didn’t insiders say there was nothing wrong -and cry bear selling? Didn’t dividends continue to be declared -and paid?</p> - -<p>In the meantime the promised squeeze of the bears did not -come but new low records did. The insider selling became -more urgent and less disguised. Nevertheless public spirited -men in Boston were denounced as stock-jobbers and demagogues<span class="pagenum" id="Page_302">302</span> -for demanding a genuine explanation for the stock’s -deplorable decline that meant appalling losses to everybody -in New England who had wanted a safe investment and a -steady dividend payer.</p> - -<p>That historic break from $255 to $12 a share never was -and never could have been a bear drive. It was not started -and it was not kept up by bear operations. The insiders sold -right along and always at higher prices than they could have -done if they had told the truth or allowed the truth to be -told. It did not matter whether the price was 250 or 200 or -150 or 100 or 50 or 25, it still was too high for that stock, -and the insiders knew it and the public did not. The public -might profitably consider the disadvantages under which it -labours when it tries to make money buying and selling the -stock of a company concerning whose affairs only a few men -are in position to know the whole truth.</p> - -<p>The stocks which have had the worst breaks in the past 20 -years did not decline on bear raiding. But the easy acceptance -of that form of explanation has been responsible for -losses by the public amounting to millions upon millions of -dollars. It has kept people from selling who did not like the -way his stock was acting and would have liquidated if they -had not expected the price to go right back after the bears -stopped their raiding. I used to hear Keene blamed in the -old days. Before him they used to accuse Charley -Woerishoffer or Addison Cammack. Later on I became the -stock excuse.</p> - -<p>I recall the case of Intervale Oil. There was a pool in it -that put the stock up and found some buyers on the advance. -The manipulators ran the price to 50. There the pool -sold and there was a quick break. The usual demand for -explanations followed. Why was Intervale so weak? Enough -people asked this question to make the answer important -news. One of the financial news tickers called up the brokers -who knew the most about Intervale Oil’s advance and ought -to be equally well posted as to the decline. What did these<span class="pagenum" id="Page_303">303</span> -brokers, members of the bull pool, say when the news -agency asked them for a reason that could be printed and -sent broadcast over the country? Why, that Larry Livingston -was raiding the market! And that wasn’t enough. They -added that they were going to “get” him. But of course, the -Intervale pool continued to sell. The stock only stood then -about $12 a share and they could sell it down to 10 or lower -and their average selling price would still be above cost.</p> - -<p>It was wise and proper for insiders to sell on the decline. -But for outsiders who had paid 35 or 40, it was a different -matter. Reading what the tickers printed there outsiders -held on and waited for Larry Livingston to get what was -coming to him at the hands of the indignant inside pool.</p> - -<p>In a bull market and particularly in booms the public at -first makes money which it later loses simply by overstaying -the bull market. This talk of “bear raids” helps them to overstay. -The public should beware of explanations that explain -only what unnamed insiders wish the public to believe.</p> - -<hr /> - -<p><span class="pagenum" id="Page_304">304</span></p> - -<div class="chapter"> -<h2 id="XXIV"><i>XXIV</i></h2> -</div> - -<p class="in0"><span class="firstword">The public</span> always wants to be told. That is what makes tip-giving -and tip-taking universal practices. It is proper that -brokers should give their customers trading advice through -the medium of their market letters as well as by word of -mouth. But brokers should not dwell too strongly on actual -conditions because the course of the market is always from -six to nine months ahead of actual conditions. Today’s earnings -do not justify brokers in advising their customers to buy -stocks unless there is some assurance that six or nine months -from today the business outlook will warrant the belief that -the same rate of earnings will be maintained. If on looking -that far ahead you can see, reasonably clearly, that conditions -are developing which will change the present actual -power, the argument about stocks being cheap today will -disappear. The trader must look far ahead, but the broker -is concerned with getting commissions now; hence the inescapable -fallacy of the average market letter. Brokers make -their living out of commissions from the public and yet they -will try to induce the public through their market letters or -by word of mouth to buy the same stocks in which they have -received selling orders from insiders or manipulators.</p> - -<p>It often happens that an insider goes to the head of a -brokerage concern and says: “I wish you’d make a market -in which to dispose of 50,000 shares of my stock.”</p> - -<p>The broker asks for further details. Let us say that the -quoted price of that stock is 50. The insider tells him: “I<span class="pagenum" id="Page_305">305</span> -will give you calls on 5000 shares at 45 and 5000 shares -every point up for the entire fifty thousand shares. I also -will give you a put on 50,000 shares at the market.”</p> - -<p>Now, this is pretty easy money for the broker, if he has a -large following and of course this is precisely the kind of -broker the insider seeks. A house with direct wires to -branches and connections in various parts of the country can -usually get a large following in a deal of that kind. Remember -that in any event the broker is playing absolutely safe -by reason of the put. If he can get his public to follow he -will be able to dispose of his entire line at a big profit in -addition to his regular commissions.</p> - -<p>I have in mind the exploits of an “insider” who is well-known -in Wall Street.</p> - -<p>He will call up the head customers’ man of a large brokerage -house. At times he goes even further and calls up one of -the junior partners of the firm. He will say something like -this:</p> - -<p>“Say, old man, I want to show you that I appreciate what -you have done for me at various times. I am going to give -you a chance to make some real money. We are forming a -new company to absorb the assets of one of our companies -and we’ll take over that stock at a big advance over present -quotations. I’m going to send in to you 500 shares of Bantam -Shops at $65. The stock is now quoted at 72.”</p> - -<p>The grateful insider tells the thing to a dozen of the headmen -in various big brokerage houses. Now since these recipients -of the insider’s bounty are in Wall Street what are they -going to do when they get that stock that already shows -them a profit? Of course, advise every man and woman they -can reach to buy that stock. The kind donor knew this. They -will help to create a market in which the kind insider can -sell his good things at high prices to the poor public.</p> - -<p>There are other devices of stock-selling promoters that -should be barred. The Exchanges should not allow trading -in listed stocks that are offered outside to the public on the<span class="pagenum" id="Page_306">306</span> -partial payment plan. To have the price officially quoted -gives a sort of sanction to any stock. Moreover, the official -evidence of a free market, and at times the difference in -prices, is all the inducement needed.</p> - -<p>Another common selling device that costs the unthinking -public many millions of dollars and sends nobody to jail because -it is perfectly legal, is that of increasing the capital -stock exclusively by reason of market exigencies. The process -does not really amount to much more than changing the -color of the stock certificates.</p> - -<p>The juggling whereby 2 or 4 or even 10 shares of new -stock are given in exchange for one of the old, is usually -prompted by a desire to make the old merchandise easily -vendible. The old price was $1 per pound package and hard -to move. At 25 cents for a quarter-pound box it might go -better; and perhaps at 27 or 30 cents.</p> - -<p>Why does not the public ask why the stock is made easy -to buy? It is a case of the Wall Street philanthropist operating -again, but the wise trader bewares of the Greeks bearing -gifts. It is all the warning needed. The public disregards it -and loses millions of dollars annually.</p> - -<p>The law punishes whoever originates or circulates rumors -calculated to affect adversely the credit or business of individuals -or corporations, that is, that tend to depress the -values of securities by influencing the public to sell. Originally, -the chief intention may have been to reduce the -danger of panic by punishing anyone who doubted aloud -the solvency of banks in times of stress. But of course, it -serves also to protect the public against selling stocks below -their real value. In other words the law of the land punishes -the disseminator of bearish items of that nature.</p> - -<p>How is the public protected against the danger of buying -stocks above their real value? Who punishes the distributor -of unjustified bullish news items? Nobody; and yet, the public -loses more money buying stocks on anonymous inside advice -when they are too high than it does selling out stocks<span class="pagenum" id="Page_307">307</span> -below their value as a consequence of bearish advice during -so-called “raids.”</p> - -<p>If a law were passed that would punish bull liars as the -law now punishes bear liars, I believe the public would save -millions.</p> - -<p>Naturally, promoters, manipulators and other beneficiaries -of anonymous optimism will tell you that anyone who trades -on rumors and unsigned statements has only himself to -blame for his losses. One might as well argue that any one -who is silly enough to be a drug addict is not entitled to protection.</p> - -<p>The Stock Exchange should help. It is vitally interested -in protecting the public against unfair practices. If a man in -position to know wishes to make the public accept his statements -of fact or even his opinions, let him sign his name. -Signing bullish items would not necessarily make them true. -But it would make the “insiders” and “directors” more careful.</p> - -<p>The public ought always to keep in mind the elementals -of stock trading. When a stock is going up no elaborate explanation -is needed as to why it is going up. It takes continuous -buying to make a stock keep on going up. As long as it -does so, with only small and natural reactions from time to -time, it is a pretty safe proposition to trail along with it. But -if after a long steady rise a stock turns and gradually begins -to go down, with only occasional small rallies, it is obvious -that the line of least resistance has changed from upward -to downward. Such being the case why should any one ask -for explanations? There are probably very good reasons why -it should go down, but these reasons are known only to a -few people who either keep those reasons to themselves, or -else actually tell the public that the stock is cheap. The nature -of the game as it is played is such that the public should -realise that the truth cannot be told by the few who know.</p> - -<p>Many of the so-called statements attributed to “insiders” -or officials have no basis in fact. Sometimes the insiders are<span class="pagenum" id="Page_308">308</span> -not even asked to make a statement, anonymous or signed. -These stories are invented by somebody or other who has a -large interest in the market. At a certain stage of an advance -in the market-price of a security the big insiders are not -averse to getting the help of the professional element to -trade in that stock. But while the insider might tell the big -plunger the right time to buy, you can bet he will never tell -when is the time to sell. That puts the big professional -in the same position as the public, only he has to have a -market big enough for him to get out on. Then is when you -get the most misleading “information.” Of course, there are -certain insiders who cannot be trusted at any stage of the -game. As a rule the men who are the head of big corporations -may act in the market upon their inside knowledge, -but they don’t actually tell lies. They merely say nothing, -for they have discovered that there are times when silence is -golden.</p> - -<p>I have said many times and cannot say it too often that -the experience of years as a stock operator has convinced me -that no man can consistently and continuously beat the stock -market though he may make money in individual stocks on -certain occasions. No matter how experienced a trader is the -possibility of his making losing plays is always present because -speculation cannot be made 100 per cent safe. Wall -Street professionals know that acting on “inside” tips will -break a man more quickly than famine, pestilence, crop failures, -political readjustments or what might be called normal -accidents. There is no asphalt boulevard to success in Wall -Street or anywhere else. Why additionally block traffic?</p> - -<div class="chapter"><div class="transnote"> -<h2 class="nobreak p1" id="Transcribers_Notes">Transcriber’s Notes</h2> - -<p>Punctuation and spelling were made -consistent when a predominant preference was found -in the original book; otherwise they were not changed. -Inconsistent hyphenation was not changed.</p> - -<p>Simple typographical errors were corrected; unbalanced -quotation marks were remedied when the change was -obvious, and otherwise left unbalanced.</p> - -<p>The illustration on the title page is the -publisher’s logo.</p> - -<p>Page <a href="#Page_224">224</a>: “they were afraid of getting stock if they tried to” -was printed that way; “stock” may be a typographic error for “stuck”.</p> -</div></div> - - - - - - - - -<pre> - - - - - -End of Project Gutenberg's Reminscences of a Stock Operator, by Edwin Lefevre - -*** END OF THIS PROJECT GUTENBERG EBOOK REMINSCENCES OF A STOCK OPERATOR *** - -***** This file should be named 60979-h.htm or 60979-h.zip ***** -This and all associated files of various formats will be found in: - http://www.gutenberg.org/6/0/9/7/60979/ - -Produced by Charlie Howard and the Online Distributed -Proofreading Team at http://www.pgdp.net - -Updated editions will replace the previous one--the old editions will -be renamed. - -Creating the works from print editions not protected by U.S. copyright -law means that no one owns a United States copyright in these works, -so the Foundation (and you!) can copy and distribute it in the United -States without permission and without paying copyright -royalties. Special rules, set forth in the General Terms of Use part -of this license, apply to copying and distributing Project -Gutenberg-tm electronic works to protect the PROJECT GUTENBERG-tm -concept and trademark. Project Gutenberg is a registered trademark, -and may not be used if you charge for the eBooks, unless you receive -specific permission. If you do not charge anything for copies of this -eBook, complying with the rules is very easy. You may use this eBook -for nearly any purpose such as creation of derivative works, reports, -performances and research. They may be modified and printed and given -away--you may do practically ANYTHING in the United States with eBooks -not protected by U.S. copyright law. Redistribution is subject to the -trademark license, especially commercial redistribution. - -START: FULL LICENSE - -THE FULL PROJECT GUTENBERG LICENSE -PLEASE READ THIS BEFORE YOU DISTRIBUTE OR USE THIS WORK - -To protect the Project Gutenberg-tm mission of promoting the free -distribution of electronic works, by using or distributing this work -(or any other work associated in any way with the phrase "Project -Gutenberg"), you agree to comply with all the terms of the Full -Project Gutenberg-tm License available with this file or online at -www.gutenberg.org/license. - -Section 1. General Terms of Use and Redistributing Project -Gutenberg-tm electronic works - -1.A. By reading or using any part of this Project Gutenberg-tm -electronic work, you indicate that you have read, understand, agree to -and accept all the terms of this license and intellectual property -(trademark/copyright) agreement. If you do not agree to abide by all -the terms of this agreement, you must cease using and return or -destroy all copies of Project Gutenberg-tm electronic works in your -possession. If you paid a fee for obtaining a copy of or access to a -Project Gutenberg-tm electronic work and you do not agree to be bound -by the terms of this agreement, you may obtain a refund from the -person or entity to whom you paid the fee as set forth in paragraph -1.E.8. - -1.B. "Project Gutenberg" is a registered trademark. It may only be -used on or associated in any way with an electronic work by people who -agree to be bound by the terms of this agreement. There are a few -things that you can do with most Project Gutenberg-tm electronic works -even without complying with the full terms of this agreement. See -paragraph 1.C below. There are a lot of things you can do with Project -Gutenberg-tm electronic works if you follow the terms of this -agreement and help preserve free future access to Project Gutenberg-tm -electronic works. See paragraph 1.E below. - -1.C. The Project Gutenberg Literary Archive Foundation ("the -Foundation" or PGLAF), owns a compilation copyright in the collection -of Project Gutenberg-tm electronic works. Nearly all the individual -works in the collection are in the public domain in the United -States. If an individual work is unprotected by copyright law in the -United States and you are located in the United States, we do not -claim a right to prevent you from copying, distributing, performing, -displaying or creating derivative works based on the work as long as -all references to Project Gutenberg are removed. Of course, we hope -that you will support the Project Gutenberg-tm mission of promoting -free access to electronic works by freely sharing Project Gutenberg-tm -works in compliance with the terms of this agreement for keeping the -Project Gutenberg-tm name associated with the work. You can easily -comply with the terms of this agreement by keeping this work in the -same format with its attached full Project Gutenberg-tm License when -you share it without charge with others. - -1.D. The copyright laws of the place where you are located also govern -what you can do with this work. Copyright laws in most countries are -in a constant state of change. If you are outside the United States, -check the laws of your country in addition to the terms of this -agreement before downloading, copying, displaying, performing, -distributing or creating derivative works based on this work or any -other Project Gutenberg-tm work. The Foundation makes no -representations concerning the copyright status of any work in any -country outside the United States. - -1.E. Unless you have removed all references to Project Gutenberg: - -1.E.1. The following sentence, with active links to, or other -immediate access to, the full Project Gutenberg-tm License must appear -prominently whenever any copy of a Project Gutenberg-tm work (any work -on which the phrase "Project Gutenberg" appears, or with which the -phrase "Project Gutenberg" is associated) is accessed, displayed, -performed, viewed, copied or distributed: - - This eBook is for the use of anyone anywhere in the United States and - most other parts of the world at no cost and with almost no - restrictions whatsoever. You may copy it, give it away or re-use it - under the terms of the Project Gutenberg License included with this - eBook or online at www.gutenberg.org. If you are not located in the - United States, you'll have to check the laws of the country where you - are located before using this ebook. - -1.E.2. If an individual Project Gutenberg-tm electronic work is -derived from texts not protected by U.S. copyright law (does not -contain a notice indicating that it is posted with permission of the -copyright holder), the work can be copied and distributed to anyone in -the United States without paying any fees or charges. If you are -redistributing or providing access to a work with the phrase "Project -Gutenberg" associated with or appearing on the work, you must comply -either with the requirements of paragraphs 1.E.1 through 1.E.7 or -obtain permission for the use of the work and the Project Gutenberg-tm -trademark as set forth in paragraphs 1.E.8 or 1.E.9. - -1.E.3. If an individual Project Gutenberg-tm electronic work is posted -with the permission of the copyright holder, your use and distribution -must comply with both paragraphs 1.E.1 through 1.E.7 and any -additional terms imposed by the copyright holder. Additional terms -will be linked to the Project Gutenberg-tm License for all works -posted with the permission of the copyright holder found at the -beginning of this work. - -1.E.4. Do not unlink or detach or remove the full Project Gutenberg-tm -License terms from this work, or any files containing a part of this -work or any other work associated with Project Gutenberg-tm. - -1.E.5. Do not copy, display, perform, distribute or redistribute this -electronic work, or any part of this electronic work, without -prominently displaying the sentence set forth in paragraph 1.E.1 with -active links or immediate access to the full terms of the Project -Gutenberg-tm License. - -1.E.6. You may convert to and distribute this work in any binary, -compressed, marked up, nonproprietary or proprietary form, including -any word processing or hypertext form. However, if you provide access -to or distribute copies of a Project Gutenberg-tm work in a format -other than "Plain Vanilla ASCII" or other format used in the official -version posted on the official Project Gutenberg-tm web site -(www.gutenberg.org), you must, at no additional cost, fee or expense -to the user, provide a copy, a means of exporting a copy, or a means -of obtaining a copy upon request, of the work in its original "Plain -Vanilla ASCII" or other form. Any alternate format must include the -full Project Gutenberg-tm License as specified in paragraph 1.E.1. - -1.E.7. Do not charge a fee for access to, viewing, displaying, -performing, copying or distributing any Project Gutenberg-tm works -unless you comply with paragraph 1.E.8 or 1.E.9. - -1.E.8. You may charge a reasonable fee for copies of or providing -access to or distributing Project Gutenberg-tm electronic works -provided that - -* You pay a royalty fee of 20% of the gross profits you derive from - the use of Project Gutenberg-tm works calculated using the method - you already use to calculate your applicable taxes. The fee is owed - to the owner of the Project Gutenberg-tm trademark, but he has - agreed to donate royalties under this paragraph to the Project - Gutenberg Literary Archive Foundation. Royalty payments must be paid - within 60 days following each date on which you prepare (or are - legally required to prepare) your periodic tax returns. Royalty - payments should be clearly marked as such and sent to the Project - Gutenberg Literary Archive Foundation at the address specified in - Section 4, "Information about donations to the Project Gutenberg - Literary Archive Foundation." - -* You provide a full refund of any money paid by a user who notifies - you in writing (or by e-mail) within 30 days of receipt that s/he - does not agree to the terms of the full Project Gutenberg-tm - License. You must require such a user to return or destroy all - copies of the works possessed in a physical medium and discontinue - all use of and all access to other copies of Project Gutenberg-tm - works. - -* You provide, in accordance with paragraph 1.F.3, a full refund of - any money paid for a work or a replacement copy, if a defect in the - electronic work is discovered and reported to you within 90 days of - receipt of the work. - -* You comply with all other terms of this agreement for free - distribution of Project Gutenberg-tm works. - -1.E.9. If you wish to charge a fee or distribute a Project -Gutenberg-tm electronic work or group of works on different terms than -are set forth in this agreement, you must obtain permission in writing -from both the Project Gutenberg Literary Archive Foundation and The -Project Gutenberg Trademark LLC, the owner of the Project Gutenberg-tm -trademark. Contact the Foundation as set forth in Section 3 below. - -1.F. - -1.F.1. Project Gutenberg volunteers and employees expend considerable -effort to identify, do copyright research on, transcribe and proofread -works not protected by U.S. copyright law in creating the Project -Gutenberg-tm collection. Despite these efforts, Project Gutenberg-tm -electronic works, and the medium on which they may be stored, may -contain "Defects," such as, but not limited to, incomplete, inaccurate -or corrupt data, transcription errors, a copyright or other -intellectual property infringement, a defective or damaged disk or -other medium, a computer virus, or computer codes that damage or -cannot be read by your equipment. - -1.F.2. LIMITED WARRANTY, DISCLAIMER OF DAMAGES - Except for the "Right -of Replacement or Refund" described in paragraph 1.F.3, the Project -Gutenberg Literary Archive Foundation, the owner of the Project -Gutenberg-tm trademark, and any other party distributing a Project -Gutenberg-tm electronic work under this agreement, disclaim all -liability to you for damages, costs and expenses, including legal -fees. YOU AGREE THAT YOU HAVE NO REMEDIES FOR NEGLIGENCE, STRICT -LIABILITY, BREACH OF WARRANTY OR BREACH OF CONTRACT EXCEPT THOSE -PROVIDED IN PARAGRAPH 1.F.3. YOU AGREE THAT THE FOUNDATION, THE -TRADEMARK OWNER, AND ANY DISTRIBUTOR UNDER THIS AGREEMENT WILL NOT BE -LIABLE TO YOU FOR ACTUAL, DIRECT, INDIRECT, CONSEQUENTIAL, PUNITIVE OR -INCIDENTAL DAMAGES EVEN IF YOU GIVE NOTICE OF THE POSSIBILITY OF SUCH -DAMAGE. - -1.F.3. LIMITED RIGHT OF REPLACEMENT OR REFUND - If you discover a -defect in this electronic work within 90 days of receiving it, you can -receive a refund of the money (if any) you paid for it by sending a -written explanation to the person you received the work from. If you -received the work on a physical medium, you must return the medium -with your written explanation. The person or entity that provided you -with the defective work may elect to provide a replacement copy in -lieu of a refund. If you received the work electronically, the person -or entity providing it to you may choose to give you a second -opportunity to receive the work electronically in lieu of a refund. If -the second copy is also defective, you may demand a refund in writing -without further opportunities to fix the problem. - -1.F.4. Except for the limited right of replacement or refund set forth -in paragraph 1.F.3, this work is provided to you 'AS-IS', WITH NO -OTHER WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING BUT NOT -LIMITED TO WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PURPOSE. - -1.F.5. Some states do not allow disclaimers of certain implied -warranties or the exclusion or limitation of certain types of -damages. If any disclaimer or limitation set forth in this agreement -violates the law of the state applicable to this agreement, the -agreement shall be interpreted to make the maximum disclaimer or -limitation permitted by the applicable state law. The invalidity or -unenforceability of any provision of this agreement shall not void the -remaining provisions. - -1.F.6. INDEMNITY - You agree to indemnify and hold the Foundation, the -trademark owner, any agent or employee of the Foundation, anyone -providing copies of Project Gutenberg-tm electronic works in -accordance with this agreement, and any volunteers associated with the -production, promotion and distribution of Project Gutenberg-tm -electronic works, harmless from all liability, costs and expenses, -including legal fees, that arise directly or indirectly from any of -the following which you do or cause to occur: (a) distribution of this -or any Project Gutenberg-tm work, (b) alteration, modification, or -additions or deletions to any Project Gutenberg-tm work, and (c) any -Defect you cause. - -Section 2. Information about the Mission of Project Gutenberg-tm - -Project Gutenberg-tm is synonymous with the free distribution of -electronic works in formats readable by the widest variety of -computers including obsolete, old, middle-aged and new computers. It -exists because of the efforts of hundreds of volunteers and donations -from people in all walks of life. - -Volunteers and financial support to provide volunteers with the -assistance they need are critical to reaching Project Gutenberg-tm's -goals and ensuring that the Project Gutenberg-tm collection will -remain freely available for generations to come. In 2001, the Project -Gutenberg Literary Archive Foundation was created to provide a secure -and permanent future for Project Gutenberg-tm and future -generations. To learn more about the Project Gutenberg Literary -Archive Foundation and how your efforts and donations can help, see -Sections 3 and 4 and the Foundation information page at -www.gutenberg.org - - - -Section 3. Information about the Project Gutenberg Literary Archive Foundation - -The Project Gutenberg Literary Archive Foundation is a non profit -501(c)(3) educational corporation organized under the laws of the -state of Mississippi and granted tax exempt status by the Internal -Revenue Service. The Foundation's EIN or federal tax identification -number is 64-6221541. Contributions to the Project Gutenberg Literary -Archive Foundation are tax deductible to the full extent permitted by -U.S. federal laws and your state's laws. - -The Foundation's principal office is in Fairbanks, Alaska, with the -mailing address: PO Box 750175, Fairbanks, AK 99775, but its -volunteers and employees are scattered throughout numerous -locations. Its business office is located at 809 North 1500 West, Salt -Lake City, UT 84116, (801) 596-1887. Email contact links and up to -date contact information can be found at the Foundation's web site and -official page at www.gutenberg.org/contact - -For additional contact information: - - Dr. Gregory B. Newby - Chief Executive and Director - gbnewby@pglaf.org - -Section 4. Information about Donations to the Project Gutenberg -Literary Archive Foundation - -Project Gutenberg-tm depends upon and cannot survive without wide -spread public support and donations to carry out its mission of -increasing the number of public domain and licensed works that can be -freely distributed in machine readable form accessible by the widest -array of equipment including outdated equipment. Many small donations -($1 to $5,000) are particularly important to maintaining tax exempt -status with the IRS. - -The Foundation is committed to complying with the laws regulating -charities and charitable donations in all 50 states of the United -States. Compliance requirements are not uniform and it takes a -considerable effort, much paperwork and many fees to meet and keep up -with these requirements. We do not solicit donations in locations -where we have not received written confirmation of compliance. To SEND -DONATIONS or determine the status of compliance for any particular -state visit www.gutenberg.org/donate - -While we cannot and do not solicit contributions from states where we -have not met the solicitation requirements, we know of no prohibition -against accepting unsolicited donations from donors in such states who -approach us with offers to donate. - -International donations are gratefully accepted, but we cannot make -any statements concerning tax treatment of donations received from -outside the United States. U.S. laws alone swamp our small staff. - -Please check the Project Gutenberg Web pages for current donation -methods and addresses. Donations are accepted in a number of other -ways including checks, online payments and credit card donations. To -donate, please visit: www.gutenberg.org/donate - -Section 5. General Information About Project Gutenberg-tm electronic works. - -Professor Michael S. Hart was the originator of the Project -Gutenberg-tm concept of a library of electronic works that could be -freely shared with anyone. For forty years, he produced and -distributed Project Gutenberg-tm eBooks with only a loose network of -volunteer support. - -Project Gutenberg-tm eBooks are often created from several printed -editions, all of which are confirmed as not protected by copyright in -the U.S. unless a copyright notice is included. Thus, we do not -necessarily keep eBooks in compliance with any particular paper -edition. - -Most people start at our Web site which has the main PG search -facility: www.gutenberg.org - -This Web site includes information about Project Gutenberg-tm, -including how to make donations to the Project Gutenberg Literary -Archive Foundation, how to help produce our new eBooks, and how to -subscribe to our email newsletter to hear about new eBooks. - - - -</pre> - -</body> -</html> diff --git a/old/60979-h/images/cover.jpg b/old/60979-h/images/cover.jpg Binary files differdeleted file mode 100644 index da6c8e8..0000000 --- a/old/60979-h/images/cover.jpg +++ /dev/null diff --git a/old/60979-h/images/logo.png b/old/60979-h/images/logo.png Binary files differdeleted file mode 100644 index 5526d1f..0000000 --- a/old/60979-h/images/logo.png +++ /dev/null |
