REMI NI SCENCES OF A STOCK OPERATOR

CHAPTER I



I WENT t o wor k when I was j ust out of gr ammar school . I got
a j ob as quot at i on- boar d boy i n a st ock- br oker age of f i ce. I was
qui ck at f i gur es. At school I di d t hr ee year s of ar i t hmet i c i n
one. I was par t i cul ar l y good at ment al ar i t hmet i c. As
quot at i on- boar d boy I post ed t he number s on t he bi g boar d i n t he
cust omer s' r oom. One of t he cust omer s usual l y sat by t he t i cker
and cal l ed out t he pr i ces. They coul dn' t come t oo f ast f or me. I
have al ways r emember ed f i gur es. No t r oubl e at al l .
Ther e wer e pl ent y of ot her empl oyes i n t hat of f i ce. Of
cour se I made f r i ends wi t h t he ot her f el l ows, but t he wor k I
di d, i f t he mar ket was act i ve, kept me t oo busy f r omt en A. M. t o
t hr ee P. m. t o l et me do much t al ki ng. I don' t car e f or i t ,
anyhow, dur i ng busi ness hour s.
But a busy mar ket di d not keep me f r om t hi nki ng about t he
wor k. Those quot at i ons di d not r epr esent pr i ces of st ocks t o'
me, so many dol l ar s per shar e. They wer e number s. Of cour se,
t hey meant somet hi ng. They wer e al ways changi ng. I t was al l I
had t o be i nt er est ed i n t he changes. Why di d t hey change? I
di dn' t know. I di dn' t car e. I di dn' t t hi nk about t hat . I si mpl y
saw t hat t hey changed. That was al l I had t o t hi nk about f i ve
hour s ever y day and t wo on Sat ur days: t hat t hey wer e al ways
changi ng.
That i s how I f i r st came t o be i nt er est ed i n t he behavi our
of pr i ces. I had a ver y good memor y f or f i gur es. I coul d
r emember i n det ai l how t he pr i ces had act ed on t he pr evi ous day,
j ust bef or e t hey went up or down. My f ondness f or ment al
ar i t hmet i c came i n ver y handy.
I not i ced t hat i n advances as wel l as decl i nes, st ock
pr i ces wer e apt t o show cer t ai n habi t s, so t o speak. Ther e was
no end of par al l el cases and t hese made pr ecedent s t o gui de me.
I was onl y f our t een, but af t er I had t aken hundr eds of
obser vat i ons i n my mi nd I f ound mysel f t est i ng t hei r accur acy,
compar i ng t he behavi our of st ocks t oday wi t h ot her days. I t was
not l ong bef or e I was ant i ci pat i ng movement s i n pr i ces. My onl y
gui de, as I say, was t hei r past per f or mances. I car r i ed t he
" dope sheet s" i n my mi nd. I l ooked f or st ock pr i ces t o r un on
f or m. I had " cl ocked" t hem. You know what I mean.
You can spot , f or i nst ance, wher e t he buyi ng i s onl y a
t r i f l e bet t er t han t he sel l i ng. A bat t l e goes on i n t he st ock


mar ket and t he t ape i s your t el escope. You can depend upon i t
seven out of t en cases.
Anot her l esson I l ear ned ear l y i s t hat t her e i s not hi ng new
i n Wal l St r eet . Ther e can' t be because specul at i on i s as ol d as
t he hi l l s. What ever happens i n t he st ock mar ket t oday has
happened bef or e and wi l l happen agai n. I ' ve never f or got t en
t hat . I suppose I r eal l y manage t o r emember when and how i t
happened. The f act t hat I r emember t hat way i s my way of
capi t al i zi ng exper i ence.
I got so i nt er est ed i n my game and so anxi ous t o ant i ci pat e
advances and decl i nes i n al l t he act i ve st ocks t hat I got a
l i t t l e book. I put down my obser vat i ons i n i t . I t was not a
r ecor d of i magi nar y t r ansact i ons such as so many peopl e keep
mer el y t o make or l ose mi l l i ons of dol l ar s wi t hout get t i ng t he
swel l ed head or goi ng t o t he poor house. I t was r at her a sor t of
r ecor d of my hi t s and mi sses, and next t o t he det er mi nat i on of
pr obabl e movement s I was most i nt er est ed i n ver i f yi ng whet her I
had obser ved accur at el y; i n ot her wor ds, whet her I was r i ght .
Say t hat af t er st udyi ng ever y f l uct uat i on of t he day i n an
act i ve st ock I woul d concl ude t hat i t was behavi ng as i t al ways
di d bef or e i t br oke ei ght or t en poi nt s. Wel l , I woul d j ot down
t he st ock and t he pr i ce on Monday, and r emember i ng past
per f or mances I woul d wr i t e down what i t ought t o do on Tuesday
and Wednesday. Lat er I woul d check up wi t h act ual t r anscr i pt i ons
f r omt he t ape.
That i s how I f i r st came t o t ake an i nt er est i n t he message
of t he t ape. The f l uct uat i ons wer e f r om t he f i r st associ at ed i n
my mi nd wi t h upwar d or downwar d movement s. Of cour se t her e i s
al ways a r eason f or f l uct uat i ons, but t he t ape does not concer n
i t sel f wi t h t he why and wher ef or e. I t doesn' t go i nt o
expl anat i ons. I di dn' t ask t he t ape why when I was f our t een, and
I don' t ask i t t oday, at f or t y. The r eason f or what a cer t ai n
st ock does t oday may not be known f or t wo or t hr ee days, or
weeks, or mont hs. But what t he di ckens does t hat mat t er ? Your
busi ness wi t h t he t ape i s now - - not t omor r ow. The r eason can
wai t . But you must act i nst ant l y or be l ef t . Ti me and agai n I
see t hi s happen. You' l l r emember t hat Hol l ow Tube went down
t hr ee poi nt s t he ot her day whi l e t he r est of t he mar ket r al l i ed
shar pl y. That was t he f act . On t he f ol l owi ng Monday you saw t hat
t he di r ect or s passed t he di vi dend. That was t he r eason. They
knew what t hey wer e goi ng t o do, and even i f t hey di dn' t sel l
t he st ock t hemsel ves t hey at l east di dn' t buy i t . Ther e was no
i nsi de buyi ng; no r eason why i t shoul d not br eak.
Wel l , I kept up my l i t t l e memor andum book per haps si x
mont hs. I nst ead of l eavi ng f or home t he moment I was t hr ough


wi t h my wor k, I ' d j ot down t he f i gur es I want ed and woul d st udy
t he changes, al ways l ooki ng f or t he r epet i t i ons and par al l el i sms
of behavi our l ear ni ng t o r ead t he t ape, al t hough I was not awar e
of i t at t he t i me.
One day one of t he of f i ce boys - - he was ol der t han I came
t o me wher e I was eat i ng my l unch and asked me on t he qui et i f I
had any money.
" Why do you want t o know?" I sai d.
" Wel l , " he sai d, " I ' ve got a dandy t i p on Bur l i ngt on. I ' m
goi ng t o pl ay i t i f I can get somebody t o go i n wi t h me. "
" How do you mean, pl ay i t ?" I asked. To me t he onl y peopl e
who pl ayed or coul d pl ay t i ps wer e t he cust omer s ol d j i gger s
wi t h oodl es of dough. Why, i t cost hundr eds, even t housands of
dol l ar s, t o get i nt o t he game. I t was l i ke owni ng your pr i vat e
car r i age and havi ng a coachman who wor e a si l k hat .
" That ' s what I mean; pl ay i t 1" he sai d. " How much you got .
" How much you need?"
" Wel l , I can t r ade i n f i ve shar es by put t i ng up $5. "
" How ar e you goi ng t o pl ay i t ?"
" I ' m goi ng t o buy al l t he Bur l i ngt on t he bucket shop wi l l
l et me car r y wi t h t he money I gi ve hi m f or mar gi n, " he sai d.
" I t ' s goi ng up sur e. I t ' s l i ke pi cki ng up money. We' l l doubl e
our s i n a j i f f y. "
" Hol d on! " I sai d t o hi m, and pul l ed out my l i t t l e dope
book.
I wasn' t i nt er est ed i n doubl i ng my money, but i n hi s sayi ng
t hat Bur l i ngt on was goi ng up. I f i t was, my not ebook ought t o
show i t . I l ooked. Sur e enough, Bur l i ngt on, accor di ng t o my
f i gur i ng, was act i ng as i t usual l y di d bef or e i t went up. I had
never bought or sol d anyt hi ng i n my l i f e, and I never gambl ed
wi t h t he ot her boys. But al l I coul d see was t hat t hi s was a
gr and chance t o t est t he accur acy of my wor k, of my hobby. I t
st r uck me at once t hat i f my dope di dn' t wor k i n pr act i ce t her e
was not hi ng i n t he t heor y of i t t o i nt er est anybody. So I gave
hi m al l I had, and wi t h our pool ed r esour ces he went t o one of
t he near by bucket shops and bought some Bur l i ngt on. Two days
l at er we cashed i n. I made a pr of i t Of $3. 12.
Af t er t hat f i r st t r ade, I got t o specul at i ng on my own hook
i n t he bucket shops. I ' d go dur i ng my l unch hour and buy or sel l
- - i t never made any di f f er ence t o me. I was pl ayi ng a syst em
and not a f avor i t e st ock or backi ng opi ni ons. Al l I knew was t he
ar i t hmet i c of i t . As a mat t er of f act , mi ne was t he i deal way t o
oper at e i n a bucket shop, wher e al l t hat a t r ader does i s t o bet
on f l uct uat i ons as t hey ar e pr i nt ed by t he t i cker on t he t ape.


I t was not l ong bef or e I was t aki ng much mor e money out of
t he bucket shops t han I was pul l i ng down f r om my j ob i n t he
br oker age of f i ce. So I gave up my posi t i on. My f ol ks obj ect ed,
but t hey coul dn' t say much when t hey saw what I was maki ng. I
was onl y a ki d and of f i ceboy wages wer e not ver y hi gh. I di d
mi ght y wel l on my own hook.
I was f i f t een when I had my f i r st t housand and l ai d t he
cash i n f r ont of my mot her - - al l made i n t he bucket shops i n a
f ew mont hs, besi des what I had t aken home. My mot her car r i ed on
somet hi ng awf ul . She want ed me t o put i t away i n t he savi ngs
bank out of r each of t empt at i on. She sai d i t was mor e money t han
she ever hear d any boy of f i f t een had made, st ar t i ng wi t h
not hi ng. She di dn' t qui t e bel i eve i t was r eal money. She used t o
wor r y and f r et about i t . But I di dn' t t hi nk of anyt hi ng except
t hat I coul d keep on pr ovi ng my f i gur i ng was r i ght . That ' s al l
t he f un t her e i s bei ng r i ght by usi ng your head. I f I was r i ght
when I t est ed my convi ct i ons wi t h t en shar es I woul d be t en
t i mes mor e r i ght i f I t r aded i n a hundr ed shar es. That i s al l
t hat havi ng mor e mar gi n meant t o me - - I was r i ght mor e
emphat i cal l y. Mor e cour age? No! No di f f er ence! I f al l I have i s
t en dol l ar s and I r i sk i t , I am much br aver t han when I r i sk a
mi l l i on, i f I have anot her mi l l i on sal t ed away.
Anyhow, at f i f t een I was maki ng a good l i vi ng out of t he
st ock mar ket . I began i n t he smal l er bucket shops, wher e t he man
who t r aded i n t went y shar es at a cl i p was suspect ed of bei ng
J ohn W. Gat es i n di sgui se or J . P. Mor gan t r avel i ng i ncogni t o.
Bucket shops i n t hose days sel dom l ay down on t hei r cust omer s.
They di dn' t have t o. Ther e wer e ot her ways of par t i ng cust omer s
f r omt hei r money, even when t hey guessed r i ght . The busi ness was
t r emendousl y pr of i t abl e. When i t was conduct ed l egi t i mat el y - - I
mean st r ai ght , as f ar as t he bucket shop went t he f l uct uat i ons
t ook car e of t he shoest r i ngs. I t doesn' t t ake much of a r eact i on
t o wi pe out a mar gi n of onl y t hr ee quar t er s of a poi nt . Al so, no
wel sher coul d ever get back i n t he game. Woul dn' t have any
t r ade.
I di dn' t have a f ol l owi ng. I kept my busi ness t o mysel f . I t
was a one- man busi ness, anyhow. I t was my head, wasn' t i t ?
Pr i ces ei t her wer e goi ng t he way I doped t hem out , wi t hout any
hel p f r omf r i ends or par t ner s, or t hey wer e goi ng t he ot her way,
and nobody coul d st op t hemout of ki ndness t o me. I coul dn' t see
wher e I needed t o t el l my busi ness t o anybody el se. I ' ve got
f r i ends, of cour se, but my busi ness has al ways been t he same - -
a one- man af f ai r . That i s why I have al ways pl ayed a l one hand.



As i t was, i t di dn' t t ake l ong f or t he bucket shops t o get
sor e on me f or beat i ng t hem. I ' d wal k i n and pl ank down my
mar gi n, but t hey' d l ook at i t wi t hout maki ng a move t o gr ab i t .
They' d t el l me t her e was not hi ng doi ng. That was t he t i me t hey
got t o cal l i ng me t he Boy Pl unger . I had t o be changi ng br oker s
al l t he t i me, goi ng f r om one bucket shop t o anot her . I t got so
t hat I had t o gi ve a f i ct i t i ous name. I ' d begi n l i ght , onl y
f i f t een or t went y shar es. At t i mes, when t hey got suspi ci ous,
I ' d l ose on pur pose at f i r st and t hen st i ng t hem pr oper . Of
cour se af t er a l i t t l e whi l e t hey' d f i nd me t oo expensi ve and
t hey' d t el l me t o t ake mysel f and my busi ness el sewher e and not
i nt er f er e wi t h t he owner s' di vi dends.
Once, when t he bi g concer n I ' d been t r adi ng wi t h f or mont hs
shut down on me I made up my mi nd t o t ake a l i t t l e mor e of t hei r
money away f r omt hem. That bucket shop had br anches al l over t he
ci t y, i n hot el l obbi es, and i n near by t owns. I went t o one of
t he hot el br anches and asked t he manager a f ew quest i ons and
f i nal l y got t o t r adi ng. But as soon as I pl ayed an act i ve st ock
my especi al way he began t o get messages f r om t he head of f i ce
aski ng who i t was t hat was oper at i ng. The manager t ol d me what
t hey asked hi m and I t ol d hi m my name was Edwar d Robi nson, of
Cambr i dge. He t el ephoned t he gl ad news t o t he bi g chi ef . But t he
ot her end want ed t o know what I l ooked l i ke. When t he manager
t ol d me t hat I sai d t o hi m, " Tel l hi m I am a shor t f at man wi t h
dar k hai r and a bushy bear d 1" But he descr i bed me i nst ead, and
t hen he l i st ened and hi s f ace got r ed and he hung up and t ol d me
t o beat i t .
" What di d t hey say t o you?" I asked hi mpol i t el y.
" They sai d, `You bl anket y- bl ank f ool , di dn' t we t el l you t o
t ake no busi ness f r om Lar r y Li ver mor e? And you del i ber at el y l et
hi mt r i mus out of $700! " He di dn' t say what el se t hey t ol d hi m.
I t r i ed t he ot her br anches one af t er anot her , but t hey al l
got t o know me, and my money wasn' t any good i n any of t hei r
of f i ces. I coul dn' t even go i n t o l ook at t he quot at i ons wi t hout
some of t he cl er ks maki ng cr acks at me. I t r i ed t o get
t hem t o l et me t r ade at l ong i nt er val s by di vi di ng my vi si t s
among t hemal l . But t hat di dn' t wor k.
Fi nal l y t her e was onl y one l ef t t o me and t hat was t he
bi ggest and r i chest of al l t he Cosmopol i t an St ock Br oker age
Company.
The Cosmopol i t an was r at ed as A- 1 and di d an enor mous
busi ness. I t had br anches i n ever y manuf act ur i ng t own i n New
Engl and. They t ook my t r adi ng al l r i ght , and I bought and sol d
st ocks and made and l ost money f or mont hs, but i n t he end i t
happened wi t h t hem as usual . They di dn' t r ef use my busi ness


poi nt - bl ank, as t he smal l concer ns had. Oh, not because i t
wasn' t spor t smanshi p, but because t hey knew i t woul d gi ve t hema
bl ack eye t o publ i sh t he news t hat t hey woul dn' t t ake a f el l ow' s
busi ness j ust because t hat f el l ow happened t o make a l i t t l e
money. But t hey di d t he next wor se t hi ng t hat i s, t hey made me
put up a t hr ee- poi nt mar gi n and compel l ed me t o pay a pr emi umat
f i r st of a hal f poi nt , t hen a poi nt , and f i nal l y, a poi nt and a
hal f . Some handi cap, t hat ! How? Easy! Suppose St eel was sel l i ng
at 90 and you bought i t . Your t i cket r ead, nor mal l y: " Bot t en
St eel at 90- 1/ 8. " I f you put up a poi nt mar gi n i t meant t hat i f
i t br oke 89- 1/ 4 you wer e wi ped out aut omat i cal l y. I n a bucket
shop t he cust omer i s not i mpor t uned f or mor e mar gi n or put t o
t he pai nf ul necessi t y of t el l i ng hi s br oker t o sel l f or anyt hi ng
he can get .
But when t he Cosmopol i t an t acked on t hat pr emi um t hey wer e
hi t t i ng bel ow t he bel t . I t meant t hat i f t he pr i ce was 90 when I
bought , i nst ead of maki ng my t i cket : " Bot St eel at 90- 1/ 8, " i t
r ead: " Bot St eel at 90- 1/ 8. " Why, t hat st ock coul d advance a
poi nt and a quar t er af t er I bought i t and I ' d st i l l be l osi ng
money i f I cl osed t he t r ade. And by al so i nsi st i ng t hat I put up
a t hr ee- poi nt mar gi n at t he ver y st ar t t hey r educed my t r adi ng
capaci t y by t wo t hi r ds. St i l l , t hat was t he onl y bucket shop
t hat woul d t ake my busi ness at al l , and I had t o accept t hei r
t er ms or qui t t r adi ng.
Of cour se I had my ups and downs, but was a wi nner on
bal ance. However , t he Cosmopol i t an peopl e wer e not sat i sf i ed
wi t h t he awf ul handi cap t hey had t acked on me, whi ch shoul d have
been enough t o beat anybody. They t r i ed t o doubl ecr oss me. They
di dn' t get me. I escaped because of one of my hunches.
The Cosmopol i t an, as I sai d, was my l ast r esor t . I t was t he
r i chest bucket shop i n New Engl and, and as a r ul e t hey put no
l i mi t on a t r ade. I t hi nk I was t he heavi est i ndi vi dual t r ader
t hey had - - t hat i s, of t he st eady, ever yday cust omer s. They had
a f i ne of f i ce and t he l ar gest and compl et est quot at i on boar d I
have ever seen anywher e. I t r an al ong t he whol e l engt h of t he
bi g r oom and ever y i magi nabl e t hi ng was quot ed. I mean st ocks
deal t i n on t he New Yor k and Bost on St ock Exchanges, cot t on,
wheat , pr ovi si ons, met al s - - ever yt hi ng t hat was bought and sol d
i n New Yor k, Chi cago, Bost on and Li ver pool .
You know how t hey t r aded i n bucket shops. You gave your
money t o a cl er k and t ol d hi m what you wi shed t o buy or sel l He
l ooked at t he t ape or t he quot at i on boar d and t ook t he pr i ce
f r omt her e - - t he l ast one, of cour se. He al so put down t he t i me
on t he t i cket so t hat i t al most r ead l i ke a r egul ar br oker ' s
r epor t - - t hat i s, t hat t hey had bought or sol d f or you so many


shar es of such a st ock at such a pr i ce at such a t i me on such a
day and how much money t hey r ecei ved f r om you. When you wi shed
t o cl ose your t r ade you went t o t he cl er k - - t he same or
anot her , i t depended on t he shop and you t ol d hi m. He t ook t he
l ast pr i ce or i f t he st ock had not been act i ve he wai t ed f or t he
next quot at i on t hat came out on t he t ape. He wr ot e t hat pr i ce
and t he t i me on your t i cket , O. K. ' d i t and gave i t back t o you,
and t hen you went t o t he cashi er and got what ever cash i t cal l ed
f or . Of cour se, when t he mar ket went agai nst you and t he pr i ce
went beyond t he l i mi t set by your mar gi n, your t r ade
aut omat i cal l y cl osed i t sel f and your t i cket became one mor e
scr ap of paper .
I n t he humbl er bucket shops, wher e peopl e wer e al l owed t o
t r ade i n as l i t t l e as f i ve shar es, t he t i cket s wer e l i t t l e sl i ps
commi ssi ons and i f you bought a st ock at 20 t he t i cket woul d
r ead 20%. You t hus had onl y Y4 of a poi nt ' s r un f or your money.
But t he Cosmopol i t an was t he f i nest i n New Engl and. I t had
t housands of pat r ons and I r eal l y t hi nk I was t he onl y man t hey
wer e af r ai d of . Nei t her t he ki l l i ng pr emi um nor t he t hr ee- poi nt
mar gi n t hey made me put up r educed my t r adi ng much. I kept on
buyi ng and sel l i ng as much as t hey' d l et me. I somet i mes had a
l i ne of 5, 000 shar es.
Wel l , on t he day t he t hi ng happened t hat I amgoi ng t o t el l
you, I was shor t t hi r t y- f i ve hundr ed shar es of Sugar . I had
seven bi g pi nk t i cket s f or f i ve hundr ed shar es each. The
Cosmopol i t an used bi g sl i ps wi t h a bl ank space on t hem wher e
t hey coul d wr i t e down addi t i onal mar gi n. Of cour se, t he bucket
shops never ask f or mor e mar gi n. The t hi nner t he shoest r i ng t he
bet t er f or t hem, f or t hei r pr of i t l i es i n your bei ng wi ped. I n
t he smal l er shops i f you want ed t o mar gi n your t r ade st i l l
f ur t her t hey' d make out a new t i cket , so t hey coul d char ge you
t he buyi ng commi ssi on and onl y gi ve you a r un of 1/ 4 of a poi nt
on each poi nt ' s decl i ne, f or t hey f i gur ed t he sel l i ng commi ssi on
al so exact l y as i f i t wer e a new t r ade.
Wel l , t hi s day I r emember I had up over $10, 000 i n mar gi ns.
I was onl y t went y when I f i r st accumul at ed t en t housand
dol l ar s i n cash. And you ought t o have hear d my mot her . You' d
have t hought t hat t en t housand dol l ar s i n cash was mor e t han
anybody car r i ed ar ound except ol d J ohn D. , and she used t o t el l
me t o be sat i sf i ed and go i nt o some r egul ar busi ness. I had a
har d t i me convi nci ng her t hat I was not gambl i ng, but maki ng
money by f i gur i ng. But al l she coul d see was t hat t en t housand
dol l ar s was a l ot of money and al l I coul d see was mor e mar gi n.
I had put out my 3500 shar es of Sugar at 105- 1/ 4. Ther e was
anot her f el l ow i n t he r oom, Henr y Wi l l i ams, who was shor t 2500


shar es. I used t o si t by t he t i cker and cal l out t he quot at i ons
f or t he boar d boy. The pr i ce behaved as I t hought i t woul d. I t
pr ompt l y went down a coupl e of poi nt s and paused a l i t t l e t o get
i t s br eat h bef or e t aki ng anot her di p. The gener al mar ket was
pr et t y sof t and ever yt hi ng l ooked pr omi si ng. Then al l of a
sudden I di dn' t l i ke t he way Sugar was doi ng i t s hesi t at i ng. I
began t o f eel uncomf or t abl e. I t hought I ought t o get out of t he
mar ket . Then i t sol d at 103 - - t hat was l ow f or t he day, but
i nst ead of f eel i ng mor e conf i dent I f el t mor e uncer t ai n. I knew
somet hi ng was wr ong somewher e, but I coul dn' t spot i t exact l y.
But i f somet hi ng was comi ng and I di dn' t know wher e f r om, I
coul dn' t be on my guar d agai nst i t . That bei ng t he case I ' d
bet t er be out of t he mar ket .
You know, I don' t do t hi ngs bl i ndl y. I don' t l i ke t o. I
never di d. Even as a ki d I had t o know why I shoul d do cer t ai n
t hi ngs. But t hi s t i me I had no def i ni t e r eason t o gi ve t o
mysel f , and yet I was so uncomf or t abl e t hat I coul dn' t st and i t .
I cal l ed t o a f el l ow I knew, Dave Wyman, and sai d t o hi m " Dave,
you t ake my pl ace her e. I want you t o do somet hi ng f or me. Wai t
a l i t t l e bef or e you cal l out t he next pr i ce of Sugar , wi l l you?"
He sai d he woul d, and I got up and gave hi mmy pl ace by t he
t i cker so he coul d cal l out t he pr i ces f or t he boy. I t ook my
seven Sugar t i cket s out of my pocket and wal ked over t o t he
count er , t o wher e t he cl er k was who mar ked t he t i cket s when you
cl osed your t r ades. But I di dn' t r eal l y know why I shoul d get
out of t he mar ket , so I j ust st ood t her e, l eani ng agai nst t he
count er , my t i cket s i n my hand so t hat t he cl er k coul dn' t see
t hem. Pr et t y soon I hear d t he cl i cki ng of a t el egr aph i nst r ument
and I saw Tom Bur nham, t he cl er k, t ur n hi s head qui ckl y and
l i st en. Then I f el t t hat somet hi ng cr ooked was hat chi ng, and I
deci ded not t o wai t any l onger . J ust t hen Dave Wyman by t he
t i cker , began: " Su" and qui ck as a f l ash I sl apped my t i cket s on
t he count er i n f r ont of t he cl er k and yel l ed, " Cl ose Sugar ! "
bef or e Dave had f i ni shed cal l i ng t he pr i ce. So, of cour se, t he
house had t o cl ose my Sugar at t he l ast quot at i on. What Dave
cal l ed t ur ned out t o be 103 agai n.
Accor di ng t o my dope Sugar shoul d have br oken 103 by now.
The engi ne wasn' t hi t t i ng r i ght . I had t he f eel i ng t hat t her e
was a t r ap i n t he nei ghbour hood. At al l event s, t he t el egr aph
i nst r ument was now goi ng l i ke mad and I not i ced t hat
Tom Bur nham, t he cl er k, had l ef t my t i cket s unmar ked wher e I
l ai d t hem, and was l i st eni ng t o t he cl i cki ng as i f he wer e
wai t i ng f or somet hi ng. So I yel l ed at hi m: " Hey, Tom, what i n
hel l ar e you wai t i ng f or ? Mar k t he pr i ce on t hese t i cket s - -
103! Get a gai t on! "


Ever ybody i n t he r oom hear d me and began t o l ook t owar d us
and ask what was t he t r oubl e, f or , you see, whi l e t he
Cosmopol i t an had never l ai d down, t her e was no t el l i ng, and a
r un on a bucket shop can st ar t l i ke a r un on a bank. I f one
cust omer get s suspi ci ous t he ot her s f ol l ow sui t . So Tom l ooked
sul ky, but came over and mar ked my t i cket s " Cl osed at 103" and
shoved t he seven of t hem over t owar d me. He sur e had a sour
f ace.
Say, t he di st ance f r om Tom' s pl ace t o t he cashi er ' s cage
wasn' t over ei ght f eet . But I hadn' t got t o t he cashi er t o get
my money when Dave Wyman by t he t i cker yel l ed exci t edl y
" Gosh! Sugar , 108! " But i t was t oo l at e; so I j ust l aughed and
cal l ed over t o Tom, " I t di dn' t wor k t hat t i me, di d i t , ol d boy?"
Of cour se, i t was a put - up j ob. Henr y Wi l l i ams and I t o-
get her wer e shor t si x t housand shar es of Sugar . That bucket shop
had my mar gi n and Henr y' s, and t her e may have been a l ot of
ot her Sugar shor t s i n t he of f i ce; possi bl y ei ght or t en t housand
shar es i n al l . Suppose t hey had $20, 000 i n Sugar mar gi ns. That
was enough t o pay t he shop t o t hi mbl er i g t he mar ket on t he New
Yor k St ock Exchange and wi pe us out . I n t he ol d days whenever a
bucket shop f ound i t sel f l oaded wi t h t oo many bul l s on a cer t ai n
st ock i t was a common pr act i ce t o get some br oker t o wash down
t he pr i ce of t hat par t i cul ar st ock f ar enough t o wi pe out al l
t he cust omer s t hat wer e l ong of i t . Thi s sel dom cost t he bucket
shop mor e t han a coupl e of poi nt s on a f ew hundr ed shar es, and
t hey made t housands of dol l ar s.
That was what t he Cosmopol i t an di d t o get me and Henr y
Wi l l i ams and t he ot her Sugar shor t s. Thei r br oker s i n New Yor k
r an up t he pr i ce t o i o8. Of cour se i t f el l r i ght back, but Henr y
and a l ot of ot her s wer e wi ped out . Whenever t her e was an
unexpl ai ned shar p dr op whi ch was f ol l owed by i nst ant r ecover y,
t he newspaper s i n t hose days used t o cal l i t a bucket - shop
dr i ve.
And t he f unni est t hi ng was t hat not l at er t han t en days
af t er t he Cosmopol i t an peopl e t r i ed t o doubl ecr oss me a New Yor k
oper at or di d t hem out of over sevent y t housand dol l ar s. Thi s
man, who was qui t e a mar ket f act or i n hi s day and a member of
t he New Yor k St ock Exchange, made a gr eat name f or hi msel f as a
bear dur i ng t he Br yan pani c of ' 96. He was f or ever r unni ng up
agai nst St ock Exchange r ul es t hat kept hi m f r om car r yi ng out
some of hi s pl ans at t he expense of hi s f el l ow member s. One day
he f i gur ed t hat t her e woul d be no compl ai nt s f r om ei t her t he
Exchange or t he pol i ce aut hor i t i es i f he t ook f r om t he bucket
shops of t he l and some of t hei r i l l - got t en gai ns. I n t he
i nst ance I speak of he sent t hi r t y- f i ve men t o act as cust omer s.


They went t o t he mai n of f i ce and t o t he bi gger br anches. On a
cer t ai n day at a f i xed hour t he agent s al l bought as much of a
cer t ai n st ock as t he manager s woul d l et t hem. They had
i nst r uct i ons t o sneak out at a cer t ai n pr of i t . Of cour se what he
di d was t o di st r i but e bul l t i ps on t hat st ock among hi s cr oni es
and t hen he went i n t o t he f l oor of t he St ock Exchange and bi d
up t he pr i ce, hel ped by t he r oom t r ader s, who t hought he was a
good spor t . Bei ng car ef ul t o pi ck out t he r i ght st ock f or t hat
wor k, t her e was no t r oubl e i n put t i ng up t he pr i ce t hr ee or f our
poi nt s. Hi s agent s at t he bucket shops cashed i n as pr ear r anged.
A f el l ow t ol d me t he or i gi nat or cl eaned up sevent y t housand
dol l ar s net , and hi s agent s made t hei r expenses and t hei r pay
besi des. He pl ayed t hat game sever al t i mes al l over t he count r y,
puni shi ng t he bi gger bucket shops of New Yor k, Bost on,
Phi l adel phi a, Chi cago, Ci nci nnat i and St . Loui s. One of hi s
f avor i t e st ocks was West er n Uni on, because i t was so easy t o
move a semi act i ve st ock l i ke t hat a f ew poi nt s up or down. Hi s
agent s bought i t at a cer t ai n f i gur e, sol d at t wo poi nt s pr of i t ,
went shor t and t ook t hr ee poi nt s mor e. By t he way, I r ead t he
ot her day t hat t hat man di ed, poor and obscur e. I f he had di ed
i n 1896 he woul d have got at l east a col umn on t he f i r st page of
ever y New Yor k paper . As i t was he got t wo l i nes on t he f i f t h.



CHAPTER I I

BETWEEN t he di scover y t hat t he Cosmopol i t an St ock Br oker age
Company was r eady t o beat me by f oul means i f t he ki l l i ng
handi cap of a t hr ee- poi nt mar gi n and a poi nt - and- a- hal f pr emi um
di dn' t do i t , and hi nt s t hat t hey di dn' t want my busi ness
anyhow, I soon made up my mi nd t o go t o New Yor k, wher e I coul d
t r ade i n t he of f i ce of some member of t he New Yor k St ock
Exchange. I di dn' t want any Bost on br anch, wher e t he quot at i ons
had t o be t el egr aphed. I want ed t o be cl ose t o t he or i gi nal
sour ce. I came t o New Yor k at t he age of 21, br i ngi ng wi t h me
al l I had, t went y- f i ve hundr ed dol l ar s.
I t ol d you I had t en t housand dol l ar s when I was t went y,
and my mar gi n on t hat Sugar deal was over t en t housand. But I
di dn' t al ways wi n. My pl an of t r adi ng was sound enough and won
of t ener t han i t l ost . I f I had st uck t o i t I ' d have been r i ght
per haps as of t en as seven out of t en t i mes. I n f act , I al ways
made money when I was sur e I was r i ght bef or e I began. What beat
me was not havi ng br ai ns enough t o st i ck t o my own game - - t hat
i s, t o pl ay t he mar ket onl y when I was sat i sf i ed t hat pr ecedent s
f avor ed my pl ay. Ther e i s a t i me f or al l t hi ngs, but I di dn' t
know i t . And t hat i s pr eci sel y what beat s so many men i n Wal l
St r eet who ar e ver y f ar f r om bei ng i n t he mai n sucker cl ass.
Ther e i s t he pl ai n f ool , who does t he wr ong t hi ng at al l t i mes
ever ywher e, but t her e i s t he Wal l St r eet f ool , who t hi nks he
must t r ade al l t he t i me. No man can al ways have adequat e r easons
f or buyi ng or sel l i ng st ocks dai l y or suf f i ci ent knowl edge t o
make hi s. pl ay an i nt el l i gent pl ay.
I pr oved i t . Whenever I r ead t he t ape by t he l i ght of
exper i ence I made money, but when I made a pl ai n f ool pl ay I had
t o l ose. I was no except i on, was I ? Ther e was t he huge quot at i on
boar d st ar i ng me i n t he f ace, and t he t i cker goi ng on, and
peopl e t r adi ng and wat chi ng t hei r t i cket s t ur n i nt o cash or i nt o
wast e paper . Of cour se I l et t he cr avi ng f or exci t ement get t he
bet t er of my j udgment . I n a bucket shop wher e your mar gi n i s a
shoest r i ng you don' t pl ay f or l ong pul l s. You ar e wi ped t oo
easi l y and qui ckl y. The desi r e f or const ant act i on i r r espect i ve
of under l yi ng condi t i ons i s r esponsi bl e f or many l osses i n Wal l
St r eet even among t he pr of essi onal s, who f eel t hat t hey must
t ake home some money ever y day, as t hough t hey wer e wor ki ng f or
r egul ar wages. I was onl y a ki d, r emember . I di d not know t hen
what I l ear ned l at er , what made me f i f t een year s l at er , wai t t wo
l ong weeks and see a st ock on whi ch I was ver y bul l i sh go up
t hi r t y poi nt s bef or e I f el t t hat i t was saf e t o buy i t . I was


br oke and was t r yi ng t o get back, and I coul dn' t af f or d t o pl ay
r eckl essl y. I had t o be r i ght , and so I wai t ed. That was i n
1915. I t ' s a l ong st or y. I ' l l t el l i t l at er i n i t s pr oper pl ace.
Now l et ' s go on f r om wher e af t er year s of pr act i ce at beat i ng
t hemI l et t he bucket shops t ake away most of my wi nni ngs.
And wi t h my eyes wi de open, t o boot ! And i t wasn' t t he onl y
per i od of my l i f e when I di d i t , ei t her . A st ock oper at or has t o
f i ght a l ot of expensi ve enemi es wi t hi n hi msel f . Anyhow, I came
t o New Yor k wi t h t went y- f i ve hundr ed dol l ar s. Ther e wer e no
bucket shops her e t hat a f el l ow coul d t r ust . The St ock Exchange
and t he pol i ce bet ween t hem had succeeded i n cl osi ng t hem up
pr et t y t i ght . Besi des, I want ed t o f i nd a pl ace wher e t he onl y
l i mi t t o my t r adi ng woul d be t he si ze of my st ake. I di dn' t have
much of one, but I di dn' t expect i t t o st ay l i t t l e f or ever . The
mai n t hi ng at t he st ar t was t o f i nd a pl ace wher e I woul dn' t
have t o wor r y about get t i ng a squar e deal . So I went t o a New
Yor k St ock Exchange house t hat had a br anch at home wher e I knew
some of t he cl er ks. They have l ong si nce gone out of busi ness. I
wasn' t t her e l ong, di dn' t l i ke one of t he par t ner s, and t hen I
went t o A. R. Ful l er t on & Co. Somebody must have t ol d t hemabout
my ear l y exper i ences, because i t was not l ong bef or e t hey al l
got t o cal l i ng me t he Boy Tr ader . I ' ve al ways l ooked young. I t
was a handi cap i n some ways but i t compel l ed me t o f i ght f or my
own because so, many t r i ed t o t ake advant age of my yout h. The
chaps at t he bucket shops seei ng what a ki d I was, al ways
t hought I was a f ool f or l uck and t hat t hat was t he onl y r eason
why I beat t hemso of t en.
Wel l , i t wasn' t si x mont hs bef or e I was br oke. I was a
pr et t y act i ve t r ader and had a sor t of r eput at i on as a wi nner . I
guess my commi ssi ons amount ed t o somet hi ng. I r an up my account
qui t e a l i t t l e, but , of cour se, i n t he end I l ost . I pl ayed
car ef ul l y; but I had t o l ose. I ' l l t el l you t he r eason: i t was
my r emar kabl e success i n t he bucket shops!
I coul d beat t he game my way onl y i n a bucket shop; wher e I
was bet t i ng on f l uct uat i ons. My t ape r eadi ng had t o do wi t h t hat
excl usi vel y. When I bought t he pr i ce was t her e on t he quot at i on
boar d, r i ght i n f r ont of me. Even bef or e I bought I knew exact l y
t he pr i ce I ' d have t o pay f or my st ock. And I al ways coul d sel l
on t he i nst ant . I coul d scal p successf ul l y, because I coul d move
l i ke l i ght ni ng. I coul d f ol l ow up my l uck or cut my l oss i n a
second. Somet i mes, f or i nst ance, I was cer t ai n a st ock woul d
move at l east a poi nt . Wel l , I di dn' t have t o hog i t , I coul d
put up a poi nt mar gi n and doubl e my money i n a j i f f y; or I ' d
t ake hal f a poi nt . On one or t wo hundr ed shar es a day, t hat
woul dn' t be bad at t he end of t he mont h, what ?


The pr act i cal t r oubl e wi t h t hat ar r angement , of cour se, was
t hat even i f t he bucket shop had t he r esour ces t o st and a bi g
st eady l oss, t hey woul dn' t do i t . They woul dn' t have a cust omer
ar ound t he pl ace who had t he bad t ast e t o wi n al l t he t i me.
At al l event s, what was a per f ect syst em f or t r adi ng i n
bucket shops di dn' t wor k i n Ful l er t on' s of f i ce. Ther e I was
act ual l y buyi ng and sel l i ng st ocks. The pr i ce of Sugar on t he
t ape mi ght be 105 and I coul d see a t hr ee- poi nt dr op comi ng. As
a mat t er of f act , at t he ver y moment t he t i cker was pr i nt i ng 105
on t he t ape t he r eal pr i ce on t he f l oor of t he Exchange mi ght be
i o4 or 103. By t he t i me my or der t o sel l a t housand shar es got
t o Ful l er t on' s f l oor man t o execut e, t he pr i ce mi ght be st i l l
l ower . I coul dn' t t el l at what pr i ce I had put out my t housand
shar es unt i l I got a r epor t f r om t he cl er k. When I sur el y woul d
have made t hr ee t housand on t he same t r ansact i on i n a bucket
shop I mi ght not make a cent i n a St ock Exchange house. Of
cour se, I have t aken an ext r eme case, but t he f act r emai ns t hat
i n A. R. Ful l er t on' s of f i ce t he t ape al ways t al ked anci ent
hi st or y t o me, as f ar as my syst emof t r adi ng went , and I di dn' t
r eal i ze i t .
And t hen, t oo, i f my or der was f ai r l y bi g my own sal e woul d
t end f ur t her t o depr ess t he pr i ce. I n t he bucket shop I di dn' t
have t o f i gur e on t he ef f ect of my own t r adi ng. I l ost i n New
Yor k because t he game was al t oget her di f f er ent . I t was not t hat
I now was pl ayi ng i t l egi t i mat el y t hat made me l ose, but t hat I
was pl ayi ng i t i gnor ant l y. I have been t ol d t hat I am a good
r eader of t he t ape. But r eadi ng t he t ape l i ke an exper t di d not
save me. I mi ght have made out a gr eat deal bl r t t er i f I had
been on t he f l oor mysel f , a r oom t r ader . I n a par t i cul ar cr owd
per haps I mi ght have adapt ed my syst em t o t he condi t i ons
i mmedi at el y bef or e me. But , of cour se, i f I had got t o oper at i ng
on such a scal e as I do now, f or i nst ance, t he syst emwoul d have
equal l y f ai l ed me, on account of t he ef f ect of my own t r adi ng on
pr i ces.
I n shor t , I di d not know t he game of st ock specul at i on. I
knew a par t of i t , a r at her i mpor t ant par t , whi ch has been ver y
val uabl e t o me at al l t i mes. But i f wi t h al l I had I st i l l l ost ,
what chance does t he gr een out si der have of wi nni ng, or , r at her ,
of cashi ng i n?
I t di dn' t t ake me l ong t o r eal i se t hat t her e was somet hi ng
wr ong wi t h my pl ay, but I coul dn' t spot t he exact t r oubl e. Ther e
wer e t i mes when my syst emwor ked beaut i f ul l y, and t hen, al l of a
sudden, not hi ng but one swat af t er anot her . I was onl y
t went y- t wo, r emember ; not t hat I was so st uck on mysel f t hat I


di dn' t want t o know j ust wher e I was at f aul t , but t hat at t hat
age nobody knows much of anyt hi ng.
The peopl e i n t he of f i ce wer e ver y ni ce t o me. I coul dn' t
pl unge as I want ed t o because of t hei r mar gi n r equi r ement s, but
ol d A. R. Ful l er t on and t he r est of t he f i r m wer e so ki nd t o me
t hat af t er si x mont hs of act i ve t r adi ng I not onl y l ost al l I
had br ought and al l t hat I had made t her e but I even owed t he
f i r ma f ew hundr eds.
Ther e I was, a mer e ki d, who had never bef or e been away
f r om home, f l at br oke; but I knew t her e wasn' t anyt hi ng wr ong
wi t h me; onl y wi t h my pl ay. I don' t know whet her I make mysel f
pl ai n, but I never l ose my t emper over t he st ock mar ket . I never
ar gue wi t h t he t ape. Get t i ng sor e at t he mar ket doesn' t get you
anywher e.
I was so anxi ous t o r esume t r adi ng t hat I di dn' t l ose a
mi nut e, but went t o ol d man Ful l er t on and sai d t o hi m, " Say, A.
R. , l end me f i ve hundr ed dol l ar s. "
" What f or ?" says he.
" I ' ve got t o have some money. "
" What f or ?" he says agai n.
" For mar gi n, of cour se, " I sai d.
" Fi ve hundr ed dol l ar s?" he sai d, and f r owned. " You know
t hey' d expect you t o keep up a 10 per cent mar gi n, and t hat
means one t housand dol l ar s on one hundr ed shar es. Much bet t er t o
gi ve you a cr edi t - - "
" No, " I sai d, " I don' t want a cr edi t her e. I al r eady owe
t he f i r m somet hi ng. What I want i s f or you t o l end me f i ve
hundr ed dol l ar s so I can go out and get a r ol l and come back. "
" How ar e you goi ng t o do i t ?" asked ol d A. R.
" I ' l l go and t r ade i n a bucket shop, " I t ol d hi m.
" Tr ade her e, " he sai d.
" No, " I sai d. " I ' mnot sur e yet I can beat t he game i n t hi s
of f i ce, but I am sur e I can t ake money out of t he bucket shops.
I know t hat game. I have a not i on t hat I know j ust wher e I went
wr ong her e. "
He l et me have i t , and I went out of t hat of f i ce wher e t he
Boy Ter r or of t he Bucket Shops, as t hey cal l ed hi m, had l ost hi s
pi l e. I coul dn' t go back home because t he shops t her e woul d not
t ake my busi ness. New Yor k was out of t he quest i on; t her e
wer en' t any doi ng busi ness at t hat t i me. They t el l me t hat i n
t he 90' s Br oad St r eet and New St r eet wer e f ul l of t hem. But
t her e wer en' t any when I needed t hem i n my busi ness. So af t er
some t hi nki ng I deci ded t o go t o St . Loui s. I had hear d of t wo
concer ns t her e t hat di d an enor mous busi ness al l t hr ough t he
Mi ddl e West . Thei r pr of i t s must have been huge. They had br anch


of f i ces i n dozens of t owns. I n f act I had been t ol d t hat t her e
wer e no concer ns i n t he East t o compar e wi t h t hem f or vol ume of
busi ness. They r an openl y and t he best peopl e t r aded t her e
wi t hout any qual ms. A f el l ow even t ol d me t hat t he owner of one
of t he concer ns was a vi ce- pr esi dent of t he Chamber of Commer ce
but t hat coul dn' t have been i n St . Loui s. At any r at e, t hat i s
wher e I went wi t h my f i ve hundr ed dol l ar s t o br i ng back a st ake
t o use as mar gi n i n t he of f i ce of A. R. Ful l er t on & Co. , member s
of t he New Yor k St ock Exchange.
When I got t o St . Loui s I went t o t he hot el , washed up and
went out t o f i nd t he bucket shops. One was t he J . G. Dol an
Company, and t he ot her was H. S. Tel l er & Co. I knew I coul d
beat t hem. I was goi ng t o pl ay dead saf e - - car ef ul l y and
conser vat i vel y. My one f ear was t hat somebody mi ght r ecogni se me
and gi ve me away, because t he bucket shops al l over t he count r y
had hear d of t he Boy Tr ader . They ar e l i ke gambl i ng houses and
get al l t he gossi p of t he pr of esh.
Dol an was near er t han Tel l er , and I went t her e f i r st . I was
hopi ng I mi ght be al l owed t o do busi ness a f ew days bef or e t hey
t ol d me t o t ake my t r ade somewher e el se. I wal ked i n. I t was a
whoppi ng bi g pl ace and t her e must have been at l east a coupl e of
hundr ed peopl e t her e st ar i ng at t he quot at i ons. I was gl ad,
because i n such a cr owd I st ood a bet t er chance of bei ng
unnot i ced. I st ood and wat ched t he boar d and l ooked t hem over
car ef ul l y unt i l I pi cked out t he st ock f or my i ni t i al pl ay.
I l ooked ar ound and saw t he or der - cl er k at t he wi ndow wher e
you put down your money and get your t i cket . He was l ooki ng at
me so I wal ked up t o hi m and asked, " I s t hi s wher e you t r ade i n
cot t on and wheat ?"
" Yes, sonny, " says he.
" Can I buy st ocks t oo?"
" You can i f you have t he cash, " he sai d.
" Oh, I got t hat al l r i ght , al l r i ght , " I sai d l i ke a
boast i ng boy.
" You have, have you?" he says wi t h a smi l e.
" How much st ock can I buy f or one hundr ed dol l ar s?" I
asked, peeved- l i ke.
" One hundr ed; i f you got t he hundr ed. "
" I got t he hundr ed. Yes; and t wo hundr ed t oo! " I t ol d hi m.
" Oh, my! " he sai d.
" J ust you buy me t wo hundr ed shar es, " I sai d shar pl y.
" Two hundr ed what ?" he asked, ser i ous now. I t was
busi ness.
I l ooked at t he boar d agai n as i f t o guess wi sel y and t ol d
hi m, " Two hundr ed Omaha. "


" Al l r i ght ! " he sai d. He t ook my money, count ed i t and
wr ot e out t he t i cket .
" What ' s your name?" he asked me, and I answer ed, " Hor ace
Kent . "
He gave me t he t i cket and I went away and sat down among
t he cust omer s t o wai t f or t he r ol l t o gr ow. I got qui ck act i on
and I t r aded sever al t i mes t hat day. On t he next day t oo. I n t wo
days I made t went y- ei ght hundr ed dol l ar s, and I was hopi ng
t hey' d l et me f i ni sh t he week out . At t he r at e I was goi ng, t hat
woul dn' t be so bad. Then I ' d t ackl e t he ot her shop, and i f I had
si mi l ar l uck t her e I ' d go back t o New Yor k wi t h a wad I coul d do
somet hi ng wi t h.
On t he mor ni ng of t he t hi r d day, when I went t o t he wi ndow,
bashf ul - - l i ke, t o buy f i ve hundr ed B. R. T. t he cl er k sai d t o
me, " Say, Mr . Kent , t he boss want s t o see you. "
I knew t he game was up. But I asked hi m, " What does he want
t o see me about ?"
" I don' t know. "
" Wher e i s he?"
" I n hi s pr i vat e of f i ce. Go i n t hat way. " And he poi nt ed t o
a door .
I went i n. Dol an was si t t i ng at hi s desk. He swung ar ound
and sai d, " Si t down, Li ver mor e. "
He poi nt ed t o a chai r . My l ast hope vani shed. I don' t know
how he di scover ed who I was; per haps f r omt he hot el r egi st er .
" What do you want t o see me about ?" I asked hi m.
" Li st en, ki d. I ai n' t got not hi n' agi n yeh, see? Not hi n' at
al l . See?"
" No, I don' t see, " I sai d.
He got up f r omhi s swi vel chai r . He was a whoppi ng bi g guy.
He sai d t o me, " J ust come over her e, Li ver mor e, wi l l yeh?" and
he wal ked t o t he door . He opened i t and t hen he poi nt ed t o t he
cust omer s i n t he bi g r oom.
" D' yeh see t hem?" he asked.
" See what ?"
" Them guys. Take a l ook at ' em, ki d. Ther e' s t hr ee hundr ed
of em! Thr ee hundr ed sucker s! They f eed me and my f ami l y. See?
Thr ee hundr ed sucker s! Then yeh come i n, and i n t wo days yeh cop
mor e t han I get out of t he t hr ee hundr ed i n t wo weeks. That
ai n' t busi ness, ki d- not f or me 1 I ai n' t got not hi n' agi n yeh.
Yer wel come t o what ye' ve got . But yeh don' t get any mor e. Ther e
ai n' t any her e f or yeh! "
Why, I
" That ' s al l . I seen yeh come i n day bef or e yest er day, and I
di dn' t l i ke yer l ooks. On t he l evel , I di dn' t . I spot t ed yeh f or


a r i nger . I cal l ed i n t hat j ackass t her e" - - he poi nt ed t o t he
gui l t y cl er k" and asked what you' d done; and when he t ol d me I
sai d t o hi m: ' I don' t l i ke t hat guy' s l ooks. He' s a r i nger ! ' And
t hat pi ece of cheese says: ' Ri nger my eye, boss! Hi s name i s
Hor ace Kent , and he' s a r ah- r ah boy pl ayi ng at bei ng used t o
l ong pant s. He' s al l r i ght ! ' Wel l , I l et hi m have hi s way. That
bl anket y- bl ank cost me t went y- ei ght hundr ed dol l ar s. I don' t
gr udge i t yeh, my boy. But t he saf e i s l ocked f or yeh. "
" Look her e" I began.
" You l ook her e, Li ver mor e, " he sai d. " I ' ve hear d al l about
yeh. I make my money copper i ng sucker s' bet s, and yeh don' t
bel ong her e. I ai m t o be a spor t and yer wel come t o what yeh
pr i ed of f ' n us. But mor e of t hat woul d make me a sucker , now
t hat I know who yeh ar e. So t oddl e al ong, sonny! "
I l ef t Dol an' s pl ace wi t h my t went y- ei ght hundr ed dol l ar s'
pr of i t . Tel l er ' s pl ace was i n t he same bl ock. I had f ound out
t hat Tel l er was a ver y r i ch man who al so r an up a l ot of pool
r ooms. I deci ded t o go t o hi s bucket shop. I wonder ed whet her i t
woul d be wi se t o st ar t moder at el y and wor k up t o a t housand
shar es or t o begi n wi t h a pl unge, on t he t heor y t hat I mi ght not
be abl e t o t r ade mor e t han one day. They get wi se mi ght y qui ck
when t hey' r e l osi ng and I di d want t o buy one t housand B. R. T.
I was sur e I coul d t ake f our or f i ve poi nt s out of i t . But i f
t hey got suspi ci ous or i f t oo many cust omer s wer e l ong of t hat
st ock t hey mi ght not l et me t r ade at al l . I t hought per haps I ' d
bet t er scat t er my t r ades at f i r st and begi n smal l .
I t wasn' t as bi g a pl ace as Dol an' s, but t he f i xt ur es wer e
ni cer and evi dent l y t he cr owd was of a bet t er cl ass. Thi s sui t ed
me down t o t he gr ound and I deci ded t o buy my one t housand B. R.
T. So I st epped up t o t he pr oper wi ndow and sai d t o t he cl er k,
" I ' d l i ke t o buy some B. R. T. What ' s t he l i mi t ?"
" Ther e' s no l i mi t , " sai d t he cl er k. " You can buy al l you
pl ease - - i f you' ve got t he money. "
" Buy f i f t een hundr ed shar es, " I says, and t ook my r ol l f r om
my pocket whi l e t he cl er k st ar t s t o wr i t e t he t i cket .
Then I saw a r ed- headed man j ust shove t hat cl er k away f r om
t he count er . He l eaned acr oss and sai d t o me, `Say, Li ver mor e,
you go back t o Dol an' s. We don' t want your busi ness. "
" Wai t unt i l I get my t i cket , " I sai d. " I j ust bought a
l i t t l e B. R. T. "
" You get no t i cket her e, " he sai d. By t hi s t i me ot her
cl er ks had got behi nd hi m and wer e l ooki ng at me. " Don' t ever
come her e t o t r ade. We don' t t ake your busi ness. Under st and?"
Ther e was no sense i n get t i ng mad or t r yi ng t o ar gue, so I
went back t o t he hot el , pai d my bi l l and t ook t he f i r st t r ai n


back t o New Yor k. I t was t ough. I want ed t o t ake back some r eal
money and t hat Tel l er woul dn' t l et me make even one t r ade.
I got back t o New Yor k, pai d Ful l er t on hi s f i ve hundr ed,
and st ar t ed t r adi ng agai n wi t h t he St . Loui s money. I had good
and bad spel l s, but I was doi ng bet t er t han br eaki ng even. Af t er
al l , I di dn' t have much t o unl ear n; onl y t o gr asp t he one f act
t hat t her e was mor e t o t he game of st ock specul at i on t han I had
consi der ed bef or e I went t o Ful l er t on' s of f i ce t o t r ade. I was
l i ke one of t hose puzzl e f ans, doi ng t he cr osswor d puzzl es i n
t he Sunday suppl ement . He i sn' t sat i sf i ed unt i l he get s i t .
Wel l , I cer t ai nl y want ed t o f i nd t he sol ut i on t o my puzzl e. I
t hought I was done wi t h t r adi ng i n bucket shops. But I was
mi st aken.
About a coupl e of mont hs af t er I got back t o New Yor k an
ol d j i gger came i nt o Ful l er t on' s of f i ce. He knew A. R. Somebody
sai d t hey' d once owned a st r i ng of r ace hor ses t oget her . I t was
pl ai n he' d seen bet t er days. I was i nt r oduced t o ol d McDevi t t .
He was t el l i ng t he cr owd about a bunch of West er n r acet r ack
cr ooks who had j ust pul l ed of f some ski n game out i n St . Loui s.
The head devi l , he sai d, was a pool r oom owner by t he name of
Tel l er .
" What Tel l er ?" I asked hi m.
" Hi Tel l er ; H. S. Tel l er . "
" I know t hat bi r d, " I sai d.
" He' s no good, " sai d McDevi t t .
" He' s wor se t han t hat , " I sai d, " and I have a l i t t l e mat t er
t o set t l e wi t h hi m. "
" Meani ng how?"
" The onl y way I can hi t any of t hese shor t spor t s i s
t hr ough t hei r pocket book. I can' t t ouch hi m i n St . Loui s j ust
now, but some day I wi l l . " And I t ol d McDevi t t my gr i evance.
" Wel l , " says ol d Mac, " he t r i ed t o connect her e i n New Yor k
and coul dn' t make i t , so he' s opened a pl ace i n Hoboken. The
wor d' s gone out t hat t her e i s no l i mi t t o t he pl ay and t hat t he
house r ol l has got t he Rock of Gi br al t ar f aded t o t he shadow of
a bant amf l ea. "
" What sor t of a pl ace?" I t hought he meant pool r oom.
" Bucket shop, " sai d McDevi t t .
" Ar e you sur e i t ' s open?"
" Yes; I ' ve seen sever al f el l ows who' ve t ol d me about i t . "
" That ' s onl y hear say, " I sai d. " Can you f i nd out posi t i vel y
i f i t ' s r unni ng, and al so how heavy t hey' l l r eal l y l et a man
t r ade?"
" Sur e, sonny, " sai d McDevi t t . " I ' l l go mysel f t omor r ow
mor ni ng, and come back her e and t el l you. "


He di d. I t seems Tel l er was al r eady doi ng a bi g busi ness
and woul d t ake al l he coul d get . Thi s was on a Fr i day. The
mar ket had been goi ng up al l t hat week - - t hi s was t went y year s
ago, r emember - - and i t was a ci nch t he bank st at ement on
Sat ur day woul d show a bi g decr ease i n t he sur pl us r eser ve.
That woul d gi ve t he convent i onal excuse t o t he bi g
r oom t r ader s t o j ump on t he mar ket and t r y t o shake out some of
t he weak commi ssi on- house account s. Ther e woul d be t he usual
r eact i ons i n t he l ast hal f hour of t he t r adi ng, par t i cul ar l y i n
st ocks i n whi ch t he publ i c had been t he most act i ve. Those, of
cour se, al so woul d be t he ver y st ocks t hat Tel l er ' s cust omer s
woul d be most heavi l y l ong of , and t he shop mi ght be gl ad t o see
some shor t sel l i ng i n t hem. Ther e i s not hi ng so ni ce as i f
cat chi ng t he sucker s bot h ways; and not hi ng so easy wi t h
one- poi nt mar gi ns.
That Sat ur day mor ni ng I chased over t o Hoboken t o t he
Tel l er pl ace. They had f i t t ed up a bi g cust omer s' r oom wi t h a
dandy quot at i on boar d and a f ul l f or ce of cl er ks and a speci al
pol i ceman i n gr ay. Ther e wer e about t went y- f i ve cust omer s.
I got t al ki ng t o t he manager . He asked me what he coul d do
f or me and I t ol d hi m not hi ng; t hat a f el l ow coul d make much
mor e money at t he t r ack on account of t he odds and t he f r eedom
t o bet your whol e r ol l and st and t o wi n t housands i n mi nut es
i nst ead of pi ki ng f or chi cken f eed i n st ocks and havi ng t o wai t
days, per haps. He began t o t el l me how much saf er t he
st ock- mar ket game was, and how much some of t hei r cust omer s made
- - you' d have swor n i t was a r egul ar br oker who act ual l y
bought and sol d your st ocks on t he Exchange and how i f a man
onl y t r aded heavy he coul d make enough t o sat i sf y anybody. He
must have t hought I was headed f or some pool r oom and he want ed
a whack at my r ol l bef or e t he poni es ni bbl ed i t away, f or he
sai d I ought t o hur r y up as t he mar ket cl osed at t wel ve o' cl ock
on Sat ur days. That woul d l eave me f r ee t o devot e t he ent i r e
af t er noon t o ot her pur sui t s. I mi ght have a bi gger r ol l t o car r y
t o t he t r ack wi t h - - i f I pi cked t he r i ght st ocks.
I l ooked as i f I di dn' t bel i eve hi m, and he kept on buzzi ng
me. I was wat chi ng t he cl ock. At 11: 15 I sai d, " Al l r i ght , " and
I began t o gi ve hi m sel l i ng or der s i n var i ous st ocks. I put up
t wo t housand dol l ar s i n cash, and he was ver y gl ad t o get i t . He
t ol d me he t hought I ' d make a l ot of money and hoped I ' d come i n
of t en.
I t happened j ust as I f i gur ed. The t r ader s hammer ed t he
st ocks i n whi ch t hey f i gur ed t hey woul d uncover t he most st ops,
and, sur e enough, pr i ces sl i d of f . I cl osed out my t r ades j ust


bef or e t he r al l y of t he l ast f i ve mi nut es on t he usual t r ader s'
cover i ng.
Ther e was f i f t y- one hundr ed dol l ar s comi ng t o me. I went t o
cash i n.
" I am gl ad I dr opped i n, " I sai d t o t he manager , and gave
hi mmy t i cket s.
" Say, " he says t o me, " I can' t gi ve you al l of i t . I wasn' t
l ooki ng f or such a r un. I ' l l have i t her e f or you Monday
mor ni ng, sur e as bl azes. "
" Al l r i ght . But f i r st I ' l l t ake al l you have i n t he house, "
I sai d.
" You' ve got t o l et me pay of f t he l i t t l e f el l ows, " he sai d.
" I ' l l gi ve you back what you put up, and anyt hi ng t hat ' s l ef t .
Wai t t i l l I cash t he ot her t i cket s. " So I wai t ed whi l e he pai d
of f t he ot her wi nner s. Oh, I knew my money was saf e. Tel l er
woul dn' t wel sh wi t h t he of f i ce doi ng such a good busi ness. And
i f he di d, what el se coul d I do bet t er t han t o t ake al l he had
t hen and t her e? I got my own t wo t housand dol l ar s and about
ei ght hundr ed dol l ar s besi des, whi ch was al l he had i n t he
of f i ce. I t ol d hi m I ' d be t her e Monday mor ni ng. He swor e t he
money woul d be wai t i ng f or me.
I got t o Hoboken a l i t t l e bef or e t wel ve on Monday. I saw a
f el l ow t al ki ng t o t he manager t hat I had seen i n t he St . Loui s
of f i ce t he day Tel l er t ol d me t o go back t o Dol an. I knew at
once t hat t he manager had t el egr aphed t o t he home of f i ce and
t hey' d sent up one of t hei r men t o i nvest i gat e t he st or y.
Cr ooks don' t t r ust anybody. _
" I came f or t he bal ance of my money, " I sai d t o t he
manager .
" I s t hi s t he man?" asked t he St . Loui s chap.
" Hol d on! " sai d t he St . Loui s f el l ow t o hi m and t hen t ur ns
t o me, " Say, Li ver mor e, di dn' t we t el l you we di dn' t want your
busi ness?"
" Gi ve me my money f i r st , " I sai d t o t he manager , and he
f or ked over t wo t housands, f our f i ve- hundr eds and t hr ee
hundr eds.
" What di d you say?" I sai d t o St . Loui s.
" We t ol d you we di dn' t want you t o t r ade i n our pl ace. "
" Yes, " I sai d; " t hat ' s why I came. "
" Wel l , don' t come any mor e. Keep away! " he snar l ed at me.
The pr i vat e pol i ceman i n gr ay came over , casual - l i ke. St . Loui s
shook hi s f i st at t he manager and yel l ed: " You ought t o' ve known
bet t er , you poor boob, t han t o l et t hi s guy get i nt o you. He' s
Li ver mor e. You had your or der s. "


" Li st en, you, " I sai d t o t he St . Loui s man. " Thi s i sn' t St .
Loui s. You can' t pul l of f any t r i ck her e, l i ke your boss di d
wi t h Bel f ast Boy. "
" You keep away f r om t hi s of f i ce! You can' t t r ade her e! " he
yel l s.
" I f I can' t t r ade her e nobody el se i s goi ng t o, " I t ol d
hi m. " You can' t get away wi t h t hat sor t of st uf f her e. "
Wel l , St . Loui s changed hi s t une at once.
" Look her e, ol d boy, " he sai d, al l f ussed up, " do us a
f avor . Be r easonabl e ! You know we can' t st and t hi s ever y day.
The ol d man' s goi ng t o hi t t he cei l i ng when he hear s who i t was.
Have a hear t , Li ver mor e ! "
" I ' l l go easy, " I pr omi sed.
" Li st en t o r eason, won' t you? For t he l ove of Pet e, keep
away! Gi ve us a chance t o get a good st ar t . We' r e new her e. Wi l l
you?"
" Yes, " sai d t he manager , and t ook a bunch of yel l ow backs
f r omhi s pocket .
" I don' t want any of t hi s hi gh- and- mi ght y busi ness t he next
t i me I come, " I sai d, and l ef t hi mt al ki ng t o t he manager at t he
r at e of a mi l l i on a mi nut e. I ' d got some money out of t hem f or
t he way t hey t r eat ed me i n St . Loui s. Ther e wasn' t any sense i n
my get t i ng hot or t r yi ng t o cl ose t hem up. I went back t o
Ful l er t on' s of f i ce and t ol d McDevi t t what had happened. Then I
t ol d hi mt hat i f i t was agr eeabl e t o hi mI ' d l i ke t o have hi mgo
t o Tel l er ' s pl ace and begi n t r adi ng i n t went y or t hi r t y shar e
l ot s, t o get t hem used t o hi m. Then, t he moment I saw a good
chance t o cl ean up bi g, I ' d t el ephone hi mand he coul d pl unge.
I gave McDevi t t a t housand dol l ar s and he went t o Hoboken
and di d as I t ol d hi m. He got t o be one of t he r egul ar s. Then
one day when I t hought I saw a br eak i mpendi ng I sl i pped Mac t he
wor d and he sol d al l t hey' d l et hi m. I cl ear ed t went y- ei ght
hundr ed dol l ar s t hat day, af t er gi vi ng Mac hi s r ake- of f and
payi ng expenses, and I suspect Mac put down a l i t t l e bet of hi s
own besi des. Less t han a mont h af t er t hat , Tel l er cl osed hi s
Hoboken br anch. The pol i ce got busy. And, anyhow, i t di dn' t pay,
t hough I onl y t r aded t her e t wi ce. We r an i nt o a cr azy bul l
mar ket when st ocks di dn' t r eact enough t o wi pe out even t he
one- poi nt mar gi ns, and, of cour se, al l t he cust omer s wer e bul l s
and wi nni ng and pyr ami di ng. No end of bucket shops bust ed al l
over t he count r y.
Thei r game has changed. Tr adi ng i n t he ol d- f ashi oned bucket
shop had some deci ded advant ages over specul at i ng i n a r eput abl e
br oker ' s of f i ce. For one t hi ng, t he aut omat i c cl osi ng out of
your t r ade when t he mar gi n r eached t he exhaust i on poi nt was t he


best ki nd of st op- l oss or der . You coul dn' t get st ung f or mor e
t han you had put up, and t her e was no danger of r ot t en execut i on
of or der s, and so on. I n New Yor k t he shops never wer e as
l i ber al wi t h t hei r pat r ons as I ' ve hear d t hey wer e i n t he West .
Her e t hey used t o l i mi t t he possi bl e pr of i t on cer t ai n st ocks
of . t he f oot bal l or der t o t wo poi nt s. Sugar and Tennessee Coal
and I r on wer e among t hese. No mat t er i f t hey moved t en poi nt s i n
t en mi nut es you coul d onl y make t wo on one t i cket . They f i gur ed
t hat ot her wi se t he cust omer was get t i ng t oo bi g odds; he st ood
t o l ose one dol l ar and t o make t en. And t hen t her e wer e t i mes
when al l t he shops, i ncl udi ng t he bi ggest , r ef used t o t ake
or der s on cer t ai n st ocks. I n i goo, on t he day bef or e El ect i on
Day, when i t was a f or egone concl usi on t hat McKi nl ey woul d wi n,
not a shop i n t he l and l et i t s cust omer s buy st ocks. The
el ect i on odds wer e 3 t o t on McKi nl ey. By buyi ng st ocks on
Monday you st ood t o make f r omt hr ee t o si x poi nt s or mor e. A man
coul d bet on Br yan and buy st ocks and make sur e money. The
bucket shops r ef used or der s t hat day.
I f i t hadn' t been f or t hei r r ef usi ng t o t ake my busi ness I
never woul d have st opped t r adi ng i n t hem. And t hen I never woul d
have l ear ned t hat t her e was much mor e t o t he game of st ock
specul at i on t han t o pl ay f or f l uct uat i ons of a f ew poi nt s.




CHAPTER I I I

I t t akes a man a l ong t i me t o l ear n al l t he l essons of al l
hi s mi st akes. They say t her e ar e t wo si des t o ever yt hi ng. But
t her e i s onl y one si de t o t he st ock mar ket ; and i t i s not t he
bul l si de or t he bear si de, but t he r i ght si de. I t t ook me
l onger t o get t hat gener al pr i nci pl e f i xed f i r ml y i n my mi nd
t han i t di d most of t he mor e t echni cal phases of t he game of
st ock specul at i on.
I have hear d of peopl e who amuse t hemsel ves conduct i ng
i magi nar y oper at i ons i n t he st ock mar ket t o pr ove wi t h i magi nar y
dol l ar s how r i ght t hey ar e. Somet i mes t hese ghost gambl er s make
mi l l i ons. I t i s ver y easy t o be a pl unger t hat way. I t i s l i ke
t he ol d st or y of t he man who was goi ng t o f i ght a duel t he next
day.
Hi s second asked hi m, " Ar e you a good shot ?"
" Wel l , " sai d t he duel i st , " I can snap t he st em of a wi ne-
gl ass at t went y paces, " and he l ooked modest .
" That ' s al l ver y wel l , " sai d t he uni mpr essed second. " But
can you snap t he st em of t he wi negl ass whi l e t he wi negl ass i s
poi nt i ng a l oaded pi st ol st r ai ght at your hear t ?"
Wi t h me I must back my opi ni ons wi t h my money. My l osses
have t aught me t hat I must not begi n t o advance unt i l I am sur e
I shal l not have t o r et r eat . But i f I cannot advance I do not
move at al l . I do not mean by t hi s t hat a man shoul d not l i mi t
hi s l osses when he i s wr ong. He shoul d. But t hat shoul d not
br eed i ndeci si on. Al l my l i f e I have made mi st akes, but i n
l osi ng money I have gai ned exper i ence and accumul at ed a l ot of
val uabl e don' t s. I have been f l at br oke sever al t i mes, but my
l oss has never been a t ot al l oss. Ot her wi se, I woul dn' t be her e
now. I al ways knew I woul d have anot her chance and t hat I woul d
not make t he same mi st ake a second t i me. I bel i eved i n mysel f .
A man must bel i eve i n hi msel f and hi s j udgment i f he ex
peas t o make a l i vi ng at t hi s game. That i s why I don' t bel i eve
i n t i ps. I f I buy st ocks on Smi t h s t i p I must sel l t hose same
st ocks on Smi t h' s t i p. I am dependi ng on hi m. Suppose Smi t h i s
away on a hol i day when t he sel l i ng t i me comes ar ound? No, si r ,
nobody can make bi g money on what someone el se t el l s hi m t o do.
I know f r omexper i ence t hat nobody can gi ve me a t i p or a ser i es
of t i ps t hat wi l l make mor e money f or me t han my own j udgment .
I t t ook me f i ve year s t o l ear n t o pl ay t he game i nt el l i gent l y
enough t o make bi g money when I was r i ght .
I di dn' t have as many i nt er est i ng exper i ences as you mi ght
i magi ne. I mean, t he pr ocess of l ear ni ng how t o specul at e does


not seem ver y dr amat i c at t hi s di st ance. I went br oke sever al
t i mes, and t hat i s never pl easant , but t he way I l ost money i s
t he way ever ybody l oses money who l oses money i n Wal l St r eet .
Specul at i on i s a har d and t r yi ng busi ness, and a specul at or must
be on t he j ob al l t he t i me or he' l l soon have no j ob t o be on.
My t ask, as I shoul d have known af t er my ear l y r ever ses at
Ful l er t on' s, was ver y si mpl e: To l ook at specul at i on f r om
anot her angl e. But I di dn' t know t hat t her e was much mor e t o t he
game t han I coul d possi bl y l ear n i n t he bucket shops. Ther e I
t hought I was beat i ng t he game when i n r eal i t y I was onl y
beat i ng t he shop. At t he same t i me t he t ape- r eadi ng abi l i t y t hat
t r adi ng i n bucket shops devel oped i n me and t he t r ai ni ng of my
memor y have been ext r emel y val uabl e. Bot h of t hese t hi ngs came
easy t o me. I owe my ear l y success as a t r ader t o t hem and not
t o br ai ns or knowl edge, because my mi nd was unt r ai ned and my
i gnor ance was col ossal . The game t aught me t he game. And i t
di dn' t spar e t he r od whi l e t eachi ng.
I r emember my ver y f i r st day i n New Yor k. I t ol d you how
t he bucket shops, by r ef usi ng t o t ake my busi ness, dr ove me t o
seek a r eput abl e commi ssi on house. One of t he boys i n t he of f i ce
wher e I got my f i r st j ob was wor ki ng f or Har di ng Br ot her s,
member s of t he New Yor k St ock Exchange. I ar r i ved i n t hi s ci t y
i n t he mor ni ng, and bef or e one o' cl ock t hat same day I had
opened an account wi t h t he f i r mand was r eady t o t r ade.
I di dn' t expl ai n t o you how nat ur al i t was f or me t o t r ade
t her e exact l y as I had done i n t he bucket shops, wher e al l I di d
was t o bet on f l uct uat i ons and cat ch smal l but sur e changes i n
pr i ces. Nobody of f er ed t o poi nt out t he essent i al di f f er ences or
set me r i ght . I f somebody had t ol d me my met hod woul d not wor k I
never t hel ess woul d have t r i ed i t out t o make sur e f or mysel f ,
f or when I am wr ong onl y one t hi ng convi nces me of i t , and t hat
i s, t o l ose money. And I am onl y r i ght when I make money. That
i s specul at i ng.
They wer e havi ng some pr et t y l i vel y t i mes t hose days and
t he mar ket was ver y act i ve. That al ways cheer s up a f el l ow. I
f el t at home r i ght away. Ther e was t he ol d f ami l i ar quot at i on
boar d i n f r ont of me, t al ki ng a l anguage t hat I had l ear ned
bef or e I was f i f t een year s ol d. Ther e was a boy doi ng exact l y
t he same t hi ng I used t o do i n t he f i r st of f i ce I ever wor ked
i n. Ther e wer e t he cust omer s - - same ol d bunch - - l ooki ng at t he
boar d or st andi ng by t he t i cket cal l i ng out t he pr i ces and
t al ki ng about t he mar ket . The machi ner y was t o al l appear ances
t he same machi ner y t hat I was used t o. The at mospher e was t he
at mospher e I had br eat hed si nce I had made my f i r st st ock- mar ket
money - - $3. 12 i n Bur l i ngt on. The same ki nd of t i cker and t he


same ki nd of t r ader s, t her ef or e t he same ki nd of game. And
r emember , I was onl y t went y- t wo. I suppose I t hought I knew t he
game f r omA t o Z. Why shoul dn' t I ?
I wat ched t he boar d and saw somet hi ng t hat l ooked good t o
me. I t was behavi ng r i ght . I bought a hundr ed at 84. I got out
at 85 i n l ess t han a hal f hour . Then I saw somet hi ng el se I
l i ked, and I di d t he same t hi ng; t ook t hr ee- quar t er s of a poi nt
net wi t hi n a ver y shor t t i me. I began wel l , di dn' t I ?
Now mar k t hi s: On t hat , my f i r st day as a cust omer of a
r eput abl e St ock Exchange house, and onl y t wo hour s of i t at
t hat , I t r aded i n el even hundr ed shar es of st ock, j umpi ng i n and
out . And t he net r esul t of t he day' s oper at i ons was t hat I l ost
exact l y el even hundr ed dol l ar s. That i s t o say, on my f i r st
at t empt , near l y one- hal f of my st ake went up t he f l ue.
And r emember , some of t he t r ades showed me a pr of i t . But I
qui t el even hundr ed dol l ar s mi nus f or t he day.
I t di dn' t wor r y me, because I coul dn' t see wher e t her e was
anyt hi ng wr ong wi t h me. My moves, al so, wer e r i ght enough, and
i f I had been t r adi ng i n t he ol d Cosmopol i t an shop I ' d have
br oken bet t er t han even. That t he machi ne wasn t , as i t ought t o
be, my el even hundr ed vani shed dol l ar s pl ai nl y t ol d me. But as
l ong as t he machi ni st was al l r i ght t her e was no need t o st ew.
I gnor ance at t went y- t wo i sn' t a st r uct ur al def ect .
Af t er a f ew days I sai d t o mysel f , " I can' t t r ade t hi s way
her e. The t i cker doesn' t hel p as i t shoul d! " But I l et i t go at
t hat wi t hout get t i ng down t o bedr ock. I kept i t up, havi ng good
days and bad days, unt i l I was cl eaned out . I went t o ol d
Ful l er t on and got hi mt o st ake me t o f i ve hundr ed dol l ar s. And I
came back f r om St . Loui s, as I t ol d you, wi t h money I t ook out
of t he bucket shops t her e - - a game I coul d al ways beat .
I pl ayed mor e car ef ul l y and di d bet t er f or a whi l e. As soon
as I was i n easy ci r cumst ances I began t o l i ve pr et t y wel l . I
made f r i ends and had a good t i me. I was not qui t e t went y- t hr ee,
r emember ; al l al one i n New Yor k wi t h easy money i n my pocket s
and t he bel i ef i n my hear t t hat I was begi nni ng t o under st and
t he new machi ne.
I was maki ng al l owances f or t he act ual execut i on of my
or der s on t he f l oor of t he Exchange, and movi ng mor e caut i ousl y.
But I was st i l l st i cki ng t o t he t ape - - t hat i s, I was st i l l
i gnor i ng gener al pr i nci pl es; and as l ong as I di d t hat I coul d
not spot t he exact t r oubl e wi t h my game.
We r an i nt o t he bi g boomof t 9oi and I made a gr eat deal of
money - - t hat i s, f or a boy. You r emember t hose t i mes? The
pr osper i t y of t he count r y was unpr ecedent ed. We not onl y r an
i nt o an er a of i ndust r i al consol i dat i ons and combi nat i ons of


capi t al t hat beat anyt hi ng we had had up t o t hat t i me, but t he
publ i c went st ock mad. I n pr evi ous f l ush t i mes, I have hear d,
Wal l St r eet used t o br ag of t wo- hundr ed- and- f i f t y- t housand- shar e
days, when secur i t i es of a par val ue of t went y- f i ve mi l l i on
dol l ar s changed hands. But i n 1901 we had a t hr ee- mi l l i on- shar e
day. Ever ybody was maki ng money. The st eel cr owd came t o t own, a
hor de of mi l l i onai r es wi t h no mor e r egar d f or money t han dr unken
sai l or s. The onl y game t hat sat i sf i ed t hemwas t he st ock mar ket .
We had some of t he bi ggest hi gh r ol l er s t he St r eet ever saw:
J ohn W. Gat es, of `Bet - you- a- mi l l i on' f ame, and hi s f r i ends,
l i ke J ohn A. Dr ake, Loyal Smi t h, and t he r est ; t he
Rei d- Leeds- Moor e cr owd, who sol d par t of t hei r St eel hol di ngs
and wi t h t he pr oceeds bought i n t he open mar ket t he act ual
maj or i t y of t he st ock of t he gr eat Rock I sl and syst em; and
Schwab and Fr i ck and Phi pps and t he Pi t t sbur gh cot er i e; t o say
not hi ng of scor es of men who wer e l ost i n t he shuf f l e but woul d
have been cal l ed gr eat pl unger s at any ot her t i me. A f el l ow
coul d buy and sel l al l t he st ock t her e was. Keene made a mar ket
f or t he U. S. St eel shar es. A br oker sol d one hundr ed t housand
shar es i n a f ew mi nut es. A wonder f ul t i me! And t her e wer e some
wonder f ul wi nni ngs. And no t axes t o pay on st ock sal es! And no
day of r eckoni ng i n si ght .
Of cour se, af t er a whi l e, I hear d a l ot of cal ami t y howl i ng
and t he ol d st ager s sai d ever ybody - - except t hemsel ves - - had
gone cr azy: But ever ybody except t hemsel ves was maki ng money. I
knew, of cour se, t her e must be a l i mi t t o t he advances and an
end t o t he cr azy buyi ng of A. O. T. - - Any Ol d Thi ng and I got
bear i sh. But ever y t i me I sol d I l ost money, and i f i t hadn' t
been t hat I r an dar n qui ck I ' d have l ost a heap mor e. I l ooked
f or a br eak, but I was pl ayi ng saf e - - maki ng money when I
bought and chi ppi ng i t out when I sol d shor t so t hat I wasn' t
pr of i t i ng by t he boom as much as you' d t hi nk when you consi der
how heavi l y I used t o t r ade, even as a boy.
Ther e was one st ock t hat I wasn' t shor t of , and t hat was
Nor t her n Paci f i c. My t ape r eadi ng came i n handy. I t hought most
st ocks had been bought t o a st andst i l l , but Li t t l e Ni pper
behaved as i f i t wer e goi ng st i l l hi gher . We know now t hat bot h
t he common and t he pr ef er r ed wer e bei ng st eadi l y absor bed by t he
Kuhn- Loeb- Har r i man combi nat i on. Wel l , I was l ong a t housand
shar es of Nor t her n Paci f i c common, and hel d i t agai nst t he
advi ce of ever ybody i n t he of f i ce. When i t got t o about 110 I
had t hi r t y poi nt s pr of i t , and I gr abbed i t . I t made my bal ance
at my br oker s' near l y f i f t y t housand dol l ar s, t he gr eat est
amount of money I had been abl e t o accumul at e up t o t hat t i me.


I t wasn' t so bad f or a chap who had l ost ever y cent t r adi ng i n
t hat sel f same of f i ce a f ew mont hs bef or e.
I f you r emember , t he Har r i man cr owd not i f i ed Mor gan and
Hi l l of t hei r i nt ent i on t o be r epr esent ed i n t he Bur l i ngt on-
Gr eat Nor t her n- Nor t her n Paci f i c combi nat i on, and t hen t he Mor gan
peopl e at f i r st i nst r uct ed Keene t o buy f i f t y t housand shar es of
N. P. t o keep t he cont r ol i n t hei r possessi on. I have hear d t hat
Keene t ol d Rober t Bacon t o make t he or der one hundr ed and f i f t y
t housand shar es and t he banker s di d. At al l event s, Keene sent
one of hi s br oker s, Eddi e Nor t on, i nt o t he N. P, cr owd and he
bought one hundr ed t housand shar es of t he st ock. Thi s was
f ol l owed by anot her or der , I t hi nk, of f i f t y t housand shar es
addi t i onal , and t he f amous cor ner f ol l owed. Af t er t he mar ket
cl osed on May 8, 1901, t he whol e wor l d knew t hat a bat t l e of
f i nanci al gi ant s was on. No t wo such combi nat i ons of capi t al had
ever opposed each ot her i n t hi s count r y. Har r i man agai nst
Mor gan; an i r r esi st i bl e f or ce meet i ng an i mmovabl e obj ect .
Ther e I was on t he mor ni ng of May ni nt h wi t h near l y f i f t y
t housand dol l ar s i n cash and no st ocks. As I t ol d you, I had
been ver y bear i sh f or some days, and her e was my chance at l ast .
I knew what woul d happen - - an awf ul br eak and t hen some
wonder f ul bar gai ns. Ther e woul d be a qui ck r ecover y and bi g
pr of i t s f or t hose who had pi cked up t he bar gai ns. I t di dn' t t ake
a Sher l ock Hol mes t o f i gur e t hi s out . We wer e goi ng t o have an
oppor t uni t y t o cat ch t hem comi ng and goi ng, not onl y f or bi g
money but f or sur e money.
Ever yt hi ng happened as I had f or eseen. I was dead r i ght and
I l ost ever y cent I had! I was wi ped out by somet hi ng t hat was
unusual . I f t he unusual never happened t her e woul d be no
di f f er ence i n peopl e and t hen t her e woul dn' t be any f un i n l i f e.
The game woul d become mer el y a mat t er of addi t i on and
subt r act i on. I t woul d make of us a r ace of bookkeeper s wi t h
pl oddi ng mi nds. I t ' s t he guessi ng t hat devel ops a man' s
br ai npower . J ust consi der what you have t o do t o guess r i ght .
The mar ket f ai r l y boi l ed, as I had expect ed. The
t r ansact i ons wer e enor mous and t he f l uct uat i ons unpr ecedent ed i n
ext ent . I put i n a l ot of sel l i ng or der s at t he mar ket . When I
saw t he openi ng pr i ces I had a f i t , t he br eaks wer e so awf ul . My
br oker s wer e on t he j ob. They wer e as compet ent and
consci ent i ous as any; but by t he t i me t hey execut ed my or der s
t he st ocks had br oken t went y poi nt s mor e. The t ape was way
behi nd t he mar ket and r epor t s wer e sl ow i n comi ng i n by r eason
of t he awf ul r ush of busi ness. When I f ound out t hat t he st ocks
I had or der ed sol d when t he t ape sai d t he pr i ce was, say, zoo
and t hey got mi ne of f at 80, maki ng a t ot al decl i ne of t hi r t y or


f or t y poi nt s f r om t he pr evi ous ni ght ' s cl ose, i t seemed t o me
t hat I was put t i ng out shor t s at a l evel t hat made t he st ocks I
sol d t he ver y bar gai ns I had pl anned t o buy. The mar ket was not
goi ng t o dr op r i ght t hr ough t o Chi na. So I deci ded i nst ant l y t o
cover my shor t s and go l ong.
My br oker s bought ; not at t he l evel t hat had made me t ur n,
but at t he pr i ces pr evai l i ng i n t he St ock Exchange when t hei r
f l oor man got my or der s. They pai d an aver age of f i f t een poi nt s
mor e t han I had f i gur ed on. A l oss of t hi r t y- f i ve poi nt s i n one
day was mor e t han anybody coul d st and.
The t i cker beat me by l aggi ng so f ar behi nd t he mar ket . I
was accust omed t o r egar di ng t he t ape as t he best l i t t l e f r i end I
had because I bet accor di ng t o what i t t ol d me. But t hi s t i me
t he t ape doubl e- cr ossed me. The di ver gence bet ween t he pr i nt ed
and t he act ual pr i ces undi d me. I t was t he subl i mat i on of my
pr evi ous unsuccess, t he sel f same t hi ng t hat had beat en me
bef or e. I t seems so obvi ous now t hat t ape r eadi ng i s not enough,
i r r espect i ve of t he br oker s' execut i on, t hat I wonder why I
di dn' t t hen see bot h my t r oubl e and t he r emedy f or i t .
I di d wor se t han not see i t ; I kept on t r adi ng, i n and out ,
r egar dl ess of t he execut i on. You see, I never coul d t r ade wi t h a
l i mi t . I must t ake my chances wi t h t he mar ket . That i s what I am
t r yi ng t o beat t he mar ket , not t he par t i cul ar pr i ce. When I
t hi nk I shoul d sel l , I sel l . When I t hi nk st ocks wi l l go up, I
buy. My adher ence t o t hat gener al
pr i nci pl e of specul at i on saved me. To have t r aded at l i mi t ed
pr i ces si mpl y woul d have been my ol d bucket - shop met hod
i nef f i ci ent l y adapt ed f or use i n a r eput abl e commi ssi on br oker ' s
of f i ce. I woul d never have l ear ned t o know what st ock
specul at i on i s, but woul d have kept on bet t i ng on what a l i mi t ed
exper i ence t ol d me was a sur e t hi ng.
Whenever I di d t r y t o l i mi t t he pr i ces i n or der t o mi ni mi ze
t he di sadvant ages of t r adi ng at t he mar ket when t he t i cker
l agged, I si mpl y f ound t hat t he mar ket got away f r om me. Thi s
happened so of t en t hat I st opped t r yi ng. I can' t t el l you how i t
came t o t ake me so many year s t o l ear n t hat i nst ead of pl aci ng
pi ki ng bet s on what t he next f ew quot at i ons wer e goi ng t o be, my
game was t o ant i ci pat e what was goi ng t o happen i n a bi g way.
Af t er my May ni nt h mi shap I pl ugged al ong, usi ng a modi f i ed
but st i l l def ect i ve met hod. I f I hadn' t made money some of t he
t i me I mi ght have acqui r ed mar ket wi sdom qui cker . But I was
maki ng enough t o enabl e me t o l i ve wel l . I l i ked f r i ends and a
good t i me. I was l i vi ng down t he J er sey Coast t hat summer , l i ke
hundr eds of pr osper ous Wal l St r eet men. My wi nni ngs wer e not
qui t e enough t o of f set bot h my l osses and my l i vi ng expenses.


I di dn' t keep on t r adi ng t he way I di d t hr ough
st ubbor nness. I si mpl y wasn' t abl e t o st at e my own pr obl em t o
mysel f , and, of cour se, i t was ut t er l y hopel ess t o t r y t o sol ve
i t . I har p on t hi s t opi c so much t o show what I had t o go
t hr ough bef or e I got t o wher e I coul d r eal l y make money. My ol d
shot gun and BB shot coul d not do t he wor k of a hi gh- power
r epeat i ng r i f l e agai nst bi g game.
Ear l y t hat f al l I not onl y was cl eaned out agai n but I was
so si ck of t he game I coul d no l onger beat t hat I deci ded t o
l eave New Yor k and t r y somet hi ng el se some ot her pl ace. I had
been t r adi ng si nce my f our t eent h year . I had made my f i r st
t housand dol l ar s when I was a ki d of f i f t een, and my f i r st t en
t housand bef or e I was t went y- one. I had made and l ost a
t en- t housand- dol l ar st ake mor e t han once. I n New Yor k I had made
t housands and l ost t hem. I got up t o f i f t y t housand dol l ar s and
t wo days l at er t hat went . I had no ot her busi ness and knew no
ot her game. Af t er sever al year s I was back wher e I began. No
wor se, f or I had acqui r ed habi t s and a st yl e of l i vi ng t hat
r equi r ed money; t hough t hat par t di dn' t bot her me as much as
bei ng wr ong so consi st ent l y.




CHAPTER I V

WELL, I went home. But t he moment I was back I knew t hat I
had but one mi ssi on i n l i f e and t hat was t o get a st ake and go
back t o Wal l St r eet . That was t he onl y pl ace i n t he count r y
wher e I coul d t r ade heavi l y. Some day, when my game was al l
r i ght , I ' d need such a pl ace. When a man i s r i ght he want s t o
get al l t hat i s comi ng t o hi mf or bei ng r i ght .
I di dn' t have much hope, but , of cour se, I t r i ed t o get
i nt o t he bucket shops agai n. Ther e wer e f ewer of t hem and some
of t hem wer e r un by st r anger s. Those who r emember ed me woul dn' t
gi ve me a chance t o show t hem whet her I had gone back as a
t r ader or not . I t ol d t hem t he t r ut h, t hat I had l ost i n New
Yor k what ever I had made at home; t hat I di dn' t know as much as
I used t o t hi nk I di d; and t hat t her e was no r eason why i t
shoul d not now be good busi ness f or t hem t o l et me t r ade wi t h
t hem. But t hey woul dn' t . And t he new pl aces wer e unr el i abl e.
Thei r owner s t hought t went y shar es was as much as a gent l eman
ought t o buy i f he had any r eason t o suspect he was goi ng t o
guess r i ght .
I needed t he money and t he bi gger shops wer e t aki ng i n
pl ent y of i t f r om t hei r r egul ar cust omer s. I got a f r i end of
mi ne t o go i nt o a cer t ai n of f i ce and t r ade. I j ust saunt er ed i n
t o l ook t hem over . I agai n t r i ed t o coax t he or der cl er k t o ac-
cept a smal l or der , even i f i t was onl y f i f t y shar es. Of cour se
he sai d no. I had r i gged up a code wi t h t hi s f r i end so t hat he
woul d buy or sel l when and what I t ol d hi m. But t hat onl y made
me chi cken f eed. Then t he of f i ce began t o gr umbl e about t aki ng
my f r i end' s or der s. Fi nal l y one day he t r i ed t o sel l a hundr ed
St . Paul and t hey shut down on hi m.
We l ear ned af t er war d t hat one of t he cust omer s saw us
t al ki ng t oget her out si de and went i n and t ol d t he of f i ce, and
when my f r i end went up t o t he or der cl er k t o sel l t hat hundr ed
St . Paul t he guy sai d
" We' r e not t aki ng any sel l i ng or der s i n St . Paul , not f r om
you. "
" Why, what ' s t he mat t er , J oe?" asked my f r i end.
" Not hi ng doi ng, t hat ' s al l , " answer ed J oe.
" I sn' t t hat money any good? Look i t over . I t ' s al l t her e. "
And my f r i end passed over t he hundr ed - - my hundr ed i n t ens. He
t r i ed t o l ook i ndi gnant and I was l ooki ng unconcer ned; but most
of t he ot her cust omer s wer e get t i ng cl ose t o t he combat ant s, as
t hey al ways di d when t her e was l oud t al ki ng or t he sl i ght est
sembl ance of a scr ap bet ween t he shop and any cust omer . They


want ed t o get a l i ne on t he mer i t s of t he case i n or der t o get a
l i ne on t he sol vency of t he concer n.
The cl er k, J oe, who was a sor t of assi st ant manager , came
out f r om behi nd hi s cage, wal ked up t o my f r i end, l ooked at hi m
and t hen l ooked at me.
" I t ' s f unny, " he sai d sl owl y" i t ' s damned f unny t hat you
never do a si ngl e t hi ng her e when your f r i end Li ver mor e i sn' t
ar ound. You j ust si t and l ook at t he boar d by t he hour . Never a
peep. But af t er he comes i n you get busy al l of a sudden. Maybe
you ar e act i ng f or your sel f ; but not i n t hi s of f i ce any mor e. We
don' t f al l f or Li ver mor e t i ppi ng you of f . "
Wel l , t hat st opped my boar d money. But I had made a f ew
hundr ed mor e t han I had spent and I wonder ed how I coul d use
t hem, f or t he need of maki ng enough money t o go back t o New Yor k
wi t h was mor e ur gent t han ever . I f el t t hat I woul d do bet t er
t he next t i me. I had had t i me t o t hi nk cal ml y of some of my
f ool i sh pl ays; and t hen, one can see t he whol e bet t er when one
sees i t f r om a l i t t l e di st ance. The i mmedi at e pr obl em was t o
make t he new st ake.
One day I was i n a hot el l obby, t al ki ng t o some f el l ows I
knew, who wer e pr et t y st eady t r ader s. Ever ybody was t al ki ng
st ock mar ket . I made t he r emar k t hat nobody coul d beat t he game
on account of t he r ot t en execut i on he got f r om hi s br oker s,
especi al l y when he t r aded at t he mar ket , as I di d.
A f el l ow pi ped up and asked me what par t i cul ar br oker s I
meant .
I sai d, " The best i n t he l and, " and he asked who mi ght t hey
be. I coul d see he wasn' t goi ng t o bel i eve I ever deal t wi t h
f i r st - cl ass houses.
But I sai d, " I mean; any member of t he New Yor k St ock
Exchange. I t i sn' t t hat t hey ar e cr ooked or car el ess, but when a
man gi ves an or der t o buy at t he mar ket he never knows what t hat
st ock i s goi ng t o cost hi m unt i l he get s a r epor t f r om t he
br oker s. Ther e ar e mor e moves of one or t wo poi nt s t han of t en
or f i f t een. But t he out si de t r ader can' t cat ch t he smal l r i ses
or dr ops because of t he execut i on. I ' d r at her t r ade i n a bucket
shop any day i n t he week, i f t hey' d onl y l et a f el l ow t r ade
bi g. "
The man who had spoken t o me I had never seen bef or e. Hi s
name was Rober t s. He seemed ver y f r i endl y di sposed. He t ook me
asi de and asked me i f I had ever t r aded i n any of t he ot her
exchanges, and I sand no. He sai d he knew some houses t hat wer e
member s of t he Cot t on Exchange and t he Pr oduce Exchange and t he
smal l er st ock exchanges. These f i r ms wer e ver y car ef ul and pai d
speci al at t ent i on t o t he execut i on. He sai d t hat t hey had


conf i dent i al connect i ons wi t h t he bi ggest and smar t est houses on
t he New Yor k St ock Exchange and t hr ough t hei r per sonal pul l and
by guar ant eei ng a busi ness of hundr eds of t housands of shar es a
mont h t hey got much bet t er ser vi ce t han an i ndi vi dual cust omer
coul d get .
" They r eal l y cat er t o t he smal l cust omer , " he sai d. " They make
a speci al t y of out - of - t own busi ness and t hey t ake j ust as much
pai ns wi t h a t en- shar e or der as t hey do wi t h one f or t en
t housand. They ar e ver y compet ent and honest . "
" Yes. But i f t hey pay t he St ock Exchange house t he r egul ar
ei ght h commi ssi on, wher e do t hey come i n?"
" Wel l , t hey ar e supposed t o pay t he ei ght h. But you know! " He
wi nked at me.
" Yes, " I sai d. " But t he one t hi ng a St ock Exchange f i r m
wi l l not do i s t o spl i t commi ssi ons. The gover nor s woul d r at her
a member commi t t ed mur der , ar son and bi gamy t han t o do busi ness
f or out si der s f or l ess t han a kosher ei ght h. The ver y l i f e of
t he St ock Exchange depends upon t hei r not vi ol at i ng t hat one
r ul e. "
He must have seen t hat I had t al ked wi t h St ock Exchange
peopl e, f or he sai d, " Li st en! Ever y now and t hen one of t hose
pi ous St ock Exchange houses i s suspended f or a year f or vi o-
l at i ng t hat r ul e, i sn' t i t ? Ther e ar e ways and ways of r ebat i ng
so nobody can squeal . " He pr obabl y saw unbel i ef i n my f ace, f or
he went on: " And besi des, on cer t ai n ki nd of busi ness we - - I
mean, t hese wi r e houses- char ge a t hi r t y- second ext r a, i n
addi t i on t o t he ei ght h commi ssi on. They ar e ver y ni ce about i t .
They never char ge t he ext r a commi ssi on except i n unusual cases,
and t hen onl y i f t he cust omer has an i nact i ve account . I t
woul dn' t pay t hem, you know, ot her wi se. They ar en' t i n busi ness
excl usi vel y f or t hei r heal t h. "
By t hat t i me I knew he was t out i ng f or some phony br oker s.
" Do you know any r el i abl e house of t hat ki nd?" I asked hi m.
" I know t he bi ggest br oker age f i r m i n t he Uni t ed St at es, "
he sai d. " I t r ade t her e mysel f . They have br anches i n sevent y-
ei ght ci t i es i n t he Uni t ed St at es and Canada. They do an
enor mous busi ness. And t hey coul dn' t ver y wel l do i t year i n and
year out i f t hey wer en' t st r i ct l y on t he l evel , coul d t hey?"
" Cer t ai nl y not , " I agr eed. " Do t hey t r ade i n t he same
st ocks t hat ar e deal t i n on t he New Yor k St ock Exchange?"
" Of cour se; and on t he cur b and on any ot her exchange i n
t hi s count r y, or Eur ope. They deal i n wheat , cot t on, pr ovi si ons;
anyt hi ng you want . They have cor r espondent s ever ywher e and
member shi ps i n al l t he exchanges, ei t her i n t hei r own name or on
t he qui et . "


I knew by t hat t i me, but I t hought I ' d l ead hi mon.
" Yes, " I sai d, " but t hat does not al t er t he f act t hat t he
or der s have t o be execut ed by somebody, and nobody l i vi ng can
guar ant ee how t he mar ket wi l l be or how cl ose t he t i cker ' s
pr i ces ar e t o t he act ual pr i ces on t he f l oor of t he Exchange. By
t he t i me a man get s t he quot at i on her e, he hands i n an or der ,
and i t ' s t el egr aphed t o New Yor k, some val uabl e t i me has gone. I
mi ght bet t er go back t o New Yor k and l ose my money t her e i n
r espect abl e company. "
" I don' t know anyt hi ng about l osi ng money; our cust omer s
don' t acqui r e t hat habi t . They make money. We t ake car e of
t hat . "





" Your cust omer s?"
" Wel l , I t ake an i nt er est i n t he f i r m, and i f I can t ur n
some busi ness t hei r way I do so because t hey' ve al ways t r eat ed
me whi t e and I ' ve made a good deal of money t hr ough t hem. I f you
wi sh I ' l l i nt r oduce you t o t he manager . "
" What ' s t he name of t he f i r m?" I asked hi m.
He t ol d me. I had hear d about t hem. They r an ads i n al l t he
paper s, cal l i ng at t ent i on t o t he gr eat pr of i t s made by t hose
cust omer s who f ol l owed t hei r i nsi de i nf or mat i on on act i ve
st ocks. That was t he f i r m' s gr eat speci al t y. They wer e not a
r egul ar bucket shop, but bucket eer s, al l eged br oker s who
bucket ed t hei r or der s but never t hel ess went t hr ough an el abor at e
camouf l age t o convi nce t he wor l d t hat t hey wer e r egul ar br oker s
engaged i n a l egi t i mat e busi ness. They wer e one of t he ol dest of
t hat cl ass of f i r ms.
They wer e t he pr ot ot ype at t hat t i me of t he same sor t of
br oker s t hat went br oke t hi s year by t he dozen. The gener al
pr i nci pl es and met hods wer e t he same, t hough t he par t i cul ar
devi ces f or f l eeci ng t he publ i c di f f er ed somewhat , cer t ai n
det ai l s havi ng been changed when t he ol d t r i cks became t oo wel l
known.
These peopl e used t o send out t i ps t o buy or sel l a cer t ai n
st ock - - hundr eds of t el egr ams advi si ng t he i nst ant pur chase of
a cer t ai n st ock and hundr eds r ecommendi ng ot her cust omer s t o
sel l t he same st ock, on t he ol d r aci ng- t i pst er pl an. Then or der s
t o buy and sel l woul d come i n. The f i r mwoul d buy and sel l , say,
a t housand of t hat st ock t hr ough a r eput abl e St ock Exchange f i r m
and get a r egul ar r epor t on i t . Thi s r epor t t hey woul d show t o
any doubt i ng Thomas who was i mpol i t e enough t o speak about
bucket i ng cust omer s' or der s.
They al so used t o f or m di scr et i onar y pool s i n t he of f i ce
and as a gr eat f avor al l owed t hei r cust omer s t o aut hor i ze t hem,
i n wr i t i ng, t o t r ade wi t h t he cust omer ' s money and i n t he cus-
t omer ' s name, as t hey i n t hei r j udgment deemed best . That way
t he most cant anker ous cust omer had no l egal r edr ess when hi s
money di sappear ed. They' d bul l a st ock, on paper , and put t he
cust omer s i n and t hen t hey' d execut e one of t he ol df ashi oned
bucket - shop dr i ves and wi pe out hundr eds of shoe- st r i ng mar gi ns.
They di d not spar e anyone, women, school t eacher s and ol d men
bei ng t hei r best bet .
" I ' m sor e on al l br oker s, " I t ol d t he t out . " I ' l l have t o
t hi nk t hi s over , " and I l ef t hi mso he woul dn' t t al k any mor e t o
me.


I i nqui r ed about t hi s f i r m. I l ear ned t hat t hey had
hundr eds of cust omer s and al t hough t her e wer e t he usual st or i es
I di d not f i nd any case of a cust omer not get t i ng hi s money f r om
t hem i f he won any. The di f f i cul t y was i n f i ndi ng anybody who
had ever won i n t hat of f i ce; but I di d. Thi ngs seemed t o be
goi ng t hei r way j ust t hen, and t hat meant t hat t hey pr obabl y
woul d not wel sh i f a t r ade went agai nst t hem. Of cour se most
concer ns of t hat ki nd event ual l y go br oke. Ther e ar e t i mes when
t her e ar e r egul ar epi demi cs of bucket eer i ng bankr upt ci es, l i ke
t he ol d- f ashi oned r uns on sever al banks af t er one of t hem goes
up. The cust omer s of t he ot her s get f r i ght ened and t hey r un t o
t ake t hei r money out . But t her e ar e pl ent y of r et i r ed
bucket - shop keeper s i n t hi s count r y.
Wel l , I hear d not hi ng al ar mi ng about t he t out ' s f i r mexcept
t hat t hey wer e on t he make, f i r st , l ast and al l t he t i me, and
t hat t hey wer e not al ways t r ut hf ul . Thei r speci al t y was t r i mmi ng
sucker s who want ed t o get r i ch qui ck. But t hey al ways asked
t hei r cust omer s' per mi ssi on, i n wr i t i ng, t o t ake t hei r r ol l s
away f r omt hem.
One chap I met di d t el l me a st or y about seei ng si x hundr ed
t el egr ams go out one day advi si ng cust omer s t o get aboar d a
cer t ai n st ock and si x hundr ed t el egr ams t o ot her cust omer s
st r ongl y ur gi ng t hemt o sel l t hat same st ock, at once.
" Yes, I know t he t r i ck, " I sai d t o t he chap who was t el l i ng
me.
" Yes, " he sai d. " But t he next day t hey sent t el egr ams t o
t he same peopl e advi si ng t hem t o cl ose out t hei r i nt er est i n
ever yt hi ng and buy or sel l anot her st ock. I asked t he seni or
par t ner , who was i n t he of f i ce, `Why do you do t hat ? The f i r st
par t I under st and. Some of your cust omer s ar e bound t o make
money on paper f or a whi l e, even i f t hey and t he ot her s
event ual l y l ose. But by sendi ng out t el egr ams l i ke t hi s you
si mpl y ki l l t hemal l . What ' s t he bi g i dea?' "
" Wel l , ' he sai d, `t he cust omer s ar e bound t o l ose t hei r
money anyhow, no mat t er what t hey buy, or how or wher e or when.
When t hey l ose t hei r money I l ose t he cust omer s. Wel l , I mi ght
as wel l get as much of t hei r money as I can and t hen l ook f or a
new cr op. ' "
Wel l , I admi t f r ankl y t hat I wasn' t concer ned wi t h t he
busi ness et hi cs of t he f i r m. I t ol d you I f el t sor e on t he
Tel l er concer n and how i t t i ckl ed me t o get even wi t h t hem. But
I di dn' t have any such f eel i ng about t hi s f i r m. They mi ght be
cr ooks or t hey mi ght not be as bl ack as t hey wer e pai nt ed. I di d
not pr opose t o l et t hem do any t r adi ng f or me, or f ol l ow t hei r
t i ps or bel i eve t hei r l i es. My one concer n was wi t h get t i ng


t oget her a st ake and r et ur ni ng t o New Yor k t o t r ade i n f ai r
amount s i n an of f i ce wher e you di d not have t o be af r ai d t he
pol i ce woul d r ai d t he j oi nt , as t hey di d t he bucket shops, or
see t he post al aut hor i t i es swoop down and t i e up your money so
t hat you' d be l ucky t o get ei ght cent s on t he dol l ar a year and
a hal f l at er .
Anyhow, I made up my mi nd t hat I woul d see what t r adi ng
advant ages of t hi s f i r m of f er ed over what you mi ght cal l t he
l egi t i mat e br oker s. I di dn' t have much money t o put up as
mar gi n, and f i r ms t hat bucket ed or der s wer e nat ur al l y much mor e
l i ber al i n t hat r espect , so t hat a f ew hundr ed dol l ar s went much
f ur t her i n t hei r of f i ces.
I went down t o t hei r pl ace and had a t al k wi t h t he manager
hi msel f . When he f ound out t hat I was an ol d t r ader and had
f or mer l y had account s i n New Yor k wi t h St ock Exchange houses and
t hat I had l ost al l I t ook wi t h me he st opped pr omi si ng t o make
a mi l l i on a mi nut e f or me i f I l et t hem i nvest my savi ngs. He
f i gur ed t hat I was a per manent sucker , t he t i cker - hound ki nd
t hat al ways pl ays and al ways l oses; a st eady i ncome pr ovi der f or
br oker s, whet her t hey wer e t he ki nd t hat bucket your or der s or
modest l y cont ent t hemsel ves wi t h t he commi ssi ons.
I j ust t ol d t he manager t hat what I was l ooki ng f or was
decent execut i on, because I al ways t r aded at t he mar ket and I
di dn' t want t o get r epor t s t hat showed a di f f er ence of a hal f or
a whol e poi nt f r omt he t i cker pr i ce.
He assur ed me on hi s wor d of honor t hat t hey woul d do
what ever I t hought was r i ght . They want ed my busi ness because
t hey want ed t o show me what hi gh- cl ass br oker i ng was. They had
i n t hei r empl oy t he best t al ent i n t he busi ness. I n f act , t hey
wer e f amous f or t hei r execut i on. I f t her e was any di f f er ence
bet ween t he t i cker pr i ce and t he r epor t i t was al ways i n f avor
of t he cust omer , t hough of cour se t hey di dn' t guar ant ee t hat . I f
I opened an account wi t h t hemI coul d buy and sel l at t he pr i ce,
whi ch came over t he wi r e, t hey wer e so conf i dent of t hei r
br oker s.
Nat ur al l y t hat meant t hat I coul d t r ade t her e t o al l
i nt ent s and pur poses as t hough I wer e i n a bucket shop - - t hat
i s, t hey' d l et me t r ade at t he next quot at i on. I di dn' t want t o
appear t oo anxi ous, so I shook my head and t ol d hi m I guessed I
woul dn' t open an account t hat day, but I ' d l et hi m know. He
ur ged me st r ongl y t o begi n r i ght away, as i t was a good mar ket
t o make money i n. I t was f or t hem; a dul l mar ket wi t h pr i ces
seesawi ng sl i ght l y, j ust t he ki nd t o get cust omer s i n and t hen
wi pe t hemout wi t h a shar p dr i ve i n t he t i pped st ock. I had some
t r oubl e i n get t i ng away.


I had gi ven hi mmy name and addr ess, and t hat ver y same day
I began t o get pr epai d t el egr ams and l et t er s ur gi ng me t o get
aboar d of some st ock or ot her i n whi ch t hey sai d t hey knew an
i nsi de pool was oper at i ng f or a f i f t y- poi nt r i se.
I was busy goi ng ar ound and f i ndi ng out al l I coul d about
sever al ot her br oker age concer ns of t he same bucket i ng ki nd. I t
seemed t o me t hat i f I coul d be sur e of get t i ng my wi nni ngs out
of t hei r cl ut ches t he onl y way of my get t i ng t oget her some r eal
money was t o t r ade i n t hese near bucket - shops.
When I had l ear ned al l I coul d I opened account s wi t h t hr ee
f i r ms. I had t aken a smal l of f i ce and had di r ect wi r es r un t o
t he t hr ee br oker s.
I t r aded i n a smal l way so t hey woul dn' t get f r i ght ened of f
at t he ver y st ar t . I made money on bal ance and t hey wer e not
sl ow i n t el l i ng me t hat t hey expect ed r eal busi ness f r om
cust omer s who had di r ect wi r es t o t hei r of f i ces. They di d not
hanker f or pi ker s. They f i gur ed t hat t he mor e I di d t he mor e I ' d
l ose, and t he mor e qui ckl y I was wi ped out t he mor e t hey' d make.
I t was a sound enough t heor y when you consi der t hat t hese peopl e
necessar i l y deal t wi t h aver ages and t he aver age cust omer was
never l ong- l i ved, f i nanci al l y speaki ng. A bust ed cust omer can' t
t r ade. A hal f - cr i ppl ed cust omer can whi ne, i nsi nuat e t hi ngs, and
make t r oubl e of one or anot her ki nd t hat hur t s busi ness.
I al so est abl i shed a connect i on wi t h a l ocal f i r m t hat had
a di r ect wi r e t o i t s New Yor k cor r espondent , who wer e al so
member s of t he New Yor k St ock Exchange. I had a st ock t i cker put
i n and I began t o t r ade conser vat i vel y. As I t ol d you, i t was
pr et t y much l i ke t r adi ng i n bucket shops; onl y i t was a l i t t l e
sl ower .
I t was a game t hat I coul d beat , and I di d. I never got i t
down t o such a f i ne poi nt t hat I coul d wi n t en t i mes out of t en;
but I won on bal ance, t aki ng i t week i n and week out . I was
agai n l i vi ng pr et t y wel l , but al ways savi ng somet hi ng, t o
i ncr ease t he st ake t hat I was t o t ake back t o Wal l St r eet . I got
a coupl e of wi r es i nt o t wo mor e of t hese bucket i ng br oker age
houses, maki ng f i ve i n al l and, of cour se, my good f i r m.
Ther e wer e t i mes when my pl ans went wr ong and my st ocks di d
not r un t r ue t o f or m, but di d t he opposi t e of what t hey shoul d
have done i f t hey had kept up t hei r r egar d f or pr ecedent . But
t hey di d not hi t me ver y har d - - t hey coul dn' t , wi t h my
shoest r i ng mar gi ns. My r el at i ons wi t h my br oker s wer e f r i endl y
enough. Thei r account s and r ecor ds di d not al ways agr ee wi t h
mi ne, and t he di f f er ences uni f or ml y happened t o be agai nst me.
Cur i ous coi nci dence not ! But I f ought f or my own and usual l y had
my way i n t he end. They al ways had t he hope of get t i ng away f r om


me what I had t aken f r om t hem. They r egar ded my wi nni ngs as
t empor ar y l oans, I t hi nk.
They r eal l y wer e not spor t y, bei ng i n t he busi ness t o make
money by hook or by cr ook i nst ead of bei ng cont ent wi t h t he
house per cent age. Si nce sucker s al ways l ose money when t hey
gambl e i n st ocks - - t hey never r eal l y specul at e - - you' d t hi nk
t hese f el l ows woul d r un what you mi ght cal l a l egi t i mat e
i l l egi t i mat e busi ness. But t hey di dn' t . " Copper your cust omer s
and gr ow r i ch" i s an ol d and t r ue adage, but t hey di d not seem
ever t o have hear d of i t and di dn' t st op at pl ai n bucket i ng.
Sever al t i mes t hey t r i ed t o doubl e- cr oss me wi t h t he ol d t r i cks.
They caught me a coupl e of t i mes because I wasn' t l ooki ng. They
al ways di d t hat when I had t aken no mor e t han my usual l i ne. I
accused t hem of bei ng shor t spor t s or wor se, but t hey deni ed i t
and i t ended by my goi ng back t o t r adi ng as usual . The beaut y of
doi ng busi ness wi t h a cr ook i s t hat he al ways f or gi ves you f or
cat chi ng hi m, so l ong as you don' t st op doi ng busi ness wi t h hi m.
I t ' s al l r i ght as f ar as he i s concer ned. He i s wi l l i ng t o meet
you mor e t han hal f way. Magnani mous soul s!
Wel l , I made up my mi nd t hat I coul dn' t af f or d t o have t he
nor mal r at e of i ncr ease of my st ake i mpai r ed by cr ooks' t r i cks,
so I deci ded t o t each t hem a l esson. I pi cked out some st ock
t hat af t er havi ng been a specul at i ve f avor i t e had become i n-
act i ve. Wat er - l ogged. I f I had t aken one t hat never had been
act i ve t hey woul d have suspect ed my pl ay. I gave out buyi ng
or der s on t hi s st ock t o my f i ve bucket eer i ng br oker s. When t he
or der s wer e t aken and t hey wer e wai t i ng f or t he next quot at i on
t o come out on t he t ape I sent i n an or der t hr ough my St ock
Exchange house t o sel l a hundr ed shar es of t hat par t i cul ar st ock
at t he mar ket . I ur gent l y asked f or qui ck act i on. Wel l , you can
i magi ne what happened when t he sel l i ng or der got t o t he f l oor of
t he Exchange; a dul l i nact i ve st ock t hat a commi ssi on house wi t h
out - of - t own connect i ons want ed t o sel l i n a hur r y. Somebody got
cheap st ock. But t he t r ansact i on as i t woul d be pr i nt ed on t he
t ape was t he pr i ce t hat I woul d pay on my f i ve buyi ng or der s. I
was l ong on bal ance f our hundr ed shar es of t hat st ock at a l ow
f i gur e. The wi r e house asked me what I ' d hear d, and I sai d I had
a t i p on i t . J ust bef or e t he cl ose of t he mar ket I sent an or der
t o my r eput abl e house t o buy back t hat hundr ed shar es, and not
wast e any t i me; t hat I di dn' t want t o be shor t under any
ci r cumst ances; and I di dn' t car e what t hey pai d. So t hey wi r ed
t o New Yor k and t he or der t o buy t hat hundr ed qui ck r esul t ed i n
a shar p advance. I of cour se had put i n sel l i ng or der s f or t he
f i ve hundr ed shar es t hat my f r i ends had bucket ed. I t wor ked ver y
sat i sf act or i l y.


St i l l , t hey di dn' t mend t hei r ways, and so I wor ked t hat
t r i ck on t hem sever al t i mes. I di d not dar e puni sh t hem as
sever el y as t hey deser ved, sel dom mor e t han a poi nt or t wo on a
hundr ed shar es. But i t hel ped t o swel l my l i t t l e hoar d t hat I
was savi ng f or my next Wal l St r eet vent ur e. I somet i mes var i ed
t he pr ocess by sel l i ng some st ock shor t , wi t hout over doi ng i t . I
was sat i sf i ed wi t h my si x or ei ght hundr ed cl ear f or each cr ack.
One day t he st unt wor ked so wel l t hat i t went f ar beyond al l
cal cul at i ons f or a t en- poi nt swi ng. I wasn' t l ooki ng f or i t . As
a mat t er of f act i t so happened t hat I had t wo hundr ed shar es
i nst ead of my usual hundr ed at one br oker ' s, t hough onl y a
hundr ed i n t he f our ot her shops. That was t oo much of a good
t hi ng f or t hem. They wer e sor e as pups about i t and t hey began
t o say t hi ngs over t he wi r es. So I went and saw t he manager , t he
same man who had been so anxi ous t o get my account , and so
f or gi vi ng ever y t i me I caught hi m t r yi ng t o put somet hi ng over
on me. He t al ked pr et t y bi g f or a man i n hi s posi t i on.
" That was a f i ct i t i ous mar ket f or t hat st ock, and we won' t
pay you a damned cent ! " he swor e.
" I t wasn' t a f i ct i t i ous mar ket when you accept ed my or der
t o buy. You l et me i n t hen, al l r i ght , and now you' ve got t o l et
me out . You can' t get ar ound t hat f or f ai r ness, can you?"
" Yes, I can! " he yel l ed. " I can pr ove t hat somebody put up
a j ob. "
" Who put up a j ob?" I asked.
: ' Somebody! "
" Who di d t hey put i t up on?" I asked.
" Some f r i ends of your s wer e i n i t as sur e as pop, " he sai d.
But I t ol d hi m, " You know ver y wel l t hat I pl ay a l one
hand. Ever ybody i n t hi s t own knows t hat . They' ve known i t ever
si nce I st ar t ed t r adi ng i n st ocks. Now I want t o gi ve you some
f r i endl y advi ce: you j ust send and get t hat money f or me. I
don' t want t o be di sagr eeabl e. J ust do what I t el l you. "
" I won' t pay i t . I t was a r i gged- up t r ansact i on, " he
yel l ed.
I got t i r ed of hi s t al k. So I t ol d hi m: " You' l l pay i t t o me
r i ght now and her e. "
Wel l , he bl ust er ed a l i t t l e mor e and accused me f l at l y of
bei ng t he gui l t y t hi mbl e r i gger ; but he f i nal l y f or ked over t he
cash. The ot her s wer e not so r ambunct i ous. I n one of f i ce t he
manager had been st udyi ng t hese i nact i ve st ock pl ays of mi ne and
when he got my or der he act ual l y bought t he st ock f or me and
t hen some f or hi msel f i n t he Li t t l e Boar d, and he made some
money. These f el l ows di dn' t mi nd bei ng sued by cust omer s on
char ges of f r aud, as t hey gener al l y had a good t echni cal l egal


def ense r eady. But t hey wer e af r ai d I ' d at t ach t he f ur ni t ur e - -
t he money i n t he bank I coul dn' t because t hey t ook car e not t o
have any f unds exposed t o t hat danger . I t woul d not hur t t hemt o
be known as pr et t y shar p, but t o get a r eput at i on f or wel shi ng
was f at al . For a cust omer t o l ose money at hi s br oker ' s i s no
r ar e event . But f or a cust omer t o make money and t hen not get i t
i s t he wor st cr i me on t he specul at or s' st at ut e books.
I got my money f r omal l ; but t hat t en- poi nt j ump put an end
t o t he pl easi ng past i me of ski nni ng ski nner s. They wer e on t he
l ookout f or t he l i t t l e t r i ck t hat t hey t hemsel ves had used t o
def r aud hundr eds of poor cust omer s. I went back t o my r egul ar
t r adi ng; but t he mar ket wasn' t al ways r i ght f or my syst em - -
t hat i s, l i mi t ed as I was by t he si ze of t he or der s t hey woul d
t ake, I coul dn' t make a ki l l i ng.
I had been at i t over a year , dur i ng whi ch I used ever y
devi ce t hat I coul d t hi nk of t o make money t r adi ng i n t hose wi r e
houses. I had l i ved ver y comf or t abl y, bought an aut omobi l e and
di dn' t l i mi t mysel f about my expenses. I had t o make a st ake,
but I al so had t o l i ve whi l e I was doi ng i t . I f my posi t i on on
t he mar ket was r i ght I coul dn' t spend as much as I made, so t hat
I ' d al ways be savi ng some. I f I was wr ong I di dn' t make any
money and t her ef or e coul dn' t spend. As I sai d, I had saved up a
f ai r - si zed r ol l , and t her e wasn' t so much money t o be made i n
t he f i ve wi r e houses; so I deci ded t o r et ur n t o New Yor k.
I had my own aut omobi l e and I i nvi t ed a f r i end of mi ne who
al so was a t r ader t o mot or t o New Yor k wi t h me. He accept ed and
we st ar t ed. We st opped at New Haven f or di nner . At t he hot el I
met an ol d t r adi ng acquai nt ance, and among ot her t hi ngs he t ol d
me t her e was a shop i n t own t hat had a wi r e and was doi ng a
pr et t y good busi ness.
We l ef t t he hot el on our way t o New Yor k, but I dr ove by
t he st r eet wher e t he bucket shop was t o see what t he out si de
l ooked l i ke. We f ound i t and coul dn' t r esi st t he t empt at i on t o
st op and have a l ook at t he i nsi de. I t wasn' t ver y sumpt uous,
but t he ol d bl ackboar d was t her e, and t he cust omer s, and t he
game was on.
The manager was a chap who l ooked as i f he had been an
act or or a st ump speaker . He was ver y i mpr essi ve. He' d say good
mor ni ng as t hough he had di scover ed t he mor ni ng' s goodness af t er
t en year s of sear chi ng f or i t wi t h a mi cr oscope and was maki ng
you a pr esent of t he di scover y as wel l as of t he sky, t he sun
and t he f i r m' s bankr ol l . He saw us come up i n t he spor t y- l ooki ng
aut omobi l e, and as bot h of us wer e young and car el ess - - I don' t
suppose I l ooked t went y - - he nat ur al l y concl uded we wer e a
coupl e of Yal e boys. I di dn' t t el l hi m we wer en' t . He di dn' t


gi ve me a chance, but began del i ver i ng a speech. He was ver y
gl ad t o see us. Woul d we have a comf or t abl e seat ? The mar ket , we
woul d f i nd, was phi l ant hr opi cal l y i ncl i ned t hat mor ni ng; i n
f act , cl amor i ng t o i ncr ease t he suppl y of col l egi at e pocket
money, of whi ch no i nt el l i gent under gr aduat e ever had a
suf f i ci ency si nce t he dawn of hi st or i c t i me. But her e and now,
by t he benef i cence of t he t i cker , a smal l i ni t i al i nvest ment
woul d r et ur n t housands. Mor e pocket money t han anybody coul d
spend was what t he st ock mar ket year ned t o yi el d.
Wel l , I t hought i t woul d be a pi t y not t o do as t he ni ce
man of t he bucket shop was so anxi ous t o have us do, so I t ol d
hi m I woul d do as he wi shed, because I had hear d t hat l ot s of
peopl e made l ot s of money i n t he st ock mar ket .
I began t o t r ade, ver y conser vat i vel y, but i ncr easi ng t he
l i ne as I won. My f r i end f ol l owed me.
We st ayed over ni ght i n New Haven and t he next mor ni ng f ound
us at t he hospi t abl e shop at f i ve mi nut es t o t en. The or at or was
gl ad t o see us, t hi nki ng hi s t ur n woul d come t hat day. But I
cl eaned up wi t hi n a f ew dol l ar s of f i f t een hundr ed. The next
mor ni ng when we dr opped i n on t he gr eat or at or , and handed hi m
an or der t o sel l f i ve hundr ed Sugar he hesi t at ed, but f i nal l y
accept ed i t i n si l ence! The st ock br oke over a poi nt and I
cl osed out and gave hi m t he t i cket . Ther e was exact l y f i ve
hundr ed dol l ar s comi ng t o me i n pr of i t s, and my f i ve hundr ed
dol l ar mar gi n. He t ook t went y f i f t i es f r om t he saf e, count ed
t hem t hr ee t i mes ver y sl owl y, t hen he count ed t hem agai n i n
f r ont of me. I t l ooked as i f hi s f i nger s wer e sweat i ng muci l age
t he way t he not es seemed t o st i ck t o hi m, but f i nal l y he handed
t he money t o me. He f ol ded hi s ar ms, bi t hi s l ower l i p, kept i t
bi t , and st ar ed at t he t op of a wi ndow behi nd me.
I t ol d hi m I ' d l i ke t o sel l 200 St eel . But he never
st i r r ed. He di dn' t hear me. I r epeat ed my wi sh, onl y I made i t
t hr ee hundr ed shar es. He t ur ned hi s head. I wai t ed f or t he
speech. But al l he di d was t o l ook at me. Then he smacked hi s
l i ps and swal l owed as i f he was goi ng t o st ar t an at t ack on
f i f t y year s of pol i t i cal mi sr ul e by t he unspeakabl e gr af t er s of
t he opposi t i on.
Fi nal l y he waved hi s hand t owar d t he yel l ow- backs i n my
hand and sai d, " Take away t hat baubl e! "
" Take away what ?" I sai d. I hadn' t qui t e under st ood what he
was dr i vi ng at . Wher e ar e you goi ng, st udent ?" He spoke ver y
i mpr essi vel y.
" New Yor k, " I t ol d hi m.
" That ' s r i ght , " he sai d, noddi ng about t went y t i mes. " That
i s exact l y r i ght . You ar e goi ng away f r om her e al l r i ght ,


because now I know t wo t hi ngs t wo st udent ! I know what
you ar e not , and I know what you ar e. Yes! Yes! Yes! "
" I s t hat so?" I sai d ver y pol i t el y.
" Yes. You t wo" He paused; and t hen he st opped bei ng i n
Congr ess and snar l ed: " You t wo ar e t he bi ggest shar ks i n t he
Uni t ed St at es of Amer i ca l St udent s? Ye- eh! You must be f r eshmen
Ye- eh! "
We l ef t hi mt al ki ng t o hi msel f . He pr obabl y di dn' t mi nd t he
money so much. No pr of essi onal gambl er does. I t ' s al l i n t he
game and t he l uck' s bound t o t ur n. I t was hi s bei ng f ool ed i n us
t hat hur t hi s pr i de.
That i s how I came back t o Wal l St r eet f or a t hi r d at t empt .
I had been st udyi ng, of cour se, t r yi ng t o l ocat e t he exact
t r oubl e wi t h my syst em t hat had been r esponsi bl e f or my def eat s
i n A. R. Ful l er t on & Co. ' s of f i ce. I was t went y when I made my
f i r st t en t housand, and I l ost t hat . But I knew how and why,
because I t r aded out of season al l t he t i me; because when I
coul dn' t pl ay accor di ng t o my syst em, whi ch was based on st udy
and exper i ence, I went i n and gambl ed. I hoped t o wi n, i nst ead
of knowi ng t hat I ought t o wi n on f or m. When I was about
t went y- t wo I r an up my st ake t o f i f t y t housand dol l ar s; I l ost
i t on May ni nt h. But I knew exact l y why and how. I t was t he
l aggar d t ape and t he unpr ecedent ed vi ol ence of t he movement s
t hat awf ul day. But I di dn' t know why I had l ost af t er my r et ur n
f r om St . Loui s or af t er t he May ni nt h pani c. I had t heor i es - -
t hat i s, r emedi es f or some of t he f aul t s t hat I t hought I f ound
i n my pl ay. But I needed act ual pr act i ce.
Ther e i s not hi ng l i ke l osi ng al l you have i n t he wor l d f or
t eachi ng you what not t o do. And when you know what not t o do i n
or der not t o l ose money, you begi n t o l ear n what t o do i n or der
t o wi n. Di d you get t hat ? You begi n t o l ear n!




CHAPTER V

THE aver age t i cker hound or as t hey used t o cal l hi m, t ape- wor m
goes wr ong, I suspect , as much f r om over speci al i zat i on as f r om
anyt hi ng el se. I t means a hi ghl y expensi ve i nel ast i ci t y. Af t er
al l , t he game of specul at i on i sn' t al l mat hemat i cs or set r ul es,
however r i gi d t he mai n l aws may be. Even i n my t ape r eadi ng
somet hi ng ent er s t hat i s mor e t han mer e ar i t hmet i c. Ther e i s
what I cal l t he behavi or of a st ock, act i ons t hat enabl e you t o
j udge whet her or not i t i s goi ng t o pr oceed i n accor dance wi t h
t he pr ecedent s t hat your obser vat i on has not ed. I f a st ock
doesn' t act r i ght don' t t ouch i t ; because, bei ng unabl e t o t el l
pr eci sel y what i s wr ong, you cannot t el l whi ch way i t i s goi ng.
No di agnosi s, no pr ognosi s. No pr ognosi s, no pr of i t .
I t i s a ver y ol d t hi ng, t hi s of not i ng t he behavi or of a
st ock and st udyi ng i t s past per f or mances. When I f i r st came t o
New Yor k t her e was a br oker ' s of f i ce wher e a Fr enchman used t o
t al k about hi s char t . At f i r st I t hought he was a sor t of pet
f r eak kept by t he f i r m because t hey wer e good- nat ur ed. Then I
l ear ned t hat he was a per suasi ve and most i mpr essi ve t al ker . He
sai d t hat t he onl y t hi ng t hat di dn' t l i e because i t si mpl y
coul dn' t was mat hemat i cs. By means of hi s cur ves he coul d
f or ecast mar ket movement s. Al so he coul d anal yse t hem, and t el l ,
f or i nst ance, why Keene di d t he r i ght t hi ng i n hi s f amous
At chi son pr ef er r ed bul l mani pul at i on, and l at er why he went
wr ong i n hi s Sout her n Paci f i c pool . At var i ous t i mes one or
anot her of t he pr of essi onal t r ader s t r i ed t he Fr enchman' s syst em
and t hen went back t o t hei r ol d unsci ent i f i c met hods of maki ng a
l i vi ng. Thei r hi t - or - mi ss syst em was cheaper , t hey sai d. I hear d
t hat t he Fr enchman sai d Keene admi t t ed t hat t he char t was 100
per cent r i ght but cl ai med t hat t he met hod was t oo sl ow f or
pr act i cal use i n an act i ve mar ket . Then t her e was one of f i ce
wher e a char t of t he dai l y movement of pr i ces was kept . I t
showed at a gl ance j ust what each st ock had done f or mont hs. By
compar i ng i ndi vi dual cur ves wi t h t he gener al mar ket cur ve and
keepi ng i n mi nd cer t ai n r ul es t he cust omer s coul d t el l whet her
t he st ock on whi ch t hey got an unsci ent i f i c t i p t o buy was
f ai r l y ent i t l ed t o a r i se. They used t he char t as a sor t of
compl ement ar y t i pst er . Today t her e ar e scor es of commi ssi on
houses when you f i nd t r adi ng char t s. They come r eady- made f r om
t he of f i ces of st at i st i cal exper t s and i ncl ude not onl y st ocks
but al so commodi t i es.
" I shoul d say t hat a char t hel ps t hose who can r ead i t or
r at her who can assi mi l at e what t hey r ead. The aver age char t


r eader , however , i s apt t o become obsessed wi t h t he not i on t hat
t he di ps and peaks and pr i mar y and secondar y movement s ar e al l
t her e i s t o st ock specul at i on. I f he pushes hi s conf i dence t o
i t s l ogi cal l i mi t he i s bound t o go br oke. Ther e i s an ext r emel y
abl e man, a f or mer par t ner of a wel l - known St ock Exchange house,
who i s r eal l y a t r ai ned mat hemat i ci an. He i s a gr aduat e of a
f amous t echni cal school . He devi sed char t s based upon a ver y
car ef ul and mi nut e st udy of t he behavi or of pr i ces i n many
mar ket s - - st ocks, bonds, gr ai n, cot t on, money, and so on. He
went back year s and year s and t r aced t he cor r el at i ons and
seasonal movement s on ever yt hi ng. He used hi s char t s i n hi s
st ock t r adi ng f or year s. What he r eal l y di d was t o t ake
advant age of some hi ghl y i nt el l i gent aver agi ng. They t el l me he
won r egul ar l y unt i l t he Wor l d War knocked al l pr ecedent s i nt o a
cocked hat . I hear d t hat he and hi s l ar ge f ol l owi ng l ost
mi l l i ons bef or e t hey desi st ed. But not even a wor l d war can keep
t he st ock mar ket f r om bei ng a bul l mar ket when condi t i ons ar e
bul l i sh, or a bear mar ket when condi t i ons ar e bear i sh. And al l a
man needs t o know t o make money i s t o appr ai se condi t i ons.
I di dn' t mean t o get of f t he t r ack l i ke t hat , but I can' t
hel p i t when I t hi nk of my f i r st f ew year s i n Wal l St r eet . I
know now what I di d not know t hen, and I t hi nk of t he mi st akes
of my i gnor ance because t hose ar e t he ver y mi st akes t hat t he
aver age st ock specul at or makes year i n and year out .
Af t er I got back t o New Yor k t o t r y f or t he t hi r d t i me t o beat
t he mar ket i n a St ock Exchange house I t r aded qui t e act i vel y. I
di dn' t expect t o do as wel l as I di d i n t he bucket shops, but I
t hought t hat af t er a whi l e I woul d do much bet t er because I
woul d be abl e t o swi ng a much heavi er l i ne. Yet , I can see now
t hat my mai n t r oubl e was my f ai l ur e t o gr asp t he vi t al
di f f er ence bet ween st ock gambl i ng and st ock specul at i on. St i l l ,
by r eason of my seven year s' exper i ence i n r eadi ng t he t ape and
a cer t ai n nat ur al apt i t ude f or t he game, my st ake was ear ni ng
not i ndeed a f or t une but a ver y hi gh r at e of i nt er est . I won and
l ost as bef or e, but I was wi nni ng on bal ance. The mor e I made
t he mor e I spent . Thi s i s t he usual exper i ence wi t h most men.
No, not necessar i l y wi t h easy- money pi cker s, but wi t h ever y
human bei ng who i s not a sl ave of t he hoar di ng i nst i nct . Some
men, l i ke ol d Russel l Sage, have t he money- maki ng and t he
money- hoar di ng i nst i nct equal l y wel l devel oped, and of cour se
t hey di e di sgust i ngl y r i ch.
The game of beat i ng t he mar ket excl usi vel y i nt er est ed me
f r omt en t o t hr ee ever y day, and af t er t hr ee, t he game of l i vi ng
my l i f e. Don' t mi sunder st and me. I never al l owed pl easur e t o
i nt er f er e wi t h busi ness. When I l ost i t was because I was wr ong


and not because I was suf f er i ng f r om di ssi pat i on or excesses.
Ther e never wer e any shat t er ed ner ves or r um- shaken l i mbs t o
spoi l my game. I coul dn' t af f or d anyt hi ng t hat kept me f r om
f eel i ng physi cal l y and ment al l y f i t . Even now I am usual l y i n
bed by t en. As a young man I never kept l at e hour s, because I
coul d not do busi ness pr oper l y on i nsuf f i ci ent sl eep. I was
doi ng bet t er t han br eaki ng even and t hat i s why I di dn' t t hi nk
t her e was any need t o depr i ve mysel f of t he good t hi ngs of l i f e.
The mar ket was al ways t her e t o suppl y t hem. I was acqui r i ng t he
conf i dence t hat comes t o a man f r om a pr of essi onal l y
di spassi onat e at t i t ude t owar d hi s own met hod of pr ovi di ng br ead
and but t er f or hi msel f .
The f i r st change I made i n my pl ay was i n t he mat t er of
t i me. I coul dn' t wai t f or t he sur e t hi ng t o come al ong and t hen
t ake a poi nt or t wo out of i t as I coul d i n t he bucket shops. I
had t o st ar t much ear l i er i f I want ed t o cat ch t he move i n
Ful l er t on' s of f i ce. I n ot her wor ds, I had t o st udy what was
goi ng t o happen t o ant i ci pat e st ock movement s. That sounds
asi ni nel y commonpl ace, but you know what I mean. I t was t he
change i n my own at t i t ude t owar d t he game t hat was of supr eme
i mpor t ance t o me. I t t aught me, l i t t l e by l i t t l e, t he essent i al
di f f er ence bet ween bet t i ng on f l uct uat i ons and ant i ci pat i ng
i nevi t abl e advances and decl i nes, bet ween gambl i ng and
specul at i ng.
I had t o go f ur t her back t han an hour i n my st udi es of t he
mar ket whi ch was somet hi ng I never woul d have l ear ned t o do i n
t he bi ggest bucket shop i n t he wor l d. I i nt er est ed mysel f i n
t r ade r epor t s, r ai l r oad ear ni ngs, and f i nanci al and commer ci al
st at i st i c. Of cour se I l oved t o t r ade heavi l y and t hey cal l ed me
t he Boy Pl unger ; but I al so l i ked t o st udy t he moves. I never
t hought t hat anyt hi ng was i r ksome i f i t hel ped me t o t r ade mor e
i nt el l i gent l y. Bef or e I can sol ve a pr obl em I must st at e i t t o
mysel f . When I t hi nk I have f ound t he sol ut i on I must pr ove I am
r i ght . I know of onl y one way t o pr ove i t ; and t hat i s, wi t h my
own money.
Sl ow as my pr ogr ess seems now, I suppose I l ear ned as f ast
as I possi bl y coul d, consi der i ng t hat I was maki ng money on
bal ance. I f I had l ost of t ener per haps i t mi ght have spur r ed me
t oo mor e cont i nuous st udy. I cer t ai nl y woul d have had mor e
mi st akes t o spot . But I am not sur e of t he exact val ue of
l osi ng, f or i f I had l ost mor e I woul d have l acked t he money t o
t est out t he i mpr ovement s i n my met hods of t r adi ng.
St udyi ng my wi nni ng pl ays i n Ful l er t on' s of f i ce I di scover ed
t hat al t hough I of t en was 100 per cent r i ght on t he mar ket t hat
i s, i n my di agnosi s of condi t i ons and gener al t r end - - I was not


maki ng as much money as my mar ket " r i ght ness" ent i t l ed me t o.
Why wasn' t I ?
Ther e was as much t o l ear n f r om par t i al vi ct or y as f r om
def eat .
For i nst ance, I had been bul l i sh f r om t he ver y st ar t of a
bul l mar ket , and I had backed my opi ni on by buyi ng st ocks. An
advance f ol l owed, as I had cl ear l y f or eseen. So f ar , al l ver y
wel l . But what el se di d I do? Why, I l i st ened t o t he el der
st at esmen and cur bed my yout hf ul i mpet uousness. I made up my
mi nd t o be wi se and pl ay car ef ul l y, conser vat i vel y. Ever ybody
knew t hat t he way t o do t hat was t o t ake pr of i t s and buy back
your st ocks on r eact i ons. And t hat i s pr eci sel y what I di d, or
r at her what I t r i ed t o do; f or I of t en t ook pr of i t s and wai t ed
f or a r eact i on t hat never came. And I saw my st ock go ki t i ng up
t en poi nt s mor e and I si t t i ng t her e wi t h my f our - poi nt pr of i t
saf e i n my conser vat i ve pocket . They say you never gr ow poor
t aki ng pr of i t s. No, you don' t . But nei t her do you gr ow r i ch
t aki ng a f our - poi nt pr of i t i n a bul l mar ket .
Wher e I shoul d have made t went y t housand dol l ar s I made t wo
t housand. That was what my conser vat i sm di d f or me. About t he
t i me I di scover ed what a smal l per cent age of what I shoul d have
made I was get t i ng I di scover ed somet hi ng el se, and t hat i s t hat
sucker s di f f er among t hemsel ves accor di ng t o t he degr ee of
exper i ence.
The t yr o knows not hi ng, and ever ybody, i ncl udi ng hi msel f ,
knows i t . But t he next , or second, gr ade t hi nks he knows a gr eat
deal and makes ot her s f eel t hat way t oo. He i s t he exper i enced
sucker , who has st udi ed not t he mar ket i t sel f but a f ew r emar ks
about t he mar ket made by a st i l l hi gher gr ade of sucker s. The
second- gr ade sucker knows how t o keep f r om l osi ng hi s money i n
some of t he ways t hat get t he r aw begi nner . I t i s t hi s
semi sucker r at her t han t he 100 per cent ar t i cl e who i s t he r eal
al l - t he- year - r ound suppor t of t he commi ssi on houses. He l ast s
about t hr ee and a hal f year s on an aver age, as compar ed wi t h a
si ngl e season of f r om t hr ee t o t hi r t y weeks, whi ch i s t he usual
Wal l St r eet l i f e of a f i r st of f ender . I t i s nat ur al l y t he
semi sucker who i s al ways quot i ng t he f amous t r adi ng aphor i sms
and t he var i ous r ul es of t he game. He knows al l t he don' t s t hat
ever f el l f r om t he or acul ar l i ps of t he ol d st ager s except i ng
t he pr i nci pal one, whi ch i s: Don' t be a sucker !
Thi s semi sucker t ype t hat t hi nks he has cut hi s wi sdom
t eet h because he l oves t o buy on decl i nes. He wai t s f or t hem. He
measur es hi s bar gai ns by t he number of poi nt s i t has sol d of f
f r omt he t op. I n bi g bul l mar ket s t he pl ai n un




Thi s semi sucker i s t he t ype t hat t hi nks he has cut hi s
wi sdom t eet h because he l oves t o buy on decl i nes. He wai t s f or
t hem. He measur es hi s bar gai ns by t he number of poi nt s i t has
sol d of f f r om t he t op. I n bi g bul l mar ket s t he pl ai n
unadul t er at ed sucker , ut t er l y i gnor ant of r ul es and pr ecedent s,
buys bl i ndl y because he hopes bl i ndl y. He makes most of t he
money unt i l one of t he heal t hy r eact i ons t akes i t away f r om hi m
at one f el l swoop. But t he Car ef ul Mi ke sucker does what I di d
when I t hought I was pl ayi ng t he game i nt el l i gent l y accor di ng t o
t he i nt el l i gence of ot her s. I knew I needed t o change my
bucket - shop met hods and I t hought I was sol vi ng my pr obl em wi t h
any change, par t i cul ar l y one t hat assayed hi gh gol d val ues
accor di ng t o t he exper i enced t r ader s among t he cust omer s.
Most l et us cal l ' em cust omer s - - ar e al i ke. You f i nd ver y
f ew who can t r ut hf ul l y say t hat Wal l St r eet doesn' t owe t hem
money. I n Ful l er t on' s t her e wer e t he usual cr owd. Al l gr ades!
Wel l , t her e was one ol d chap who was not l i ke t he ot her s. To
begi n wi t h, he was a much ol der man. Anot her t hi ng was t hat he
never vol unt eer ed advi ce and never br agged of hi s wi nni ngs. He
was a gr eat hand f or l i st eni ng ver y at t ent i vel y t o t he ot her s.
He di d not seemver y keen t o get t i ps - - t hat i s, he never asked
t he t al ker s what t hey' d hear d or what t hey knew. But when
somebody gave hi m one he al ways t hanked t he t i pst er ver y
pol i t el y. Somet i mes he t hanked t he t i pst er agai n - - when t he t i p
t ur ned out O. K. But i f i t went wr ong he never whi ned, so t hat
nobody coul d t el l whet her he f ol l owed i t or l et i t sl i de by. I t
was a l egend of t he of f i ce t hat t he ol d j i gger was r i ch and
coul d swi ng qui t e a l i ne. But he wasn' t donat i ng much t o t he
f i r m i n t he way of commi ssi ons; at l east not t hat anyone coul d
see. Hi s name was Par t r i dge, but t hey ni cknamed hi m Tur key
behi nd hi s back, because he was so t hi ck- chest ed and had a habi t
of st r ut t i ng about t he var i ous r ooms, wi t h t he poi nt of hi s chi n
r est i ng on hi s br east .
The cust omer s, who wer e al l eager t o be shoved and f or ced
i nt o doi ng t hi ngs so as t o l ay t he bl ame f or f ai l ur e on ot her s,
used t o go t o ol d Par t r i dge and t el l hi m what some f r i end of a
f r i end of an i nsi der had advi sed t hem t o do i n a cer t ai n st ock.
They woul d t el l hi m what t hey had not done wi t h t he t i p so he
woul d t el l t hem what t hey ought t o do. But whet her t he t i p t hey
had was t o buy or t o sel l , t he ol d chap' s answer was al ways t he
same.
The cust omer woul d f i ni sh t he t al e of hi s per pl exi t y and
t hen ask: " What do you t hi nk I ought t o do?"


Ol d Tur key woul d cock hi s head t o one si de, cont empl at e hi s
f el l ow cust omer wi t h a f at her l y smi l e, and f i nal l y he woul d say
ver y i mpr essi vel y, " You know, i t ' s a bul l mar ket ! "
Ti me and agai n I hear d hi m say, " Wel l , t hi s i s a bul l mar ket ,
you know! " as t hough he wer e gi vi ng t o you a pr i cel ess t al i sman
wr apped up i n a mi l l i on- dol l ar acci dent - i nsur ance pol i cy. And of
cour se I di d not get hi s meani ng.
One day a f el l ow named El mer Har wood r ushed i nt o t he
of f i ce, wr ot e out an or der and gave i t t o t he cl er k. Then he
r ushed over t o wher e Mr . Par t r i dge was l i st eni ng pol i t el y t o
J ohn Fanni ng' s st or y of t he t i me he over hear d Keene gi ve an
or der t o one of hi s br oker s and al l t hat J ohn made was a measl y
t hr ee poi nt s on a hundr ed shar es and of cour se t he st ock had t o
go up t went y- f our poi nt s i n t hr ee days r i ght af t er J ohn sol d
out . I t was at l east t he f our t h t i me t hat J ohn had t ol d hi mt hat
t al e of woe, but ol d Tur key was smi l i ng as sympat het i cal l y as i f
i t was t he f i r st t i me he hear d i t .
Wel l , El mer made f or t he ol d man and, wi t hout a wor d of
apol ogy t o J ohn Fanni ng, t ol d Tur key, " Mr . Par t r i dge, I have
j ust sol d my Cl i max Mot or s. My peopl e say t he mar ket i s ent i t l ed
t o a r eact i on and t hat I ' l l be abl e t o buy i t back cheaper . So
you' d bet t er do l i kewi se. That i s, i f you' ve st i l l got your s. "
El mer l ooked suspi ci ousl y at t he man t o whom he had gi ven t he
or i gi nal t i p t o buy. The amat eur , or gr at ui t ous, t i pst er al ways
t hi nks he owns t he r ecei ver of hi s t i p body and soul , even
bef or e he knows how t he t i p i s goi ng t o t ur n out .
" Yes, Mr . Har wood, I st i l l have i t . Of cour se! " sai d Tur key
gr at ef ul l y. I t was ni ce of El mer t o t hi nk of t he ol d chap.
" Wel l , now i s t he t i me t o t ake your pr of i t and get i n agai n on
t he next di p, " sai d El mer , as i f he had j ust made out t he
deposi t sl i p f or t he ol d man. Fai l i ng t o per cei ve ent husi ast i c
gr at i t ude i n t he benef i ci ar y' s f ace El mer went on: " I have j ust
sol d ever y shar e I owned! "
Fr om hi s voi ce and manner you woul d have conser vat i vel y
est i mat ed i t at t en t housand shar es.
But Mr . Par t r i dge shook hi s head r egr et f ul l y and whi ned, " No!
No! I can' t do t hat ! "
: ' What ?" yel l ed El mer .
" I si mpl y can' t ! " sai d Mr . Par t r i dge. He was i n gr eat
t r oubl e.
" Di dn' t I gi ve you t he t i p t o buy i t ?"
" You di d, Mr . Har wood, and I am ver y gr at ef ul t o you.
I ndeed, I am, si r . But - - "
" Hol d on! Let me t al k! And di dn' t t hat st ock go up seven
poi nt s i n t en days? Di dn' t i t ?"


" I t di d, and I am much obl i ged t o you, my dear boy. But I
coul dn' t t hi nk of sel l i ng t hat st ock. "
" You coul dn' t ?" asked El mer , begi nni ng t o l ook doubt f ul
hi msel f . I t i s a habi t wi t h most t i p gi ver s t o be t i p t aker s.
" No, I coul dn' t . "
" Why not ?" And El mer dr ew near er .
" Why, t hi s i s a bul l mar ket ! " The ol d f el l ow sai d i t as
t hough he had gi ven a l ong and det ai l ed expl anat i on.
" That ' s al l r i ght , " sai d El mer , l ooki ng angr y because of
hi s di sappoi nt ment . " I know t hi s i s a bul l mar ket as wel l as you
do. But you' d bet t er sl i p t hem t hat st ock of your s and buy i t
back on t he r eact i on. You mi ght as wel l r educe t he cost t o
your sel f . "
" My dear boy, " sai d ol d Par t r i dge, i n gr eat di st r ess " my
dear boy, i f I sol d t hat st ock now I ' d l ose my posi t i on; and
t hen wher e woul d I be?"
El mer Har wood t hr ew up hi s hands, shook hi s head and wal ked
over t o me t o get sympat hy: " Can you beat i t ?" he asked me i n a
st age whi sper . " I ask you! "
I di dn' t say anyt hi ng. So he went on: " I gi ve hi m a t i p on
Cl i max Mot or s. He buys f i ve hundr ed shar es. He' s got seven
poi nt s' pr of i t and I advi se hi m t o get out and buy ' em back on
t he r eact i on t hat ' s over due even now. And what does he say when
I t el l hi m? He says t hat i f he sel l s he' l l l ose hi s j ob. What do
you know about t hat ?"
" I beg your par don, Mr . Har wood; I di dn' t say I ' d l ose my
j ob, " cut i n ol d Tur key. " I sai d I ' d l ose my posi t i on. And when
you ar e as ol d as I amand you' ve been t hr ough as many booms and
pani cs as I have, you' l l know t hat t o l ose your posi t i on i s
somet hi ng nobody can af f or d; not even J ohn D. Rockef el l er . I
hope t he st ock r eact s and t hat you wi l l be abl e t o r epur chase
your l i ne at a subst ant i al concessi on, si r . But I mysel f can
onl y t r ade i n accor dance wi t h t he exper i ence of many year s. I
pai d a hi gh pr i ce f or i t and I don' t f eel l i ke t hr owi ng away a
second t ui t i on f ee. But I am as much obl i ged t o you as i f I had
t he money i n t he bank. I t ' s a bul l mar ket , you know. " And he
st r ut t ed away, l eavi ng El mer dazed.
What ol d Mr . Par t r i dge sai d di d not mean much t o me unt i l I
began t o t hi nk about my own numer ous f ai l ur es t o make as much
money as I ought t o when I was so r i ght on t he gener al mar ket .
The mor e I st udi ed t he mor e I r eal i zed how wi se t hat ol d chap
was. He had evi dent l y suf f er ed f r omt he same def ect i n hi s young
days and knew hi s own human weaknesses. He woul d not l ay hi msel f
open t o a t empt at i on t hat exper i ence had t aught hi m was har d t o
r esi st and had al ways pr oved expensi ve t o hi m, as i t was t o me.


I t hi nk i t was a l ong st ep f or war d i n my t r adi ng educat i on
when I r eal i zed at l ast t hat when ol d Mr . Par t r i dge kept on
t el l i ng t he ot her cust omer s, " Wel l , you know t hi s i s a bul l
mar ket ! " he r eal l y meant t o t el l t hemt hat t he bi g money was not
i n t he i ndi vi dual f l uct uat i ons but i n t he mai n movement s t hat
i s, not i n r eadi ng t he t ape but i n si zi ng up t he ent i r e mar ket
and i t s t r end.
And r i ght her e l et me say one t hi ng: Af t er spendi ng many
year s i n Wal l St r eet and af t er maki ng and l osi ng mi l l i ons of
dol l ar s I want t o t el l you t hi s: I t never was my t hi nki ng t hat
made t he bi g money f or me. I t al ways was my si t t i ng. Got t hat ?
My si t t i ng t i ght ! I t i s no t r i ck at al l t o be r i ght on t he
mar ket . You al ways f i nd l ot s of ear l y bul l s i n bul l mar ket s and
ear l y bear s i n bear mar ket s. I ' ve known many men who wer e r i ght
at exact l y t he r i ght t i me, and began buyi ng or sel l i ng st ocks
when pr i ces wer e at t he ver y l evel , whi ch shoul d show t he
gr eat est pr of i t . And t hei r exper i ence i nvar i abl y mat ched mi ne - -
t hat i s, t hey made no r eal money out of i t . Men who can bot h be
r i ght and si t t i ght ar e uncommon. I f ound i t one of t he har dest
t hi ngs t o l ear n. But i t i s onl y af t er a st ock oper at or has
f i r ml y gr asped t hi s t hat he can make bi g money. I t i s l i t er al l y
t r ue t hat mi l l i ons come easi er t o a t r ader af t er he knows how t o
t r ade t han hundr eds di d i n t he days of hi s i gnor ance.
The r eason i s t hat a man may see st r ai ght and cl ear l y and
yet become i mpat i ent or doubt f ul when t he mar ket t akes i t s t i me
about doi ng as he f i gur ed i t must do. That i s why so many men i n
Wal l St r eet , who ar e not at al l i n t he sucker cl ass, not even i n
t he t hi r d gr ade, never t hel ess l ose money. The mar ket does not
beat t hem. They beat t hemsel ves, because t hough t hey have br ai ns
t hey cannot si t t i ght . Ol d Tur key was dead r i ght i n doi ng and
sayi ng what he di d. He had not onl y t he cour age of hi s
convi ct i ons but t he i nt el l i gent pat i ence t o si t t i ght .
Di sr egar di ng t he bi g swi ng and t r yi ng t o j ump i n and out
was f at al t o me. Nobody can cat ch al l t he f l uct uat i ons. I n a
bul l mar ket your game i s t o buy and hol d unt i l you bel i eve t hat
t he bul l mar ket i s near i t s end. To do t hi s you must st udy
gener al condi t i ons and not t i ps or speci al f act or s af f ect i ng
i ndi vi dual st ocks. Then get out of al l your st ocks; get out f or
keeps! Wai t unt i l you see - - or i f you pr ef er , unt i l you t hi nk
you see t he t ur n of t he mar ket ; t he begi nni ng of a r ever sal of
gener al condi t i ons. You have t o use your br ai ns and your vi si on
t o do t hi s; ot her wi se my advi ce woul d be as i di ot i c as t o t el l
you t o buy cheap and sel l dear . One of t he most hel pf ul t hi ngs
t hat anybody can l ear n i s t o gi ve up t r yi ng t o cat ch t he l ast
ei ght h or t he f i r st . These t wo ar e t he most expensi ve ei ght hs i n


t he wor l d. They have cost st ock t r ader s, i n t he aggr egat e,
enough mi l l i ons of dol l ar s t o bui l d a concr et e hi ghway acr oss
t he cont i nent .
Anot her t hi ng I not i ced i n st udyi ng my pl ays i n Ful l er t on' s
of f i ce af t er I began t o t r ade l ess uni nt el l i gent l y was t hat my
i ni t i al oper at i ons sel dom showed me a l oss. That nat ur al l y made
me deci de t o st ar t bi g. I t gave me conf i dence i n my own j udgment
bef or e I al l owed i t t o be vi t i at ed by t he advi ce of ot her s or
even by my own i mpat i ence at t i mes. Wi t hout f ai t h i n hi s own
j udgment no man can go ver y f ar i n t hi s game. That i s about al l
I have l ear ned t o st udy gener al condi t i ons, t o t ake a posi t i on
and st i ck t o i t . I can wai t wi t hout a t wi nge of i mpat i ence. I
can see a set back wi t hout bei ng shaken, knowi ng t hat i t i s onl y
t empor ar y. I have been shor t one hundr ed t housand shar es and I
have seen a bi g r al l y comi ng. I have f i gur ed and f i gur ed
cor r ect l y - - t hat such a r al l y as I f el t was i nevi t abl e, and
even whol esome, woul d make a di f f er ence of one mi l l i on dol l ar s
i n my paper pr of i t s. And I never t hel ess have st ood pat and seen
hal f my paper pr of i t wi ped out , wi t hout once consi der i ng t he
advi sabi l i t y of cover i ng my shor t s t o put t hem out agai n on t he
r al l y. I knew t hat i f I di d I mi ght l ose my posi t i on and wi t h i t
t he cer t ai nt y of a bi g ki l l i ng. I t i s t he bi g swi ng t hat makes
t he bi g money f or you.
I f I l ear ned al l t hi s so sl owl y i t was because I l ear ned by
my mi st akes, and some t i me al ways el apses bet ween maki ng a
mi st ake and r eal i zi ng i t , and mor e t i me bet ween r eal i zi ng i t and
exact l y det er mi ni ng i t . But at t he same t i me I was f ar i ng pr et t y
comf or t abl y and was ver y young, so t hat I made up i n ot her ways.
Most of my wi nni ngs wer e st i l l made i n par t t hr ough my t ape
r eadi ng because t he ki nd of mar ket s we wer e havi ng l ent
t hemsel ves f ai r l y wel l t o my met hod. I was not l osi ng ei t her as
of t en or as i r r i t at i ngl y as i n t he begi nni ng of my New Yor k
exper i ences. I t wasn' t anyt hi ng t o be pr oud of , when you t hi nk
t hat I had been br oke t hr ee t i mes i n l ess t han t wo year s. And as
I t ol d you, bei ng br oke i s a ver y ef f i ci ent educat i onal agency.
I was not i ncr easi ng my st ake ver y f ast because I l i ved up
t o t he handl e al l t he t i me. I di d not depr i ve mysel f of many of
t he t hi ngs t hat a f el l ow of my age and t ast es woul d want . I had
my own aut omobi l e and I coul d not see any sense i n ski mpi ng on
l i vi ng when I was t aki ng i t out of t he mar ket . The t i cker onl y
st opped Sundays and hol i days, whi ch was as i t shoul d be. Ever y
t i me I f ound t he r eason f or a l oss or t he why and how of anot her
mi st ake, I added a br and- new Don t t o my schedul e of asset s. And
t he ni cest way t o capi t al i ze my i ncr easi ng asset s was by not
cut t i ng down on my l i vi ng expenses. Of cour se I had some amusi ng


exper i ences and some t hat wer e not so amusi ng, but i f I t ol d
t hem al l i n det ai l I ' d never f i ni sh. As a mat t er of f act , t he
onl y i nci dent s t hat I r emember wi t hout speci al ef f or t ar e t hose
t hat t aught me somet hi ng of def i ni t e val ue t o me i n my t r adi ng;
somet hi ng t hat added t o my st or e of knowl edge of t he game and of
mysel f !




I N t he spr i ng of 1906 I was i n At l ant i c Ci t y f or a shor t vaca-
t i on. I was out of st ocks and was t hi nki ng onl y of havi ng a
change of ai r and a ni ce r est . By t he way, I had gone back t o my
f i r st br oker s, Har di ng Br ot her s, and my account had got t o be
pr et t y act i ve. I coul d swi ng t hr ee or f our t housand shar es. That
wasn' t much mor e t han I had done i n t he ol d Cosmopol i t an shop
when I was bar el y t went y year s of age. But t her e was some
di f f er ence bet ween my one- poi nt mar gi n i n t he bucket shop and
t he mar gi n r equi r ed by br oker s who act ual l y bought or sol d
st ocks f or my account on t he New Yor k St ock Exchange.
You may r emember t he st or y I t ol d you about t hat t i me when
I was shor t t hi r t y- f i ve hundr ed Sugar i n t he Cosmopol i t an and I
had a hunch somet hi ng was wr ong and I ' d bet t er cl ose t he t r ade?
Wel l , I have of t en had t hat cur i ous f eel i ng. As a r ul e, I yi el d
t o i t . But at t i mes I have pooh- poohed t he i dea and have t ol d
mysel f t hat i t was si mpl y asi ni ne t o f ol l ow any of t hese sudden
bl i nd i mpul ses t o r ever se my posi t i on. I have ascr i bed my hunch
t o a st at e of ner ves r esul t i ng f r om t oo many ci gar s or
i nsuf f i ci ent sl eep or a t or pi d l i ver or somet hi ng of t hat ki nd.
When I have ar gued mysel f i nt o di sr egar di ng my i mpul se and have
st ood pat I have al ways had cause t o r egr et i t . A dozen
i nst ances occur t o me when I di d not sel l as per hunch, and t he
next day I ' d go downt own and t he mar ket woul d be st r ong, or
per haps even advance, and I ' d t el l mysel f how si l l y i t woul d
have been t o obey t he bl i nd i mpul se t o sel l . But on t he
f ol l owi ng day t her e woul d be a pr et t y bad dr op. Somet hi ng had
br oken l oose somewher e and I ' d have made money by not bei ng so
wi se and l ogi cal . The r eason pl ai nl y was not physi ol ogi cal but
psychol ogi cal .
I want t o t el l you onl y about one of t hem because of what
i t di d f or me. I t happened when I was havi ng t hat l i t t l e
vacat i on i n At l ant i c Ci t y i n t he spr i ng of i 9o6. I had a f r i end
wi t h me who al so was a cust omer of Har di ng Br ot her s. I had no
i nt er est i n t he mar ket one way or anot her and was enj oyi ng my
r est . I can al ways gi ve up t r adi ng t o pl ay, unl ess of cour se i t
i s an except i onal l y act i ve mar ket i n whi ch my commi t ment s ar e
r at her heavy. I t was a bul l mar ket , as I r emember i t . The
out l ook was f avor abl e f or gener al busi ness and t he st ock mar ket
had sl owed down but t he t one was f i r m and al l i ndi cat i ons
poi nt ed t o hi gher pr i ces.
One mor ni ng af t er we had br eakf ast ed and had f i ni shed
r eadi ng al l t he New Yor k mor ni ng paper s, and had got t i r ed of
wat chi ng t he sea gul l s pi cki ng up cl ams and f l yi ng up wi t h t hem
t went y f eet i n t he ai r and dr oppi ng t hemon t he har d wet sand t o


open t hem f or t hei r br eakf ast , my f r i end and I st ar t ed up t he
Boar dwal k. That was t he most exci t i ng t hi ng we di d i n t he
dayt i me.
I t was not noon yet , and we wal ked up sl owl y t o ki l l t i me
and br eat he t he sal t ai r . Har di ng Br ot her s had a br anch of f i ce
on t he Boar dwal k and we used t o dr op i n ever y mor ni ng and see
how t hey' d opened. I t was mor e f or ce of habi t t han anyt hi ng
el se, f or I wasn' t doi ng anyt hi ng.
The mar ket , we f ound, was st r ong and act i ve. My f r i end, who
was qui t e bul l i sh, was car r yi ng a moder at e l i ne pur chased
sever al poi nt s l ower . He began t o t el l me what an obvi ousl y wi se
t hi ng i t was t o hol d st ocks f or much hi gher pr i ces. I wasn' t
payi ng enough at t ent i on t o hi mt o t ake t he t r oubl e t o agr ee wi t h
hi m. I was l ooki ng- over t he quot at i on boar d, not i ng t he changes
t hey wer e most l y advances unt i l I came t o Uni on Paci f i c. I got a
f eel i ng t hat I ought t o sel l i t . I can' t t el l you mor e. I j ust
f el t l i ke sel l i ng i t . I asked mysel f why I shoul d f eel l i ke
t hat , and I coul dn' t f i nd any r eason what ever f or goi ng shor t of
UP.
I st ar ed at t he l ast pr i ce on t he boar d unt i l I coul dn' t
see any f i gur es or any boar d or anyt hi ng el se, f or t hat mat t er .
Al l I knew was t hat I want ed t o sel l Uni on Paci f i c and I
coul dn' t f i nd out why I want ed t o.
I must have l ooked queer , f or my f r i end, who was st andi ng
al ongsi de of me, suddenl y nudged me and asked, " Hey, what ' s t he
mat t er ?"
" I don' t know, " I answer ed.
" Goi ng t o sl eep?" he sai d.
" No, " I sai d. " I am not goi ng t o sl eep. What I am goi ng t o
do i s t o sel l t hat st ock. " I had al ways made money f ol l owi ng my
hunches.
I wal ked over t o a t abl e wher e t her e wer e some bl ank or der
pads. My f r i end f ol l owed me. I wr ot e out an or der t o sel l a
t housand Uni on Paci f i c at t he mar ket and handed i t t o t he
manager . He was smi l i ng when I wr ot e i t and when he t ook i t . But
when he r ead t he or der he st opped smi l i ng and l ooked at me.
" I s t hi s r i ght ?" he asked me. But I j ust l ooked at hi m and
he r ushed i t over t o t he oper at or .
" What ar e you doi ng?" asked my f r i end.
" I ' msel l i ng i t ! " I t ol d hi m.
" Sel l i ng what ?" he yel l ed at me. I f he was a bul l how
coul d I be a bear ? Somet hi ng was wr ong.
" A t housand UP, " I sai d.
" Why?" he asked me i n gr eat exci t ement .


I shook my head, meani ng I had no r eason. But he must have
t hought I ' d got a t i p, because he t ook me by t he ar m and l ed me
out si de i nt o t he hal l , wher e we coul d be out of si ght and
hear i ng of t he ot her cust omer s and r ubber i ng chai r war mer s.
" What di d you bear ?" he asked me.
He was qui t e exci t ed. UP. was one of hi s pet s and he was
bul l i sh on i t because of i t s ear ni ngs and i t s pr ospect s. But he
was wi l l i ng t o t ake a bear t i p on i t at second hand.
" Not hi ng 1" I sai d.
" You di dn' t ?" He was skept i cal and showed i t pl ai nl y.
" I di dn' t hear a t hi ng. "
" Then why i n bl azes ar e you sel l i ng?"
" I don' t know, " I t ol d hi m. I spoke gospel t r ut h.
" Oh, come acr oss, Lar r y, " he sai d.
He knew i t was my habi t t o know why I t r aded. I had sol d a
t housand shar es of Uni on Paci f i c. I must have a ver y good r eason
t o sel l t hat much st ock i n t he f ace of t he st r ong mar ket .
" I don' t know, " I r epeat ed. " I j ust f eel t hat somet hi ng i s
goi ng t o happen. "
" What ' s goi ng t o happen?"
" I don' t know. I can' t gi ve you any r eason. Al l I know i s
t hat I want t o sel l t hat st ock. And I ' m goi ng t o l et ' em have
anot her t housand. "
I wal ked back i nt o t he of f i ce and gave an or der t o sel l a
second t housand. I f I was r i ght i n sel l i ng t he f i r st t housand I
ought t o have out a l i t t l e mor e.
" What coul d possi bl y happen?" per si st ed my f r i end, who
coul dn' t make up hi s mi nd t o f ol l ow my l ead. I f I ' d t ol d hi m
t hat I had hear d UP. was goi ng down he' d have sol d i t wi t hout
aski ng me f r om whom I ' d hear d i t or why. " What coul d possi bl y
happen?" he asked agai n.
" A mi l l i on t hi ngs coul d happen. But I can' t pr omi se you
t hat any of t hem wi l l . I can' t gi ve you any r easons and I can' t
t el l f or t unes, " I t ol d hi m.
" Then you' r e cr azy, " he sai d. " St ar k cr azy, sel l i ng t hat
st ock wi t hout r i me or r eason. You don' t know why you want t o
sel l i t ?"
" I don' t know why I want t o sel l i t . I onl y know I do want
t o, " I sai d. " I want t o, l i ke ever yt hi ng. " The ur ge was so
st r ong t hat I sol d anot her t housand.
That was t oo much f or my f r i end. He gr abbed me by t he ar m
and sai d, " Her e! Let ' s get out of t hi s pl ace bef or e you sel l t he
ent i r e capi t al st ock. "
I had sol d as much as I needed t o sat i sf y my f eel i ng, so I
f ol l owed hi m wi t hout wai t i ng f or a r epor t on t he l ast t wo


t housand shar es. I t was a pr et t y good j ag of st ock f or me t o
sel l even wi t h t he best of r easons. I t seemed mor e t han enough
t o be shor t of wi t hout any r eason what ever , par t i cul ar l y when
t he ent i r e mar ket was so st r ong and t her e was not hi ng i n si ght
t o make anybody t hi nk of t he bear si de. But I r emember ed t hat on
pr evi ous occasi ons when I had t he same ur ge t o sel l and di dn' t
do i t I al ways had r easons t o r egr et i t .
I have t ol d some of t hese st or i es t o f r i ends, and some of
t hem t el l me i t i sn' t a hunch but t he subconsci ous mi nd, whi ch
i s t he cr eat i ve mi nd, at wor k. That i s t he mi nd whi ch makes
ar t i st s do t hi ngs wi t hout t hei r knowi ng how t hey came t o do
t hem. Per haps wi t h me i t was t he cumul at i ve ef f ect of a l ot of
l i t t l e t hi ngs i ndi vi dual l y i nsi gni f i cant but col l ect i vel y power -
f ul . Possi bl y my f r i end' s uni nt el l i gent bul l i shness ar oused a
spi r i t of cont r adi ct i on and I pi cked on UP. because i t had been
t out ed so much. I can' t t el l you what t he cause or mot i ve f or
hunches may be. Al l I know i s t hat I went out of t he At l ant i c
Ci t y br anch of f i ce of Har di ng Br ot her s shor t t hr ee t housand
Uni on Paci f i c i n a r i si ng mar ket , and I wasn' t wor r i ed a bi t .
I want ed t o know what pr i ce t hey' d got f or my l ast t wo
t housand shar es. So af t er l uncheon we wal ked up t o t he of f i ce. I
had t he pl easur e of seei ng t hat t he gener al mar ket was st r ong
and Uni on Paci f i c hi gher .
" I see your f i ni sh, " sai d my f r i end. You coul d see he was
gl ad he hadn' t sol d any.
The next day t he gener al mar ket went up some mor e and I
hear d not hi ng but cheer f ul r emar ks f r om my f r i end. But I f el t
sur e I had done r i ght t o sel l UP, and I never get i mpat i ent when
I f eel I am r i ght . What ' s t he sense? That af t er noon Uni on
Paci f i c st opped cl i mbi ng, and t owar d t he end of t he day i t began
t o go of f . Pr et t y soon i t got down t o a poi nt bel ow t he l evel of
t he aver age of my t hr ee t housand shar es. I f el t mor e posi t i ve
t han ever t hat I was on t he r i ght si de, and si nce I f el t t hat
way I nat ur al l y had t o sel l some mor e. So, t owar d t he cl ose, I
sol d an addi t i onal t wo t housand shar es.
Ther e I was, shor t f i ve t housand shar es of UP. On a hunch.
That was as much as I coul d sel l i n Har di ng' s of f i ce wi t h t he
mar gi n I had up. I t was t oo much st ock f or me t o be shor t of , on
a vacat i on; so I gave up t he vacat i on and r et ur ned t o New Yor k
t hat ver y ni ght . Ther e was no t el l i ng what mi ght happen and I
t hought I ' d bet t er be J ohnny- on- t he- spot . Ther e I coul d move
qui ckl y i f I had t o.
The next day we got t he news of t he San Fr anci sco ear t h-
quake. I t was an awf ul di sast er . But t he mar ket opened down onl y
a coupl e of poi nt s. The bul l f or ces wer e at wor k, and t he publ i c


never i s i ndependent l y r esponsi ve t o news. You see t hat al l
t he t i me. I f t her e i s a sol i d bul l f oundat i on, f or i nst ance,
whet her or not what t he paper s cal l bul l mani pul at i on i s goi ng
on at t he same t i me, cer t ai n news i t ems f ai l t o have t he ef f ect
t hey woul d have i f t he St r eet was bear i sh. I t i s al l i n t he
st at e of sent i ment at t he t i me. I n t hi s case t he St r eet di d
not appr ai se t he ext ent of t he cat ast r ophe because i t di dn' t
wi sh t o. Bef or e t he day was over pr i ces came back. I was shor t
f i ve t housand shar es. The bl ow had f al l en, but my st ock hadn' t .
My hunch was of t he f i r st wat er , but my bank account wasn' t
gr owi ng; not even on paper . The f r i end who had been i n At l ant i c
Ci t y wi t h me when I put out my shor t l i ne i n UP. Was gl ad and
sad about i t .
He t ol d me: " That was some hunch, ki d. But , say, when t he
t al ent and t he money ar e al l on t he bul l si de what ' s t he use of
bucki ng agai nst t hem? They ar e bound t o wi n out . "
" Gi ve t hem t i me, " I sai d. I meant pr i ces. I woul dn' t cover
because I knew t he damage was enor mous and t he Uni on Paci f i c
woul d be one of t he wor st suf f er er s. But i t was exasper at i ng t o
see t he bl i ndness of t he St r eet .
" Gi ve ' em t i me and your ski n wi l l be wher e al l t he ot her
bear hi des ar e st r et ched out i n t he sun, dr yi ng, " he assur ed me.
" What woul d you do?" I asked hi m. " Buy UP. On t he st r engt h
of t he mi l l i ons of dol l ar s of damage suf f er ed by t he Sout her n
Paci f i c and ot her l i nes? Wher e ar e t he ear ni ngs f or di vi dends
goi ng t o come f r omaf t er t hey pay f or al l t hey' ve l ost ? The best
you can say i s t hat t he t r oubl e may not be as bad as i t i s
pai nt ed. But i s t hat a r eason f or buyi ng t he st ocks of t he r oads
chi ef l y af f ect ed? Answer me t hat . "
But al l my f r i end sai d was: " Yes, t hat l i st ens f i ne. But I
t el l you, t he mar ket doesn' t agr ee wi t h you. The t ape doesn' t
l i e, does i t ?"
" I t doesn' t al ways t el l t he t r ut h on t he i nst ant , " I sai d.
" Li st en. A man was t al ki ng t o J i m Fi sk a l i t t l e bef or e
Bl ack Fr i day, gi vi ng t en good r easons why gol d ought t o go down
f or keeps. He got so encour aged by hi s own wor ds t hat he ended
by t el l i ng Fi sk t hat he was goi ng t o sel l a f ew mi l l i on. And J i m
Fi sk j ust l ooked at hi m and sai d, " Go ahead! Do! Sel l i t shor t
and i nvi t e me t o your f uner al . " '
" Yes, " I sai d; " and i f t hat chap had sol d i t shor t , l ook at
t he ki l l i ng he woul d have made l Sel l some UP. your sel f . "
" Not I ! I ' m t he ki nd t hat t hr i ves best on not r owi ng
agai nst wi nd and t i de. "
On t he f ol l owi ng day, when f ul l er r epor t s came i n, t he
mar ket began t o sl i de of f , but even t hen not as vi ol ent l y as i t


shoul d. Knowi ng t hat not hi ng under t he sun coul d st ave of f a
subst ant i al br eak I doubl ed up and sol d f i ve t housand shar es.
Oh, by t hat t i me i t was pl ai n t o most peopl e, and my br oker s
wer e wi l l i ng enough. I t wasn' t r eckl ess of t hem or of me, not
t he way I si zed up t he mar ket . On t he day f ol l owi ng, t he mar ket
began t o go f or f ai r . Ther e was t he di ckens t o pay. Of cour se I
pushed my l uck f or al l i t was wor t h. I doubl ed up agai n and sol d
t en t housand shar es mor e. I t was t he onl y pl ay possi bl e.
I wasn' t t hi nki ng of anyt hi ng except t hat I was r i ght 100
per cent r i ght and t hat t hi s was a heaven- sent oppor t uni t y. I t
was up t o me t o t ake advant age of i t . I sol d mor e. Di d I t hi nk
t hat wi t h such a bi g l i ne of shor t s out , i t woul dn' t t ake much
of a r al l y t o wi pe out my paper pr of i t s and possi bl y my
pr i nci pal ? I don' t know whet her I t hought of t hat or not , but i f
I di d i t di dn' t car r y much wei ght wi t h me. I wasn' t pl ungi ng
r eckl essl y. I was r eal l y pl ayi ng conser vat i vel y. Ther e was
not hi ng t hat anybody coul d do t o undo t he ear t hquake, was t her e?
They coul dn' t r est or e t he cr umpl ed bui l di ngs over ni ght , f r ee,
gr at i s, f or not hi ng, coul d t hey? Al l t he money i n t he wor l d
coul dn' t hel p much i n t he next f ew hour s, coul d i t ?
I was not bet t i ng bl i ndl y. I wasn' t a cr azy bear . I wasn' t
dr unk wi t h success or t hi nki ng t hat because Fr i sco was pr et t y
wel l wi ped of f t he map t he ent i r e count r y was headed f or t he
scr ap heap. No, i ndeed! I di dn' t l ook f or a pani c. Wel l , t he
next day I cl eaned up. I made t wo hundr ed and f i f t y t housand
dol l ar s. I t was my bi ggest wi nni ngs up t o t hat t i me. I t was al l
made i n a f ew days. The St r eet pai d no at t ent i on t o t he
ear t hquake t he f i r st day or t wo. They' l l t el l you t hat i t was
because t he f i r st di spat ches wer e not so al ar mr i ng, but I t hi nk
i t was because i t t ook so l ong t o change t he poi nt of vi ew of
t he publ i c t owar d t he secur i t i es mar ket s. Even t he pr of essi onal
t r ader s f or t he most par t wer e sl ow and shor t si ght ed.
I have no expl anat i on t o gi ve you, ei t her sci ent i f i c or
chi l di sh. I amt el l i ng you what I di d, and why, and what came of
i t . I was much l ess concer ned wi t h t he myst er y of t he hunch t han
wi t h t he f act t hat I got a quar t er of a mi l l i on out of i t . I t
meant t hat I coul d now swi ng a much bi gger l i ne t han ever , i f or
when t he t i me came f or i t .
That summer I went t o Sar at oga Spr i ngs. I t was supposed t o
be a vacat i on f or me, but I kept an eye on t he mar ket . To
begi n wi t h, I wasn' t so t i r ed t hat i t bot her ed me t o t hi nk
about i t . And t hen, ever ybody I knew up t her e had or had
had an act i ve i nt er est i n i t . We nat ur al l y t al ked about i t . I
have not i ced t hat t her e i s qui t e a di f f er ence bet ween t al ki ng
and t r adi ng. Some of t hese chaps r emi nd you of t he bol d cl er k


who t al ks t o hi s cant anker ous empl oyer as t o a yel l ow dog when
he t el l s you about i t .
Har di ng Br ot her s had a br anch of f i ce i n Sar at oga. Many of
t hei r cust omer s wer e t her e. But t he r eal r eason, I suppose,
was t he adver t i si ng val ue. Havi ng a br anch of f i ce i n a r esor t i s
si mpl y hi gh- cl ass bi l l boar d adver t i si ng. I used t o dr op i n and
si t ar ound wi t h t he r est of t he cr owd. The manager was a ver y
ni ce chap f r om t he New Yor k of f i ce who was t her e t o gi ve t he
gl ad hand t o f r i ends and st r anger s and, i f possi bl e, t o get
busi ness. I t was a wonder f ul pl ace f or t i ps - - al l ki nds of
t i ps, hor se- r ace, st ock- mar ket , and wai t er s' . The of f i ce knew I
' di dn' t t ake any, so t he manager di dn' t come and whi sper
conf i dent i al l y i n my ear what he' d j ust got on t he q. t . f r om
t he New Yor k of f i ce. He si mpl y passed over t he t el egr ams,
sayi ng, " Thi s i s what t hey' r e sendi ng out , " or somet hi ng of t he
ki nd.
Of cour se I wat ched t he mar ket . Wi t h me, t o l ook at t he
quot at i on boar d and t o r ead t he si gns i s one pr ocess. My good
f r i end Uni on Paci f i c, I not i ced, l ooked l i ke goi ng up. The pr i ce
was hi gh, but t he st ock act ed as i f i t wer e bei ng accumul at ed. I
wat ched i t a coupl e of days wi t hout t r adi ng i n i t , and t he mor e
I wat ched i t t he mor e convi nced I became t hat i t was bei ng
bought on bal ance by somebody who was no pi ker , somebody who not
onl y had a bi g bank r ol l but knew what was what . Ver y cl ever
accumul at i on, I t hought .
As soon as I was sur e of t hi s I nat ur al l y began t o buy i t ,
at about i 6o. I t kept on act i ng al l hunky, and so I kept on
buyi ng i t , f i ve hundr ed shar es at a cl i p. The mor e I bought t he
st r onger i t got , wi t hout any spur t , and I was f eel i ng ver y
comf or t abl e. I coul dn' t see any r eason why t hat st ock shoul dn' t
go up a gr eat deal mor e; not wi t h what I r ead on t he t ape.
Al l of a sudden t he manager came t o me and sai d t hey' d got
a message f r om New Yor k t hey had a di r ect wi r e of cour se - -
aski ng i f I was i n t he of f i ce, and when t hey answer ed yes,
anot her came sayi ng: " Keep hi mt her e. Tel l hi mMr .
Har di ng want s t o speak t o hi m. "
I sai d I ' d wai t , and bought f i ve hundr ed shar es mor e of UP.
I coul dn' t i magi ne what Har di ng coul d have t o say t o me. I
di dn' t t hi nk i t was anyt hi ng about busi ness. My mar gi n was mor e
t han ampl e f or what I was buyi ng. Pr et t y soon t he manager came
and t ol d me t hat Mr . Ed Har di ng want ed me on t he l ong- di st ance
t el ephone.
" Hel l o, Ed, " I sai d.
But he sai d, " What t he devi l ' s t he mat t er wi t h you? Ar e you
cr azy?"


" Ar e you?" I sai d.
" What ar e you doi ng?" he asked.
" What do you mean?"
" Buyi ng al l t hat st ock. " '
" Why, i sn' t my mar gi n al l r i ght ?"
" I t i sn' t a case of mar gi n, but of bei ng a pl ai n sucker . "
" I don' t get you. "
" Why ar e you buyi ng al l t hat Uni on Paci f i c?"
" I t ' s goi ng up, " I sai d.
" Goi ng up, hel l ! Don' t you know t hat t he i nsi der s ar e
f eedi ng i t out t o you? You' r e j ust about t he easi est mar k up
t her e. You' d have mor e f un l osi ng i t on t he poni es. Don' t l et
t hemki d you. "
" Nobody i s ki ddi ng me, " I t ol d hi m. " I haven' t t al ked t o a
soul about i t . "
But he came back at me: " You can' t expect a mi r acl e t o save
you ever y t i me you pl unge i n t hat st ock. Get out whi l e you' ve
st i l l got a chance, " he sai d. " I t ' s a cr i me t o be l ong of t hat
st ock at t hi s l evel - when t hese hi ghbi nder s ar e shovel i ng i t out
by t he t on. "
" The t ape says t hey' r e buyi ng i t , " I i nsi st ed.
" Lar r y, I got hear t di sease when your or der s began t o come
i n. For t he l ove of Mi ke, don' t be a sucker . Get out ! Ri ght
away. I t ' s l i abl e t o bust wi de open any mi nut e. I ' ve done my
dut y. Good- by! " And he hung up.
Ed Har di ng was a ver y cl ever chap, unusual l y wel l - i nf or med
and a r eal f r i end, di si nt er est ed and ki nd- hear t ed. And what was
even mor e, I knew he was i n posi t i on t o hear t hi ngs. Al l I had
t o go by i n my pur chases of UP. , was my year s of st udyi ng t he
behavi our of st ocks and my per cept i on of cer t ai n sympt oms whi ch
exper i ence had t aught me usual l y accompani ed a subst ant i al r i se.
I don' t know what happened t o me, but I suppose I must have
concl uded t hat my t ape r eadi ng t ol d me t he st ock was bei ng
absor bed si mpl y because ver y cl ever mani pul at i on by t he i nsi der s
made t he t ape t el l a st or y t hat wasn' t t r ue. Possi bl y I was
i mpr essed by t he pai ns Ed Har di ng t ook t o st op me f r om maki ng
what he was so sur e woul d be a col ossal mi st ake on my par t .
Nei t her hi s br ai ns nor hi s mot i ves wer e t o be quest i oned.
What ever i t was t hat made me deci de t o f ol l ow hi s advi ce, I
cannot t el l you; but f ol l ow i t , I di d.
I sol d out al l my Uni on Paci f i c. Of cour se i f i t was unwi se
t o be l ong of i t was equal l y unwi se not t o be shor t of i t . So
af t er I got r i d of my l ong st ock I sol d f our t housand shar es
shor t . I put out most of i t ar ound 162.


The next day t he di r ect or s of t he Uni on Paci f i c Company
decl ar ed a t o per cent di vi dend on t he st ock. At f i r st nobody i n
Wal l St r eet bel i eved i t . I t was t oo much l i ke t he desper at e
maneuver of cor ner ed gambl er s. Al l t he newspaper s j umped on t he
di r ect or s. But whi l e t he Wal l St r eet t al ent hesi t at ed t o act t he
mar ket boi l ed over . Uni on Paci f i c l ed, and on huge t r ansact i ons
made a hew hi gh- r ecor d pr i ce. Some of t he r oom t r ader s made
f or t unes i n an hour and I r emember l at er hear i ng about a r at her
dul l - wi t t ed speci al i st who made a mi st ake t hat put t hr ee hundr ed
and f i f t y t housand dol l ar s i n hi s pocket . He sol d hi s seat t he
f ol l owi ng week and became a gent l eman f ar mer t he f ol l owi ng
mont h.
Of cour se I r eal i sed, t he moment I hear d t he news of t he
decl ar at i on of t hat unpr ecedent ed t o per cent di vi dend, t hat I
got what I deser ved f or di sr egar di ng t he voi ce of exper i ence and
l i st eni ng t o t he voi ce of a t i pst er . My own convi ct i ons I had
set asi de f or t he suspi ci ons of a f r i end, si mpl y because he was
di si nt er est ed and as a r ul e knew what he was doi ng.
As soon as I saw Uni on Paci f i c maki ng new hi gh r ecor ds I
sai d t o mysel f , " Thi s i s no st ock f or me t o be shor t of . "
Al l I had i n t he wor l d was up as mar gi n i n Har di ng' s
of f i ce. I was nei t her cheer ed nor made st ubbor n by t he knowl edge
of t hat f act . What was pl ai n was t hat I had r ead t he t ape
accur at el y and t hat I had been a ni nny t o l et Ed Har di ng shake
my own r esol ut i on. Ther e was no sense i n r ecr i mi nat i ons, because
I had no t i me t o l ose; and besi des, what ' s done i s done. So I
gave an or der t o t ake i n my shor t s. The st ock was ar ound i 65
when I sent i n t hat or der t o buy i n t he f our t housand UP. at t he
mar ket . I had a t hr ee- poi nt l oss on i t at t hat f i gur e. Wel l , my
br oker s pai d 172 and 17 f or some of i t bef or e t hey wer e
t hr ough. I f ound when I got my r epor t s t hat Ed Har di ng' s ki ndl y
i nt ent i oned i nt er f er ence cost me f or t y t housand dol l ar s. A l ow
pr i ce f or a man t o pay f or not havi ng t he cour age of hi s own
convi ct i ons! I t was a cheap l esson.
I wasn' t wor r i ed, because t he t ape sai d st i l l hi gher
pr i ces. I t was an unusual move and t her e wer e no pr ecedent s f or
t he act i on of t he di r ect or s, but I di d t hi s t i me what I t hought
I ought t o do. As soon as I had gi ven t he f i r st or der t o buy
f our t housand shar es t o cover my shor t s I deci ded t o pr of i t by
what t he t ape i ndi cat ed and so I went al ong. I bought f our
t housand shar es and hel d t hat st ock unt i l t he next mor ni ng. Then
I got out . I not onl y made up t he f or t y t housand dol l ar s I had
l ost but about f i f t een t housand besi des. I f Ed Har di ng hadn' t
t r i ed t o save me money I ' d have made a ki l l i ng. But he di d me a


ver y gr eat ser vi ce, f or i t was t he l esson of t hat epi sode t hat ,
I f i r ml y bel i eve, compl et ed my educat i on as a t r ader .
I t was not t hat al l I needed t o l ear n was not t o t ake t i ps
but f ol l ow my own i ncl i nat i on. I t was t hat I gai ned conf i dence
i n mysel f and I was abl e f i nal l y t o shake of f t he ol d met hod of
t r adi ng. That Sar at oga exper i ence was my l ast haphazar d,
hi t - or - mi ss oper at i on. Fr om t hen on I began t o t hi nk of basi c
condi t i ons i nst ead of i ndi vi dual st ocks. I pr omot ed mysel f t o a
hi gher gr ade i n t he har d school of specul at i on. I t was a l ong
and di f f i cul t st ep t o t ake.



CHAPTER VI I

I NEVER hesi t at e t o t el l a man t hat I ambul l i sh or bear i sh. But
I do not t el l peopl e t o buy or sel l any par t i cul ar st ock. I n a
bear mar ket al l st ocks go down and i n a bul l mar ket t hey go up.
I don' t mean of cour se t hat i n a bear mar ket caused by a war ,
ammuni t i on shar es do not go up. I speak i n a gener al sense. But
t he aver age man doesn' t wi sh t o be t ol d t hat i t i s a bul l or a
bear mar ket . What he desi r es i s t o be t ol d speci f i cal l y whi ch
par t i cul ar st ock t o buy or sel l . He want s t o get somet hi ng f or
not hi ng. He does not wi sh t o wor k. He doesn' t even wi sh t o have
t o t hi nk. I t i s t oo much bot her t o have t o count t he money t hat
he pi cks up f r omt he gr ound.
Wel l , I wasn' t t hat l azy, but I f ound i t easi er t o t hi nk of
i ndi vi dual st ocks t han of t he gener al mar ket and t her ef or e of
i ndi vi dual f l uct uat i ons r at her t han of gener al movement s. I had
t o change and I di d.
Peopl e don' t seem t o gr asp easi l y t he f undament al s of st ock
t r adi ng. I have of t en sai d t hat t o buy on a r i si ng mar ket i s t he
most comf or t abl e way of buyi ng st ocks. Now, t he poi nt i s not so
much t o buy as cheap as possi bl e or go shor t at t op pr i ces, but
t o buy or sel l at t he r i ght t i me. When I ambear i sh and I sel l a
st ock, each sal e must be at a l ower l evel t han t he pr evi ous
sal e. When I am buyi ng, t he r ever se i s t r ue. I must buy on a
r i si ng scal e. I don' t buy l ong st ock on a scal e down, I buy on a
scal e up.
Let us suppose, f or exampl e, t hat I am buyi ng some st ock.
I ' l l buy t wo t housand shar es at 110. I f t he st ock goes up t o 111
af t er I buy i t I am, at l east t empor ar i l y, r i ght i n my
oper at i on, because i t i s a poi nt hi gher ; i t shows me a pr of i t .
Wel l , because I am r i ght I go i n and buy anot her t wo t housand
shar es. I f t he mar ket i s st i l l r i si ng I buy a t hi r d l ot of t wo
t housand shar es. Say t he pr i ce goes t o 114. I t hi nk i t i s enough
f or t he t i me bei ng. I now have a t r adi ng basi s t o wor k f r om. I
am l ong si x t housand shar es at an aver age of 111- 3/ 4 and t he
st ock i s sel l i ng at 114. I won' t buy any mor e j ust t hen. I wai t
and see. I f i gur e t hat at some st age of t he r i se t her e i s goi ng
t o be a r eact i on. I want t o see how t he mar ket t akes car e of
i t sel f af t er t hat r eact i on. I t wi l l pr obabl y r eact t o wher e I
got my t hi r d l ot . Say t hat af t er goi ng hi gher i t f al l s back t o
112- 1/ 4, and t hen r al l i es. Wel l , j ust as i t goes back t o 113- 3/ 4
I shoot an or der t o buy f our t housand at t he mar ket of cour se.
Wel l , i f I get t hat f our t housand at 113- 3/ 4 I know somet hi ng i s
wr ong and I ' l l gi ve a t est i ng or der t hat i s, I ' l l sel l one
t housand shar es t o see how t he mar ket t akes i t . But suppose t hat


of t he or der t o buy t he f our t housand shar es t hat I put i n when
t he pr i ce was 113- 3/ 4 I get t wo t housand at 114 and f i ve hundr ed
at 114- 1/ 2 and t he r est on t he way up so t hat f or t he l ast f i ve
hundr ed I pay 115- 1/ 2. Then I know I am r i ght . I t i s t he way I
get t he f our t housand shar es t hat t el l s me whet her I amr i ght i n
buyi ng t hat par t i cul ar st ock at t hat par t i cul ar t i me f or of
cour se I am wor ki ng on t he assumpt i on t hat I have checked up
gener al condi t i ons pr et t y wel l and t hey ar e bul l i sh. I never
want t o buy st ocks t oo cheap or t oo easi l y.
I r emember a st or y I hear d about Deacon S. V. Whi t e when he
was one of t he bi g oper at or s of t he St r eet . He was a ver y f i ne
ol d man, cl ever as t hey make t hem, and br ave. He di d some
wonder f ul t hi ngs i n hi s day, f r omal l I ' ve hear d.
I t was i n t he ol d days when Sugar was one of t he most
cont i nuous pur veyor s of f i r ewor ks i n t he mar ket . H. O.
Havemeyer , pr esi dent of t he company, was i n t he heyday of hi s
power . I gat her f r om t al ks wi t h t he ol d- t i mer s t hat H. O. and
hi s f ol l owi ng had al l t he r esour ces of cash and cl ever ness
necessar y t o put t hr ough successf ul l y any deal i n t hei r own
st ock. They t el l me t hat Havemeyer t r i mmed mor e smal l
pr of essi onal t r ader s i n t hat st ock t han any ot her i nsi der i n any
ot her st ock. As a r ul e, t he f l oor t r ader s ar e mor e l i kel y t o
t hwar t t he i nsi der s' game t han hel p i t .
One day a man who knew Deacon Whi t e r ushed i nt o t he of f i ce
al l exci t ed and sai d, " Deacon, you t ol d me i f I ever got any
good i nf or mat i on t o come t o you at once wi t h i t and i f used i t
you' d car r y me f or a f ew hundr ed shar es. " He paused f or br eat h
and f or conf i r mat i on.
The deacon l ooked at hi m i n t hat medi t at i ve way he had and
sai d, " I don' t know whet her I ever t ol d you exact l y t hat or not ,
but I amwi l l i ng t o pay f or i nf or mat i on t hat I can use. "
" Wel l , I ' ve got i t f or you. "
" Now, t hat ' s ni ce, " sai d t he deacon, so mi l dl y t hat t he man
wi t h t he i nf o swel l ed up and sai d, " Yes, si r , deacon. " Then he
came cl oser so nobody el se woul d hear and sai d, " H. O. Havemeyer
i s buyi ng Sugar . "
" I s he?" asked t he deacon qui t e cal ml y.
I t peeved t he i nf or mant , who sai d i mpr essi vel y: " Yes, si r .
Buyi ng al l he can get , deacon. "
" My f r i end, ar e you sur e?" asked ol d S. V.
" Deacon, I know i t f or a posi t i ve f act . The ol d i nsi de gang
ar e buyi ng al l t hey can l ay t hei r hands on. I t ' s got somet hi ng
t o do wi t h t he t ar i f f and t her e' s goi ng t o be a ki l l i ng i n t he
common. I t wi l l cr oss t he pr ef er r ed. And t hat means a sur e
t hi r t y poi nt s f or a st ar t er . "


" D' you r eal l y t hi nk so?" And t he ol d man l ooked at hi m
over t he t op of t he ol d- f ashi oned si l ver - r i mmed spect acl es t hat
he had put on t o l ook at t he t ape.
" Do I t hi nk so? No, I don' t t hi nk so; I know so. Abso-
l ut el y! Why, deacon, when H. O. Havemeyer and hi s f r i ends buy
Sugar as t hey' r e doi ng now t hey' r e never sat i sf i ed wi t h anyt hi ng
l ess t han f or t y poi nt s net . I shoul dn' t be sur pr i sed t o see t he
mar ket get away f r omt hemany mi nut e and shoot up bef or e t hey' ve
got t hei r f ul l l i nes. Ther e ai n' t as much of i t ki cki ng ar ound
t he br oker s' of f i ces as t her e was a mont h ago. "
" He' s buyi ng Sugar , eh?" r epeat ed t he deacon absent l y.
" Buyi ng i t ? Why, he' s scoopi ng i t i n as f ast as he can
wi t hout put t i ng up t he pr i ce on hi msel f . "
" So?" sai d t he deacon. That was al l .
But i t was enough t o net t l e t he t i pst er , and he sai d, " Yes,
si r - r eel And I cal l t hat ver y good i nf or mat i on. Why, i t ' s
absol ut el y st r ai ght . "
" I s i t ?"
" Yes; and i t ought t o be wor t h a whol e l ot . Ar e you goi ng
t o use i t ?"
" Oh, yes. I ' mgoi ng t o use i t . "
" When?" asked t he i nf or mat i on br i nger suspi ci ousl y.
" Ri ght away. " And t he deacon cal l ed: . Fr ank! " I t was t he
f i r st name of hi s shr ewdest br oker , who was t hen i n t he
adj oi ni ng r oom.
" Yes, si r , " sai d Fr ank.
" I wi sh you' d go over t o t he Boar d and sel l t en t housand
Sugar . "
" Sel l ?" yel l ed t he t i pst er . Ther e was such suf f er i ng i n hi s
voi ce t hat Fr ank, who had st ar t ed out at a r un, hal t ed i n hi s
t r acks.
" Why, yes, " sai d t he deacon mi l dl y.
" But I t ol d you H. O. Havemeyer was buyi ng i t ! "
" I know you di d, my f r i end, " sai d t he deacon cal ml y; and
t ur ni ng t o t he br oker : " Make hast e, Fr ank! "
The br oker r ushed out t o execut e t he or der and t he t i pst er
t ur ned r ed.
" I came i n her e, " he sai d f ur i ousl y, " wi t h t he best
i nf or mat i on I ever had. I br ought i t t o you because I t hought
you wer e my f r i end, and squar e. I expect ed you t o act on i t . "
" I am act i ng on i t , " i nt er r upt ed t he deacon i n a
t r anqui l l i zi ng voi ce.
" But I t ol d you H. O. and hi s gang wer e buyi ng! "
" That ' s r i ght . I hear d you. "
" Buyi ng! Buyi ng! I sai d buyi ng! " shr i eked t he t i pst er .


" Yes, buyi ng! That i s what I under st ood you t o say, " t he
deacon assur ed hi m. He was st andi ng by t he t i cker , l ooki ng at
t he t ape.
" But you ar e sel l i ng i t . "
" Yes; t en t housand shar es. " And t he deacon nodded. " Sel l i ng
i t , of cour se. "
He st opped t al ki ng t o concent r at e on t he t ape and t he
t i pst er appr oached t o see what t he deacon saw, f or t he ol d man
was ver y f oxy. Whi l e he was l ooki ng over t he deacon' s shoul der a
cl er k came i n wi t h a sl i p, obvi ousl y t he r epor t f r om Fr ank. The
deacon bar el y gl anced at i t . He had seen on t he t ape how hi s
or der had been execut ed.
I t made hi msay t o t he cl er k, " Tel l hi mt o sel l anot her t en
t housand Sugar . "
" Deacon, I swear t o you t hat t hey r eal l y ar e buyi ng t he
st ock 1"
" Di d Mr . Havemeyer t el l you?" asked t he deacon qui et l y.
" Of cour se not ! He never t el l s anybody anyt hi ng. He woul d not
bat an eyel i d t o hel p hi s best f r i end make a ni ckel . But I know
t hi s i s t r ue. "
" Do not al l ow your sel f t o become exci t ed, my f r i end. " And
t he deacon hel d up a hand. He was l ooki ng at t he t ape. The
t i p- br i nger sai d, bi t t er l y " I f I had known you wer e goi ng t o do
t he opposi t e of what I expect ed I ' d never have wast ed your t i me
or mi ne. But I am not goi ng t o f eel gl ad when you cover t hat
st ock at an awf ul l oss. I ' m sor r y f or you, deacon. Honest l i f
you' l l excuse me I ' l l go el sewher e and act on my own
i nf or mat i on. "
" I ' m act i ng on i t . I t hi nk I know a l i t t l e about t he
mar ket ; not as much, per haps, as you and your f r i end H. O. Have-
meyer , but st i l l a l i t t l e. What I amdoi ng i s what my exper i ence
t el l s me i s t he wi se t hi ng t o do wi t h t he i nf or mat i on you
br ought me. Af t er a man has been i n Wal l St r eet as l ong as I
have he i s gr at ef ul f or anybody who f eel s sor r y f or hi m. Remai n
cal m, my f r i end. "
The man j ust st ar ed at t he deacon, f or whose j udgment and
ner ve he had gr eat r espect .
Pr et t y soon t he cl er k came i n agai n and handed a r epor t t o
t he deacon, who l ooked at i t and sai d: " Now t el l hi m t o buy
t hi r t y t housand Sugar . Thi r t y t housand 1"
The cl er k hur r i ed away and t he t i pst er j ust gr unt ed and
l ooked at t he ol d gr ay f ox.
" My f r i end, " t he deacon expl ai ned ki ndl y, " I di d not doubt
t hat you wer e t el l i ng me t he t r ut h as you saw i t . But even i f I
had hear d H. O. Havemeyer t el l you hi msel f , I st i l l woul d have


act ed as I di d. For t her e was onl y one way t o f i nd out i f
anybody was buyi ng t he st ock i n t he way you sai d H. O. Havemeyer
and hi s f r i ends wer e buyi ng i t , and t hat was t o do what I di d.
The f i r st t en t housand shar es went f ai r l y easi l y. I t was not
qui t e concl usi ve. But t he second t en t housand was absor bed by a
mar ket t hat di d not st op r i si ng. The way t he t went y t housand
shar es wer e t aken by somebody pr oved t o me t hat somebody was i n
t r ut h wi l l i ng t o t ake al l t he st ock t hat was of f er ed. I t doesn' t
par t i cul ar l y mat t er at t hi s poi nt who t hat par t i cul ar somebody
may be. So I have cover ed my shor t s and am l ong t en t housand
shar es, and I t hi nk t hat your i nf or mat i on was good as f ar as i t
went . "
" And how f ar does i t go?" asked t he t i pst er .
" You have f i ve hundr ed shar es i n t hi s of f i ce at t he aver age
pr i ce of t he t en t housand shar es, " sai d t he deacon. " Good day,
my f r i end. Be cal mt he next t i me. "
" Say, deacon, " sai d t he t i pst er , " won' t you pl ease sel l
mi ne when you sel l your s? I don' t know as much as I t hought I
di d. "
That ' s t he t heor y. That i s why I never buy st ocks cheap. Of
cour se I al ways t r y t o buy ef f ect i vel y i n such a way as t o hel p
my si de of t he mar ket . When i t comes t o sel l i ng st ocks, i t i s
pl ai n t hat nobody can sel l unl ess somebody want s t hose st ocks.
I f you oper at e on a l ar ge scal e you wi l l have t o bear t hat
i n mi nd al l t he t i me. A man st udi es condi t i ons, pl ans hi s
oper at i ons car ef ul l y and pr oceeds t o act . He swi ngs a pr et t y
f ai r l i ne and he accumul at es a bi g pr of i t on paper . Wel l , t hat
man can' t sel l at wi l l . You can' t expect t he mar ket t o absor b
f i f t y t housand shar es of one st ock as easi l y as i t does one
hundr ed. He wi l l have t o wai t unt i l he has a mar ket t her e t o
t ake i t . Ther e comes t he t i me when he t hi nks t he r equi si t e
buyi ng power i s t her e. When t hat oppor t uni t y comes he must sei ze
i t . As a r ul e he wi l l have been wai t i ng f or i t . He has t o sel l
when he can, not when he want s t o. To l ear n t he t i me, he has t o
wat ch and t est . I t i s no t r i ck t o t el l when t he mar ket can t ake
what you gi ve i t . But i n st ar t i ng a movement i t i s unwi se t o
t ake on your f ul l l i ne unl ess you ar e convi nced t hat condi t i ons
ar e exact l y r i ght . Remember t hat st ocks ar e never t oo hi gh f or
you t o begi n buyi ng or t oo l ow t o begi n sel l i ng. But af t er t he
i ni t i al t r ansact i on, don' t make a second unl ess t he f i r st shows
you a pr of i t . Wai t and wat ch. That i s wher e your t ape r eadi ng
comes i nt o enabl e you t o deci de as t o t he pr oper t i me f or
begi nni ng. Much depends upon begi nni ng at exact l y t he r i ght
t i me. I t t ook me year s t o r eal i ze t he i mpor t ance of t hi s. I t
al so cost me some hundr eds of t housands of dol l ar s.


I don' t mean t o be under st ood as advi si ng per si st ent pyr a-
mi di ng. A man can pyr ami d and make bi g money t hat he coul dn' t
make i f he di dn' t pyr ami d; of cour se. But what I meant t o say
was t hi s: Suppose a man' s l i ne i s f i ve hundr ed shar es of st ock.
I say t hat he ought not t o buy i t al l at once; not i f he i s
specul at i ng. I f he i s mer el y gambl i ng t he onl y advi ce I have t o
gi ve hi mi s, don' t !
Suppose he buys hi s f i r st hundr ed, and t hat pr ompt l y shows
hi m a l oss. Why shoul d he go t o wor k and get mor e st ock? He
ought t o see at once t hat he i s i n wr ong; at l east t empor ar i l y.



CHAPTER VI I I

THE Uni on Paci f i c i nci dent i n Sar at oga i n t he summer of 1906
made me mor e i ndependent t han ever of t i ps and t al k t hat i s, of
t he opi ni ons and sur mi ses and suspi ci ons of ot her peopl e,
however f r i endl y or however abl e t hey mi ght be per sonal l y.
Event s, not vani t y, pr oved f or me t hat I coul d r ead t he t ape
mor e accur at el y t han most of t he peopl e about me. I al so was
bet t er equi pped t han t he aver age cust omer of Har di ng Br ot her s i n
t hat I was ut t er l y f r ee f r om specul at i ve pr ej udi ces. The bear
si de doesn' t appeal t o me any mor e t han t he bul l si de, or vi ce
ver sa. My one st eadf ast pr ej udi ce i s agai nst bei ng wr ong.
Even as a l ad I al ways got my own meani ngs out of such
f act s as I obser ved. I t i s t he onl y way i n whi ch t he meani ng
r eaches me. I cannot get out of f act s what somebody t el l s me t o
get . They ar e my f act s, don' t you see? I f I bel i eve somet hi ng
you can be sur e i t i s because I si mpl y must . When I am l ong of
st ocks i t i s because my r eadi ng of condi t i ons has made me
bul l i sh. But you f i nd many peopl e, r eput ed t o be i nt el l i gent ,
who ar e bul l i sh because t hey have st ocks. I do not al l ow my
possessi ons or my pr epossessi ons ei t her t o do any t hi nki ng f or
me. That i s why I r epeat t hat I never ar gue wi t h t he t ape. To be
angr y at t he mar ket because i t unexpect edl y or even i l l ogi cal l y
goes agai nst you i s l i ke get t i ng mad at your l ungs because you
have pneumoni a.
I had been gr adual l y appr oachi ng t he f ul l r eal i zat i on of
how much mor e t han t ape r eadi ng t her e was t o st ock specul at i on.
Ol d man Par t r i dge' s i nsi st ence on t he vi t al i mpor t ance of bei ng
cont i nuousl y bul l i sh i n a bul l mar ket doubt l ess made my mi nd
dwel l on t he need above al l ot her t hi ngs of det er mi ni ng t he ki nd
of mar ket a man i s t r adi ng i n. I began t o r eal i ze t hat t he bi g
money must necessar i l y be i n t he bi g swi ng. What ever mi ght seem
t o gi ve a bi g swi ng, i ni t i al i mpul se, t he f act i s t hat i t s
cont i nuance i s not t he r esul t of mani pul at i on by pool s or
ar t i f i ce by f i nanci er s, but depends upon basi c condi t i ons. And
no mat t er who opposes i t , t he swi ng must i nevi t abl y r un as f ar
and as f ast and as l ong as t he i mpel l i ng f or ces det er mi ne.
Af t er Sar at oga I began t o see mor e cl ear l y per haps I shoul d
say mor e mat ur el y t hat si nce t he ent i r e l i st moves i n accor dance
wi t h t he mai n cur r ent t her e was not so much need as I had
i magi ned t o st udy i ndi vi dual pl ays or t he behavi our of t hi s or
t he ot her st ock. Al so, by t hi nki ng of t he swi ng a man was not
l i mi t ed i n hi s t r adi ng. He coul d buy or sel l t he ent i r e l i st . I n
cer t ai n st ocks a shor t l i ne i s danger ous af t er a man sel l s mor e
t han a cer t ai n per cent age of t he capi t al st ock, t he amount


dependi ng upon how, wher e and by whom t he st ock i s hel d. But he
coul d sel l a mi l l i on shar es of t he gener al l i st i f he had t he
pr i ce wi t hout t he danger of bei ng squeezed. A gr eat deal of
money used t o be made per i odi cal l y by i nsi der s i n t he ol d days
out of t he shor t s and t hei r car ef ul l y f ost er ed f ear s of cor ner s
and squeezes.
Obvi ousl y t he t hi ng t o do was t o be bul l i sh i n a bul l
mar ket and bear i sh i n a bear mar ket . Sounds si l l y, doesn' t i t ?
But I had t o gr asp t hat gener al pr i nci pl e f i r ml y bef or e I saw
t hat t o put i t i nt o pr act i ce r eal l y meant t o ant i ci pat e
pr obabi l i t i es. I t t ook me a l ong t i me t o l ear n t o t r ade on t hose
l i nes. But i n j ust i ce t o mysel f I must r emi nd you t hat up t o
t hen I had never had a bi g enough st ake t o specul at e t hat way. A
bi g swi ng wi l l mean bi g money i f your l i ne i s bi g, and t o be
abl e t o swi ng a bi g l i ne you need a bi g bal ance at your
br oker ' s.
I al ways had or f el t t hat I had t o make my dai l y br ead out
of t he st ock mar ket . I t i nt er f er ed wi t h my ef f or t s t o i ncr ease
t he st ake avai l abl e f or t he mor e pr of i t abl e but sl ower and
t her ef or e mor e i mmedi at el y expensi ve met hod of t r adi ng on
swi ngs.
But now not onl y di d my conf i dence i n mysel f gr ow st r onger
but my br oker s ceased t o t hi nk of me as a spor adi cal l y l ucky Boy
Pl unger . They had made a gr eat deal out of me i n commi ssi ons,
but now I was i n a f ai r way t o become t hei r st ar cust omer and as
such t o have a val ue beyond t he act ual vol ume of my t r adi ng. A
cust omer who makes money i s an asset t o any br oker ' s of f i ce.
The moment I ceased t o be sat i sf i ed wi t h mer el y st udyi ng
t he t ape I ceased t o concer n mysel f excl usi vel y wi t h t he dai l y
f l uct uat i ons i n speci f i c st ocks, and when t hat happened I si mpl y
had t o st udy t he game f r oma di f f er ent angl e. I wor ked back f r om
t he quot at i on t o f i r st pr i nci pl es; f r om pr i ce f l uct uat i ons t o
basi c condi t i ons.
Of cour se I had been r eadi ng t he dai l y dope r egul ar l y f or a
l ong t i me. Al l t r ader s do. But much of i t was gossi p, some of i t
del i ber at el y f al se, and t he r est mer el y t he per sonal opi ni on of
t he wr i t er s. The r eput abl e weekl y r evi ews when t hey t ouched upon
under l yi ng condi t i ons wer e not ent i r el y sat i sf act or y t o me. The
poi nt of vi ew of t he f i nanci al edi t or s was not mi ne as a r ul e.
I t was not a vi t al mat t er f or t hem t o mar shal t hei r f act s and
dr aw t hei r concl usi ons f r om t hem, but i t was f or me. Al so t her e
was a vast di f f er ence i n our appr ai sal of t he el ement of t i me.
The anal ysi s of t he week t hat had passed was l ess i mpor t ant t o
me t han t he f or ecast of t he weeks t hat wer e t o come.


For year s I had been t he vi ct i m of an unf or t unat e
combi nat i on of i nexper i ence, yout h and i nsuf f i ci ent capi t al . But
now I f el t t he el at i on of a di scover er . My new at t i t ude t owar d
t he game expl ai ned my r epeat ed f ai l ur es t o make bi g money i n New
Yor k. But now wi t h adequat e r esour ces, exper i ence and
conf i dence, I was i n such a hur r y t o t r y t he new key t hat I di d
not not i ce t hat t her e was anot her l ock on t he door t i me l ock! I t
was a per f ect l y nat ur al over si ght . I had t o pay t he usual
t ui t i on a good whack per each st ep f or war d.
I st udi ed t he si t uat i on i n 1906 and I t hought t hat t he
money out l ook was par t i cul ar l y ser i ous. Much act ual weal t h t he
wor l d over had been dest r oyed. Ever ybody must sooner or l at er
f eel t he pi nch, and t her ef or e nobody woul d be i n posi t i on t o
hel p anybody. I t woul d not be t he ki nd of har d t i mes t hat comes
f r om t he swappi ng of a house wor t h t en t housand dol l ar s f or a
car l oad of r acehor ses wor t h ei ght t housand dol l ar s. I t was t he
compl et e dest r uct i on of t he house by f i r e and of most of t he
hor ses by a r ai l r oad wr eck. I t was good har d cash t hat went up
i n cannon smoke i n t he Boer War , and t he mi l l i ons spent f or
f eedi ng nonpr oduci ng sol di er y i n Sout h Af r i ca meant no hel p f r om
Br i t i sh i nvest or s as i n t he past . Al so, t he ear t hquake and t he
f i r e i n San Fr anci sco and ot her di sast er s t ouched ever ybody - -
manuf act ur er s, f ar mer s, mer chant s, l abour er s and mi l l i onai r es.
The r ai l r oads must suf f er gr eat l y. I f i gur ed t hat not hi ng coul d
st ave of f one peach of a smash. Such bei ng t he case t her e was
but one t hi ng t o do sel l st ocks!
I t ol d you I had al r eady obser ved t hat my i ni t i al
t r ansact i on, af t er I made up my mi nd whi ch way I was goi ng t o
t r ade, was apt t o show me a pr of i t . And now when I deci ded t o
sel l I pl unged. Si nce we undoubt edl y wer e ent er i ng upon a
genui ne bear mar ket I was sur e I shoul d make t he bi ggest ki l l i ng
of my car eer .
The mar ket went of f . Then i t came back. I t shaded of f and
t hen i t began t o advance st eadi l y. My paper pr of i t s vani shed and
my paper l osses gr ew. One day i t l ooked as i f not a bear woul d
be l ef t t o t el l t he t al e of t he st r i ct l y genui ne bear mar ket . I
coul dn' t st and t he gaf f . I cover ed. I t was j ust as wel l . I f I
hadn' t I woul dn' t have had enough l ef t t o buy a post al car d. I
l ost most of my f ur , but i t was bet t er t o l i ve t o f i ght anot her
day.
I had made a mi st ake. But wher e? I was bear i sh i n a bear
mar ket . That was wi se. I had sol d st ocks shor t . That was pr oper .
I had sol d t hemt oo soon. That was cost l y. My posi t i on was r i ght
but my pl ay was wr ong. However , ever y day br ought t he mar ket
near er t o t he i nevi t abl e smash. So I wai t ed and when t he r al l y


began t o f al t er and pause I l et t hem have as much st ock as my
sadl y di mi ni shed mar gi ns per mi t t ed. I was r i ght t hi s t i me f or
exact l y one whol e day, f or on t he next t her e was anot her r al l y.
Anot her bi g bi t e out of your s t r ul y! So I r ead t he t ape and
cover ed and wai t ed. I n due cour se I sol d agai n and agai n t hey
went down pr omi si ngl y and t hen t hey r udel y r al l i ed.
I t l ooked as i f t he mar ket wer e doi ng i t s best t o make me
go back t o my ol d and si mpl e ways of bucket - shop t r adi ng. I t was
t he f i r st t i me I had wor ked wi t h a def i ni t e f or war d l ooki ng pl an
embr aci ng t he ent i r e mar ket i nst ead of one or t wo st ocks. I
f i gur ed t hat I must wi n i f I hel d out . Of cour se at t hat t i me I
had not devel oped my syst em of pl aci ng my bet s or I woul d have
put out my shor t l i ne on a decl i ni ng mar ket , as I expl ai ned t o
you t he l ast t i me. I woul d not t hen have l ost so much of my
mar gi n. I woul d have been wr ong but not hur t . You see, I had
obser ved cer t ai n f act s but had not l ear ned t o co- or di nat e t hem.
My i ncompl et e obser vat i on not onl y di d not hel p but act ual l y
hi nder ed.
I have al ways f ound i t pr of i t abl e t o st udy my mi st akes.
Thus I event ual l y di scover ed t hat i t was al l ver y wel l not t o
l ose your bear posi t i on i n a bear mar ket , but t hat at al l t i mes
t he t ape shoul d be r ead t o det er mi ne t he pr opi t i ousness of t he
t i me f or oper at i ng. I f you begi n r i ght you wi l l not see your
pr of i t abl e posi t i on ser i ousl y menaced; and t hen you wi l l f i nd no
t r oubl e i n si t t i ng t i ght .
Of cour se t oday I have gr eat er conf i dence i n t he accur acy
of my obser vat i ons i n whi ch nei t her hopes nor hobbi es pl ay any
par t and al so I have gr eat er f aci l i t i es f or ver i f yi ng my f act s
as wel l as ' f or var i ousl y t est i ng t he cor r ect ness of my vi ews.
But i n i 9o6 t he successi on of r al l i es danger ousl y i mpai r ed my
mar gi ns.
I was near l y t went y- seven year s ol d. I had been at t he game
t wel ve year s. But t he f i r st t i me I t r aded because of a cr i si s
t hat was st i l l t o come I f ound t hat I had been usi ng a
t el escope. Bet ween my f i r st gl i mpse of t he st or m cl oud and t he
t i me f or cashi ng i n on t he bi g br eak t he st r et ch was evi dent l y
so much gr eat er t han I had t hought t hat I began t o wonder
whet her I r eal l y saw what I t hought I saw so cl ear l y. We had had
many war ni ngs and sensat i onal ascensi ons i n cal l money r at es.
St i l l some of t he gr eat f i nanci er s t al ked hopef ul l y at l east t o
newspaper r epor t er s and t he ensui ng r al l i es i n t he st ock mar ket
gave t he l i e t o t he cal ami t y howl er s. Was I f undament al l y wr ong
i n bei ng bear i sh or mer el y t empor ar i l y wr ong i n havi ng begun t o
sel l shor t t oo soon?


I deci ded t hat I began t oo soon, but t hat I r eal l y coul dn' t
hel p i t . Then t he mar ket began t o sel l of f . That was my
oppor t uni t y. I sol d al l I coul d, and t hen st ocks r al l i ed agai n,
t o qui t e a hi gh l evel .
I t cl eaned me out .
Ther e I was - - r i ght and bust ed!
I t el l you i t was r emar kabl e. What happened was t hi s I
l ooked ahead and saw a bi g pi l e of dol l ar s. Out of i t st uck a
si gn. I t had " Hel p your sel f , " on i t , i n huge l et t er s. Besi de i t
st ood a car t wi t h " Lawr ence Li ver mor e Tr ucki ng Cor por at i on"
pai nt ed on i t s si de. I had a br and- new shovel i n my hand. Ther e
was not anot her soul i n si ght , so I had no compet i t i on i n t he
gol d- shovel i ng, whi ch i s one beaut y of seei ng t he dol l ar - heap
ahead of ot her s. The peopl e who mi ght have seen i t i f t hey had
st opped t o l ook wer e j ust t hen l ooki ng at basebal l games
i nst ead, or mot or i ng or buyi ng houses t o be pai d f or wi t h t he
ver y dol l ar s t hat I saw. That was t he f i r st t i me t hat I had seen
bi g money ahead, and I nat ur al l y st ar t ed t owar d i t on t he r un.
Bef or e I coul d r each t he dol l ar - pi l e my wi nd went back on me and
I f el l t o t he gr ound. The pi l e of dol l ar s was st i l l t her e, but I
had l ost t he shovel , and t he wagon was gone. So much f or
spr i nt i ng t oo soon ! I was t oo eager t o pr ove t o mysel f t hat I
had seen r eal dol l ar s and not a mi r age. I saw, and knew t hat I
saw. Thi nki ng about t he r ewar d f or my excel l ent si ght kept me
f r om consi der i ng t he di st ance t o t he dol l ar - heap. I shoul d have
wal ked and not spr i nt ed.
That i s what happened. I di dn' t wai t t o det er mi ne whet her or not
t he t i me was r i ght f or pl ungi ng on t he bear si de. On t he one
occasi on when I shoul d have i nvoked t he ai d of my t ape- r eadi ng I
di dn' t do i t . That i s how I came t o l ear n t hat even when one i s
pr oper l y bear i sh at t he ver y begi nni ng of a bear mar ket i t i s
wel l not t o begi n sel l i ng i n bul k unt i l t her e i s no danger of
t he engi ne back- f i r i ng.
I had t r aded i n a good many t housands of shar es at Har d-
i ng' s of f i ce i n al l t hose year s, and,
mor eover , t he f i r m had conf i dence i n me
and our r el at i ons wer e of t he
pl easant est . I t hi nk t hey f el t t hat I was bound t o be r i ght
agai n ver y shor t l y and t hey knew t hat wi t h my habi t of pushi ng
my l uck al l I needed was a st ar t and I ' d mor e t han r ecover what
I had l ost
They had made a gr eat deal of money out of my t r adi ng and
t hey woul d make mor e. So t her e was no t r oubl e about my bei ng
abl e t o t r ade t her e agai n as l ong as my cr edi t st ood hi gh.


The successi on of spanki ngs I had r ecei ved made me l ess
aggr essi vel y cocksur e; per haps I shoul d say l ess car el ess, f or
of cour se I knew I was j ust so much near er t o t he smash. Al l I
coul d do was wai t wat chf ul l y, as I shoul d have done bef or e
pl ungi ng. I t wasn' t a case of l ocki ng t he st abl e af t er t he hor se
was st ol en. I si mpl y had t o be sur e, t he next t i me I t r i ed. I f a
man di dn' t make mi st akes he' d own t he wor l d i n a mont h. But i f
he di dn' t pr of i t by hi s mi st akes he woul dn' t own a bl essed
t hi ng.
Wel l , si r , one f i ne mor ni ng I came downt own f eel i ng cock-
sur e once mor e. Ther e wasn' t any doubt t hi s t i me. I had r ead an
adver t i sement i n t he f i nanci al pages of al l t he newspaper s t hat
was t he hi gh si gn I hadn' t had t he sense t o wai t f or bef or e
pl ungi ng. I t was t he announcement of a new i ssue of st ock by t he
Nor t her n Paci f i c and Gr eat Nor t her n r oads. The payment s wer e t o
be made on t he i nst al l ment pl an f or t he conveni ence of t he
st ockhol der s. Thi s consi der at i on was somet hi ng new i n Wal l
St r eet . I t st r uck me as mor e t han omi nous.
For year s t he unf ai l i ng bul l i t em on Gr eat Nor t her n pr e-
f er r ed had been t he announcement t hat anot her mel on was t o be
cut , sai d mel on consi st i ng of t he r i ght of t he l ucky
st ockhol der s t o subscr i be at par t o a new i ssue of Gr eat
Nor t her n st ock. These r i ght s wer e val uabl e, si nce t he mar ket
pr i ce was al ways way above par . But now t he money mar ket was
such t hat t he most power f ul banki ng houses i n t he count r y wer e
none t oo sur e t he st ockhol der s woul d be abl e t o pay cash f or t he
bar gai n. And Gr eat Nor t her n pr ef er r ed was sel l i ng at about 330!
As soon as I got t o t he of f i ce I t ol d Ed Har di ng, " The t i me
t o sel l i s r i ght now. Thi s i s when I shoul d have begun. J ust
l ook at t hat ad, wi l l you?"
He had seen i t . I poi nt ed out what t he banker s' conf essi on
amount ed t o i n my opi ni on, but he coul dn' t qui t e see t he bi g
br eak r i ght on t op of us. He t hought i t bet t er t o wai t bef or e
put t i ng out a ver y bi g shor t l i ne by r eason of t he mar ket ' s
habi t of havi ng bi g r al l i es. I f I wai t ed pr i ces mi ght be l ower ,
but t he oper at i on woul d be saf er .
" Ed, " I sai d t o hi m, " t he l onger t he del ay i n st ar t i ng t he
shar per t he br eak wi l l be when i t does st ar t . That ad i s a
si gned conf essi on on t he par t of t he banker s. What t hey f ear i s
what I hope. Thi s i s a si gn f or us t o get aboar d t he bear wagon.
I t i s al l we needed. I f I had t en mi l l i on dol l ar s I ' d st ake
ever y cent of i t t hi s mi nut e. "
I had t o do some mor e t al ki ng and ar gui ng. He wasn' t
cont ent wi t h t he onl y i nf er ences a sane man coul d dr aw f r omt hat


amazi ng adver t i sement . I t was enough f or me, but not f or most of
t he peopl e i n t he of f i ce. I sol d a l i t t l e; t oo l i t t l e.
A f ew days l at er St . Paul ver y ki ndl y came out wi t h an
announcement of an i ssue of i t s own; ei t her st ock or not es, I
f or get whi ch. But t hat doesn' t mat t er . What mat t er ed t hen was
t hat I not i ced t he moment I r ead i t t hat t he dat e of payment was
set ahead of t he Gr eat Nor t her n and Nor t her n Paci f i c payment s,
whi ch had been announced ear l i er . I t was as pl ai n as t hough t hey
had used a megaphone t hat gr and ol d St . Paul was t r yi ng t o beat
t he t wo ot her r ai l r oads t o what l i t t l e money t her e was f l oat i ng
ar ound i n Wal l St r eet . The St . Paul ' s banker s qui t e obvi ousl y
f ear ed t hat t her e wasn' t enough f or al l t hr ee and t hey wer e not
sayi ng, " Af t er you, my dear Al phonse! " I f money al r eady was t hat
scar ce and you bet t he banker s knew- what woul d i t be l at er ? The
r ai l r oads needed i t desper at el y. I t wasn' t t her e. What was t he
answer ?
Sel l ' em! Of cour se! The publ i c, wi t h t hei r eyes f i xed on
t he st ock mar ket , saw l i t t l e t hat week. The wi se st ock oper at or s
saw much t hat year . That was t he di f f er ence.
For me, t hat was t he end of doubt and hesi t at i on. I made up
my mi nd f or keeps t hen and t her e. That same mor ni ng I began what
r eal l y was my f i r st campai gn al ong t he l i nes t hat I have si nce
f ol l owed. I t ol d Har di ng what I t hought and how I st ood, and he
made no obj ect i ons t o my sel l i ng Gr eat Nor t her n pr ef er r ed at
ar ound 330, and ot her st ocks at hi gh pr i ces. I pr of i t ed by my
ear l i er and cost l y mi st akes and sol d mor e i nt el l i gent l y.
My r eput at i on and my cr edi t wer e r eest abl i shed i n a j i f f y.
That i s t he beaut y of bei ng r i ght i n a br oker ' s of f i ce, whet her
by acci dent or not . But t hi s t i me I was col d- bl oodedl y r i ght ,
not because of a hunch or f r om ski l f ul r eadi ng of t he t ape, but
as t he r esul t of my anal ysi s of condi t i ons af f ect i ng t he st ock
mar ket i n gener al . I wasn' t guessi ng. I was ant i ci pat i ng t he
i nevi t abl e. I t di d not cal l f or any cour age t o sel l st ocks. I
si mpl y coul d not see anyt hi ng but l ower pr i ces, and I had t o act
on i t , di dn' t I ? What el se coul d I do?
The whol e l i st was sof t as mush. Pr esent l y t her e was a
r al l y and peopl e came t o me t o war n me t hat t he end of t he
decl i ne had been r eached. The bi g f el l ows, knowi ng t he shor t
i nt er est t o be enor mous, had deci ded t o squeeze t he st uf f i ng out
of t he bear s, and so f or t h. I t woul d set us pessi mi st s back a
f ew mi l l i ons. I t was a ci nch t hat t he bi g f el l ows woul d have no
mer cy. I used t o t hank t hese ki ndl y counsel or s. I woul dn' t even
ar gue, because t hen t hey woul d have t hought t hat I wasn' t
gr at ef ul f or t he war ni ngs.


The f r i end who had been i n At l ant i c Ci t y wi t h me was i n
agony. He coul d under st and t he hunch t hat was f ol l owed by t he
ear t hquake. He coul dn' t di sbel i eve i n such agenci es, si nce I had
made a quar t er of a mi l l i on by i nt el l i gent l y obeyi ng my bl i nd
i mpul se t o sel l Uni on Paci f i c. He even sai d i t was Pr ovi dence
wor ki ng i n i t s myst er i ous way t o make me sel l st ocks when he
hi msel f was bul l i sh. And he coul d under st and my second UP. t r ade
i n Sar at oga because he coul d under st and any deal t hat i nvol ved
one st ock, on whi ch t he t i p def i ni t el y f i xed t he movement i n
advance, ei t her up or down. But t hi s t hi ng of pr edi ct i ng t hat
al l st ocks wer e bound t o go down used t o exasper at e hi m. What
good di d t hat ki nd of dope do anybody? How i n bl azes coul d a
gent l eman t el l what t o do?
I r ecal l ed ol d Par t r i dge' s f avour i t e r emar k - - " Wel l , t hi s
i s a bul l mar ket , you know" - - as t hough t hat wer e t i p enough
f or anybody who was wi se enough; as i n t r ut h i t was. I t was ver y
cur i ous how, af t er suf f er i ng t r emendous l osses f r om a br eak of
f i f t een or t went y poi nt s, peopl e who wer e st i l l hangi ng on,
wel comed a t hr ee- poi nt r al l y and wer e cer t ai n t he bot t om had
been r eached and compl et e r ecover y begun.
One day my f r i end came t o me and asked me, " Have you
cover ed?"
" Why shoul d I ?" I sai d
" For t he best r eason i n t he wor l d. "
" What r eason i s t hat ?"
" To make money. They' ve t ouched bot t om and what goes down
must come up. I sn' t t hat so?"
" Yes, " I answer ed. " Fi r st t hey si nk t o t he bot t om. Then
t hey come up; but not r i ght away. They' ve got t o be good and
dead a coupl e of days. I t i sn' t t i me f or t hese cor pses t o r i se
t o t he sur f ace. They ar e not qui t e dead yet . "
An ol d- t i mer hear d me. He was one of t hose chaps t hat ar e
al ways r emi nded of somet hi ng. He sai d t hat Wi l l i am R. Tr aver s,
who was bear i sh, once met a f r i end who was bul l i sh. They
exchanged mar ket vi ews and t he f r i end sai d, " Mr . Tr aver s, how
can you be bear i sh wi t h t he mar ket so st i f f ?" and Tr aver s
r et or t ed, " Yes! Th- t he s- s- st i f f ness of d- deat h! " I t was Tr aver s
who went t o t he of f i ce of a company and asked t o be al l owed t o
see t he booxs. The cl er k asked hi m, " Have you an i nt er est i n
t hi s company?" and Tr aver s answer ed, " I sh- shoul d s- say I had!
I ' msh- shor t t - t - t went y t housand sh- shar es of t he st ock ! "
Wel l , t he r al l i es gr ew f eebl er and f eebl er . I was pushi ng
my l uck f or al l I was wor t h. Ever y t i me I sol d a f ew t housand
shar es of Gr eat Nor t her n pr ef er r ed t he pr i ce br oke sever al
poi nt s. I f el t out weak spot s el sewher e and l et ' em have a f ew.


Al l yi el ded, wi t h one i mpr essi ve except i on; and t hat was
Readi ng.
When ever yt hi ng el se hi t t he t oboggan sl i de Readi ng st ood
l i ke t he Rock of Gi br al t ar . Ever ybody sai d t he st ock was
cor ner ed. I t cer t ai nl y act ed l i ke i t . They used t o t el l me i t
was pl ai n sui ci de t o sel l Readi ng shor t . Ther e wer e peopl e i n
t he of f i ce who wer e now as bear i sh on ever yt hi ng as I was. But
when anybody hi nt ed at sel l i ng Readi ng t hey shr i eked f or hel p. I
mysel f had sol d some shor t and was st andi ng pat on i t . At t he
same t i me I nat ur al l y pr ef er r ed t o
seek and hi t t he sof t spot s i nst ead of at t acki ng t he mor e
st r ongl y pr ot ect ed speci al t i es. My t ape r eadi ng f ound easi er
money f or me i n ot her st ocks.
I hear d a gr eat deal about t he Readi ng bul l pool . I t was a
mi ght y st r ong pool . To begi n wi t h t hey had a l ot of l ow- pr i ced
st ock, so t hat t hei r aver age was act ual l y bel ow t he pr evai l i ng
l evel , accor di ng t o f r i ends who t ol d me. Mor eover , t he pr i nci pal
member s of t he pool had cl ose connect i ons of t he f r i endl i est
char act er wi t h t he banks whose money t hey wer e usi ng t o car r y
t hei r huge hol di ngs of Readi ng. As l ong as t he pr i ce st ayed up
t he banker s' f r i endshi p was st aunch and st eadf ast . One pool
member ' s paper pr of i t was upwar d of t hr ee mi l l i ons. That al l owed
f or some decl i ne wi t hout causi ng f at al i t i es. No wonder t he st ock
st ood up and def i ed t he bear s. Ever y now and t hen t he r oom
t r ader s l ooked at t he pr i ce, smacked t hei r l i ps and pr oceeded t o
t est i t wi t h a t housand shar es or t wo. They coul d not di sl odge a
shar e, so t hey cover ed and went l ooki ng el sewher e f or easi er
money. Whenever I l ooked at i t , I al so sol d a l i t t l e mor e - -
j ust enough t o convi nce mysel f t hat I was t r ue t o my new t r adi ng
pr i nci pl es and wasn' t pl ayi ng f avour i t es.
I n t he ol d days t he st r engt h of Readi ng mi ght have f ool ed
me. The t ape kept on sayi ng, " Leave i t al one! " But my r eason
t ol d me di f f er ent l y. I was ant i ci pat i ng a gener al br eak, and
t her e wer e not goi ng t o be any except i ons, pool or no pool .
I have al ways pl ayed a l one hand. I began t hat way i n t he
bucket shops and have kept i t up. I t i s t he way my mi nd wor ks. I
have t o do my own seei ng and my own t hi nki ng. But I can t el l you
af t er t he mar ket began t o go my way I f el t f or t he f i r st t i me i n
my l i f e t hat I had al l i es - - t he st r ongest and t r uest i n t he
wor l d: under l yi ng condi t i ons. They wer e hel pi ng me wi t h al l
t hei r mi ght . Per haps t hey wer e a t r i f l e sl ow at t i mes i n
br i ngi ng up t he r eser ves, but t hey wer e dependabl e, pr ovi ded I
di d not get t oo i mpat i ent . I was not pi t t i ng my t ape- r eadi ng
knack or my hunches agai nst chance. The i nexor abl e l ogi c of
event s was maki ng money f or me.


The t hi ng was t o be r i ght ; t o know i t and t o act
accor di ngl y. Gener al condi t i ons, my t r ue al l i es, sai d " Down! "
and Readi ng di sr egar ded t he command. I t was an i nsul t t o us. I t
began t o annoy me t o see Readi ng hol di ng f i r ml y, as t hough
ever yt hi ng wer e ser ene. I t ought t o be t he best shor t sal e i n
t he ent i r e l i st because i t had not gone down and t he pool was
car r yi ng a l ot of st ock t hat i t woul d not be abl e t o car r y when
t he money st r i ngency gr ew mor e pr onounced. Some day t he banker s'
f r i ends woul d f ar e no bet t er t han t he f r i endl ess publ i c. The
st ock must go wi t h t he ot her s. I f Readi ng di dn' t decl i ne, t hen
my t heor y was wr ong; I was wr ong; f act s wer e wr ong; l ogi c was
wr ong.
I f i gur ed t hat t he pr i ce hel d because t he St r eet was af r ai d
t o sel l i t . So one day I gave t o t wo br oker s each an or der t o
sel l f our t housand shar es, at t he same t i me.
You ought t o have seen t hat cor ner ed st ock, t hat i t was sur e
sui ci de t o go shor t of , t ake a headl ong di ve when t hose com-
pet i t i ve or der s st r uck i t . I l et ' em have a f ew t housand mor e.
The pr i ce was 111 when I st ar t ed sel l i ng i t . Wi t hi n a f ew
mi nut es I t ook i n my ent i r e shor t l i ne at 92.
I had a wonder f ul t i me af t er t hat , and i n Febr uar y of 1907 I
cl eaned up. Gr eat Nor t her n pr ef er r ed had gone down si xt y or
sevent y poi nt s, and ot her st ocks i n pr opor t i on. I had made a
good bi t , but t he r eason I cl eaned up was t hat I f i gur ed t hat
t he decl i ne had di scount ed t he i mmedi at e f ut ur e. I l ooked f or a
f ai r r ecover y, but I wasn' t bul l i sh enough t o pl ay f or a t ur n. I
wasn' t goi ng t o l ose my posi t i on ent i r el y. The mar ket woul d not
be r i ght f or me t o t r ade i n f or a whi l e. The f i r st t en t housand
dol l ar s I made i n t he bucket shops I l ost because I t r aded i n
and out of season, ever y day, whet her or not condi t i ons wer e
r i ght . I wasn' t maki ng t hat mi st ake t wi ce. Al so, don' t f or get
t hat I had gone br oke a l i t t l e whi l e bef or e because I had seen
t hi s br eak t oo soon and st ar t ed sel l i ng bef or e i t was t i me. Now
when I had a bi g pr of i t I want ed t o cash i n so t hat I coul d f eel
I had been r i ght . The r al l i es had br oken me bef or e. I wasn' t
goi ng t o l et t he next r al l y wi pe me out . I nst ead of si t t i ng
t i ght I went t o Fl or i da. I l ove f i shi ng and I needed a r est . I
coul d get bot h down t her e. And besi des, t her e ar e di r ect wi r es
bet ween Wal l St r eet and Pal mBeach.




CHAPTER I X

CRUI SED of f t he coast of Fl or i da. The f i shi ng was good. I was
out of st ocks. My mi nd was easy. I was havi ng a f i ne t i me. One
day of f Pal m Beach some f r i ends came al ongsi de i n a mot or boat .
One of t hembr ought a newspaper wi t h hi m. I hadn' t l ooked at one
i n some days and had not f el t any desi r e t o see one. I was not
i nt er est ed i n any news i t mi ght pr i nt . But I gl anced over t he
one my f r i end br ought t o t he yacht , and I saw t hat t he mar ket
had had a bi g r al l y; t en poi nt s and mor e.
I t ol d my f r i ends t hat I woul d go ashor e wi t h t hem. Mod-
er at e r al l i es f r om t i me t o t i me wer e r easonabl e. But t he bear
mar ket was not over ; and her e was Wal l St r eet or t he f ool publ i c
or desper at e bul l i nt er est s di sr egar di ng monet ar y condi t i ons and
mar ki ng up pr i ces beyond r eason or l et t i ng somebody el se do i t .
I t was t oo much f or me. I si mpl y had t o t ake a l ook at t he
mar ket . I di dn' t know what I mi ght or mi ght not do. But I knew
t hat my pr essi ng need was t he si ght of t he quot at i on boar d.
My br oker s, Har di ng Br ot her s, had a br anch of f i ce i n Pal m
Beach. When I wal ked i n I f ound t her e a l ot of chaps I knew.
Most of t hem wer e t al ki ng bul l i sh. They wer e of t he t ype t hat
t r ade on t he t ape and want qui ck act i on. Such t r ader s don' t car e
t o l ook ahead ver y f ar because t hey don' t need t o wi t h t hei r
st yl e of pl ay. I t ol d you how I ' d got t o be known i n t he New
Yor k of f i ce as t he Boy Pl unger . Of cour se peopl e al ways magni f y
a f el l ow' s wi nni ngs and t he si ze of t he l i ne he swi ngs. The
f el l ows i n t he of f i ce had hear d t hat I had made a ki l l i ng i n New
Yor k on t he bear si de and t hey now expect ed t hat I agai n woul d
pl unge on t he shor t si de. They t hemsel ves t hought t he r al l y
woul d go t o a good deal f ur t her , but t hey r at her consi der ed i t
my dut y t o f i ght i t .
I had come down t o Fl or i da on a f i shi ng t r i p. I had been
under a pr et t y sever e st r ai n and I needed my hol i day. But t he
moment I saw how f ar t he r ecover y i n pr i ces had gone I no l onger
f el t t he need of a vacat i on. I had not t hought of j ust what I
was goi ng t o do when I came ashor e. But now I knew I must sel l
st ocks. I was r i ght , and I must pr ove i t i n my ol d and onl y way
by sayi ng i t wi t h money. To sel l t he gener al l i st woul d be a
pr oper , pr udent , pr of i t abl e and even pat r i ot i c act i on.
The f i r st t hi ng I saw on t he quot at i on boar d was t hat
Anaconda was on t he poi nt of cr ossi ng 300. I t had been goi ng. up
by l eaps and bounds and t her e was appar ent l y an aggr essi ve bul l
par t y i n i t . I t was an ol d t r adi ng t heor y of mi ne t hat when a
st ock cr osses 100 or 200 or 300 f or t he f i r st t i me t he pr i ce


does not st op at t he even f i gur e but goes a good deal hi gher , so
t hat i f you buy i t as soon as i t cr osses t he l i ne i t i s al most
cer t ai n t o show you a pr of i t . Ti mi d peopl e don' t l i ke t o buy a
st ock at a new hi gh r ecor d. But I had t he hi st or y of such
movement s t o gui de me.
Anaconda was onl y quar t er st ock - - t hat i s, t he par of t he
shar es was onl y t went y- f i ve dol l ar s. I t t ook f our hundr ed shar es
of i t t o equal t he usual one hundr ed shar es of ot her st ocks, t he
par val ue of whi ch was one hundr ed dol l ar s. I f i gur ed t hat when
i t cr ossed 300 i t ought t o keep on goi ng and pr obabl y t ouch 340
i n a j i f f y.
I was bear i sh, r emember , but I was al so a t ape- r eadi ng
t r ader . I knew Anaconda, i f i t went t he way I f i gur ed, woul d
move ver y qui ckl y. What ever moves f ast al ways appeal s t o me. I
have l ear ned pat i ence and how t o si t t i ght , but my per sonal
pr ef er ence i s f or f l eet movement s, and Anaconda cer t ai nl y was no
sl uggar d. My buyi ng i t because i t cr ossed 300 was pr ompt ed by
t he desi r e, al ways st r ong i n me, of conf i r mi ng my obser vat i ons.
J ust t hen t he t ape was sayi ng t hat t he buyi ng was st r onger
t han t he sel l i ng, and t her ef or e t he gener al r al l y mi ght easi l y
go a bi t f ur t her . I t woul d be pr udent t o wai t bef or e goi ng
shor t . St i l l I mi ght as wel l pay mysel f wages f or wai t i ng. Thi s
woul d be accompl i shed by t aki ng a qui ck t hi r t y poi nt s out of
Anaconda. Bear i sh on t he ent i r e mar ket and bul l i sh on t hat one
st ock! So I bought t hi r t y- t wo t housand shar es of Anaconda - -
t hat i s, ei ght t housand f ul l shar es. I t was a ni ce l i t t l e f l yer
but I was sur e of my pr emi ses and I f i gur ed t hat t he pr of i t
woul d hel p t o swel l t he mar gi n avai l abl e f or bear oper at i ons
l at er on.
On t he next day t he t el egr aph wi r es wer e down on account of
a st or m up Nor t h or somet hi ng of t he sor t . I was i n Har di ng' s
of f i ce wai t i ng f or news. The cr owd was chewi ng t he r ag and
wonder i ng al l sor t s of t hi ngs, as st ock t r ader s wi l l when t hey
can' t t r ade. Then we got a quot at i on, t he onl y one t hat day:
Anaconda, 292.
Ther e was a chap wi t h me, a br oker I had met i n New Yor k.
He knew I was l ong ei ght t housand f ul l shar es and I suspect t hat
he had some of hi s own, f or when we got t hat one quot at i on he
cer t ai nl y had a f i t . He coul dn' t t el l whet her t he st ock at t hat
ver y moment had gone of f anot her t en poi nt s or not . The way
Anaconda had gone up i t woul dn' t have been anyt hi ng unusual f or
i t t o br eak t went y poi nt s. But I sai d t o hi m, " Don' t you wor r y,
J ohn. I t wi l l be al l r i ght t omor r ow. " That was r eal l y t he way I
f el t . But he l ooked at me and shook hi s head. He knew bet t er . He
was t hat ki nd. So I l aughed, and I wai t ed i n t he of f i ce i n case


some quot at i on t r i ckl ed t hr ough. But no, si r . That one was al l
we got : Anaconda, 292. I t meant a paper l oss t o me of near l y one
hundr ed t housand dol l ar s. I had want ed qui ck act i on. Wel l , I was
get t i ng i t .
The next day t he wi r es wer e wor ki ng and we got t he
quot at i ons as usual . Anaconda opened at 298 and went up t o
3ozY4, but pr et t y soon i t began t o f ade away. Al so, t he r est of
t he mar ket was not act i ng j ust r i ght f or a f ur t her r al l y. I made
up my mi nd t hat i f Anaconda went back t o 301 I must consi der t he
whol e t hi ng a f ake movement . On a l egi t i mat e advance t he pr i ce
shoul d have gone t o 310 wi t hout st oppi ng. I f i nst ead i t r eact ed
i t meant t hat pr ecedent s had f ai l ed me and I was wr ong; and t he
onl y t hi ng t o do when a man i s wr ong i s t o be r i ght by ceasi ng
t o be wr ong. I had bought ei ght t housand f ul l shar es i n
expect at i on of a t hi r t y or f or t y poi nt r i se. I t woul d not be my
f i r st mi st ake; nor my l ast .
Sur e enough, Anaconda f el l back t o 301. The moment i t
t ouched t hat f i gur e I sneaked over t o t he t el egr aph oper at or -
t hey had a di r ect wi r e t o t he New Yor k of f i ce and I sai d t o hi m,
" Sel l al l my Anaconda, ei ght t housand f ul l shar es. " I sai d i t i n
a l ow voi ce. I di dn' t want anybody el se t o know what I was
doi ng.
He l ooked up at me al most i n hor r or . But I nodded and sai d,
" Al l I ' ve got ! "
" Sur el y, Mr . Li ver mor e, you don' t meant at t he mar ket ?" and
he l ooked as i f he was goi ng t o l ose a coupl e of mi l l i ons of hi s
own t hr ough bum execut i on by a car el ess br oker . But I j ust t ol d
hi m, " Sel l i t ! Don' t ar gue about i t ! "
The t wo Bl ack boys, J i m and Ol l i e, wer e i n t he of f i ce, out
of hear i ng of t he oper at or and mysel f . They wer e bi g t r ader s who
had come or i gi nal l y f r om Chi cago, wher e t hey had been f amous
pl unger s i n wheat , and wer e now heavy t r ader s on t he New Yor k
St ock Exchange. They wer e ver y weal t hy and wer e hi gh r ol l er s f or
f ai r .
As I l ef t t he t el egr aph oper at or t o go back t o my seat i n
f r ont of t he quot at i on boar d Ol i ver Bl ack nodded t o me and
smi l ed.
" You' l l be sor r y, Lar r y, " he sai d.
I st opped and asked hi m, " What do you mean?"
" Tomor r ow you' l l be buyi ng i t back. "
" Buyi ng what back?" I sai d. I hadn' t t ol d a soul except t he
t el egr aph oper at or .
" Anaconda, " he sai d. " You' l l be payi ng 320 f or i t . That
wasn' t a good move of your s, Lar r y. " And he smi l ed agai n.
" What wasn' t ?" And I l ooked i nnocent .


" Sel l i ng your ei ght t housand Anaconda at t he mar ket ; i n
f act , i nsi st i ng on i t , " sai d Ol l i e Bl ack.
I knew t hat he was supposed t o be ver y cl ever and al ways
t r aded on i nsi de news. But how he knew my busi ness so accur at el y
was beyond me. I was sur e t he of f i ce hadn' t gi ven me away.
" Ol l i e, how di d you know t hat ?" I asked hi m.
He l aughed and t ol d me: " I got i t f r om Char l i e Kr at zer . "
That was t he t el egr aph oper at or .
" But he never budged f r omhi s pl ace, " I sai d.
" I coul dn' t hear you and hi m whi sper i ng, " he chuckl ed. " But
I hear d ever y wor d of t he message he sent t o t he New Yor k of f i ce
f or you. I l ear ned t el egr aphy year s ago af t er I had a bi g r ow
over a mi st ake i n a message. Si nce t hen when I do what you di d
j ust now - - gi ve an or der by wor d of mout h t o an oper at or - - I
want t o be sur e t he oper at or sends t he message as I gi ve i t t o
hi m. I know what he sends i n my name. But you wi l l be sor r y you
sol d t hat Anaconda. I t ' s goi ng t o 500. "
" Not t hi s t r i p, Ol l i e, " I sai d.
He st ar ed at me and sai d, " You' r e pr et t y cocky about i t . "
" Not I ; t he t ape, " I sai d. Ther e wasn' t any t i cker t her e
so t her e wasn' t any t ape. But he knew what I meant .
" I ' ve hear d of t hose bi r ds, " he sai d, " who l ook at t he t ape
and i nst ead of seei ng pr i ces t hey see a r ai l r oad t i met abl e of
t he ar r i val and depar t ur e of st ocks. But t hey wer e i n padded
cel l s wher e t hey coul dn' t hur t t hemsel ves. "
I di dn' t answer hi m anyt hi ng because about t hat t i me t he
boy br ought me a memor andum. They had sol d f i ve t housand shar es
at 299Y4. I knew our quot at i ons wer e a l i t t l e behi nd t he mar ket .
The pr i ce on t he boar d at Pal m Beach when I gave t he oper at or
t he or der t o sel l was 30 1 - I f el t so cer t ai n t hat at t hat ver y
moment t he pr i ce at whi ch t he st ock was act ual l y sel l i ng on t he
St ock Exchange i n New Yor k was l ess, t hat i f anybody had of f er ed
t o t ake t he st ock of f my hands at 296 I ' d have been t i ckl ed t o
deat h t o accept . What happened shows you t hat I am r i ght i n
never t r adi ng at l i mi t s. Suppose I had l i mi t ed my sel l i ng pr i ce
t o 300? I ' d never have got i t of f . No, si r ! When you want t o get
out , get out .
Now, my st ock cost me about 300. They got of f f i ve hundr ed
shar es - - f ul l shar es, of cour se, at 299- 3/ 4. The next t housand
t hey sol d at 299- 5/ 8. Then a hundr ed at 1/ 2; t wo hundr ed at 3/ 8
and t wo hundr ed at 1/ 4. The l ast of my st ock went at 298- 3/ 4. I t
t ook Har di ng' s cl ever est f l oor man f i f t een mi nut es t o get r i d of
t hat l ast one hundr ed shar es. They di dn' t want t o cr ack i t wi de
open.


The moment I got t he r epor t of t he sal e of t he l ast of my
l ong st ock I st ar t ed t o do what I had r eal l y come ashor e t o do -
t hat i s, t o sel l st ocks. I si mpl y had t o. Ther e was t he mar ket
af t er i t s out r ageous r al l y, beggi ng t o be sol d. Why, peopl e wer e
begi nni ng t o t al k bul l i sh agai n. The cour se of t he mar ket ,
however , t ol d me t hat t he r al l y had r un i t s cour se. I t was saf e
t o sel l t hem. I t di d not r equi r e r ef l ect i on.
The next day Anaconda opened bel ow 296. Ol i ver Bl ack, who
was wai t i ng f or a f ur t her r al l y, had come down ear l y t o be
J ohnny- on- t he- spot when t he st ock cr ossed 320. I don' t know how
much of i t he was l ong of or whet her he was l ong of i t at al l .
But he di dn' t l augh when he saw t he openi ng pr i ces, nor l at er i n
t he day when t he st ock br oke st i l l mor e and t he r epor t came back
t o us i n Pal mBeach t hat t her e was no mar ket f or i t at al l .
Of cour se t hat was al l t he conf i r mat i on any man needed. My
gr owi ng paper pr of i t kept r emi ndi ng me t hat I was r i ght , hour by
hour . Nat ur al l y I sol d some mor e st ocks. Ever yt hi ng! I t was a
bear mar ket . They wer e al l goi ng down. The next day was Fr i day,
Washi ngt on' s Bi r t hday. I coul dn' t st ay i n Fl or i da and f i sh
because I had put out a ver y f ai r shor t l i ne, f or me. I was
needed i n New Yor k. Who needed me? I di d! Pal m Beach was t oo
f ar , t oo r emot e. Too much val uabl e t i me was l ost t el egr aphi ng
back and f or t h.
I l ef t Pal m Beach f or New Yor k. On Monday I had t o l i e i n
St . August i ne t hr ee hour s, wai t i ng f or a t r ai n. Ther e was a
br oker ' s of f i ce t her e, and nat ur al l y I had t o see how t he mar ket
was act i ng whi l e I was wai t i ng. Anaconda had br oken sever al
poi nt s si nce t he l ast t r adi ng day. As a mat t er of f act , i t
di dn' t st op goi ng down unt i l t he bi g br eak t hat f al l .
I got t o New Yor k and t r aded on t he bear si de f or about
f our mont hs. The mar ket had f r equent r al l i es as bef or e, and I
kept cover i ng and put t i ng t hem out agai n. I di dn' t , st r i ct l y
speaki ng, si t t i ght . Remember , I had l ost ever y cent of t he
t hr ee hundr ed t housand dol l ar s I made out of t he San Fr anci sco
ear t hquake br eak. I had been r i ght , and never t hel ess had gone
br oke. I was now pl ayi ng saf e, because af t er bei ng down a man
enj oys bei ng up, even i f he doesn' t qui t e make t he t op. The way
t o make money i s t o make i t . The way t o make bi g money i s t o be
r i ght at exact l y t he r i ght t i me. I n t hi s busi ness a man has t o
t hi nk of bot h t heor y and pr act i ce. A specul at or must not be
mer el y a st udent , he must be bot h a st udent and a specul at or .
I di d pr et t y wel l , even i f I can now see wher e my campai gn
was t act i cal l y i nadequat e. When summer came t he mar ket got dul l .
I t was a ci nch t hat t her e woul d be not hi ng doi ng i n a bi g way
unt i l wel l al ong i n t he f al l . Ever ybody I knew had gone or was


goi ng t o Eur ope. I t hough t hat woul d be a good move f or me. So I
cl eaned up. When I sai l ed f or Eur ope I was a t r i f l e mor e t han
t hr ee- quar t er s of a mi l l i on t o t he good. To me t hat l ooked l i ke
some bal ance.
I was i n Ai x- l es- Bai ns enj oyi ng mysel f . I had ear ned my
vacat i on. I t was good t o be i n a pl ace l i ke t hat wi t h pl ent y of
money and f r i ends and acquai nt ances and ever ybody i nt ent upon
havi ng a good t i me. Not much t r oubl e about havi ng t hat , i n Ai x.
Wal l St r eet was so f ar away t hat I never t hought about i t , and
t hat i s mor e t han I coul d say of any r esor t i n t he Uni t ed
St at es. I di dn' t have t o l i st en t o t al k about t he st ock mar ket .
I di dn' t need t o t r ade. I had enough t o l ast me qui t e a l ong
t i me, and besi des, when I got back I knew what t o do t o make
much mor e t han I coul d spend i n Eur ope t hat summer .
One day I saw i n t he Par i s Her al d a di spat ch f r om New Yor k
t hat Smel t er s had decl ar ed an ext r a di vi dend. They had r un up
t he pr i ce of t he st ock and t he ent i r e mar ket had come back qui t e
st r ong. Of cour se t hat changed ever yt hi ng f or me i n Ai x. The
news si mpl y meant t hat t he bul l cl i ques wer e st i l l f i ght i ng
desper at el y agai nst condi t i ons - - agai nst common sense and
agai nst common honest y, f or t hey knew what was comi ng and wer e
r esor t i ng t o such schemes t o put up t he mar ket i n or der t o
unl oad st ocks bef or e t he st or m st r uck t hem. I t i s possi bl e t hey
r eal l y di d not bel i eve t he danger was as ser i ous or as cl ose at
hand as I t hought . The bi g men of t he St r eet ar e as pr one t o be
wi shf ul t hi nker s as t he pol i t i ci ans or t he pl ai n sucker s. I
mysel f can' t wor k t hat way. I n a specul at or such an at t i t ude i s
f at al . Per haps a manuf act ur er of secur i t i es or a pr omot er of new
ent er pr i ses can af f or d t o i ndul ge i n hope- j ags.
At al l event s, I knew t hat al l bul l mani pul at i on was '
f or edoomed t o f ai l ur e i n t hat bear mar ket . The i nst ant I r ead
t he di spat ch I knew t her e was onl y one t hi ng t o do t o be com-
f or t abl e, and t hat was t o sel l Smel t er s shor t . Why, t he i nsi der s
as much as begged me on t hei r knees t o do i t , when t hey
i ncr eased t he di vi dend r at e on t he ver ge of a money pani c. I t
was as i nf ur i at i ng as t he ol d " dar es" of your boyhood. They
dar ed me t o sel l t hat par t i cul ar st ock shor t .
I cabl ed some sel l i ng or der s i n Smel t er s and advi sed my
f r i ends i n New Yor k t o go shor t of i t . When I got my r epor t f r om
t he br oker s I saw t he pr i ce t hey got was si x poi nt s bel ow t he
quot at i ons I had seen i n t he Par i s Her al d. I t shows you what t he
si t uat i on was.
My pl ans had been t o r et ur n t o Par i s at t he end of t he
mont h and about t hr ee weeks l at er sai l f or New Yor k, but as soon
as I r ecei ved t he cabl ed r epor t s f r om my br oker s I went back t o


Par i s. The same day I ar r i ved I cal l ed at t he st eamshi p of f i ces
and f ound t her e was a f ast boat l eavi ng f or New Yor k t he next
day. I t ook i t .
Ther e I was, back i n New Yor k, al most a mont h ahead of my
or i gi nal pl ans, because i t was t he most comf or t abl e pl ace t o be
shor t of t he mar ket i n. I had wel l over hal f a mi l l i on i n cash
avai l abl e f or mar gi ns. My r et ur n was not due t o my bei ng bear i sh
but t o my bei ng l ogi cal .
I sol d mor e st ocks. As money got t i ght er cal l - money r at es
went hi gher and pr i ces of st ocks l ower . I had f or eseen i t . At
f i r st , my f or esi ght br oke me. But now I was r i ght and
pr osper i ng. However , t he r eal j oy was i n t he consci ousness t hat
as a t r ader I was at l ast on t he r i ght t r ack. I st i l l had much
t o l ear n but I knew what t o do. No mor e f l ounder i ng, no mor e
hal f - r i ght met hods. Tape r eadi ng was an i mpor t ant par t of t he
game; so was begi nni ng at t he r i ght t i me; so was st i cki ng t o
your posi t i on. But my gr eat est di scover y was t hat a man must
st udy gener al condi t i ons, t o si ze t hem so as t o be abl e t o
ant i ci pat e pr obabi l i t i es. I n shor t , I had l ear ned t hat I had t o
wor k f or my money. I was no l onger bet t i ng bl i ndl y or concer ned
wi t h mast er i ng t he t echni c of t he game, but wi t h ear ni ng my
successes by har d st udy and cl ear t hi nki ng. I al so had f ound out
t hat nobody was i mmune f r om t he danger of maki ng sucker pl ays.
And f or a sucker pl ay a man get s sucker pay; f or t he paymast er
i s on t he j ob and never l oses t he pay envel ope t hat i s comi ng t o
you.
Our of f i ce made a gr eat deal of money. My own oper at i ons
wer e so successf ul t hat t hey began t o be t al ked about and, of
cour se, wer e gr eat l y exagger at ed. i was cr edi t ed wi t h st ar t i ng
t he br eaks i n var i ous st ocks. Peopl e I di dn' t know by name used
t o come and congr at ul at e me. They al l t hought t he most wonder f ul
t hi ng was t he money I had made. They di d not say a wor d about
t he t i me when I f i r st t al ked bear i sh t o t hem and t hey t hought I
was a cr azy bear wi t h a st ock- mar ket l oser ' s vi ndi ct i ve gr ouch.
That I had f or eseen t he money t r oubl es was not hi ng. That my
br oker s' bookkeeper had used a t hi r d of a dr op of i nk on t he
cr edi t si de of t he l edger under my name was a mar vel l ous
achi evement t o t hem.
Fr i ends used t o t el l me t hat i n var i ous of f i ces t he Boy Pl unger
i n Har di ng Br ot her s' of f i ce was quot ed as maki ng al l sor t s of
t hr eat s agai nst t he bul l cl i ques t hat had t r i ed t o mar k up
pr i ces of var i ous st ocks l ong af t er i t was pl ai n t hat t he mar ket
was bound t o seek a much l ower l evel . To t hi s day t hey t al k of
my r ai ds.


Fr om t he l at t er par t of Sept ember on, t he money mar ket was
megaphoni ng war ni ngs t o t he ent i r e wor l d. But a bel i ef i n
mi r acl es kept peopl e f r om sel l i ng what r emai ned of t hei r
specul at i ve hol di ngs. Why, a br oker t ol d me a st or y t he f i r st
week of Oct ober t hat made me f eel al most ashamed of my.
moder at i on.
You r emember t hat money l oans used t o be made on t he f l oor
of t he Exchange ar ound t he Money Post . Those br oker s who had
r ecei ved not i ce f r om t hei r banks t o pay cal l l oans knew i n a
gener al way how much money t hey woul d have t o bor r ow af r esh. And
of cour se t he banks knew t hei r posi t i on so f ar as l oanabl e f unds
wer e concer ned, and t hose whi ch had money t o l oan woul d send i t
t o t he Exchange. Thi s bank money was handl ed by a f ew br oker s
whose pr i nci pal busi ness was t i me l oans. At about noon t he
r enewal r at e f or t he day was post ed. Usual l y t hi s r epr esent ed a
f ai r aver age of t he l oans made up t o t hat t i me. Busi ness was as
a r ul e t r ansact ed openl y by bi ds and of f er s, so t hat ever yone
knew what was goi ng on. Bet ween noon and about t wo o' cl ock t her e
was or di nar i l y not much busi ness done i n money, but af t er
del i ver y t i me - - namel y, 2: 15 P. M. - - br oker s woul d know exact l y
what t hei r cash posi t i on f or t he day woul d be, and t hey wer e
abl e ei t her t o go t o t he Money Post and l end t he bal ances t hat
t hey had over or t o bor r ow what t hey r equi r ed. Thi s busi ness
al so was done openl y.
Wel l , somet i me ear l y i n Oct ober t he br oker I was t el l i ng
you about came t o me and t ol d me t hat br oker s wer e get t i ng so
t hey di dn' t go t o t he Money Post when t hey had money t o l oan.
The r eason was t hat member s of a coupl e of wel l - known commi ssi on
houses wer e on wat ch t her e, r eady t o snap up any of f er i ngs of
money. Of cour se no l ender who of f er ed money publ i cl y coul d
r ef use t o l end t o t hese f i r ms. They wer e sol vent and t he
col l at er al was good enough. But t he t r oubl e was t hat once t hese
f i r ms bor r owed money on cal l t her e was no pr ospect of t he l ender
get t i ng t hat money back. They si mpl y sai d t hey coul dn' t pay i t
back and t he l ender woul d wi l l y- ni l l y have t o r enew t he l oan. So
any St ock Exchange house t hat had money t o l oan t o i t s f el l ows
used t o send i t s men about t he f l oor i nst ead of t o t he Post , and
t hey woul d whi sper t o good f r i ends, " Want a hundr ed?" meani ng,
" Do you wi sh t o bor r ow a hundr ed t housand dol l ar s?" The money
br oker s who act ed f or t he banks pr esent l y adopt ed t he same pl an,
and i t was a di smal si ght t o wat ch t he Money Post . Thi nk of i t .
Why, he al so t ol d me t hat i t was a mat t er of St ock Exchange
et i quet t e i n t hose Oct ober days f or t he bor r ower t o make hi s own
r at e of i nt er est . You see, i t f l uct uat ed bet ween i oo and 150 per
cent per annum. I suppose by l et t i ng t he bor r ower f i x t he r at e


t he l ender i n some st r ange way di dn' t f eel so much l i ke a
usur er . But you bet he got as much as t he r est . The l ender
nat ur al l y di d not dr eam of not payi ng a hi gh r at e. He pl ayed
f ai r and pai d what ever t he ot her s di d. What he needed was t he
money and was gl ad t o get i t .
Thi ngs got wor se and wor se. Fi nal l y t her e came t he awf ul
day of r eckoni ng f or t he bul l s and t he opt i mi st s and t he wi shf ul
t hi nker s and t hose vast hor des t hat , dr eadi ng t he pai n of a
smal l l oss at t he begi nni ng, wer e now about t o suf f er t ot al
amput at i on - - wi t hout anaest het i cs. A day I shal l never f or get ,
Oct ober 24, 1907.
Repor t s f r om t he money cr owd ear l y i ndi cat ed t hat bor r ower s
woul d have t o pay what ever t he l ender s saw f i t t o ask. Ther e
woul dn' t be enough t o go ar ound. That day t he money cr owd was
much l ar ger t han usual . When del i ver y t i me came t hat af t er noon
t her e must have been a hundr ed br oker s ar ound t he Money Post ,
each hopi ng t o bor r ow t he money t hat hi s f i r m ur gent l y needed.
Wi t hout money t hey must sel l what st ocks t hey wer e car r yi ng on
mar gi n- sel l at any pr i ce t hey coul d get i n a mar ket wher e buyer s
wer e as scar ce as moneyand j ust t hen t her e was not a dol l ar i n
si ght .
My f r i end' s par t ner was as bear i sh as I was. The f i r m
t her ef or e di d not have t o bor r ow, but my f r i end, t he br oker I
t ol d you about , f r esh f r om seei ng t he haggar d f aces ar ound t he
Money Post , came t o me. He knew I was heavi l y shor t of t he
ent i r e mar ket .
He sai d, " My God, Lar r y! I don' t know what ' s goi ng t o happen. I
never saw anyt hi ng l i ke i t . I t can' t go on. Somet hi ng has got t o
gi ve. I t l ooks t o me as i f ever ybody i s bust ed r i ght now. You
can' t sel l st ocks, and t her e i s absol ut el y no money i n t her e. "
" How do you mean?" I asked.
But what he answer ed was, " Di d you ever hear of t he cl ass-
r oom exper i ment of t he mouse i n a gl ass- bel l when t hey begi n t o
pump t he ai r out of t he bel l ? You can see t he poor mouse br eat he
f ast er and f ast er , i t s si des heavi ng l i ke over wor ked bel l ows,
t r yi ng t o get enough oxygen out of t he decr easi ng suppl y i n t he
bel l . You wat ch i t suf f ocat e t i l l i t s eyes al most pop out of
t hei r socket s, gaspi ng, dyi ng. Wel l , t hat i s what I t hi nk of
when I see t he cr owd at t he Money Post ! No money anywher e, and
you can' t l i qui dat e st ocks because t her e i s nobody t o buy t hem.
The whol e St r eet i s br oke at t hi s ver y moment , i f you ask me! "
I t made me t hi nk. I had seen a smash comi ng, but not , I
admi t , t he wor st pani c i n our hi st or y. I t mi ght not be pr of i t -
abl e t o anybody i f i t went much f ur t her .


Fi nal l y i t became pl ai n t hat t her e was no use i n wai t i ng at t he
Post f or money. Ther e wasn' t goi ng t o be any. Then hel l br oke
l oose.
The pr esi dent of t he St ock Exchange, Mr . R. H. Thomas, so I
hear d l at er i n t he day, knowi ng t hat ever y house i n t he St r eet
was headed f or di sast er , went out i n sear ch of succour . He
cal l ed on J ames St i l l man, pr esi dent of t he Nat i onal Ci t y Bank,
t he r i chest bank i n t he Uni t ed St at es. I t s boast was t hat i t
never l oaned money at a hi gher r at e t han 6 per cent .
St i l l man hear d what t he pr esi dent of t he New Yor k St ock
Exchange had t o say. Then he sai d, " Mr . Thomas, we' l l have t o go
and see Mr . Mor gan about t hi s. "
The t wo men, hopi ng t o st ave of f t he most di sast r ous pani c
i n our f i nanci al hi st or y, went t oget her t o t he of f i ce of J . P.
Mor gan & Co. and saw Mr . Mor gan. Mr . Thomas l ai d t he case bef or e
hi m. The moment he got t hr ough speaki ng Mr . Mor gan sai d, " Go
back t o t he Exchange and t el l t hem t hat t her e wi l l be money f or
t hem. "
" Wher e?"
" At t he banks! "
So st r ong was t he f ai t h of al l men i n Mr . Mor gan i n t hose
cr i t i cal t i mes t hat Thomas di dn' t wai t f or f ur t her det ai l s but
r ushed back t o t he f l oor of t he Exchange t o announce t he
r epr i eve t o hi s deat h- sent enced f el l ow member s.
Then, bef or e hal f past t wo i n t he af t er noon, J . P. Mor gan
sent J ohn T. At t er bur y, of Van Embur gh & At t er bur y, who was
known t o have cl ose r el at i ons wi t h J . P. Mor gan & Co. , i nt o t he
money cr owd. My f r i end sai d t hat t he ol d br oker wal ked qui ckl y
t o t he Money Post . He r ai sed hi s hand l i ke an exhor t er at a
r evi val meet i ng. The cr owd, t hat at f i r st had been cal med down
somewhat by Pr esi dent Thomas' announcement , was begi nni ng t o
f ear t hat t he r el i ef pl ans had mi scar r i ed and t he wor st was
st i l l t o come. But when t hey l ooked at Mr . At t er bur y' s f ace and
saw hi mr ai se hi s hand t hey pr ompt l y pet r i f i ed t hemsel ves.
I n t he dead si l ence t hat f ol l owed, Mr . At t er bur y sai d, " I
am aut hor i zed t o l end t en mi l l i on dol l ar s. Take i t easy ! Ther e
wi l l be enough f or ever ybody! "
Then he began. I nst ead of gi vi ng t o each bor r ower t he name
of t he l ender he si mpl y j ot t ed down t he name of t he bor r ower and
t he amount of t he l oan and t ol d t he bor r ower , " You wi l l be t ol d
wher e your money i s. " He meant t he name of t he bank f r om whi ch
t he bor r ower woul d get t he money l at er .
I hear d a day or t wo l at er t hat Mr . Mor gan si mpl y sent wor d
t o t he f r i ght ened banker s of New Yor k t hat t hey must pr ovi de t he
money t he St ock Exchange needed.


" But we haven' t got any. We' r e l oaned up t o t he hi l t , " t he
banks pr ot est ed.
" You' ve got your r eser ves, " snapped J . P.
" But we' r e al r eady bel ow t he l egal l i mi t , " t hey howl ed
" Use t hem! That ' s what r eser ves ar e f or ! " And t he banks
obeyed and i nvaded t he r eser ves t o t he ext ent of about t went y
mi l l i on dol l ar s. I t saved t he st ock mar ket . The bank pani c
di dn' t come unt i l t he f ol l owi ng week. He was a man, J . P. Mor gan
was. They don' t come much bi gger .
That was t he day I r emember most vi vi dl y of al l t he days of
my l i f e as a st ock oper at or . I t was t he day when my wi nni ngs
exceeded one mi l l i on dol l ar s. I t mar ked t he successf ul endi ng of
my f i r st del i ber at el y pl anned t r adi ng campai gn. What I had
f or eseen had come t o pass. But mor e t han al l t hese t hi ngs was
t hi s: a wi l d dr eam of mi ne had been r eal i sed. I had been ki ng
f or a day!
I ' l l expl ai n, of cour se. Af t er I had been i n New Yor k a
coupl e of year s I used t o cudgel my br ai ns t r yi ng t o det er mi ne
t he exact r eason why I coul dn' t beat i n a St ock Exchange house
i n New Yor k t he game t hat I had beat en as a ki d of f i f t een i n a
bucket shop i n Bost on. I knew t hat some day I woul d f i nd out
what was wr ong and I woul d st op bei ng wr ong. I woul d t hen have
not al one t he wi l l t o be r i ght but t he knowl edge t o i nsur e my
bei ng r i ght . And t hat woul d mean power .
Pl ease do not mi sunder st and me. I t was not a del i ber at e
dr eamof gr andeur or a f ut i l e desi r e bor n of over weeni ng vani t y.
I t was r at her a sor t of f eel i ng t hat t he same ol d st ock mar ket
t hat so baf f l ed me i n Ful l er t on' s of f i ce and i n Har di ng' s woul d
one day eat out of my hand. I j ust f el t t hat such a day woul d
come. And i t di d Oct ober 24, 1907.
The r eason why I say i t i s t hi s: That mor ni ng a br oker who
had done a l ot of busi ness f or my br oker s and knew t hat I had
been pl ungi ng on t he bear si de r ode down i n t he company of one
of t he par t ner s of t he f or emost banki ng house i n t he St r eet . My
f r i end t ol d t he banker how heavi l y I had been t r adi ng, f or I
cer t ai nl y pushed my l uck t o t he l i mi t . What i s t he use of bei ng
r i ght unl ess you get al l t he good possi bl e i out of i t ?
Per haps t he br oker exagger at ed t o make hi s st or y sound
i mpor t ant . Per haps I had mor e of a f ol l owi ng t han I knew.
Per haps t he banker knew f ar bet t er t han I how cr i t i cal t he
si t uat i on was. At al l event s, my f r i end sai d t o me: " He l i st ened
wi t h gr eat i nt er est t o what I t ol d hi m you sai d t he mar ket was
goi ng t o do when t he r eal sel l i ng began, af t er anot her push or
t wo. When I got t hr ough he sai d he mi ght have somet hi ng f or me
t o do l at er i n t he day. "


When t he commi ssi on houses f ound out t her e was not a cent t o be
had at any pr i ce I knew t he t i me had come. I sent br oker s i nt o
t he var i ous cr owds. Why, at one t i me t her e wasn' t a si ngl e bi d
f or Uni on Paci f i c. Not at any pr i ce! Thi nk of i t ! And i n ot her
st ocks t he same t hi ng. No money t o hol d st ocks and nobody t o buy
t hem.
I had enor mous paper pr of i t s and t he cer t ai nt y t hat al l
t hat I had t o do t o smash pr i ces st i l l mor e was t o send i n
or der s t o sel l t en t housand shar es each of Uni on Paci f i c and of
a hal f dozen ot her good di vi dend- payi ng st ocks and what woul d
f ol l ow woul d be si mpl y hel l . I t seemed t o me t hat t he pani c t hat
woul d be pr eci pi t at ed woul d be of such an i nt ensi t y and char -
act er t hat t he boar d of gover nor s woul d deem i t advi sabl e t o
cl ose t he Exchange, as was done i n August , 1914, when t he Wor l d
War br oke out .
I t woul d mean gr eat l y i ncr eased pr of i t s on paper . I t al so
mean an i nabi l i t y t o conver t t hose pr of i t s i nt o act ual cash. But
t her e wer e ot her t hi ngs t o consi der , and one was t hat a f ur t her
br eak woul d r et ar d t he r ecover y t hat I was begi nni ng t o f i gur e
on, t he compensat i ng i mpr ovement af t er al l t hat bl oodl et t i ng.
Such a pani c woul d do much har mt o t he count r y gener al l y.
I made up my mi nd t hat si nce i t was unwi se and unpl easant
t o cont i nue act i vel y bear i sh i t was i l l ogi cal f or me t o st ay
shor t . So I t ur ned and began t o buy.
I t wasn' t l ong af t er my br oker s began t o buy i n f or meand,
by t he way, I got bot t om pr i ces t hat t he banker sent f or my
f r i end.
" I have sent f or you, " he sai d, " because I want you t o go
i nst ant l y t o your f r i end Li ver mor e and say t o hi m t hat we hope
he wi l l not sel l any mor e st ocks t oday. The mar ket can' t st and
much mor e pr essur e. As i t i s, i t wi l l be an i mmensel y di f f i cul t
t ask t o aver t a devast at i ng pani c. Appeal t o your f r i end' s
pat r i ot i sm. Thi s i s a case wher e a man has t o wor k f or t he
benef i t of al l . Let me know at once what he says. "
My f r i end came r i ght over and t ol d me. He was ver y t act f ul .
I suppose he t hought t hat havi ng pl anned t o smash t he mar ket I
woul d consi der hi s r equest as equi val ent t o t hr owi ng away t he
chance t o make about t en mi l l i on dol l ar s. He knew I was sor e on
some of t he bi g guns f or t he way t hey had act ed t r yi ng t o l and
t he publ i c wi t h a l ot of st ock when t hey knew as wel l as I di d
what was comi ng.
As a mat t er of f act , t he bi g men wer e bi g suf f er er s and
l ot s of t he st ocks I bought at t he ver y bot t om wer e i n f amous
f i nanci al names. I di dn' t know i t at t he t i me, but i t di d not
mat t er . I had pr act i cal l y cover ed al l my shor t s and i t seemed t o


me t her e was a chance t o buy st ocks cheap and hel p t he needed
r ecover y i n pr i ces at t he same t i me i f nobody hammer ed t he
mar ket .
So I t ol d my f r i end, " Go back and t el l Mr . Bl ank t hat I
agr ee wi t h t hem and t hat I f ul l y r eal i sed t he gr avi t y of t he
si t uat i on even bef or e he sent f or you. I not onl y wi l l not sel l
any mor e st ocks t oday, but I am goi ng i n and buy as much as I
can car r y. " And I kept my wor d. I bought one hundr ed t housand
shar es t hat day, f or t he l ong account . I di d not sel l anot her
st ock shor t f or ni ne mont hs.
That i s why I sai d t o f r i ends t hat my dr eam had come t r ue
and t hat I had been ki ng f or a moment . The st ock mar ket at one
t i me t hat day cer t ai nl y was at t he mer cy of anybody who want ed
t o hammer i t . I do not suf f er f r om del usi ons of gr andeur ; i n
f act you know how I f eel about bei ng accused of r ai di ng t he
mar ket and about t he way my oper at i ons ar e exagger at ed by t he
gossi p of t he St r eet .
I came out of i t i n f i ne shape. The newspaper s sai d t hat
Lar r y Li ver mor e, t he Boy Pl unger , had made sever al mi l l i ons.
Wel l , I was wor t h over one mi l l i on af t er t he cl ose of busi ness
t hat day. But my bi ggest wi nni ngs wer e not i n dol l ar s but i n t he
i nt angi bl es: I had been r i ght , I had l ooked ahead and f ol l owed a
cl ear - cut pl an. I had l ear ned what a man must do i n or der t o
make bi g money; I was per manent l y out of t he gambl er cl ass; I
had at l ast l ear ned t o t r ade i nt el l i gent l y i n a bi g way. I t was
a day of days f or me.



CHAPTER X

THE r ecogni t i on of our own mi st akes shoul d not benef i t us any
mor e t han t he st udy of our successes. But t her e i s a nat ur al
t endency i n al l men t o avoi d puni shment . When you associ at e
cer t ai n mi st akes wi t h a l i cki ng, you do not hanker f or a second
dose, and, of cour se, al l st ock- mar ket mi st akes wound you i n t wo
t ender spot s - - your pocket book and your vani t y. But I wi l l t el l
you somet hi ng cur i ous: A st ock specul at or somet i mes makes
mi st akes and knows t hat he i s maki ng t hem. And af t er he makes
t hem he wi l l ask hi msel f why he made t hem; and af t er t hi nki ng
over i t col d- bl oodedl y a l ong t i me af t er t he pai n of puni shment
i s over he may l ear n how he came t o make t hem, and when, and at
what par t i cul ar poi nt of hi s t r ade; but not why. And t hen he
si mpl y cal l s hi msel f names and l et s i t go at t hat .
Of cour se, i f a man i s bot h wi se and l ucky, he wi l l not
make t he same mi st ake t wi ce. But he wi l l make any one of t he t en
t housand br ot her s or cousi ns of t he or i gi nal . The Mi st ake f ami l y
i s so l ar ge t hat t her e i s al ways one of t hem ar ound when you
want t o see what you can do i n t he f ool - pl ay l i ne.
To t el l you about t he f i r st of my mi l l i on- dol l ar mi st akes I
shal l have t o go back t o t hi s t i me when I f i r st became a
mi l l i onai r e, r i ght af t er t he bi g br eak of Oct ober , 1907. As f ar
as my t r adi ng went , havi ng a mi l l i on mer el y meant mor e r eser ves.
Money does not gi ve a t r ader mor e comf or t , because, r i ch or
poor , he can make mi st akes and i t i s never comf or t abl e t o be
wr ong. And when a mi l l i onai r e i s r i ght hi s money i s mer el y one
of hi s sever al ser vant s. Losi ng money i s t he l east of my
t r cubl es. A l oss never bot her s me af t er I t ake i t . I f or get i t
over ni ght . But bei ng wr ong - - not t aki ng t he l oss t hat i s what
does t he damage t o t he pocket book and t o t he soul . You r emember
Di ckson G. Wat t s' st or y about t he man who was so ner vous t hat a
f r i end asked hi mwhat was t he mat t er .
" I can' t sl eep, " answer ed t he ner vous one.
" Why not ?" asked t he f r i end.
" I am car r yi ng so much cot t on t hat I can' t sl eep t hi nki ng
about i t . I t i s wear i ng me out . What can I do?"
" Sel l down t o t he sl eepi ng poi nt , " answer ed t he f r i end.
As a r ul e a man adapt s hi msel f t o condi t i ons so qui ckl y
t hat he l oses t he per spect i ve. He does not f eel t he di f f er ence
much t hat i s, he does not vi vi dl y r emember how i t f el t not t o be
a mi l l i onai r e. He onl y r emember s t hat t her e wer e t hi ngs he coul d
not do t hat he can do now. I t does not t ake a r easonabl y young
and nor mal man ver y l ong t o l ose t he habi t of bei ng poor . I t
r equi r es a l i t t l e l onger t o f or get t hat he used t o be r i ch. I


suppose t hat i s because money cr eat es needs or encour ages t hei r
mul t i pl i cat i on. I mean t hat af t er a man makes money i n t he st ock
mar ket he ver y qui ckl y l oses t he habi t of not spendi ng. But
af t er he l oses hi s money i t t akes hi m a l ong t i me t o l ose t he
habi t of spendi ng.
Af t er I t ook i n my shor t s and went l ong i n Oct ober , 1907, I
deci ded t o t ake i t easy f or a whi l e. I bought a yacht and
pl anned t o go of f on a cr ui se i n Sout her n wat er s. I am cr azy
about f i shi ng and I was due t o have t he t i me of my l i f e. I
l ooked f or war d t o i t and expect ed t o go any day. But I di d not .
The mar ket woul dn' t l et me.
I al ways have t r aded i n commodi t i es as wel l as i n st ocks. I
began as a youngst er i n t he bucket shops. I st udi ed t hose
mar ket s f or year s, t hough per haps not so assi duousl y as t he
st ock mar ket . As a mat t er of f act , I woul d r at her pl ay com-
modi t i es t han st ocks. Ther e i s no quest i on about t hei r gr eat er
l egi t i macy, as i t wer e. I t par t akes mor e of t he nat ur e of a
commer ci al vent ur e t han t r adi ng i n st ocks does. A man can
appr oach i t as he mi ght any mer cant i l e pr obl em. I t may be
possi bl e t o use f i ct i t i ous ar gument s f or or agai nst a cer t ai n
t r end i n a commodi t y mar ket ; but success wi l l be onl y t empor ar y,
f or i n t he end t he f act s ar e bound t o pr evai l , so t hat a t r ader
get s di vi dends on st udy and obser vat i on, as he does i n a r egul ar
busi ness. He can wat ch and wei gh condi t i ons and he knows as much
about i t as anyone el se. He need not guar d agai nst i nsi de
cl i ques. Di vi dends ar e not unexpect edl y passed or i ncr eased
over ni ght i n t he cot t on mar ket or i n wheat or cor n. I n t he l ong
r un commodi t y pr i ces ar e gover ned but by one l aw - - t he economi c
l aw of demand and suppl y. The busi ness of t he t r ader i n
commodi t i es i s si mpl y t o get f act s about t he demand and t he
suppl y, pr esent and pr ospect i ve. He does not i ndul ge i n guesses
about a dozen t hi ngs as he does i n st ocks. I t al ways appeal ed t o
me t r adi ng i n commodi t i es.
Of cour se t he same t hi ngs happen i n al l specul at i ve
mar ket s. The message of t he t ape i s t he same. That wi l l be
per f ect l y pl ai n t o anyone who wi l l t ake t he t r oubl e t o t hi nk. He
wi l l f i nd i f he asks hi msel f quest i ons and consi der s condi t i ons,
t hat t he answer s wi l l suppl y t hemsel ves di r ect l y. But peopl e
never t ake t he t r oubl e t o ask quest i ons, l eave al one seeki ng
answer s. The aver age Amer i can i s f r om Mi ssour i ever ywher e and at
al l t i mes except when he goes t o t he br oker s' of f i ces and l ooks
at t he t ape, whet her i t i s st ocks or commodi t i es. The one game
of al l games t hat r eal l y r equi r es st udy bef or e maki ng a pl ay i s
t he one he goes i nt o wi t hout hi s usual hi ghl y i nt el l i gent pr e-
l i mi nar y and pr ecaut i onar y doubt s. He wi l l r i sk hal f hi s f or t une


i n t he st ock mar ket wi t h l ess r ef l ect i on t han he devot es t o t he
sel ect i on of a medi um- pr i ced aut omobi l e.
Thi s mat t er of t ape r eadi ng i s not so compl i cat ed as i t
appear s. Of cour se you need exper i ence. But i t i s even mor e
i mpor t ant t o keep cer t ai n f undament al s i n mi nd. To r ead t he t ape
i s not t o have your f or t une t ol d. The t ape does not t el l you how
much you wi l l sur el y be wor t h next Thur sday at 1: 35 P. m. The
obj ect of r eadi ng t he t ape i s t o ascer t ai n, f i r st , how and,
next , when t o t r ade - - t hat i s, whet her i t i s wi ser t o buy t han
t o sel l . I t wor ks exact l y t he same f or st ocks as f or cot t on or
wheat or cor n or oat s.
You wat ch t he mar ket - - t hat i s, t he cour se of pr i ces as
r ecor ded by t he t ape wi t h one obj ect : t o det er mi ne t he di r ect i on
- - t hat i s, t he pr i ce t endency. Pr i ces, we know, wi l l move
ei t her up or down accor di ng t o t he r esi st ance t hey encount er .
For pur poses of easy expl anat i on we wi l l say t hat pr i ces, l i ke
ever yt hi ng el se, move al ong t he l i ne of l east r esi st ance. They
wi l l do what ever comes easi est , t her ef or e t hey wi l l go up i f
t her e i s l ess r esi st ance t o an advance t han t o a decl i ne; and
vi ce ver sa.
Nobody shoul d be puzzl ed as t o whet her a mar ket i s a bul l
or a bear mar ket af t er i t f ai r l y st ar t s. The t r end i s evi dent t o
a man who has an open mi nd and r easonabl y cl ear si ght , f or i t i s
never wi se f or a specul at or t o f i t hi s f act s t o hi s t heor i es.
Such a man wi l l , or ought t o, know whet her i t i s a bul l or a
bear mar ket , and i f he knows t hat he knows whet her t o buy or t o
sel l . I t i s t her ef or e at t he ver y i ncept i on of t he movement t hat
a man needs t o know whet her t o buy or t o sel l .
Let us say, f or exampl e, t hat t he mar ket , as i t usual l y
does i n t hose bet ween swi ngs t i mes, f l uct uat es wi t hi n a r ange of
t en poi nt s; up t o 13o and down t o 120. I t may l ook ver y weak at
t he bot t om; or , on t he way up, af t er a r i se of ei ght or t en
poi nt s, i t may l ook as st r ong as anyt hi ng. A man ought not t o be
l ed i nt o t r adi ng by t okens. He shoul d wai t unt i l t he t ape t el l s
hi m t hat t he t i me i s r i pe. As a mat t er of f act , mi l l i ons upon
mi l l i ons of dol l ar s have been l ost by men who bought st ocks
because t hey l ooked cheap or sol d t hembecause t hey l ooked dear .
The specul at or i s not an i nvest or . Hi s obj ect i s not t o secur e a
st eady r et ur n on hi s money at a good r at e of i nt er est , but t o
pr of i t by ei t her a r i se or a f al l i n t he pr i ce of what ever he
may be specul at i ng i n. Ther ef or e t he t hi ng t o det er mi ne i s t he
specul at i ve l i ne of l east r esi st ance at t he moment of t r adi ng;
and what he shoul d wai t f or i s t he moment when t hat l i ne def i nes
i t sel f , because t hat i s hi s si gnal t o get busy.


Readi ng t he t ape mer el y enabl es hi m t o see t hat at 130 t he
sel l i ng had been st r onger t han t he buyi ng and a r eact i on i n t he
pr i ce l ogi cal l y f ol l owed. Up t o t he poi nt wher e t he sel l i ng
pr evai l ed over t he buyi ng, super f i ci al st udent s of t he t ape may
concl ude t hat t he pr i ce i s not goi ng t o st op shor t of 1 So, and
t hey buy. But af t er t he r eact i on begi ns t hey hol d on, or sel l
out at a smal l l oss, or t hey go shor t and t al k bear i sh. But at
120 t her e i s st r onger r esi st ance t o t he decl i ne. The buyi ng
pr evai l s over t he sel l i ng, t her e i s a r al l y and t he shor t s
cover .
The publ i c i s so of t en whi psawed t hat one mar vel s at t hei r
per si st ence i n not l ear ni ng t hei r l esson.
Event ual l y somet hi ng happens t hat i ncr eases t he power of
ei t her t he upwar d or t he downwar d f or ce and t he poi nt of
gr eat est r esi st ance moves up or cl own - - t hat i s, t he buyi ng at
130 wi l l f or t he f i r st t i me be st r onger t han t he sel l i ng, or t he
sel l i ng at 12o be st r onger t han t he buyi ng. The pr i ce wi l l br eak
t hr ough t he ol d bar r i er or movement - l i mi t and so on. As a r ul e,
t her e i s al ways a cr owd of t r ader s who ar e shor t at 12o because
i t l ooked so weak, or l ong at 13o because i t l ooked so st r ong,
and, when t he mar ket goes agai nst t hem t hey ar e f or ced, af t er a
whi l e, ei t her t o change t hei r mi nds and t ur n or t o cl ose out . I n
ei t her event t hey hel p t o def i ne even mor e cl ear l y t he pr i ce
l i ne of l east r esi st ance. Thus t he i nt el l i gent t r ader who has
pat i ent l y wai t ed t o det er mi ne t hi s l i ne wi l l enl i st t he ai d of
f undament al t r ade condi t i ons and al so of t he f or ce of t he
t r adi ng of t hat par t of t he communi t y t hat happened t o guess
wr ong and must now r ect i f y mi st akes. Such cor r ect i ons t end t o
push pr i ces al ong t he l i ne of l east r esi st ance.
And r i ght her e I wi l l say t hat , t hough I do not gi ve i t as
a mat hemat i cal cer t ai nt y or as an axi om of specul at i on, my
exper i ence has been t hat acci dent s - - t hat i s, t he unexpect ed or
unf or eseen have al ways hel ped me i n my mar ket posi t i on whenever
t he l at t er has been based upon my det er mi nat i on of t he l i ne of
l east r esi st ance. Do you r emember t hat Uni on Paci f i c epi sode at
Sar at oga t hat I t ol d you about ? Wel l , I was l ong because I f ound
out t hat t he l i ne of l east r esi st ance was upwar d. I shoul d have
st ayed l ong i nst ead of l et t i ng my br oker t el l me t hat i nsi der s
wer e sel l i ng st ocks. I t di dn' t make any di f f er ence what was
goi ng on i n t he di r ect or s' mi nds. That was somet hi ng I coul dn' t
possi bl y know. But I coul d and di d know t hat t he t ape sai d:
" Goi ng up! " And t hen came t he unexpect ed r ai si ng of t he di vi dend
r at e and t he t hi r t y poi nt r i se i n t he st ock. At 164 pr i ces
l ooked mi ght y hi gh, but as I t ol d you bef or e, st ocks ar e never


t oo hi gh t o buy or t oo l ow t o sel l . The pr i ce, per se, has
not hi ng t o do wi t h est ab l i shi ng my l i ne of l east r esi st ance.
You wi l l f i nd i n act ual pr act i ce t hat i f you t r ade as I
have i ndi cat ed any i mpor t ant pi ece of news gi ven out bet ween t he
cl osi ng of one mar ket and t he openi ng of anot her i s usual l y i n
har mony wi t h t he l i ne of l east r esi st ance. The t r end has been
est abl i shed bef or e t he news i s publ i shed, and i n bul l mar ket s
bear i t ems ar e i gnor ed and bul l news exagger at ed, and vi ce
ver sa. Bef or e t he war br oke out t he mar ket was i n a ver y weak
condi t i on. Ther e came t he pr ocl amat i on of Ger many' s submar i ne
pol i cy. I was shor t one hundr ed and f i f t y t housand shar es of
st ock, not because I knew t he news was comi ng, but because I was
goi ng al ong t he l i ne of l east r esi st ance. What happened came out
of a cl ear sky, as f ar as my pl ay was concer ned. Of cour se I
t ook advant age of t he si t uat i on and I cover ed my shor t s t hat
day.
I t sounds ver y easy t o say t hat al l you have t o do i s t o
wat ch t he t ape, est abl i sh your r esi st ance poi nt s and be r eady t o
t r ade al ong t he l i ne of l east r esi st ance as soon as you have
det er mi ned i t . But i n act ual pr act i ce a man has t o guar d agai nst
many t hi ngs, and most of al l agai nst hi msel f - - t hat i s, agai nst
human nat ur e. That i s t he r eason why I say t hat t he man who i s
r i ght al ways has t wo f or ces wor ki ng i n hi s f avor basi c condi t i ons
and t he men who ar e wr ong. I n a bul l mar ket bear f act or s ar e
i gnor ed. That i s human nat ur e, and yet human bei ngs pr of ess
ast oni shment at i t . Peopl e wi l l t el l you t hat t he wheat cr op has
gone t o pot because t her e has been bad weat her i n one or t wo
sect i ons and some f ar mer s have been r ui ned. When t he ent i r e cr op
i s gat her ed and al l t he f ar mer s i n al l t he wheat gr owi ng
sect i ons begi n t o t ake t hei r wheat t o t he el evat or s t he bul l s
ar e sur pr i sed at t he smal l ness of t he damage. They di scover t hat
t hey mer el y have hel ped t he bear s.
When a man makes hi s pl ay i n a commodi t y mar ket he must not
per mi t hi msel f set opi ni ons. He must have an open mi nd and
f l exi bi l i t y. I t i s not wi se t o di sr egar d t he message of t he
t ape, no mat t er what your opi ni on of cr op condi t i ons or of t he
pr obabl e demand may be. I r ecal l how I mi ssed a bi g pl ay j ust by
t r yi ng t o ant i ci pat e t he st ar t i ng si gnal . I f el t so sur e of
condi t i ons t hat I t hought i t was not necessar y t o wai t f or t he
l i ne of l east r esi st ance t o def i ne i t sel f . I even t hought I
mi ght hel p i t ar r i ve, because i t l ooked as i f i t mer el y needed a
l i t t l e assi st ance.
I was ver y bul l i sh on cot t on. I t was hangi ng ar ound t wel ve
cent s, r unni ng up and down wi t hi n a moder at e r ange. I t was i n
one of t hose i n- bet ween pl aces and I coul d see i t . I knew I


r eal l y ought t o wai t . But I got t o t hi nki ng t hat i f I gave i t a
l i t t l e push i t woul d go beyond t he upper r esi st ance poi nt .
I bought f i f t y t housand bal es. Sur e enough, i t moved up.
And sur e enough, as soon as I st opped buyi ng i t st opped goi ng
up. Then i t began t o set t l e back t o wher e i t was when I began
buyi ng i t . I got out and i t st opped goi ng down. I t hought I was
now much near er t he st ar t i ng si gnal , and pr esent l y I t hought I ' d
st ar t i t mysel f agai n. I di d. The same t hi ng happened. I bi d i t
up, onl y t o see i t go down when I st opped. I di d t hi s f our or
f i ve t i mes unt i l I f i nal l y qui t i n di sgust . I t cost me about t wo
hundr ed t housand dol l ar s. I was done wi t h i t . I t wasn' t ver y
l ong af t er t hat when i t began t o go up and never st opped t i l l i t
got t o a pr i ce t hat woul d have meant a ki l l i ng f or me - - i f I
hadn' t been i n such a gr eat hur r y t o st ar t .
Thi s exper i ence has been t he exper i ence of so many t r ader s
so many t i mes t hat I can gi ve t hi s r ul e: I n a nar r ow mar ket ,
when pr i ces ar e not get t i ng anywher e t o speak of but move wi t hi n
a nar r ow r ange, t her e i s no sense i n t r yi ng t o ant i ci pat e what
t he next bi g movement i s goi ng t o be up or down. The t hi ng t o do
i s t o wat ch t he mar ket , r ead t he t ape t o det er mi ne t he l i mi t s of
t he get - nowher e pr i ces, and make up your mi nd t hat you wi l l not
t ake an i nt er est unt i l t he pr i ce br eaks t hr ough t he l i mi t i n
ei t her di r ect i on. A specul at or must concer n hi msel f wi t h maki ng
money out of t he mar ket and not wi t h i nsi st i ng t hat t he t ape
must agr ee wi t h hi m. Never ar gue wi t h i t or ask i t f or r easons
or expl anat i ons. St ock- mar ket post - mor t ems don' t pay di vi dends.
Not so l ong ago I was wi t h a par t y of f r i ends. They got t o
t al ki ng wheat . Some of t hem wer e bul l i sh and ot her s bear i sh.
Fi nal l y t hey asked me what I t hought . Wel l , I had been st udyi ng
t he mar ket f or some t i me. I knew t hey di d not want any
st at i st i cs or anal yses of condi t i ons. So I sai d:
" I f you want t o make some money out of wheat I can t el l you
how t o do i t . "
They al l sai d t hey di d and I t ol d t hem, " I f you ar e sur e
you wi sh t o make money i n wheat j ust you wat ch i t . Wai t . The
moment i t cr osses $I . 20 buy i t and you wi l l get a ni ce qui ck
pl ay i n i t ! "
" Why not buy i t now, at $I . I 4?" one of t he par t y asked.
" Because I don' t know yet t hat i t i s goi ng up at al l . "
" Then why buy i t at $1. 20? I t seems a mi ght y hi gh pr i ce. "
" Do you wi sh t o gambl e bl i ndl y i n t he hope of get t i ng a
gr eat bi g pr of i t or do you wi sh t o specul at e i nt el l i gent l y and
get a smal l er but much mor e pr obabl e pr of i t ?"
They al l sai d t hey want ed t he smal l er but sur er pr of i t , so
I sai d, " Then do as I t el l you. I f i t cr osses $1. 20 buy. "


As I t ol d you, I had wat ched i t a l ong t i me. For mont hs i t
sol d bet ween $1. 10 and $1. 20, get t i ng nowher e i n par t i cul ar .
Wel l , si r , one day i t cl osed at above $1. I 9. I got r eady f or i t .
Sur e enough t he next day i t opened at $1. 20- 1/ 2, and I bought .
I t went t o $1. 21, t o $1. 22, t o $1. 23, t o $1. 25, and I went wi t h
i t .
Now I coul dn' t have t ol d you at t he t i me j ust what was
goi ng on. I di dn' t get any expl anat i ons about i t s behavi our
dur i ng t he cour se of t he l i mi t ed f l uct uat i ons. I coul dn' t t el l
whet her t he br eaki ng t hr ough t he l i mi t woul d be up t hr ough $1. 20
or down t hr ough $1. 10 t hough I suspect ed i t woul d be up because
t her e was not enough wheat i n t he wor l d f or a bi g br eak i n
pr i ces.
As a mat t er of f act , i t seems Eur ope had been buyi ng
qui et l y and a l ot of t r ader s had gone shor t of i t at ar ound
$I . I 9. Owi ng t o t he Eur opean pur chases and ot her causes, a l ot
of wheat had been t aken out of t he mar ket , so t hat f i nal l y t he
bi g movement got st ar t ed. The pr i ce went beyond t he $1. 20 mar k.
That was al l t he poi nt I had and i t was al l I needed. I knew
t hat when i t cr ossed $1. 20 i t woul d be because t he upwar d
movement at l ast had gat her ed f or ce t o push i t over t he l i mi t
and somet hi ng had t o happen. I n ot her wor ds, by cr ossi ng $1. 20
t he l i ne of l east r esi st ance of wheat pr i ces was est abl i shed. I t
was a di f f er ent st or y t hen.

I r emember t hat one day was a hol i day wi t h us and al l our
mar ket s wer e cl osed. Wel l , i n Wi nni peg wheat opened up si x cent s
a bushel . When our mar ket opened on t he f ol l owi ng day, i t al so
was up si x cent s a bushel . The pr i ce j ust went al ong t he l i ne of
l east r esi st ance.
What I have t ol d you gi ves you t he essence of my t r adi ng
syst em as based on st udyi ng t he t ape. I mer el y l ear n t he way
pr i ces ar e most pr obabl y goi ng t o move. I check up my own
t r adi ng by addi t i onal t est s, t o det er mi ne t he psychol ogi cal
moment . I do t hat by wat chi ng t he way t he pr i ce act s af t er I
begi n.
I t i s sur pr i si ng how many exper i enced t r ader s t her e ar e who
l ook i ncr edul ous when I t el l t hem t hat when I buy st ocks f or a
r i se I l i ke t o pay t op pr i ces and when I sel l I must sel l l ow or
not at al l . I t woul d not be so di f f i cul t t o make money i f a
t r ader al ways st uck t o hi s specul at i ve guns - - t hat i s, wai t ed
f or t he l i ne of l east r esi st ance t o def i ne i t sel f and began
buyi ng onl y when t he t ape sai d up or sel l i ng onl y when i t sai d
down. He shoul d accumul at e hi s l i ne on t he way up. Let hi m buy
one- f i f t h of hi s f ul l l i ne. I f t hat does not show hi m a pr of i t


he must not i ncr ease hi s hol di ngs because he has obvi ousl y begun
wr ong; he i s wr ong t empor ar i l y and t her e i s no pr of i t i n bei ng
wr ong at any t i me. The same t ape t hat sai d up di d not
necessar i l y l i e mer el y because i t i s now sayi ng NOT YET.
I n cot t on I was ver y successf ul i n my t r adi ng f or a l ong
t i me. I had my t heor y about i t and I absol ut el y l i ved up t o i t .
Suppose I had deci ded t hat my l i ne woul d be f or t y t o f i f t y
t housand bal es. Wel l , I woul d st udy t he t ape as I t ol d you,
wat chi ng f or an oppor t uni t y ei t her t o buy or t o sel l . Suppose
t he l i ne of l east r esi st ance i ndi cat ed a bul l movement . Wel l , I
woul d buy t en t housand bal es. Af t er I got t hr ough buyi ng t hat ,
i f t he mar ket went up t en poi nt s over my i ni t i al pur chase pr i ce,
I woul d t ake on anot her t en t housand bal es. Same t hi ng. Then, i f
I coul d get t went y poi nt s' pr of i t , or one dol l ar a bal e, I woul d
buy t went y t housand mor e. That woul d gi ve me my l i ne - - my basi s
f or my t r adi ng. But i f af t er buyi ng t he f i r st t en or t went y
t housand bal es, i t showed me a l oss, out I ' d go. I was wr ong. I t
mi ght be I was onl y t empor ar i l y wr ong.
But as I have sai d bef or e i t doesn' t pay t o st ar t wr ong i n
anyt hi ng.
What I accompl i shed by st i cki ng t o my syst em was t hat I
al ways had a l i ne of cot t on i n ever y r eal movement . I n t he
cour se of accumul at i ng my f ul l l i ne I mi ght chi p out f i f t y or
si xt y t housand dol l ar s i n t hese f eel i ng- out pl ays of mi ne. Thi s
l ooks l i ke a ver y expensi ve t est i ng, but i t wasn' t . Af t er t he
r eal movement st ar t ed, how l ong woul d i t t ake me t o make up t he
f i f t y t housand dol l ar s I had dr opped i n or der t o make sur e t hat
I began t o l oad up at exact l y t he r i ght t i me? No t i me at al l ! I t
al ways pays a man t o be r i ght at t he r i ght t i me.
As I t hi nk I al so sai d bef or e, t hi s descr i bes what I may
cal l my syst em f or pl aci ng my bet s. I t i s si mpl e ar i t hmet i c t o
pr ove t hat i t i s a wi se t hi ng t o have t he bi g bet down onl y when
you wi n, and when you l ose t o l ose onl y a smal l expl or at or y bet ,
as i t wer e. I f a man t r ades i n t he way I have descr i bed, he wi l l
al ways be i n t he pr of i t abl e posi t i on of bei ng abl e t o cash i n on
t he bi g bet .
Pr of essi onal t r ader s have al ways had some syst em or ot her
based upon t hei r exper i ence and gover ned ei t her by t hei r at t i -
t ude t owar d specul at i on or by t hei r desi r es. I r emember I met an
ol d gent l eman i n Pal m Beach whose name I di d not cat ch or di d
not at once i dent i f y. I knew he had been i n t he St r eet f or
year s, way back i n Ci vi l War t i mes, and somebody t ol d me t hat he
was a ver y wi se ol d codger who had gone t hr ough so many booms
and pani cs t hat he was al ways sayi ng t her e was not hi ng new under
t he sun and l east of al l i n t he st ock mar ket .


The ol d f el l ow asked me a l ot of quest i ons. When I got
t hr ough t el l i ng hi mabout my usual pr act i ce i n t r adi ng he nodded
and sai d, " Yes! Yes! You' r e r i ght . The way you' r e bui l t , t he way
your mi nd r uns, makes your syst em a good syst em f or you. I t
comes easy f or you t o pr act i ce what you pr each, because t he
money you bet i s t he l east of your car es. I r ecol l ect Pat
Hear ne. Ever hear of hi m? Wel l , he was a ver y wel l - known
spor t i ng man and he had an account wi t h us. Cl ever chap and
ner vy. He made money i n st ocks, and t hat made peopl e ask hi mf or
advi ce. He woul d never gi ve any. I f t hey asked hi m poi nt - bl ank
f or hi s opi ni on about t he wi sdom of t hei r commi t ment s he used a
f avour i t e r ace- t r ack maxi m of hi s: " You can' t t el l t i l l you
bet . " He t r aded i n our of f i ce. He woul d buy one hundr ed shar es
of some act i ve st ock and when, or i f , i t went up i per cent he
woul d buy anot her hundr ed. On anot her poi nt ' s advance, anot her
hundr ed shar es; and so on. He used t o say he wasn' t pl ayi ng t he
game t o make money f or ot her s and t her ef or e he woul d put i n a
st opl oss or der one poi nt bel ow t he pr i ce of hi s l ast pur chase.
When t he pr i ce kept goi ng up he si mpl y moved up hi s st op wi t h
i t . On a 1 per cent r eact i on he was st opped out . He decl ar ed he
di d not see any sense i n l osi ng mor e t han one poi nt , whet her i t
came out of hi s or i gi nal mar gi n or out of hi s paper pr of i t s.
" You know, a pr of essi onal gambl er i s not l ooki ng f or l ong
shot s, but f or sur e money. Of cour se l ong shot s ar e f i ne when
t hey come i n. I n t he st ock mar ket Pat wasn' t af t er t i ps or
pl ayi ng t o cat ch t went y- poi nt s- a- week advances, but sur e money
i n suf f i ci ent quant i t y t o pr ovi de hi mwi t h a good l i vi ng. Of al l
t he t housands of out si der s t hat I have r un acr oss i n Wal l
St r eet , Pat Hear ne was t he onl y one who saw i n st ock specul at i on
mer el y a game of chance l i ke f ar o or r oul et t e, but , never -
t hel ess, had t he sense t o st i ck t o a r el at i vel y sound bet t i ng
met hod.
" Af t er Hear ne' s deat h one of our cust omer s who had al ways
t r aded wi t h Pat and used hi s syst em made over one hundr ed
t housand dol l ar s i n Lackawanna. Then he swi t ched over t o some
ot her st ock and because he had made a bi g st ake he t hought he
need not st i ck t o Pat ' s way. When a r eact i on came, i nst ead of
cut t i ng shor t hi s l osses he l et t hem r un as t hough t hey wer e
pr of i t s. Of cour se ever y cent went . When he f i nal l y qui t he owed
us sever al t housand dol l ar s.
" He hung ar ound f or t wo or t hr ee year s. He kept t he f ever
l ong af t er t he cash had gone; but we di d not obj ect as l ong as
he behaved hi msel f . I r emember t hat he used t o admi t f r eel y t hat
he, had been t en t housand ki nds of an ass not t o st i ck t o Pat
Hear ne' s st yl e of pl ay. Wel l , one day he came t o me gr eat l y


exci t ed and asked me t o l et hi m sel l some st ock shor t i n our
of f i ce. He was a ni ce enough chap who had been a good cust omer
i n hi s day and I t ol d hi m I per sonal l y woul d guar ant ee hi s
account f or one hundr ed shar es.
" He sol d shor t one hundr ed shar es of Lake Shor e. That was
t he t i me Bi l l Tr aver s hammer ed t he mar ket , i n 1875. My f r i end
Rober t s put out t hat Lake Shor e at exact l y t he r i ght t i me and
kept sel l i ng i t on t he way down as he had been wont t o do i n t he
ol d successf ul days bef or e he f or sook Pat Hear ne' s syst em and
i nst ead l i st ened t o hope' s whi sper s.
" Wel l , si r , i n f our days of successf ul pyr ami di ng, Rober t s'
account showed hi m a pr of i t of f i f t een t housand dol l ar s. Ob-
ser vi ng t hat he had not put i n a st op- l oss or der I spoke t o hi m
about i t and he t ol d me t hat t he br eak hadn' t f ai r l y begun and
he wasn' t goi ng t o be shaken out by any one- poi nt r eact i on. Thi s
was i n August . Bef or e t he mi ddl e of Sept ember he bor r owed t en
dol l ar s f r om me f or a baby car r i age - - hi s f our t h. He di d not
st i ck t o hi s own pr oved syst em. That ' s t he t r oubl e wi t h most of
t hem, " and t he ol d f el l ow shook hi s head at me.
And he was r i ght . I somet i mes t hi nk t hat specul at i on must
be an unnat ur al sor t of busi ness, because I f i nd t hat t he
aver age specul at or has ar r ayed agai nst hi m hi s own nat ur e. The
weaknesses t hat al l men ar e pr one t o ar e f at al t o success i n
specul at i on - - usual l y t hose ver y weaknesses t hat make hi m
l i kabl e t o hi s f el l ows or t hat he hi msel f par t i cul ar l y guar ds
agai nst i n t hose ot her vent ur es of hi s wher e t hey ar e not near l y
so danger ous as when he i s t r adi ng i n st ocks or commodi t i es.
The specul at or ' s chi ef enemi es ar e al ways bor i ng f r om
wi t hi n. I t i s i nsepar abl e f r omhuman nat ur e t o hope and t o f ear .
I n specul at i on when t he mar ket goes agai nst you - - you hope t hat
ever y day wi l l be t he l ast day and you l ose mor e t han you shoul d
had you not l i st ened t o hope - - t o t he same al l y t hat i s so
pot ent a success- br i nger t o empi r e bui l der s and pi oneer s, bi g
and l i t t l e. And when t he mar ket goes your way you become f ear f ul
t hat t he next day wi l l t ake away your pr of i t , and you get out
t oo soon. Fear keeps you f r om maki ng as much money as you ought
t o. The successf ul t r ader has t o f i ght t hese t wo deep- seat ed
i nst i nct s. He has t o r ever se what you mi ght cal l hi s nat ur al
i mpul ses. I nst ead of hopi ng he must f ear ; i nst ead of f ear i ng he
must hope. He must f ear t hat hi s l oss may devel op i nt o a much
bi gger l oss, and hope t hat hi s pr of i t may become a bi g pr of i t .
I t i s absol ut el y wr ong t o gambl e i n st ocks t he way t he aver age
man does.
I have been i n t he specul at i ve game ever si nce I was f our -
t een. I t i s al l I have ever done. I t hi nk I know what I am


t al ki ng about . And t he concl usi on t hat I have r eached af t er
near l y t hi r t y year s of const ant t r adi ng, bot h on a shoest r i ng
and wi t h mi l l i ons of dol l ar s back of me, i s t hi s: A man may beat
a st ock or a gr oup at a cer t ai n t i me, but no man l i vi ng can beat
t he st ock mar ket ! A man may make money out of i ndi vi dual deal s
i n cot t on or gr ai n, but no man can beat t he cot t on mar ket or t he
gr ai n mar ket . I t ' s l i ke t he t r ack. A man may beat a hor se r ace,
but he cannot beat hor se r aci ng.
I f I knew how t o make t hese st at ement s st r onger or mor e
emphat i c I cer t ai nl y woul d. I t does not make any di f f er ence what
anybody says t o t he cont r ar y. I know I am r i ght i n sayi ng t hese
ar e i ncont r over t i bl e st at ement s.

CHAPER XI

AND now I ' l l get back t o Oct ober , 1907. I bought a yacht
and made al l pr epar at i ons t o l eave New Yor k f or a cr ui se i n
Sout her n wat er s. I am r eal l y daf f y about f i shi ng and t hi s was
t he t i me when I was goi ng t o f i sh t o my hear t ' s cont ent f r om my
own yacht , goi ng wher ever I wi shed whenever I f el t l i ke i t .
Ever yt hi ng was r eady. I had made a ki l l i ng i n st ocks, but at t he
l ast moment cor n hel d me back.
I must expl ai n t hat bef or e t he money pani c whi ch gave me my
f i r st mi l l i on I had been t r adi ng i n gr ai n at Chi cago. I was
shor t t en mi l l i on bushel s of wheat and t en mi l l i on bushel s of
cor n. I had st udi ed t he gr ai n mar ket s f or a l ong t i me and was as
bear i sh on cor n and wheat as I had been on st ocks.
Wel l , t hey bot h st ar t ed down, but whi l e wheat kept on de-
cl i ni ng t he bi ggest of al l t he Chi cago oper at or s - - I ' l l cal l
hi m St r at t on - - t ook i t i nt o hi s head t o r un a cor ner i n cor n.
Af t er I cl eaned up i n st ocks and was r eady t o go Sout h on my
yacht I f ound t hat wheat showed me a handsome, pr of i t , but i n
cor n St r at t on had r un up t he pr i ce and I had qui t e a l oss.
I knew t her e was much mor e cor n i n t he count r y t han t he
pr i ce i ndi cat ed. The l aw of demand and suppl y wor ked as al ways.
But t he demand came chi ef l y f r omSt r at t on and t he suppl y was not
comi ng at al l , because t her e was an acut e congest i on i n t he
movement of cor n. I r emember t hat I used t o pr ay f or a col d
spel l t hat woul d f r eeze t he i mpassabl e r oads and enabl e t he
f ar mer s t o br i ng t hei r cor n i nt o t he mar ket . But no such l uck.
Ther e I was, wai t i ng t o go on my j oyousl y pl anned f i shi ng
t r i p and t hat l oss i n cor n hol di ng me back. I coul dn' t go away
wi t h t he mar ket as i t was. Of cour se St r at t on kept pr et t y cl ose
t abs on t he shor t i nt er est . He knew he had me, and I knew i t
qui t e as wel l as he di d. But , as I sai d, I was hopi ng I mi ght


convi nce t he weat her t hat i t ought t o get busy and hel p me.
Per cei vi ng t hat nei t her t he weat her nor any ot her ki ndl y
wonder - wor ker was payi ng any at t ent i on t o my needs I st udi ed how
I mi ght wor k out of my di f f i cul t y by my own ef f or t s.
I cl osed out my l i ne of wheat at a good pr of i t . But t he
pr obl em i n cor n was i nf i ni t el y mor e di f f i cul t . I f I coul d have
cover ed my t en mi l l i on bushel s at t he pr evai l i ng pr i ces I i n-
st ant l y and gl adl y woul d have done so, l ar ge t hough t he l oss
woul d have been. But , of cour se, t he moment I st ar t ed t o buy i n
my cor n St r at t on woul d be on t he j ob as squeezer i n chi ef , and I
no mor e r el i shed r unni ng up t he pr i ce on mysel f by r eason of my
own pur chases t han cut t i ng my own t hr oat wi t h my own kni f e.
St r ong t hough cor n was, my desi r e t o go f i shi ng was even
st r onger , so i t was up t o me t o f i nd a way out at once. I must
conduct a st r at egi c r et r eat . I must buy back t he t en mi l l i on
bushel s I was shor t of and i n so doi ng keep down my l oss as much
as I possi bl y coul d.
I t so happened t hat St r at t on at t hat t i me was al so r unni ng
a deal i n oat s and had t he mar ket pr et t y wel l sewed up. I had
kept t r ack of al l t he gr ai n mar ket s i n t he way of cr op news and
pi t gossi p, and I hear d t hat t he power f ul Ar mour i nt er est s wer e
not f r i endl y, mar ket wi se, t o St r at t on. Of cour se I knew t hat
St r at t on woul d not l et me have t he cor n I needed except at hi s
own pr i ce, but t he moment I hear d t he r umor s about Ar mour bei ng
agai nst St r at t on i t occur r ed t o me t hat I mi ght l ook t o t he
Chi cago t r ader s f or ai d. The onl y way i n whi ch t hey coul d
possi bl y hel p me was f or t hem t o sel l me t he cor n t hat St r at t on
woul dn' t . The r est was easy.
Fi r st , I put i n or der s t o buy f i ve hundr ed t housand bushel s
of cor n ever y ei ght h of a cent down. Af t er t hese or der s wer e i n
I gave t o each of f our houses an or der t o sel l si mul t aneousl y
f i f t y t housand bushel s of oat s at t he mar ket . That , I f i gur ed,
ought t o make a qui ck br eak i n oat s. Knowi ng how t he t r ader s'
mi nds wor ked, i t was a ci nch t hat t hey woul d i nst ant l y t hi nk
t hat Ar mour was gunni ng f or St r at t on. Seei ng t he at t ack opened
i n oat s t hey woul d l ogi cal l y concl ude t hat t he next br eak woul d
be i n cor n and t hey woul d st ar t t o sel l i t . I f t hat cor ner i n
cor n was bust ed, t he pi cki ngs woul d be f abul ous.
My dope on t he psychol ogy of t he Chi cago t r ader s was
absol ut el y cor r ect . When t hey saw oat s br eaki ng on t he scat t er ed
sel l i ng t hey pr ompt l y j umped on cor n and sol d i t wi t h gr eat
ent husi asm. I was abl e t o buy si x mi l l i on bushel s of cor n i n t he
next t en mi nut es. The moment I f ound t hat t hei r sel l i ng of cor n
ceased I si mpl y bought i n t he ot her f our mi l l i on bushel s at t he
mar ket . Of cour se t hat made t he pr i ce go up agai n, but t he net


r esul t of my manoeuvr e was t hat I cover ed t he ent i r e l i ne of t en
mi l l i on bushel s wi t hi n one- hal f cent of t he pr i ce pr evai l i ng at
t he t i me I st ar t ed t o cover on t he t r ader s' sel l i ng. The t wo
hundr ed t housand bushel s of oat s t hat I sol d shor t t o st ar t t he
t r ader s' sel l i ng of cor n I cover ed at a l oss of onl y t hr ee
t housand dol l ar s. That was pr et t y cheap bear bai t . The pr of i t s I
had made i n wheat of f set so much of my def i ci t i n cor n t hat my
t ot al l oss on al l my gr ai n t r ades t hat t i me was onl y t went y- f i ve
t housand dol l ar s. Af t er war ds cor n went up t went y- f i ve cent s a
bushed. St r at t on undoubt edl y had me at hi s mer cy. I f I had set
about buyi ng my t en mi l l i on bushel s of cor n wi t hout bot her i ng t o
t hi nk of t he pr i ce t her e i s no t el l i ng what I woul d have had t o
pay.
A man can' t spend year s at one t hi ng and not acqui r e a
habi t ual at t i t ude t owar ds i t qui t e unl i ke t hat of t he aver age
begi nner . The di f f er ence di st i ngui shes t he pr of essi onal f r om t he
amat eur . I t i s t he way a man l ooks at t hi ngs t hat makes or l oses
money f or hi m i n t he specul at i ve mar ket s. The publ i c has t he
di l et t ant e' s poi nt of vi ew t owar d hi s own ef f or t . The ego
obt r udes i t sel f undul y and t he t hi nki ng t her ef or e i s not deep or
exhaust i ve. The pr of essi onal concer ns hi msel f wi t h doi ng t he
r i ght t hi ng r at her t han wi t h maki ng money, knowi ng t hat t he
pr of i t t akes car e of i t sel f i f t he ot her t hi ngs ar e at t ended t o.
A t r ader get s t o pl ay t he game as t he pr of essi onal bi l l i ar d
pl ayer does - - t hat i s, he l ooks f ar ahead i nst ead of
consi der i ng t he par t i cul ar shot bef or e hi m. I t get s t o be an
i nst i nct t o pl ay f or posi t i on.
I r emember hear i ng a st or y about Addi son Cammack t hat
i l l ust r at es ver y ni cel y what I wi sh t o poi nt out . Fr om al l I
have hear d, I am i ncl i ned t o t hi nk t hat Cammack was one of t he
abl est st ock t r ader s t he St r eet ever saw. He was not a chr oni c
bear as many bel i eve, but he f el t t he gr eat er appeal of t r adi ng
on t he bear si de, of ut i l i si ng i n hi s behal f t he t wo gr eat human
f act or s of hope and f ear . He i s cr edi t ed wi t h coi ni ng t he
war ni ng: " Don' t sel l st ocks when t he sap i s r unni ng up t he
t r ees! " and t he ol d- t i mer s t el l me t hat hi s bi ggest wi nni ngs
wer e made on t he bul l si de, so t hat i t i s pl ai n he di d not pl ay
pr ej udi ces but condi t i ons. At al l event s, he was a consummat e
t r ader . I t seems t hat once t hi s was way back at t he t ag end of a
bul l mar ket - - Cammack was bear i sh and J . Ar t hur J oseph, t he
f i nanci al wr i t er and r acont eur , knew i t . The mar ket , however ,
was not onl y st r ong but st i l l r i si ng, i n r esponse t o pr oddi ng by
t he bul l l eader s and opt i mi st i c r epor t s by t he newspaper s.
Knowi ng what use a t r ader l i ke Cammack coul d make of bear i sh


i nf or mat i on, J oseph r ushed t o Cammack' s of f i ce one day wi t h gl ad
t i di ngs.
" Mr . Cammack, I have a ver y good f r i end who i s a t r ansf er
cl er k i n t he St . Paul of f i ce and he has j ust t ol d me somet hi ng
whi ch I t hi nk you ought t o know. "
" What i s i t ?" asked Cammack l i st l essl y.
" You' ve t ur ned, haven' t you? You ar e bear i sh now?" asked
J oseph, t o make sur e. I f Cammack wasn' t i nt er est ed he wasn' t
goi ng t o wast e pr eci ous ammuni t i on.
" Yes. What ' s t he wonder f ul i nf or mat i on?"
" I went ar ound t o t he St . Paul of f i ce t oday, as I do i n my
news- gat her i ng r ounds t wo or t hr ee t i mes a week, and my f r i end
t her e sai d t o me: `The Ol d Man i s sel l i ng st ock. ' He meant
Wi l l i am Rockef el l er . `I s he r eal l y, J i mmy?' I sai d t o hi m, and
he answer ed, `Yes; he i s sel l i ng f i f t een hundr ed shar es ever y
t hr ee- ei ght hs of a poi nt up. I ' ve been t r ansf er r i ng t he st ock
f or t wo or t hr ee days now. ' I di dn' t l ose any t i me, but car ne
r i ght over t o t el l you. "
Cammack was not easi l y exci t ed, and, mor eover , was so
accust omed t o havi ng al l manner of peopl e r ush madl y i nt o hi s
of f i ce wi t h al l manner of news, gossi p, r umor s, t i ps and l i es
t hat he had gr own di st r ust f ul of t hem al l . He mer el y sai d now,
" Ar e you sur e you hear d r i ght , J oseph?"
" Am I sur e? Cer t ai nl y I am sur e! Do you t hi nk I am deaf ?"
sai d J oseph.
" Ar e you sur e of your man?"
" Absol ut el y! " decl ar ed J oseph. " I ' ve known hi m f or year s.
He has never l i ed t o me. He woul dn' t ! No obj ect ! I know he i s
absol ut el y r el i abl e and I ' d st ake my l i f e on what he t el l s me. I
know hi m as wel l as I know anybody i n t hi s wor l d a gr eat deal
bet t er t han you seemt o know me, af t er al l t hese year s. "
" Sur e of hi m, eh?" And Cammack agai n l ooked at J oseph. Then
he sai d, " Wel l , you ought t o know. " He cal l ed hi s br oker , W. B.
Wheel er . J oseph expect ed t o hear hi m gi ve an or der t o sel l at
l east f i f t y t housand shar es of St . Paul . Wi l l i amRockef el l er was
di sposi ng of hi s hol di ngs i n St . Paul , t aki ng advant age of t he
st r engt h of t he mar ket . Whet her i t was i nvest ment st ock or
specul at i ve hol di ngs was i r r el evant . The one i mpor t ant f act was
t hat t he best st ock t r ader of t he St andar d Oi l cr owd was get t i ng
out of St . Paul . What woul d t he aver age man have done i f he had
r ecei ved t he news f r oma t r ust wor t hy sour ce? No need t o ask.
But Cammack, t he abl est bear oper at or of hi s day, who was
bear i sh on t he mar ket j ust t hen, sai d t o hi s br oker , " Bi l l y, go
over t o t he boar d and buy f i f t een hundr ed St . Paul ever y
t hr ee- ei ght hs up. " The st ock was t hen i n t he ni net i es.


" Don' t you mean sel l ?" i nt er j ect ed J oseph hast i l y. He was
no novi ce i n Wal l St r eet , but he was t hi nki ng of t he mar ket f r om
t he poi nt of vi ew of t he newspaper man and, i nci dent al l y, of t he
gener al publ i c. The pr i ce cer t ai nl y ought t o go down on t he news
of i nsi de sel l i ng. And t her e was no bet t er i nsi de sel l i ng t han
Mr . Wi l l i am Rockef el l er ' s. The St andar d Oi l get t i ng out and
Cammack buyi ng! I t coul dn' t bet
" No, " sai d Cammack; " I mean buy! "
" Don' t you bel i eve me?"
" Yes !
" Don' t you bel i eve my i nf or mat i on?"
" Yes. "
" Ar en' t you bear i sh?"
" Yes. "
" Wel l , t hen?"
" That ' s why I ' mbuyi ng. Li st en t o me now: You keep i n t ouch
wi t h t hat r el i abl e f r i end of your s and t he moment t he scal ed
sel l i ng st ops, l et me know. I nst ant l y! Do you under st and?"
" Yes, " sai d J oseph, and went away, not qui t e sur e he coul d
f at hom Cammack' s mot i ves i n buyi ng Wi l l i am Rockef el l er ' s st ock.
I t was t he knowl edge t hat Cammack was bear i sh on t he ent i r e
mar ket t hat made hi s manoeuvr e so di f f i cul t t o expl ai n. However ,
J oseph saw hi s f r i end t he t r ansf er cl er k and t ol d hi m he want ed
t o be t i pped of f when t he Ol d Man got t hr ough sel l i ng. Regul ar l y
t wi ce a day J oseph cal l ed on hi s f r i end t o i nqui r e.
One day t he t r ansf er cl er k t ol d hi m, " Ther e i sn' t any mor e
st ock comi ng f r om t he Ol d Man. " J oseph t hanked hi m and r an t o
Cammack' s of f i ce wi t h t he i nf or mat i on.
Cammack l i st ened at t ent i vel y, t ur ned t o Wheel er and asked,
" Bi l l y, how much St . Paul have we got i n t he of f i ce?" Wheel er
l ooked i t up and r epor t ed t hat t hey had accumul at ed about si xt y
t housand shar es.
Cammack, bei ng bear i sh, had been put t i ng out shor t l i nes i n
t he ot her Gr anger s as wel l as i n var i ous ot her st ocks, even be-
f or e he began t o buy St . Paul . He was now heavi l y shor t of t he
mar ket . He pr ompt l y or der ed Wheel er t o sel l t he si xt y t housand
shar es of St . Paul t hat t hey wer e l ong of , and mor e besi des. He
used hi s l ong hol di ngs of St . Paul as a l ever t o depr ess t he
gener al l i st and gr eat l y benef i t hi s oper at i ons f or a decl i ne.
St . Paul di dn' t st op on t hat move unt i l i t r eached f or t y-
f our and Cammack made a ki l l i ng i n i t . He pl ayed hi s car ds wi t h
consummat e ski l l and pr of i t ed accor di ngl y. The poi nt I woul d
make i s hi s habi t ual at t i t ude t owar d t r adi ng. He di dn' t have t o
r ef l ect . He saw i nst ant l y what was f ar mor e i mpor t ant t o hi m
t han hi s pr of i t on t hat one st ock. He saw t hat he had


pr ovi dent i al l y been of f er ed an oppor t uni t y t o begi n hi s bi g bear
oper at i ons not onl y at t he pr oper t i me but wi t h a pr oper i ni t i al
push. The St . Paul t i p made hi m buy i nst ead of sel l because he
saw at once t hat i t gave hi m a vast suppl y of t he best
ammuni t i on f or hi s bear campai gn.
To get back t o mysel f . Af t er I cl osed my t r ade i n
wheat and cor n I went Sout h i n my yacht . I cr ui sed about i n
Fl or i da wat er s, havi ng a gr and ol d t i me. The f i shi ng was gr eat .
Ever yt hi ng was l ovel y. I di dn' t have a car e i n t he wor l d
and I wasn' t l ooki ng f or any.
One day I went ashor e at Pal m Beach. I met a l ot of Wal l
St r eet f r i ends and ot her s. They wer e al l t al ki ng about t he most
pi ct ur esque cot t on specul at or of t he day. A r epor t f r omNew Yor k
had i t t hat Per cy Thomas had l ost ever y cent . I t wasn' t a
commer ci al bankr upt cy; mer el y t he r umor of t he wor l d- f amous
oper at or ' s second Wat er l oo i n t he cot t on mar ket .
I had al ways f el t a gr eat admi r at i on f or hi m. The f i r st I
ever hear d of hi m was t hr ough t he newspaper s at t he t i me of t he
f ai l ur e of t he St ock Exchange house of Shel don & Thomas, when
Thomas t r i ed t o cor ner cot t on. Shel don, who di d not have t he
vi si on or t he cour age of hi s par t ner , got col d f eet on t he ver y
ver ge of success. At l east , so t he St r eet sai d at t he t i me. At
al l event s, i nst ead of maki ng a ki l l i ng t hey made one of t he
most sensat i onal f ai l ur es i n year s. I f or get how many mi l l i ons.
The f i r m was wound up and Thomas went t o wor k al one. He devot ed
hi msel f excl usi vel y t o cot t on and i t was not l ong bef or e he was
on hi s f eet agai n. He pai d of f hi s cr edi t or s i n f ul l wi t h
i nt er est - - debt s he was not l egal l y obl i ged t o di schar ge and
wi t hal had a mi l l i on dol l ar s l ef t f or hi msel f . Hi s comeback i n
t he cot t on mar ket was i n i t s way as r emar kabl e as Deacon S. V.
Whi t e' s f amous st ock- mar ket expl oi t of payi ng of f one mi l l i on
dol l ar s i n one year . Thomas' pl uck and br ai ns made me admi r e hi m
i mmensel y.
Ever ybody i n Pal m Beach was t al ki ng about t he col l apse of
Thomas' deal i n Mar ch cot t on. You know how t he t al k goes and
gr ows; t he amount of mi si nf or mat i on and exagger at i on and
i mpr ovement s t hat you hear . Why, I ' ve seen a r umor about mysel f
gr ow so t hat t he f el l ow who st ar t ed i t di d not r ecogni se i t when
i t came back t o hi mi n l ess t han t went y f our hour s, swol l en wi t h
new and pi ct ur esque det ai l s.
The news of Per cy Thomas' l at est mi sadvent ur e t ur ned my
mi nd f r om t he f i shi ng t o t he cot t on mar ket . I got f i l es of t he
t r ade paper s and r ead t hem t o get a l i ne on condi t i ons. When I
got back t o New Yor k I gave mysel f up t o st udyi ng t he mar ket .
Ever ybody was bear i sh and ever ybody was sel l i ng J ul y cot t on. You


know how peopl e ar e. I suppose i t i s t he cont agi on of exampl e
t hat makes a man do somet hi ng because ever ybody ar ound hi m i s
doi ng t he same t hi ng. Per haps i t i s some phase or var i et y of t he
her d i nst i nct . I n any case i t was, i n t he opi ni on of hundr eds of
t r ader s, t he wi se and pr oper t hi ng t o sel l J ul y cot t on and so
saf e t oo! You coul dn' t cal l t hat gener al sel l i ng r eckl ess; t he
wor d i s t oo conser vat i ve. The t r ader s si mpl y saw one si de t o t he
mar ket and a gr eat bi g pr of i t . They cer t ai nl y expect ed a
col l apse i n pr i ces.
I saw al l t hi s, of cour se, and i t st r uck me t hat t he chaps
who wer e shor t di dn' t have a t er r i bl e l ot of t i me t o cover i n.
The mor e I st udi ed t he si t uat i on t he cl ear er I saw t hi s, unt i l I
f i nal l y deci ded t o buy J ul y cot t on. I went t o wor k and qui ckl y
bought one hundr ed t housand bal es. I exper i enced no t r oubl e i n
get t i ng i t because i t came f r omso many sel l er s. I t seemed t o me
t hat I coul d have of f er ed a r ewar d of one mi l l i on dol l ar s f or
t he capt ur e, dead or al i ve, of a si ngl e t r ader who was not
sel l i ng J ul y cot t on and nobody woul d have cl ai med i t .
I shoul d say t hi s was i n t he l at t er par t of May. I kept
buyi ng mor e and t hey kept on sel l i ng i t t o me unt i l I had pi cked
up al l t he f l oat i ng cont r act s and I had one hundr ed and t went y
t housand bal es. A coupl e of days af t er I had bought t he l ast of
i t i t began t o go up. Once i t st ar t ed t he mar ket was ki nd enough
t o keep on doi ng ver y wel l i ndeed - - t hat i s, i t went up f r om
f or t y t o f i f t y poi nt s a day.
One Sat ur day t hi s was about t en days af t er I began
oper at i ons - - t he pr i ce began t o cr eep up. I di d not know
whet her t her e was any mor e J ul y cot t on f or sal e. I t was up t o me
t o f i nd out , so I wai t ed unt i l t he l ast t en mi nut es. At t hat
t i me, I knew, i t was usual f or t hose f el l ows t o be shor t and i f
t he mar ket cl osed up f or t he day t hey woul d be saf el y hooked. So
I sent i n f our di f f er ent or der s t o buy f i ve t housand bal es each,
at t he mar ket , at t he same t i me. That r an t he pr i ce up t hi r t y
poi nt s and t he shor t s wer e doi ng t hei r best t o wr i ggl e away. The
mar ket cl osed at t he t op. Al l I di d, r emember , was t o buy t hat
l ast t went y t housand bal es.
The next day was Sunday. But on Monday, Li ver pool was due
t o open up t went y poi nt s t o be on a par i t y wi t h t he advance i n
New Yor k. I nst ead, i t came f i f t y poi nt s hi gher . That meant t hat
Li ver pool had exceeded our advance by 100 per cent . I had
not hi ng t o do wi t h t he r i se i n t hat mar ket . Thi s showed me t hat
my deduct i ons had been sound and t hat I was t r adi ng al ong t he
l i ne of l east r esi st ance. At t he same t i me I was not l osi ng
si ght of t he f act t hat I had a whoppi ng bi g l i ne t o di spose of .
A mar ket may advance shar pl y or r i se gr adual l y and yet not


possess t he power t o absor b mor e t han a cer t ai n amount of
sel l i ng.
Of cour se t he Li ver pool cabl es made our own mar ket wi l d.
But I not i ced t he hi gher i t went t he scar cer J ul y cot t on seemed
t o be. I wasn' t l et t i ng go any of mi ne. Al t oget her t hat Monday
was an exci t i ng and not ver y cheer f ul day f or t he bear s; but f or
al l t hat , I coul d det ect no si gns of an i mpendi ng bear pani c; no
begi nni ngs of a bl i nd st ampede t o. cover . And I had one hundr ed
and f or t y t housand bal es f or whi ch I must f i nd a mar ket .
On Tuesday mor ni ng as I was wal ki ng t o my of f i ce I met a
f r i end at t he ent r ance of t he bui l di ng.
" That was qui t e a st or y i n t he Wor l d t hi s mor ni ng, " he sai d
wi t h a smi l e.
" What st or y?" I asked.
" What ? Do you mean t o t el l me you haven' t seen i t ?"
" I never see t he Wor l d, " I sai d. " What i s t he st or y?"
" Why, i t ' s al l about you. I t says you' ve got J ul y cot t on
cor ner ed. "
" I haven' t seen i t , " I t ol d hi m and l ef t hi m. I don' t know
whet her he bel i eved me or not . He pr obabl y t hought i t was hi ghl y
i nconsi der at e of me not t o t el l hi mwhet her i t was t r ue or not .
When I got t o t he of f i ce I sent out f or a copy of t he
paper . Sur e enough, t her e i t was, on t he f r ont page, i n bi g
headl i nes:

J ULY COTTON CORNERED BY LARRY LI VERMORE

Of cour se I knew at once t hat t he ar t i cl e woul d pl ay t he
di ckens wi t h t he mar ket . I f I had del i ber at el y st udi ed ways and
means of di sposi ng of my one hundr ed and f or t y t housand bal es t o
t he best advant age I coul dn' t have hi t upon a bet t er pl an. I t
woul d not have been possi bl e t o f i nd one. That ar t i cl e at t hat
ver y moment was bei ng r ead al l over t he count r y ei t her i n t he
Wor l d or i n ot her paper s quot i ng i t . I t had been cabl ed t o
Eur ope. That was pl ai n f r om t he Li ver pool pr i ces. That mar ket
was si mpl y wi l d. No wonder , wi t h such news.
Of cour se I knew what New Yor k woul d do, and what I ought
t o do. The mar ket her e opened at t en o' cl ock. At t en mi nut es
af t er t en I di d not own any cot t on. I l et t hemhave ever y one of
my one hundr ed and f or t y t housand bal es. For most of my l i ne I
r ecei ved what pr oved t o be t he t op pr i ces of t he day. The
t r ader s made t he mar ket f or me. Al l I r eal l y di d was t o see a
heaven- sent oppor t uni t y t o get r i d of my cot t on. I gr asped i t
because I coul dn' t hel p i t . What el se coul d I do?


The pr obl em t hat I knew woul d t ake a gr eat deal of har d
t hi nki ng t o sol ve was t hus sol ved f or me by an acci dent . I f t he
Wor l d had not publ i shed t hat ar t i cl e I never woul d have been
abl e t o di spose of my l i ne wi t hout sacr i f i ci ng t he gr eat er
por t i on of my paper pr of i t s. Sel l i ng one hundr ed and f or t y
t housand bal es of J ul y cot t on wi t hout sendi ng t he pr i ce down was
a t r i ck beyond my power s. But t he Wor l d st or y t ur ned i t f or me
ver y ni cel y.
Why t he Wor l d publ i shed i t I cannot t el l you. I never knew.
I suppose t he wr i t er was t i pped of f by some f r i end i n t he cot t on
mar ket and he t hought he was pr i nt i ng a scoop. I di dn' t see hi m
or anybody f r om t he Wor l d. I di dn' t know i t was pr i nt ed t hat
mor ni ng unt i l af t er ni ne o' cl ock; and i f i t had not been f or my
f r i end cal l i ng my at t ent i on t o i t I woul d not have known i t
t hen.
Wi t hout i t I woul dn' t have had a mar ket bi g enough t o
unl oad i n. That i s one t r oubl e about t r adi ng on a l ar ge scal e.
You cannot sneak out as you can when you pi ke al ong. You cannot
al ways sel l out when you wi sh or when you t hi nk i t wi se. You
have t o get out when you can; when you have a mar ket t hat wi l l
absor b your ent i r e l i ne. Fai l ur e t o gr asp t he oppor t uni t y t o get
out may cost you mi l l i ons. You cannot hesi t at e. I f you do you
ar e l ost . Nei t her can you t r y st unt s l i ke r unni ng up t he pr i ce
on t he bear s by means of compet i t i ve buyi ng, f or you may t her eby
r educe t he absor bi ng capaci t y. And I want t o t el l you t hat
per cei vi ng your oppor t uni t y i s not as easy as i t sounds. A man
must be on t he l ookout so al er t l y t hat when hi s chance st i cks i n
i t s head at hi s door he must gr ab i t .
Of cour se not ever ybody knew about my f or t unat e acci dent .
I n Wal l St r eet , and, f or t hat mat t er , ever ywher e el se, any
acci dent t hat makes bi g money f or a man i s r egar ded wi t h sus-
pi ci on. When t he acci dent i s unpr of i t abl e i t i s never consi der ed
an acci dent but t he l ogi cal out come of your hoggi shness or of
t he swel l ed head. But when t her e i s a pr of i t t hey cal l i t l oot
and t al k about how wel l unscr upul ousness f ar es, and how i l l
conser vat i smand decency.
I t was not onl y t he evi l - mi nded shor t s smar t i ng under pun-
i shment br ought about by t hei r own r eckl essness who accused me
of havi ng del i ber at el y pl anned t he coup. Ot her peopl e t hought
t he same t hi ng.
One of t he bi ggest men i n cot t on i n t he ent i r e wor l d met me
a day or t wo l at er and sai d, " That was cer t ai nl y t he sl i ckest
deal you ever put over , Li ver mor e. I was wonder i ng how much you
wer e goi ng t o l ose when you came t o mar ket t hat l i ne of your s.
You knew t hi s mar ket was not bi g enough t o t ake mor e t han f i f t y


or si xt y t housand bal es wi t hout sel l i ng of f , and how you wer e
goi ng t o wor k of f t he r est and not l ose al l your paper pr of i t s
was begi nni ng t o i nt er est me. I di dn' t t hi nk of your scheme. I t
cer t ai nl y was sl i ck. "
" I had not hi ng t o do wi t h i t , " I assur ed hi m as ear nest l y
as I coul d.
But al l he di d was t o r epeat : " Mi ght y sl i ck, my boy. Mi ght y
sl i ck! Don' t be so modest ! "
I t was af t er t hat deal t hat some of t he paper s r ef er r ed t o
me as t he Cot t on Ki ng. But , as I sai d, I r eal l y was not ent i t l ed
t o t hat cr own. I t i s not necessar y t o t el l you t hat t her e i s not
enough money i n t he Uni t ed St at es t o buy t he col umns of t he New
Yor k Wor l d or enough per sonal pul l t o secur e t he publ i cat i on of
a st or y l i ke t hat . I t gave me an ut t er l y unear ned r eput at i on
t hat t i me.
But I have not t ol d t hi s st or y t o mor al i ze on t he cr owns
t hat ar e somet i mes pr essed down upon t he br ows of undeser vi ng
t r ader s or t o emphasi ze t he need of sei zi ng t he oppor t uni t y, no
mat t er when or how i t comes. My obj ect mer el y was t o account f or
t he vast amount of newspaper not or i et y t hat came t o me as t he
r esul t of my deal i n J ul y cot t on. I f i t hadn' t been f or t he
newspaper s I never woul d have met t hat r emar kabl e man, Per cy
Thomas.



CHAPTER XI I

NOT l ong af t er I cl osed my J ul y cot t on deal mor e success-
f ul l y t han I had expect ed I r ecei ved by mai l a r equest f or an
i nt er vi ew. The l et t er was si gned by Per cy Thomas. Of cour se I
i mmedi at el y answer ed t hat I ' d be gl ad t o see hi mat my of f i ce at
any t i me he car ed t o cal l . The next day he came.
I had l ong admi r ed hi m. Hi s name was a househol d wor d
wher ever men t ook an i nt er est i n gr owi ng or buyi ng or sel l i ng
cot t on. I n Eur ope as wel l as al l over t hi s count r y peopl e quot ed
Per cy Thomas' opi ni ons t o me. I r emember once at a Swi ss r esor t
t al ki ng t o a Cai r o banker who was i nt er est ed i n cot t on gr owi ng
i n Egypt i n associ at i on wi t h t he l at e Si r Er nest Cassel . When he
hear d I was f r om New Yor k he i mmedi at el y asked me about Per cy
Thomas, whose mar ket r epor t s he r ecei ved and r ead wi t h unf ai l i ng
r egul ar i t y.
Thomas, I al ways t hought , went about hi s busi ness sci en-
t i f i cal l y. He was a t r ue specul at or , a t hi nker wi t h t he vi si on
of a dr eamer and t he cour age of a f i ght i ng man - - an unusual l y
wel l - i nf or med man, who knew bot h t he t heor y and t he pr act i ce of
t r adi ng i n cot t on. He l oved t o hear and t o expr ess i deas and
t heor i es and abst r act i ons, and at t he same t i me t her e was mi ght y
l i t t l e about t he pr act i cal si de of t he cot t on mar ket or t he
psychol ogy of cot t on t r ader s t hat he di d not know, f or he had
been t r adi ng f or year s and had made and l ost vast sums.
Af t er t he f ai l ur e of hi s ol d St ock Exchange f i r mof Shel don
& Thomas he went i t al one. I nsi de of t wo year s he came back,
al most spect acul ar l y. I r emember r eadi ng i n t he Sun t hat t he
f i r st t hi ng he di d when he got on hi s f eet f i nanci al l y was t o
pay of f hi s ol d cr edi t or s i n f ul l , and t he next was t o hi r e an
exper t t o st udy and det er mi ne f or hi m how he had best i nvest a
mi l l i on dol l ar s. Thi s exper t exami ned t he pr oper t i es and
anal ysed t he r epor t s of sever al compani es and t hen r ecommended
t he pur chase of Del awar e & Hudson st ock.
Wel l , af t er havi ng f ai l ed f or mi l l i ons and havi ng come back
wi t h mor e mi l l i ons, Thomas was cl eaned out as t he r esul t of hi s
deal i n Mar ch cot t on. Ther e wasn' t much t i me wast ed af t er he
came t o see me. He pr oposed t hat we f or m a wor ki ng al l i ance.
What ever i nf or mat i on he got he woul d i mmedi at el y t ur n over t o me
bef or e passi ng i t on t o t he publ i c. My par t woul d be t o do t he
act ual t r adi ng, f or whi ch he sai d I had a speci al geni us and he
hadn' t .
That di d not appeal t o me f or a number of r easons. I t ol d
hi m f r ankl y t hat I di d not t hi nk I coul d r un i n doubl e har ness
and wasn' t keen about t r yi ng t o l ear n. But he i nsi st ed t hat i t


woul d be an i deal combi nat i on unt i l I sai d f l at l y t hat I di d not
want t o have anyt hi ng t o do wi t h i nf l uenci ng ot her peopl e t o
t r ade.
" I f I f ool mysel f , " I t ol d hi m, " I al one suf f er and I pay
t he bi l l at once. Ther e ar e no dr awn- out payment s or unexpect ed
annoyances. I pl ay a l one hand by choi ce and al so because i t i s
t he wi sest and cheapest way t o t r ade. I get my pl easur e out of
mat chi ng my br ai ns agai nst t he br ai ns of ot her t r ader s- men whom
I have never seen and never t al ked t o and never advi sed t o buy
or sel l and never expect t o meet or know. When I make money I
make i t backi ng my own opi ni ons. I don' t sel l t hemor capi t al i se
t hem. I f I made money i n any ot her way I woul d i magi ne I had not
ear ned i t . Your pr oposi t i on does not i nt er est me because I am
i nt er est ed i n t he game onl y as I pl ay i t f or mysel f and i n my
own way. "
He sai d he was sor r y I f el t t he way I di d, and t r i ed t o
convi nce me t hat I was wr ong i n r ej ect i ng hi s pl an. But I st uck
t o my vi ews. The r est was a pl easant t al k. I t ol d hi m I knew he
woul d " come back" and t hat I woul d consi der i t a pr i vi l ege i f he
woul d al l ow me t o be of f i nanci al assi st ance t o hi m. But he sai d
he coul d not accept any l oans f r omme. Then he asked me about my
J ul y deal and I t ol d hi m al l about i t ; how I had gone i nt o i t
and how much cot t on I bought and t he pr i ce and ot her det ai l s. We
chat t ed a l i t t l e mor e and t hen he went away.
When I sai d t o you some t i me ago t hat a specul at or has a
host of enemi es, many of whom successf ul l y bor e f r om wi t hi n, I
had i n mi nd my many mi st akes. I have l ear ned t hat a man may
possess an or i gi nal mi nd and a l i f el ong habi t of i ndependent
t hi nki ng and wi t hal be vul ner abl e t o at t acks by a per suasi ve
per sonal i t y. I am f ai r l y i mmune f r om t he commoner specul at i ve
ai l ment s, such as gr eed and f ear and hope. But bei ng an or di nar y
man I f i nd I can er r wi t h gr eat ease.
I ought t o have been on my guar d at t hi s par t i cul ar t i me
because not l ong bef or e t hat I had had an exper i ence t hat pr oved
how easi l y a man may be t al ked i nt o doi ng somet hi ng agai nst hi s
j udgment and even agai nst hi s wi shes. I t happened i n Har di ng' s
of f i ce. I had a sor t of pr i vat e of f i ce - - a r oom t hat t hey l et
me occupy by mysel f and nobody was supposed t o get t o me dur i ng
mar ket hour s wi t hout my consent . I di dn' t wi sh t o be bot her ed
and, as I was t r adi ng on a ver y l ar ge scal e and my account was
f ai r l y pr of i t abl e, I was pr et t y wel l guar ded.
One day j ust af t er t he mar ket cl osed I hear d somebody say,
" Good af t er non, Mr . Li ver mor e. "
I t ur ned and saw an ut t er st r anger - - a chap of about
t hi r t y or t hi r t y- f i ve. I coul d not under st and how he' d got i n,


but t her e he was. I concl uded hi s busi ness wi t h me had passed
hi m. But I di dn' t say anyt hi ng. I j ust l ooked at hi m and pr et t y
soon he sai d, " I cai ne t o see you about t hat Wal t er Scot t , " and
he was of f .
He was a book agent . Now, he was not par t i cul ar l y pl easi ng
of manner or ski l l f ul of speech. Nei t her was he especi al l y
at t r act i ve t o l ook at . But he cer t ai nl y had per sonal i t y. He
t al ked and I t hought I l i st ened. But I do not know what he sai d.
I don' t t hi nk I ever knew, not even at t he t i me. When he
f i ni shed hi s monol ogue he handed me f i r st hi s f ount ai n pen and
t hen a bl ank f or m, whi ch I si gned. I t was a cont r act t o t ake a
set of Scot t ' s wor ks f or f i ve hundr ed dol l ar s.
The moment I si gned I came t o. But he had t he cont r act saf e
i n hi s pocket . I di d not want t he books. I had no pl ace f or
t hem. They wer en' t of any use what ever t o me. I had nobody t o
gi ve t hem t o. Yet I had agr eed t o buy t hem f or f i ve hundr ed
dol l ar s.
I amso accust omed t o l osi ng money t hat I never t hi nk f i r st
of t hat phase of my mi st akes. I t i s al ways t he pl ay i t sel f , t he
r eason why. I n t he f i r st pl ace I wi sh t o know my own l i mi t at i ons
and habi t s of t hought . Anot her r eason i s t hat I do not wi sh t o
make t he same mi st ake a second t i me. A man can excuse hi s
mi st akes onl y by capi t al i si ng t hemt o hi s subsequent pr of i t .
Wel l , havi ng made a f i ve- hundr ed dol l ar mi st ake but not yet
havi ng l ocal i sed t he t r oubl e, I j ust l ooked at t he f el l ow t o
si ze hi m up as a f i r st st ep. I ' l l be hanged i f he di dn' t
act ual l y smi l e at me - - an under st andi ng l i t t l e smi l e! He seemed
t o r ead my t hought s. I somehow knew t hat I di d not have t o
expl ai n anyt hi ng t o hi m; he knew i t wi t hout my t el l i ng hi m. So I
ski pped t he expl anat i ons and t he pr el i mi nar i es and asked hi m,
" How much commi ssi on wi l l you get on t hat f i ve hundr ed dol l ar
or der ?"
He pr ompt l y shook hi s head and sai d, " I can' t do i t !
Sor r y! "
" How much do you get ?" I per si st ed.
" A t hi r d. But I can' t do i t ! " he sai d.
" A t hi r d of f i ve hundr ed dol l ar s i s one hundr ed and si xt y-
si x dol l ar s and si xt y- si x cent s. I ' l l gi ve you t wo hundr ed
dol l ar s cash i f you gi ve me back t hat si gned cont r act . " And t o
pr ove i t I t ook t he money out of my pocket .
" I t ol d you I coul dn' t do i t , " he sai d.
" Do al l your cust omer s make t he same of f er t o you?" I
asked.
" No, " he answer ed.
" Then why wer e you so sur e t hat I was goi ng t o make i t ?"


" I t i s what your t ype of spor t woul d do. You ar e a f i r st -
cl ass l oser and t hat makes you a f i r st - cl ass busi nessman. I am
much obl i ged t o you, but I can' t do i t . "
" Now t el l me why you do not wi sh t o make mor e t han your
commi ssi on?"
" I t i sn' t t hat , exact l y, " he sai d. " I am not wor ki ng j ust
f or t he commi ssi on. "
" What ar e you wor ki ng f or t hen?"
" For t he commi ssi on and t he r ecor d, " he answer ed.
" What r ecor d?"
" Mi ne. "
" What ar e you dr i vi ng at ?"
" Do you wor k f or money al one?" he asked me.
" Yes, " I sai d.
" No. " And he shook hi s head. " No, you don' t . You woul dn' t
get enough f un out of i t . You cer t ai nl y do not wor k mer el y t o
add a f ew mor e dol l ar s t o your bank account and you ar e not i n
Wal l St r eet because you l i ke easy money. You get your f un some
ot her way. Wel l , same her e. "
I di d not ar gue but asked hi m, " And how do you get your
f un?"
" Wel l , " he conf essed, " we' ve al l got a weak spot . "
" And what ' s your s?"
" Vani t y, " he sai d.
" Wel l , " I t ol d hi m, " you succeeded i n get t i ng me t o si gn
on. Now I want t o si gn of f , and I am payi ng you t wo hundr ed
dol l ar s f or t en mi nut es' wor k. I sn' t t hat enough f or your pr i de
?"
" No, " he answer ed. " You see, al l t he r est of t he bunch have
been wor ki ng Wal l St r eet f or mont hs and f ai l ed t o make expenses.
They sai d i t was t he f aul t of t he goods and t he t er r i t or y. So
t he of f i ce sent f or me t o pr ove t hat t he f aul t was wi t h t hei r
sal esmanshi p and not wi t h t he books or t he pl ace. They wer e
wor ki ng on a 25 per cent commi ssi on. I was i n Cl evel and, wher e I
sol d ei ght y- t wo set s i n t wo weeks. I am her e t o sel l a cer t ai n
number of set s not onl y t o peopl e who di d not buy f r omt he ot her
agent s but t o peopl e t hey coul dn' t even get t o see. That ' s why
t hey gi ve me 33A per cent . "
" I can' t qui t e f i gur e out how you sol d me t hat set . "
" Why, " he sai d consol i ngl y, " I sol d J . P. Mor gan a set . "
" No, you di dn' t , " I sai d.
He wasn' t angr y. He si mpl y sai d, " Honest , I di d! "
" A set of Wal t er Scot t t o J . P. Mor gan, who not onl y has
some f i ne edi t i ons but pr obabl y t he or i gi nal manuscr i pt s of some
of t he novel s as wel l ?"


" Wel l , her e' s hi s J ohn Hancock. " And he pr ompt l y f l ashed on
me a cont r act si gned by J . P. Mor gan hi msel f . I t mi ght not have
been Mr . Mor gan' s si gnat ur e, but i t di d not occur t o me t o doubt
i t at t he t i me. Di dn' t he have mi ne i n hi s pocket ? Al l I f el t
was cur i osi t y. So I asked hi m, " How di d you get past t he
l i br ar i an?"
" I di dn' t see any l i br ar i an. I saw t he Ol d Man hi msel f . I n
hi s of f i ce. "
" That ' s t oo much! " I sai d. Ever ybody knew t hat i t was much
har der t o get i nt o Mr . Mor gan' s pr i vat e of f i ce empt y handed t han
i nt o t he Whi t e House wi t h a par cel t hat t i cked l i ke an al ar m
cl ock.
But he decl ar ed, " I di d. "
" But how di d you get i nt o hi s of f i ce?"
" How di d I get i nt o your s?" he r et or t ed.
" I don' t know. You t el l me, " I sai d.
" Wel l , t he way I got i nt o Mor gan' s of f i ce and t he way I got
i nt o your s ar e t he same. I j ust t al ked t o t he f el l ow at t he door
whose busi ness i t was not t o l et me i n. And t he way I got Mor gan
t o si gn was t he same way I got you t o si gn. You wer en' t si gni ng
a cont r act f or a set of books. You j ust t ook t he f ount ai n pen I
gave you and di d what I asked you t o do wi t h i t . No di f f er ence.
Same as you. "
" And i s t hat r eal l y Mor gan' s si gnat ur e?" I asked hi m, about
t hr ee mi nut es l at e wi t h my skept i ci sm.
" Sur e! He l ear ned how t o wr i t e hi s name when he was a boy. "
" And t hat ' s al l t her e' s t o i t ?"
" That ' s al l , " he answer ed. " I know exact l y what I amdoi ng.
That ' s al l t he secr et t her e i s. I am much obl i ged t o you. Good
day, Mr . Li ver mor e. " And he st ar t ed t o go out .
" Hol d on, " I sai d. " I ' m bound t o have you make an even t wo
hundr ed dol l ar s out of me. " And I handed hi m t hi r t y- f i ve
dol l ar s.
He shook hi s head. Then: " No, " he sai d. " I can' t do t hat .
But I can do t hi s! " And he t ook t he cont r act f r om hi s pocket ,
t or e i t i n t wo and gave me t he pi eces.
I count ed t wo hundr ed dol l ar s and hel d t he money bef or e
hi m, but he agai n shook hi s head.
" I sn' t t hat what you meant ?" I sai d.
" No. "
" Then, why di d you t ear up t he cont r act ?"
" Because you di d not whi ne, but t ook i t as I woul d have
t aken i t mysel f had I been i n your pl ace. "
" But I of f er ed you t he t wo hundr ed dol l ar s of my own
accor d, " I sai d.


" I know; but money i sn' t ever yt hi ng. "
Somet hi ng i n hi s voi ce made me say, " You' r e r i ght ; i t
i sn' t . And now what do you r eal l y want me t o do f or you?"
" You' r e qui ck, ar en' t you?" he sai d. " Do you r eal l y want t o
do somet hi ng f or me?"
" Yes, " I t ol d hi m, " I do. But whet her I wi l l or not depends
what i t i s you have i n mi nd. "
" Take me wi t h you i nt o Mr . Ed Har di ng' s of f i ce and t el l hi m
t o l et me t al k t o hi m t hr ee mi nut es by t he cl ock. Then l eave me
al one wi t h hi m. "
I shook my head and sai d, " He i s a good f r i end of mi ne. "
" He' s f i f t y year s ol d and a st ock br oker , " sai d t he book
agent .
That was per f ect l y t r ue, so I t ook hi m i nt o Ed' s of f i ce. I
di d not hear anyt hi ng mor e f r om or about t hat book agent . But
one eveni ng some weeks l at er when I was goi ng upt own I r an
acr oss hi m i n a Si xt h Avenue L t r ai n. He r ai sed hi s hat ver y
pol i t el y and I nodded back. He came over and asked me, " How do
you do, Mr . Li ver mor e? And how i s Mr . Har di ng?"
" He' s wel l . Why do you ask?" I f el t he was hol di ng back a
st or y.
" I sol d hi m t wo t housand dol l ar s' wor t h of books t hat day
you t ook me i n t o see hi m. "
" He never sai d a wor d t o me about i t , " I sai d.
" No; t hat ki nd doesn' t t al k about i t . "
" What ki nd doesn' t t al k?"
" The ki nd t hat never makes mi st akes on account of i t s bei ng
bad busi ness t o make t hem. That ki nd al ways knows what he want s
and nobody can t el l hi m di f f er ent . That i s t he ki nd t hat ' s
educat i ng my chi l dr en and keeps my wi f e i n good humor . You di d
me a good t ur n, Mr . Li ver mor e. I expect ed i t when I gave up t he
t wo hundr ed dol l ar s you wer e so anxi ous t o pr esent t o me. "
" And i f Mr . Har di ng hadn' t gi ven you an or der ?"
" Oh, but I knew he woul d. I had f ound out what ki nd of man
he was. He was a ci nch. "
" Yes. But i f he hadn' t bought any books?" I per si st ed.
" I ' d have come back t o you and sol d you somet hi ng. Good
day, Mr . Li ver mor e. I am goi ng t o see t he mayor . " And he got up
as we pul l ed up at Par k Pl ace.
" I hope you sel l hi m t en set s, " I sai d. Hi s Honor was a
Tammany man.
" I ' M' a Republ i can, t oo, " he sai d, and went out , not
hast i l y, but l ei sur el y, conf i dent t hat t he t r ai n woul d wai t . And
i t di d.


I have t ol d you t hi s st or y i n such det ai l because i t con-
cer ned a r emar kabl e man who made me buy what I di d not wi sh t o
buy. He was t he f i r st man who di d t hat t o me. Ther e never shoul d
have been a second, but t her e was. You can never bank on t her e
bei ng but one r emar kabl e sal esman i n t he wor l d or on compl et e
i mmuni zat i on f r omt he i nf l uence of per sonal i t y.
When Per cy Thomas l ef t my of f i ce, af t er I had pl easant l y
but def i ni t el y decl i ned t o ent er i nt o a wor ki ng al l i ance wi t h
hi m, I woul d have swor n t hat our busi ness pat hs woul d never
cr oss. I was not sur e I ' d ever even see hi m agai n. But on t he
ver y next day he wr ot e me a l et t er t hanki ng me f or my of f er s of
hel p and i nvi t i ng me t o come and see hi m. I answer ed t hat I
woul d. He wr ot e agai n. I cal l ed.
I got t o see a gr eat deal of hi m. I t was al ways a pl easur e
f or me t o l i st en t o hi m, he knew so much and he expr essed hi s
knowl edge so i nt er est i ngl y. I t hi nk he i s t he most magnet i c man
I ever met .
We t al ked of many t hi ngs, f or he i s a wi del y r ead man wi t h
an amazi ng gr asp of many subj ect s and a r emar kabl e gi f t f or
i nt er est i ng gener al i zat i on. The wi sdom of hi s speech i s
i mpr essi ve; and as f or pl ausi bi l i t y, he hasn' t an equal . I have
hear d many peopl e accuse Per cy Thomas of many t hi ngs, i ncl udi ng
i nsi ncer i t y, but I somet i mes wonder i f hi s r emar kabl e
pl ausi bi l i t y does not come f r omt he f act t hat he f i r st convi nces
hi msel f so t hor oughl y as t o acqui r e t her eby a gr eat l y i ncr eased
power t o convi nce ot her s.
Of cour se we t al ked about mar ket mat t er s at gr eat l engt h. I
was not bul l i sh on cot t on, but he was. I coul d not see t he bul l
si de at al l , but he di d. He br ought up so many f act s and f i gur es
t hat I ought t o have been over whel med, but I wasn' t . I coul dn' t
di spr ove t hem because I coul d not deny t hei r aut hent i ci t y, but
t hey di d not shake my bel i ef i n what I r ead f or mysel f . But he
kept at i t unt i l I no l onger f el t sur e of my own i nf or mat i on as
gat her ed f r om t he t r ade paper s and t he dai l i es. That meant I
coul dn' t see t he mar ket wi t h my own eyes. A man cannot be
convi nced agai nst hi s own convi ct i ons, but he can be t al ked i nt o
a st at e of uncer t ai nt y and i ndeci si on, whi ch i s even wor se, f or
t hat means t hat he cannot t r ade wi t h conf i dence and comf or t .
I cannot say t hat I got al l mi xed up, exact l y, but I l ost
my poi se; or r at her , I ceased t o do my own t hi nki ng. I cannot
gi ve you i n det ai l t he var i ous st eps by whi ch I r eached t he
st at e of mi nd t hat was t o pr ove so cost l y t o me. I t hi nk i t t eas
hi s assur ances of t he accur acy of hi s f i gur es, whi ch wer e
excl usi vel y hi s, and t he undependabi l i t y of mi ne, whi ch wer e not
excl usi vel y mi ne, but publ i c pr oper t y. He har ped on t he ut t er


r el i abi l i t y, as pr oved t i me and agai n, of al l hi s t en t housand
cor r espondent s t hr oughout t he Sout h. I n t he end I came t o r ead
condi t i ons as he hi msel f r ead t hembecause we wer e bot h r eadi ng
f r omt he same page of t he same book, hel d by hi mbef or e my eyes.
He has a l ogi cal mi nd. Once I accept ed hi s f act s i t was a ci nch
t hat my own concl usi ons, der i ved f r om hi s f act s, woul d agr ee
wi t h hi s own.
When he began hi s t al ks wi t h me about t he cot t on si t uat i on
I not onl y was bear i sh but I was shor t of t he mar ket . Gr adual l y,
as I began t o accept hi s f act s and f i gur es, I began t o f ear I
had been basi ng my pr evi ous posi t i on on mi si nf or mat i on. Of
cour se I coul d not f eel t hat way and not cover . And once I had
cover ed because Thomas made me t hi nk I was wr ong, I si mpl y had
t o go l ong. I t i s t he way my mi nd wor ks. You know, I have done
not hi ng i n my l i f e but t r ade i n st ocks and commodi t i es. I
nat ur al l y t hi nk t hat i f i t i s wr ong t o be bear i sh i t must be
r i ght t o be a bul l . And i f i t i s r i ght t o be a bul l i t i s
i mper at i ve t o buy. As my ol d Pal m Beach f r i end sai d Pat Hear ne
used t o say, " You can' t t el l t i l l you bet ! " I must pr ove whet her
I am r i ght on t he mar ket or not ; and t he pr oof s ar e t o be r ead
onl y i n my br oker s' st at ement s at t he end of t he mont h.
I st ar t ed i n t o buy cot t on and i n a j i f f y I had my usual
l i ne, about si xt y t housand bal es. I t was t he most asi ni ne pl ay
of my car eer . I nst ead of st andi ng or f al l i ng by my own obser va-
t i on and deduct i ons I was mer el y pl ayi ng anot her man' s game. I t
was emi nent l y f i t t i ng t hat my si l l y pl ays shoul d not end wi t h
t hat . I not onl y bought when I had no busi ness t o be bul l i sh but
I di dn' t accumul at e my l i ne i n accor dance wi t h t he pr ompt i ngs of
exper i ence. I wasn' t t r adi ng r i ght . Havi ng l i st ened, I was l ost .
The mar ket was not goi ng my way. I am never af r ai d or
i mpat i ent when I am sur e of my posi t i on. But t he mar ket di dn' t
act t he way i t shoul d have act ed had Thomas been r i ght . Havi ng
t aken t he f i r st wr ong st ep I t ook t he second and t he t hi r d, and
of cour se i t muddl ed me al l up. I al l owed mysel f t o be per suaded
not onl y i nt o not t aki ng my l oss but i nt o hol di ng up t he mar ket .
That i s a st yl e of pl ay f or ei gn t o my nat ur e and cont r ar y t o my
t r adi ng pr i nci pl es and t heor i es. Even as a boy i n t he bucket
shops I had known bet t er . But I was not mysel f . I was anot her
man - - a Thomasi zed per son.
I not onl y was l ong of cot t on but I was car r yi ng a heavy
l i ne of wheat . That was doi ng f amousl y and showed me a handsome
pr of i t . My f ool ef f or t s t o bol st er up cot t on had i ncr eased my
l i ne t o about one hundr ed and f i f t y t housand bal es. I may t el l
you t hat about t hi s t i me I was not f eel i ng ver y wel l . I don' t
say t hi s t o f ur ni sh an excuse f or my bl under s, but mer el y t o


st at e a per t i nent f act . I r emember I went t o Bayshor e f or a
r est .
Whi l e t her e I di d some t hi nki ng. I t seemed t o me t hat my
specul at i ve commi t ment s wer e over l ar ge. I am not t i mi d as a
r ul e, but I got t o f eel i ng ner vous and t hat made me deci de t o
l i ght en my l oad. To do t hi s I must cl ean up ei t her t he cot t on or
t he wheat .
I t seems i ncr edi bl e t hat knowi ng t he game as wel l as I di d
and wi t h an exper i ence of t wel ve or f our t een year s of
specul at i ng i n st ocks and commodi t i es I di d pr eci sel y t he wr ong
t hi ng. The cot t on showed me a l oss and I kept i t . The wheat
showed me a pr of i t and I sol d i t out . I t was an ut t er l y f ool i sh
pl ay, but al l I can say i n ext enuat i on i s t hat i t wasn' t r eal l y
my deal , but Thomas' . Of al l specul at i ve bl under s t her e ar e f ew
gr eat er t han t r yi ng t o aver age a l osi ng game. My cot t on deal
pr oved i t t o t he hi l t a l i t t l e l at er . Al ways sel l what shows you
a l oss and keep what shows you a pr of i t . That was so obvi ousl y
t he wi se t hi ng t o do and was so wel l known t o me t hat even now I
mar vel at mysel f f or doi ng t he r ever se.
And so I sol d my wheat , del i ber at el y cut shor t my pr of i t i n
i t . Af t er I got out of i t t he pr i ce went up t went y cent s a
bushel wi t hout st oppi ng. I f I had kept i t I mi ght have t aken a
pr of i t of about ei ght mi l l i on dol l ar s. And havi ng deci ded t o
keep on wi t h t he l osi ng pr oposi t i on I bought mor e cot t on
I r emember ver y cl ear l y how ever y day I woul d buy cot t on,
mor e cot t on. And why do you t hi nk I bought i t ? To keep t he pr i ce
f r om goi ng down! I f t hat i sn' t a super sucker pl ay, what i s? I
si mpl y kept on put t i ng up mor e and mor e moneymor e money t o l ose
event ual l y. My br oker s and my i nt i mat e f r i ends coul d not
under st and i t ; and t hey don' t t o t hi s day. Of cour se i f t he deal
had t ur ned out di f f er ent l y I woul d have been a wonder . Mor e t han
once I was war ned agai nst pl aci ng t oo much r el i ance on Per cy
Thomas' br i l l i ant anal yses. To t hi s I pai d no heed, but kept on
buyi ng cot t on t o keep i t f r om goi ng down. I was even buyi ng i t
i n Li ver pool . I accumul at ed f our hundr ed and f or t y t housand
bal es bef or e I r eal i sed what I was doi ng. And t hen i t was t oo
l at e. So I sol d out my l i ne.
I l ost near l y al l t hat I had made out of al l my ot her deal s
i n st ocks and commodi t i es. I was not compl et el y cl eaned out , but
I had l ef t f ewer hundr eds of t housands t han I had mi l l i ons
bef or e I met my br i l l i ant f r i end Per cy Thomas. For me of al l men
t o vi ol at e al l t he l aws t hat exper i ence had t aught me t o obser ve
i n or der t o pr osper was mor e t han asi ni ne.
To l ear n t hat a man can make f ool i sh pl ays f or no r eason
what ever was a val uabl e l esson. I t cost me mi l l i ons t o l ear n


t hat anot her danger ous enemy t o a t r ader i s hi s suscept i bi l i t y
t o t he ur gi ngs of a magnet i c per sonal i t y when pl ausi bl y
expr essed by a br i l l i ant mi nd. I t has al ways seemed t o me,
however , t hat I mi ght have l ear ned my l esson qui t e as wel l i f
t he cost had been onl y one mi l l i on. But Fat e does not al ways l et
you f i x t he t ui t i on f ee. She del i ver s t he educat i onal wal l op and
pr esent s her own bi l l , knowi ng you have t o pay i t , no mat t er
what t he amount may be. Havi ng l ear ned what f ol l y I was capabl e
of I cl osed t hat par t i cul ar i nci dent . Per cy Thomas went out of
my l i f e.
Ther e I was, wi t h mor e t han ni ne- t ent hs of my st ake, as J i m
Fi sk used t o say, gone wher e t he woodbi ne t wi net h- up t he spout .
I had been a mi l l i onai r e r at her l ess t han a year . My mi l l i ons I
had made by usi ng br ai ns, hel ped by l uck. I had l ost t hem by
r ever si ng t he pr ocess. I sol d my t wo yacht s and was deci dedl y
l ess ext r avagant i n my manner of l i vi ng.
But t hat one bl ow wasn' t enough. Luck was agai nst me. I r an
up f i r st agai nst i l l ness and t hen agai nst t he ur gent need of t wo
hundr ed t housand dol l ar s i n cash. A f ew mont hs bef or e t hat sum
woul d have been not hi ng at al l ; but now i t meant al most t he
ent i r e r emnant of my f l eet - wi nged f or t une. I had t o suppl y t he
money and t he quest i on was: Wher e coul d I get i t ? I di dn' t want
t o t ake i t out of t he bal ance I kept at my br oker s' because i f I
di d I woul dn' t have much of a mar gi n l ef t f or my own t r adi ng;
and I needed t r adi ng f aci l i t i es mor e t han ever i f I was t o wi n
back my mi l l i ons qui ckl y. Ther e was onl y one al t er nat i ve t hat I
coul d see, and t hat was t o t ake i t out of t he st ock mar ket !
J ust t hi nk of i t ! I f you know much about t he aver age
cust omer of t he aver age commi ssi on house you wi l l agr ee wi t h me
t hat t he hope of maki ng t he st ock mar ket pay your bi l l i s one of
t he most pr ol i f i c sour ces of l oss i n Wal l St r eet . You wi l l chi p
out al l you have i f you adher e t o your det er mi nat i on.
Why, i n Har di ng' s of f i ce one wi nt er a l i t t l e bunch of hi gh
f l yer s spent t hi r t y or f or t y t housand dol l ar s f or an over coat -
and not one of t hem l i ved t o wear i t . I t so happened t hat a
pr omi nent f l oor t r ader who si nce has become wor l d- f amous as one
of t he dol l ar - a- year men- came down t o t he Exchange wear i ng a f ur
over coat l i ned wi t h sea ot t er . I n t hose days, bef or e f ur s went
up sky hi gh, t hat coat was val ued at onl y t en t housand dol l ar s.
Wel l , one of t he chaps i n Har di ng' s of f i ce, Bob Keown, deci ded
t o get a coat l i ned wi t h Russi an sabl e. He pr i ced one upt own.
The cost was about t he same, t en t housand dol l ar s.
" That ' s t he devi l of a l ot of money, " obj ect ed one of t he
f el l ows.


" Oh, f ai r ! Fai r ! " admi t t ed Bob Keown ami abl y. " About a
week' s wages - - unl ess you guys pr omi se t o pr esent i t t o me as a
sl i ght but si ncer e t oken of t he est eem i n whi ch you hol d t he
ni cest man i n t he of f i ce. Do I hear t he pr esent at i on speech? No?
Ver y wel l . I shal l l et t he st ock mar ket buy i t f or me! "
" Why do you want a sabl e coat ?" asked Ed Har di ng.
" I t woul d l ook par t i cul ar l y wel l on a man of my i nches, "
r epl i ed Bob, dr awi ng hi msel f up.
" And how di d you say you wer e goi ng t o pay f or i t ?" asked
J i mMur phy, who was t he st ar t i p- chaser of t he of f i ce.
" By a j udi ci ous i nvest ment of a t empor ar y char act er , J ames.
That ' s how, " answer ed Bob, who knew t hat Mur phy mer el y want ed a
t i p.
Sur e enough, J i mmy asked, " What st ock ar e you goi ng t o
buy?"
" Wr ong as usual , f r i end. Thi s i s no t i me t o buy anyt hi ng. I
pr opose t o sel l f i ve t housand St eel . I t ought t o go down t en
poi nt s at t he l east . I ' l l j ust t ake t wo and a hal f poi nt s net .
That i s conser vat i ve, i sn' t i t ?"
" What do you hear about i t ?" asked Mur phy eager l y. He was a
t al l t hi n man wi t h bl ack hai r and a hungr y l ook, due t o hi s
never goi ng out t o l unch f or f ear of mi ssi ng somet hi ng on t he
t ape.
" I hear t hat coat ' s t he most becomi ng I ever pl anned t o
get . " He t ur ned t o Har di ng and sai d, " Ed, sel l f i ve t housand U.
S. St eel common at t he mar ket . Today, dar l i ng! "
He was a pl unger , Bob was, and l i ked t o i ndul ge i n humor ous
t al k. I t was hi s way of l et t i ng t he wor l d know t hat he had an
i r on ner ve. He sol d f i ve t housand St eel , and t he st ock pr ompt l y
went up. Not bei ng hal f as bi g an ass as he seemed when he
t al ked, Bob st opped hi s l oss at one and a hal f poi nt s and
conf i ded t o t he of f i ce t hat t he New Yor k cl i mat e was t oo beni gn
f or f ur coat s. They wer e unheal t hy and ost ent at i ous. The r est of
t he f el l ows j eer ed. But i t was not l ong bef or e one of t hem
bought some Uni on Paci f i c t o pay f or t he coat . He l ost ei ght een
hundr ed dol l ar s and sai d sabl es wer e al l r i ght f or t he out si de
of a woman' s wr ap, but not f or t he i nsi de of a gar ment i nt ended
t o be wor n by a modest and i nt el l i gent man.
Af t er t hat , one af t er anot her of t he f el l ows t r i ed t o coax
t he mar ket t o pay f or t hat coat . One day I sai d I woul d buy i t
t o keep t he of f i ce f r om goi ng br oke. But t hey al l sai d t hat i t
wasn' t a spor t i ng t hi ng t o do; t hat i f I want ed t he coat f or
mysel f I ought t o l et t he mar ket gi ve i t t o me. But Ed Har d-
i ngst r ongl y appr oved of my i nt ent i on and t hat same af t er noon I


went t o t he f ur r i er ' s t o buy i t . I f ound out t hat a man f r om
Chi cago had bought i t t he week bef or e.
That was onl y one case. Ther e i sn' t a man i n Wal l St r eet
who has not l ost money t r yi ng t o make t he mar ket pay f or an
aut omobi l e or a br acel et or a mot or boat or a pai nt i ng. I coul d
bui l d a huge hospi t al wi t h t he bi r t hday pr esent s t hat t he
t i ght - f i st ed st ock mar ket has r ef used t o pay f or . I n f act , of
al l hoodoos i n Wal l St r eet I t hi nk t he r esol ve t o i nduce t he
st ock mar ket t o act as a f ai r y godmot her i s t he busi est and most
per si st ent .
Li ke al l wel l - aut hent i cat ed hoodoos t hi s has i t s r eason f or
bei ng. What does a man do when he set s out t o make t he st ock
mar ket pay f or a sudden need? Why, he mer el y hopes. He gambl es.
He t her ef or e r uns much gr eat er r i sks t han he woul d i f he wer e
specul at i ng i nt el l i gent l y, i n accor dance wi t h opi ni ons or
bel i ef s l ogi cal l y ar r i ved at af t er a di spassi onat e st udy of
under l yi ng condi t i ons. To begi n wi t h, he i s af t er an i mmedi at e
pr of i t . He cannot af f or d t o wai t . The mar ket must be ni ce t o hi m
at once i f at al l . He f l at t er s hi msel f t hat he i s not aski ng
mor e t han t o pl ace an even- money bet . Because he i s pr epar ed t o
r un qui ck - - say, st op hi s l oss at t wo poi nt s when al l he hopes
t o make i s t wo poi nt s - - he hugs t he f al l acy t hat he i s mer el y
t aki ng a f i f t y- f i f t y chance. Why, I ' ve known men t o l ose
t housands of dol l ar s on such t r ades, par t i cul ar l y on pur chases
made at t he hei ght of a bul l mar ket j ust bef or e a moder at e
r eact i on. I t cer t ai nl y i s no way t o t r ade.
Wel l , t hat cr owni ng f ol l y of my car eer as a st ock oper at or
was t he l ast st r aw. I t beat me. I l ost what l i t t l e my cot t on
deal had l ef t me. I t di d even mor e har m, f or I kept on t r adi ng
and l osi ng. I per si st ed i n t hi nki ng t hat t he st ock mar ket must
per f or ce make money f or me i n t he end. But t he onl y end i n si ght
was t he end of my r esour ces. I went i nt o debt , not onl y t o my
pr i nci pal br oker s but t o ot her houses t hat accept ed busi ness
f r omme wi t hout my put t i ng up an adequat e mar gi n. I not onl y got
i n debt but I st ayed i n debt f r omt hen on.



CHAPTER XI I I

THERE I was, once mor e br oke, whi ch was bad, and dead wr ong
i n my t r adi ng, whi ch was a si ght wor se. I was si ck, ner vous,
upset and unabl e t o r eason cal ml y. That i s, I was i n t he f r ame
of mi nd i n whi ch no specul at or shoul d be when he i s t r adi ng.
Ever yt hi ng went wr ong wi t h me. I ndeed, I began t o t hi nk t hat I
coul d not r ecover my depar t ed sense of pr opor t i on. Havi ng gr own
accust omed t o swi ngi ng a bi g l i ne - - say, mor e t han a hundr ed
t housand shar es of st ock - - I f ear ed I woul d not show good
j udgment t r adi ng i n a smal l way. I t scar cel y seemed wor t hwhi l e
bei ng r i ght when al l you car r i ed was a hundr ed shar es of st ock.
Af t er t he habi t of t aki ng a bi g pr of i t on a bi g l i ne I wasn' t
sur e I woul d know when t o t ake my pr of i t on a smal l l i ne. I
can' t descr i be t o you how weaponl ess I f el t .
Br oke agai n and i ncapabl e of assumi ng t he of f ensi ve vi gor -
ousl y. I n debt and wr ong! Af t er al l t hose l ong year s of
successes, t emper ed by mi st akes t hat r eal l y ser ved t o pave t he
way f or gr eat er successes, I was now wor se of f t han when I began
i n t he bucket shops. I had l ear ned a gr eat deal about t he game
of st ock specul at i on, but I had not l ear ned qui t e so much about
t he pl ay of human weaknesses. Ther e i s no mi nd so machi nel i ke
t hat you can depend upon i t t o f unct i on wi t h equal ef f i ci ency at
al l t i mes. I now l ear ned t hat I coul d not t r ust mysel f t o r emai n
equal l y unaf f ect ed by men and mi sf or t unes at al l t i mes.
Money l osses have never wor r i ed me i n t he sl i ght est . But
ot her t r oubl es coul d and di d. I st udi ed my di sast er i n det ai l
and of cour se f ound no di f f i cul t y i n seei ng j ust wher e I had
been si l l y. I spot t ed t he exact t i me and pl ace. A man must know
hi msel f t hor oughl y i f he i s goi ng t o make a good j ob out of
t r adi ng i n t he specul at i ve mar ket s. To know what I was capabl e
of i n t he l i ne of f ol l y was a l ong educat i onal st ep. I somet i mes
t hi nk t hat no pr i ce i s t oo hi gh f or a specul at or t o pay t o l ear n
t hat whi ch wi l l keep hi m f r om get t i ng t he swel l ed head. A gr eat
many smashes by br i l l i ant men can be t r aced di r ect l y t o t he
swel l ed head - - an expensi ve di sease ever ywher e t o ever ybody,
but par t i cul ar l y i n Wal l St r eet t o a specul at or .
I was not happy i n New Yor k, f eel i ng t he way I di d. I
di dn' t want t o t r ade, because I wasn' t i n good t r adi ng t r i m. I
deci ded t o go away and seek a st ake el sewher e. The change of
scene coul d hel p me t o f i nd mysel f agai n, I t hought . So once
mor e I l ef t New Yor k, beat en by t he game of specul at i on. I was
wor se t han br oke, si nce I owed over one hundr ed t housand dol l ar s
spr ead among var i ous br oker s.


I went t o Chi cago and t her e f ound a st ake. I t was not a
ver y subst ant i al st ake, but t hat mer el y meant t hat I woul d need
a l i t t l e mor e t i me t o wi n back my f or t une. A house t hat I once
had done busi ness wi t h had f ai t h i n my abi l i t y as a t r ader and
t hey wer e wi l l i ng t o pr ove i t by al l owi ng me t o t r ade i n t hei r
of f i ce i n a smal l way.
I began ver y conser vat i vel y. I don' t know how I mi ght have
f ar ed had I st ayed t her e. But one of t he most r emar kabl e
exper i ences i n my car eer cut shor t my st ay i n Chi cago. I t i s an
al most i ncr edi bl e st or y.
One day I got a t el egr am f r om Luci us Tucker . I had known
hi mwhen he was t he of f i ce manager of a St ock Exchange f i r mt hat
I had at t i mes gi ven some busi ness t o, but I had l ost t r ack of
hi m. The t el egr amr ead

Come t o New Yor k at once.
L. TUCKER.

I knew t hat he knew f r ommut ual f r i ends how I was f i xed and
t her ef or e i t was cer t ai n he had somet hi ng up hi s sl eeve. At t he
same t i me I had no money t o t hr ow away on an unnecessar y t r i p t o
New Yor k; so i nst ead of doi ng what he asked me t o do I got hi m
on t he l ong di st ance.
" I got your t el egr am, " I sai d. " What does i t mean?"
" I t means t hat a bi g banker i n New Yor k want s t o see you, "
he answer ed.
" Who i s i t ?" I asked. I coul dn' t i magi ne who i t coul d be.
" I ' l l t el l you when you get t o New Yor k. No use ot her wi se. "
" You say he want s t o see me?"
" He does. "
" What about ?"
" He' l l t el l you t hat i n per son i f you gi ve hi m a chance, "
sai d Luci us.
" Can' t you wr i t e me?"
" No. "
" Then t el l me mor e pl ai nl y, " I sai d.
" I don' t want t o. "
" Look her e, Luci us, " I sai d, " j ust t el l me t hi s much: I s
t hi s a f ool t r i p?"
" Cer t ai nl y not . I t wi l l be t o your advant age t o come. "
" Can' t you gi ve me an i nkl i ng?"
" No, " he sai d. " I t woul dn' t be f ai r t o hi m. And besi des, I
don' t know j ust how much he want s t o do f or you. But t ake my
advi ce: Come, and come qui ck. "
" Ar e you sur e i t i s I t hat he wi shes t o see?"


" Nobody el se but you wi l l do. Bet t er come, I t el l you.
Tel egr aph me what t r ai n you t ake and I ' l l meet you at t he
st at i on. "
" Ver y wel l , " I sai d, and hung up.
I di dn' t l i ke qui t e so much myst er y, but I knew t hat Luci us
was f r i endl y and t hat he must have a good r eason f or t al ki ng t he
way he di d. I wasn' t f ar i ng so sumpt uousl y i n Chi cago t hat i t
woul d br eak my hear t t o l eave i t . At t he r at e I was t r adi ng i t
woul d be a l ong t i me bef or e I coul d get t oget her enough money t o
oper at e on t he ol d scal e.
I came back t o New Yor k, not knowi ng what woul d happen.
I ndeed, mor e t han once dur i ng t he t r i p I f ear ed not hi ng at al l
woul d happen and t hat I ' d be out my r ai l r oad f ar e and my t i me. I
coul d not guess t hat I was about t o have t he most cur i ous
exper i ence of my ent i r e l i f e.
Luci us met me at t he st at i on and di d not wast e any t i me i n
t el l i ng me t hat he had sent f or me at t he ur gent r equest of Mr .
Dani el Wi l l i amson, of t he wel l - known St ock Exchange house of
Wi l l i amson & Br own. Mr . Wi l l i amson t ol d Luci us t o t el l me t hat
he had a busi ness pr oposi t i on t o make t o me t hat he was sur e I
woul d accept si nce i t woul d be ver y pr of i t abl e f or me. Luci us
swor e he di dn' t know what t he pr oposi t i on was. The char act er of
t he f i r m was a guar ant y t hat not hi ng i mpr oper woul d be demanded
of me.
Dan Wi l l i amson was t he seni or member of t he f i r m, whi ch was
f ounded by Egber t Wi l l i amson way back i n t he ' 7o' s. Ther e was no
Br own and hadn' t been one i n t he f i r m f or year s. The house had
been ver y pr omi nent i n Dan' s f at her ' s t i me and Dan had i nher i t ed
a consi der abl e f or t une and di dn' t go af t er much out si de
busi ness. They had one cust omer who was wor t h a hundr ed aver age
cust omer s and t hat was Al vi n Mar quand, Wi l l i amson' s
br ot her - i n- l aw, who i n addi t i on t o bei ng a di r ect or i n a dozen
banks and t r ust compani es was t he pr esi dent of t he gr eat
Chesapeake and At l ant i c Rai l r oad syst em. He was t he most
pi ct ur esque per sonal i t y i n t he r ai l r oad wor l d af t er J ames J .
Hi l l , and was t he spokesman and domi nant member of t he power f ul
banki ng cot er i e known as t he For t Dawson gang. He was wor t h f r om
f i f t y mi l l i on t o f i ve hundr ed mi l l i on dol l ar s, t he est i mat e
dependi ng upon t he st at e of t he speaker ' s l i ver . When he di ed
t hey f ound out t hat he was wor t h t wo hundr ed and f i f t y mi l l i on
dol l ar s, al l made i n Wai l St r eet . So you see he was some
cust omer .
Luci us t ol d me l i e had j ust accept ed a posi t i on wi t h
Wi l l i amson & Br own - - one t hat was made f or hi m. He was supposed
t o be a sor t of ci r cul at i ng gener al busi ness get t er . The f i r m


was af t er a gener al commi ssi on busi ness and Luci us had i nduced
Mr . Wi l l i amson t o open a coupl e of br anch of f i ces, one i n one of
t he bi g hot el s upt own and t he ot her i n Chi cago. I r at her
gat her ed t hat I was goi ng t o be of f er ed a posi t i on i n t he l at t er
pl ace, possi bl y as of f i ce manager , whi ch was somet hi ng I woul d
not accept . I di dn' t j ump on Luci us because I t hought I ' d bet t er
wai t unt i l t he of f er was made bef or e I r ef used i t .
Luci us t ook me i nt o Mr . Wi l l i amson' s pr i vat e of f i ce, i nt r o-
duced me t o hi s chi ef and l ef t t he r oomi n a hur r y, as t hough he
wi shed t o avoi d bei ng cal l ed as wi t ness i n a case i n whi ch he
knew bot h par t i es. I pr epar ed t o l i st en and t hen t o say no. Mr .
Wi l l i amson was ver y pl easant . He was a t hor ough gent l eman, wi t h
pol i shed manner s and a ki ndl y smi l e. I coul d see t hat he made
f r i ends easi l y and kept t hem. Why not ? He was heal t hy and
t her ef or e good- humor ed. He had sl at her s of money and t her ef or e
coul d not be suspect ed of sor di d mot i ves. These t hi ngs, t oget her
wi t h hi s educat i on and soci al t r ai ni ng, made i t easy f or hi m t o
be not onl y pol i t e but f r i endl y, and not onl y f r i endl y but
hel pf ul .
I sai d not hi ng. I had not hi ng t o say and, besi des, I al ways
l et t he ot her man have hi s say i n f ul l bef or e I do any t al ki ng.
Somebody t ol d me t hat t he l at e J ames St i l l man, pr esi dent of t he
Nat i onal Ci t y Bank - - who, by t he way, was an i nt i mat e f r i end of
Wi l l i amson' s made i t hi s pr act i ce t o l i st en i n si l ence, wi t h an
i mpassi ve f ace, t o anybody who br ought a pr oposi t i on t o hi m.
Af t er t he man got t hr ough Mr . St i l l man cont i nued t o l ook at hi m,
as t hough t he man had not f i ni shed. So t he man, f eel i ng ur ged t o
say somet hi ng mor e, di d so. Si mpl y by l ooki ng and l i st eni ng
St i l l man of t en made t he man of f er t er ms much mor e advant ageous
t o t he bank t han he had meant t o of f er when he began t o speak.
I don' t keep si l ent j ust t o i nduce peopl e t o of f er a bet t er
bar gai n, but because I l i ke t o know al l t he f act s of t he case.
By l et t i ng a man have hi s say i n f ul l you ar e abl e t o deci de at
once. I t i s a gr eat t i me- saver . I t aver t s debat es and pr ol onged
di scussi ons t hat get nowher e. Near l y ever y busi ness pr oposi t i on
t hat i s br ought t o me can be set t l ed, as f ar as my par t i ci pat i on
i n i t i s concer ned, by my sayi ng yes or no. But I cannot say yes
or no r i ght of f unl ess I have t he compl et e pr oposi t i on bef or e
me.
Dan Wi l l i amson di d t he t al ki ng and I di d t he l i st eni ng. He
t ol d me he had hear d a gr eat deal about my oper at i ons i n t he
st ock mar ket and how he r egr et t ed t hat I had gone out si de of my
bai l i wi ck and come a cr opper i n cot t on. St i l l i t was t o my bad
l uck t hat he owed t he pl easur e of t hat i nt er vi ew wi t h me. He


t hought my f or t e was t he st ock mar ket , t hat I was bor n f or i t
and t hat I shoul d not st r ay f r omi t .
" And t hat i s t he r eason, Mr . Li ver mor e, " he concl uded
pl easant l y, " why we wi sh t o do busi ness wi t h you. "
" Do busi ness how! ?" I asked hi m.
" Be your br oker s, " he sai d. " My f i r m woul d l i ke t o do your
st ock busi ness. "
" I ' d l i ke t o gi ve i t t o you, " I sai d, " but I can' t . "
" Why not ?" he asked.
" I haven' t any money, " I answer ed.
" That par t i s al l r i ght , " he sai d wi t h a f r i endl y smi l e.
" I ' l l f ur ni sh i t . " He t ook out a pocket check book, wr ot e out a
check f or t went y- f i ve t housand dol l ar s t o my or der , and gave i t
t o me.
" What ' s t hi s f or ?" I asked.
" For you t o deposi t i n your own bank. You wi l l dr aw your
own checks. I want you t o do your t r adi ng i n our of f i ce. I don' t
car e whet her you wi n or l ose. I f t hat money goes I wi l l gi ve you
anot her per sonal check. So you don' t have t o be so ver y car ef ul
wi t h t hi s one. See?"
I knew t hat t he f i r m was t oo r i ch and pr osper ous t o need
anybody' s busi ness, much l ess t o gi ve a f el l ow t he money t o put
up as mar gi n. And t hen he was so ni ce about i t ! I nst ead of
gi vi ng me a cr edi t wi t h t he house l i e gave me t he act ual cash,
so t hat he al one knew wher e i t came f r om, t he onl y st r i ng bei ng
t hat i f I t r aded I shoul d do so t hr ough hi s f i r m. And t hen t he
pr omi se t hat t her e woul d be mor e i f t hat went
St i l l , t her e must be a r eason.
" What ' s t he i dea?" I asked hi m.
" The i dea i s si mpl y t hat we want t o have a cust omer i n t hi s
of f i ce who i s known as a bi g act i ve t r ader . Ever ybody knows t hat
you swi ng a bi g l i ne on t he shor t si de, whi ch i s what I
par t i cul ar l y l i ke about you. You ar e known as a pl unger . "
" I st i l l don' t get i t , " I sai d.
" I ' l l be f r ank wi t h you, Mr . Li ver mor e. We have t wo or
t hr ee ver y weal t hy cust omer s who buy and sel l st ocks i n a bi g
way. I don' t want t he St r eet t o suspect t hem of sel l i ng l ong
st ock ever y t i me we sel l t en or t went y t housand shar es of any
st ock. I f t he St r eet knows t hat you ar e t r adi ng i n our of f i ce i t
wi l l not know whet her i t i s your shor t sel l i ng or t he ot her
cust omer s' l ong st ock t hat i s comi ng on t he mar ket . "
I under st ood at once. He want ed t o cover up hi s br ot her -
i n- l aw' s oper at i ons wi t h my r eput at i on as a pl unger ! I t so
happened t hat I had made my bi ggest ki l l i ng on t he bear si de a
year and a hal f bef or e, and, of cour se, t he St r eet gossi ps and


t he st upi d r umor monger s had acqui r ed t he habi t of bl ami ng me
f or ever y decl i ne i n pr i ces. To t hi s day when t he mar ket i s ver y
weak t hey say I amr ai di ng i t .
I di dn' t have t o r ef l ect . I saw at a gl ance t hat Dan
Wi l l i amson was of f er i ng me a chance t o come back and come back
qui ckl y. I t ook t he check, banked i t , opened an account wi t h hi s
f i r m and began t r adi ng. I t was a good act i ve mar ket , br oad
enough f or a man not t o have t o st i ck t o one or t wo speci al t i es.
I had begun t o f ear , as I t ol d you, t hat I had l ost t he knack of
hi t t i ng i t r i ght . But i t seems I hadn' t . I n t hr ee weeks' t i me I
had made a pr of i t of one hundr ed and t wel ve t housand dol l ar s out
of t he t went y- f i ve t housand t hat Dan Wi l l i amson l ent me.
I went t o hi m and sai d, " I ' ve come t o pay you back t hat
t went y- f i ve t housand dol l ar s. "
" No, no! " he sai d and waved me away exact l y as i f I had
of f er ed hi m a cast or - oi l cockt ai l . " No, no, my boy. Wai t unt i l
your account amount s t o somet hi ng. Don' t t hi nk about i t yet .
You' ve onl y got chi cken f eed t her e. "
Ther e i s wher e I made t he mi st ake t hat I have r egr et t ed
mor e t han any ot her I ever made i n my Wal l St r eet car eer . I t was
r esponsi bl e f or l ong and dr ear y year s of suf f er i ng. I shoul d
have i nsi st ed on hi s t aki ng t he money. I was on my way t o a
bi gger f or t une t han I had l ost and wal ki ng pr et t y f ast . For
t hr ee weeks my aver age pr of i t was 150 per cent per week. Fr om
t hen on my t r adi ng woul d be on a st eadi l y i ncr easi ng scal e. But
i nst ead of f r eei ng mysel f f r omal l obl i gat i on I l et hi mhave hi s
way and di d not compel hi m t o accept t he t went y- f i ve t housand
dol l ar s. Of cour se, si nce he di dn' t dr aw out t he t went y- f i ve
t housand dol l ar s he had advanced me I f el t I coul d not ver y wel l
dr aw out my pr of i t . I was ver y gr at ef ul t o hi m, but I am so
const i t ut ed t hat I don' t l i ke t o owe money or f avour s. I t an pay
t he money back wi t h money, but t he f avour s and ki ndnesses I must
pay back i n ki nd and you ar e apt t o f i nd t hese mor al obl i gat i ons
mi ght y hi gh pr i ced at t i mes. Mor eover t her e i s no st at ut e of
l i mi t at i ons.
I l ef t t he money undi st ur bed and r esumed my t r adi ng. I was
get t i ng on ver y ni cel y. I was r ecover i ng my poi se and I was sur e
i t woul d not be ver y l ong bef or e I shoul d get back i nt o my 1907
st r i de. Once I di d t hat , al l I ' d ask f or woul d be f or t he mar ket
t o hol d out a l i t t l e whi l e and I ' d mor e t han make up my l osses.
But maki ng or not maki ng t he money was not bot her i ng me much.
What made me happy was t hat I was l osi ng t he habi t of bei ng
wr ong, of not bei ng mysel f . I t had pl ayed havoc wi t h me f or
mont hs but I had l ear ned my l esson.


J ust about t hat t i me I t ur ned bear and I began t o sel l
shor t sever al r ai l r oad st ocks. Among t hem was Chesapeake &
At l ant i c. I t hi nk I put out a shor t l i ne i n i t ; about ei ght
t housand shar es.
One mor ni ng when I got downt own Dan Wi l l i amson cal l ed me
i nt o hi s pr i vat e of f i ce bef or e t he mar ket opened and sai d t o me:
" Lar r y, don' t do anyt hi ng i n Chesapeake & At l ant i c j ust now.
That was a bad pl ay of your s, sel l i ng ei ght t housand shor t . I
cover ed i t f or you t hi s mor ni ng i n London and went l ong. "
I was sur e Chesapeake & At l ant i c was goi ng down. The t ape
t ol d i t t o me qui t e pl ai nl y; and besi des I was bear i sh on t he
whol e mar ket , not vi ol ent l y or i nsanel y bear i sh, but enough t o
f eel comf or t abl e wi t h a moder at e shor t l i ne out . I sai d t o
Wi l l i amson, " What di d you do t hat f or ? I ambear i sh on t he whol e
mar ket and t hey ar e al l goi ng l ower . "
But he j ust shook hi s head and sai d, " I di d i t because I
happen t o know somet hi ng about Chesapeake & At l ant i c t hat you
coul dn' t know. My advi ce t o you i s not t o sel l t hat st ock shor t
unt i l I t el l you i t i s saf e t o do so. "
What coul d I do? That wasn' t an asi ni ne t i p. I t was advi ce
t hat came f r om t he br ot her - i n- l aw of t he chai r man of t he boar d
of di r ect or s. Dan was not onl y Al vi n Mar quand' s cl osest f r i end
but he had been ki nd and gener ous t o me. He had shown hi s f ai t h
i n me and conf i dence i n my wor d. I coul dn' t do l ess t han t o
t hank hi m. And so my f eel i ngs agai n won over my j udgment and I
gave i n. To subor di nat e my j udgment t o hi s desi r es was t he
undoi ng of me. Gr at i t ude i s somet hi ng a decent man can' t hel p
f eel i ng, but i t i s f or a f el l ow t o keep i t f r omcompl et el y t yi ng
hi mup. The f i r st t hi ng I knew I not onl y had l ost al l my pr of i t
but I owed t he f i r m one hundr ed and f i f t y t housand dol l ar s
besi des. I f el t pr et t y badl y about i t , but Dan t ol d me not t o
wor r y.
" I ' l l get you out of t hi s hol e, " he pr omi sed. " I know I
wi l l . But I can onl y do i t i f you l et me. You wi l l have t o st op
doi ng busi ness on your own hook. I can' t be wor ki ng f or you and
t hen have you compl et el y undo al l my wor k i n your behal f . J ust
you l ay of f t he mar ket and gi ve me a chance t o make some money
f or you. Won' t you, Lar r y?"
Agai n I ask you: What coul d I do? I t hought of hi s ki ndl i -
ness and I coul d not do anyt hi ng t hat mi ght be const r ued as
l acki ng i n appr eci at i on. I had gr own t o l i ke hi m. He was ver y
pl easant and f r i endl y. I r emember t hat al l I got f r om hi m was
encour agement . He kept on assur i ng me t hat ever yt hi ng woul d come
out O. K. One day, per haps si x mont hs l at er , he came t o me wi t h a
pl eased smi l e and gave me some cr edi t sl i ps.


" I t ol d you I woul d pul l you out of t hat hol e, " he sai d,
" and I have. " And t hen I di scover ed t hat not onl y had he wi ped
out t he debt ent i r el y but I had a smal l cr edi t bal ance besi des.
I t hi nk I coul d have r un t hat up wi t hout much t r oubl e, f or
t he mar ket was r i ght , but he sai d t o me, " I have bought you t en
t housand shar es of Sout her n At l ant i c. " That was anot her r oad
cont r ol l ed by hi s br ot her - i n- l aw, Al vi n Mar quand, who al so r ul ed
t he mar ket dest i ni es of t he st ock.
When a man does f or you what Dan Wi l l i amson di d f or me you
can' t say anyt hi ng but " Thank you" - - no mat t er what your mar ket
vi ews may be. You may be sur e you' r e r i ght , but as Pat Hear ne
used t o say: " You can' t t el l t i l l you bet ! " and Dan Wi l l i amson
had bet f or me wi t h hi s money.
Wel l , Sout her n At l ant i c went down and st ayed down and I
l ost , I f or get how much, on my t en t housand shar es bef or e Dan
sol d me out . I owed hi m mor e t han ever . But you never saw a
ni cer or l ess i mpor t unat e cr edi t or i n your l i f e. Never a whi mper
f r om hi m. I nst ead, encour agi ng wor ds and admoni t i ons not t o
wor r y about i t . I n t he end t he l oss was made up f or me i n t he
same gener ous but myst er i ous way.
He gave no det ai l s what ever . They wer e al l number ed
account s. Dan Wi l l i amson woul d j ust say t o me, " We made up your
Sout her n At l ant i c l oss wi t h pr of i t s on t hi s ot her deal , " and
he' d t el l me how he had sol d sevent y- f i ve hundr ed shar es of some
ot her st ock and made a ni ce t hi ng out of i t . I can t r ut hf ul l y
say t hat I never knew a bl essed t hi ng about t hose t r ades of mi ne
unt i l I was t ol d t hat t he i ndebt edness was wi ped out .
Af t er t hat happened sever al t i mes I began t o t hi nk, and I
got t o l ook at my case f r om a di f f er ent angl e. Fi nal l y I
t umbl ed. I t was pl ai n t hat I had been used by Dan Wi l l i amson. I t
made me angr y t o t hi nk i t , but st i l l angr i er t hat I had not
t umbl ed t o i t qui cker . As soon as I had gone over t he whol e
t hi ng i n my mi nd I went t o Dan Wi l l i amson, t ol d hi m I was
t hr ough wi t h t he f i r m, and I qui t t he of f i ce of Wi l l i amson &
Br own. I had no wor ds wi t h hi mor any of hi s par t ner s. What good
woul d t hat have done me? But I wi l l admi t t hat I was sor e at
mysel f qui t e as much as at Wi l l i amson & Br own.
The l oss of t he money di dn' t bot her me. Whenever I have
l ost money i n t he st ock mar ket I have al ways consi der ed t hat I
have l ear ned somet hi ng; t hat i f I have l ost money I have gai ned
exper i ence, so t hat t he money r eal l y went f or a t ui t i on f ee. A
man has t o have exper i ence and he has t o pay f or i t . But t her e
was somet hi ng t hat hur t a whol e l ot i n t hat exper i ence of mi ne
i n Dan Wi l l i amson' s of f i ce, and t hat was t he l oss of a gr eat


oppor t uni t y. The money a man l oses i s not hi ng; he can make i t
up. But oppor t uni t i es such as I had t hen do not come ever y day.
The mar ket , you see, had been a f i ne t r adi ng mar ket . I was
r i ght ; I mean, I was r eadi ng i t accur at el y. The oppor t uni t y t o
make mi l l i ons was t her e. But I al l owed my gr at i t ude t o i nt er f er e
wi t h my pl ay. I t i ed my own hands. I had t o do what Dan
Wi l l i amson i n hi s ki ndness wi shed done. Al t oget her i t was mor e
unsat i sf act or y t han doi ng busi ness wi t h a r el at i ve. Bad
busi ness!
And t hat wasn' t t he wor st t hi ng about i t . I t was t hat af t er
t hat t her e was pr act i cal l y no oppor t uni t y f or me t o make bi g
money. The mar ket f l at t ened out . Thi ngs dr i f t ed f r om bad t o
wor se. I not onl y l ost al l I had but got i nt o debt agai n - - mor e
heavi l y t han ever . Those wer e l ong l ean year s, 1911, 1912, 1913
and 1914. Ther e was no money t o be made. The oppor t uni t y si mpl y
wasn' t t her e and so I was wor se of f t han ever .
I t i sn' t uncomf or t abl e t o l ose when t he l oss i s not accom-
pani ed by a poi gnant vi si on of what mi ght have been. That was
pr eci sel y what I coul d not keep my mi nd f r omdwel l i ng on, and of
cour se i t unset t l ed me f ur t her . I l ear ned t hat t he weaknesses t o
whi ch a specul at or i s pr one ar e al most number l ess. I t was pr oper
f or me as a man t o act t he way I di d i n Dan Wi l l i amson' s of f i ce,
but i t was i mpr oper and unwi se f or me as a specul at or t o al l ow
mysel f t o be i nf l uenced by any consi der at i on t o act agai nst my
own j udgment . Nobl esse obl i ge, but not i n t he st ock mar ket ,
because t he t ape i s not chi val r ous and mor eover does not r ewar d
l oyal t y. I r eal i se t hat I coul dn' t have act ed di f f er ent l y. I
coul dn' t make mysel f over j ust because I wi shed t o t r ade i n t he
st ock mar ket . But busi ness i s busi ness al ways, and my busi ness
as a specul at or i s t o back my own j udgment al ways.
I t was a ver y cur i ous exper i ence. I ' l l t el l you what I
t hi nk happened. Dan Wi l l i amson was per f ect l y si ncer e i n what he
t ol d me when he f i r st saw me. Ever y t i me hi s f i r m di d a f ew
t housand shar es i n any one st ock t he St r eet j umped at t he
concl usi on t hat Al vi n Mar quand was buyi ng or sel l i ng. He was t he
bi g t r ader of t he of f i ce, t o be sur e, and he gave t hi s f i r m al l
hi s busi ness; and he was one of t he best and bi ggest t r ader s
t hey have ever had i n Wal l St r eet . Wel l , I was t o be used as a
smoke scr een, par t i cul ar l y f or Mar quand' s sel l i ng.
Al vi n Mar quand f el l si ck shor t l y af t er I went i n. Hi s ai l -
ment was ear l y di agnosed as i ncur abl e, and Dan Wi l l i amson of
cour se knew i t l ong bef or e : Mar quand hi msel f di d. That i s why
Dan cover ed my Chesapeake & At l ant i c st ock. He had begun t o
l i qui dat e some of hi s br ot her - i n- l aw' s specul at i ve hol di ngs of
t hat and ot her st ocks.


Of cour se when Mar quand di ed t he est at e had t o l i qui dat e
hi s specul at i ve and semi specul at i ve l i nes, and by t hat t i me we
had r un i nt o a bear mar ket . By t yi ng me up t he way he di d, Dan
was hel pi ng t he est at e a whol e l ot . I do not speak boast f ul l y
when I say t hat I was a ver y heavy t r ader and t hat I was dead
r i ght i n my vi ews on t he st ock mar ket . I know t hat Wi l l i amson
r emember ed my successf ul oper at i ons i n t he bear mar ket of 1907
and he coul dn' t af f or d t o r un t he r i sk of havi ng me at l ar ge.
Why, i f I had kept on t he way I was goi ng I ' d have made so much
money t hat by t he t i me he was t r yi ng t o l i qui dat e par t of Al vi n
Mar quand' s est at e I woul d have been t r adi ng i n hundr eds of
t housands of shar es. As an act i ve bear I woul d have done damage
r unni ng i nt o t he mi l l i ons of dol l ar s t o t he Mar quand hei r s, f or
Al vi n l ef t onl y a l i t t l e over a coupl e of hundr ed mi l l i ons.
I t was much cheaper f or t hem t o l et me get i nt o debt and
t hen t o pay of f t he debt t han t o have me i n some ot her of f i ce
oper at i ng act i vel y on t he bear si de. That i s pr eci sel y what I
woul d have been doi ng but f or my f eel i ng t hat I must not be
out done i n decency by Dan Wi l l i amson.
I have al ways consi der ed t hi s t he most i nt er est i ng and most
unf or t unat e of al l my exper i ences as a st ock oper at or . As a
l esson i t cost me a di spr opor t i onat el y hi gh pr i ce. I t put of f
t he t i me of my r ecover y sever al year s. I was young enough t o
wai t wi t h pat i ence f or t he st r ayed mi l l i ons t o come back. But
f i ve year s i s a l ong t i me f or a man t o be poor . Young or ol d, i t
i s not t o be r el i shed. I coul d do wi t hout t he yacht s a gr eat
deal easi er t han I coul d wi t hout a mar ket t o come back on. The
gr eat est oppor t uni t y of a l i f et i me was hol di ng bef or e my ver y
nose t he pur se I had l ost . I coul d not put out my hand and r each
f or i t . A ver y shr ewd boy, t hat Dan Wi l l i amson; as sl i ck as t hey
make t hem; f ar si ght ed, i ngeni ous, dar i ng. He i s a t hi nker , has
i magi nat i on, det ect s t he vul ner abl e spot i n any man and can pl an
col d- bl oodedl y t o hi t i t . He di d hi s own si zi ng up and soon
doped out j ust what t o do t o me i n or der t o r educe me t o
compl et e i nof f ensi veness i n t he mar ket . He di d not act ual l y do
me out of any money. On t he cont r ar y, he was t o al l appear ances
ext r emel y ni ce about i t . He l oved hi s si st er , Mr s. Mar quand, and
he di d hi s dut y t owar d her as he saw i t .



CHAPTER XI V

I T has al ways r ankl ed i n my mi nd t hat af t er I l ef t Wi l l i am-
son & Br own' s of f i ce t he cr eam was of f t he mar ket . We r an smack
i nt o a l ong moneyl ess per i od; f our mi ght y l ean year s. Ther e was
not a penny t o be made. As Bi l l y Henr i quez once sai d, " I t was
t he ki nd of mar ket i n whi ch not even a skunk coul d make a
scent . "
I t l ooked t o me as t hough I was i n Dut ch wi t h dest i ny. I t
mi ght have been t he pl an of Pr ovi dence t o chast en me, but r eal l y
I had not been f i l l ed wi t h such pr i de as cal l ed f or a f al l . I
had not commi t t ed any of t hose specul at i ve si ns whi ch a t r ader
must expi at e on t he debt or si de of t he account . I was not gui l t y
of a t ypi cal sucker pl ay. What I had done, or , r at her , what I
had l ef t undone, was somet hi ng f or whi ch I woul d have r ecei ved
pr ai se and not bl ame nor t h of For t y- second St r eet . I n Wal l
St r eet i t was absur d and cost l y. But by f ar t he wor st t hi ng
about i t was t he t endency i t had t o make a man a l i t t l e l ess
i ncl i ned t o per mi t hi msel f human f eel i ngs i n t he t i cker
di st r i ct .
I l ef t Wi l l i amson' s and t r i ed ot her br oker s' of f i ces. I n
ever y one of t hem I l ost money. I t ser ved me r i ght , because I
was t r yi ng t o f or ce t he mar ket i nt o gi vi ng me what i t di dn' t
have t o gi ve t o wi t , oppor t uni t i es f or maki ng money. I di d not
f i nd any t r oubl e i n get t i ng cr edi t , because t hose who knew me
had f ai t h i n me. You can get an i dea of how st r ong t hei r
conf i dence was when I t el l you t hat when I f i nal l y st opped t r ad-
i ng on cr edi t I owed wel l over one mi l l i on dol l ar s.
The t r oubl e was not t hat I had l ost my gr i p but t hat dur i ng
t hose f our wr et ched year s t he oppor t uni t i es f or maki ng money
si mpl y di dn' t exi st . St i l l I pl ugged al ong, t r yi ng t o make a
st ake and succeedi ng onl y i n i ncr easi ng my i ndebt edness. Af t er I
ceased t r adi ng on my own hook because I woul dn' t owe my f r i ends
any mor e money I made a l i vi ng handl i ng account s f or peopl e who
bel i eved I knew t he game wel l enough t o beat i t even i n a dul l
mar ket . For my ser vi ces I r ecei ved a per cent age of t he pr of i t s
when t her e wer e any. That i s how I l i ved. Wel l , say t hat i s how
I sust ai ned l i f e.
Of cour se, I di dn' t al ways l ose, but I never made enough t o
al l ow me mat er i al l y t o r educe what I owed. Fi nal l y, as t hi ngs
got wor se, I f el t t he begi nni ngs of di scour agement f or t he f i r st
t i me i n my l i f e.
Ever yt hi ng seemed t o have gone wr ong wi t h me. I di d not go
about bewai l i ng t he descent f r om mi l l i ons and yacht s t o debt s
and t he si mpl e l i f e. I di dn' t enj oy t he si t uat i on, but I di d not


f i l l up wi t h sel f - pi t y. I di d not pr opose t o wai t pat i ent l y f or
t i me and Pr ovi dence t o br i ng about t he cessat i on of my
di scomf or t s. I t her ef or e st udi ed my pr obl em. I t was pl ai n t hat
t he onl y way out of my t r oubl es was by maki ng money. To make
money I needed mer el y t o t r ade successf ul l y. I had so t r aded
bef or e and I must do so once mor e. Mor e t han once i n t he past I
had r un up a shoe st r i ng i nt o hundr eds of t housands. Sooner or
l at er t he mar ket woul d of f er me an oppor t uni t y.
I convi nced mysel f t hat what ever was wr ong was wr ong wi t h
me and not wi t h t he mar ket . Now what coul d be t he t r oubl e wi t h
me? I asked mysel f t hat quest i on i n t he same spi r i t i n whi ch I
al ways st udy t he var i ous phases of my t r adi ng pr obl ems. I
t hought about i t cal ml y and came t o, t he concl usi on t hat my mai n
t r oubl e came f r om wor r yi ng over t he money I owed. I was never
f r ee f r om t he ment al di scomf or t of i t . I must expl ai n t o you
t hat i t was not t he mer e consci ousness of my i ndebt edness. Any
busi ness man cont r act s debt s i n t he cour se of hi s r egul ar
busi ness. Most of my debt s wer e r eal l y not hi ng but busi ness
debt s, due t o what wer e unf avour abl e busi ness condi t i ons f or me,
and no wor se t han a mer chant suf f er s f r om, f or i nst ance, when
t her e i s an unusual l y pr ol onged spel l of unseasonabl e weat her .
Of cour se as t i me went on and I coul d not pay I began t o
f eel l ess phi l osophi cal about my debt s. I ' l l expl ai n: I owed
over a mi l l i on dol l ar s - - al l of i t st ock- mar ket l osses,
r emember . Most of my cr edi t or s wer e ver y ni ce and di dn' t bot her
me; but t her e wer e t wo who di d bedevi l me. They used t o f ol l ow
me ar ound. Ever y t i me I made a wi nni ng each of t hem was
J ohnny- on- t he- spot , want i ng t o know al l about i t and i nsi st i ng
on get t i ng t hei r s r i ght of f . One of t hem, t o whom I owed ei ght
hundr ed dol l ar s, t hr eat ened t o sue me, sei ze my f ur ni t ur e, and
so f or t h. I can' t concei ve why he t hought I was conceal i ng
asset s, unl ess i t was t hat I di dn' t qui t e l ook l i ke a st age hobo
about t o di e of dest i t ut i on.
As I st udi ed t he pr obl em I saw t hat i t wasn' t a case t hat
cal l ed f or r eadi ng t he t ape but f or r eadi ng my own sel f . I qui t e
col d- bl oodedl y r eached t he concl usi on t hat I woul d never be abl e
t o accompl i sh anyt hi ng usef ul so l ong as I was wor r i ed, and i t
was equal l y pl ai n t hat I shoul d be wor r i ed so l ong as I owed
money. I mean, as l ong as any cr edi t or had t he power t o vex me
or t o i nt er f er e wi t h my comi ng back by i nsi st i ng upon bei ng pai d
bef or e I coul d get a decent st ake t oget her . Thi s was al l so
obvi ousl y t r ue t hat I sai d t o mysel f , " I must go t hr ough
bankr upt cy. " What el se coul d r el i eve my mi nd?
I t sounds bot h easy and sensi bl e, doesn' t i t ? But i t was
mor e t han unpl easant , I can t el l you. I hat ed t o do i t . I hat ed


t o put mysel f i n a posi t i on t o be mi sunder st ood or mi sj udged. I
mysel f never car ed much f or money. I never t hought enough of i t
t o consi der i t wor t h whi l e l yi ng f or . But I knew t hat ever ybody
di dn' t f eel t hat way. Of cour se I al so knew t hat i f I got on my
f eet agai n I ' d pay ever ybody of f , f or t he obl i gat i on r emai ned.
But unl ess I was abl e t o t r ade i n t he ol d way I ' d never be abl e
t o pay back t hat mi l l i on.
I ner ved mysel f and went t o see my cr edi t or s. I t was a
mi ght y di f f i cul t t hi ng f or me t o do, f or al l t hat most of t hem
wer e per sonal f r i ends or ol d acquai nt ances.
I expl ai ned t he si t uat i on qui t e f r ankl y t o t hem. I sai d
" I am not goi ng t o t ake t hi s st ep because I don' t wi sh t o
pay you but because, i n j ust i ce t o bot h mysel f and you, I must
put mysel f i n a posi t i on t o make money. I have been t hi nki ng of
t hi s sol ut i on of f and on f or over t wo year s, but I si mpl y di dn' t
have t he ner ve t o come out and say so f r ankl y t o you. I t woul d
have been i nf i ni t el y bet t er f or al l of us i f I had. I t al l
si mmer s down t o t hi s: I posi t i vel y cannot be my ol d sel f whi l e I
am har assed or upset by t hese debt s. I have deci ded t o do now
what I shoul d have done a year ago. I have no ot her r eason t han
t he one I have j ust gi ven you. "
What t he f i r st man sai d was t o al l i nt ent s and pur poses
what al l of t hemsai d. He spoke f or hi s f i r m.
" Li ver mor e, " he sai d, " we under st and. We r eal i se your
posi t i on per f ect l y. I ' l l t el l you what we' l l do: we' l l j ust gi ve
you a r el ease. Have your l awyer pr epar e any ki nd of paper you
wi sh, and we' l l si gn i t . "
That was i n subst ance what al l my bi g cr edi t or s sai d. That
i s one si de of Wal l St r eet f or you. I t wasn' t mer el y car el ess
good nat ur e or spor t smanshi p. I t was al so a mi ght y i nt el l i gent
deci si on, f or i t was cl ear l y good busi ness. I appr eci at ed bot h
t he good wi l l and t he busi ness gumpt i on.
These cr edi t or s gave me a r el ease on debt s amount i ng t o
over a mi l l i on dol l ar s. But t her e wer e t he t wo mi nor cr edi t or s
who woul dn' t si gn of f . One of t hem was t he ei ght hundr ed- dol l ar
man I t ol d you about . I al so owed si xt y t housand dol l ar s t o a
br oker age f i r m whi ch had gone i nt o bankr upt cy, and t he
r ecei ver s, who di dn' t know me f r om Adam, wer e on my neck ear l y
and l at e. Even i f t hey had been di sposed t o f ol l ow t he exampl e
set by my l ar gest cr edi t or s I don' t suppose t he cour t woul d have
l et t hem si gn of f . At al l event s my schedul e of bankr upt cy
amount ed t o onl y about one hundr ed t housand dol l ar s; t hough, as
I sai d, I owed wel l over a mi l l i on.
I t was ext r emel y di sagr eeabl e t o see t he st or y i n t he news-
paper s. I had al ways pai d my debt s i n f ul l and t hi s new


exper i ence was most mor t i f yi ng t o me. I knew I ' d pay of f
ever ybody some day i f I l i ved, but ever ybody who r ead t he
ar t i cl e woul dn' t know i t . I was ashamed t o go out af t er I saw
t he r epor t i n t he newspaper s. But i t al l wor e of f pr esent l y and
I cannot t el l you how i nt ense was my f eel i ng of r el i ef t o know
t hat I wasn' t goi ng t o be har r i ed any mor e by peopl e who di dn' t
under st and how a man must gi ve hi s ent i r e mi nd t o hi s busi ness,
i f he wi shes t o succeed i n st ock specul at i on.
My mi nd now bei ng f r ee t o t ake up t r adi ng wi t h some
pr ospect of success, unvexed by debt s, t he next st ep was t o get
anot her st ake. The St ock Exchange had been cl osed f r om J ul y
t hi r t y- f i r st t o t he mi ddl e of December 1914, and Wal l St r eet was
i n t he dumps. Ther e hadn' t been any busi ness what ever i n a l ong
t i me. I owed al l my f r i ends. I coul dn' t ver y wel l ask t hem t o
hel p me agai n j ust because t hey had been so pl easant and
f r i endl y t o me, when I knew t hat nobody was i n a posi t i on t o do
much f or anybody.
I t was a mi ght y di f f i cul t t ask, get t i ng a decent st ake, f or
wi t h t he cl osi ng of t he St ock Exchange t her e was not hi ng t hat I
coul d ask any br oker t o do f or me. I t r i ed i n a coupl e of
pl aces. No use.
Fi nal l y I went t o see Dan Wi l l i amson. Thi s was i n Febr uar y,
1915. I t ol d hi m t hat I had r i d mysel f of t he ment al i ncubus of
debt and I was r eady t o t r ade as of ol d. You wi l l r ecal l t hat
when he needed me he of f er ed me t he use of t went y- f i ve t housand
dol l ar s wi t hout my aski ng hi m.
Now t hat I needed hi mhe sai d, " When you see somet hi ng t hat
l ooks good t o you and you want t o buy f i ve hundr ed shar es go
ahead and i t wi l l be al l r i ght . "
I t hanked hi m and went away. He had kept me f r om maki ng a
gr eat deal of money and t he of f i ce had made a l ot i n commi ssi ons
f r om me. I admi t I was a l i t t l e sor e t o t hi nk t hat Wi l l i amson &
Br own di dn' t gi ve me a decent st ake. I i nt ended t o t r ade
conser vat i vel y at f i r st . I t woul d make my f i nanci al r ecover y
easi er and qui cker i f I coul d begi n wi t h a l i ne a l i t t l e bet t er
t han f i ve hundr ed shar es. But , anyhow, I r eal i sed t hat , such as
i t was, t her e was my chance t o come back.
I l ef t Dan Wi l l i amson' s of f i ce and st udi ed t he si t uat i on i n
gener al and my own pr obl em i n par t i cul ar . I t was a bul l mar ket .
That was as pl ai n t o me as i t was t o t housands of t r ader s. But
my st ake consi st ed mer el y of an of f er t o car r y f i ve hundr ed
shar es f or me. That i s, I had no l eeway, l i mi t ed as I was. I
coul dn' t af f or d even a sl i ght set back at t he begi nni ng. I must
bui l d up my st ake wi t h my ver y f i r st pl ay. That i ni t i al pur chase
of mi ne of f i ve hundr ed shar es must be pr of i t abl e. I had t o make


r eal money. I knew t hat unl ess I had suf f i ci ent t r adi ng capi t al
I woul d not be abl e t o use good j udgment . Wi t hout adequat e
mar gi ns i t woul d be i mpossi bl e t o t ake t he col d- bl ooded,
di spassi onat e at t i t ude t owar d t he game t hat comes f r om t he
abi l i t y t o af f or d a f ew mi nor l osses such as I of t en i ncur r ed i n
t est i ng t he mar ket bef or e put t i ng down t he bi g bet .
I t hi nk now t hat I f ound mysel f t hen at t he most cr i t i cal
per i od of my car eer as a specul at or . I f I f ai l ed t hi s t i me t her e
was no t el l i ng wher e or when, i f ever , I mi ght get anot her st ake
f or anot her t r y. I t was ver y cl ear t hat I si mpl y must wai t f or
t he exact psychol ogi cal moment .
I di dn' t go near Wi l l i amson & Br own' s. I mean, I pur posel y
kept away f r omt hemf or si x l ong weeks of st eady t ape r eadi ng. I
was af r ai d t hat i f I went t o t he of f i ce, knowi ng t hat I coul d
buy f i ve hundr ed shar es, I mi ght be t empt ed i nt o t r adi ng at t he
wr ong t i me or i n t he wr ong st ock. A t r ader , i n addi t i on t o
st udyi ng basi c condi t i ons, r emember i ng mar ket pr ecedent s and
keepi ng i n mi nd t he psychol ogy of t he out si de publ i c as wel l as
t he l i mi t at i ons of hi s br oker s, must al so know hi msel f and
pr ovi de agai nst hi s own weaknesses. Ther e i s no need t o f eel
anger over bei ng human. I have come t o f eel t hat i t i s as
necessar y t o know how t o r ead mysel f as t o know how t o r ead t he
t ape. I have st udi ed and r eckoned on my own r eact i ons t o gi ven
i mpul ses or t o t he i nevi t abl e t empt at i ons of an act i ve mar ket ,
qui t e i n t he same mood and spi r i t as I have consi der ed cr op
condi t i ons or anal ysed r epor t s of ear ni ngs.
So day af t er day, br oke and anxi ous t o r esume t r adi ng, I
sat i n f r ont of a quot at i on- boar d i n anot her br oker ' s of f i ce
wher e I coul dn' t buy or sel l as much as one shar e of st ock,
st udyi ng t he mar ket , not mi ssi ng a si ngl e t r ansact i on on t he
t ape, wat chi ng f or t he psychol ogi cal moment t o r i ng t he f ul l -
speed- ahead bel l .
By r eason of condi t i ons known t o t he whol e wor l d t he st ock
I was most bul l i sh on i n t hose cr i t i cal days of ear l y 1915 was
Bet hl ehem St eel . I was mor al l y cer t ai n i t was goi ng way up, but
i n or der t o make sur e t hat I woul d wi n on my ver y f i r st pl ay, as
I must , I deci ded t o wai t unt i l i t cr ossed par .
I t hi nk I have t ol d you i t has been my exper i ence t hat
whenever a st ock cr osses 100 or 200 or 300 f or t he f i r st t i me,
i t near l y al ways keeps goi ng up f or 30 t o 50 poi nt s and af t er
300 f ast er t han af t er 100 or 200. One of my f i r st bi g coups was
i n Anaconda, whi ch I bought when i t cr ossed 200 and sol d a day
l at er at 260. My pr act i ce of buyi ng a st ock j ust af t er i t
cr ossed par dat ed back t o my ear l y bucket - shop days. I t i s an
ol d t r adi ng pr i nci pl e.


You can i magi ne how keen I was t o get back t o t r adi ng on my
ol d scal e. I was so eager t o begi n t hat I coul d not t hi nk of
anyt hi ng el se; but I hel d mysel f i n l eash. I saw Bet hl ehemSt eel
cl i mb, ever y day, hi gher and hi gher , as I was sur e i t woul d, and
yet t her e I was checki ng my i mpul se t o r un over t o Wi l l i amson &
Br own' s of f i ce and buy f i ve hundr ed shar es. I knew I si mpl y had
t o make my i ni t i al oper at i on as near l y a ci nch as was humanl y
possi bl e.
Ever y poi nt t hat st ock went up meant f i ve hundr ed dol l ar s I
had not made. The f i r st t en poi nt s' advance meant t hat I woul d
have been abl e t o pyr ami d, and i nst ead of f i ve hundr ed shar es I
mi ght now be car r yi ng one t housand shar es t hat woul d be ear ni ng
f or me one t housand dol l ar s a poi nt . But I sat t i ght and i nst ead
of l i st eni ng t o my l oud- mout hed hopes or t o my cl amor ous bel i ef s
I heeded onl y t he l evel voi ce of my exper i ence and t he counsel
of common sense. Once I got a decent st ake t oget her I coul d
af f or d t o t ake chances. But wi t hout a st ake, t aki ng chances,
even sl i ght chances, was a l uxur y ut t er l y beyond my r each. Si x
weeks of pat i ence, but i n t he end, a vi ct or y f or common sense
over gr eed and hope!
I r eal l y began t o waver and sweat bl ood when t he st ock got
up t o go. Thi nk of what I had not made by not buyi ng, when I was
so bul l i sh. Wel l , when i t got t o 98 I sai d t o mysel f , " Bet hl ehem
i s goi ng t hr ough t oo, and when i t does t he r oof i s goi ng t o bl ow
cl ean of f ! " The t ape sai d t he same t hi ng mor e t han pl ai nl y. I n
f act , i t used a megaphone. I t el l you, I saw 100 on t he t ape
when t he t i cker was onl y pr i nt i ng 98. And I knew t hat wasn' t t he
voi ce of my hope or t he si ght of my desi r e, but t he asser t i on of
my t ape- r eadi ng i nst i nct . So I sai d t o mysel f , " I can' t wai t
unt i l i t get s t hr ough 100. I have t o get i t now. I t i s as good
as gone t hr ough par . "
I r ushed t o Wi l l i amson & Br own' s of f i ce and put i n an or der
t o buy f i ve hundr ed shar es of Bet hl ehem St eel . The mar ket was
t hen 98. I got f i ve hundr ed shar es at 98 t o 99. Af t er t hat she
shot r i ght up, and cl osed t hat ni ght , I t hi nk, at 114 or 115. I
bought f i ve hundr ed shar es mor e.
The next day Bet hl ehem St eel was 145 and I had my st ake.
But I ear ned i t . Those si x weeks of wai t i ng f or t he r i ght moment
wer e t he most st r enuous and wear i ng si x weeks I ever put i n. But
i t pai d me, f or I now had enough capi t al t o t r ade i n f ai r - si zed
l ot s. I never woul d have got anywher e j ust on f i ve hundr ed
shar es of st ock.
Ther e i s a gr eat deal i n st ar t i ng r i ght , what ever t he
ent er pr i se may be, and I di d ver y wel l af t er my Bet hl ehem deal
so wel l , i ndeed, t hat you woul d not have bel i eved i t was t he


sel f same man t r adi ng. As a mat t er of f act I wasn' t t he same man,
f or wher e I had been har assed and wr ong I was now at ease and
r i ght . Ther e wer e no cr edi t or s t o annoy and no l ack of f unds t o
i nt er f er e wi t h my t hi nki ng or wi t h my l i st eni ng t o t he t r ut hf ul
voi ce of exper i ence, and so I was wi nni ng r i ght al ong.
Al l of a sudden, as I was on my way t o a sur e f or t une, we
had t he Lusi t ani a br eak. Ever y once i n a whi l e a man get s a
cr ack l i ke t hat i n t he sol ar pl exus, pr obabl y t hat he may be
r emi nded of t he sad f act t hat no human bei ng can be so uni f or ml y
r i ght on t he mar ket as t o be beyond t he r each of unpr of i t abl e
acci dent s. I have hear d peopl e say t hat no pr of essi onal
specul at or need have been hi t ver y har d by t he news of t he
t or pedoi ng of t he Lusi t ani a, and t hey go on t o t el l how t hey had
i t l ong bef or e t he St r eet di d. I was not cl ever enough t o escape
by means of advance i nf or mat i on, and al l I can t el l you i s t hat
on account of what I l ost t hr ough t he Lusi t ani a br eak and one or
t wo ot her r ever ses t hat I wasn' t wi se enough t o f or esee, I f ound
mysel f at t he end of 1915 wi t h a bal ance at my br oker s' of about
one hundr ed and f or t y t housand dol l ar s. That was al l I act ual l y
made, t hough I was consi st ent l y r i ght on t he mar ket t hr oughout
t he gr eat er par t of t he year .
I di d much bet t er dur i ng t he f ol l owi ng year . I was ver y
l ucky. I was r ampant l y bul l i sh i n a wi l d bul l mar ket . Thi ngs
wer e cer t ai nl y comi ng my way so t hat t her e wasn' t anyt hi ng t o do
but t o make money. I t made me r emember a sayi ng of t he l at e H.
H. Roger s, of t he St andar d Oi l Company, t o t he ef f ect t hat t her e
wer e t i mes when a man coul d no mor e hel p maki ng money t han he
coul d hel p get t i ng wet i f he went out i n a r ai nst or m wi t hout an
umbr el l a. I t was t he most cl ear l y def i ned bul l mar ket we ever
had. I t was pl ai n t o ever ybody t hat t he Al l i ed pur chases of al l
ki nds of suppl i es her e made t he Uni t ed St at es t he most
pr osper ous nat i on i n t he wor l d. We had al l t he t hi ngs t hat no
one el se had f or sal e, and we wer e f ast get t i ng al l t he cash i n
t he wor l d. I mean t hat t he wi de wor l d' s gol d was pour i ng i nt o
t hi s count r y i n t or r ent s. I nf l at i on was i nevi t abl e, and, of
cour se, t hat meant r i si ng pr i ces f or ever yt hi ng.
Al l t hi s was so evi dent f r om t he f i r st t hat l i t t l e or no
mani pul at i on f or t he r i se was needed. That was t he r eason why
t he pr el i mi nar y wor k was so much l ess t han i n ot her bul l
mar ket s. And not onl y was t he war - br i de boom mor e nat ur al l y
devel oped t han al l ot her s but i t pr oved unpr ecedent edl y
pr of i t abl e f or t he gener al publ i c. That i s, t he st ock- mar ket
wi nni ngs dur i ng 1915 wer e mor e wi del y di st r i but ed t han i n any
ot her boom i n t he hi st or y of Wal l St r eet . That t he publ i c ( l i d
not t ur n al l t hei r paper pr of i t s i nt o good har d cash or t hat


t hey di d not l ong keep what pr of i t s t hey act ual l y t ook was
mer el y hi st or y r epeat i ng i t sel f . Nowher e does hi st or y i ndul ge i n
r epet i t i ons so of t en or so uni f or ml y as i n Wal l St r eet . When you
r ead cont empor ar y account s of booms or pani cs t he one t hi ng t hat
st r i kes you most f or ci bl y i s how l i t t l e ei t her st ock specul at i on
or st ock specul at or s t oday di f f er f r om yest er day. The game does
not change and nei t her does human nat ur e.
I went al ong wi t h t he r i se i n 1916. I was as bul l i sh as t he
next man, but of cour se I kept my eyes open. I knew, as
ever ybody di d, t hat t her e must be an end, and I was on t he wat ch
f or war ni ng si gnal s. I wasn' t par t i cul ar l y i nt er est ed i n
guessi ng f r om whi ch quar t er t he t i p woul d come and so I di dn' t
st ar e at j ust one spot . I was not , and I never have f el t t hat I
was, wedded i ndi ssol ubl y t o one or t he ot her si de of t he mar ket .
That a bul l mar ket has added t o my bank account or a bear mar ket
has been par t i cul ar l y gener ous I do not consi der suf f i ci ent
r eason f or st i cki ng t o t he bul l or t he bear si de af t er I r ecei ve
t he get - out war ni ng. A man does not swear et er nal al l egi ance t o
ei t her t he bul l or t he bear si de. Hi s concer n l i es wi t h bei ng
r i ght .
And t her e i s anot her t hi ng t o r emember , and t hat i s t hat a
mar ket does not cul mi nat e i n one gr and bl aze of gl or y. Nei t her
does i t end wi t h a sudden r ever sal of f or m. A mar ket can and
does of t en cease t o be a bul l mar ket l ong bef or e pr i ces
gener al l y begi n t o br eak. My l ong expect ed war ni ng came t o me
when I not i ced t hat , one af t er anot her , t hose st ocks whi ch had
been t he l eader s of t he mar ket r eact ed sever al poi nt s f r om t he
t op and f or t he f i r st t i me i n many mont hs - - di d not come back.
Thei r r ace evi dent l y was r un, and t hat cl ear l y necessi t at ed a
change i n my t r adi ng t act i cs.
I t was si mpl e enough. I n a bul l mar ket t he t r end of pr i ces,
of couxse, i s deci dedl y and def i ni t el y upwar d. Ther ef or e
whenever a st ock goes agai nst t he gener al t r end you ar e j ust i -
f i ed i n assumi ng t hat t her e i s somet hi ng wr ong wi t h t hat
par t i cul ar st ock. I t i s enough f or t he exper i enced t r ader t o
per cei ve t hat somet hi ng i s wr ong. He must not expect t he t ape t o
become a l ect ur er . Hi s j ob i s t o l i st en f or i t t o say " Get out ! "
and not wai t f or i t t o submi t a l egal br i ef f or appr oval .
As I sai d bef or e, I not i ced t hat st ocks whi ch had been t he
l eader s of t he wonder f ul advance had ceased t o advance. They
dr opped si x or seven poi nt s and st ayed t her e. At t he same t i me
t he r est of t he mar ket kept on advanci ng under new st andar d
bear er s. Si nce not hi ng wr ong had devel oped wi t h t he compani es
t hemsel ves, t he r eason had t o be sought el sewher e. Those st ocks
had gone wi t h t he cur r ent f or mont hs. When t hey ceased t o do so,


t hough t he bul l t i de was st i l l r unni ng st r ong, i t meant t hat f or
t hose par t i cul ar st ocks t he bul l mar ket was over . For t he r est
of t he l i st t he t endency was st i l l deci dedl y upwar d.
Ther e was no need t o be per pl exed i nt o i nact i vi t y, f or
t her e wer e r eal l y no cr oss cur r ent s. I di d not t ur n bear i sh on
t he mar ket t hen, because t he t ape di dn' t t el l me t o do so. The
end of t he bul l mar ket had not come, t hough i t was wi t hi n
hai l i ng di st ance. Pendi ng i t s ar r i val t her e was st i l l bul l money
t o be made. Such bei ng t he case, I mer el y t ur ned bear i sh on t he
st ocks whi ch had st opped advanci ng and as t he r est of t he mar ket
had r i si ng power behi nd i t I bot h bought and sol d.
The l eader s t hat had ceased t o l ead I sol d. I put out a
shor t l i ne of f i ve t housand shar es i n each of t hem; and t hen I
went l ong of t he new l eader s. The st ocks I was shor t of di dn' t
do much, but my l ong st ocks kept on r i si ng. When f i nal l y t hese
i n t ur n ceased t o advance I sol d t hem out and went shor t f i ve
t housand shar es of each. By t hi s t i me I was mor e bear i sh t han
bul l i sh, because obvi ousl y t he next bi g money was goi ng t o be
made on t he down si de. Whi l e I f el t cer t ai n t hat t he bear mar ket
had r eal l y begun bef or e t he bul l mar ket had r eal l y ended, I knew
t he t i me f or bei ng a r ampant bear was not yet . Ther e was no
sense i n bei ng mor e r oyal i st t han t he ki ng; especi al l y i n bei ng
so t oo soon. The t ape mer el y sai d t hat pat r ol l i ng par t i es f r om
t he mai n bear ar my had dashed by. Ti me t o get r eady.
I kept on bot h buyi ng and sel l i ng unt i l af t er about a
mont h' s t r adi ng I had out a shor t l i ne of si xt y t housand shar es
- - f i ve t housand shar es each i n a dozen di f f er ent st ocks whi ch
ear l i er i n t he year had been t he publ i c' s f avour i t es because
t hey had been t he l eader s of t he gr eat bul l mar ket . I t was not a
ver y heavy l i ne; but don' t f or get t hat nei t her was t he mar ket
def i ni t el y bear i sh.
Then one day t he ent i r e mar ket became qui t e weak and pr i ces
of al l st ocks began t o f al l . When I had a pr of i t of at l east
f our poi nt s i n each and ever y one of t he t wel ve st ocks t hat I
was shor t of , I knew t hat I was r i ght . The t ape t ol d me i t was
now saf e t o be bear i sh, so I pr ompt l y doubl ed up.
I had my posi t i on. I was shor t of st ocks i n a mar ket t hat
now was pl ai nl y a bear mar ket . Ther e wasn' t any need f or me t o
push t hi ngs al ong. The mar ket was bound t o go my way, and,
knowi ng t hat , I coul d af f or d t o wai t . Af t er I doubl ed up I
di dn' t make anot her t r ade f or a l ong t i me. About seven weeks
af t er I put out my f ul l l i ne, we had t he f amous " l eak, " and
st ocks br oke badl y. I t was sai d t hat somebody had advance news
f r om Washi ngt on t hat Pr esi dent Wi l son was goi ng t o i ssue a
message t hat woul d br i ng back t he dove of peace t o Eur ope i n a


hur r y. Of cour se t he war - br i de boom was st ar t ed and kept up by
t he Wor l d War , and peace was a bear i t em. When one of t he
cl ever est t r ader s on t he f l oor was accused of pr of i t i ng by
advance i nf or mat i on he si mpl y sai d he had sol d st ocks not on any
news but because he consi der ed t hat t he bul l mar ket was
over r i pe. I mysel f had doubl ed my l i ne of shor t s seven weeks
bef or e.
On t he news t he mar ket br oke badl y and I nat ur al l y cover ed.
I t was t he onl y pl ay possi bl e. When somet hi ng happens on whi ch
you di d not count when you made your pl ans i t behooves you t o
ut i l i se t he oppor t uni t y t hat a ki ndl y f at e of f er s you. For one
t hi ng, on a bad br eak l i ke t hat you have a bi g mar ket , one t hat
you can t ur n ar ound i n, and t hat i s t he t i me t o t ur n your paper
pr of i t s i nt o r eal money. Even i n a bear mar ket a man cannot
al ways cover one hundr ed and t went y t housand shar es of st ock
wi t hout put t i ng up t he pr i ce on hi msel f . He must wai t f or t he
mar ket t hat wi l l al l ow hi m t o buy t hat much at no damage t o hi s
pr of i t as i t st ands hi mon paper .
I shoul d l i ke t o poi nt out t hat I was not count i ng on t hat
par t i cul ar br eak at t hat par t i cul ar t i me f or t hat par t i cul ar
r eason. But , as I have t ol d you bef or e, my exper i ence of t hi r t y
year s as a t r ader i s t hat such acci dent s ar e usual l y al ong t he
l i ne of l east r esi st ance on whi ch I base my posi t i on i n t he
mar ket . Anot her t hi ng t o bear i n mi nd i s t hi s: Never t r y t o sel l
at t he t op. I t i sn' t wi se. Sel l af t er a r eact i on i f t her e i s no
r al l y.
I cl ear ed about t hr ee mi l l i on dol l ar s i n 1916 by bei ng
bul l i sh as l ong as t he bul l mar ket l ast ed and t hen by bei ng
bear i sh when t he bear mar ket st ar t ed. As I sai d bef or e, a man
does not have t o mar r y one si de of t he mar ket t i l l deat h do t hem
par t .
That wi nt er I went Sout h, t o Pal m Beach, as I usual l y do
f or a vacat i on, because I amver y f ond of sal t - wat er f i shi ng. I
was shor t of st ocks and wheat , and bot h l i nes showed me a
handsome pr of i t . Ther e wasn' t anyt hi ng t o annoy me and I was
havi ng a good t i me. Of cour se t j nl ess I go t o Eur ope I cannot
r eal l y be out of t ouch wi t h t he st ock or commodi t i es mar ket s.
For i nst ance, i n t he Adi r ondacks I have a di r ect wi r e f r om my
br oker ' s of f i ce t o my house.
I n Pal m Beach I used t o go t o my br oker ' s br anch of f i ce
r egul ar l y. I not i ced t hat cot t on, i n whi ch I had no i nt er est ,
was st r ong and r i si ng. About t hat t i me t hi s was i n 1917 - - I
hear d a gr eat deal about t he ef f or t s t hat Pr esi dent Wi l son was
maki ng t o br i ng about peace. The r epor t s came f r om Washi ngt on,
bot h i n t he shape of pr ess di spat ches and pr i vat e advi ces t o


f r i ends i n Pal m Beach. That i s t he r eason why one day I got t he
not i on t hat t he cour se of t he var i ous mar ket s r ef l ect ed
conf i dence i n Mr . Wi l son' s success. Wi t h peace supposedl y cl ose
at hand, st ocks and wheat ought t o go down and cot t on up. I was
al l set as f ar as st ocks and wheat went , but I had not done
anyt hi ng i n cot t on i n some t i me.
At 2: 20 t hat af t er noon I di d not own a si ngl e bal e, but at
2: 25 my bel i ef t hat peace was i mpendi ng made me buy f i f t een
t housand bal es as a st ar t er . I pr oposed t o f ol l ow my ol d syst em
of t r adi ng - - t hat i s, of buyi ng my f ul l l i ne, whi ch I have
al r eady descr i bed t o you.
That ver y af t er noon, af t er t he mar ket cl osed, we got t he
Unr est r i ct ed War f ar e not e. Ther e wasn' t anyt hi ng t o do except t o
wai t f or t he mar ket t o open t he next day. I r ecal l t hat at
Gr i dl ey' s t hat ni ght one of t he gr eat est capt ai ns of i ndust r y i n
t he count r y was of f er i ng t o sel l any amount of Uni t ed St at es
St eel at f i ve poi nt s bel ow t he cl osi ng pr i ce t hat af t er noon.
Ther e wer e sever al Pi t t sbur gh mi l l i onai r es wi t hi n hear i ng.
Nobody t ook t he bi g man' s of f er . They knew t her e was bound t o be
a whoppi ng bi g br eak at t he openi ng.
Sur e enough, t he next mor ni ng t he st ock and commodi t y
mar ket s wer e i n an upr oar , as you can i magi ne. Some st ocks
opened ei ght poi nt s bel ow t he pr evi ous ni ght ' s cl ose. To me t hat
meant a heaven- sent oppor t uni t y t o cover al l my shor t s
pr of i t abl y. As I sai d bef or e, i n a bear mar ket i t i s al ways wi se
t o cover i f compl et e demor al i sat i on suddenl y devel ops. That i s
t he onl y way, i f you swi ng a good- si zed l i ne, of t ur ni ng a bi g
paper pr of i t i nt o r eal money bot h qui ckl y and wi t hout
r egr et t abl e r educt i ons. For i nst ance, I was shor t f i f t y t housand
shar es of Uni t ed St at es St eel al one. Of cour se I was shor t of
ot her st ocks, and when I saw I had t he mar ket t o cover i n, I
( l i d. My pr of i t s amount ed t o about one and a hal f mi l l i on
dol l ar s. I t was not a chance t o di sr egar d.
Cot t on, of whi ch I was l ong f i f t een t housand bal es, bought
i n t he l ast hal f hour of t he t r adi ng t he pr evi ous af t er noon,
opened down f i ve hundr ed poi nt s. Some br eak! I t meant an
over ni ght l oss of t hr ee hundr ed and sevent y- f i ve t housand
dol l ar s. Whi l e i t was per f ect l y cl ear t hat t he onl y wi se pl ay i n
st ocks and wheat was t o cover on t he br eak I was not so cl ear as
t o what I ought t o do i n cot t on. Ther e wer e var i ous t hi ngs t o
consi der , and whi l e I al ways t ake my l oss t he moment I am
convi nced I am wr ong, I di d not l i ke t o t ake t hat l oss t hat
mor ni ng. Then I r ef l ect ed t hat I had gone Sout h t o have a good
t une f i shi ng i nst ead of per pl exi ng mysel f over t he cour se of t he
cot t on mar ket . And, mor eover , I had t aken such bi g pr of i t s i n my


wheat and i n st ocks t hat I deci ded t o t ake my l oss i n cot t on. I
woul d f i gur e t hat my pr of i t had been a l i t t l e mor e t han one
mi l l i on i nst ead of over a mi l l i on and a hal f . I t was al l a
mat t er of bookkeepi ng, as pr omot er s ar e apt t o t el l you when you
ask t oo many quest i ons.
I f I hadn' t bought t hat cot t on j ust bef or e t he mar ket
cl osed t he day bef or e, I woul d have saved t hat f our hundr ed
t housand dol l ar s. I t shows you how qui ckl y a man may l ose bi g
money on a moder at e l i ne. My mai n posi t i on was absol ut el y
cor r ect and I benef i t ed by an acci dent of a nat ur e di amet r i cal l y
opposi t e t o t he consi der at i ons t hat l ed me t o t ake t he posi t i on
I di d i n st ocks and wheat . Obser ve, pl ease, t hat t he specul at i ve
l i ne of l east r esi st ance agai n demonst r at ed i t s val ue t o a
t r ader . Pr i ces went as I expect ed, not wi t hst andi ng t he
unexpect ed mar ket f act or i nt r oduced by t he Ger man not e. I f
t hi ngs had t ur ned out as I had f i gur ed I woul d have been i oo per
cent r i ght i n al l t hr ee of my l i nes, f or wi t h peace st ocks and
wheat woul d have gone down and cot t on woul d have gone ki t i ng up.
I woul d have cl eaned up i n al l t hr ee. I r r espect i ve of peace or
war , I was r i ght i n my posi t i on on t he st ock mar ket and i n wheat
and t hat i s why t he unl ooked f or event hel ped. I n cot t on I based
my pl ay on somet hi ng t hat mi ght happen out si de of t he mar ket - -
t hat i s, I bet on Mr . Wi l son' s success i n hi s peace
negot i at i ons. I t was t he Ger man mi l i t ar y l eader s who made me
l ose t he cot t on bet .
When I r et ur ned t o New Yor k ear l y i n 1917 I pai d back al l
t he money I owed, whi ch was over a mi l l i on dol l ar s. I f was a
gr eat pl easur e t o me t o pay my debt s. I mi ght have pai d i t back
a f ew mont hs ear l i er , but I di dn' t f or a ver y si mpl e r eason. I
was t r adi ng act i vel y and successf ul l y and I needed al l t he
capi t al I had. I owed i t t o mysel f as wel l as t o t he men I
consi der ed my cr edi t or s t o t ake ever y advant age of t he wonder f ul
mar ket s we had i n 1915 and 1916. I knew t hat I woul d make a
gr eat deal of money and I wasn' t wor r yi ng because I was l et t i ng
t hem wai t a f ew mont hs l onger f or money many of t hem never
expect ed t o get back. I di d not wi sh t o pay of f my obl i gat i ons
i n dr i bl et s or t o one man at a t i me, but i n f ul l t o al l at once.
So as l ong as t he mar ket was doi ng al l i t coul d f or me I j ust
kept on t r adi ng on as bi g a scal e as my r esour ces per mi t t ed.
I wi shed t o pay i nt er est , but al l t hose cr edi t or s who had
si gned r el eases posi t i vel y r ef used t o accept i t . The man I pai d
of f t he l ast of al l was t he chap I owed t he ei ght hundr ed
dol l ar s t o, who had made my l i f e a bur den and had upset me unt i l
I coul dn' t t r ade. I l et hi m wai t unt i l he hear d t hat I had pai d
of f al l t he ot her s. Then he got hi s money. I want ed t o t each hi m


t o be consi der at e t he next t i me somebody owed hi m a f ew
hundr eds.
And t hat i s how I came back.
Af t er I pai d of f my debt s i n f ul l I put a pr et t y f ai r
amount i nt o annui t i es. I made up my mi nd I wasn' t goi ng t o be
st r apped and uncomf or t abl e and mi nus a st ake ever agai n. Of
cour se, af t er I mar r i ed I put some money i n t r ust f or my wi f e.
And af t er t he boy came I put some i n t r ust f or hi m.
The r eason I di d t hi s was not al one t he f ear t hat t he st ock
mar ket mi ght t ake i t away f r omme, but because I knew t hat a man
wi l l spend anyt hi ng he can l ay hi s hands on. By doi ng what I di d
my wi f e and chi l d ar e saf e f r omme.
Mor e t han one man I know has done t he same t hi ng, but has
coaxed hi s wi f e t o si gn of f when he needed t he money, and he has
l ost i t . But I have f i xed i t up so t hat no mat t er what I want or
what my wi f e want s, t hat t r ust hol ds. I t i s absol ut el y saf e f r om
al l at t acks by ei t her of us; saf e f r om my mar ket needs; saf e
even f r oma devot ed wi f e' s l ove. I ' mt aki ng no chances!



CHAPTER XV

AMONG t he hazar ds of specul at i on t he happeni ng of t he
unexpect ed, I mi ght even say of t he unexpect abl e r anks hi gh.
Ther e ar e cer t ai n chances t hat t he most pr udent man i s j ust i f i ed
i n t aki ng chances t hat he must t ake i f he wi shes t o be mor e t han
a mer cant i l e mol l usk. Nor mal busi ness hazar ds ar e no wor se t han
t he r i sks a man r uns when he goes out of hi s house i nt o t he
st r eet or set s out on a r ai l r oad j our ney. When I l ose money by
r eason of some devel opment whi ch nobody coul d f or esee I t hi nk no
mor e vi ndi ct i vel y of i t t han I do of an i nconveni ent l y t i med
st or m. Li f e i t sel f f r om t he cr adl e t o t he gr ave i s a gambl e and
what happens t o me because I do not possess t he gi f t of second
si ght I can bear undi st ur bed. But t her e have been t i mes i n my
car eer as a specul at or when I have bot h been r i ght and pl ayed
squar e and never t hel ess I have been cheat ed out of my ear ni ngs
by t he sor di d unf ai r ness of unspor t smanl i ke opponent s.
Agai nst mi sdeeds by cr ooks, cowar ds and cr owds a qui ck-
t hi nki ng or f ar - si ght ed busi ness man can pr ot ect hi msel f . I have
never gone up agai nst downr i ght di shonest y except i n a bucket
shop or t wo because even t her e honest y was t he best pol i cy; t he
bi g money was i n bei ng squar e and not i n wel shi ng. I have never
t hought i t good busi ness t o pl ay any game i n any pl ace wher e i t
was necessar y t o keep an eye on t he deal er because he was l i kel y
t o cheat i f unwat ched. But agai nst t he whi ni ng wel sher t he
decent man i s power l ess. Fai r pl ay i s f ai r pl ay. I coul d t el l
you a dozen i nst ances wher e I have been t he vi ct i m of my own
bel i ef i n t he sacr edness of t he pl edged wor d or of t he
i nvi ol abi l i t y of a gent l emen' s agr eement . I shal l not do so
because no usef ul pur pose can be ser ved t her eby.
Fi ct i on wr i t er s, cl er gymen and women ar e f ond of al l udi ng
t o t he f l oor of t he St ock Exchange as a boodl er s' bat t l ef i el d
and t o Wal l St r eet ' s dai l y busi ness as a f i ght . I t i s qui t e
dr amat i c but ut t er l y mi sl eadi ng. I do not t hi nk t hat my busi ness
i s st r i f e and cont est . I never f i ght ei t her i ndi vi dual s or
specul at i ve cl i ques. I mer el y di f f er i n opi ni on - - t hat i s, i n
my r eadi ng of basi c condi t i ons. What pl aywr i ght s cal l bat t l es of
busi ness ar e not f i ght s bet ween human bei ngs. They ar e mer el y
t est s of busi ness vi si on. I t r y t o st i ck t o f act s and f act s
onl y, and gover n my act i ons accor di ngl y. That i s Ber nar d M.
Bar uch' s r eci pe f or success i n weal t h- wi nni ng. Somet i mes I do
not see t he f act s, al l t he f act s cl ear l y enough or ear l y enough;
or el se I do not r eason l ogi cal l y. Whenever any of t hese t hi ngs
happen I l ose. I am wr ong. And i t al ways cost s me money t o be
wr ong.


No r easonabl e man obj ect s t o payi ng f or hi s mi st akes. Ther e
ar e no pr ef er r ed cr edi t or s i n mi st ake- maki ng and no except i ons
or exempt i ons. But I obj ect t o l osi ng money when I am r i ght . I
do not mean, ei t her , t hose deal s t hat have cost me money because
of sudden changes i n t he r ul es of some par t i cul ar exchange. I
have i n mi nd cer t ai n hazar ds of specul at i on t hat f r om t i me t o
t i me r emi nd a man t hat no pr of i t shoul d be count ed saf e unt i l i t
i s deposi t ed i n your bank t o your cr edi t .
Af t er t he Gr eat War br oke out i n Eur ope t her e began t he
r i se i n t he pr i ces of commodi t i es t hat was t o be expect ed. I t
was as easy t o f or esee t hat as t o f or esee war i nf l at i on. Of
cour se t he gener al advance cont i nued as t he war pr ol onged
i t sel f . As you may r emember , I was busy " comi ng back" i n 1915.
The boom i n st ocks was t her e and i t was my dut y t o ut i l i se i t .
My saf est , easi est and qui ckest bi g pl ay was i n t he st ock
mar ket , and I was l ucky, as you know.
By J ul y, 1917, I not onl y had been abl e t o pay of f al l my
debt s but was qui t e a l i t t l e t o t he good besi des. Thi s meant
t hat I now had t he t i me, t he money and t he i ncl i nat i on t o con-
si der t r adi ng i n commodi t i es as wel l as i n st ocks. For many
year s I have made i t my pr act i ce t o st udy al l t he mar ket s. The
advance i n commodi t y pr i ces over t he pr ewar l evel r anged f r om
i oo t o 4oo per cent . Ther e was onl y one except i on, and t hat was
cof f ee. Of cour se t her e was a r eason f or t hi s. The br eaki ng out
of t he war meant t he cl osi ng up of Eur opean mar ket s and huge
car goes wer e sent t o t hi s count r y, whi ch was t he one bi g mar ket .
That l ed i n t i me t o an enor mous sur pl us of r aw cof f ee her e, and
t hat , i n t ur n, kept t he pr i ce l ow. Why, when I f i r st began t o
consi der i t s specul at i ve possi bi l i t i es cof f ee was act ual l y
sel l i ng bel ow pr ewar pr i ces. I f t he r easons f or t hi s anomal y
wer e pl ai n, no l ess pl ai n was i t t hat t he act i ve and
i ncr easi ngl y ef f i ci ent oper at i on by t he Ger man and Aust r i an
submar i nes must mean an appal l i ng r educt i on i n t he number of
shi ps avai l abl e f or commer ci al pur poses. Thi s event ual l y i n t ur n
must l ead t o dwi ndl i ng i mpor t s of cof f ee. Wi t h r educed r ecei pt s
and an unchanged consumpt i on t he sur pl us st ocks must be
absor bed, and when t hat happened t he pr i ce of cof f ee must do
what t he pr i ces of al l ot her commodi t i es had done, whi ch was, go
way up.
I t di dn' t r equi r e a Sher l ock Hol mes t o si ze up t he
si t uat i on. Why ever ybody di d not buy cof f ee I cannot t el l you.
When I deci ded t o buy i t I di d not consi der i t a specul at i on. I t
was much mor e of an i nvest ment . I knew i t woul d t ake t i me t o
cash i n, but I knew al so t hat i t was bound t o yi el d a good


pr of i t . That made i t a conser vat i ve i nvest ment oper at i on - - a
banker ' s act r at her t han a gambl er ' s pl ay.
I st ar t ed my buyi ng oper at i ons i n t he wi nt er of 1917. I
t ook qui t e a l ot of cof f ee. The mar ket , however , di d not hi ng t o
speak of . I t cont i nued i nact i ve and as f or t he pr i ce, i t di d not
go up as I had expect ed. The out come of i t al l was t hat I si mpl y
car r i ed my l i ne t o no pur pose f or ni ne l ong mont hs. My cont r act s
expi r ed t hen and I sol d out al l my opt i ons. I t ook a whoppi ng
bi g l oss on t hat deal and yet I was sur e my vi ews wer e sound. I
had been cl ear l y wr ong i n t he mat t er of t i me, but I was
conf i dent t hat cof f ee must advance as al l commodi t i es had done,
so t hat no sooner had I sol d out my l i ne t han I st ar t ed i n t o
buy agai n. I bought t hr ee t i mes as much cof f ee as I had so
unpr of i t abl y car r i ed dur i ng t hose ni ne di sappoi nt i ng mont hs. Of
cour se I bought def er r ed opt i ons f or as l ong a t i me as I coul d
get .
I was not so wr ong now. As soon as I had t aken on my
t r ebl ed l i ne t he mar ket began t o go up. Peopl e ever ywher e seemed
t o r eal i se al l of a sudden what was bound t o happen i n t he
cof f ee mar ket . I t began t o l ook as i f my i nvest ment was goi ng t o
r et ur n me a mi ght y good r at e of i nt er est .
The sel l er s of t he cont r act s I hel d wer e r oast er s, most l y
of Ger man names and af f i l i at i ons, who had bought t he cof f ee i n
Br azi l conf i dent l y expect i ng t o br i ng i t t o t hi s count r y. But
t her e wer e no shi ps t o br i ng i t , and pr esent l y t hey f ound
t hemsel ves i n t he uncomf or t abl e posi t i on of havi ng no end of
cof f ee down t her e and bei ng heavi l y shor t of i t t o me up her e.
Pl ease bear i n mi nd t hat I f i r st became bul l i sh on cof f ee
whi l e t he pr i ce was pr act i cal l y at a pr e- war l evel , and don' t
f or get t hat af t er I bought i t I car r i ed i t t he gr eat er par t of a
year and t hen t ook a bi g l oss on i t . The puni shment f or bei ng
wr ong i s t o l ose money. The r ewar d f or bei ng r i ght i s t o make
money. Bei ng cl ear l y r i ght and car r yi ng a bi g l i ne, I was
j ust i f i ed i n expect i ng t o make a ki l l i ng. I t woul d not t ake much
of an advance t o make my pr of i t sat i sf act or y t o me, f or I was
car r yi ng sever al hundr ed t housand bags. I don' t l i ke t o t al k
about my oper at i ons i n f i gur es because somet i mes t hey sound
r at her f or mi dabl e and peopl e mi ght t hi nk I was boast i ng. As a
mat t er of f act I t r ade i n accor dance t o my means and al ways
l eave mysel f an ampl e mar gi n of saf et y. I n t hi s i nst ance I was
conser vat i ve enough. The r eason I bought opt i ons so f r eel y was
because I coul dn' t see how I coul d l ose. Condi t i ons wer e i n my
f avour . I had been made t o wai t a year , but now I was goi ng t o
be pai d bot h f or my wai t i ng and f or bei ng r i ght . I coul d see t he


pr of i t comi ng f ast . Ther e wasn' t any cl ever ness about i t . I t was
si mpl y t hat I wasn' t bl i nd.
Comi ng sur e and f ast , t hat pr of i t of mi l l i ons! But i t never
r eached me. No, i t wasn' t si de- t r acked by a sudden change i n
condi t i ons. The mar ket di d not exper i ence an abr upt r ever sal of
f or m. Cof f ee di d not pour i nt o t he count r y. What happened? The
unexpect abl e! What had never happened i n anybody' s exper i ence;
what I t her ef or e had no r eason t o guar d agai nst . I added a new
one t o t he l ong l i st of hazar ds of specul at i on t hat I must
al ways keep bef or e me. I t was si mpl y t hat t he f el l ows who had
sol d me t he cof f ee, t he shor t s, knew what was i n st or e f or t hem,
and i n t hei r ef f or t s t o squi r m out of t he posi t i on i nt o whi ch
t hey had sol d t hemsel ves, devi sed a new way of wel shi ng. They
r ushed t o Washi ngt on f or hel p, and got i t .
Per haps you r emember t hat t he Gover nment had evol ved
var i ous pl ans f or pr event i ng f ur t her pr of i t eer i ng i n
necessi t i es. You know how most of t hem wor ked. Wel l , t he
phi l ant hr opi c cof f ee shor t s appear ed bef or e t he Pr i ce Fi xi ng
Commi t t ee of t he War I ndust r i es Boar d, I t hi nk t hat was t he
of f i ci al desi gnat i on and made a pat r i ot i c appeal t o t hat body t o
pr ot ect t he Amer i can br eakf ast er . They asser t ed t hat a
pr of essi onal specul at or , one Lawr ence Li ver mor e, had cor ner ed,
or was about t o cor ner , cof f ee. I f hi s specul at i ve pl ans wer e
not br ought t o naught he woul d t ake advant age of t he condi t i ons
cr eat ed by t he war and t he Amer i can peopl e woul d be f or ced t o
pay exor bi t ant pr i ces f or t hei r dai l y cof f ee. I t was unt hi nkabl e
t o t he pat r i ot s who had sol d me car goes of cof f ee t hey coul dn' t
f i nd shi ps f or , t hat one hundr ed mi l l i ons of Amer i cans, mor e or
l ess, shoul d pay t r i but e t o consci encel ess specul at or s. They
r epr esent ed t he cof f ee t r ade, not t he cof f ee gambl er s, and t hey
wer e wi l l i ng t o hel p t he Gover nment cur b pr of i t eer i ng act ual or
pr ospect i ve.
Now I have a hor r or of whi ner s and I do not mean t o
i nt i mat e t hat t he Pr i ce Fi xi ng Commi t t ee was not doi ng i t s
honest best t o cur b pr of i t eer i ng and wast ef ul ness. But t hat need
not st op me f r omexpr essi ng t he opi ni on t hat t he commi t t ee coul d
not have gone ver y deepl y i nt o t he par t i cul ar pr obl em of t he
cof f ee mar ket . They f i xed on a maxi mum pr i ce f or r aw cof f ee and
al so f i xed a t i me l i mi t f or cl osi ng out al l exi st i ng cont r act s.
Thi s deci si on meant , of cour se, t hat t he Cof f ee Exchange woul d
have t o go out of busi ness. Ther e was onl y one t hi ng f or me t o
do and I di d i t , and t hat was t o sel l out al l my cont r act s.
Those pr of i t s of mi l l i ons t hat I had deemed as cer t ai n t o come
my way as any I ever made f ai l ed compl et el y t o mat er i al i se. I
was and am as keen as anybody agai nst t he pr of i t eer i n t he


necessar i es of l i f e, but at t he t i me t he Pr i ce Fi xi ng Commi t t ee
made t hei r r ul i ng on cof f ee, al l ot her commodi t i es wer e sel l i ng
at f r om 250 t o 400 per cent above pr e- war pr i ces whi l e r aw
cof f ee was act ual l y bel ow t he aver age pr evai l i ng f or some year s
bef or e t he war . I can' t see t hat i t made any r eal di f f er ence who
hel d t he cof f ee. The pr i ce was bound t o advance; and t he r eason
f or t hat was not t he oper at i ons of consci encel ess specul at or s,
but t he dwi ndl i ng sur pl us f or whi ch t he di mi ni shi ng i mpor t at i ons
wer e r esponsi bl e, and t hey i n t ur n wer e af f ect ed excl usi vel y by
t he appal l i ng dest r uct i on of t he wor l d' s shi ps by t he Ger man
submar i nes. The commi t t ee di d not wai t f or cof f ee t o st ar t ; t hey
cl amped on t he br akes.
As a mat t er of pol i cy and of expedi ency i t was a mi st ake t o
f or ce t he Cof f ee Exchange t o cl ose j ust t hen. I f t he commi t t ee
had l et cof f ee al one t he pr i ce undoubt edl y woul d have r i sen f or
t he r easons I have al r eady st at ed, whi ch had not hi ng t o do wi t h
any al l eged cor ner . But t he hi gh pr i ce, whi ch need not have been
exor bi t ant woul d have been an i ncent i ve t o at t r act suppl i es t o
t hi s mar ket . I have hear d Mr . Ber nar d M. Bar uch say t hat t he War
I ndust r i es Boar d t ook i nt o consi der at i on t hi s f act or - - t he
i nsur i ng of a suppl y- i n f i xi ng pr i ces, and f or t hat r eason some
of t he compl ai nt s about t he hi gh l i mi t on cer t ai n commodi t i es
wer e unj ust . When t he Cof f ee Exchange r esumed busi ness, l at er
on, cof f ee sol d at t went y- t hr ee cent s. The Amer i can peopl e pai d
t hat pr i ce because of t he smal l suppl y, and t he suppl y was smal l
because t he pr i ce had been f i xed t oo l ow, at t he suggest i on of
phi l ant hr opi c shor t s, t o make i t possi bl e t o pay t he hi gh ocean
f r ei ght s and t hus i nsur e cont i nued i mpor t at i ons.
I have al ways t hought t hat my cof f ee deal was t he most
l egi t i mat e of al l my t r ades i n commodi t i es. I consi der ed i t mor e
of an i nvest ment t han a specul at i on. I was i n i t over a year . I f
t her e was any gambl i ng i t was done by t he pat r i ot i c r oast er s
wi t h Ger man names and ancest r y. They had cof f ee i n Br azi l and
t hey sol d i t t o me i n New Yor k. The Pr i ce Fi xi ng Commi t t ee f i xed
t he pr i ce of t he onl y commodi t y t hat had not advanced. They
pr ot ect ed t he publ i c agai nst pr of i t eer i ng bef or e i t st ar t ed, but
not agai nst t he i nevi t abl e hi gher pr i ces t hat f ol l owed. Not onl y
t hat , but even when gr een cof f ee hung ar ound ni ne cent s a pound,
r oast ed cof f ee went up wi t h ever yt hi ng el se. I t was onl y t he
r oast er s who benef i t ed. I f t he pr i ce of gr een cof f ee had gone up
t wo or t hr ee cent s a pound i t woul d have meant sever al mi l l i ons
f or me. And i t woul dn' t have cost t he publ i c as much as t he
l at er advance di d.
Post - mor t ems i n specul at i on ar e a wast e of t i me. They get
you nowher e. But t hi s par t i cul ar deal has a cer t ai n educat i onal


val ue. I t was as pr et t y as any I ever went i nt o. The r i se was so
sur e, so l ogi cal , t hat I f i gur ed t hat I si mpl y coul dn' t hel p
maki ng sever al mi l l i ons of dol l ar s. But I di dn' t .
On t wo ot her occasi ons I have suf f er ed f r om t he act i on of
exchange commi t t ees maki ng r ul i ngs t hat changed t r adi ng r ul es
wi t hout war ni ng. But i n t hose cases my own posi t i on, whi l e
t echni cal l y r i ght , was not qui t e so sound commer ci al l y as i n my
cof f ee t r ade. You cannot be dead sur e of anyt hi ng i n a
specul at i ve oper at i on. I t was t he exper i ence I have j ust t ol d
you t hat made me add t he unexpect abl e t o t he unexpect ed i n my
l i st of hazar ds.
Af t er t he cof f ee epi sode I was so successf ul i n ot her com-
modi t i es and on t he shor t si de of t he st ock mar ket , t hat I began
t o suf f er f r om si l l y gossi p. The pr of essi onal s i n Wal l St r eet
and t he newspaper wr i t er s got t he habi t of bl ami ng me and my
al l eged r ai ds f or t he i nevi t abl e br eaks i n pr i ces. At t i mes my
sel l i ng was cal l ed unpat r i ot i c - - whet her I was r eal l y sel l i ng
or not . The r eason f or exagger at i ng t he magni t ude and t he ef f ect
of my oper at i ons, I suppose, was t he need t o sat i sf y t he
publ i c' s i nsat i abl e demand f or r easons f or each and ever y pr i ce
movement .
As I have sai d a t housand t i mes, no mani pul at i on can put
st ocks down and keep t hem down. Ther e i s not hi ng myst er i ous
about t hi s. The r eason i s pl ai n t o ever ybody who wi l l t ake t he
t r oubl e t o t hi nk about i t hal f a mi nut e. Suppose an oper at or
r ai ded a st ock - - t hat i s, put t he pr i ce down t o a l evel bel ow
i t s r eal val ue - - what woul d i nevi t abl y happen? Why, t he r ai der
woul d at once be up agai nst t he best ki nd of i nsi de buyi ng. The
peopl e who know what a st ock i s wor t h wi l l al ways buy i t when i t
i s sel l i ng at bar gai n pr i ces. I f t he i nsi der s ar e not abl e t o
buy, i t wi l l be because gener al condi t i ons ar e agai nst t hei r
f r ee command of t hei r own r esour ces, and such condi t i ons ar e not
bul l condi t i ons. When peopl e speak about r ai ds t he i nf er ence i s
t hat t he r ai ds ar e unj ust i f i ed; al most cr i mi nal . But sel l i ng a
st ock down t o a pr i ce much bel ow what i t i s wor t h i s mi ght y
danger ous busi ness. I t i s wel l t o bear i n mi nd t hat a r ai ded
st ock t hat f ai l s t o r al l y i s not get t i ng much i nsi de buyi ng and
wher e t her e i s a r ai d, t hat i s unj ust i f i ed shor t sel l i ng - -
t her e i s usual l y apt t o be i nsi de buyi ng; and when t her e i s
t hat , t he pr i ce does not st ay down. I shoul d say t hat i n
ni net y- ni ne cases out of a hundr ed, so- cal l ed r ai ds ar e r eal l y
l egi t i mat e decl i nes, accel er at ed at t i mes but not pr i mar i l y
caused by t he oper at i ons of a pr of essi onal t r ader , however bi g a
l i ne he may be abl e t o swi ng.


The t heor y t hat most of t he sudden decl i nes or par t i cul ar
shar p br eaks ar e t he r esul t s of some pl unger ' s oper at i ons
pr obabl y was i nvent ed as an easy way of suppl yi ng r easons t o
t hose specul at or s who, bei ng not hi ng but bl i nd gambl er s, wi l l
bel i eve anyt hi ng t hat i s t ol d t hem r at her t han do a l i t t l e
t hi nki ng. The r ai d excuse f or l osses t hat unf or t unat e
specul at or s so of t en r ecei ve f r om br oker s and f i nanci al
gossi per s i s r eal l y an i nver t ed t i p. The di f f er ence l i es i n
t hi s: A bear t i p i s di st i nct , posi t i ve advi ce t o sel l shor t . But
t he i nver t ed t i p - - t hat i s, t he expl anat i on t hat does not
expl ai n - - ser ves mer el y t o keep you f r om wi sel y sel l i ng shor t .
The nat ur al t endency when a st ock br eaks badl y i s t o sel l i t .
Ther e i s a r eason - - an unknown r eason but a good r eason;
t her ef or e get out . But i t i s not wi se t o get out when t he br eak
i s t he r esul t of a r ai d by an oper at or , because t he moment he
st ops t he pr i ce must r ebound. I nver t ed t i ps!



CHAPTER XVI

TI PS! How peopl e want t i ps! They cr ave not onl y t o get t hem
but t o gi ve t hem. Ther e i s gr eed i nvol ved, and vani t y. I t i s
ver y amusi ng, at t i mes, t o wat ch r eal l y i nt el l i gent peopl e f i sh
f or t hem. And t he t i p- gi ver need not hesi t at e about t he qual i t y,
f or t he t i p- seeker i s not r eal l y af t er good t i ps, but af t er any
t i p. I f i t makes good, f i ne! I f i t doesn' t , bet t er l uck wi t h t he
next . I am t hi nki ng of t he aver age cust omer of t he aver age
commi ssi on house. Ther e i s a t ype of pr omot er or mani pul at or
t hat bel i eves i n t i ps f i r st , l ast and al l t he t i me. A good f l ow
of t i ps i s consi der ed by hi m as a sor t of subl i mat ed publ i ci t y
wor k, t he best mer chandi si ng dope i n t he wor l d, f or , si nce
t i p- seeker s and t i p- t aker s ar e i nvar i abl y t i p- passer s,
t i p- br oadcast i ng becomes a sor t of endl ess chai n adver t i si ng.
The t i pst er - pr omot er l abour s under t he del usi on t hat no human
bei ng br eat hes who can r esi st a t i p i f pr oper l y del i ver ed. He
st udi es t he ar t of handi ng t hemout ar t i st i cal l y.
I get t i ps by t he hundr eds ever y day f r om al l sor t s of
peopl e. I ' l l t el l you a st or y about Bor neo Ti n. You r emember
when t he st ock was br ought out ? I t was at t he hei ght of t he
boom. The pr omot er ' s pool had t aken t he advi ce of a ver y cl ever
banker and deci ded t o f l oat t he new company i n t he open mar ket
at once i nst ead of l et t i ng an under wr i t i ng syndi cat e t ake i t s
t i me about i t . I t was good advi ce. The onl y mi st ake t he member s
of t he pool made came f r om i nexper i ence. They di d not know what
t he st ock mar ket was capabl e of doi ng dur i ng a cr azy boomand at
t he same t i me t hey wer e not i nt el l i gent l y l i ber al . They wer e
agr eed on t he need of mar ki ng up t he pr i ce i n or der t o mar ket
t he st ock, but t hey st ar t ed t he t r adi ng at a f i gur e at whi ch t he
t r ader s and t he specul at i ve pi oneer s coul d not buy i t wi t hout
mi sgi vi ngs.
By r i ght s t he pr omot er s ought t o have got st uck wi t h i t ,
but i n t he wi l d bul l mar ket t hei r hoggi shness t ur ned out t o be
r ank conser vat i sm. The publ i c was buyi ng anyt hi ng t hat was
adequat el y t i pped. I nvest ment s wer e not want ed. The demand was
f or easy money; f or t he sur e gambl i ng pr of i t . Gol d was pour i ng
i nt o t hi s count r y t hr ough t he huge pur chases of war mat er i al .
They t el l me t hat t he pr omot er s, whi l e maki ng t hei r pl ans f or
br i ngi ng out Bor neo st ock, mar ked up t he openi ng pr i ce t hr ee
di f f er ent t i mes bef or e t hei r f i r st t r ansact i on was of f i ci al l y
r ecor ded f or t he benef i t of t he publ i c.
I had been appr oached t o j oi n t he pool and I had l ooked
i nt o i t but I di dn' t accept t he of f er because i f t her e i s any
mar ket manoeuvr i ng t o do, I l i ke t o do i t mysel f . I t r ade on my


own i nf or mat i on and f ol l ow my own met hods. When Bor neo Ti n was
br ought out , knowi ng what t he pool ' s r esour ces wer e and what
t hey had pl anned t o do, and al so knowi ng what t he publ i c was
capabl e of , I bought t eo t housand shar es dur i ng t he f i r st hour
of t he f i r st day. I t s mar ket debut was successf ul at l east t o
t hat ext ent . As a mat t er of f act t he pr omot er s f ound t he demand
so act i ve t hat t hey deci ded i t woul d be a mi st ake t o l ose so
much st ock so soon. They f ound out t hat I had acqui r ed my t en
t housand shar es about at t he same t i me t hat t hey f ound out t hat
t hey woul d pr obabl y be abl e t o sel l ever y shar e t hey owned i f
t hey mer el y mar ked up t he pr i ce t went y- f i ve or t hi r t y poi nt s.
They t her ef or e concl uded t hat t he pr of i t on my t en t housand
shar es woul d t ake t oo bi g a chunk out of t he mi l l i ons t hey f el t
wer e al r eady as good as banked. So t hey act ual l y ceased t hei r
bul l oper at i ons and t r i ed t o shake me out . But I si mpl y sat
t i ght . They gave me up as a bad j ob because t hey di dn' t want t he
mar ket t o get away f r om t hem, and t hen t hey began t o put up t he
pr i ce, wi t hout l osi ng any mor e st ock t han t hey coul d hel p.
They saw t he cr azy hei ght t hat ot her st ocks r ose t o and
t hey began t o t hi nk i n bi l l i ons. Wel l , when Bor neo ' r i l l got up
t o 120 I l et t hem have my t en t housand shar es. I t checked t he
r i se and t he pool manager s l et up on t hei r j acki ng- up pr ocess.
On t he next gener al r al l y t hey agai n t r i ed t o make an act i ve
mar ket f or i t and di sposed of qui t e a l i t t l e. but t he
mer chandi si ng pr oved t o be r at her expensi ve. Fi nal l y t hey mar ked
i t up t o 15o. But t he bl oom was of f t he bul l mar ket f or keeps,
so t he pool was compel l ed t o mar ket what st ock i t coul d on t he
way down t o t hose peopl e who l ove t o buy af t er a good r eact i on,
on t he f al l acy t hat a st ock t hat has once sol d at 150 must be
cheap at I V and a gr eat bar gai n at 120. Al so, t hey passed t he
t i p f i r st t o t he f l oor t r ader s, who of t en ar e abl e t o make a
t empor ar y mar ket , and l at er t o t he commi ssi on houses. Ever y
l i t t l e hel ped and t he pool was usi ng ever y devi ce known. The
t r oubl e was t hat t he t i me f or bul l i ng st ocks had passed. The
sucker s had swal l owed ot her hooks. The Bor neo bunch di dn' t or
woul dn' t see i t .
I was down i n Pal m Beach wi t h my wi f e. One day I made a
l i t t l e money at Gr i dl ey' s and when I got home I gave Mr s.
Li ver mor e a f i ve- hundr ed- dol l ar bi l l out of i t . I t was a cur i ous
coi nci dence, but t hat same ni ght she met at a di nner t he pr esi -
dent of t he Bor neo Ti n Company, a Mr . Wi senst ei n, who had become
t he manager of t he st ock pool . We di dn' t l ear n unt i l some t i me
af t er war d t hat t hi s Wi senst ei n del i ber at el y manceuvr ed so t hat
he sat next t o Mr s. Li ver mor e at di nner .


He l ai d hi msel f out t o be par t i cul ar l y ni ce t o her and
t al ked most ent er t ai ni ngl y. I n t he end he t ol d her , ver y con-
f i dent i al l y, " Mr s. Li ver mor e, I ' m goi ng t o do somet hi ng I ' ve
never done bef or e. I am ver y gl ad t o do i t because you know
exact l y what i t means. " He st opped and l ooked at Mr s. Li ver mor e
anxi ousl y, t o make sur e she was not onl y wi se but di scr eet . She
coul d r ead i t on hi s f ace, pl ai n as pr i nt . But al l she sai d was,
" Yes. "
" Yes, Mr s. Li ver mor e. I t has been a ver y gr eat pl easur e t o
meet you and your husband, and I want t o pr ove t hat I amsi ncer e
i n sayi ng t hi s because I hope t o see a gr eat deal of bot h of
you. I am sur e I don' t have t o t el l you t hat what I am goi ng t o
say i s st r i ct l y conf i dent i al ! " Then he whi sper ed, " I f you wi l l
buy some Bor neo Ti n you wi l l make a gr eat deal of money. "
" Do you t hi nk so?" she asked.
" J ust bef or e I l ef t t he hot el , " he sai d, " I r ecei ved some
cabl es wi t h news t hat won' t be known t o t he publ i c f or sever al
days at l east . I amgoi ng t o gat her i n as much of t he st ock as I
can. I f you get some at t he openi ng t omor r ow you wi l l be buyi ng
i t at t he same t i me and at t he same pr i ce as 1. I gi ve you my
wor d t hat Bor neo Ti n wi l l sur el y advance. You ar e t he onl y
per son t hat I have t ol d t hi s t o. Absol ut el y t he onl y one ! "
She t hanked hi m and t hen she t ol d hi m t hat she di dn' t know
anyt hi ng about specul at i ng i n st ocks. But he assur ed her i t
wasn' t necessar y f or her t o know any mor e t han he had t ol d her .
To make sur e she hear d i t cor r ect l y he r epeat ed hi s advi ce t o
her
" Al l you have t o do i s t o buy as much Bor neo Ti n as you
wi sh. I can gi ve you my wor d t hat i f you do you wi l l not l ose a
cent . I ' ve never bef or e t ol d a woman or a man, f or t hat mat t er
t o buy anyt hi ng i n my l i f e. But I am so sur e t he st ock won' t
st op t hi s si de of Zoo t hat I ' d l i ke you t o make some money. I
can' t buy al l t he st ock mysel f , you know, and i f somebody
besi des mysel f i s goi ng t o benef i t by t he r i se I ' d r at her i t .
was you t han some st r anger . Much r at her ! I ' ve t ol d you i n
conf i dence because I know you won' t t al k about i t . Take my wor d
f or i t , Mr s. Li ver mor e, and buy Bor neo Ti n! "
He was ver y ear nest about i t and succeeded i n so i mpr essi ng
her t hat she began t o t hi nk she had f ound an excel l ent use f or
t he f i ve hundr ed dol l ar s I had gi ven her t hat af t er noon. That
money hadn' t cost me anyt hi ng and was out si de of her al l owance.
I n ot her wor ds, i t was easy money t o l ose i f t he l uck went
agai nst her . But he had sai d she woul d sur el y wi n. I t woul d be
ni ce t o make money on her own hook and t el l me al l about i t
af t er war ds.


Wel l , si r , t he ver y next mor ni ng bef or e t he mar ket opened
she went i nt o Har di ng' s of f i ce and sai d t o t he manager
" Mr . Hal ey, I want t o buy some st ock, but I don' t want i t
t o go i n my r egul ar account because I don' t wi sh my husband t o
know anyt hi ng about i t unt i l I ' ve made some money. Can you f i x
i t f or me?"
Hal ey, t he manager , sai d, " Oh, yes. We can make i t a
speci al account . What ' s t he st ock and how much of i t do you want
t o buy?"
She gave hi m t he f i ve hundr ed dol l ar s and t ol d hi m,
" Li st en, pl ease. I do not wi sh t o l ose mor e t han t hi s money. I f
t hat goes I don' t want t o owe you anyt hi ng; and r emember , I
don' t want Mr . Li ver mor e t o know anyt hi ng about t hi s. Buy me as
much Bor neo Ti n as you can f or t he money, at t he openi ng. "
Hal ey t ool ; t he money and t ol d her he' d never say a wor d t o
a soul , and bought her a hundr ed shar es at t he openi ng. I t hi nk
she got i t at i o8. The st ock was ver y act i ve t hat day and cl osed
at an advance of t hr ee poi nt s. Mr s. Li ver mor e was so del i ght ed
wi t h her expl oi t t hat i t was al l she coul d do t o keep f r om
t el l i ng me al l about i t .
I t so happened t hat I had been get t i ng mor e and mor e bear -
i sh on t he gener al mar ket . The unusual act i vi t y i n Bor neo Ti n
dr ew my at t ent i on t o i t . I di dn' t t hi nk t he t i me was r i ght f or
any st ock t o advance, much l ess one l i ke t hat . I had deci ded t o
begi n my bear oper at i ons t hat ver y day, and I st ar t ed by sel l i ng
about t en t housand shar es of Bor neo. I f I had not I r at her t hi nk
t he st ock woul d have gone up f i ve or si x poi nt s i nst ead of
t hr ee.
On t he ver y next day I sol d t wo t housand shar es at t he
openi ng and t wo t housand shar es j ust bef or e t he cl ose, and t he
st ock br oke t 0 102.
Hal ey, t he manager of Har di ng Br ot her s' Pal m Beach Br anch,
was wai t i ng f or Mr s. Li ver mor e t o cal l t her e on t he t hi r d
mor ni ng. She usual l y st r ol l ed i n about el even t o see how t hi ngs
wer e, i f I was doi ng anyt hi ng.
Hal ey t ook her asi de and sai d, " Mr s. Li ver mor e, i f you want
me t o car r y t hat hundr ed shar es of Bor neo Ti n f or you you wi l l
have t o gi ve me mor e mar gi n. "
" But I haven' t any mor e, " she t ol d hi m.
" I can t r ansf er i t t o your r egul ar account , " he sai d.
" No, " she obj ect ed, " because t hat way L. L. woul d l ear n
about i t . "
" But t he account al r eady shows a l oss of " he began.


" But I t ol d you di st i nct l y I di dn' t want t o l ose mor e t han
t he f i ve hundr ed dol l ar s. I di dn' t even want t o l ose t hat , " she
sai d.
" I know, Mr s. Li ver mor e, but I di dn' t want t o sel l i t wi t h-
out consul t i ng you, and now unl ess you aut hor i se me t o hol d i t
I ' l l have t o l et i t go. "
" But i t di d so ni cel y t he day I bought i t , " she sai d, " t hat

I di dn' t bel i eve i t woul d act t hi s way so soon. Di d you?"
" No, " answer ed Hal ey, " I di dn' t . " They have t o be di pl omat i c i n
br oker s' of f i ces.
" What ' s gone wr ong wi t h i t , Mr . Hal ey?"
Hal ey knew, but he coul d not t el l her wi t hout gi vi ng me
away, and a cust omer ' s busi ness i s sacr ed. So he sai d, " I don' t
hear anyt hi ng speci al about i t , one way or anot her . Ther e she
goes! That ' s l ow f or t he move! " and he poi nt ed t o t he quot at i on
boar d.
Mr s. Li ver mor e gazed at t he si nki ng st ock and cr i ed: " Oh,
Mr . Hal ey! I di dn' t want t o l ose my f i ve hundr ed dol l ar s! What
shal l I do?"
" I don' t know, Mr s. Li ver mor e, but i f I wer e you I ' d ask
Mr . Li ver mor e. "
" Oh, no! He doesn' t want me t o specul at e on my own hook.
He' s t ol d me so. He' l l buy or sel l st ock f or me, i f I ask hi m,
but I ' ve never bef or e done t r adi ng t hat he di d not know al l
about . I woul dn' t dar e t el l hi m. "
" That ' s al l r i ght , " sai d Hal ey soot hi ngl y. " He i s a
wonder f ul t r ader and he' l l know j ust what t o do. " Seei ng her
shake her head vi ol ent l y he added devi l i shl y: " Or el se you put
up a t housand or t wo t o t ake car e of your Bor neo. "
The al t er nat i ve deci ded her t hen and t her e. She hung about
t he of f i ce, but as t he mar ket got weaker and weaker she came
over t o wher e I sat wat chi ng t he boar d and t ol d me she want ed t o
speak t o me. We went i nt o t he pr i vat e of f i ce and she t ol d me t he
whol e st or y. So I j ust sai d t o her : " You f ool i sh l i t t l e gi r l ,
you keep your hands of f t hi s deal . "
She pr omi sed t hat she woul d, and so I gave her back her
f i ve hundr ed dol l ar s and she went away happy. The st ock was par
by t hat t i me.
I saw what had happened. Wi senst ei n was an ast ut e per son.
He f i gur ed t hat Mr s. Li ver mor e woul d t el l one what he had t ol d
her and I ' d st udy t he st ock. He knew t hat act i vi t y al ways
at t r act ed me and I was known t o swi ng a pr et t y f ai r l i ne. I
suppose he t hought I ' d buy t en or t went y t housand shar es.


I t was one of t he most cl ever l y pl anned and ar t i st i cal l y
pr opel l ed t i ps I ' ve ever hear d of . But i t went wr ong. I t had t o.
I n t he f i r st pl ace, t he l ady had t hat ver y day r ecei ved an
unear ned f i ve hundr ed dol l ar s and was t her ef or e i n a much mor e
vent ur esome mood t han usual . She wi shed t o make some money al l
by her sel f , and womanl i ke dr amat i sed t he t empt at i on so
at t r act i vel y t hat i t was i r r esi st i bl e. She knew how I f el t about
st ock specul at i on as pr act i sed by out si der s, and she di dn' t dar e
ment i on t he mat t er t o me. Wi senst ei n di dn' t si ze up her
psychol ogy r i ght .
He al so was ut t er l y wr ong i n hi s guess about t he ki nd of
t r ader I was. I never t ake t i ps and I was bear i sh on t he ent i r e
mar ket . The t act i cs t hat he t hought woul d pr ove ef f ect i ve i n
i nduci ng me t o buy Bor neo - - t hat i s, t he act i vi t y and t he t hr ee
poi nt r i se wer e pr eci sel y what made me pi ck Bor neo as a st ar t er
when I deci ded t o sel l t he ent i r e mar ket . '
Af t er I hear d Mr s. Li ver mor e' s st or y I was keener t han ever
t o sel l Bor neo. Ever y mor ni ng at t he openi ng and ever y af t er noon
j ust bef or e cl osi ng I l et hi mhave some st ock r egul ar l y, unt i l I
saw a chance t o t ake i n my shor t s at a handsome pr of i t .
I t has al ways seemed t o me t he hei ght of damf ool i shness t o
t r ade on t i ps. I suppose I am not bui l t t he way a t i p- t aker i s.
I somet i mes t hi nk t hat t i p- t aker s ar e l i ke dr unkar ds. Ther e ar e
some who can' t r esi st t he cr avi ng and al ways l ook f or war d t o
t hose j ags whi ch t hey consi der i ndi spensabl e t o t hei r happi ness.
I t i s so easy t o open your ear s and l et t he t i p i n. To be t ol d
pr eci sel y what t o do t o be happy i n such a manner t hat you can
eagi l y obey i s t he next ni cest t hi ng t o bei ng happy whi ch i s a
mi ght y l ong f i r st st ep t owar d t he f ul f i l ment of your hear t ' s
desi r e. I t i s not so much gr eed made bl i nd by eager ness as i t i s
hope bandaged by t he unwi l l i ngness t o do any t hi nki ng.
And i t i s not onl y among t he out si de publ i c t hat you f i nd
i nvet er at e t i p- t aker s. The pr of essi onal t r ader on t he f l oor of
t he New Yor k St ock Exchange i s qui t e as bad. I am def i ni t el y
awar e t hat no end of t hemcher i sh mi st aken not i ons of me because
I never gi ve anybody t i ps. I f I t ol d t he aver age man, " Sel l
your sel f f i ve t housand St eel ! " he woul d do i t on t he. spot . But
i f I t el l hi m I am qui t e bear i sh on t he ent i r e mar ket and gi ve
hi m my r easons i n det ai l , he f i nds t r oubl e i n l i st eni ng and
af t er I ' m done t al ki ng he wi l l gl ar e at me f or wast i ng hi s t i me
expr essi ng my vi ews on gener al condi t i ons i nst ead of gi vi ng hi m
a di r ect and speci f i c t i p, l i ke a r eal phi l ant hr opi st of t he
t ype t hat i s so abundant i n Wal l St r eet t he sor t who l oves t o put
mi l l i ons i nt o t he pocket s of f r i ends, acquai nt ances and ut t er
st r anger s al i ke.


The bel i ef i n mi r acl es t hat al l men cher i sh i s bor n of i m-
moder at e i ndul gence i n hope. Ther e ar e peopl e who go on hope
spr ees per i odi cal l y and we al l know t he chr oni c hope dr unkar d
t hat i s hel d up bef or e us as an exempl ar y opt i mi st . Ti p- t aker s
ar e al l t hey r eal l y ar e.
I have an acquai nt ance, a member of t he New Yor k St ock
Exchange, who was one of t hose who t hought I was a sel f i sh,
col d- bl ooded pi g because I never gave t i ps or put f r i ends i nt o
t hi ngs. One day- t hi s was some year s ago he was t al ki ng t o a
newspaper man who casual l y ment i oned t hat he had had i t f r om a
good sour ce t hat G. O. H. was goi ng up. My br oker f r i end
pr ompt l y bought a t housand shar es and saw t he pr i ce decl i ne so
qui ckl y t hat he was out t hi r t y- f i ve hundr ed dol l ar s bef or e he
coul d st op hi s l oss. He met t he newspaper man a day or t wo
l at er , whi l e he st i l l was sor e.
" That was a hel l of a t i p you gave me, " he compl ai ned.
" What t i p was t hat ?" asked t he r epor t er , who di d not
r emember .
" About G. O. H. You sai d you had i t f r oma good sour ce. "
" So I di d. A di r ect or of t he company who i s a member of t he
f i nance commi t t ee t ol d me. "
" Whi ch of t hemwas i t ?" asked t he br oker vi ndi ct i vel y.
" I f you must know, " answer ed t he newspaper man, " i t was
your own f at her - i n- l aw, Mr . West l ake. "
" Why i n Hades di dn' t you t el l me you meant hi m! " yel l ed t he
br oker . " You cost me t hi r t y- f i ve hundr ed dol l ar s! " He di dn' t
bel i eve i n f ami l y t i ps. The f ar t her away t he sour ce t he pur er
t he t i p.
Ol d West l ake was a r i ch and successf ul banker and pr omot er .
He r an acr oss J ohn W. Gat es one day. Gat es asked hi m what he
knew. " I f you wi l l act on i t I ' l l gi ve you a t i p. I f you won' t
I ' l l save my br eat h, " answer ed ol d West l ake gr umpi l y.
" Of cour se I ' l l act on i t , " pr omi sed Gat es cheer f ul l y.
" Sel l Readi ng! Ther e i s a sur e t went y- f i ve poi nt s i n i t ,
and possi bl y mor e. But t went y- f i ve absol ut el y cer t ai n, " sai d
West l ake i mpr essi vel y.
" I ' m much obl i ged t o you, " and Bet - you- a- mi l l i on Gat es
shook hands war ml y and went away i n t he di r ect i on of hi s
br oker ' s of f i ce.
West l ake had speci al i zed on Readi ng. He knew al l about t he
company and st ood i n wi t h t he i nsi der s so t hat t he mar ket f or
t he st ock was an open book t o hi m and ever ybody knew i t . Now he
was advi si ng t he West er n pl unger t o go shor t of i t .
Wel l , Readi ng never st opped goi ng up. I t r ose somet hi ng
l i ke one hundr ed poi nt s i n a f ew weeks. One day ol d West l ake r an


smack up agai nst J ohn W. i n t he St r eet , but he made out he
hadn' t seen hi mand was wal ki ng on. J ohn W. Gat es caught up wi t h
hi m, hi s f ace al l smi l es and hel d out hi s hand. Ol d West l ake
shook i t dazedl y.
" I want t o t hank you f or t hat t i p you gave me on Readi ng, "
sai d Gat es.
" I di dn' t gi ve you any t i p, " sai d West l ake, f r owni ng.
" Sur e you di d. And i t was a J i mHi ckey of a t i p t oo. I made
si xt y t housand dol l ar s. "
" Made si xt y t housand dol l ar s?"
" Sur e! Don' t you r emember ? You t ol d me t o sel l Readi ng; so
I bought i t ! I ' ve al ways made money copper i ng your t i ps,
West l ake, " sai d J ohn W. Gat es pl easant l y. " Al ways! "
Ol d West l ake l ooked at t he bl uf f West er ner and pr esent l y
r emar ked admi r i ngl y, " Gat es, what a r i ch man I ' d be i f I had
your br ai ns! "
The ot her day I met Mr . W. A. Roger s, t he f amous car -
t ooni st , whose Wal l St r eet dr awi ngs br oker s so gr eat l y admi r e.
Hi s dai l y car t oons i n t he New Yor k Her al d f or year s gave
pl easur e t o t housands. Wel l , he t ol d me a st or y. I t was j ust
bef or e we went t o war wi t h Spai n. He was spendi ng an eveni ng
wi t h a br oker f r i end. When he l ef t he pi cked up hi s ' eder by hat
f r omt he r ack, at l east he t hought i t was hi s hat , f or i t was t he
same shape and f i t t ed hi mper f ect l y.
The St r eet at t hat t i me was t hi nki ng and t al ki ng of not hi ng
but war wi t h Spai n. Was t her e t o be one or not ? I f i t was t o be
war t he mar ket woul d go down; not so much on our own sel l i ng as
on pr essur e f r om Eur opean hol der s of our secur i t i es. I f peace,
i t woul d be a ci nch t o buy st ocks, as t her e had been
consi der abl e decl i nes pr ompt ed by t he sensat i onal cl amor i ngs of
t he yel l ow paper s. Mr . Roger s t ol d me t he r est of t he st or y as
f ol l ows
` " My f r i end, t he br oker , at whose house I had been t he
ni ght bef or e, st ood i n t he Exchange t he next day anxi ousl y
debat i ng i n hi s mi nd whi ch si de of t he mar ket t o pl ay. He went
over t he pr os and cons, but i t was i mpossi bl e t o di st i ngui sh
whi ch wer e r umour s and whi ch wer e f act s. Ther e was no
aut hent i c news t o gui de hi m. At one moment he t hought war
was i nevi t abl e, and on t he next he al most con vi nced hi msel f
t hat i t was ut t er l y unl i kel y. Hi s per pl exi t y must have
caused a r i se i n hi s t emper at ur e, f or he t ook of f hi s der by
t o wi pe hi s f ever ed br ow. He coul dn' t t el l whet her he shoul d
buy or sel l .
" He happened t o l ook i nsi de of hi s hat . Ther e i n
gol d


l et t er s was t he wor d WAR. That was al l t he hunch he
needed. Was i t not a t i p f r omPr ovi dence vi a my hat ? So he sol d
a r af t of st ock, war was dul y decl ar ed, he cover ed on
t he br eak and made a ki l l i ng. " And t hen W. A. Roger s
f i ni shed, " I never got back t hat hat ! "
But t he pr i ze t i p st or y of my col l ect i on concer ns
one of t he most popul ar member s of t he New Yor k St ock Exchange,
J . T. Hood. One day anot her f l oor t r ader , Ber t Wal ker , t ol d
hi mt hat he had done a good t ur n t o a pr omi nent di r ect or of
t he At l ant i c & Sout her n. I n r et ur n t he gr at ef ul i nsi der
t ol d hi m t o buy al l t he A. & S. he coul d car r y. The di r ect or s
wer e goi ng t o do somet hi ng t hat woul d put t he st ock up at l east
t went y- f i ve poi nt s. Al l t he di r ect or s wer e not i n t he deal , but
t he maj or i t y woul d be sur e t o vot e as want ed.
^ Ber t Wal ker concl uded t hat t he di vi dend r at e was goi ng
t o be r ai sed. He t ol d hi s f r i end Hood and t hey each bought a
coupl e of t housand shar es of A. & S. The st ock was ver y weak,
bef or e and af t er t hey bought , but Hood sai d t hat was obvi ousl y
i nt ended t o f aci l i t at e accumul at i on by t he i nsi de cl i que, headed
by Ber t ' s gr at ef ul f r i end.
On t he f ol l owi ng Thur sday, af t er t he mar ket cl osed, t he
di r ect or s of t he At l ant i c & Sout her n met and passed t he
di vi dend. The st ock br oke si x poi nt s i n t he f i r st si x mi nut es of
t r adi ng Fr i day mor ni ng.
Ber t Wal ker was sor e as a pup. He cal l ed on t he gr at ef ul
di r ect or , who was br oken- hear t ed about i t and ver y peni t ent . He
sai d t hat he had f or got t en t hat he had t ol d Wal ker t o buy. That
was t he r eason he had negl ect ed t o cal l hi m up t o t el l hi m of a
change i n t he pl ans of t he domi nant f act i on i n t he boar d. The
r emor sef ul di r ect or was so anxi ous t o make up t hat he gave Ber t
anot her t i p. He ki ndl y expl ai ned t hat a coupl e of hi s col l eagues
want ed t o get cheap st ock and agai nst hi s j udgment r esor t ed t o
coar se wor k. He had t o yi el d t o wi n t hei r vot es. But now t hat
t hey al l had accumul at ed t hei r f ul l l i nes t her e was not hi ng t o
st op t he advance. I t was a doubl er i vet ed, l ead- pi pe ci nch t o buy
A. & S. now.
Ber t not onl y f or gave hi m but shook hands war ml y wi t h t he
hi gh f i nanci er . Nat ur al l y he hast ened t o f i nd hi s f r i end and
f el l ow vi ct i m, Hood, t o i mpar t t he gl ad t i di ngs t o hi m. They
wer e goi ng t o make a ki l l i ng. The st ock had been t i pped f or a
r i se bef or e and t hey bought . But now i t was f i f t een poi nt s
l ower . That made i t a ci nch. So t hey bought f i ve t housand
shar es, j oi nt account .
As i f t hey had r ung a bel l t o st ar t i t , t he st ock br oke
badl y on what qui t e obvi ousl y was i nsi de sel l i ng. Two


speci al i st s cheer f ul l y conf i r med t he suspi ci on. Hood sol d out
t hei r f i ve t housand shar es. When he got t hr ough Ber t Wal ker sai d
t o hi m, " I f t hat bl anket y- bl ank bl anker hadn' t gone t o Fl or i da
day bef or e yest er day I ' d l i ck t he st uf f i ng out of hi m. Yes, I
woul d. But you come wi t h me. "
" Wher e t o?" asked Hood.
" To t he t el egr aph of f i ce. I want t o send t hat skunk a
t el egr amt hat he' l l never f or get . Come on. "
Hood went on. Ber t l ed t he way t o t he t el egr aph of f i ce.
Ther e, car r i ed away by hi s f eel i ngs t hey had t aken qui t e a l oss
on t he f i ve t housand shar es he composed a mast er pi ece of
vi t uper at i on. He r ead i t t o Hood and f i ni shed, " That wi l l come
pr et t y near t o showi ng hi mwhat I t hi nk of hi m. "
He was about t o sl i de i t t owar d t he wai t i ng cl er k when Hood
sai d, " Hol d on, Ber t ! "
" What ' s t he mat t er ?"
" I woul dn' t send i t , " advi sed Hood ear nest l y.
" Why not ?" snapped Ber t .
" I t wi l l make hi msor e as t he di ckens. "
" That ' s what we want , i sn' t i t ?" sai d Ber t , l ooki ng at Hood
i n sur pr i se.
But Hood shook hi s head di sappr ovi ngl y and sai d i n al l
ser i ousness, " We' l l never get anot her t i p f r om hi m i f you send
t hat t el egr am! "
A pr of essi onal t r ader act ual l y sai d t hat . Now what ' s t he
use of t al ki ng about sucker t i p- t aker s? Men do not t ake t i ps
because t hey ar e bal l y asses but because t hey l i ke t hose hope
cockt ai l s I spoke of . Ol d Bar on Rot hschi l d' s r eci pe f or weal t h
wi nni ng appl i es wi t h gr eat er f or ce t han ever t o specul at i on.
Somebody asked hi m i f maki ng money i n t he Bour se was not a ver y
di f f i cul t mat t er , and he r epl i ed t hat , on t he cont r ar y, he
t hought i t was ver y easy.
" That i s because you ar e so r i ch, " obj ect ed t he
i nt er vi ewer .
" Not at al l . I have f ound an easy way and I st i ck t o i t . I
si mpl y cannot hel p maki ng money. I wi l l t el l you my secr et i f
you wi sh. I t i s t hi s: I never buy at t he bot t om and I al ways
sel l t oo soon. "
I nvest or s ar e a di f f er ent br eed of cat s. Most of t hemgo i n
st r ong f or i nvent or i es and st at i st i cs of ear ni ngs and al l sor t s
of mat hemat i cal dat a, as t hough t hat meant f act s and
cer t ai nt i es. The human f act or i s mi ni mi sed as a r ul e. Ver y f ew
peopl e l i ke t o buy i nt o a one- man busi ness. But t he wi sest
i nvest or I ever knew was a man who began by bei ng a Pennsyl vani a


Dut chman and f ol l owed i t up by comi ng t o Wal l St r eet and seei ng
a gr eat deal of Russel l Sage.
He was a gr eat i nvest i gat or , an i ndef at i gabl e Mi ssour i an.
He bel i eved i n aski ng hi s own quest i ons and i n doi ng hi s
seei ng wi t h hi s own eyes. He had no use f or anot her man' s
spect acl es. Thi s was year s ago. I t seems he hel d qui t e a l i t t l e
At chi son. Pr esent l y he began t o hear di squi et i ng r epor t s about
t he company and i t s management . He was t ol d t hat Mr . Rei nhar t ,
t he pr esi dent , i nst ead of bei ng t he mar vel he was cr edi t ed wi t h
bei ng, i n r eal i t y was a most ext r avagant manager whose
r eckl essness was f ast pushi ng t he company i nt o a mess. Ther e
woul d be t he deuce t o pay on t he i nevi t abl e day of r eckoni ng.
Thi s was pr eci sel y t he ki nd of news t hat was as t he br eat h
of l i f e t o t he Pennsyl vani a Dut chman. He hur r i ed over t o Bost on
t o i nt er vi ew Mr . Rei nhar t and ask hi m a f ew quest i ons. The
quest i ons consi st ed of r epeat i ng t he accusat i ons he had hear d
and t hen aski ng t he pr esi dent of t he At chi son, Topeka & Sant a Fe
Rai l r oad i f t hey wer e t r ue.
Mr . Rei nhar t not onl y deni ed t he al l egat i ons emphat i cal l y
but sai d even mor e: He pr oceeded t o pr ove by f i gur es t hat t he
al l egat or s wer e mal i ci ous l i ar s. The Pennsyl vani a Dut chman had
asked f or exact i nf or mat i on and t he pr esi dent gave i t t o hi m,
showi ng hi m what t he company was doi ng and how i t st ood
f i nanci al l y, t o a cent .
The Pennsyl vani a Dut chman t hanked Pr esi dent Rei nhar t ,
r et ur ned t o New Yor k and pr ompt l y sol d al l hi s At chi son
hol di ngs. A week or so l at er he used hi s i dl e f unds t o buy a bi g
l ot of Del awar e, Lackawanna & West er n.
Year s af t er war d we wer e t al ki ng of l ucky swaps and he ci t ed
hi s own case. He expl ai ned what pr ompt ed hi mt o make i t .
" You see, " he sai d, " I not i ced t hat Pr esi dent Rei nhar t ,
when he wr ot e down f i gur es, t ook sheet s of l et t er paper f r om a
pi geonhol e i n hi s mahogany r ol l - t op desk. I t was f i ne heavy
l i nen paper wi t h beaut i f ul l y engr aved l et t er heads i n t wo col or s.
I t was not onl y ver y expensi ve but wor se - - i t was unnecessar i l y
expensi ve. He woul d wr i t e a f ew f i gur es on a sheet t o show me
exact l y what t he company was ear ni ng on cer t ai n di vi si ons or t o
pr ove how t hey wer e cut t i ng down expenses or r educi ng oper at i ng
cost s, and t hen he woul d cr umpl e up t he sheet of t he expensi ve
paper and t hr ow i t i n t he wast ebasket . Pr et t y soon he woul d want
t o i mpr ess me wi t h t he economi es t hey wer e i nt r oduci ng and he
woul d r each f or a f r esh sheet of t he beaut i f ul not epaper wi t h
t he. engr aved l et t er heads i n t wo col or s. A f ew f i gur es and
bi ngo, i nt o t he wast ebasket ! Mor e money wast ed wi t hout a
t hought . I t st r uck me t hat i f t he pr esi dent was t hat ki nd of a


man he woul d scar cel y be l i kel y t o i nsi st upon havi ng or
r ewar di ng economi cal assi st ant s. I t her ef or e deci ded t o bel i eve
t he peopl e who had t ol d me t he management was ext r avagant
i nst ead of accept i ng t he pr esi dent ' s ver si on and I sol d what
At chi son st ock I hel d.
" I t so happened t hat I had occasi on t o go t o t he of f i ces of
t he Del awar e, Lackawanna & West er n a f ew days l at er . Ol d Sam
Sl oan was t he pr esi dent . Hi s of f i ce was t he near est t o t he
ent r ance and hi s door was wi de open. I t was al ways open. Nobody
coul d wal k i nt o t he gener al of f i ces of t he D. L. & W. i n t hose
days and not see t he pr esi dent of t he company seat ed at hi s
desk. Any man coul d wal k i n and do busi ness wi t h hi m r i ght of f ,
i f he had any busi ness t o do. The f i nanci al r epor t er s used t o
t el l me t hat t hey never had t o beat about t he bush wi t h ol d Sam
Sl oan, but woul d ask t hei r quest i ons and get a st r ai ght yes or
no f r om hi m, no mat t er what t he st ock- mar ket exi genci es of t he
ot her di r ect or s mi ght be.
" When I wal ked i n I saw t he ol d man was busy. I t hought at
f i r st t hat he was openi ng hi s mai l , but af t er I got i nsi de cl ose
t o t he desk I saw what he was doi ng. I l ear ned af t er war ds t hat
i t was hi s dai l y cust om t o do i t . Af t er t he mai l was sor t ed and
opened, i nst ead of t hr owi ng away t he empt y envel opes he had t hem
gat her ed up and t aken t o hi s of f i ce. I n hi s l ei sur e moment s he
woul d r i p t he envel ope al l ar ound. That gave hi m t wo bi t s of
paper , each wi t h one cl ean bl ank si de. He woul d pi l e t hese up
and t hen he woul d have t hem di st r i but ed about , t o be used i n
l i eu of scr at ch pads f or such f i gur i ng as Rei nhar t had done f or
me on engr aved not epaper . No wast e of empt y envel opes and no
wast e of t he pr esi dent ' s i dl e moment s. Ever yt hi ng ut i l i sed.
" I t st r uck me t hat i f t hat was t he ki nd of man t he D. L. &
W. had f or pr esi dent , t he company was managed economi cal l y i n
al l depar t ment s. The pr esi dent woul d see t o t hat ! Of cour se I
knew t he company was payi ng r egul ar di vi dends and had a good
pr oper t y. I bought al l t he D. L. & W. st ock I coul d. Si nce t hat
t i me t he capi t al st ock has been doubl ed and quadr upl ed. My
annual di vi dends amount t o as much as my or i gi nal i nvest ment . I
st i l l have my D. L. & W. And At chi son went i nt o t he hands of a
r ecei ver a f ew mont hs af t er I saw t he pr esi dent t hr owi ng sheet
af t er sheet of l i nen paper wi t h engr aved l et t er heads i n t wo
col or s i nt o t he wast ebasket t o pr ove t o me wi t h f i gur es t hat he
was not ext r avagant . "
And t he beaut y of t hat st or y i s t hat i t i s t r ue and t hat no
ot her st ock t hat t he Pennsyl vani a Dut chman coul d have bought
woul d have pr oved t o be so good an i nvest ment as D. L. & W.


CHAPTER XVI I

0NE of my most i nt i mat e f r i ends i s ver y f ond of t el l i ng
st or i es about what he cal l s my hunches. He i s f or ever ascr i bi ng
t o me power s t hat def y anal ysi s. I l e decl ar es I mer el y f ol l ow
bl i ndl y cer t ai n myst er i ous i mpul ses and t her eby get out of t he
st ock mar ket at pr eci sel y t he r i ght t i me. Hi s pet yar n i s about
a bl ack cat t hat t ol d me, at hi s br eakf ast t abl e, t o sel l a l ot
of st ock I was car r yi ng, and t hat af t er I got t he pussy' s
message I was gr ouchy and ner vous unt i l I sol d ever y shar e I was
l ong of . I got pr act i cal l y t he t op pr i ces of t he movement , whi ch
of cour se st r engt hened t he hunch t heor y of my har d- headed
f r i end.
I had gone t o Washi ngt on t o endeavor t o convi nce a f ew
Congr essmen t hat t her e was no wi sdomi n t axi ng us t o deat h and I
wasn' t payi ng much at t ent i on t o t he st ock mar ket . My deci si on t o
sel l out my l i ne came suddenl y, hence my f r i end' s yar n.
I admi t t hat I do get i r r esi st i bl e i mpul ses at t i mes t o do
cer t ai n t hi ngs i n t he mar ket . I t doesn' t mat t er whet her I am
l ong or shor t of st ocks. I must get out . I am uncomf or t abl e
unt i l I do. I mysel f t hi nk t hat what happens i s t hat I see a l ot
of war ni ng- si gnal s. Per haps not a si ngl e one may be suf f i ci ent l y
cl ear or power f ul t o af f or d me a posi t i ve, def i ni t e r eason f or
doi ng what I suddenl y f eel l i ke doi ng. Pr obabl y t hat i s al l
t her e i s t o what t hey cal l " t i cker - sense" t hat ol d t r ader s say
J ames R. Keene had so st r ongl y devel oped and ot her oper at or s
bef or e hi m. Usual l y, I conf ess, t he war ni ng t ur ns out t o be not
onl y sound but t i med t o t he mi nut e. But i n t hi s par t i cul ar
i nst ance t her e was no hunch. The bl ack cat had not hi ng t o do
wi t h i t . What he t el l s ever ybody about my get t i ng up so gr umpy
t hat mor ni ng I suppose can be expl ai ned i f I i n t r ut h was
gr ouchy by my di sappoi nt ment . I knew I was not convi nci ng t he
Congr essman I t al ked t o and t he Commi t t ee di d not vi ew t he
pr obl em of t axi ng Wal l St r eet as I di d. I wasn' t t r yi ng t o
ar r est or evade t axat i on on st ock t r ansact i ons but t o suggest a
t ax t hat I as an exper i enced st ock oper at or f el t was nei t her
unf ai r nor uni nt el l i gent . I di dn' t want Uncl e Sam t o ki l l t he
goose t hat coul d l ay so many gol den eggs wi t h f ai r t r eat ment .
Possi bl y my l ack of success not onl y i r r i t at ed me but made me
pessi mi st i c over t he f ut ur e of an unf ai r l y t axed busi ness. But
I ' l l t el l you exact l y what happened.
At t he begi nni ng of t he bul l mar ket I t hought wel l of t he
out l ook i n bot h t he St eel t r ade and t he copper mar ket and I
t her ef or e f el t bul l i sh on st ocks of bot h gr oups. So I st ar t ed t o
accumul at e some of t hem. I began by buyi ng Sooo shar es of Ut ah


Copper and st opped because i t di dn' t act r i ght . That i s, i t di d
not behave as i t shoul d have behaved t o make me f eel I was wi se
i n buyi ng i t . I t hi nk t he pr i ce was ar ound I I . I al so st ar t ed
t o buy Uni t ed St at es St eel at al most t he same pr i ce. I bought i n
al l 20, 000 shar es t he f i r st day because i t di d act r i ght . I
f ol l owed t he met hod I have descr i bed bef or e.
St eel cont i nued t o act r i ght and I t her ef or e cont i nued t o
accumul at e i t unt i l I was car r yi ng 72, 000 shar es of i t i n al l .
But my hol di ngs of Ut ah Copper consi st ed of my i ni t i al pur chase.
I never got above t he 5000 shar es. I t s behavi our di d not
encour age me t o do mor e wi t h i t .
Ever ybody knows what happened. We had a bi g bul l movement .
I knew t he mar ket was goi ng up. Gener al condi t i ons wer e
f avour abl e. Even af t er st ocks had gone up ext ensi vel y and my
paper - pr of i t was not t o be sneezed at , t he t ape kept t r umpet i ng:
Not yet ! Not yet ! When I ar r i ved i n Washi ngt on t he t ape was
st i l l sayi ng t hat t o me. Of cour se, I had no i nt ent i on of
i ncr easi ng my l i ne at t hat l at e day, even t hough I was st i l l
bul l i sh. At t he same t i me, t he mar ket was pl ai nl y goi ng my way
and t her e was no occasi on f or me t o si t i n f r ont of a quot at i on
boar d al l day, i n hour l y expect at i on of get t i ng a t i p t o get
out . Bef or e t he cl ar i on cal l t o r et r eat camebar r i ng an ut t er l y
unexpect ed cat ast r ophe, of cour se, t he mar ket woul d hesi t at e or
ot her wi se pr epar e me f or a r ever sal of t he specul at i ve
si t uat i on. That was t he r eason why I went bl i t hel y about my
busi ness wi t h my Congr essmen.
At t he same t i me, pr i ces kept goi ng up and t hat meant t hat
t he end of t he bul l mar ket was dr awi ng near er . I di d not l ook
f or t he end on any f i xed dat e. That was somet hi ng qui t e beyond
my power t o det er mi ne. But I needn' t t el l you t hat I was on t he
wat ch f or t he t i p- of f . I al ways am, anyhow. I t has become a
mat t er of busi ness habi t wi t h me.
I cannot swear t o i t but I r at her suspect t hat t he day
bef or e I sol d out , seei ng t he hi gh pr i ces made me t hi nk of t he
magni t ude of my paper - pr of i t as wel l as of t he l i ne I was
car r yi ng and, l at er on, of my vai n ef f or t s t o i nduce our
l egi sl at or s t o deal f ai r l y and i nt el l i gent l y by Wal l St r eet .
That was pr obabl y t he way and t he t i me t he seed was sown wi t hi n
me. The subconsci ous mi nd wor ked on i t al l ni ght . I n t he mor ni ng
I t hought of t he mar ket and began t o wonder how i t woul d act
t hat day. When I went down t o t he of f i ce I saw not so much t hat
pr i ces wer e st i l l hi gher and t hat I had a sat i sf yi ng pr of i t but
t hat t her e was a gr eat bi g mar ket wi t h a t r emendous power of
absor pt i on. I coul d sel l any amount o st ock i n t hat mar ket ;
and, of cour se, when a man i s car r yi ng hi s f ul l l i ne of st ocks,


he must be on t he wat ch f or an oppor t uni t y t o change hi s paper
pr of i t i nt o act ual cash. He shoul d t r y t o l ose as l i t t l e of t he
pr of i t as possi bl e i n t he swappi ng. Exper i ence has t aught me
t hat a man can al ways f i nd an oppor t uni t y t o make hi s pr of i t s
r eal and t hat t hi s oppor t uni t y usual l y comes at t he end of t he
move. That i sn' t t ape- r eadi ng or a hunch.
Of cour se, when I f ound t hat mor ni ng a mar ket i n whi ch I
coul d sel l out al l my st ocks wi t hout any t r oubl e I di d so. When
you ar e sel l i ng out i t i s no wi ser or br aver t o sel l f i f t y
shar es t han f i f t y t housand; but f i f t y shar es you can sel l i n t he
dul l est mar ket wi t hout br eaki ng t he pr i ce and f i f t y t housand
shar es of a si ngl e st ock i s a di f f er ent pr oposi t i on. I had
sevent y- t wo t housand shar es of U. S. St eel . Thi s may not seem a
col ossal l i ne, but you can' t al ways sel l t hat much wi t hout
l osi ng some of t hat pr of i t t hat l ooks so ni ce on paper when you
f i gur e i t out and t hat hur t s as much t o l ose as i f you act ual l y
had i t saf e i n bank.
I had a t ot al pr of i t of about $1, 500, 000 and I gr abbed i t
whi l e t he gr abbi ng was good. But t hat wasn' t t he pr i nci pal
r eason f or t hi nki ng t hat I di d t he r i ght t hi ng i n sel l i ng out
when I di d. The mar ket pr oved i t f or me and t hat was i ndeed a
sour ce of sat i sf act i on t o me. I t was t hi s way: I succeeded i n
sel l i ng my ent i r e l i ne of sevent y- t wo t housand shar es of U. S.
St eel at a pr i ce whi ch aver aged me j ust one poi nt f r om t he t op
of t he day and of t he movement . I t pr oved t hat I was r i ght , t o
t he mi nut e. But when, on t he ver y same hour of t he ver y same day
I came t o sel l my 5000 Ut ah Copper , t he pr i ce br oke f i ve poi nt s.
Pl ease r ecal l t hat I began buyi ng bot h st ocks at t he same t i me
and t hat I act ed wi sel y i n i ncr easi ng my l i ne of U. S. St eel
f r om t went y t housand shar es t o sevent y- t wo t housand, and equal l y
wi sel y i n not i ncr easi ng my l i ne of Ut ah f r om t he or i gi nal 5000
shar es. The r eason why I di dn' t sel l out my Ut ah Copper bef or e
was t hat I was bul l i sh on t he copper t r ade and i t was a bul l
mar ket i n st ocks and I di dn' t t hi nk t hat Ut ah woul d hur t me much
even i f I
di dn' t make a ki l l i ng i n i t . But as f or hunches, t her e
wer en' t any.
The t r ai ni ng of a st ock t r ader i s l i ke a medi cal educat i on.
The physi ci an has t o spend l ong year s l ear ni ng anat omy,
physi ol ogy, mat er i a medi ca and col l at er al subj ect s by t he dozen.
He l ear ns t he t heor y and t hen pr oceeds t o devot e hi s l i f e t o t he
pr act i ce. He obser ves and cl assi f i es al l sor t s of pat hol ogi cal
phenomena. He l ear ns t o di agnose. I f hi s di agnosi s i s cor r ect ,
and t hat depends upon t he accur acy of hi s obser vat i on - - he
ought t o do pr et t y wel l i n hi s pr ognosi s, al ways keepi ng i n


mi nd, of cour se, t hat human f al l i bi l i t y and t he ut t er l y
unf or eseen wi l l keep hi m f r om scor i ng 100 per cent of bul l ' s
eyes.
And t hen, as he gai ns i n exper i ence, he. l ear ns not onl y t o
do t he r i ght t hi ng but t o do i t i nst ant l y, so t hat many peopl e
wi l l t hi nk he does i t i nst i nct i vel y. I t r eal l y i sn' t aut omat i sm.
I t i s t hat he has di agnosed t he case accor di ng t o hi s
obser vat i ons of such cases dur i ng a per i od of many year s; and,
nat ur al l y, af t er he has di agnosed i t , he can onl y t r eat i t i n
t he way t hat exper i ence has t aught hi m i s t he pr oper t r eat ment .
You can t r ansmi t knowl edge - - t hat i s, your par t i cul ar
col l ect i on of car d i ndexed f act s, but not your exper i ence. A man
may know what t o do and l ose money - - i f he doesn' t do i t
qui ckl y enough.
Obser vat i on, exper i ence, memor y and mat hemat i cs - - t hese
ar e what t he successf ul t r ader must depend on. He must not onl y
obser ve accur at el y but r emember at al l t i mes what he has
obser ved. He cannot bet on t he unr easonabl e or on t he unex-
pect ed, however st r ong hi s per sonal convi ct i ons may be about
man' s unr easonabl eness or however cer t ai n he may f eel t hat t he
unexpect ed happens ver y f r equent l y. He must bet al ways on
pr obabi l i t i es - - t hat i s, t r y t o ant i ci pat e t hem. Year s of
pr act i ce at t he game, of const ant st udy, of al ways r emember i ng,
enabl e t he t r ader t o act on t he i nst ant when t he unexpect ed
happens as wel l as when t he expect ed comes t o pass.
A man can have gr eat mat hemat i cal abi l i t y and an unusual
power of accur at e obser vat i on and yet f ai l i n specul at i on unl ess
he al so possesses t he exper i ence and t he memor y. And t hen, l i ke
t he physi ci an who keeps up wi t h t he advances of sci ence, t he
wi se t r ader never ceases t o st udy gener al condi t i ons, t o keep
t r ack of devel opment s ever ywher e t hat ar e l i kel y t o af f ect or
i nf l uence t he cour se of t he var i ous mar ket s. Af t er year s at t he
game i t becomes a habi t t o keep post ed. He act s al most
aut omat i cal l y. He acqui r es t he i nval uabl e pr of essi onal at t i t ude
and t hat enabl es hi m t o beat t he game at t i mes! Thi s di f f er ence
bet ween t he pr of essi onal and t he amat eur or occasi onal t r ader
cannot be over emphasi sed. I f i nd, f or i nst ance, t hat memor y and
mat hemat i cs hel p me ver y much. Wal l St r eet makes i t s money on a
mat hemat i cal basi s. I mean, i t makes i t s money by deal i ng wi t h
f act s and f i gur es.
When I sai d t hat a t r ader has t o keep post ed t o t he mi nut e
and t hat he must t ake a pur el y pr of essi onal at t i t ude t owar d al l
mar ket s and al l devel opment s, I mer el y meant t o emphasi se agai n
t hat hunches and t he myst er i ous t i cker - sense haven' t so ver y
much t o do wi t h success. Of cour se, i t of t en happens t hat an


exper i enced t r ader act s so qui ckl y t hat he hasn' t t i me t o gi ve
al l hi s r easons i n advance, but never t hel ess t hey ar e good and
suf f i ci ent r easons, because t hey ar e based on f act s col l ect ed by
hi m i n hi s year s of wor ki ng and t hi nki ng and seei ng t hi ngs f r om
t he angl e of t he pr of essi onal , t o whom ever yt hi ng t hat comes t o
hi s mi l l i s gr i st . Let me i l l ust r at e what I mean by t he
pr of essi onal at t i t ude.
I keep t r ack of t he commodi t i es mar ket s, al ways. I t i s a
habi t of year s. As you know, t he Gover nment r epor t s i ndi cat ed a
wi nt er wheat cr op about t he same as l ast year and a bi gger
spr i ng wheat cr op t han i n 1921. The condi t i on was much bet t er
and we pr obabl y woul d have an ear l i er har vest t han usual . When I
got t he f i gur es of condi t i on and I saw what we mi ght expect i n
t he way of yi el d- mat hemat i cs, I al so t hought at once of t he coal
mi ner s' st r i ke and t he r ai l r oad shopmen' s st r i ke. I coul dn' t
hel p t hi nki ng of t hem because my mi nd al ways t hi nks of al l
devel opment s t hat have a bear i ng on t he mar ket s. I t i nst ant l y
st r uck me t hat t he st r i ke whi ch had al r eady af f ect ed t he
movement of f r ei ght ever ywher e must af f ect wheat pr i ces
adver sel y. I f i gur ed t hi s way: Ther e was bound t o be
consi der abl e del ay i n movi ng wi nt er wheat t o mar ket by r eason of
t he st r i ke- cr i ppl ed t r anspor t at i on f aci l i t i es, and by t he t i me
t hose i mpr oved t he Spr i ng wheat cr op woul d be r eady t o move.
That meant t hat when t he r ai l r oads wer e abl e t o move wheat i n
quant i t y t hey woul d be br i ngi ng i n bot h cr ops t oget her t he
del ayed wi nt er and t he ear l y spr i ng wheat and t hat woul d mean a
vast quant i t y of wheat pour i ng i nt o t he mar ket at one f el l
swoop. Such bei ng t he f act s of t he case - - t he obvi ous
pr obabi l i t i es - - t he t r ader s, who woul d know and f i gur e as I
di d, woul d not bul l wheat f or a whi l e. They woul d not f eel l i ke
buyi ng i t unl ess t he pr i ce decl i ned t o such f i gur es as made t he
pur chase of wheat a good i nvest ment . Wi t h no buyi ng power i n t he
mar ket , t he pr i ce ought t o go down. Thi nki ng t he way I di d I
must f i nd whet her I was r i ght or not . As ol d Pat Hear ne used t o
r emar k, " You can' t t el l t i l l you bet . " Bet ween bei ng bear i sh and
sel l i ng t her e i s no need t o wast e t i me.
Exper i ence has t aught me t hat t he way a mar ket behaves i s
an excel l ent gui de f or an oper at or t o f ol l ow. I t i s l i ke t aki ng
a pat i ent ' s t emper at ur e and pul se or not i ng t he col our of t he
eyebal l s and t he coat i ng of t he t ongue.
Now, or di nar i l y a man ought t o be abl e t o buy or sel l a
mi l l i on bushel s of wheat wi t hi n a r ange of Y4 cent . On t hi s day
when I sol d t he 250, 000 bushel s t o t est t he mar ket f or
t i mel i ness, t he pr i ce went down Y4 cent . Then, si nce t he r eac-
t i on di d not def i ni t el y t el l me al l I wi shed t o know, I sol d an-


ot her quar t er of a mi l l i on bushel s. I not i ced t hat i t was t aken
i n dr i bl et s; t hat i s, t he buyi ng was i n l ot s of i o, ooo or 15, 000
bushel s i nst ead of bei ng t aken i n t wo or t hr ee t r ansact i ons
whi ch woul d have been t he nor mal way. I n addi t i on t o t he
homeopat hi c buyi ng t he pr i ce went down i Y4 cent s on my sel l i ng.
Now, I need not wast e t i me poi nt i ng out t hat t he way i n whi ch
t he mar ket t ook my wheat and t he di spr opor t i onat e decl i ne on my
sel l i ng t ol d me t hat t her e was no buyi ng power t her e. Such bei ng
t he case, what was t he onl y t hi ng t o do? Of cour se, t o sel l a
l ot mor e. Fol l owi ng t he di ct at es of exper i ence may possi bl y f ool
you, now and t hen. But not f ol l owi ng t hem i nvar i abl y makes an
ass of you. So I sol d 2, 000, 000 bushel s and t he pr i ce went down
some mor e. A f ew days l at er t he mar ket ' s behavi our pr act i cal l y
compel l ed me t o sel l an addi t i onal 2, 000, 000 bushel s and t he
pr i ce decl i ned f ur t her st i l l ; a f ew days l at er wheat st ar t ed t o
br eak badl y and sl umped of f 6 cent s a bushel . And i t di dn' t st op
t her e. I t has been goi ng down, wi t h shor t - l i ved r al l i es.
Now, I di dn' t f ol l ow a hunch. Nobody gave me a t i p. I t was
my habi t ual or pr of essi onal ment al at t i t ude t owar d t he
commodi t i es mar ket s t hat gave me t he pr of i t and t hat at t i t ude
came f r ommy year s at t hi s busi ness. I st udy because my busi ness
i s t o t r ade. The moment t he t ape t ol d me t hat I was on t he r i ght
t r ack my busi ness dut y was t o i ncr ease my l i ne. I di d. That i s
al l t her e i s t o i t .
I have f ound t hat exper i ence i s apt t o be st eady di vi dend
payer i n t hi s game and t hat obser vat i on gi ves you t he best t i ps
of al l . The behavi our of a cer t ai n st ock i s al l you need at
t i mes. You obser ve i t . Then exper i ence shows you how t o pr of i t
by var i at i ons f r om t he usual , t hat i s, f r om t he pr obabl e. For
exampl e, we know t hat al l st ocks do not move one way t oget her
but t hat al l t he st ocks of a gr oup wi l l move up i n a bul l mar ket
and down i n a bear mar ket . Thi s i s a commonpl ace of specul at i on.
I t i s t he commonest of al l sel f - gi ven t i ps and t he commi ssi on
houses ar e wel l awar e of i t and pass i t on t o any cust omer who
has not t hought of i t hi msel f ; I mean, t he advi ce t o t r ade i n
t hose st ocks whi ch have l agged behi nd ot her st ocks of t he same
gr oup. Thus, i f U. S. St eel goes up, i t i s l ogi cal l y assumed
t hat i t i s onl y a mat t er of t i me when Cr uci bl e or Republ i c or
Bet hl ehem wi l l f ol l ow sui t . Tr ade condi t i ons and pr ospect s
shoul d wor k al i ke wi t h al l st ocks of a gr oup and t he pr osper i t y
shoul d be shar ed by al l . On t he t heor y, cor r obor at ed by
exper i ence t i mes wi t hout number , t hat ever y dog has hi s day i n
t he mar ket , t he publ i c wi l l buy A. B. St eel because i t has not
advanced whi l e C. D. St eel and X. Y. St eel have gone up.


I never buy a st ock even i n a bul l mar ket , i f i t doesn' t
act as i t ought t o act i n t hat ki nd of mar ket . I have somet i mes
bought a st ock dur i ng an undoubt ed bul l mar ket and f ound out
t hat ot her st ocks i n t he same gr oup wer e not act i ng bul l i shl y
and I have sol d out my st ock. Why? Exper i ence t el l s me t hat i t
i s not wi se t o buck agai nst what I may cal l t he mani f est gr oup
t endency. I cannot expect t o pl ay cer t ai nt i es onl y. I must
r eckon on pr obabi l i t i es and ant i ci pat e t hem. An ol d br oker once
sai d t o me: " I f I am wal ki ng al ong a r ai l r oad t r ack and I see a
t r ai n comi ng t owar d me at si xt y mi l es an hour , do I keep on
wal ki ng on t he t i es? Fr i end, I si dest ep. And I do not even pat
mysel f on t he back f or bei ng so wi se and pr udent . "
L~_at year , af t er t he gener al bul l movement was wel l under
way, I not i ced t hat one st ock i n a cer t ai n gr oup was not goi ng
wi t h t he r est of t he gr oup, t hough t he gr oup v: r h t hat one
except i on was goi ng wi t h t he r est of t he mar l : ct . I was l ong a
ver y f ai r amount of Bl ackwood Mot or s. Evcr ybody knew t hat t he
company was doi ng a ver y bi g busi nes. The pr i ce was r i si ng f r om
one t o t hr ee poi nt s a day and t i l e publ i c was comi ng i n mor e and
mor e. Thi s nat ur al l y cent er ed at t ent i on on t he gr oup and al l t he
var i ous mot or st ocks began t o go up. One of t hem, however ,
per si st ent l y hel d back and t hat was Chest er . I t l agged behi nd
t he ot her s so t hat i t was not l ong bef or e i t made peopl e t al k.
The l ow pr i ce of Chest er and i t s apat hy was cont r ast ed wi t h t he
st r engt h and act i vi t y i n Bl ackwood and ot her mot or st ocks and
t he publ i c l ogi cal l y enough l i st ened t o t he t out s and t i pst er s
and wi seacr es and began t o buy Chest er on t he t heor y t hat i t
must pr esent l y move up wi t h t he r est of t he gr oup.
I nst ead of goi ng up on t hi s moder at e publ i c buyi ng, Chest er
act ual l y decl i ne, . Now, i t woul d have been no j ob t o put i t up
i n t hat bul l ' Mar ket , consi der i ng t hat Bl ackwood, a st ock of t he
same gr oup, was one of t he sensat i onal l eader s of t he gener al
advance and we wer e hear i ng not hi ng but t he wonder f ul
i mpr ovement i n t he demand f or aut omobi l es of al l ki nds and t he
r ecor d out put .
I t was t hus pl ai n t hat t he i nsi de cl i que i n Chest er wer e
not doi ng any of t he t hi ngs t hat i nsi de cl i ques i nvar i abl y do i n
a bul l mar ket . For t hi s f ai l ur e t o do t he usual t hi ng t her e
mi ght be t wo r easons. Per haps t he i nsi der s di d not put i t up
because t hey wi shed t o accumul at e mor e st ock bef or e advanci ng
t he pr i ce. But t hi s was an unt enabl e t heor y i f you anal ysed t he
vol ume and char act er of t he t r adi ng i n Chest er . The ot her r eason
was t hat t hey di d not put i t up because t hey wer e af r ai d of
get t i ng st ock i f t hey t r i ed t o.


When t he men who ought t o want a st ock don' t want i t , why
shoul d I want i t ? I f i gur ed t hat no mat t er how pr osper ous ot her
aut omobi l e compani es mi ght be, i t was a ci nch t o sel l Chest er
shor t . Exper i ences had t aught me t o bewar e of buyi ng a st ock
t hat r ef uses t o f ol l ow t he gr oup- l eader .
I easi l y est abl i shed t he f act t hat not onl y t her e was no
i nsi de buyi ng but t hat t her e was act ual l y i nsi de sel l i ng. Ther e
wer e ot her sympt omat i c war ni ngs agai nst buyi ng Chest er , t hough
al l I r equi r ed was i t s i nconsi st ent mar ket behavi our . I t was
agai n t he t ape t hat t i pped me of f and t hat was why I sol d
Chest er shor t . One day, not ver y l ong af t er war d, t he st ock br oke
wi de open. Lat er on we l ear ned of f i ci al l y, as i t wer e t hat
i nsi der s had i ndeed been sel l i ng i t , knowi ng f ul l wel l t hat t he
condi t i on of t he company was not good. The r eason, as usual , was
di scl osed af t er t he br eak. But t he war ni ng came bef or e t he
br eak. I don' t l ook out f or t he br eaks; I l ook out f or t he
war ni ngs. I di dn' t know what was t he t r oubl e wi t h Chest er ;
nei t her di d I f ol l ow a hunch. I mer el y knew t hat somet hi ng must
be wr ong.
Onl y t he ot her day w e had what t he newspaper s cal l ed a
sensat i onal movement i n Gui ana Gol d. Af t er sel l i ng on t he Cur b
at 50 or cl ose t o i t , i t was l i st ed on t he St ock Exchange. I t
st ar t ed t her e at ar ound 35, began t o go down and f i nal l y br oke
20.
Now, I ' d never have cal l ed t hat br eak sensat i onal because
i t was f ul l y t o be expect ed. I f you had asked you coul d have
l ear ned t he hi st or y of t he company. No end of peopl e knew i t . I t
was t ol d t o me as f ol l ows: A syndi cat e was f or med consi st i ng of
a hal f dozen ext r emel y wel l - known capi t al i st s and a pr omi nent
banki ng- house. One of t he member s was t he head of t he Bel l e I sl e
Expl or at i on Company, whi ch advanced Gui ana over $10, 000, 000 cash
and r ecei ved i n r et ur n bonds and 250, 000 shar es out of a t ot al
of one mi l l i on shar es of t he Gui ana Gol d Mi ni ng Company. The
st ock went on a di vi dend basi s and i t was mi ght y wel l
adver t i sed. The Bel l e I sl e peopl e t hought i t wel l t o cash i n and
t hey gave a cal l on t hei r 250, 000 shar es t o t he banker s, who
ar r anged t o t r y t o mar ket t hat st ock and some of t hei r own
hol di ngs as wel l . They t hought of ent r ust i ng t he mar ket
mani pul at i on t o a pr of essi onal whose f ee was t o be one t hi r d of
t he pr of i t s f r om t he sal e of t he 250, 000 shar es above 36. I
under st and t hat t he agr eement was dr awn up and r eady t o be
si gndd but at t he l ast moment t he banker s deci ded t o under t ake
t he mar ket i ng t hemsel ves and save t he f ee. So t hey or gani zed an
i nsi de pool . The banker s had a cal l on t he Bel l e I sl e hol di ngs
of 250, 000 at 36. They put t hi s i n at 41. That i s, i nsi der s pai d


t hei r own banki ng col l eagues a 5- poi nt pr of i t t o st ar t wi t h. I
don' t know whet her t hey knew i t or not .
I t i s per f ect l y pl ai n t hat t o t he banker s t he oper at i on had
ever y sembl ance of a ci nch. We had r un i nt o a bul l mar ket and
t he st ocks of t he gr oup t o whi ch Gui ana Gol d bel onged wer e among
t he mar ket l eader s. The company was maki ng bi g pr of i t s and
payi ng r egul ar di vi dends. Thi s t oget her wi t h t he hi gh char act er
of t he sponsor s made t he publ i c r egar d Gui ana al most as an
i nvest ment st ock. I was t ol d t hat about 400, 000 shar es wer e sol d
t o t he publ i c al l t he way up t o 47.
The gol d gr oup was ver y st r ong. But pr esent l y Gui ana began
t o sag. I t decl i ned t en poi nt s. That was al l r i ght i f t he pool
was mar ket i ng st ock. But pr et t y soon t he St r eet began t o hear
t hat t hi ngs wer e not al t oget her sat i sf act or y and t he pr oper t y
was not bear i ng out t he hi gh expect at i ons of t he pr omot er s.
Then, of cour se, t he r eason f or t he decl i ne became pl ai n. But
bef or e t he r eason was known I had t he war ni ng and had t aken
st eps t o t est t he mar ket f or Gui ana. The st ock was act i ng pr et t y
much as Chest er Mot or s di d. I sol d Gui ana. The pr i ce went down.
I sol d mor e. The pr i ce went st i l l l ower . The st ock was r epeat i ng
t he per f or mance of Chest er and of a dozen ot her st ocks whose
cl i ni cal hi st or y I r emember ed. The t ape pl ai nl y t ol d me. t hat
t her e was somet hi ng wr ong - - somet hi ng t hat kept i nsi der s f r om
buyi ng i t i nsi der s who knew exact l y why t hey shoul d not buy t hei r
own st ock i n a bul l mar ket . On t he ot her hand, out si der s, who
di d not know, wer e now buyi ng because havi ng sol d at 45 and
hi gher t he st ock l ooked cheap at 35 and l ower . The di vi dend was
st i l l bei ng pai d. The st ock was a bar gai n.
Then t he news came. I t r eached me, as i mpor t ant mar ket news
of t en does, bef or e i t r eached t he publ i c. But t he conf i r mat i on
of t he r epor t s of st r i ki ng bar r en r ock i nst ead of r i ch or e
mer el y gave me t he r eason f or t he ear l i er i nsi de sel l i ng. I
mysel f di dn' t sel l on t he news. I had sol d l ong bef or e, on t he
st ock' s behavi our . My concer n wi t h i t was not phi l osophi cal . I
am a t r ader and t her ef or e l ooked f or one si gn: I nsi de buyi ng.
Ther e wasn' t any. I di dn' t have t o know why t he i nsi der s di d not
t hi nk enough of t hei r own st ock t o buy i t on t he decl i ne. I t was
enough t hat t hei r mar ket pl ans pl ai nl y di d not i ncl ude f ur t her
mani pul at i on f or t he r i se. That made i t a ci nch t o sel l t he
st ock shor t . The publ i c had bought al most a hal f mi l l i on shar es
and t he onl y change i n owner shi p possi bl e was f r om one set of
i gnor ant out si der s who woul d sel l i n t he hope of st oppi ng l osses
t o anot her set of i gnor ant out si der s who mi ght buy i n t he hope
of maki ng money.


I am not t el l i ng you t hi s t o mor al i se on i t he publ i c' s
l osses t hr ough t hei r buyi ng of Gui ana or on my pr of i t t hr ough my
sel l i ng of i t , but t o emphasi se how i mpor t ant t he st udy of gr oup
behavi our i sm i s and how i t s l essons ar e di sr egar ded by
i nadequat el y equi pped t r ader s, bi g and l i t t l e. And i t i s not
onl y i n t he st ock mar ket t hat t he t ape war ns you. I t bl ows t he
whi st l e qui t e as l oudl y i n commodi t i es.
I had an i nt er est i ng exper i ence i n cot t on. I was bear i sh on
st ocks and put out a moder at e shor t l i ne. At t he same t i me I
sol d cot t on shor t ; 50, 000 bal es. My st ock deal pr oved pr of i t abl e
and I negl ect ed my cot t on. The f i r st t hi ng I knew I had a l oss
of $250, 000 on my 50, 000 bal es. As I sai d, my st ock deal was so
i nt er est i ng and I was doi ng so wel l i n i t t hat I di d not wi sh t o
t ake my mi nd of f i t . Whenever I t hought of cot t on I j ust sai d t o
mysel f : " I ' l l wai t f or a r eact i on and cover . " The pr i ce woul d
r eact a l i t t l e but bef or e I coul d deci de t o t ake my l oss and
cover t he pr i ce woul d r al l y agai n, and go hi gher t han ever . So
I ' d deci de agai n t o wai t a l i t t l e and I ' d go back t o my st ock
deal and conf i ne my at t ent i on t o t hat . Fi nal l y I cl osed out my
st ocks at a ver y handsome pr of i t and went away t o Hot Spr i ngs
f or a r est and a hol i day.
That r eal l y was t he f i r st t i me t hat I had my mi nd f r ee t o
deal wi t h t he pr obl emof my l osi ng deal i n cot t on. The t r ade had
gone agai nst me. Ther e wer e t i mes when i t al most l ooked as i f I
mi ght wi n out . I not i ced t hat whenever anybody sol d heavi l y
t her e was a good r eact i on. But al most i nst ant l y t he pr i ce woul d
r al l y and make a new hi gh f or t he move.
Fi nal l y, by t he t i me I had been i n Hot Spr i ngs a f ew days,
I was a mi l l i on t o t he bad and no l et up i n t he r i si ng t endency.
I t hought over al l I had done and had not done and I sai d t o
mysel f : " I must be wr ong! " Wi t h me t o f eel t hat I am wr ong and
t o deci de t o get out ar e pr act i cal l y one pr ocess. So I cover ed,
at a l oss of about one mi l l i on.
The next mor ni ng I was pl ayi ng gol f and not t hi nki ng of
anyt hi ng el se. I had made my pl ay i n cot t on. I had been wr ong. I
had pai d f or bei ng wr ong and t he r ecei pt ed bi l l was i n my
pocket . I had no mor e concer n wi t h t he cot t on mar ket t han I have
at t hi s moment . When I went back t o t he hot el f or l uncheon I
st opped at t he br oker ' s of f i ce and t ook a l ook at t he
quot at i ons. I saw t hat cot t on had gone of f 5o poi nt s. That
wasn' t anyt hi ng. But I al so not i cedi t hat i t had not r al l i ed as
i t had been i n t he habi t of doi ng f or weeks, as soon as t he
pr essur e of t he par t i cul ar sel l i ng t hat had depr essed i t eased
up. Thi s had i ndi cat ed t hat t he l i ne of l east r esi st ance was up-
war d and i t had cost me a mi l l i on t o shut my eyes t o i t .


Now, however , t he r eason t hat had made me cover at a bi g
l oss was no l onger a good r eason si nce t her e had not been t he
usual pr ompt and vi gor ous r al l y. So I sol d r o, ooo bal es and
wai t ed. Pr et t y soon t he mar ket went of f So poi nt s. I wai t ed a
l i t t l e whi l e l onger . Ther e was no r al l y. I had got pr et t y hungr y
by now, so I went i nt o t he di ni ng- r oom and or der ed my l uncheon.
Bef or e t he wai t er coul d ser ve i t , I j umped up, went t o t he
br oker ' s of f i ce, I saw t hat t her e had been no r al l y and so I
sol d i o, ooo bal es mor e. I wai t ed a l i t t l e and had t he pl easur e
of seei ng t he pr i ce decl i ne 40 poi nt s mor e. That showed me I was
t r adi ng cor r ect l y so I r et ur ned t o t he di ni ngr oom, at e my
l uncheon and went back t o t he br oker ' s. Ther e was no r al l y i n
cot t on t hat day. That ver y ni ght I l ef t Hot Spr i ngs.
I t was al l ver y wel l t o pl ay gol f but I had been wr ong i n
cot t on i n sel l i ng when I di d and i n cover i ng when I di d. So I
si mpl y had t o get back on t he j ob and be wher e I coul d t r ade i n
comf or t . The way t he mar ket t ook my f i r st t en t housand bal es
made me sel l t he second t en t housand, and t he way t he mar ket
t ook t he second made me cer t ai n t he t ur n had come. I t was t he
di f f er ence i n behavi our .
Wel l , I r eached Washi ngt on and went t o my br oker s' of f i ce
t her e, whi ch was i n char ge of my ol d f r i end Tucker . Whi l e I was
t her e t he mar ket went down some mor e. I was mor e conf i dent of
bei ng r i ght now t han I had been of bei ng wr ong bef or e. So I sol d
40, ooo bal es and t he mar ket went of f 75 poi nt s. I t showed t hat
t her e was no suppor t t her e. That ni ght t he mar ket cl osed st i l l
l ower . The ol d buyi ng power was pl ai nl y gone. Ther e was no
t el l i ng at what l evel t hat power woul d agai n devel op, but I f el t
conf i dent of t he wi sdom of my posi t i on. The next mor ni ng I l ef t
Washi ngt on f or New Yor k by mot or . Ther e was no need t o hur r y.
When we got t o Phi l adel phi a I dr ove t o a br oker ' s of f i ce. I
saw t hat t her e was t he ver y di ckens t o pay i n t he cot t on mar ket .
Pr i ces had br oken badl y and t her e was a smal l - si zed pani c on. I
di dn' t wai t t o get t o New Yor k. I cal l ed up my br oker s on t he
l ong di st ance and I cover ed my shor t s. As soon as I got my
r epor t s and f ound t hat I had pr act i cal l y made up my pr evi ous
l oss, I mot or ed on t o New Yor k wi t hout havi ng t o st op en r out e
t o see any mor e quot at i ons.
Some f r i ends who wer e wi t h me i n Hot Spr i ngs t al k t o t hi s
day of t he way I j umped up f r om t he l uncheon t abl e t o sel l t hat
second l ot of i o, ooo bal es. But agai n t hat cl ear l y was not a
hunch. I t was an i mpul se t hat came f r om t he convi ct i on t hat t he
t i me t o sel l cot t on had now come, however gr eat my pr evi ous
mi st ake had been. I had t o t ake advant age of i t . I t was my
chance. The subconsci ous mi nd pr obabl y went on wor ki ng, r eachi ng


concl usi ons f or me. The deci si on t o sel l i n Washi ngt on was t he
r esul t of my obser vat i on. My year s of exper i ence i n t r adi ng t ol d
me t hat t he l i ne of l east r esi st ance had changed f r om up t o
down.
I bor e t he cot t on mar ket no gr udge f or t aki ng a mi l l i on
dol l ar s out of me and I di d not hat e mysel f f or maki ng a mi st ake
of t hat cal i br e any mor e t han I f el t pr oud f or cover i ng i n
Phi l adel phi a and maki ng up my l oss. My t r adi ng mi nd concer ns
i t sel f wi t h t r adi ng pr obl ems and I t hi nk I am j ust i f i ed i n
asser t i ng t hat I made up my f i r st l oss because I had t he
exper i ence and t he memor y.



CHAPTER XVI I I

HI STORY r epeat s i t sel f al l t he t i me i n Wal l St r eet . Do you
r emember a st or y I t ol d you about cover i ng my shor t s at t he t i me
St r at t on had cor n cor ner ed? Wel l , anot her t i me I used
pr act i cal l y t he same t act i cs i n t he st ock mar ket . The st ock was
Tr opi cal Tr adi ng. I have made money bul l i ng i t and al so bear i ng
i t . I t al ways was an act i ve st ock and a f avour i t e wi t h
advent ur ous t r ader s. The i nsi de cot er i e has been accused t i me
and agai n by t he newspaper s of bei ng mor e concer ned over t he
f l uct uat i ons i n t he st ock t han wi t h encour agi ng per manent
i nvest ment i n i t . The ot her day one of t he abl est br oker s I know
asser t ed t hat not even Dani el Dr ew i n Er i e or H. O. Havemeyer i n
Sugar devel oped so per f ect a met hod f or mi l ki ng t he mar ket f or a
st ock as Pr esi dent Mul l i gan and hi s f r i ends have done i n
Tr opi cal Tr adi ng. Many t i mes t hey have encour aged t he bear s t o
sel l TT shor t and t hen have pr oceeded t o squeeze t hem wi t h
busi ness- l i ke t hor oughness. Ther e was no mor e vi ndi ct i veness
about t he pr ocess t han i s f el t by a hydr aul i c pr ess or no mor e
squeami shness, ei t her .
Of cour se, t her e have been peopl e who have spoken about
cer t ai n " unsavor y i nci dent s" i n t he mar ket car eer of TT st ock.
But I dar e say t hese cr i t i cs wer e suf f er i ng f r om t he squeezi ng.
Why do t he r oom t r ader s, who have suf f er ed so of t en f r om t he
l oaded di ce of t he i nsi der s, cont i nue t o go up agai nst t he game?
Wel l , f or one t hi ng t hey l i ke act i on and t hey cer t ai nl y get i t
i n Tr opi cal Tr adi ng. No pr ol onged spel l s of dul ness. No r easons
asked or gi ven. No t i me wast ed. No pat i ence st r ai ned by wai t i ng
f or t he t i pped movement t o begi n. Al ways enough st ock t o go
ar ound - - except when t he shor t i nt er est i s bi g enough t o make
t he scar ci t y wor t h whi l e. One bor n ever y mi nut e!
I t so happened some t i me ago t hat I was i n Fl or i da on my
usual wi nt er vacat i on. I was f i shi ng and enj oyi ng mysel f wi t h
out any t hought of t he mar ket s except i ng when we r ecei ved a
bat ch of newspaper s. One mor ni ng when t he semi - weekl y mai l came
i n I l ooked at t he st ock quot at i ons and saw t hat Tr opi cal
Tr adi ng was sel l i ng at 155. The l ast t i me I ' d seen a quot at i on
i n i t , I t hi nk, was ar ound i qo. My opi ni on was t hat we wer e
goi ng i nt o a bear mar ket and I was bi di ng my t i me bef or e goi ng
shor t of st ocks. But t her e was no mad r ush. That was why I was
f i shi ng and out of hear i ng of t he t i cker . I knew t hat I ' d be
back home when t he r eal cal l came. I n t he meanwhi l e not hi ng t hat
I di d or f ai l ed t o do woul d hur r y mat t er s a bi t .
The behavi our of Tr opi cal Tr adi ng was t he out st andi ng
f eat ur e of t he mar ket , accor di ng t o t he newspaper s I got t hat


mor ni ng. I t ser ved t o cr yst al l i se my gener al bear i shness because
I t hought i t par t i cul ar l y asi ni ne f or t he i nsi der s t o r un up t he
pr i ce of TT i n t he f ace of t he heavi ness of t he gener al l i st .
Ther e ar e t i mes when t he mi l ki ng pr ocess must be suspended. What
i s abnor mal i s sel dom a desi r abl e f act or i n a t r ader ' s
cal cul at i ons and i t l ooked t o me as i f t he mar ki ng up of t hat
st ock wer e a capi t al bl under . Nobody can make bl under s of t hat
magni t ude wi t h i mpuni t y; not i n t he st ock mar ket .
Af t er I got t hr ough r eadi ng t he newspaper s I went back t o
my f i shi ng but I kept t hi nki ng of what t he i nsi der s i n Tr opi cal
Tr adi ng wer e t r yi ng t o do. That t hey wer e bound t o f ai l was as
cer t ai n as t hat a man i s bound t o smash hi msel f i f he j umps f r om
t he r oof 9f a t went y- st or y bui l di ng wi t hout a par achut e. I
coul dn' t t hi nk of anyt hi ng el se and f i nal l y I gave up t r yi ng t o
f i sh and sent of f a t el egr am t o my br oker s t o sel l 2000 shar es
of TT at t he mar ket . Af t er t hat I was abl e t o go back t o my
f i shi ng. I di d pr et t y wel l .
t he r est of t he mar ket i nst ead of goi ng up on i nsi de mani pul a-
t i on. I t her ef or e l ef t my f i shi ng camp and r et ur ned t o Pal m
Beach; or , r at her , t o t he di r ect wi r e t o New Yor k.
The moment I got t o Pal m Beach and saw what t he mi sgui ded
i nsi der s wer e st i l l t r yi ng t o do, I l et t hem have a second l ot
of aooo TT. Back came t he r epor t and I sol d anot her 2000 shar es.
The mar ket behaved excel l ent l y. That i s, i t decl i ned on my
sel l i ng. Ever yt hi ng bei ng sat i sf act or y I went out and had a
chai r r i de. But I wasn' t happy. The mor e I t hought t he unhappi er
i t made me t o t hi nk t hat I hadn' t sol d mor e. So back I went t o
t he br oker ' s of f i ce and sol d anot her 2000 shar es.
I was happy onl y when I was sel l i ng t hat st ock. Pr esent l y I
was shor t i o, ooo shar es. Then I deci ded t o r et ur n t o New Yor k. I
had busi ness t o do now. My f i shi ng I woul d do some ot her t i me.
When I ar r i ved i n New Yor k I made i t a poi nt t o get a l i ne
on t he company' s busi ness, act ual and pr ospect i ve. What I
l ear ned st r engt hened my convi ct i on t hat t he i nsi der s had been
wor se t han r eckl ess i n j acki ng up t he pr i ce at a t i me when such
an advance was not j ust i f i ed ei t her by~t he t one of t he gener al
mar ket or by t he company' s ear ni ngs.
The r i se, i l l ogi cal and i l l - t i med t hough i t was, had
devel oped some publ i c f ol l owi ng and t hi s doubt l ess encour aged
t he i nsi der s t o pur sue t hei r unwi se t act i cs. Ther ef or e I sol d
mor e st ock. The i nsi der s ceased t hei r f ol l y. So I t est ed t he
mar ket agai n and agai n, i n accor dance wi t h my t r adi ng met hods,
unt i l f i nal l y I was shor t 30, 000 shar es of t he st ock of t he
Tr opi cal Tr adi ng Company. By t hen t he pr i ce was 133.


I had been war ned t hat t he TT i nsi der s knew t he exact
wher eabout s of ever y st ock cer t i f i cat e i n t he St r eet and t he
pr eci se di mensi ons and i dent i t y of t he shor t i nt er est as wel l as
ot her f act s of t act i cal i mpor t ance. They wer e abl e men and
shr ewd t r ader s. Al t oget her i t was a danger ous combi nat i on t o go
up agai nst . But f act s ar e f act s and t he st r ongest of al l al l i es
ar e condi t i ons.
Of cour se, on t he way down f r om 153 t o 133 t he shor t
i nt er est had gr own and t he publ i c t hat buys on r eact i ons began
t o ar gue as usual : That st ock had been consi der ed a good
pur chase at 153 and hi gher . Now 20 poi nt s l ower , i t was
necessar i l y a much bet t er pur chase. Same st ock; same di vi dend
r at e; same of f i cer s; same busi ness. Gr eat bar gai n l
The publ i c' s pur chases r educed t he f l oat i ng suppl y and t he
i nsi der s, knowi ng t hat a l ot of r oomt r ader s wer e shor t , t hought
t he t i me pr opi t i ous f or a squeezi ng. The pr i ce was dul y r un up
t o i 5o. I dar esay t her e was pl ent y of cover i ng but I st ayed pat .
Why shoul dn' t I ? The i nsi der s mi ght know t hat a shor t l i ne of
30, 000 shar es had not been t aken i n but why shoul d t hat f r i ght en
me? The r easons t hat had i mpel l ed me t o begi n sel l i ng at 153 and
keep at i t on t he way down t o 133, not onl y st i l l exi st ed but
wer e st r onger t han ever . The i nsi der s mi ght desi r e t o f or ce me
t o cover but t hey adduced no convi nci ng ar gument s. Fundament al
condi t i ons wer e f i ght i ng f or me. I t was not di f f i cul t t o be bot h
f ear l ess and pat i ent . A specul at or must have f ai t h i n hi msel f
and i n hi s j udgment . The l at e Di ckson G. Wat t s, ex- Pr esi dent of
t he New Yor k Cot t on Exchange and f amous aut hor of " Specul at i on
as a Fi ne Ar t , " says t hat cour age i n a specul at or i s mer el y
conf i dence t o act on t he deci si on of hi s mi nd. Wi t h me, I cannot
f ear t o be wr ong because I never t hi nk I am wr ong unt i l I am
pr oven wr ong. I n f act , I am uncomf or t abl e unl ess I am
capi t al i si ng my exper i ence. The cour se of t he mar ket at a gi ven
t i me does not necessar i l y pr ove me wr ong. I t i s t he char act er of
t he advance or of t he decl i ne t hat det er mi nes f or me t he
cor r ect ness or t he f al l acy of my mar ket posi t i on. I can onl y
r i se by knowl edge. I f I f al l i t must be by my own bl under s.
Ther e was not hi ng i n t he char act er of t he r al l y f r om133 t o
150 t o f r i ght en me i nt o cover i ng and pr esent l y t he st ock, as was
t o be expect ed, st ar t ed down agai n. I t br oke 140 bef or e t he
i nsi de cl i que began t o gi ve i t suppor t . Thei r buyi ng was
coi nci dent wi t h a f l ood of bul l r umor s about t he st ock. The
company, we hear d, was maki ng per f ect l y f abul ous pr of i t s, and
t he ear ni ngs j ust i f i ed an i ncr ease i n t he r egul ar di vi dend r at e.
Al so, t he shor t i nt er est was sai d t o be per f ect l y huge and t he
squeeze of t he cent ur y was about t o be i nf l i ct ed on t he bear


par t y i n gener al and i n par t i cul ar on a cer t ai n oper at or who was
mor e t han over - ext ended. I coul dn' t begi n t o t el l you al l I
hear d as t hey r an t he pr i ce up t en poi nt s.
The mani pul at i on di d not seem par t i cul ar l y danger ous t o me
but when t he pr i ce t ouched 149 I deci ded t hat i t was not wi se t o
l et t he St r eet accept as t r ue al l t he bul l st at ement s t hat wer e
f l oat i ng ar ound. Of cour se, t her e was not hi ng t hat I or any
ot her r ank out si der coul d say t hat woul d car r y convi ct i on ei t her
t o t he f r i ght ened shor t s or t o t hose cr edul ous cust omer s of
commi ssi on houses t hat t r ade on hear say t i ps. The most ef f ect i ve
r et or t cour t eous i s t hat whi ch t he t ape al one can pr i nt . Peopl e
wi l l bel i eve t hat when t hey wi l l not bel i eve an af f i davi t f r om
any l i vi ng man, much l ess, one f r om a chap who i s shor t 30, 000
shar es. So I used t he same t act i cs t hat I di d at t he t i me of t he
St r at t on cor ner i n cor n, when I sol d oat s t o make t he t r ader s
bear i sh on cor n. Exper i ence and memor y agai n.
When t he i nsi der s j acked up t he pr i ce of Tr opi cal Tr adi ng
wi t h a vi ew t o f r i ght eni ng t he shor t s I di dn' t f r y t o check t he
r i se by sel l i ng t hat st ock. I was al r eady shor t 30, 000 shar es of
i t whi ch was as bi g a per cent age of t he f l oat i ng suppl y as I
t hought wi se t o be shor t of . I di d not pr opose t o put my head
i nt o t he noose so obl i gi ngl y hel d open f or me - - t he second
r al l y was r eal l y an ur gent i nvi t at i on. What I di d when TT
t ouched i 49 was t o sel l about 10, 000 shar es of Equat or i al
Commer ci al Cor por at i on. Thi s company owned a l ar ge bl ock of
Tr opi cal Tr adi ng.
Equat or i al Commer ci al , whi ch was not as act i ve a st ock as
TT, br oke badl y on my sel l i ng, as I had f or eseen; and, of
cour se, my pur pose was achi eved. When t he t r ader s and t he
cust omer s of t he commi ssi on houses who had l i st ened t o t he
uncont r adi ct ed bul l dope on TT- saw t hat t he r i se i n Tr opi cal
synchr oni sed wi t h heavy sel l i ng and a shar p br eak i n Equat or i al ,
t hey nat ur al l y concl uded t hat t he st r engt h of TT was mer el y a
smoke- scr een - - a mani pul at ed advance obvi ousl y desi gned t o
f aci l i t at e i nsi de l i qui dat i on i n Equat or i al Commer ci al , whi ch
was l ar gest hol der of TT st ock. I t must be bot h l ong st ock and
i nsi de st ock i n Equat or i al , because no out si der woul d dr eam of
sel l i ng so much shor t st ock at t he ver y moment when Tr opi cal
Tr adi ng was so ver y st r ong. So t hey sol d Tr opi cal Tr adi ng and
checked t he r i se i n t hat st ock, t he i nsi der s ver y pr oper l y not
wi shi ng t o t ake al l t he st ock t hat was pr essed f or sal e. The
moment t he i nsi der s t ook away t hei r suppor t t he pr i ce of TT
decl i ned. The t r ader s and pr i nci pal commi ssi on houses now sol d
some Equat or i al al so and I t ook i n my shor t l i ne i n t hat at a


smal l pr of i t . I hadn' t sol d i t t o make money out o f t he
oper at i on but t o check t he r i se i n TT.
Ti me and agai n t he Tr opi cal Tr adi ng i nsi der s and t hei r
har d- wor ki ng publ i ci t y man f l ooded t he St r eet wi t h al l manner of
bul l i t ems and t r i ed t o put up t he pr i ce. And ever y t i me t hey
di d I sol d Equat or i al Commer ci al shor t and cover ed i t wi t h TT
r eact ed and car r i ed E C wi t h i t . I t t ook t he wi nd out of t he
mani pul at or s' sai l s. The pr i ce of TT f i nal l y went down t o 125
and t he shor t i nt er est r eal l y gr ew so bi g t hat t he i nsi der s wer e
enabl ed t o r un i t up 2o or 25 poi nt s. Thi s t i me i t was a
l egi t i mat e enough dr i ve agai nst an over - ext ended shor t i nt er est ;
but whi l e I f or esaw t he r al l y I di d not cover , not wi shi ng t o
l ose my posi t i on. Bef or e Equat or i al Commer ci al coul d advance i n
sympat hy wi t h t he r i se i n TT I sol d a r af t of i t shor t wi t h t he
usual r esul t s. Thi s gave t he l i e t o t he bul l t al k i n TT whi ch
had got qui t e boi st er ous af t er t he l at est sensat i onal r i se.
By t hi s t i me t he gener al mar ket had gr own qui t e weak. As I
t ol d you, i t was t he convi ct i on t hat we wer e i n a bear mar ket
t hat st ar t ed me sel l i ng TT shor t i n t he f i shi ng- camp i n Fl or i da.
I was shor t of qui t e a f ew ot her st ocks but TT was my pet .
Fi nal l y, gener al condi t i ons pr oved t oo much f or t he i nsi de
cl i que t o def y and TT hi t t he t oboggan sl i de. I t went bel ow 120
f or t he f i r st t i me i n year s; t hen bel ow i i o; bel ow par ; and
st i l l I di d not cover . One day when t he ent i r e mar ket was
ext r emel y weak Tr opi cal Tr adi ng br oke go and on t he de-
mor al i sat i on I cover ed. Same ol d r eason! I had t he oppor t uni t y -
- t he bi g mar ket and t he weakness and t he excess of sel l er s over
buyer s. I may t el l you, even at t he r i sk of appear i ng t o be
monot onousl y br aggi ng of my cl ever ness, t hat I t ook i n my 30, 000
shar es of TT at pr act i cal l y t he l owest pr i ces of t he movement .
But I wasn' t t hi nki ng of cover i ng at t he bot t om. I was i nt ent on
t ur ni ng my paper pr of i t s i nt o cash wi t hout l osi ng much of t he
pr of i t i n t he changi ng.
I st ood pat t hr oughout because I knew my posi t i on was
sound. I wasn' t bucki ng t he t r end of t he mar ket or goi ng agai nst
basi c condi t i ons but t he r ever se, and t hat was what made me so
sur e of t he f ai l ur e of an over - conf i dent i nsi de cl i que. What
t hey t r i ed t o do ot her s had t r i ed bef or e and i t had al ways
f ai l ed. The f r equent r al l i es, even when I knew as wel l as
anybody t hat t hey wer e due, coul d not f r i ght en me. I knew I ' d do
much bet t er i n t he end by st ayi ng pat t han by t r yi ng t o cover t o
put out a new shor t l i ne at a hi gher pr i ce. By st i cki ng t o t he
posi t i on t hat I f el t was r i ght I made over a mi l l i on dol l ar s. I
was not i ndebt ed t o hunches or t o ski l f ul t ape r eadi ng or t o
st ubbor n cour age. I t was a di vi dend decl ar ed by my f ai t h i n my


j udgment and not by my cl ever ness or by my vani t y. Knowl edge i s
power and power need not f ear l i es - - not even when t he t ape
pr i nt s t hem. The r et r act i on f ol l ows pr et t y qui ckl y.
A year l at er , TT was j acked up agai n t o i 5o and hung
ar ound t her e f or a coupl e of weeks. The ent i r e mar ket was
ent i t l ed t o a good r eact i on f or i t had r i sen uni nt er r upt edl y and
i t di d not bul l any l onger . I know because I t est ed i t . Now, t he
gr oup t o whi ch TT bel onged had been suf f er i ng f r om ver y poor
busi ness and I coul dn' t see anyt hi ng t o bul l t hose st ocks on
anyhow, even i f t he r est of t he mar ket wer e due f or a r i se,
whi ch i t wasn' t . So I began t o sel l Tr opi cal Tr adi ng. I i nt ended
t o put out i o, ooo shar es i n al l . The pr i ce br oke on my sel l i ng.
I coul dn' t see t hat t her e was any suppor t what ever . Then
suddenl y, t he char act er of t he buyi ng changed.
I am not t r yi ng t o make mysel f out a wi zar d when I assur e
you t hat I coul d t el l t he moment suppor t came i n. Ft i nst ant l y
st r uck me t hat i f t he i nsi der s i n t hat st ock, who never f el t a
mor al obl i gat i on t o keep t he pr i ce up, wer e now buyi ng t he st ock
i n t he f ace of a decl i ni ng gener al mar ket t her e must be a
r eason. They wer e not i gnor ant asses nor phi l ant hr opi st s nor yet
banker s concer ned wi t h keepi ng t he pr i ce up t o sel l mor e
secur i t i es over t he count er . The pr i ce r ose not wi t hst andi ng my
sel l i ng and t he sel l i ng of ot her s. At 153 I cover ed my 10, 000
shar es and at 156 I act ual l y went l ong because by t hat t i me t he
t ape t ol d me t he l i ne of l east r esi st ance was upwar d. I was
bear i sh on t he gener al mar ket but I was conf r ont ed by a t r adi ng
condi t i on i n a cer t ai n st ock and not by a specul at i ve t heor y i n
gener al . The pr i ce went out of si ght , above 200. I t was t he
sensat i on of t he year . I was f l at t er ed by r epor t s spoken and
pr i nt ed t hat I had been squeezed out of ei ght or ni ne mi l l i ons
of dol l ar s. As a mat t er of f act , i nst ead of bei ng shor t I was
l ong of TT al l t he way up. I n f act , I hel d on a l i t t l e t oo l ong
and l et some of my paper pr of i t s get away. Do you wi sh t o know
why I di d? Because I t hought t he TT i nsi der s woul d nat ur al l y do
what I woul d have done had I been i n t hei r pl ace. But t hat was
somet hi ng I had no busi ness t o t hi nk because my busi ness i s t o
t r ade - - t hat i s, t o st i ck t o t he f act s bef or e me and not t o
what I t hi nk ot her peopl e ought t o do.

CHAPTER XI X

DO not know when or by whomt he wor d " mani pul at i on"
was f i r st used i n connect i on wi t h what r eal l y ar e no mor e
t han common mer chandi si ng pr ocesses appl i ed t o t he sal e i n bul k
of secur i t i es on t he St ock Exchange. Ri ggi ng t he mar ket t o


f aci l i t at e cheap pur chases of a st ock whi ch i t i s desi r ed t o
accumul at e i s al so mani pul at i on. But i t i s di f f er ent . I t may not
be necessar y t o st oop t o i l l egal pr act i ces, but i t woul d be
di f f i cul t t o avoi d doi ng what some woul d t hi nk i l l egi t i mat e. How
ar e you goi ng t o buy a bi g bl ock of a st ock i n a bul l mar ket
wi t hout put t i ng up t he pr i ce on your sel f ? That woul d be t he
pr obl em. How can i t be sol ved? I t depends upon so many t hi ngs
t hat you can' t gi ve a gener al sol ut i on unl ess you say: possi bl y
by means of ver y adr oi t mani pul at i on. For i nst ance? Wel l , i t
woul d depend upon condi t i ons. You can' t gi ve any cl oser answer
t han t hat .
I am pr of oundl y i nt er est ed i n al l phases of my busi ness,
and of cour se I l ear n f r om t he exper i ence of ot her s as wel l as
f r ommy own. But i t i s ver y di f f i cul t t o l ear n how t o mani pul at e
st ocks t oday f r om such yar ns as ar e t ol d of an af t er noon i n t he
br oker s' of f i ces af t er t he cl ose. Most of t he t r i cks, devi ces
and expedi ent s of bygone days ar e obsol et e and f ut i l e; or
i l l egal and i mpr act i cabl e. St ock Exchange r ul es and condi t i ons
have changed, and t he st or y - - even t he accur at el y det ai l ed
st or y of what Dani el Dr ew or J acob Li t t l e or J ay Goul d coul d do
f i f t y or sevent y- f i ve year s ago i s scar cel y wor t h l i st eni ng t o.
The mani pul at or t oday has no mor e need t o consi der what t hey di d
and how t hey di d i t t han a cadet at West Poi nt need st udy
ar cher y as pr act i ced by t he anci ent s i n or der t o i ncr ease hi s
wor ki ng knowl edge of bal l i st i cs.
On t he ot her hand t her e i s pr of i t i n st udyi ng t he human
f act or s, t he ease wi t h whi ch human bei ngs bel i eve what i t
pl eases t hem t o bel i eve; and how t hey al l ow t hemsel ves i ndeed,
ur ge t hemsel ves t o be i nf l uenced by t hei r cupi di t y or by t he
dol l ar - cost of t he aver age man' s car el essness. Fear and hope
r emai n t he same; t her ef or e t he st udy of t he psychol ogy of
specul at or s i s as val uabl e as i t ever was. Weapons change, but
st r at egy r emai ns st r at egy, on t he New Yor k St ock Exchange as on
t he bat t l ef i el d. I t hi nk t he cl ear est summi ng up of t he whol e
t hi ng was expr essed by Thomas F. Woodl ock when he decl ar ed: " The
pr i nci pl es of successf ul st ock specul at i on ar e based on t he
supposi t i on t hat peopl e wi l l cont i nue i n t he f ut ur e t o make t he
mi st akes t hat t hey have made i n t he past . "
I n booms, whi ch i s when t he publ i c i s i n t he mar ket i n t he
gr eat est number s, t her e i s never any need of subt l et y, so t her e
i s no sense of . wast i ng t i me: di scussi ng ei t her mani pul at i on or
specul at i on dur i ng such t i mes; i t woul d be l i ke t r yi ng t o f i nd
t he di f f er ence i n r ai ndr ops t hat ar e f al l i ng synchr onousl y on
t he same r oof acr oss t he st r eet . The sucker has al ways t r i ed t o
get somet hi ng f or not hi ng, and t he appeal i n al l booms i s al ways


f r ankl y t o t he gambl i ng i nst i nct ar oused by cupi di t y and spur r ed
by a per vasi ve pr osper i t y. Peopl e who l ook f or easy money
i nvar i abl y pay f or t he pr i vi l ege of pr ovi ng concl usi vel y t hat i t
cannot be f ound on t hi s sor di d ear t h. At f i r st , when I l i st ened
t o t he account s of ol d- t i me deal s and devi ces I used t o t hi nk
t hat peopl e wer e mor e gul l i bl e i n t he i 86o' s and ' 7o' s t han i n
t he i goo' s. But I was sur e t o r ead i n t he newspaper s t hat ver y
day or t he next somet hi ng about t he l at est Ponzi or t he bust - up
of some bucket i ng br oker and about t he mi l l i ons of sucker money
gone t o j oi n t he, si l ent maj or i t y of vani shed savi ngs.
When I f i r st came t o New Yor k t her e was a gr eat f uss made
about wash sal es and mat ched or der s, f or al l t hat such pr act i ces
wer e f or bi dden by t he St ock Exchange. At t i mes t he washi ng was
t oo cr ude t o decei ve anyone. The br oker s had no hesi t at i on i n
sayi ng t hat " t he l aundr y was act i ve" whenever anybody t r i ed t o
wash up some st ock or ot her , and, as I have sai d bef or e, mor e
t han once t hey had what wer e f r ankl y r ef er r ed t o as " bucket - shop
dr i ves, " when a st ock was of f er ed down t wo or t hr ee poi nt s i n a
j i f f y j ust t o est abl i sh t he decl i ne on t he t ape and wi pe up t he
myr i ad shoe- st r i ng t r ader s who wer e l ong of t he st ock i n t he
bucket shops. As f or mat ched or der s, t hey wer e al ways used wi t h
some mi sgi vi ngs by r eason of t he di f f i cul t y of coor di nat i ng and
synchr oni si ng oper at i ons by br oker s, al l such busi ness bei ng
agai nst St ock Exchange r ul es. A f ew year s ago a f amous oper at or
cancel ed t he sel l i ng but not t he buyi ng par t of hi s mat ched
or der s, and t he r esul t was t hat an i nnocent br oker r an up t he
pr i ce t went yf i ve poi nt s or so i n a f ew mi nut es, onl y t o see i t
br eak wi t h equal cel er i t y as soon as hi s buyi ng ceased. The
or i gi nal i nt ent i on was t o cr eat e an appear ance of act i vi t y. Bad
busi ness, pl ayi ng wi t h such unr el i abl e weapons. You see, you
can' t t ake your best br oker s i nt o your conf i dence - - not i f you
want t hemt o r emai n member s of t he New Yor k St ock Exchange. Then
al so, t he t axes have made al l pr act i ces i nvol vi ng f i ct i t i ous
t r ansact i ons much mor e expensi ve t han t hey used t o be i n t he ol d
t i mes.
The di ct i onar y def i ni t i on of mani pul at i on i ncl udes cor ner s.
Now, a cor ner mi ght be t he r esul t of mani pul at i on or i t mi ght
i be t he r esul t of compet i t i ve buyi ng, as, f or i nst ance, t he
Nor t her n Paci f i c cor ner on May 9, i goi , whi ch cer t ai nl y was not
mani pul at i on. The St ut z cor ner was expensi ve t o ever y body
concer ned, bot h i n money and i n pr est i ge. And i t wasnot a
del i ber at el y engi neer ed cor ner , at t hat .
As a mat t er of f act ver y f ew of t he gr eat cor ner s wer e
pr of i t abl e t o t he engi neer s of t hem. Bot h Commodor e Vander bi l t ' s
Har l em cor ner s pai d bi g, but t he ol d chap deser ved t he mi l l i ons


he made out of a l ot of shor t spor t s, cr ooked l egi sl at or s and
al der men who t r i ed t o doubl e- cr oss hi m. On t he ot her hand, J ay
Goul d l ost i n hi s Nor t hwest er n cor ner . Deacon S. V. Whi t e made a
mi l l i on i n hi s Lackawanna cor ner , but J i m Keene dr opped a
mi l l i on i n t he Hanni bal & St . J oe deal . The f i nanci al success of
a cor ner of cour se depends upon t he mar ket i ng of t he accumul at ed
hol di ngs at hi gher t han cost , and t he shor t i nt er est has t o be
of some magni t ude f or t hat t o happen easi l y.
I used t o wonder why cor ner s wer e so popul ar among t he bi g
oper at or s of a hal f - cent ur y ago. They wer e men of abi l i t y and
exper i ence, wi de- awake and not pr one t o chi l dl i ke t r ust i n t he
phi l ant hr opy of t hei r f el l ow t r ader s. Yet t hey used t o get st ung
wi t h an ast oni shi ng f r equency. A wi se ol d br oker t ol d me t hat
al l t he bi g oper at or s of t he ' 60' s and ' do' s had one ambi t i on,
and t hat was t o wor k a cor ner . I n many cases t hi s was t he
of f spr i ng of vani t y: i n ot her s, of t he desi r e f or r evenge. At
al l event s, t o be poi nt ed out as t he man who had successf ul l y
cor ner ed t hi s or t he ot her st ock was i n r eal i t y r ecogni t i on of
br ai ns, bol dness and boodl e. I t gave t he cor ner er t he r i ght t o
be haught y. He accept ed t he pl audi t s of hi s f el l ows as f ul l y
ear ned. I t was mor e t han t he pr ospect i ve money pr of i t t hat
pr ompt ed t he engi neer s of cor ner s t o do t hei r damnedest . I t was
t he vani t y compl ex asser t i ng i t sel f among col d- bl ooded
oper at or s.
Dog cer t ai nl y at e dog i n t hose days wi t h r el i sh and
ease.
I t hi nk I t ol d you bef or e t hat I have managed t o escape
bei ng squeezed mor e t han once, not because of t he possessi on of
a
myst er i ous t i cker - sense but because I can gener al l y t el l t he
moment t he char act er of t he buyi ng i n t he st ock makes i t
i mpr udent f or me t o be shor t of i t . Thi s I do by common- sense
t est s, whi ch must have been t r i ed i n t he ol d t i mes al so. Ol d
Dani el Dr ew used t o squeeze t he boys wi t h some f r equency and
make t hem pay hi gh pr i ces f or t he Er i e " sheer s" t hey had sol d
shor t t o hi m. He was hi msel f squeezed by Commodor e Vander bi l t i n
Er i e, and when ol d Dr ew begged f or mer cy t he Commodor e gr i ml y
quot ed t he Gr eat Bear ' s own deat hl ess di st i ch
He t hat sel l s what i sn' t hi sn
Must buy i t back or go t o pr i m.

Wal l St r eet r emember s ver y l i t t l e of an oper at or who f or
mor e t han a gener at i on was one of i t s Ti t ans. Hi s chi ef cl ai mt o
i mmor t al i t y seems t o be t he phr ase " wat er i ng st ock. "


Addi son G. J er ome was t he acknowl edged ki ng of t he Publ i c
Boar d i n t he spr i ng of 1863. Hi s mar ket t i ps, t hey t el l me, wer e
consi der ed as good as cash i n bank. Fr om al l account s he was a
gr eat t r ader and made mi l l i ons. He was l i ber al t o t he poi nt of
ext r avagance and had a gr eat f ol l owi ng i n t he St r eet unt i l Henr y
Keep, known as Wi l l i am t he Si l ent , squeezed hi m out of al l hi s
mi l l i ons i n t he Ol d Sout her n cor ner . Keep, by t he way, was t he
br ot her - i n- l aw of Gov. Roswel l P. Fl ower .
I n most of t he ol d cor ner s t he mani pul at i on consi st ed
chi ef l y of not l et t i ng t he ot her man know t hat you wer e
cor ner i ng t he st ock whi ch he was var i ousl y i nvi t ed t o sel l
shor t . I t t her ef or e was ai med chi ef l y at f el l ow pr of essi onal s,
f or t he gener al publ i c does not t ake ki ndl y t o t he shor t si de of
t he account . The r easons t hat pr ompt ed t hese wi se pr of essi onal s
t o put out shor t l i nes i n such st ocks wer e pr et t y much t he same
as pr ompt s t hem t o do t he same t hi ng t oday. Apar t f r om t he
sel l i ng by f ai t h br eaki ng pol i t i ci ans i n t he Har l em cor ner of
t he Commodor e, I gat her f r om t he st or i es I have r ead t hat t he
pr of essi onal t r ader s sol d t he st ock because i t was t oo hi gh. And
t he r eason t hey t hought i t was t oo hi gh was t hat i t never bef or e
had sol d so hi gh; and t hat made i t t oo hi gh t o buy; and i f i t
was t oo hi gh t o buy i t was j ust r i ght t o sel l . That sounds
pr et t y moder n, doesn' t i t ? They wer e t hi nki ng of t he pr i ce, and
t he Commodor e was t hi nki ng of t he val ue! And so, f or year s
af t er war ds, ol d- t i mer s t el l me t hat peopl e used t o say, " He went
shor t of Har l em! " whenever t hey wi shed t o descr i be abj ect
pover t y.
Many year s ago I happened t o be speaki ng t o one of J ay
Goul d' s ol d br oker s. He assur ed me ear nest l y t hat Mr . Goul d not
onl y was a most unusual man - - i t was of hi m t hat ol d Dani el
Dr ew shi ver i ngl y r emar ked, " Hi s t ouch i s Deat h 1" but t hat he was
head and shoul der s above al l ot her mani pul at or s past and
pr esent . He must have been a f i nanci al wi zar d i ndeed t o have
done what he di d; t her e can be no quest i on of t hat . Even at t hi s
di st ance I can see t hat he had an amazi ng knack f or adapt i ng
hi msel f t o new condi t i ons, and t hat i s val uabl e i n a t r ader . He
var i ed hi s met hods of at t ack and def ense wi t hout a pang because
he was mor e concer ned wi t h t he mani pul at i on of pr oper t i es t han
wi t h st ock specul at i on. He mani pul at ed f or i nvest ment r at her
t han f or a mar ket t ur n. He ear l y saw t hat t he bi g money was i n
owni ng t he r ai l r oads i nst ead of r i ggi ng t hei r secur i t i es on t he
f l oor of t he St ock Exchange.
He ut i l i sed t he st ock mar ket of cour se. But I suspect i t
was because t hat was t he qui ckest and easi est way t o qui ck and
easy money and he needed many mi l l i ons, j ust as ol d Col l i s P.


Hunt i ngt on was al ways har d up because he al ways needed t went y or
t hi r t y mi l l i ons mor e t han t he banker s wer e wi l l i ng t o l end hi m.
Vi si on wi t hout money means hear t aches; wi t h money, i t means
achi evement ; and t hat means power ; and t hat means money; and
t hat means achi evement ; and so on, over and over and over .
Of cour se mani pul at i on was not conf i ned t o t he gr eat
f i gur es of t hose days. Ther e wer e scor es of mi nor mani pul at or s.
I r emember a st or y an ol d br oker t ol d me about t he manner s and
mor al s of t he ear l y ' 60' s. He sai d
" The ear l i est r ecol l ect i on I have of Wal l St r eet i s of my
f i r st vi si t t o t he f i nanci al di st r i ct . My f at her had some
busi ness t o at t end t o t her e and f or some r eason or ot her t ook me
wi t h hi m. We came down Br oadway and I r emember t ur ni ng of f at
Wal l St r eet . We wal ked down Wal l and j ust as we came t o Br oad
or , r at her , Nassau St r eet , t o t he cor ner wher e t he Banker s'
Tr ust Company' s: bui l di ng now st ands, I saw a cr owd f ol l owi ng
t wo men. The f i r st was wal ki ng east war d, t r yi ng t o l ook
unconcer ned. He was f ol l owed by t he ot her , a r edf aced man who
was wi l dl y wavi ng hi s hat wi t h one hand and shaki ng t he ot her
f i st i n t he ai r . He was yel l i ng t o beat t he band: `Shyl ock !
Shyl ock ! What ' s t he pr i ce of money? Shyl ock ! Shyl ock ! ' I
coul d see heads st i cki ng out of wi ndows. They di dn' t have
skyscr aper s i n t hose days, but I was sur e t he second and
t hi r d- st or y r ubber necks woul d t umbl e out . My f at her asked what
was t he mat t er , and somebody answer ed somet hi ng I di dn' t hear . I
was t oo busy keepi ng a deat h cl ut ch on my f at her ' s hand so t hat
t he j ost l i ng woul dn' t separ at e us. The cr owd was gr owi ng, as
st r eet cr owds do, and I wasn' t comf or t abl e. Wi l d- eyed men came
r unni ng down f r om Nassau St r eet and up f r om Br oad as wel l as
east and west on Wal l St r eet . Af t er we f i nal l y got out of t he
j am my f at her expl ai ned t o me t hat t he man who was shout i ng
`Shyl ock ! ' was So- and- So. I have f or got t en t he name, but he was
t he bi ggest oper at or i n cl i que st ocks i n t he ci t y and was
under st ood t o have made and l ost mor e money t han any ot her man
i n Wal l St r eet wi t h t he except i on of J acob Li t t l e. I r emember
J acob Li t t l e' s name because I t hought i t was a f unny name f or a
man t o have. The ot her man, t he Shyl ock, was a not or i ous l ocker -
up of money. Hi s name has al so gone f r om me. But I r emember he
was t al l and t hi n and pal e. I n t hose days t he cl i ques used t o
l ock up money by bor r owi ng i t or , r at her , by r educi ng t he amount
avai l abl e t o St ock Exchange bor r ower s. They woul d bor r ow i t and
get a cer t i f i ed check. They woul dn' t act ual l y t ake t he money out
and use i t . Of cour se t hat was r i ggi ng. I t was a f or m of
mani pul at i on, I t hi nk. "


I agr ee wi t h t he ol d chap. I t was a phase of mani pul at i on
t hat we don' t have nowadays.
MYSELF never spoke t o any of t he gr eat st ock mani pul at or s
t hat t he St r eet st i l l t al ks about . I don' t mean l eader s; I mean
mani pul at or s. They wer e al l bef or e my t i me, al t hough when I
f i r st came t o New Yor k, J ames R. Keene, gr eat est of t hem al l ,
was i n hi s pr i me. But I was a mer e youngst er t hen, excl usi vel y
concer ned wi t h dupl i cat i ng, i n a r eput abl e br oker ' s of f i ce, t he
success I had enj oyed i n t he bucket shops of my nat i ve ci t y.
And, t hen, t oo, at t he t i me Keene was busy wi t h t he U. S. St eel
st ocks, hi s mani pul at i ve mast er pi ece - - I had no exper i ence wi t h
mani pul at i on, no r eal knowl edge of i t or of i t s val ue or
meani ng, and, f or t hat mat t er , no gr eat need of such knowl edge.
I f I t hought about i t at al l I suppose I must have r egar ded i t
as a wel l - dr essed f or m of t hi mbl er i ggi ng, of whi ch t he l owbr ow
f or m was such t r i cks as had been t r i ed on me i n t he bucket
shops. Such t al k as I si nce have hear d on t he subj ect has
consi st ed i n gr eat par t of sur mi ses and suspi ci ons; of guesses
r at her t han i nt el l i gent anal yses.
Mor e t han one man who knew hi m wel l has t ol d me t hat Keene
was t he bol dest and most br i l l i ant oper at or t hat ever wor ked i n
Wal l St r eet . That i s sayi ng a gr eat deal , f or t her e have been
some gr eat t r ader s. Thei r names ar e now al l but f or got t en, but
never t hel ess t hey wer e ki ngs i n t hei r day - - f or a day! They
wer e pul l ed up out of obscur i t y i nt o t he sunl i ght of f i nanci al
f ame by t he t i cker t ape and t he l i t t l e paper r i bbon di dn' t pr ove
st r ong enough t o keep t hem suspended t her e l ong enough f or t hem
t o become hi st or i cal f i xt ur es. At al l event s Keene was by al l
odds t he best mani pul at or of hi s day and i t was a l ong and
exci t i ng day.
He capi t al i zed hi s knowl edge of t he game, hi s exper i ence as
an oper at or and hi s t al ent s when he sol d hi s ser vi ces t o t he
Havemeyer br ot her s, who want ed hi m t o devel op a mar ket f or t he
Sugar st ocks. He was br oke at t he t i me or he woul d have
cont i nued t o t r ade on hi s own hook; and he was some pl unger ! He
was successf ul wi t h Sugar ; made t he shar es t r adi ng f avour i t es,
and t hat made t hem easi l y vendi bl e. Af t er t hat , he was asked
t i me and agai n t o t ake char ge of pool s. I am t ol d t hat i n t hese
pool oper at i ons he never asked or accept ed a f ee, but pai d f or
hi s shar e l i ke t he ot her member s of t he pool . The mar ket conduct
of t he st ock, of cour se, was excl usi vel y i n hi s char ge. Of t en
t her e was t al k of t r eacher y on bot h si des. Hi s f eud wi t h t he
Whi t ney- Ryan cl i que ar ose f r om such accusat i ons. I t i s not
di f f i cul t f or a mani pul at or t o be mi sunder st ood by hi s


associ at es. They don' t see hi s needs as he hi msel f does. I know
t hi s f r ommy own exper i ence.
I t i s a mat t er of r egr et t hat Keene di d not l eave an
accur at e r ecor d of hi s gr eat est expl oi t - - t he successf ul
mani pul at i on of t he U. S. St eel shar es i n t he spr i ng of i goi . As
I under st and i t , Keene never had an i nt er vi ew wi t h J . P. Mor gan
about i t . Mor gan' s f i r mdeal t wi t h or t hr ough Tal bot J . Tayl or &
Co. , at whose of f i ce Keene made hi s headquar t er s. Tal bot Tayl or
was Keene' s son- i n- l aw. I am assur ed t hat Keene' s f ee f or hi s
Wor k consi st ed of t he pl easur e he der i ved f r omt he wor k. That he
made mi l l i ons t r adi ng i n t he mar ket he hel ped t o put up t hat
spr i ng i s wel l known. He t ol d a f r i end of mi ne t hat i n t he
cour se of a f ew weeks he sol d i n t he open mar ket f or t he
under wr i t er s' syndi cat e mor e t han seven hundr ed and f i f t y
t housand shar es. Not bad when you consi der t wo t hi ngs
That t hey wer e new and unt r i ed st ocks of a cor por at i on
whose capi t al i zat i on was gr eat er t han t he ent i r e debt of t he
Uni t ed St at es at t hat t i me; and second, t hat men - - l i ke D. G.
Rei d, W. B. Leeds, t he Moor e br ot her s, Henr y Phi pps, H. C. Fr i ck
and t he ot her St eel magnat es al so sol d hundr eds of t housands of
shar es t o t he publ i c at t he same t i me i n t he same mar ket t hat
Keene hel ped t o cr eat e.
Of cour se, gener al condi t i ons f avour ed hi m. Not onl y act ual
busi ness but sent i ment and hi s unl i mi t ed f i nanci al backi ng made
possi bl e hi s success. What we had was not mer el y a bi g bul l
mar ket but a boom and a st at e of mi nd not l i kel y t o. be seen
agai n. The undi gest ed secur i t i es pani c came l at er , when St eel
common, whi ch Keene had mar ked up t o 55 i n 1901, sol d at i o i n
1903 and at 8Y8 i n 1904.
We can' t anal yse Keene' s mani pul at i ve campai gns. Hi s books
ar e not avai l abl e; t he adequat el y det ai l ed r ecor d i s
nonexi st ent . For exampl e, i t woul d be i nt er est i ng t o see how he
wor ked i n Amal gamat ed Copper . H. H. Roger s and Wi l l i am
Rockef el l er had t r i ed t o di spose of t hei r sur pl us st ock i n t he
mar ket and had f ai l ed. Fi nal l y t hey asked Keene t o mar ket t hei r
l i ne, and he agr eed. Bear i n mi nd t hat H. H. Roger s was one of
t he abl est busi ness men of hi s day i n Wal l St r eet and t hat
Wi l l i am Rockef el l er was t he bol dest specul at or of t he ent i r e
St andar d Oi l cot er i e. They had pr act i cal l y unl i mi t ed r esour ces
and vast pr est i ge as wel l as year s of exper i ence i n t he
st ock- mar ket game. And yet t hey had t o go t o Keene. I ment i on
t hi s t o show you t hat t her e ar e some t asks whi ch i t r equi r es a
speci al i st t o per f or m. Her e was a wi del y t out ed st ock, sponsor ed
by Amer i ca' s gr eat est capi t al i st s, t hat coul d not be sol d except
at a gr eat sacr i f i ce of money and pr est i ge. Roger s and


Rockef el l er wer e i nt el l i gent enough t o deci de t hat Keene al one
mi ght hel p t hem.
Keene began t o wor k at once. He had a bul l mar ket t o wor k
i n and sol d t wo hundr ed and t went y t housand shar es of
Amal gamat ed at ar ound par . Af t er he di sposed of t he i nsi der s'
l i ne t he publ i c kept on buyi ng and t he pr i ce went t en poi nt s
hi gher . I ndeed t he i nsi der s got bul l i sh on t he st ock t hey had
sol d when t hey saw how eager l y t he publ i c was t aki ng i t . Ther e
was a st or y t hat Roger s act ual l y advi sed Keene t o go l ong of
Amal gamat ed. I I i s scar cel y cr edi bl e t hat Roger s meant t o unl oad
on Keene. He was t oo shr ewd a man not t o know t hat Keene was no
bl eat i ng l amb. Keene wor ked as he al ways di d - - t hat i s, doi ng
hi s bi g sel l i ng on t he way down af t er t he bi g r i se. Of cour se
hi s t act i cal moves wer e di r ect ed by hi s needs and by t he mi nor
cur r ent s t hat changed f r om day t o day. I n t he st ock mar ket , as
i n war f ar e, i t i s wel l t o keep i n mi nd t he di f f er ence bet ween
st r at egy and t act i cs.
One of Keene' s conf i dent i al men he i s t he best f l y
f i sher man I know - - t ol d me onl y t he ot her day t hat dur i ng t he
Amal ?amat ed campai gn Keene woul d f i nd hi msel f al most out of
st ock one day - - t hat i s, out of t he st ock he had been f or ced t o
t ake i n mar ki ng up t he pr i ce; and on t he next day he woul d buy
back t housands of shar es. On t he day af t er t hat , he woul d sel l
on bal ance. Then he woul d l eave t he mar ket absol ut el y al one, t o
see how i t woul d t ake car e of i t sel f and al so t o accust om i t t o
do so. When i t came t o t he act ual mar ket i ng of t he l i ne he di d
what I t ol d you: he sol d i t on t he way down. The t r adi ng publ i c
i s al ways l ooki ng f or a r al l y, and, besi des, t her e i s t he
cover i ng by t he shor t s.
The man who was cl osest t o Keene dur i ng t hat deal t ol d me
t hat af t er Keene sol d t he Roger s- Rockef el l er l i ne f or somet hi ng
l i ke t went y or t went y- f i ve mi l l i on dol l ar s i n cash Roger s sent
hi m a check f or t wo hundr ed t housand. Thi s r emi nds you of t he
mi l l i onai r e' s wi f e who gave t he Met r opol i t an Oper a House
scr ub- woman f i f t y cent s r ewar d f or f i ndi ng t he one-
hundr ed- t housand- dol l ar pear l neckl ace. Keene sent t he check
back wi t h a pol i t e not e sayi ng he was not a st ock br oker and
t hat he was gl ad t o have been of some ser vi ce t o t hem. They kept
t he check and wr ot e hi mt hat t hey woul d be gl ad t o wor k wi t h hi m
agai n. Shor t l y af t er t hat i t was t hat H. H. Roger s gave Keene
t he f r i endl y t i p t o buy Amal gamat ed at ar ound 130!
A br i l l i ant oper at or , J ames R. Keene! Hi s pr i vat e secr et ar y
t ol d me t hat when t he mar ket was goi ng hi s way Mr . Keene was
i r asci bl e; and t hose who knew hi m say hi s i r asci bi l i t y was
expr essed i n sar doni c phr ases t hat l i nger ed l ong i n t he memor y


of hi s hear er s. But when he was l osi ng he was i n t he best of
humour , a pol i shed man of t he wor l d, agr eeabl e, epi gr ammat i c,
i nt er est i ng.
He had i n super l at i ve degr ee t he qual i t i es of mi nd t hat ar e
associ at ed wi t h successf ul specul at or s anywher e. That he di d not
ar gue wi t h t he t ape i s pl ai n. He was ut t er l y f ear l ess but never
r eckl ess. He coul d and di d t ur n i n a t wi nkl i ng, i f he f ound he
was wr ong.
Si nce hi s day t her e have been so many changes i n St ock
Exchange r ul es and so much mor e r i gor ous enf or cement of ol d
r ul es, so many new t axes on st ock sal es and pr of i t s, and so on,
t hat t he game seems di f f er ent . Devi ces t hat Keene coul d use wi t h
ski l l and pr of i t can no l onger be ut i l i sed. Al so, we ar e
assur ed, t he busi ness mor al i t y of Wal l St r eet i s on a hi gher
pl ane. Never t hel ess i t i s f ai r t o say t hat i n any per i od of our
f i nanci al hi st or y Keene woul d have been a gr eat mani pul at or
because he was a gr eat st ock oper at or and knew t he game of
specul at i on f r om t he gr ound up. He achi eved what he di d because
condi t i ons at t he t i me per mi t t ed hi m t o do so. He woul d have
been as successf ul i n hi s under t aki ngs i n 1922 as he was i n i goi
or i n 1876, when he f i r st came t o New Yor k f r om Cal i f or ni a and
made ni ne mi l l i on dol l ar s i n t wo year s. Ther e ar e men whose gai t
i s f ar qui cker t han t he mob' s. They ar e bound t o l ead no mat t er
how much t he mob changes.
As a mat t er of f act , t he change i s by no means as r adi cal
as you' d i magi ne. The r ewar ds ar e not so gr eat , f or i t i s no
l onger pi oneer wor k and t her ef or e i t i s not pi oneer ' s pay. But
i n cer t ai n r espect s mani pul at i on i s easi er t han i t was; i n ot her
ways much har der t han i n Keene' s day.
Ther e i s no quest i on t hat adver t i si ng i s an ar t , and
mani pul at i on i s t he ar t of adver t i si ng t hr ough t he medi umof t he
t ape. The t ape shoul d t el l t he st or y t he mani pul at or wi shes i t s
r eader s t o see. The t r uer t he st or y t he mor e convi nci ng i t i s
bound t o be, and t he mor e convi nci ng i t i s t he bet t er t he
adver t i si ng i s. A mani pul at or t oday, f or i nst ance, has not onl y
t o make a st ock l ook st r ong but al so t o make i t be st r ong.
Mani pul at i on t her ef or e must be based on sound t r adi ng pr i nci -
pl es. That i s what made Keene such a mar vel l ous mani pul at or ; he
was a consummat e t r ader t o begi n wi t h.
The wor d " mani pul at i on" has come t o have an ugl y sound. I t
needs an al i as. I do not t hi nk t her e i s anyt hi ng so ver y
myst er i ous or cr ooked about t he pr ocess i t sel f when i t has f or
an obj ect t he sel l i ng of a st ock i n bul k, pr ovi ded, of cour se,
t hat such oper at i ons ar e not accompani ed by mi sr epr esent at i on.
Ther e i s l i t t l e quest i on t hat a mani pul at or necessar i l y seeks


hi s buyer s among specul at or s. He t ur ns t o men who ar e l ooki ng
f or bi g r et ur ns cn t hei r capi t al and ar e t her ef or e wi l l i ng t o
r un a gr eat er t han nor mal busi ness r i sk. I can' t have much
sympat hy f or t he man who, knowi ng t hi s, never t hel ess bl ames
ot her s f or hi s own f ai l ur e t o make easy money. He i s a devi l of
a cl ever f el l ow when he wi ns. But when he l oses money t he ot her
f el l ow was a cr ook; a mani pul at or ! I n such moment s and f r omsuch
l i ps t he wor d connot es t he use of mar ked car ds. But t hi s i s not
so.
Usual l y t he obj ect of mani pul at i on i s t o devel op mar ket -
abi l i t y - - t hat i s, t he abi l i t y t o di spose of f ai r - si zed bl ocks
at some pr i ce at any t i me. Of cour se a pool , by r eason of a
r ever sal of gener al mar ket condi t i ons, may f i nd i t sel f unabl e t o
sel l except at a sacr i f i ce t oo gr eat t o be pl easi ng. They t hen
may deci de t o empl oy a pr of essi onal , bel i evi ng t hat hi s ski l l
and exper i ence wi l l enabl e hi m t o conduct an or der l y r et r eat
i nst ead of suf f er i ng an appal l i ng r out .
You wi l l not i ce t hat I do not speak of mani pul at i on
desi gned t o per mi t consi der abl e accumul at i on of a st ock as
cheapl y as possi bl e, as, f or i nst ance, i n buyi ng f or cont r ol ,
because t hi s does not happen of t en nowadays.
When J ay Goul d wi shed t o ci nch hi s cont r ol of West er n Uni on
and deci ded t o buy a bi g bl ock of t he st ock, Washi ngt on E.
Connor , who had not been seen on t he f l oor of t he St ock Exchange
f or year s, suddenl y showed up i n per son at t he West er n Uni on
post . He began t o bi d f or West er n Uni on. The t r ader s t o a man
l aughed at hi s st upi di t y i n t hi nki ng t hem so si mpl e and t hey
cheer f ul l y sol d hi m al l t he st ock he want ed t o buy. I t was t oo
r aw a t r i ck, t o t hi nk he coul d put up t he pr i ce by act i ng as
t hough Mr . Goul d want ed t o buy West er n Uni on. Was t hat
mani pul at i on? I t hi nk I can onl y answer t hat by sayi ng " No; and
yes! "
I n t he maj or i t y of cases t he obj ect of mani pul at i on i s, as
I sai d, t o sel l st ock t o t he publ i c at t he best possi bl e pr i ce.
I t i s not al one a quest i on of sel l i ng but of di st r i but i ng. I t i s
obvi ousl y bet t er i n ever y way f or a st ock t o be had by a
t housand peopl e t han by one man bet t er f or t he mar ket i n i t . So
i t i s not al one t he sal e at a good pr i ce but t he char act er of
t he di st r i but i on t hat a mani pul at or must consi der .
Ther e i s no sense i n mar ki ng up t he pr i ce t o a ver y hi gh
l evel i f you cannot i nduce t he publ i c t o t ake i t of f your hands
l at er . Whenever i nexper i enced mani pul at or s t r y t o unl oad at t he
t op and f ai l , ol d- t i mer s l ook mi ght y wi se and t el l you t hat you
can l ead a hor se t o wat er but you cannot make hi mdr i nk.


Or i gi nal devi l s! As a mat t er of f act , i t i s wel l t o
r emember a r ul e of mani pul at i on, a r ul e t hat Keene and hi s abl e
pr edecessor s wel l knew. I t i s t hi s: St ocks ar e mani pul at ed t o
t he hi ghest poi nt possi bl e and t hen sol d t o t he publ i c on t he
way down.
Let me begi n at t he begi nni ng. Assume t hat t her e i s some
one - - an under wr i t i ng syndi cat e or a pool or an i ndi vi dual t hat
has a bl ock of st ock whi ch i t i s desi r ed t o sel l at t he best
pr i ce possi bl e. I t i s a st ock dul y l i st ed on t he New Yor k St ock
Exchange. The best pl ace f or sel l i ng i t ought t o be t he open
mar ket , and t he best buyer ought t o be t he gener al publ i c. The
negot i at i ons f or t he sal e ar e i n char ge of a man. He or some
pr esent or f or mer associ at e has t r i ed t o sel l t he st ock on t he
St ock Exchange and has not succeeded. He i s or soon becomes
suf f i ci ent l y f ami l i ar wi t h st ock- mar ket oper at i ons t o r eal i se
t hat mor e exper i ence and gr eat er apt i t ude f or t he wor k ar e
needed t han he possesses. He knows per sonal l y or by hear say
sever al men who have been successf ul i n t hei r handl i ng of
si mi l ar deal s, and he deci des t o avai l hi msel f of t hei r
pr of essi onal ski l l . He seeks one of t hem as he woul d seek a
physi ci an i f he wer e i l l or an engi neer i f he needed t hat ki nd
of exper t .
Suppose he has hear d of me as a man who knows t he game.
Wel l , I t ake i t t hat he t r i es t o f i nd out al l he can about me.
He t hen ar r anges f or an i nt er vi ew, and i n due t i me cal l s at my
of f i ce.
Of cour se, t he chances ar e t hat I know about t he st ock and
what i t r epr esent s. I t i s my busi ness t o know. That i s how I
make my l i vi ng. My vi si t or t el l s me what he and hi s associ at es
wi sh t o do, and asks me t o under t ake t he deal .
I t i s t hen my t ur n t o t al k. I ask f or what ever i nf or mat i on
I deem necessar y t o gi ve me a cl ear under st andi ng of what I am
asked t o under t ake. I det er mi ne t he val ue and est i mat e t he
mar ket possi bi l i t i es of t hat st ock. That and my r eadi ng of
cur r ent condi t i ons i n t ur n hel p me t o gauge t he l i kel i hood of
success f or t he pr oposed oper at i on.
I f my i nf or mat i on i ncl i nes me t o a f avour abl e vi ew I accept
t he pr oposi t i on and t el l hi m t hen and t her e what my t er ms wi l l
be f or my ser vi ces. I f he i n t ur n accept s my t er ms t he
honor ar i umand t he condi t i ons - - I begi n my wor k at once.
I gener al l y ask and r ecei ve cal l s on a bl ock of st ock. I
i nsi st upon gr aduat ed cal l s as t he f ai r est t o al l concer ned. The
pr i ce of t he cal l begi ns at a l i t t l e bel ow t he pr evai l i ng mar ket
pr i ce and goes up; say, f or exampl e, t hat I get cal l s on one
hundr ed t housand shar es and t he st ock i s quot ed at 40. I begi n


wi t h a cal l f or some t housands of shar es at 35, anot her at 37,
anot her at 40, and at 45 and 50, and so on up t o 75 or 80.
I f as t he r esul t of my pr of essi onal wor k my mani pul at i on - -
t he pr i ce goes up, and i f at t he hi ghest l evel t her e i s a good
demand f or t he st ock so t hat I can sel l f ai r - si zed bl ocks of i t
I of cour se cal l t he st ock. I am maki ng money; but so ar e my
cl i ent s maki ng money. Thi s i s as i t shoul d be. I f my ski l l i s
what t hey ar e payi ng f or t hey ought t o get val ue. Of cour se,
t her e ar e t i mes when a pool may be wound up at a l oss, but t hat
i s sel dom, f or I do not under t ake t he wor k unl ess I see my way
cl ear t o a pr of i t . Thi s year I was not so f or t unat e i n one or
t wo deal s, and I di d not make a pr of i t . Ther e ar e r easons, but
t hat i s anot her st or y, t o be t ol d l at er per haps.
The f i r st st ep i n a bul l movement i n a st ock i s t o
adver t i se t he f act t hat t her e i s a bul l movement on. Sounds
si l l y, doesn' t i t ? Wel l , t hi nk a moment . I t i sn' t as si l l y as i t
sounded, i s i t ? The most ef f ect i ve way t o adver t i se what , i n
ef f ect , ar e your honour abl e i nt ent i ons i s t o make t he st ock
act i ve and st r ong. Af t er al l i s sai d and done, t he gr eat est
publ i ci t y agent i n t he wi de wor l d i s t he t i cker , and by f ar t he
best adver t i si ng medi um i s t he t ape. I do not need t o put out
any l i t er at ur e f or my cl i ent s. I do not have t o i nf or mt he dai l y
pr ess as t o t he val ue of t he st ock or t o wor k t he f i nanci al
r evi ews f or not i ces about t he company' s pr ospect s. Nei t her do I
have t o get a f ol l owi ng. I accompl i sh al l t hese hi ghl y desi r abl e
t hi ngs by mer el y maki ng t he st ock act i ve. When t her e i s act i vi t y
t her e i s a synchr onous demand f or expl anat i ons; and t hat means,
of cour se, t hat t he necessar y r easons f or publ i cat i on suppl y
t hemsel ves wi t hout t he sl i ght est ai d f r omme.
Act i vi t y i s al l t hat t he f l oor t r ader s ask. They wi l l buy
or sel l any st ock at any l evel i f onl y t her e i s a f r ee mar ket
f or i t . They wi l l deal i n t housands of shar es wher ever t hey see
act i vi t y, and t hei r aggr egat e capaci t y i s consi der abl e. I t
necessar i l y happens t hat t hey const i t ut e t he mani pul at or ' s f i r st
cr op of buyer s. They wi l l f ol l ow you al l t he way up and t hey
t hus ar e a gr eat hel p at al l t he st ages of t he oper at i on. I
under st and t hat J ames R. ' Keene used habi t ual l y t o empl oy t he
most act i ve of t he r oom t r ader s, bot h t o conceal t he sour ce of
t he mani pul at i on and al so because he knew t hat t hey wer e by f ar
t he best busi ness- spr eader s and t i p- di st r i but or s. He of t en gave
cal l s t o t hem ver bal cal l s above t he mar ket , so t hat t hey mi ght
do some hel pf ul wor k bef or e t hey coul d cash i n. He made t hem
ear n t hei r pr of i t . To get a pr of essi onal f ol l owi ng I mysel f have
never had t o do mor e t han t o make a st ock act i ve. Tr ader s don' t
ask f or mor e. I t i s wel l , of cour se, t o r emember t hat t hese


pr of essi onal s on t he f l oor of t he Exchange buy st ocks wi t h t he
i nt ent i on of sel l i ng t hem at a pr of i t They do not i nsi st on i t s
bei ng a bi g pr of i t ; but i t must be a qui ck pr of i t .
I make t he st ock act i ve i n or der t o dr aw t he at t ent i on of
specul at or s t o i t , f or t he r easons I have gi ven. I buy i t and I
sel l i t and t he t r ader s f ol l ow sui t . The sel l i ng pr essur e i s not
apt t o be st r ong wher e a man has as much specul at i vel y hel d
st ock sewed up i n cal l s - - as I i nsi st on havi ng. The buyi ng,
t her ef or e, pr evai l s over t he sel l i ng, and t he publ i c f ol l ows t he
l ead not so much of t he mani pul at or as of t he r oom t r ader s. I t
comes i n as a buyer . Thi s hi ghl y desi r abl e demand I f i l l - - t hat
i s, I sel l st ock on bal ance. I f t he demand i s what i t ought t o
be i t wi l l absor b mor e t han t he amount of st ock I was compel l ed
t o accumul at e i n t he ear l i er st ages of t he mani pul at i on; and
when t hi s happens I sel l t he st ock shor t t hat i s, t echni cal l y. I n
ot her wor ds, I sel l mor e st ock t han I act ual l y hol d. I t i s
per f ect l y saf e f or me t o do so si nce I amr eal l y sel l i ng agai nst
my cal l s. Of cour se, when t he demand f r om t he publ i c sl ackens,
t he st ock ceases t o advance. Then I wai t .
Say, t hen, t hat t he st ock has ceased t o advance. Ther e
comes a weak day. The ent i r e mar ket may devel op a r eact i onar y
t endency or some shar p- eyed t r ader my per cei ve t hat t her e ar e no
buyi ng or der s t o speak of i n my st ock, and he sel l s i t , and hi s
f el l ows f ol l ow. What ever t he r eason may be, my st ock st ar t s t o
go down. Wel l , I begi n t o buy i t . I gi ve i t t he suppor t t hat a
st ock ought t o have i f i t i s i n good odour wi t h i t s own
sponsor s. And mor e: I amabl e t o suppor t i t wi t hout accumul at i ng
i t - - t hat i s, wi t hout i ncr easi ng t he amount I shal l have t o
sel l l at er on. Obser ve t hat I do t hi s wi t hout decr easi ng my
f i nanci al r esour ces. Of cour se what I am r eal l y doi ng i s
cover i ng st ock I sol d shor t at hi gher pr i ces when t he demand
f r om t he publ i c or f r om t he t r ader s or f r om bot h enabl ed me t o
do i t . I t i s al ways wel l t o make i t pl ai n t o t he t r ader s and t o
t he publ i c, al so t hat t her e i s a demand f or t he st ock on t he way
down. That t ends t o check bot h r eckl ess shor t sel l i ng by t he
pr of essi onal s and l i qui dat i on by f r i ght ened hol der s whi ch i s t he
sel l i ng you usual l y see when a st ock get s weaker and weaker ,
whi ch i n t ur n i s what a st ock does when i t i s not suppor t ed.
These cover i ng pur chases of mi ne const i t ut e what I cal l t he
st abi l i si ng pr ocess.
As t he mar ket br oadens I of cour se sel l st ock on t he way
up, but never enough t o check t he r i se. Thi s i s i n st r i ct
accor dance wi t h my st abi l i si ng pl ans. I t i s obvi ous t hat t he
mor e st ock I sel l on a r easonabl e and or der l y advance t he mor e I
encour age t he conser vat i ve specul at or s, who ar e mor e numer ous


t han t he r eckl ess r oomt r ader s; and i n addi t i on t he mor e suppor t
I shal l be abl e t o gi ve t o t he st ock on t he i nevi t abl e weak
days. By al ways bei ng shor t ' I al ways am i n a posi t i on t o
suppor t t he st ock wi t hout danger t o mysel f . As a r ul e I begi n my
sel l i ng at a pr i ce t hat wi l l show me a pr of i t . But I of t en sel l
wi t hout havi ng a pr of i t , si mpl y t o cr eat e or t o i ncr ease what I
may cal l my r i skl ess buyi ng power . My busi ness i s not al one t o
put up t he pr i ce or t o sel l a bi g bl ock of st ock f or a cl i ent
but t o make money f or mysel f . That i s why I do not ask any
cl i ent s t o f i nance my oper at i ons. My f ee i s cont i ngent upon my
success.
Of cour se what I have descr i bed i s not my i nvar i abl e
pr act i ce. I nei t her have nor adher e t o an i nf l exi bl e syst em. I
modi f y my t er ms and condi t i ons accor di ng t o ci r cumst ances. A
st ock whi ch i t i s desi r ed t o di st r i but e shoul d be mani pul at ed t o
t he hi ghest possi bl e poi nt and t hen sol d. I r epeat t hi s bot h
because i t i s f undament al and because t he publ i c appar ent l y
bel i eves t hat t he sel l i ng i s al l done at t he t op. Somet i mes a
st ock get s wat er l ogged, as i t wer e; i t doesn' t go up. That i s
t he t i me t o sel l . The pr i ce nat ur al l y wi l l go down on your
sel l i ng r at her f ur t her t han you wi sh, but you can gener al l y
nur se i t back. As l ong as a st ock t hat I ammani pul at i ng goes up
on my buyi ng I know I amal l hunky, and i f need be I buy i t wi t h
conf i dence and use my own money wi t hout f ear pr eci sel y as I
woul d any ot her st ock t hat act s t he same way. I t i s t he l i ne of
l east r esi st ance. You r emember my t r adi ng t heor i es about t hat
l i ne, don' t you? Wel l , when t he pr i ce l i ne of l east r esi st ance
i s est abl i shed I f ol l ow i t , not because I am mani pul at i ng t hat
par t i cul ar st ock at t hat par t i cul ar moment but because I am a
st ock oper at or at al l t i mes.
When my buyi ng does not put t he st ock up I st op buyi ng and
t hen pr oceed t o sel l i t down; and t hat al so i s exact l y what I
woul d do wi t h t hat same st ock i f I di d not happen t o be
mani pul at i ng i t . The pr i nci pal mar ket i ng of t he st ock, as you
know, i s done on t he way down. I t i s per f ect l y ast oni shi ng how
much st ock a man can get r i d of on a decl i ne.
I r epeat t hat at no t i me dur i ng t he mani pul at i on do I
f or get t o be a st ock t r ader . My pr obl ems as a mani pul at or , af t er
al l , ar e t he same t hat conf r ont me as an oper at or . Al l mani pu-
l at i on comes t o an end when t he mani pul at or cannot make a st ock
do what he want s i t t o do. When t he st ock you ar e mani pul at i ng
doesn' t act as i t shoul d, qui t . Don' t ar gue wi t h t he t ape. Do
not seek t o l ur e t he pr of i t back. Qui t whi l e t he qui t t i ng i s
good and cheap.
CHAPTER XXI


AM wel l awar e t hat al l t hese gener al i t i es do not sound
especi al l y i mpr essi ve. Gener al i t i es sel dom do. Possi bl y I may
succeed bet t er i f I gi ve a concr et e exampl e. I ' l l t el l you how I
mar ked up t he pr i ce of a st ock 30 poi nt s, and i n so doi ng
accumul at ed onl y seven t housand shar es and devel oped a mar ket
t hat woul d absor b al most any amount of st ock.
I t was I mper i al St eel . The st ock had been br ought out by
r eput abl e peopl e and i t had been f ai r l y wel l t i pped as a
pr oper t y of val ue. About 30 per cent of t he capi t al st ock was
pl aced wi t h t he gener al publ i c t hr ough var i ous Wal l St r eet
houses, but t her e had been no si gni f i cant act i vi t y i n t he shar es
af t er t hey wer e l i st ed. Fr om t i me t o t i me somebody woul d ask
about i t and one or anot her i nsi der - - member s of t he or i gi nal
under wr i t i ng syndi cat e woul d say t hat t he company' s ear ni ngs
wer e bet t er t han expect ed and t he pr ospect s mor e t han
encour agi ng. Thi s was t r ue enough and ver y good as f ar as.
I t went , but not exact l y t hr i l l i ng. The specul at i ve appeal
was absent , and f r om t he i nvest or ' s poi nt of vi ew t he pr i ce
st abi l i t y and di vi dend per manency of t he st ock wer e not yet
demonst r at ed. I t was a st ock t hat never behaved sensat i onal l y.
I t was so gent l emanl y t hat no cor r obor at i ve r i se ever
f ol l owed t he i nsi der s' emi nent l y t r ut hf ul r epor t s. On t he ot her
hand, nei t her di d t he pr i ce decl i ne.
I mper i al St eel r emai ned unhonour ed and unsung and unt i pped,
cont ent t o be one of t hose st ocks t hat don' t go down because
nobody sel l s and t hat nobody sel l s because nobody l i kes t o go
shor t of a st ock t hat i s not wel l di st r i but ed; t he sel l er i s t oo
much at t he mer cy of t he l oaded- up i nsi de cl i que.
Si mi l ar l y, t her e i s no i nducement t o buy such a st ock. To
t he i nvest or I mper i al St eel t her ef or e r emai ned a specul at i on. To
t he specul at or i t was a dead one - - t he ki nd t hat makes an
i nvest or of you agai nst your wi l l by t he si mpl e expedi ent of
f al l i ng i nt o a t r ance t he moment you go l ong of i t . The chap who
i s compel l ed t o l ug a cor pse a year or t wo al ways l oses mor e
t han t he or i gi nal cost of t he deceased; he i s sur e t o f i nd
hi msel f t i ed up wi t h i t when some r eal l y good t hi ngs come hi s
way.
One day t he f or emost member of t he I mper i al St eel
syndi cat e, act i ng f or hi msel f and associ at es, came t o see me.
They wi shed t o cr eat e a mar ket f or t he st ock, of whi ch t hey
cont r ol l ed t he undi st r i but ed 70 per cent . They want ed me t o
di spose of t hei r hol di ngs at bet t er pr i ces t han t hey t hought
t hey woul d obt ai n i f t hey t r i ed t o sel l i n t he open mar ket . They
want ed t o know on what t er ms I woul d under t ake t he j ob.


I t ol d hi m t hat I woul d l et hi m know i n a f ew days. Then I
l ooked i nt o t he pr oper t y. I had exper t s go over t he var i ous
depar t ment s of t he company - - i ndust r i al , commer ci al and f i nan-
ci al . They made r epor t s t o me whi ch wer e unbi ased. I wasn' t
l ooki ng f or t he good or t he bad poi nt s, but f or t he f act s, such,
as t hey wer e.
The r epor t s showed t hat i t was a val uabl e pr oper t y. The
pr ospect s j ust i f i ed pur chases of t he st ock at t he pr evai l i ng
mar ket pr i ce i f t he i nvest or wer e wi l l i ng t o wai t a l i t t l e.
Under t he ci r cumst ances an advance i n t he pr i ce woul d i n r eal i t y
be t he commonest and most l egi t i mat e of al l mar ket movement s t o
wi t , t he pr ocess of di scount i ng t he f ut ur e. Ther e was t her ef or e
no r eason t hat I coul d see why I shoul d not consci ent i ousl y and
conf i dent l y under t ake t he bul l manpul at i on of I mper i al St eel .
I l et my man know my mi nd and he cal l ed at my of f i ce t o
t al k t he deal over i n det ai l . I t ol d hi mwhat my t er ms wer e. For
my ser vi ces I asked no cash, but cal l s on one hundr ed t housand
shar es of t he I mper i al St eel st ock. The pr i ce of t he cal l s r an
up f r om 70 t o 100. That may seem l i ke a bi g f ee t o some. But
t hey shoul d consi der t hat t he i nsi der s wer e cer t ai n t hey
t hemsel ves coul d not sel l one hundr ed t housand shar es, or even
f i f t y t housand shar es, at 70. Ther e was no mar ket f or t he st ock.
Al l t he t al k about wonder f ul ear ni ngs and excel l ent ; pr ospect s
had not br ought i n buyer s, not t o any gr eat ext ent .
I n addi t i on, I coul d not get my f ee i n cash wi t hout my
cl i ent s f i r st maki ng some mi l l i ons of dol l ar s. What I st ood t o
make was not an exor bi t ant sel l i ng commi ssi on. I t was a f ai r
cont i ngent f ee.
Knowi ng t hat t he st ock had r eal val ue and t hat gener al
mar ket
condi t i ons wer e bul l i sh and t her ef or e f avour abl e f or an advance
i n al l good st ocks, I f i gur ed t hat I ought t o do pr et t y wel l . My
cl i ent s wer e encour aged by t he opi ni ons I expr essed, agr eed t o
my t er ms at once, and t he deal began wi t h pl easant f eel i ngs al l
ar ound.
I pr oceeded t o pr ot ect mysel f as t hor oughl y as I coul d. The
syndi cat e owned or cont r ol l ed about 70 per cent of t he out
st andi ng st ock. I had t hem deposi t t hei r ' 7o per cent under a
t r ust agr eement . I di dn' t pr opose t o be used as a dumpi ng gr ound
f or t he bi g hol der s. Wi t h t he maj or i t y hol di ngs t hus secur el y
t i ed up, I st i l l had 30 per cent of scat t er ed hol di ngs t o
consi der , but t hat was a r i sk I had t o t ake. Exper i enced
specul at or s do not expect ever t o engage i n ut t er l y r i skl ess
vent ur es. As a mat t er of f act , i t was not much mor e l i kel y t hat
al l t he unt r ust eed st ock woul d be t hr own on t he mar ket at one


f el l swoop t han t hat al l t he pol i cyhol der s of a l i f e i nsur ance
company woul d di e at t he same hour , t he same day. Ther e ar e
unpr i nt ed act uar i al t abl es of st ock- mar ket r i sks as wel l as of
human mor t al i t y.
Havi ng pr ot ect ed mysel f f r om some of t he avoi dabl e danger s
of a st ock- mar ket deal of t hat sor t , I was r eady t o begi n my
campai gn. I t s obj ect i ve was t o make my cal l s val uabl e.
To do t hi s I must put up t he pr i ce and devel op a mar ket i n
whi ch I coul d sel l one hundr ed t housand shar es - - t he st ock i n
whi ch I hel d opt i ons.
The f i r st t hi ng I di d was t o f i nd out how much st ock was l i kel y
t o come on t he mar ket on an advance. Thi s was easi l y done
t hr ough my br oker s, who had no t r oubl e i n ascer t ai ni ng what
st ock was f or sal e at or a l i t t l e above t he mar ket . I don' t know
whet her t he speci al i st s t ol d t hemwhat or der s t hey had ' on t hei r
books or not . The pr i ce was nomi nal l y 70, but I coul d not have
sol d one t housand shar es at t hat pr i ce. I had no evi dence of
even a moder at e demand at t hat f i gur e or even a f ew poi nt s
l ower . I had t o go by what my br oker s f ound out . But i t was
enough t o show me how much st ock t her e was f or sal e and how
l i t t l e was want ed.
As soon as I had a l i ne on t hese poi nt s I qui et l y t ook al l
t he st ock t hat was f or sal e at 7o and hi gher . When I say " I " you
wi l l under st and t hat I mean my br oker s. The sal es wer e f or
account of some of t he mi nor i t y hol der s because my cl i ent s
nat ur al l y had cancel l ed what ever sel l i ng or der s t hey mi ght have
gi ven out bef or e t hey t i ed up t hei r st ock.
I di dn' t have t o buy ver y much st ock. Mor eover , I knew t hat
t he r i ght ki nd of advance woul d br i ng i n ot her buyi ng a or der s
and, of cour se, sel l i ng or der s al so.
I di dn' t gi ve bul l t i ps on I mpdr i al St eel t o anybody. I
di dn' t have t o. My j ob was t o seek di r ect l y t o i nf l uence
sent i ment by t he best possi bl e ki nd of publ i ci t y. I do not say
t hat t her e shoul d never be bul l pr opaganda. I t i s as l egi t i mat e
and i ndeed as desi r abl e t o adver t i se t he val ue of a new st ock as
t o adver t i se t he val ue of wool ens or shoes or aut omobi l es.
Accur at e and r el i abl e i nf or mat i on shoul d be gi ven by t he publ i c.
But what I meant was t hat t he t ape di d al l t hat was. needed f or
my pur pose. As I sai d bef or e, t he r eput abl e newspaper s al ways
t r y t o pr i nt expl anat i ons f or mar ket movement s. I t i s news.
Thei r r eader s demand t o know not onl y what happens i n t he st ock
mar ket but why i t happens. Ther ef or e wi t hout t he mani pul at or
l i f t i ng a f i nger t he f i nanci al wr i t er s wi l l pr i nt al l t he
avai l abl e i nf or mat i on and gossi p, and al so anal yse t he r epor t s
of ear ni ngs, t r ade condi t i on and out l ook; i n shor t , what ever may


t hr ow l i ght on t he advance. Whenever a news paper man or an
acquai nt ance asks my opi ni on of a st ock and I have one I do not
hesi t at e t o expr ess i t . I do not vol unt eer advi ce and I never
gi ve t i ps, but I have not hi ng t o gai n i n my oper at i ons f r om
secr ecy. At t he same t i me I r eal i se t hat t he best of al l
t i pst er s, t he most per suasi ve of al l sal esmen, i s t he t ape.
When I had absor bed al l t he st ock t hat was f or sal e at 70
and a l i t t l e hi gher I r el i eved t he mar ket of t hat pr essur e, and
nat ur al l y t hat made cl ear f or t r adi ng pur poses t he l i ne of l east
r esi st ance i n I mper i al St eel . I t was mani f est l y upwar d. The
moment t hat f act was per cei ved by t he obser vant t r ader s on t he
f l oor t hey l ogi cal l y assumed t hat t he st ock was i n f or an
advance t he ext ent of whi ch t hey coul d not know; but t hey knew
enough t o begi n buyi ng. Thei r demand f or I mper i al St eel , cr eat ed
excl usi vel y by t he obvi ousness of t he st ock' s r i si ng t endency - -
t he t ape' s i nf al l i bl e bul l t i p 1 - - I pr ompt l y f i l l ed. I sol d t o
t he t r ader s t he st ock t hat I had bought f r om t he t i r ed- out
hol der s at t he begi nni ng. Of cour se t hi s sel l i ng was
j udi ci ousl y done; I cont ent ed mysel f wi t h suppl yi ng t he demand.
I was not f or ci ng my st ock on t he mar ket and I di d not want
t oo r api d an advance. I t woul dn' t have been good busi ness t o
sel l out t he hal f of my one hundr ed t housand shar es at t hat
st age of t he pr oceedi ngs. My j ob was t o make a mar ket on
whi ch I mi ght sel l my ent i r e l i ne. But even t hough I sol d onl y
as much as t he t r ader s wer e anxi ous t o buy, t he mar ket was
t empor ar i l y depr i ved of my own buyi ng power , whi ch I had
hi t her t o exer t ed st eadi l y. I n due cour se t he t r ader s' pur chases
ceased and t he pr i ce st opped r i si ng. As soon as t hat happened
t her e began t he sel l i ng by di sappoi nt ed bul l s or by t hose
t r ader s whose r easons f or buyi ng di sappear ed t he i nst ant t he
r i si ng t endency was checked.
But I was r eady f or t hi s sel l i ng, and on t he way down I
bought back t he st ock I had sol d t o t he t r ader s a coupl e of
poi nt s hi gher . Thi s buyi ng of st ock I knew was bound t o be sol d
i n t ur n checked t he downwar d cour se; and when t he pr i ce st opped
goi ng down t he sel l i ng or der s st opped comi ng i n.
I t hen began al l over agai n. I t ook al l t he st ock t hat was
f or sal e on t he way up - - i t wasn' t ver y much and t he pr i ce
began t o r i se a second t i me; f r om a hi gher st ar t i ng poi nt t han
you. Don' t f or get t hat on t he way down t her e ar e many hol der s
who wi sh t o heaven t hey had sol d t hei r s but won' t do i t t hr ee or
f our poi nt s f r om t he t op. Such specul at or s al ways vow t hey wi l l
sur el y sel l out i f t her e i s a r al l y. They put i n t hei r or der s t o
sel l on t he way up, and t hen t hey change t hei r mi nds wi t h t he
change i n t he st ock' s pr i ce- t r end. Of cour se, t her e i s al ways


pr of i t t aki ng f r om saf e- pl ayi ng qui ck r unner s t o whom a pr of i t
i s al ways a pr of i t t o be t aken.
Al l I had t o do af t er t hat was t o r epeat t he pr ocess;
al t er nat el y buyi ng and sel l i ng; but al ways wor ki ng hi gher .
Somet i mes, af t er you have t aken al l t he st ock t hat i s f or
sal e, i t pays t o r ush up t he pr i ce shar pl y, t o have what mi ght
be cal l ed l i t t l e bul l f l ur r i es i n t he st ock you ar e
mani pul at i ng. I t i s excel l ent adver t i si ng, because i t makes t al k
and al so br i ngs i n bot h t he pr of essi onal t r ader s and t hat
por t i on of t he specul at i ng publ i c t hat l i kes act i on. I t i s, I
t hi nk, a l ar ge por t i on. I di d t hat i n I mper i al St eel , and
what ever demand was cr eat ed by t hose spur t s I suppl i ed. My
sel l i ng al ways kept t he upwar d movement wi t hi n bounds bot h as t o
ext ent and as t o speed. I n buyi ng on t he way down and sel l i ng on
t he way up I was doi ng mor e t han mar ki ng up t he pr i ce: I was
devel opi ng t he mar ket abi l i t y of I mper i al St eel .
Af t er I began my oper at i ons i n i t t her e never was a t i me
when a man coul d not buy or sel l t he st ock f r eel y; I mean by
t hi s, buy or sel l a r easonabl e amount wi t hout causi ng over
vi ol ent f l uct uat i ons i n t he pr i ce. The f ear of bei ng l ef t hi gh
and dr y i f he bought , or squeezed t o deat h i f he sol d, was gone.
The gr adual spr ead among t he pr of essi onal s and t he publ i c of a
bel i ef i n t he per manence of t he mar ket f or I mper i al St eel had
much t o do wi t h cr eat i ng conf i dence i n t he movement ; and, of
cour se, t he act i vi t y al so put an end t o a l ot of ot her
obj ect i ons. The r esul t was t hat af t er buyi ng and sel l i ng a good
many t housands of shar es I succeeded i n maki ng t he st ocks sel l
at par . At one hundr ed dol l ar s a shar e ever ybody want ed t o buy
I mper i al St eel . Why not ? Ever ybody now knew t hat i t was a good
st ock; t hat i t had been and st i l l was a bar gai n. The pr oof was
t he r i se. A st ock t hat coul d go t hi r t y poi nt s f r om 70 coul d go
up t hi r t y mor e f r ompar . That i s t he way a good many ar gued.
I n t he cour se of mar ki ng up t he pr i ce t hose t hi r t y poi nt s I
accumul at ed onl y seven t housand shar es. The pr i ce on t hi s l i ne
aver aged me al most exact l y 85. That meant a pr of i t of f i f t een
poi nt s on i t ; but , of cour se, my ent i r e pr of i t , st i l l on t he
paper , was much mor e. I t was a saf e enough pr of i t , f or I had a
mar ket f or al l I want ed t o sel l . The st ock woul d sel l hi gher ; on
j udi ci ous mani pul at i on and I had gr aduat ed cal l s on one hundr ed
t housand shar es begi nni ng at 70 and endi ng at 100.
Ci r cumst ances pr event ed me f r om car r yi ng out cer t ai n pl ans
of mi ne f or conver t i ng my paper - pr of i t s i nt o good har d cash. I t
had been, i f I do say so mysel f , ~a beaut i f ul pi ece of mani pu-
l at i on, st r i ct l y l egi t i mat e and deser vedl y successf ul . The pr op-
er t y of t he company was val uabl e and t he st ock was not dear at


t he hi gher pr i ce. One of t he member s of t he or i gi nal syndi cat e
devel oped a desi r e t o secur e t he cont r ol of t he pr oper t y- a
pr omi nent banki ng house wi t h ampl e r esour ces. The cont r ol of a
pr osper ous and gr owi ng concer n l i ke t he I mper i al St eel
Cor por at i on i s possi bl y mor e val uabl e t o a banki ng f i r m t han t o
i ndi vi dual i nvest or s. At al l event s, t hi s f i r m made me an of f er
f or al l my opt i ons on t he st ock. I t meant an enor mous pr of i t f or
me, and I i nst ant l y t ook i t . I am al ways wi l l i ng t o sel l out
when I can do so i n a l ump at a good pr of i t . I was qui t e cont ent
wi t h what I made out of i t .
Bef or e I di sposed of my cal l s on t he hundr ed t housand
shar es I l ear ned t hat t hese banker s had empl oyed mor e exper t s t o
make a st i l l mor e t hor ough exami nat i on of t he pr oper t y. Thei r
r epor t s showed enough t o br i ng me i n t he of f er I got . I kept
sever al t housand shar es of t he st ock f or i nvest ment . I bel i eve
i n i t .
Ther e wasn' t anyt hi ng about my mani pul at i on of I mper i al
St eel t hat wasn' t nor mal and sound. As l ong as t he pr i ce went up
on my buyi ng I knew I was O. K. The st ock never got wat er l ogged,
as a st ock somet i mes does. When you f i nd t hat i t f ai l s t o
r espond adequat el y t o your buyi ng you don' t need any bet t er t i p
t o sel l . You know t hat i f t her e i s any val ue t o a st ock and
gener al mar ket condi t i ons ar e r i ght you can al ways nur se i t back
af t er a decl i ne, no mat t er i f i t ' s t went y poi nt s. But I never
had t o do anyt hi ng l i ke t hat i n I mper i al St eel .
I n my mani pul at i on of st ocks I never l ose si ght of basi c t r adi ng
pr i nci pl es. Per haps you wonder why I r epeat t hi s or why I keep
on har pi ng on t he f act t hat I never ar gue wi t h t he t ape or l ose
my t emper at t he mar ket because of i t s behavi our . You woul d
t hi nk - - woul dn' t you? - - t hat shr ewd men who have made mi l l i ons
i n t hei r own busi ness and i n addi t i on have successf ul l y oper at ed
i n Wal l St r eet at t i mes woul d r eal i se t he wi sdom of pl ayi ng t he
game di spassi onat el y. Wel l , you woul d be sur pr i sed at t he
f r equency wi t h whi ch some of our most successf ul pr omot er s
behave l i ke peevi sh women because t he mar ket does not act t he
way t hoy wi sh i t t o act . They seem t o t ake i t as a per sonal
sl i ght , and t hey pr oceed t o l ose money by f i r st l osi ng t hei r
t emper .
Ther e has been much gossi p about a di sagr eement bet ween
J ohn Pr ent i ss and mysel f . Peopl e have been l ed t o expect a
dr amat i c nar r at i ve of a st ock- mar ket deal t hat went wr ong or
some doubl e- cr ossi ng t hat cost me or hi m - - mi l l i ons; or
somet hi ng of t hat sor t . Wel l , i t wasn' t .


Pr ent i ss and I had been f r i endl y f or year s. He had gi ven me
at var i ous t i mes i nf or mat i on t hat I was abl e t o ut i l i se
pr of i t abl y, and I had gi ven hi madvi ce whi ch he may or may not
have f ol l owed. I f he di d he saved money.
He was l ar gel y i nst r ument al i n t he or gani sat i on and
pr omot i on of t he Pet r ol eum Pr oduct s Company. Af t er a mor e or
l ess successf ul mar ket debut gener al condi t i ons changed f or t he
wor se and t he new st ock di d not f ar e as wel l as Pr ent i ss and hi s
associ at es had hoped. When basi c condi t i ons t ook a t ur n f or t he
bet t er Pr ent i ss f or med a pool and began oper at i ons i n Pet e
Pr oduct s.
I cannot t el l you anyt hi ng about hi s t echni que. He di dn' t
t el l me how he wor ked and I di dn' t ask hi m. But i t was pl ai n
t hat not wi t hst andi ng hi s Wal l St r eet exper i ence and hi s
undoubt ed cl ever ness, what ever i t was he di d pr oved of l i t t l e
val ue and i t di dn' t t ake t he pool l ong t o f i nd out t hat t hey
coul dn' t get r i d of much st ock. He must have t r i ed ever yt hi ng he
knew, because a pool manager does not ask t o be super seded by an
out si der unl ess he f eel s unequal t o t he t ask, and t hat i s t he
l ast t hi ng t he aver age man l i kes t o admi t . At al l event s he came
t o me and af t er some f r i endl y pr el i mi nar i es he sai d he want ed me
t o t ake char ge of t he mar ket f or Pet e Pr oduct s and di spose of
t he pool ' s hol di ngs, whi ch amount ed t o a l i t t l e over one hundr ed
t housand shar es. The st ock was sel l i ng at 102 t o 103.
The t hi ng l ooked dubi ous t o me and I decl i ned hi s
pr oposi t i on wi t h t hanks. But he i nsi st ed t hat I accept . He put
i t on per sonal gr ounds, so t hat i n t he end I consent ed. I
const i t ut i onal l y di sl i ke t o i dent i f y mysel f Wi t h ent er pr i ses i n
t he success of whi ch I cannot f eel conf i dence, but I al so t hi nk
a man owes somet hi ng t o hi s f r i ends and acquai nt ances. I sai d I d
do my best , but I t ol d hi m I di d not f eel ver y cocky about i t
and I enumer at ed t he adver se f act or s t hat I woul d have t o
cont end wi t h. But al l Pr ent i ss sai d t o t hat was t hat he wasn' t
aski ng me t o guar ant ee mi l l i ons i n pr of i t s t o t he pool . He was
sur e t hat i f I t ook hol d I ' d make out wel l enough t o sat i sf y
any r easonabl e bei ng.
Wel l , t her e I was, engaged i n doi ng somet hi ng agai nst my
own j udgment . I f ound, as I f ear ed, a pr et t y t ough st at e of
af f ai r s, due i n gr eat measur e t o Pr ent i ss' own mi st akes whi l e he
was mani pul at i ng t he st ock f or account of t he pool . But t he
chi ef f act or agai nst me was t i me. I was convi nced t hat we wer e
r api dl y appr oachi ng t he end of a bul l swi ng and t her ef or e t hat
t he i mpr ovement i n t he mar ket , whi ch had so encour aged Pr ent i ss,
woul d pr ove t o be mer el y a shor t - l i ved r al l y. I f ear ed t hat t he
mar ket woul d t ur n def i ni t el y bear i sh bef or e I coul d accompl i sh


much wi t h Pet e Pr oduct s. However , I had gi ven my pr omi se and I
deci ded t o wor k as har d as I knew how.
I st ar t ed t o put up t he pr i ce. I had moder at e success. I
t hi nk I r an i t up t o i on or t her eabout s, whi ch was pr et t y f ai r ,
and I was even abl e t o sel l a l i t t l e st ock on bal ance. I t wasn' t
much, but I was gl ad not t o have i ncr eased t he pool ' s hol di ngs.
Ther e wer e a l ot of peopl e not i n t he pool who wer e j ust wai t i ng
f or a smal l r i se t o dump t hei r st ock, and I was a godsend t o
t hem. Had gener al condi t i ons been bet t er I al so woul d have done
bet t er . I t was t oo bad t hat I wasn' t cal l ed i n ear l i er . Al l I
coul d do now, I f el t , was t o get out wi t h as l i t t l e l oss as
possi bl e t o t he pool .
I sent f or Pr ent i ss and t ol d hi m my vi ews. But he st ar t ed
t o obj ect . I t hen expl ai ned t o hi m why I t ook t he posi t i on I
di d. I sai d: " Pr ent i ss, I can f eel ver y pl ai nl y t he pul se of t he
mar ket . Ther e i s no f ol l ow- up i n your st ock. I t i s no t r i ck t o
see j ust what t he publ i c' s r eact i on i s t o my mani pul at i on.
Li st en: When Pet e Pr oduct s i s made as at t r act i ve t o t r ader s
as possi bl e and you gi ve i t al l t he suppor t needed at al l t i mes
and not wi t hst andi ng al l t hat you f i nd t hat t he publ i c l eaves i t
al one you may be sur e t hat t her e i s somet hi ng wr ong, not wi t h
t he st ock but wi t h t he mar ket . Ther e i s absol ut el y no use i n
t r yi ng t o f or ce mat t er s. You ar e bound t o l ose i f you do. A pool
manager shoul d be wi l l i ng t o buy hi s own st ock when he has
company. But when he i s t he onl y buyer i n t he mar ket he' d be an
ass t o buy i t . For ever y f i ve t housand shar es I buy t he publ i c
ought t o be wi l l i ng or abl e t o buy f i ve t housand mor e. But I
cer t ai nl y am not goi ng t o do al l t he buyi ng. I f I di d, al l I
woul d succeed i n doi ng woul d be t o get soaked wi t h a l ot of l ong
st ock t hat I don' t want . Ther e i s onl y one t hi ng t o do, and t hat
i s t o sel l . And t he onl y way t o sel l i s t o sel l . "
" You mean, sel l f or what you can get ?" asked Pr ent i ss.
" Ri ght ! " I sai d. I coul d see he was get t i ng r eady t o
obj ect .
I f I am t o sel l t he pool ' s st ock at al l you can make up
your mi nd t hat t he pr i ce i s goi ng t o br eak t hr ough par and"
" Oh, no! Never ! " he yel l ed. You' d have i magi ned I was
aski ng hi mt o j oi n a sui ci de cl ub.
" Pr ent i ss, " I sai d t o hi m, " i t i s a car di nal pr i nci pl e of
st ock mani pul at i on t o put up a st ock i n or der t o sel l i t . But
you
don' t sel l i n bul k on t he advance. You can' t . The bi g sel l i ng i s
done on t he way down f r omt he t op. I cannot put up your st ock t o
125 or 130. I ' d l i ke t o, but i t can' t be done. So you wi l l have
t o begi n your sel l i ng f r om t hi s l evel . I n my opi ni on al l st ocks


ar e goi ng down, and Pet r ol eumPr oduct s i sn' t goi ng t o be t he one
except i on. I t i s bet t er f or i t t o go down now on t he pool ' s
sel l i ng t han f or i t t o br eak next mont h on sel l i ng by some one
el se. I t wi l l go down anyhow. "
I can' t see t hat I sai d anyt hi ng har r owi ng, but you coul d
have hear d hi s howl s i n Chi na. He si mpl y woul dn' t l i st en t o such
a t hi ng. I t woul d never do. I t woul d pl ay t he di ckens wi t h t he
st ock' s r ecor d, t o say not hi ng of i nconveni ent possi bi l i t i es at
t he banks wher e t he st ock was hel d as col l at er al on l oans, and
so on.
I t ol d hi m agai n t hat i n my j udgment not hi ng i n t he wor l d
coul d pr event Pet e Pr oduct s f r om br eaki ng f i f t een or t went y
poi nt s, because t he ent i r e mar ket was headed t hat way, and I
once mor e sai d i t was absur d t o expect hi s st ock t o be a
dazzl i ng except i on. But agai n my t al k went f or not hi ng. He
i nsi st ed t hat I suppor t t he st ock.
Her e was a shr ewd busi ness man, one of t he most successf ul
pr omot er s of t he day, who had made mi l l i ons i n Wal l St r eet deal s
and knew much mor e t han t he aver age man about t he game of
specul at i on, act ual l y i nsi st i ng on suppor t i ng a st ock i n an
i nci pi ent bear mar ket . I t was hi s st ock, t o be sur e, but i t was
never t hel ess bad busi ness. So much so t hat i t went agai nst t he
gr ai n and I agai n began t o ar gue wi t h hi m. But i t was no use. He
i nsi st ed on put t i ng i n suppor t i ng or der s.
Of cour se when t he gener al mar ket got weak and t he decl i ne
began i n ear nest Pet e Pr oduct s went wi t h t he r est . I nst ead of
sel l i ng I act ual l y bought st ock f or t he i nsi der s' pool by
Pr ent i ss' or der s.
The onl y expl anat i on i s t hat Pr ent i ss di d not bel i eve t he
bear mar ket was r i ght on t op of us. I mysel f was conf i dent t hat
t he bul l mar ket was over . I had ver i f i ed my f i r st sur mi se by
t est s not al one i n Pet e Pr oduct s but i n ot her st ocks as wel l . I
di dn' t wai t f or t he bear mar ket t o announce i t s saf e ar r i val
bef or e I st ar t ed sel l i ng. Of cour se I di dn' t sel l a shar e of
Pet e Pr oduct s, t hough I was shor t of ot her st ocks.
The Pet e Pr oduct s pool , as I expect ed, was hung up wi t h al l
t hey hel d t o begi n wi t h and wi t h al l t hey had t o t ake i n t hei r
f ut i l e ef f or t t o hol d up t he pr i ce. I n t he end t hey di d
l i qui dat e; but at much l ower f i gur es t han t hey woul d have got i f
Pr ent i ss had l et me sel l when and as I wi shed. I t coul d not be
ot her wi se. But Pr ent i ss st i l l t hi nks he was r i ght or says he
does. I under st and he says t he r eason I . gave hi m t he advi ce I
di d was t hat I was shor t of ot her st ocks and t he gener al mar ket
was goi ng up. I t i mpl i es, of cour se, t hat t he br eak i n Pet e
Pr oduct s t hat woul d have r esul t ed f r om sel l i ng out t he pool ' s


hol di ngs at any pr i ce woul d have hel ped my bear posi t i on i n
ot her st ocks.
That i s al l t ommyr ot . I was not bear i sh because I was shor t
of st ocks. I was bear i sh because t hat was t he way I si zed up t he
si t uat i on, and I sol d st ocks shor t onl y af t er I t ur ned bear i sh.
Ther e never i s much money i n doi ng t hi ngs wr ong end t o; not i n
t he st ock mar ket . My pl an f or sel l i ng t he pool ' s st ock was based
on what t he exper i ence of t went y year s t ol d me al one was
f easi bl e and t her ef or e wi se. Pr ent i ss' ought t o have been enough
of a t r ader t o see i t as pl ai nl y as I di d. I t was t oo l at e t o
t r y t o do anyt hi ng el se.
I suppose Pr ent i ss shar es t he del usi on of t housands of
out si der s who t hi nk a mani pul at or can do anyt hi ng. He can' t . The
bi ggest t hi ng Keene di d was hi s mani pul at i on of U. S. St eel
common and pr ef er r ed i n t he spr i ng of yoi . He succeeded not
because he was cl ever and r esour cef ul and not because he had a
syndi cat e of t he r i chest men i n t he count r y back of hi m. He
succeeded par t l y because of t hose r easons but chi ef l y because
t he gener al mar ket was r i ght and t he publ i es st at e of mi nd was
r i ght .
I t i sn' t good busi ness f or a man t o act agai nst t he
t eachi ngs of exper i ence and agai nst common sense. But t he
sucker s i n Wal t St r eet ar e not al l out si der s. Pr ent i ss'
gr i evance agai nst me i s what I have j ust t ol d you. He f eel s sor e
because I di d my mani pul at i on not as I want ed t o but as he asked
me t o.
Ther e i sn' t anyt hi ng myst er i ous or under handed or cr ooked
about mani pul at i on desi gned t o sel l a st ock i n bul k pr ovi ded
such oper at i ons ar e not accompani ed by del i ber at e mi sr epr e-
sent at i ons. Sound mani pul at i on must be based on sound t r adi ng
pr i nci pl es. Peopl e l ay gr eat st r ess on ol d- t i me pr act i ces, such
as wash sal es. But I can assur e you t hat t he mer e mechani cs of
decept i on count f or ver y l i t t l e. The di f f er ence bet ween
st ock- mar ket mani pul at i on and t he over - t he- count er sal e of
st ocks and bonds i s i n t he char act er of t he cl i ent el e r at her
t han i n t he char act er of t he appeal . J . P. Mor gan & Co. sel l an
i ssue of bonds t o t he publ i c - - t hat i s, t o i nvest or s. A
mani pul at or di sposes of a bl ock of st ock t o t he publ i c - - t hat
i s, t o specul at or s. An i nvest or l ooks f or saf et y, f or per manence
of t he i nt er est r et ur n on t he capi t al he i nvest s. The specul at or
l ooks f or a qui ck pr of i t
t o get a bi g r et ur n on t hei r capi t al . I mysel f never have
bel i eved i n bl i nd gambl i ng. I may pl unge or I may buy one
hundr ed shar es. But i n ei t her case I must have a r eason f or what
I do.
Th i l t i l f i d hi i


di st i nct l y r emember how I got i nt o t he game of
mani pul at i on t hat i s, i n t he mar ket i ng of st ocks f or ot her s. I t
gi ves me pl easur e t o r ecal l i t because i t shows so beaut i f ul l y
t he pr of essi onal Wal l St r eet at t i t ude t owar d st ock- mar ket
oper at i ons. I t happened af t er I had " come back" - - t hat i s, af t er
my Bet hl ehem St eel t r ade i n i gi 5 st ar t ed me on t he r oad t o
f i nanci al r ecover y.
I t r aded pr et t y st eadi l y and had ver y good l uck. I have
never sought newspaper publ i ci t y, but nei t her have I gone out of
my way t o hi de mysel f . At t he same t i me, you know t hat
pr of essi onal Wal l St r eet exagger at es bot h t he successes and t he
f ai l ur es of whi chever oper at or happens t o be act we; and, of
cour se, t he newspaper s hear about hi m and pr i nt r umor s. I have
been br oke so many t i mes, accor di ng t o t he gossi ps, or have made
so many mi l l i ons, accor di ng t o t he same aut hor i t i es, t hat my
onl y r eact i on t o such r epor t s i s t o wonder how and wher e t hey
ar e bor n. And how t hey gr ow! I have had br oker f r i end af t er
br oker f r i end br i ng t he same st or y t o me, a l i t t l e changed each
t i me, i mpr oved, mor e ci r cumst ant i al .
Al l t hi s pr ef ace i s t o t el l you how I f i r st came t o
under t ake t he mani pul at i on of a st ock f or someone el se. The
st or i es t he newspaper s pr i nt ed of how I had pai d back i n f ul l
t he mi l l i ons I owed di d t he t r i ck. My pl ungi ngs and my wi nni ngs
wer e so magni f i ed by t he newspaper s t hat I was t al ked about i n
Wal l St r eet . The day was past when an oper at or swi ngi ng a l i ne
of t wo hundr ed t housand shar es of st ock coul d domi nat e t he
mar ket . But , as you know, t he publ i c al ways desi r es t o f i nd
successor s t o t he ol d l eader s. I t was Mr . Keene' s r eput at i on as
a ski l f ul st ock oper at or , a wi nner of mi l l i ons on hi s own hook,
t hat made pr omot er s and banki ng houses appl y t o hi m f or sel l i ng
l ar ge bl ocks of secur i t i es. I n shor t , hi s ser vi ces as
mani pul at or wer e i n demand because of t he st or i es t he St r eet had
hear d about hi s pr evi ous successes as a t r ader .
264 REMI NI SCENCES OF

But Keene was gone - - passed on t o t hat heaven wher e he once
sai d he woul dn' t st ay a moment unl ess he f ound Sysonby t her e
wai t i ng f or hi m. Two or t hr ee ot her men who made st ock- mar ket
hi st or y f or a f ew mont hs had r el apsed i nt o t he obscur i t y of
pr ol onged i nact i vi t y. I r ef er par t i cul ar l y t o cer t ai n of t hose
pl ungi ng West er ner s who came t o Wal l St r eet i n 1901 and af t er
maki ng many mi l l i ons out of t hei r St eel hol di ngs r emai ned i n
Wal l St r eet . They wer e i n r eal i t y super pr omot er s r at her t han
oper at or s of t he Keene t ype. But t hey wer e ext r emel y abl e,
ext r emel y r i ch and ext r emel y successf ul i n t he secur i t i es of t he


compani es whi ch t hey and t hei r f r i ends cont r ol l ed. They wer e not
r eal l y gr eat mani pul at or s, l i ke Keene or Gover nor Fl ower . St i l l ,
t he St r eet f ound i n t hem pl ent y t o gossi p about and t hey
cer t ai nl y had a f ol l owi ng among t he pr of essi onal s and t he
spor t i er commi ssi on houses Af t er t hey ceased t o t r ade act i vel y
t he St r eet f ound i t sel f wi t hout mani pul at or s; at l east , i t
coul dn' t r ead about t hemi n t he newspaper s.
You r emember t he bi g bul l mar ket t hat began when t he St ock
Exchange r esumed busi ness i n 1915. As t he mar ket br oadened and
t he Al l i es' pur chases i n t hi s count r y mount ed i nt o bi l l i ons we
r an i nt o a boom. As f ar as mani pul at i on went , i t wasn' t
necessar y f or anybody t o l i f t a f i nger t o cr eat e an unl i mi t ed
mar ket f or a war br i de. Scor es of men made mi l l i ons by
capi t al i zi ng cont r act s or even pr omi ses of cont r act s. They
became successf ul pr omot er s, ei t her wi t h t he ai d of f r i endl y
banker s or by br i ngi ng out t hei r compani es on t he Cur b mar ket .
The publ i c bought anyt hi ng t hat was adequat el y t out ed.
When t he bl oom wor e of f t he boom, some of t hese pr omot er s
f ound t hemsel ves i n need of hel p f r om exper t s i n st ock
sal esmanshi p. When t he publ i c i s hung up wi t h al l ki nds of
secur i t i es, some of t hem pur chased at hi gher pr i ces, i t i s not
an easy t ask t o di spose of unt r i ed st ocks. Af t er a boom t he
publ i c i s posi t i ve t hat not hi ng i s goi ng up. I t i sn' t t hat
buyer s become mor e di scr i mi nat i ng, but t hat t he bl i nd buyi ng i s
over . 1t i s t he st at e of mi nd t hat has changed. Pr i ces don' t
even have t o go down t o make peopl e pessi mi st i c. I t i s enough i f
t he mar ket get s dul l and st ays dul l f or a t i me.
I n ever y boom compani es ar e f or med pr i mar i l y i f not
excl usi vel y t o t ake advant age of t he publ i c' s appet i t e f or al l
ki nds of st ocks. Al so t her e ar e bel at ed pr omot i ons. The r eason
why pr omot er s make t hat mi st ake i s t hat bei ng human t hey ar e
unwi l l i ng t o see t he end of t he boom. Mor e over , i t i s good
busi ness t o t ake chances when t he possi bl e pr of i t i s bi g enough.
The t op i s never i n si ght when t he vi si on i s vi t i at ed by hope.
The aver age man sees a st ock t hat nobody want ed at t wel ve
dol l ar s or f our t een dol l ar s a shar e suddenl y advance t o t hi r t y -
- whi ch sur el y i s t he t op unt i l i t r i ses t o f i f t y. That i s
absol ut el y t he end of t he r i se. Then i t goes t o si xt y; t o
sevent y; t o sevent y- f i ve. I t t hen becomes a cer t ai nt y t hat t hi s
st ock, whi ch a f ew weeks ago was sel l i ng f or l ess t han f i f t een,
can' t go any hi gher . But i t goes t o ei ght y; and t o ei ght y- f i ve.
Wher eupon t he aver age man, who never t hi nks of val ues but of
pr i ces, and i s not gover ned i n hi s act i ons by condi t i ons but by
f ear s, t akes t he easi est way he st ops t hi nki ng t hat t her e must
be a l i mi t t o t he advances. That i s why t hose out si der s who ar e


wi se enough not t o buy at t he t op make up f or i t by not t aki ng
pr of i t s. The bi g money i n booms i s al ways made f i r st by t he
publ i c- on- paper . And i t r emai ns on paper .




CHAPTER XXI I

ONE day J i m Bar nes, who not onl y was one of my pr i nci pal
br oker s but an i nt i mat e f r i end as wel l , cal l ed on me. He sai d he
want ed me t o do hi m a gr eat f avour . He never bef or e had t al ked
t hat way, and so I asked hi m t o t el l me what t he f avour was,
hopi ng i t was somet hi ng I coul d do, f or I cer t ai nl y wi shed t o
obl i ge hi m. He t hen t ol d me t hat hi s f i r m was i nt er est ed i n a
cer t ai n st ock; i n f act , t hey had been t he pr i nci pal pr omot er s of
t he company and had pl aced t he gr eat er par t of t he st ock.
Ci r cumst ances had ar i sen t hat made i t i mper at i ve f or t hem t o
mar ket a r at her l ar ge bl ock. J i m want ed me t o under t ake t o do
t he mar ket i ng f or hi m. The st ock was Consol i dat ed St ove.
I di d not wi sh t o have anyt hi ng t o do wi t h i t f or var i ous
r easons. But Bar nes, t o whom I was under some obl i gat i ons,
i nsi st ed on t he per sonal f avour phase of t he mat t er , whi ch al one
coul d over come my obj ect i ons. He was a good f el l ow, a f r i end,
and hi s f i r m, I gat her ed, was pr et t y heavi l y i nvol ved, so i n t he
end I consent ed t o do what I coul d.
I t has al ways seemed t o me t hat t he most pi ct ur esque poi nt
of di f f er ence bet ween t he war boom and ot her booms was t he par t
t hat was pl ayed by a t ype new i n st ock- mar ket af f ai r st he boy
banker .
The boom was st upendous and i t s or i gi ns and causes wer e
pl ai nl y t o be gr asped by al l . But at t he same t i me t he gr eat est
banks and t r ust compani es i n t he count r y cer t ai nl y di d al l t hey
coul d t o hel p make mi l l i onai r es over ni ght of al l sor t s and
condi t i ons of pr omot er s and muni t i on maker s. I t got so t hat al l
a man had t o do was t o say t hat he had a f r i end who was a f r i end
of a member of one of t he Al l i ed commi ssi ons and he woul d be
of f er ed al l t he capi t al needed t o car r y out t he cont r act s he had
not yet secur ed. I used t o hear i ncr edi bl e st or i es of cl er ks
becomi ng pr esi dent s of compani es doi ng a busi ness of mi l l i ons of
dol l ar s on money bor r owed f r om t r ust i ng t r ust compani es, and of
cont r act s t hat l ef t a t r ai l of pr of i t s as t hey passed f r om man
t o man. A f l ood of gol d was pour i ng i nt o t hi s count r y f r om
Eur ope and t he banks had t o f i nd ways of i mpoundi ng i t .
The way busi ness was done mi ght have been r egar ded wi t h
mi sgi vi ngs by t he ol d, but t her e di dn' t seem t o be so many of
t hem about . The f ashi on f or gr ay- hai r ed pr esi dent s of banks was
al l ver y wel l i n t r anqui l t i mes, but yout h was t he chi ef
qual i f i cat i on i n t hese st r enuous t i mes. The banks cer t ai nl y di d
make enor mous pr of i t s.
J i m Bar nes and hi s associ at es, enj oyi ng t he f r i endshi p and
conf i dence of t he yout hf ul pr esi dent of t he Mar shal l Nat i onal


Bank, deci ded t o consol i dat e t hr ee wel l - known st ove compames and
sel l t he st ock of t he new company t o t he publ i c t hat f or mont hs
had been buyi ng any ol d t hi ng i n t he way of engr aved st ock
cer t i f i cat es.
One t r oubl e was t hat t he st ove busi ness was so pr osper ous
t hat al l t hr ee compani es wer e act ual l y ear ni ng di vi dends on
t hei r common st ock f or t he f i r st t i me i n t hei r hi st or y. Thei r
pr i nci pal st ockhol der s di d not wi sh t o par t wi t h t he cont r ol .
Ther e was a good mar ket f or t hei r st ocks on t he Cur b; and t hey
had sol d as much as t hey car ed t o par t wi t h and t hey wer e
cont ent wi t h t hi ngs as t hey wer e. Thei r i ndi vi dual
capi t al i sat i on was t oo smal l t o j ust i f y bi g mar ket movement s,
and t hat i s wher e J i m Bar nes' f i r m came i n. I t poi nt ed out t hat
t he col i dat ed company must be bi g enough t o l i st on t he St ock
Exchange, wher e t he new shar es coul d be made mor e val uabl e t han
t he ol d ones. I t i s an ol d devi ce i n Wal l St r eet t o change t he
col our of t he cer t i f i cat es i n or der t o make t hem mor e val uabl e.
Say a st ock ceases t o be easi l y vendi bl e at par . Wel l , somet i mes
by quadr upl i ng t he st ock you may make t he new shar es sel l at 30
or 35. Thi s i s equi val ent t o 120 or 140 f or t he ol d st ock a
f i gur e i t never coul d have r eached.
I t seems t hat Bar nes and hi s associ at es succeeded i n
i nduci ng some of t hei r f r i ends who hel d specul at i vel y some
bl ocks of Gr ay St ove Company, a l ar ge concer n t o come i nt o t he
consol i dat i on on t he basi s of f our shar es of Consol i dat ed f or
each shar e of Gr ay. Then t he Mi dl and and t he West er n f ol l owed
t hei r bi g si st er and came i n on t he basi s of shar e f or shar e.
Thei r s had been quot ed on t he Cur b at ar ound 25 t o 3o, and t he
Gr ay, whi ch was bet t er known and pai d di vi dends, hung ar ound
125.
I n or der t o r ai se t he money t o buy out t hose hol der s who
i nsi st ed upon sel l i ng f or cash, and al so t o pr ovi de addi t i onal
wor ki ng capi t al f or i mpr ovement s and pr omot i on expenses, i t
became necessar y t o r ai se a f ew mi l l i ons. So Bar nes saw t he
pr esi dent of hi s bank, who ki ndl y l ent hi s syndi cat e t hr ee
mi l l i on f i ve hundr ed t housand dol l ar s. The col l at er al was one
hundr ed t housand shar es of t he newl y or gani sed cor por at i on. The
syndi cat e assur ed t he pr esi dent , or so I was t ol d, t hat t he
pr i ce woul d not go bel ow 50. I t woul d be a ver y pr of i t abl e deal
as t her e was bi g val ue t her e.
The pr omot er s' f i r st mi st ake was i n t he mat t er of
t i mel i ness. The sat ur at i on poi nt f or new st ock i ssues had
been r eached by t he mar ket , and t hey shoul d have seen i t . But
even t hen t hey mi ght have made a f ai r pr of i t af t er al l i f t hey


had not t r i ed t o dupl i cat e t he unr easonabl e ki l l i ngs whi ch ot her
pr ot mot er s had made at t he ver y hei ght of t he boom.
Now you must not r un away wi t h t he not i on t hat J i m Bar nes
and hi s associ at es wer e f ool s or i nexper i enced ki ds. They wer e
shr ewd men. Al l of t hem wer e f ami l i ar wi t h a, Wal l St r eet
met hods and some of t hem wer e except i onal l y successf ul st ock
t r ader s. But t hey di d r at her mor e t han mer el y over est i mat e t he
publ i c' s buyi ng capaci t y. Af t er al l , t hat capaci t y was somet hi ng
t hat t hey coul d det er mi ne onl y by act ual t est s. Wher e t hey er r ed
mor e expensi vel y was i n expect i ng t he bul l mar ket t o l ast l onger
t han i t di d. I suppose t he r eason was t hat t hese same men had
met wi t h such gr eat and par t i cul ar l y wi t h such qui ck success
t hat t hey di dn' t doubt t hey' d be al l t hr ough wi t h t he deal
bef or e t he bul l mar ket t ur ned. They wer e al l wel l known and had
a consi der abl e f ol l owi ng among t he pr of essi onal t r ader s and t he
wi r e houses.
The deal was ext r emel y wel l adver t i sed. The newspaper s
cer t ai nl y wer e gener ous wi t h t hei r space. The ol der concer ns
awer e i dent i f i ed wi t h t he st ove i ndust r y of Amer i ca and t hei r
pr oduct was known t he wor l d over . I t was a pat r i ot i c
amal gamat i on and t her e was a heap of l i t er at ur e i n t he dai l y
paper s about t he wor l d conquest s. The mar ket s of Asi a, Af r i ca
and Sout h Amer i ca wer e as good as ci nched.
The di r ect or s of t he company wer e al l men whose names wer e
f ami l i ar t o al l r eader s of t he f i nanci al pages. The publ i ci t y
wor k was so wel l handl ed and t he pr omi ses of unnamed i nsi der s as
t o what t he pr i ce was goi ng t o do wer e so def i ni t e and
convi nci ng t hat a gr eat demand f or t he new st ock was cr eat ed.
The r esul t was t hat when t he books wer e cl osed i t was f ound t hat
t he st ock whi ch was of f er ed t o t he publ i c at f i f t y dol l ar s a
shar e had been over subscr i bed by 25 per cent .
Thi nk of i t ! The best t he pr omot er s shoul d have expect ed
was t o succeed i n sel l i ng t he new st ock at t hat pr i ce af t er
weeks of wor k and af t er put t i ng up t he pr i ce t o 75 or hi gher i n
or der t o aver age 50. At t hat , i t meant an advance of about 100
per cent i n t he ol d pr i ces of t he st ocks of t he const i t uent
compani es. That was t he cr i si s and t hey di d not meet i t as i t
shoul d have been met . I t shows you t hat ever y busi ness has i t s
own needs. Gener al wi sdom i s l ess val uabl e t han speci f i c savvy.
The pr omot er s, del i ght ed by t he unexpect ed over subscr i pt i on,
concl uded t hat t he publ i c was r eady t o pay any pr i ce f or any
quant i t y of t hat st ock. And t hey act ual l y wer e st upi d enough t o
under al l ot t he st ock. Af t er t he pr omot er s made up t hei r mi nds t o
be hoggi sh t hey shoul d have t r i ed t o be i nt el l i gent l y hoggi sh.


What t hey shoul d have done, of cour se, was t o al l ot t he
st ock i n f ul l . That woul d have made t hem shor t t o t he ext ent of
25 per cent of t he t ot al amount of f er ed f or subscr i pt i on t o t he
publ i c, and t hat , of cour se, woul d have enabl ed t hem t o suppor t
t he st ock when necessar y and at no cost t o t hemsel ves. Wi t hout
any ef f or t on t hei r par t t hey woul d have been i n t he st r ong
st r at egi c posi t i on t hat I al ways t r y t o f i nd mysel f i n when I am
mani pul at i ng a st ock. They coul d have kept t he pr i ce f r om
saggi ng, t her eby i nspi r i ng conf i dence i n t he new st ock' s pr i ce
st abi l i t y and i n t he under wr i t i ng syndi cat e back of i t . They
shoul d have r emember ed t hat t hei r wor k was not over when t hey
sol d t he st ock of f er ed t o t he publ i c. That was onl y a par t of
what t hey had t o mar ket .
hey t hought t hey had been ver y successf ul , but i t was not
l ong bef or e t he consequences of t hei r t wo capi t al bl under s
became appar ent . The publ i c di d not buy any mor e of t he new
st ock, because t he ent i r e mar ket devel oped r eact i onar y
t endenci es. The i nsi der s got col d f eet and di d not suppor t
Consol i dat ed St ove; and i f i nsi der s don' t buy t hei r own st ock on
r ecessi ons, who shoul d? The absence of i nsi de suppor t i s
gener al l y accept ed as a pr et t y good bear t i p.
Ther e i s no need t o go i nt o st at i st i cal det ai l s. The pr i ce
of Consol i dat ed St ove f l uct uat ed wi t h t he r est of t he mar ket ,
but i t never went above t he i ni t i al mar ket quot at i ons, whi ch
wer e onl y a f r act i on above So. Bar nes and hi s f r i ends i n t he end
had t o come i n as buyer s i n or der t o keep i t above o. Not t o
have suppor t ed t hat st ock at t he out set of i t s mar ket car eer was
r egr et t abl e. But not t o have sol d al l t he st ock t he publ i c
subscr i bed f or was much wor se.
At al l event s, t he st ock was dul y l i st ed on t he New Yor k
St ock Exchange and t he pr i ce of i t dul y kept saggi ng unt i l i t
nomi nal l y st ood at 37. And i t st ood t her e because J i mBar nes and
hi s associ at es had t o keep i t t her e because t hei r bank had
l oaned t hem t hi r t y- f i ve dol l ar s a shar e on one hundr ed t housand
shar es. I f t he bank ever t r i ed t o l i qui dat e t hat l oan t her e was
no t el l i ng what t he pr i ce woul d br eak t o. The publ i c t hat had
been eager t o buy i t at 50, now di dn' t car e f or i t at 37, and
pr obabl y woul dn' t want i t at 27.
As t i me went on t he banks' excesses i n t he mat t er of ex-
t ensi ons of cr edi t s made peopl e t hi nk. The day of t he boy banker
was over . The banki ng busi ness appear ed t o be on t he r agged edge
of suddenl y r el apsi ng i nt o conser vat i sm. I nt i mat e f r i ends wer e
now asked t o pay of f l oans, f or al l t he wor l d as t hough t hey had
never pl ayed gol f wi t h t he pr esi dent .


Ther e was no need t o t hr eat en on t he l ender ' s par t or t o
pl ead f or mor e t i me on t he bor r ower ' s. The si t uat i on was hi ghl y
uncomf or t abl e f or bot h. The bank, f or exampl e, wi t h whi ch my
f r i end J i mBar nes di d busi ness, was st i l l ki ndl y
di sposed. But i t was a case of " For heaven' s sake t ake up t hat
l oan or we' l l al l be i n a di ckens of a mess! "
The char act er of t he mess and i t s expl osi ve possi bi l i t i es
wer e enough t o make J i m Bar nes come t o me t o ask me t o sel l t he
one hundr ed t housand shar es f or enough t o pay of f t he bank' s
t hr ee- mi l l i on- f i ve- hundr ed- t housand- dol l ar l oan. J i m di d not now
expect t o make a pr of i t on t hat st ock. I f t he syndi cat e onl y
made a smal l l oss on i t t hey woul d be mor e t han gr at ef ul .
I t seemed a hopel ess t ask. The gener al mar ket was nei t her
act i ve nor st r ong, t hough at t i mes t her e wer e r al l i es, when
ever ybody per ked up and t r i ed t o bel i eve t he bul l swi ng was
about t o r esume.
The answer I gave Bar nes was t hat I ' d l ook i nt o t he mat t er
and l et hi m know under what condi t i ons I ' d under t ake t he wor k.
Wel l , I di d l ook i nt o i t . I di dn' t anal yse t he company' s l ast
annual r epor t . My st udi es wer e conf i ned t o t he st ock mar ket
phases of t he pr obl em. I was not goi ng t o t out t he st ock f or a
r i se on i t s ear ni ngs or i t s pr ospect s, but t o di spose of t hat
bl ock i n t he open mar ket . Al l I consi der ed was what shoul d,
coul d or mi ght hel p or hi nder me i n t hat t ask.
I di scover ed f or one t hi ng t hat t her e was t oo much st ock
hel d by t oo f ew peopl e - - t hat i s, t oo much f or saf et y and f ar
t oo much f or comf or t . Cl i f t on P. Kane & Co. , banker s and
br oker s, member s of t he New Yor k St ock Exchange, wer e car r yi ng
sevent y t housand shar es. They wer e i nt i mat e f r i ends of Bar nes
and had been i nf l uent i al i n ef f ect i ng t he consol i dat i on, as t hey
had made a speci al t y of st ove st ocks f or year s. Thei r
cust omer s had been l et i nt o t he good t hi ng. Ex- Senat or Samuel
Gor don, who was t he speci al par t ner i n hi s nephews' f i r m, Gor don
Br os. , was t he owner of a second bl ock of sevent y t housand
shar es; and t he f amous J oshua Wol f f had si xt y t housand shar es.
Thi s made a t ot al of t wo hundr ed t housand shar es of Consol i dat ed
St ove hel d by t hi s handf ul of vet er an Wal l St r eet pr of essi onal s.
They di d not need any ki nd per son t o t el l t hem when t o sel l
t hei r st ock. I f I di d anyt hi ng i n t he mani pul at i ng l i ne
cal cul at ed t o br i ng i n publ i c buyi ng t hat i s t o say, i f I made
t he st ock st r ong and act i ve I coul d see Kane and Gor don and
Wol f f unl oadi ng, and not i n homeopat Q doses ei t her . The vi si on
of t hei r t wo hundr ed t housand shar es Ni agar ai ng i nt o t he mar ket
was not exact l y ent r anci ng. Don' t f or get t hat t he cr eam was of f
t he bul l movement and t hat no over whel mi ng demand was goi ng t o


be manuf act ur ed by my oper at i ons, however ski l f ul l y conduct ed
t hey mi ght be. J i m Bar nes had no i l l usi ons about t he j ob he was
modest l y si dest eppi ng i n my f avour . He had gi ven me a
wat er l ogged st ock t o sel l on a bul l mar ket t hat was about t o
br eat he i t s l ast . Of cour se t her e was no t al k i n t he newspaper s
about t he endi ng of t he bul l mar ket , but I knew i t , and J i m
Bar nes knew i t , and you bet t he bank knew i t .
St i l l , I had gi ven J i mmy wor d, so I sent f or Kane, Gor don
and Wol f f . Thei r t wo hundr ed t housand shar es was t he swor d of
Damocl es. I t hought I ' d l i ke t o subst i t ut e a st eel chai n f or t he
hai r . The easi est way, i t seemed t o me, was by some sor t of
r eci pr oci t y agr eement . I f t hey hel ped me passi vel y by hol di ng
of f whi l e I sol d t he bank' s one hundr ed t housand shar es, I
woul d hel p t hem act i vel y by t r yi ng t o make a mar ket f or al l of
us t o unl oad on. As t hi ngs wer e, t hey coul dn' t sel l one- t ent h of
t hei r hol di ngs wi t hout havi ng Consol i dat ed St ove br eak wi de
open, and t hey knew i t so wel l t hat t hey had never dr eamed of
t r yi ng. Al l I asked of t hem was j udgment i n t i mi ng t he sel l i ng
and an i nt el l i gent unsel f i shness i n or der not t o be
uni nt el l i gent l y sel f i sh. I t never pays t o be a dog i n t he manger
i n Wal l St r eet or anywher e el se. I desi r ed t o convi nce t hemt hat
pr emat ur e or i l l - consi der ed unl oadi ng woul d pr event compl et e
unl oadi ng. Ti me ur ged.
I hoped my pr oposi t i on woul d appeal t o t hem because t hey
wer e exper i encd Wal l St r eet men and had no i l l usi ons about t he
act ual demand f or Consol i dat ed St ove. Cl i f t on P. Kane was t he
head of a pr osper ous commi ssi on house wi t h br anches i n el even
ci t i es and cust omer s by t he hundr eds. Hi s f i r m had act ed as
manager s f or mor e t han one pool i n t he past .
Senat or Gor don, who hel d sevent y t housand shar es, was an
exceedi ngl y weal t hy man. Hi s name was as f ami l i ar t o t he v
r eader s of t he met r opol i t an pr ess as t hough he had been
sued f or br each of pr omi se by a si xt een- year - ol d mani cur i st
possassi ng a f i ve- t housand- dol l ar mi nk coat and one hundr ed and
t hi r t y- t wo l et t er s f r om t he def endant . He had st ar t ed hi s
nephews i n busi ness as br oker s and he was a speci al par t ner i n
t hei r f i r m. He had been i n dozens of pool s. He had i n her i t ed a
l ar ge i nt er est i n t he Mi dl and St ove Company and he got one
hundr ed t housand shar es of Consol i dat ed St ove f or i t . He had
been car r yi ng enough t o di sr egar d J i m Bar nes' wi l d bul l t i ps and
had cashed i n on t hi r t y t housand shar es bef or e t he mar ket
pet er ed out on hi m. He t ol d a f r i end l at er t hat he woul d have
sol d mor e onl y t he ot her bi g hol der s, who wer e ol d and i nt i mat e
f r i ends, pl eaded wi t h hi m not t o sel l any mor e, and out of


r egar d f or t hem he st opped. Besi des whi ch, as I sai d, he had no
mar ket t o unl oad on.
The t hi r d man was J oshua Wol f f . He was pr obabl y t he best
known of al l t he t r ader s. For t went y year s ever ybody had known
hi mas one of t he pl unger s on t he f l oor . I n bi ddi ng up st ocks or
of f er i ng t hemdown he had f ew equal s, f or t en or t went y t housand
shar es meant no mor e t o hi m t han t wo or t hr ee hundr ed. Bef or e I
came t o New Yor k I had hear d of hi m as a pl unger . He was t hen
t r ai l i ng wi t h a spor t i ng cot er i e t hat pl ayed a no l i mi t game,
whet her on t he r ace t r ack or i n t he st ock mar ket .
They used t o accuse hi mof bei ng not hi ng but a gambl er , but
he had r eal abi l i t y and a st r ongl y devel oped apt i t ude f or t he
specul at i ve game. At t he same t i me hi s r eput ed i ndi f f er ence t o
hi ghbr ow pur sui t s made hi m t he her o of number l ess anecdot es. One
of t he most wi del y ci r cul at ed of t he yar ns was t hat J oshua was a
guest at what he cal l ed a swel l di nner and by some over si ght of
t he host ess sever al of t he ot her guest s began t o di scuss
l i t er at ur e bef or e t hey coul d be st opped.
A gi r l who sat next t o J osh and had not hear d hi m use hi s
mout h except f or mast i cat i ng pur poses, t ur ned t o hi mand l ooki ng
anxi ous t o hear t he gr eat f i nanci er ' s opi ni on asked hi m, " Oh,
Mr . Wol f f , what do you t hi nk of Bal zac?"
J osh pol i t el y ceased t o mast i cat e, swal l owed and answer ed,
" I never t r ade i n t hemCur b st ocks! "
Such wer e t he t hr ee l ar gest i ndi vi dual hol der s of
Consol i dat ed St ove. When t hey came over t o see me I t ol d t hem
t hat i f t hey f or med a syndi cat e t o put up some cash and gave me
a cal l on t hei r st ock at a l i t t l e above t he mar ket I woul d do
what I coul d t o make a mar ket . They pr ompt l y asked me how much
money woul d be r equi r ed.
I answer ed, " You' ve had t hat st ock a l ong t i me and you can' t do
a t hi ng wi t h i t . Bet ween t he t hr ee of you you' ve got t wo hundr ed
t housand shar es, and you know ver y wel l t hat you haven' t t he
sl i ght est chance of get t i ng r i d of i t unl ess you make a mar ket
f or i t . I t ' s got t o be some mar ket t o absor b what you' ve got t o
gi ve i t , and i t wi l l be wi se t o have enough cash t o pay f or
what ever st ock i t may be necessar y t o buy at f i r st . I t ' s no use
t o begi n and t hen have t o st op because t her e i sn' t enough money.
I suggest t hat you f or m a syndi cat e and r ai se si x mi l l i ons i n
cash. Then gi ve t he syndi cat e a cal l on your t wo hundr ed
t housand shar es at 40 and put al l your st ock i n escr ow. I f
ever yt hi ng goes wel l you chaps wi l l get r i d of your dead pet and
t he syndi cat e wi l l make some money. "
As I t ol d you bef or e, t her e had been al l sor t s of r umour s
about my st ock- mar ket wi nni ngs. I suppose t hat hel ped, f or


not hi ng succeeds l i ke success. At al l event s, I di dn' t have t o
do much expl ai ni ng t o t hese chaps. They knew exact l y how f ar
t hey' d get i f t hey t r i ed t o pl ay a l one hand. They t hought mi ne
was a good pl an. When t hey went away t hey sai d t hey woul d f or m
t he syndi cat e at once.
They di dn' t have much t r oubl e i n i nduci ng a l ot of t hei r
f r i ends t o j oi n t hem. I suppose t hey spoke wi t h mor e assur ance
t han I had of t he syndi cat e' s pr of i t s. Fr om al l I hear d t hey
r eal l y bel i eved i t , so t hei r s wer e no consci encel ess t i ps. At
al l event s t he syndi cat e was f or med i n a coupl e of days. Kane,
Gor don and Wol f f gave cal l s on t he t wo hundr ed t housand shar es
at 4o and I saw t o i t t hat t he st ock i t sel f was put i n escr ow,
so t hat none of i t woul d come out on t he mar ket i f I shoul d
put up t he pr i ce. I had t o pr ot ect mysel f . Mor e t han one
pr omi si ng deal has f ai l ed t o pan out as expect ed because t he
member s of t he pool or cl i que f ai l ed t o keep f ai t h wi t h one
anot her . Dog has no f ool i sh pr ej udi ces agai nst eat i ng dog i n
Wal l St r eet . At t he t i me t he second Amer i can St eel and Wi r e
Company was br ought out t he i nsi der s accused one anot her of
br each of f ai t h and t r yi ng t o unl oad. Ther e had been a
gent l emen' s agr eement bet ween J ohn W. Gat es and hi s pal s and t he
Sel i gmans and t hei r banki ng associ at es. Wel l , I hear d somebody
i n a br oker ' s of f i ce r eci t i ng t hi s quat r ai n, whi ch was sai d t o
have been composed by J ohn W. Gat es:

The t ar ant ul a j umped on t he cent i pede' s back
And chor t l ed wi t h ghoul i sh gl ee:
" I ' l l poi son t hi s mur der ous son o f a gun.
I f I don' t he' l l poi son me! "
Mi nd you, I do not mean f or one moment t o i mpl y t hat any of
my f r i ends i n Wal l St r eet woul d even dr eam of doubl ecr ossi ng me
i n a st ock deal . But on gener al pr i nci pl es i t i s j ust as wel l t o
pr ovi de f or any and al l cont i ngenci es. I t ' s pl ai n sense,
Af t er Wol f f and Kane and Gor don t ol d me t hat t hey had
f or med t hei r syndi cat e t o put up si x mi l l i ons i n cash t her e was
not hi ng f or me t o do but wai t f or t he money t o come i n. I had
ur ged t he vi t al need of hast e. Never t hel ess t he money came i n
dr i bl et s. I t hi nk i t t ook f our or f i ve i nst al l ment s. I don' t
know what t he r eason was, but I r emember t hat I had t o send out
an S O S cal l t o Wol f f and Kane and Gor don.
That af t er noon I got some bi g checks t hat br ought t he cash
i n my possessi on t o about f our mi l l i on dol l ar s and t he pr omi se
of t he r est i n a day or t wo. I t began at l ast t o l ook as t hough
t he syndi cat e mi ght do somet hi ng bef or e t he bul l mar ket passed
away. At best i t woul d be no ci nch, and t he sooner I began wor k


t he bet t er . The publ i c had not been par t i cul ar l y keen about new
mar ket movement s i n i nact i ve st ocks. But a man coul d do a gr eat
deal t o ar ouse i nt er est i n any st ock wi t h f our mi l l i ons i n cash.
I t was enough t o absor b al l t he pr obabl e of f er i ngs. I f t i me
ur ged, as I had sai d, t her e was no sense i n wai t i ng f or t he
ot her t wo mi l l i ons. The sooner t he st ock got up t o 50 t he bet t er
f or t he syndi cat e. That was obvi ous.
The next mor ni ng at t he openi ng I was sur pr i sed t o see t hat
t her e wer e unusual l y heavy deal i ngs i n Consol i dat ed St ove. As I
t ol d you bef or e, t he st ock had been wat er l ogged f or mont hs. The
pr i ce had been pegged at 37, J i m Bar nes t aki ng good car e not t o
l et i t go any l ower on account of t he bi g bank l oan at 35. But
as f or goi ng any hi gher , he' d as soon expect t o see t he Rock of
Gi br al t ar shi mmyi ng acr oss t he St r ai t as t o see Consol i dat ed
St ove do any cl i mbi ng on t he t ape.
Wel l , si r , t hi s mor ni ng t her e was qui t e a demand f or t he
st ock, and t he pr i ce went up t o 39. I n t he f i r st hour of t he
t r adi ng t he t r ansact i ons wer e heavi er t han f or t he whol e pr e-
vi ous hal f year . I t was t he sensat i on of t he day and af f ect ed
bul l i shl y t he ent i r e mar ket . I hear d af t er war ds t hat not hi ng
el se was t al ked about i n t he cust omer s' r ooms of t he commi ssi on
houses.
I di dn' t know what i t meant , but i t di dn' t hur t my f eel i ngs
any t o see Consol i dat ed St ove per k up. As a r ul e I do not have
t o ask about any unusual movement i n any st ock because my
f r i ends on t he f l oor - br oker s who do busi ness f or me, as wel l as
per sonal f r i ends among t he r oom t r ader s - - keep me post ed. They
assume I ' d l i ke t o know and t hey t el ephone me any news or gossi p
t hey pi ck up. On t hi s day al l I hear d was t hat t her e was
unmi st akabl e i nsi de buyi ng i n Consol i dat ed St ove. Ther e wasn' t
any washi ng. I t was al l genui ne. The pur chaser s t ook al l t he
of f er i ngs f r om 37 t o 39 and when i mpor t uned f or r easons or
begged f or a t i p, f l at l y r ef used t o gi ve any. Thi s made t he wi l y
and wat chf ul t r ader s concl ude t hat t her e was somet hi ng doi ng;
somet hi ng bi g. When a st ock goes up on buyi ng by i nsi der s who
r ef use t o encour age t he wor l d at l ar ge t o f ol l ow sui t t he t i cker
hounds begi n t o wonder al oud when t he of f i ci al not i ce wi l l be
gi ven out .
I di dn' t do anyt hi ng mysel f . I wat ched and wonder ed and
kept t r ack of t he t r ansact i ons. But on t he next day t he buyi ng
was not onl y gr eat er i n vol ume but mor e aggr essi ve i n char act er .
The sel l i ng or der s t hat had been on t he speci al i st s' books f or
mont hs at above t he pegged pr i ce of 37 wer e absor bed wi t hout any
t r oubl e, and not enough new sel l i ng or der s came i n t o check t he


r i se. Nat ur al l y, up went t he pr i ce. I t cr ossed qo. Pr esent l y i t
t ouched 42.
The moment i t t ouched t hat f i gur e I f el t t hat I was
j ust i f i ed i n st ar t i ng t o sel l t he st ock t he bank hel d as
col l at er al . Of cour se I f i gur ed t hat t he pr i ce woul d go down on
my sel l i ng, but i f my aver age on t he ent i r e l i ne was 37 I ' d have
no f aul t t o f i nd. I knew what t he st ock was wor t h and I had
gat her ed some i dea of t he vendi bi l i t y f r om t he mont hs of
i nact i vi t y. Wel l , si r , I l et t hem have st ock car ef ul l y unt i l I
had got r i d of t hi r t y t housand shar es. And t he advance was not
checked!
That af t er noon I was t ol d t he r eason f or t hat oppor t une but
myst i f yi ng r i se. I t seems t hat t he f l oor t r ader s had been t i pped
of f af t er t he cl ose t he ni ght bef or e and al so t he next mor ni ng
bef or e t he openi ng, t hat I was bul l i sh as bl azes on Consol i dat ed
St ove and was goi ng t o r ush t he pr i ce r i ght up f i f t een or t went y
poi nt s wi t hout a r eact i on, as was my cust omt hat i s, my cust om
accor di ng t o peopl e who never kept my books. The t i pst er i n
chi ef was no l ess a per sonage t han J oshua Wol f f . I t was hi s own
i nsi de buyi ng t hat st ar t ed t he r i se of t he day bef or e. Hi s
cr oni es among t he f l oor t r ader s wer e onl y t oo wi l l i ng t o f ol l ow
hi s t i p, f or he knew t oo much t o gi ve wr ong st eer s t o hi s
f el l ows.
As a mat t er of f act , t her e was not so much st ock pr essi ng
on t he mar ket as had been f ear ed. Consi der t hat I had t i ed up
t hr ee hundr ed t housand shar es and you wi l l r eal i se t hat t he ol d
f ear s had been wel l f ounded. I t now pr oved l ess of a j ob t han I
had ant i ci pat ed t o put up t he st ock. Af t er al l , Gover nor Fl ower
was r i ght . Whenever he was accused of mani pul at i ng hi s f i r m' s
speci al t i es, l i ke Chi cago Gas, Feder al St eel or B. R. T. , he
used t o say: " The onl y way I know of maki ng a st ock go up i s t o
buy i t . " That al so was t he f l oor t r ader s' onl y way, and t he
pr i ce r esponded.
On t he next day, bef or e br eakf ast , I r ead i n t he mor ni ng
paper s what was r ead by t housands and what undoubt edl y was sent
over t he wi r es t o hundr eds of br anches and out - of - t own of f i ces,
and t hat was t hat Lar r y Li ver mor e was about t o begi n act i ve bul l
oper at i ons i n Consol i dat ed St ove. The addi t i onal det ai l s
di f f er ed. One ver si on had i t t hat I had f or med an i nsi der s' pool
and was goi ng t o puni sh t he over ext ended shor t i nt er est . Anot her
hi nt ed at di vi dend announcement s i n t he near f ut ur e. Anot her
r emi nded t he wor l d t hat what I usual l y di d t o a st ock I was
bul l i sh on was somet hi ng t o r emember . St i l l anot her accused t he
company of conceal i ng i t s asset s i n or der t o per mi t accumul at i on


by i nsi der s. And al l of t hem agr eed t hat t he r i se hadn' t f ai r l y
st ar t ed.
By t he t i me I r eached my of f i ce and r ead my mai l bef or e t he
mar ket opened I was made awar e t hat t he St r eet was f l ooded wi t h
r ed- hot t i ps t o buy Consol i dat ed St ove at once. My t el ephone
bel l kept r i ngi ng and t he cl er k who answer ed t he cal l s hear d t he
same quest i on asked i n one f or m or anot her a hundr ed t i mes t hat
mor ni ng: Was i t t r ue t hat Consol i dat ed St ove was goi ng up? I
must say t hat J oshua Wol f f and Kane and Gor don and possi bl y J i m
Bar nes handl ed t hat l i t t l e t i ppi ng j ob mi ght y wel l .
I had no i dea t hat I had such a f ol l owi ng. Why, t hat mor n-
i ng t he buyi ng or der s came i n f r omal l over t he count r yor der s t o
buy t housands of shar es of a st ock t hat nobody want ed at any
pr i ce t hr ee days bef or e. And don' t f or get t hat , as a mat t er of
f act , al l t hat t he publ i c had t o go by was my newspaper
r eput at i on as a successf ul pl unger ; somet hi ng f or whi ch I had t o
t hank an i magi nat i ve r epor t er or t wo.
Wel l , si r , on t hat , t he t hi r d day of t he r i se, I sol d
Consol i dat ed St ove; and on t he f our t h day and t he f i f t h; and t he
f i r st t hi ng I knew I had sol d f or J i m Bar nes t he one hundr ed
t housand shar es of st ock whi ch t he Mar shal l Nat i onal Bank hel d
as col l at er al on t he t hr ee- mi l l i on- f i ve- hundr ed- t housand- dol l ar
l oan t hat needed payi ng of f . I f t he most successf ul mani pul at i on
consi st s of t hat i n whi ch t he desi r ed end i s gai ned at t he l east
possi bl e cost t o t he mani pul at or , t he consol i dat ed St ove deal i s
by al l means t he most successf ul of my Wal l St r eet car eer . Why,
at no t i me di d I have t o t ake any st ock. I di dn' t have t o buy
f i r st i n or der t o sel l t he mor e easi l y l at er on. I di d not put
up t he pr i ce t o t he hi ghest possi bl e poi nt and t hen begi n my
r eal sel l i ng. I di dn' t even do my pr i nci pal sel l i ng on t he way
down, but on t he way up. I t was l i ke a dr eamof Par adi se t o f i nd
an adequat e buyi ng power cr eat ed f or you wi t hout your st i r r i ng a
f i nger t o br i ng i t about , par t i cul ar l y when you wer e i n a hur r y.
I once hear d a f r i end of Gover nor Fl ower ' s say t hat i n one of
t he gr eat bul l - l eader ' s oper at i ons f or t he account of a pool i n
B. R. T. t he pool sol d f i f t y t housand shar es of t he st ock at a
pr of i t , but Fl ower & Co. got commi ssi ons on mor e t han t wo
hundr ed and f i f t y t housand shar es and W. P. Hami l t on says t hat
t o di st r i but e t wo hundr ed and t went y t housand shar es of
Amal gamat ed Copper , J ames R. Keene must have t r aded i n at l east
seven hundr ed t housand shar es of t he st ock dur i ng t he necessar y
mani pul at i on. Some commi ssi on bi l l ! Thi nk of t hat and t hen
consi der t hat t he onl y commi ssi ons t hat I had t o pay wer e t he
commi ssi ons on t he one hundr ed t housand shar es I act ual l y sol d
f or J i mBar nes. I cal l t hat some savi ng.


Havi ng sol d what I had engaged t o sel l f or my f r i end J i m,
and al l t he money t he syndi cat e had agr eed t o r ai se not havi ng
been sent i n, and f eel i ng no desi r e t o buy back any of t he st ock
I had sol d, I r at her t hi nk I went away somewher e f or a shor t
vacat i on. I do not r emember exact l y. But I do r emember ver y wel l
t hat I l et t he st ock al one and t hat i t was not l ong bef or e t he
pr i ce began t o sag. One day, when t he ent i r e mar ket was weak,
some di sappoi nt ed bul l want ed t o get r i d of hi s Consol i dat ed
St ove i n a hur r y, and on hi s of f er i ngs t he st ock br oke bel ow
t he cal l pr i ce, whi ch was qo. Nobody seemed t o want any of i t .
As I t ol d you bef or e, I wasn' t bul l i sh on t he gener al si t uat i on
and t hat made me mor e gr at ef ul t han ever f or t he mi r acl e t hat
had enabl ed me t o di spose of t he one hundr ed t housand shar es
wi t hout havi ng t o put t he pr i ce up t went y or t hi r t y poi nt s i n a
week, as t he ki ndl y t i pst er s had pr ophesi ed.
Fi ndi ng no suppor t , t he pr i ce devel oped a habi t of
decl i ni ng r egul ar l y unt i l one day i t br oke r at her badl y and
t ouched 32. That was t he l owest t hat had ever been r ecor ded f or
i t , f or as you wi l l r emember , J i m Bar nes and t he or i gi nal
syndi cat e had pegged i t at 37 i n or der not t o have t hei r one
hundr ed t housand shar es dumped on t he mar ket by t he bank.
I was i n my of f i ce t hat day peacef ul l y st udyi ng t he t ape
when J oshua Wol f f was announced. I sai d I woul d see hi m. He
r ushed i n. He i s not a ver y l ar ge man, but he cer t ai nl y seemed
al l swel l ed up wi t h anger , as I i nst ant l y di scover ed.

He r an t o wher e I st ood by t he t i cker and yel l ed, " Hey? I
What t he devi l ' s t he mat t er ?"
" Have a chai r , Mr . Wol f f , " I sai d pol i t el y and sat down
mysel f t o encour age hi mt o t al k cal ml y. t .
" I don' t want any chai r ! I want t o know what i t means! " he
cr i ed at t he t op of hi s voi ce.
" What does what mean?"
" What i n hel l ar e you doi ng t o i t ?"
" What am I doi ng t o what ?"
" That st ock! That st ock! "
" What st ock?" I asked hi m.
But t hat onl y made hi m see r ed, f or he shout ed,
" Consol i dat ed St ove! What ar e you doi ng t o i t ?"
" Not hi ng! Absol ut el y not hi ng. What ' s wr ong?" I sai d.
He st ar ed at me f ul l y f i ve seconds bef or e he expl oded:
" Look at t he pr i ce! Look at i t ! "
He cer t ai nl y was angr y. So I got up and l ooked at t he t ape.
sai d, " The pr i ce of i t i s now 3 i A. "
Yeh ! Thi r t y- one and a quar t er , and I ' ve got a r af t of i t . "


I know you have si xt y t housand shar es. You have had i t a
l ong t i me, because when you or i gi nal l y bought your Gr ay St ove
But he di dn' t l et me f i ni sh. He sai d, " But I bought a l ot
mor e. Some of i t cost me as hi gh as 40! And I ' ve got i t yet ! "
He was gl ar i ng at me so host i l el y t hat I sai d, " I di dn' t
t el l you t o buy i t . "
" You di dn' t what ?"
" I di dn' t t el l you t o l oad up wi t h i t . "
" I di dn' t say you di d. But you wer e goi ng t o put i t up"
" Why was I ?" I i nt er r upt ed.
He l ooked at me, unabl e t o speak f or anger . When he f ound
hi s voi ce agai n, he sai d, " You wer e goi ng t o put i t up. You had
t he money t o buy i t . "
" Yes. But I di dn' t buy a shar e, " I t ol d hi m.
That was t he l ast st r aw.
" You di dn' t buy a shar e, and you had over f our mi l l i ons i n
cash t o buy wi t h? You di dn' t buy any?"
" Not a shar e! " I r epeat ed.
He was so mad by now t hat he coul dn' t t al k pl ai nl y. Fi nal l y
he managed t o say, " What ki nd of a game do you cal l t hat ?"
He was i nwar dl y accusi ng me of al l sor t s of unspeakabl e
cr i mes. I sur e coul d see a l ong l i st of t hem i n hi s eyes. I t
made me say t o hi m: " What you r eal l y mean t o ask me, Wol f f , i s,
why I di dn' t buy f r om you above 50 t he st ock you bought bel ow
40. I sn' t t hat i t ?"
" No, i t i sn' t . You had a cal l at 40 and f our mi l l i ons i n
cr i b t o put up t he pr i ce wi t h. "
" Yes, but I di dn' t t ouch t he money and t he syndi cat e has
not l ost a cent by my oper at i ons. "
" Look her e, Li ver mor e" he began.
But I di dn' t l et hi msay any mor e.
" You l i st en t o me, Wol f f . You knew t hat t he t wo hundr ed
t housand shar es you and Gor don and Kane hel d wer e t i ed up, and
t hat t her e woul dn' t be an awf ul l ot of f l oat i ng st ock t o come on
t he mar ket i f I put up t he pr i ce, as I ' d have t o do f or t wo
r easons: The f i r st t o make a mar ket f or t he st ock; and t he
second t o make a pr of i t out of t he cal l at q. o. But you wer en' t
sat i sf i ed t o get 4o f or t he si xt y t housand shar es you' d been
l uggi ng f or mont hs or wi t h your shar e of t he syndi cat e pr of i t s,
i f any; so you deci ded t o t ake on a l ot of st ock under 40 t o
unl oad on me when h put t he pr i ce up wi t h t he syndi cat e' s money,
as you wer e sur e I meant t o do. You' d buy bef or e I di d and you' d
unl oad bef or e I di d; i n al l pr obabi l i t y I ' d be t he one t o unl oad
on. I suspect you f i gur ed on my havi ng t o put t he pr i ce up t o.
60. I t was such a ci nch t hat you pr obabl y bought t en t housand


shar es st r i ct l y f or unl oadi ng pur poses, and t o make sur e
somebody hel d t he bag i f I di dn' t , you t i pped of f ever ybody i n
t he Uni t ed St at es, Canada and Mexi co wi t hout t hi nki ng of my
added di f f i cul t i es. Al l your f r i ends knew what I was supposed t o
do. Bet ween t hei r buyi ng and mi ne you wer e goi ng t o be al l
hunky. Wel l , your i nt i mat e f r i ends t o whom you gave t he t i p
passed i t on t o t hei r f r i ends af t er t hey had bought t hei r l i nes,
and t he t hi r d st r at um of t i p- t aker s pl anned t o suppl y t he
f our t h, f i f t h and possi bl y si xt h st r at a of sucker s, so t hat when
I f i nal l y came t o do some sel l i ng I ' d f i nd mysel f ant i ci pat ed by
a f ew t housands of wi se specul at or s. I t was a f r i endl y t hought ,
t hat not i on of your s, Wol f f . You can' t i magi ne how sur pr i sed I
was when Consol i dat ed St ove began t o go up bef or e I even t hought
of buyi ng a si ngl e shar e; or how gr at ef ul , ei t her , when t he
under wr i t i ng syndi cat e sol d one hundr ed t housand shar es ar ound
40 t o t he peopl e who wer e goi ng t o sel l t hose same shar es t o me
at 50 or 60. I sur e was a sucker not t o use t he f our mi l l i ons t o
make money f or t hem, wasn' t I ? The cash was suppl i ed t o buy
st ock wi t h, but onl y i f I t hought i t necessar y t o do so. Wel l , I
di dn' t . "
J oshua had been i n Wal l St r eet l ong enough not t o l et anger
i nt er f er e wi t h busi ness. He cool ed of f as he hear d me, and when
I was t hr ough t al ki ng he sai d i n a f r i endl y t one of voi ce, " Look
her e, Lar r y, ol d chap, what shal l we do?"
" Do what ever you pl ease. "
" Aw, be a spor t . What woul d you do i f you wer e i n our
pl ace?
`I f I wer e i n your pl ace, " I sai d sol emnl y, " do you know
what I ' d do?"
What ?
" I ' d sel l out ! " I t ol d hi m.
He l ooked at me a moment , and wi t hout anot her wor d t ur ned
on hi s heel and wal ked out of my of f i ce. He' s never been i n z
i t si nce.
Not l ong af t er t hat , Senat or Gor don. al so cal l ed. He, t oo,
was qui t e peevi sh and bl amed me f or t hei r t r oubl es. Then Kane
j oi ned t he anvi l chor us. They f or got t hat t hei r st ock had been
unsal abl e i n bul k when t hey f or med t he syndi cat e. Al l t hey coul d
r emember was t hat I di dn' t sel l t hei r hol di ngs when I had t he
syndi cat e' s mi l l i ons and t he st ock was act i ve at 44, and t hat
now i t was 3o and dul l as di shwat er . To t hei r way of t hi nki ng I
shoul d have sol d out at a good f at pr of i t .
Of cour se t hey al so cool ed down i n due t i me. The syndi cat e
wasn' t out a cent and t he mai n pr obl em r emai ned unchanged t o
sel l t hei r st ock. A day or t wo l at er t hey came back and asked me


t o hel p t hem out . Gor don was par t i cul ar l y i nsi st ent , and i n t he
end I made t hemput i n t hei r pool ed st ock at 25- 1/ 2.
My f ee f or my ser vi ces was t o be one- hal f of what ever I got
above t hat f i gur e. The l ast sal e had been at about 30.
Ther e I was wi t h t hei r st ock t o l i qui dat e. Gi ven gener al
mar ket condi t i ons and speci f i cal l y t he behavi our of Consol i dat ed
St ove, t her e was onl y one way t o do i t , and t hat was, of cour se,
t o sel l on t he way down and wi t hout f i r st t r yi ng t o put up t he
pr i ce, and I cer t ai nl y woul d have got st ock by t he r eam on t he
way up. But on t he way down I coul d r each t hose buyer s who
al ways ar gue t hat a st ock i s cheap when i t sel l s f i f t een or
t went y poi nt s bel ow t he t op of t he movement , par t i cul ar l y when
t hat t op i s a mat t er of r ecent hi st or y. A r al l y i s due, i n
t hei r opi ni on. Af t er seei ng Consol i dat ed St ove sel l up t o cl ose
t o 44 i t sur e l ooked l i ke a good t hi ng bel ow 30.
I t wor ked out as al ways. Bar gai n hunt er s bought i t i n
suf f i ci ent vol ume t o enabl e me t o l i qui dat e t he pool ' s hol di ngs.
But do you t hi nk t hat Gor don or Wol f f or Kane f el t any
gr at i t ude? Not a bi t of i t . They ar e st i l l sor e at me, or so
t hei r f r i ends t el l me. They of t en t el l peopl e how I di d t hem.
They cannot f or gi ve me f or not put t i ng up t he pr i ce on mysel f ,
as t hey expect ed.
As a mat t er of f act I never woul d have been abl e t o sel l
t he bank' s hundr ed t housand shar es i f Wol f f and t he r est had
not passed ar ound t hose r ed- hot bul l t i ps of t hei r s. I f I had
wor ked as I usual l y do - - t hat i s, i n a l ogi cal nat ur al way I
woul d have had t o t ake what ever pr i ce I coul d get . I t ol d you
we r an i nt o a decl i ni ng mar ket . The onl y way t o sel l on such a
mar ket i s t o sel l not necessar i l y r eckl essl y but r eal l y
r egar dl ess of pr i ce. No ot her way was possi bl e, but I suppose
t hey do not bel i eve t hi s. They ar e st i l l angr y. I am not .
Get t i ng angr y doesn' t get a man anywher e. Mor e t han once i t has
been bor ne i n on me t hat a specul at or who l oses hi s t emper i s a
goner . I n t hi s case t her e was no af t er mat h t o t he gr ouches.
But I ' l l t el l you somet hi ng cur i ous. One day Mr s. Li ver mor e
went t o a dr essmaker who had been war ml y r ecommended t o her . The
woman was compet ent and obl i gi ng and had a ver y pl easi ng
per sonal i t y. At t he t hi r d or f our t h vi si t , when t he dr essmaker
f el t l ess l i ke a st r anger , she sai d t o Mr s. Li ver mor e: " I hope
Mr . Li ver mor e put s up Consol i dat ed St ove soon. We have some t hat
we bought because we wer e t ol d he was goi ng t o put i t up, and
we' d al ways hear d t hat he was ver y successf ul i n al l hi s deal s. "
I t el l you i t i sn' t pl easant t o t hi nk t hat i nnocent peopl e
may have l ost money f ol l owi ng a t i p of t hat sor t . Per haps you
under st and why I never gi ve any mysel f . That dr essmaker made me


f eel t hat i n t he mat t er of gr i evances I had a r eal one agai nst
Wol f .


CHAPTER XXI I I

SPECULATI ON i n st ocks wi l l never di sappear . I t i sn' t
desi r abl e t hat i t shoul d. I t cannot be checked by war ni ngs as t o
i t s danger s. You cannot pr event peopl e f r om guessi ng wr ong no
mat t er how abl e or how exper i enced t hey may be. Car ef ul l y l ai d
pl ans wi l l mi scar r y because t he unexpect ed and even t he
unexpect abl e wi l l happen. Di sast er may come f r oma convul si on of
nat ur e or f r om t he weat her , f r om your own gr eed or f r om some
man' s vani t y; f r om f ear or f r om uncont r ol l ed hope. But apar t
f r om what one mi ght cal l hi s nat ur al f oes, a specul at or i n
st ocks has t o cont end wi t h cer t ai n pr act i ces or abuses t hat ar e
i ndef ensi bl e mor al l y as wel l as commer ci al l y.
As I l ook back and consi der what wer e t he common pr act i ces
t went y- f i ve year s ago when I f i r st came t o Wal l St r eet , I have
t o admi t t hat t her e have been many changes f or t he bet t er . The
ol d- f ashi oned bucket shops ar e gone, t hough bucket eer i ng
" br oker age" houses st i l l pr osper at t he expense of men and women
who per si st i n pl ayi ng t he game of get t i ng r i ch qui ck. The St ock
Exchange i s doi ng excel l ent wor k not onl y i n get t i ng af t er t hese
out - and- out swi ndl er s but i n i nsi st i ng upon st r i ct adher ence t o
i t s r ul es by i t s own member s. Many whol esome r egul at i ons and
r est r i ct i ons ar e now st r i ct l y enf or ced but t her e i s st i l l r oom
f or i mpr ovement . The i ngr ai ned conser vat i sm of Wal l St r eet
r at her t han et hi cal cal l ousness i s t o bl ame f or t he per si st ence
of cer t ai n abuses.
Di f f i cul t as pr of i t abl e st ock specul at i on al ways has been
i t i s becomi ng even mor e di f f i cul t ever y day. I t was not so l ong
ago when a r eal t r ader coul d have a good wor ki ng knowl edge of
pr act i cal l y ever y st ock on t he l i st . I n i 9oi , when J . P. Mor gan
br ought out t he Uni t ed St at es St eel Cor por at i on, whi ch was
mer el y a consol i dat i on of l esser consol i dat i ons most of whi ch
wer e l ess t han t wo year s ol d, t he St ock Exchange had 275 st ocks
on i t s l i st and about zoo i n i t s " unl i st ed depar t ment " ; and t hi s
i ncl uded a l ot t hat a chap di dn' t have t o know anyt hi ng about
because t hey wer e smal l i ssues, or i nact i ve by r eason of bei ng
mi nor i t y or guar ant eed st ocks and t her ef or e l acki ng i n
specul at i ve at t r act i ons. I n f act , an over whel mi ng maj or i t y wer e
st ocks i n whi ch t her e had not been a sal e i n year s. Today t her e
ar e about coo st ocks on t he r egul ar l i st and i n our r ecent
act i ve mar ket s about 600 separ at e i ssues wer e t r aded i n.
Mor eover , t he ol d gr oups or cl asses of st ocks wer e easi er t o
keep t r ack of . They not onl y wer e f ewer but t he capi t al i zat i on
was smal l er and t he news a t r ader had t o be on t he l ookout f or
di d not cover so wi de a f i el d. But t oday, a man i s t r adi ng i n


ever yt hi ng; al most ever y i ndust r y i n t he wor l d i s r epr esent ed.
I t r equi r es mor e t i me and mor e wor k t o keep post ed and t o t hat
ext ent st ock specul at i on has become much mor e di f f i cul t f or
t hose who oper at e i nt el l i gent l y.
Ther e ar e many t housands of peopl e who buy and sel l st ocks
specul at i vel y but t he number of t hose who specul at e pr of i t abl y
i s smal l . As t he publ i c al ways i s " i n" t he mar ket t o some ex-
t ent , i t f ol l ows t hat t her e ar e l osses by t he publ i c al l t he
t i me.
The specul at or ' s deadl y enemi es ar e: I gnor ance, gr eed, f ear
and hope. Al l t he st at ut e books i n t he wor l d and al l t he r ul es
of al l t he Exchanges on ear t h cannot el i mi nat e t hese f r om t he
human ani mal . Acci dent s whi ch knock car ef ul l y concei ved pl ans
sky hi gh al so ar e beyond r egul at i on by bodi es of col d bl ooded
economi st s or war m- hear t ed phi l ant hr opi st s. Ther e r emai ns
anot her sour ce of l oss and t hat i s, del i ber at e mi si nf or mat i on as
di st i ngui shed f r om st r ai ght t i ps. And because i t i s apt t o come
t o a st ock t r ader var i ousl y di sgui sed and camouf l aged, i t i s t he
mor e i nsi di ous and danger ous.
The aver age out si der , of cour se, t r ades ei t her on t i ps or
on r umour s, spoken or pr i nt ed, di r ect or i mpl i ed. Agai nst
or di nar y t i ps you cannot guar d. For i nst ance, a l i f el ong f r i end
si ncer el y desi r es t o make you r i ch by t el l i ng you what he has
done, t hat i s, t o buy or sel l some st ock. Hi s i nt ent i s good a
j ob. I f t he t i p goes wr ong what can you do? Al so agai nst t he
pr of essi onal or cr ooked t i pst er t he publ i c i s pr ot ect ed t o about
t he same ext ent t hat he i s agai nst gol d- br i cks or wood- al cohol .
But agai nst t he t ypi cal Wal l St r eet r umour s, t he specul at i ng
publ i c has nei t her pr ot ect i on nor r edr ess. Whol esal e deal er s i n
secur i t i es, mani pul at or s, pool s and i ndi vi dual s r esor t t o
var i ous devi ces t o ai d t hem i n di sposi ng of t hei r sur pl us hol d-
i ngs at t he best possi bl e pr i ces. The ci r cul at i on of bul l i sh
i t ems by t he newspaper s and t he t i cker s i s t he most per ni ci ous
of al l .
Get t he sl i ps of t he f i nanci al news- agenci es any day and i t
wi l l sur pr i se you t o see how many st at ement s of an i mpl i ed
semi - of f i ci al nat ur e t hey pr i nt . The aut hor i t y i s some " l eadi ng
i nsi der " or " a pr omi nent di r ect or " or " a hi gh of f i ci al " or
someone " i n aut hor i t y" who pr esumabl y knows what he i s t al ki ng
about . Her e ar e t oday' s sl i ps. I pi ck an i t emat r andom. Li st en
t o t hi s: " A l eadi ng banker says i t i s t oo ear l y yet t o expect a
decl i ni ng mar ket . "
Di d a l eadi ng banker r eal l y say t hat and i f he sai d i t why
di d he say i t ? Why does he not al l ow hi s name t o be pr i nt ed? I s
he af r ai d t hat peopl e wi l l bel i eve hi mi f he does?


Her e i s anot her one about a company t he st ock of whi ch has
been act i ve t hi s week. Thi s t i me t he man who makes t he st at ement
i s a " pr omi nent di r ect or . " Now whi ch - - i f any - - of t he
company' s dozen di r ect or s i s doi ng t he t al ki ng? I t i s pl ai n t hat
by r emai ni ng anonymous nobody can be bl amed f or any damage t hat
may be done by t he st at ement .
Qui t e apar t f r omt he i nt el l i gent st udy of specul at i on ever y
wher e t he t r ader i n st ocks must consi der cer t ai n f act s i n
connect i on wi t h t he game i n Wal l St r eet . I n addi t i on t o t r yi ng
t o det er mi ne how t o make money one must al so t r y t o keep f r om
l osi ng money. I t i s al most as i mpor t ant t o know what not t o do
as t o know what shoul d be done. I t i s t her ef or e wel l t o r emember
t hat mani pul at i on of some sor t ent er s i nt o pr act i cal l y al l
advances i n i ndi vi dual st ocks and t hat such advances ar e
engi neer ed by i nsi der s wi t h one obj ect i n vi ew and one onl y and
t hat i s t o sel l at t he best pr of i t possi bl e. However , t he
aver age br oker ' s cust omer bel i eves hi msel f t o be a busi ness man
f r om Mi ssour i i f he i nsi st s upon bei ng t ol d why a cer t ai n st ock
goes up. Nat ur al l y, t he mani pul at or s " expl ai n" t he advance i n a
way cal cul at ed t o f aci l i t at e di st r i but i on. I am f i r ml y convi nced
t hat t he publ i c' s l osses woul d be gr eat l y r educed i f no
anonymous st at ement s of a bul l i sh nat ur e wer e al l owed t o be
pr i nt ed. I mean st at ement s cal cul at ed t o make t he publ i c buy or
hol d st ocks.
The over whel mi ng maj or i t y of t he bul l i sh ar t i cl es pr i nt ed
on t he aut hor i t y of unnamed di r ect or s or i nsi der s convey
unr el i abl e and mi sl eadi ng i mpr essi ons t o t he publ i c. The publ i c
l oses f i any mi l l i ons of dol l ar s ever y year by accept i ng such.
st at ement s as semi - of f i ci al and t her ef or e t r ust wor t hy.
Say f or exampl e t hat a company has gone t hr ough a per i od of
depr essi on i n i t s par t i cul ar l i ne of busi ness. The st ock i s
i nact i ve. The quot at i on r epr esent s t he gener al and pr esumabl y
accur at e bel i ef of i t s act ual val ue. I f t he st ock wer e t oo cheap
at t hat l evel somebody woul d know i t and buy i t and i t woul d
advance. I f t oo dear somebody woul d know enough t o sel l i t and
t he pr i ce woul d decl i ne. As not hi ng happens one way or anot her
nobody t al ks about i t or does anyt hi ng.
The t ur n comes i n t he l i ne of busi ness t he company i s
engaged i n. Who ar e t he f i r st t o know i t , t he i nsi der s or t he
publ i c? You can bet i t i sn' t t he publ i c. What happens next ? Why,
i f t he i mpr ovement cont i nues t he ear ni ngs wi l l i ncr ease and t he
company wi l l be i n posi t i on t o r esume di vi dends on t he st ock;
or , i f di vi dends wer e not di scont i nued, t o pay a hi gher r at e.
That i s, t he val ue of t he st ock wi l l i ncr ease.


Say t hat t he i mpr ovement keeps up. Does t he management make
publ i c t hat gl ad f act ? Does t he pr esi dent t el l t he st ockhol der s?
Does a phi l ant hr opi c di r ect or come out wi t h a si gned st at ement
f or t he benef i t of t hat par t of t he publ i c t hat r eads t he
f i nanci al page i n t he newspaper s and t he sl i ps of t he news
agenci es? Does some modest i nsi der pur sui ng hi s usual pol i cy of
anonymi t y come out wi t h an unsi gned st at ement t o t he ef f ect t hat
t he company' s f ut ur e i s most pr omi si ng? Not t hi s t i me. Not a
wor d i s sai d by anyone and no st at ement what ever i s pr i nt ed by
newspaper s or t i cker s:
The val ue- maki ng i nf or mat i on i s car ef ul l y kept f r om t he
publ i c whi l e t he now t aci t ur n " pr omi nent i nsi der s" go i nt o t he
mar ket and buy al l t he cheap st ock t hey can l ay t hei r hands on
As t hi s wel l - i nf or med but unost ent at i ous buyi ng keeps on, t he
st ock r i ses. The f i nanci al r epor t er s, knowi ng t hat t he i nsi der s
ought t o know t he r eason f or t he r i se, ask quest i ons. The
unani mousl y anonymous i nsi der s unani mousl y decl ar e t hat t hey
have no news t o gi ve out . They do not know t hat t her e i s any
war r ant f or t he r i se. Somet i mes t hey even st at e t hat t hey ar e
not par t i cul ar l y concer ned wi t h t he vagar i es of t he st ock mar ket
or t he act i ons of st ock specul at or s.
The r i se cont i nues and t her e comes a happy day when t hose
who know have al l t he st ock t hey want or can car r y. The St r eet
at once begi ns t o hear al l ki nds of bul l i sh r umour s. The t i cker s
t el l t he t r ader s " on good aut hor i t y" t hat t he company has
def i ni t el y t ur ned t he cor ner . The same modest di r ect or who di d
not wi sh hi s name used when he sai d he knew no war r ant f or t he
r i se i n t he st ock i s now quot ed, of cour se, not by name as
sayi ng t hat t he st ockhol der s have ever y r eason t o f eel gr eat l y
encour aged over t he out l ook.
Ur ged by t he del uge of bul l i sh news i t ems t he publ i c begi ns
t o buy t he st ock. These pur chases hel p t o put t he pr i ce st i l t
hi gher . I n due cour se t he pr edi ct i ons of t he uni f or ml y unnamed
di r ect or s come t r ue and t he company r esumes di vi dend payment s or
i ncr eases t he r at e, as t he case may be. Wi t h t hat t he bul l i sh
i t ems mul t i pl y. They not onl y ar e mor e numer ous t han ever but
much mor e ent husi ast i c. A " l eadi ng di r ect or , " asked poi nt bl ank
f or a st at ement of condi t i ons, i nf or ms t he wor l d t hat t he
i mpr ovement i s mor e t han keepi ng up. A " pr omi nent i nsi der , "
af t er much coaxi ng, i s f i nal l y i nduced by a news- agency t o
conf ess t hat t he ear ni ngs ar e not hi ng shor t of phenomenal . A
" wel l - known banker , " who i s af f i l i at ed i n a busi ness way wi t h
t he company, i s made t o say t hat t he expansi on i n t he vol ume of
sal es i s si mpl y unpr ecedent ed i n t he hi st or y of t he t r ade. I f


not anot her or der came i n t he company woul d r un ni ght and day
f or heaven knows how many mont hs.
A " member of t he f i nance commi t t ee, " i n a doubl e- l eaded
mani f est o, expr esses hi s ast oni shment at t he publ i c' s
ast oni shment over t he st ock' s r i se. The onl y ast oni shi ng t hi ng
i s t he st ock' s moder at i on i n t he cl i mbi ng l i ne. Anybody who wi l l
anal yse t he f or t hcomi ng annual r epor t can easi l y f i gur e how much
mor e t han t he mar ket - pr i ce t he book- val ue of t he st ock i s. But
i n no i nst ance i s t he name of t he communi cat i ve phi l ant hr opi st
gi ven.
As l ong as t he ear ni ngs cont i nue good and t he i nsi der s do
not di scer n any si gn of a l et up i n t he company' s pr osper i t y
t hey si t on t he st ock t hey bought at t he l ow pr i ces. Ther e i s
not hi ng t o put t he pr i ce down, so why shoul d t hey sel l ? But t he
moment t her e i s a t ur n f or t he wor se i n t he company' s busi ness,
what happens? Do t hey come out wi t h st at ement s or war ni ngs or
t he f ai nt est of hi nt s? Not much. The t r end i s now downwar d. J ust
as t hey bought wi t hout any f l our i sh of t r umpet s when t he
company' s busi ness' t ur ned f or t he bet t er , t hey now si l ent l y
sel l . On t hi s i nsi de sel l i ng t he st ock nat ur al l y decl i nes. Then
t he publ i c begi ns t o get t he f ami l i ar " expl anat i ons. " A " l eadi ng
i nsi der " asser t s t hat ever yt hi ng i s O. K. and t he decl i ne i s
mer el y t he r esul t of sel l i ng by bear s who ar e t r yi ng t o af f ect
t he gener al mar ket . I f on one f i ne day, af t er t he st ock has been
decl i ni ng f or some t i me, t her e shoul d be a shar p br eak, t he
demand f or " r easons" " expl anat i ons" becomes cl amor ous. Unl ess
somebody says somet hi ng t he publ i c wi l l f ear t he wor st . So t he
news- t i cker s now pr i nt somet hi ng l i ke t hi s: " When we asked a
pr omi nent di r ect or of t he company t o expl ai n t he weakness i n t he
st ock, he r epl i ed t hat t he onl y concl usi on he coul d ar r i ve at
was t hat t he decl i ne t oday was caused by a bear dr i ve.
Under l yi ng condi t i ons ar e unchanged. The busi ness of t he company
was never bet t er t han at pr esent and t he pr obabi l i t i es ar e t hat
unl ess somet hi ng ent i r el y unf or eseen happens i n t he meanwhi l e,
t her e wi l l be an i ncr ease i n t he r at e at t he next di vi dend
meet i ng. The bear par t y i n t he mar ket has become aggr essi ve and
t he weakness i n t he st ock was cl ear l y a r ai d i nt ended t o
di sl odge weakl y hel d st ock. " The news- t i cker s, wi shi ng t o gi ve
good measur e, as " l i kel y as not wi l l go on t o st at e t hat t hey
ar e " r el i abl y i nf or med" t hat most of t he st ock bought on t he
day' s decl i ne was t aken by i nsi de i nt er est s and t hat t he bear s
wi l l f i nd t hat t hey have sol d t hemsel ves i nt o a t r ap. Ther e wi l l
be a day of r eckoni ng.
I n addi t i on t o t he l osses sust ai ned by t he publ i c t hr ough
bel i evi ng bul l i sh st at ement s and buyi ng st ocks, t her e ar e t he


l osses t hat come t hr ough bei ng di ssuaded f r om sel l i ng out . The
next best t hi ng t o havi ng peopl e buy t he st ock t he " pr omi nent
i nsi der " wi shes t o sel l i s t o pr event peopl e f r om sel l i ng t he
same st ock when he does not wi sh t o suppor t or accumul at e i t .
What i s t he publ i c t o bel i eve af t er r eadi ng t he st at ement of t he
" pr omi nent di r ect or " ? What can t he aver age out si der t hi nk? Of
cour se, t hat t he st ock shoul d never have gone down; t hat i t was
f or ced down by bear - sel l i ng and t hat as soon as t he bear s st op
t he i nsi der s wi l l engi neer a puni t i ve advance dur i ng whi ch t he
shor t s wi l l be dr i ven t o cover at hi gh pr i ces. The publ i c
pr oper l y bel i eves t hi s because i t i s exact l y what woul d happen
i f t he decl i ne had i n t r ut h been caused by a bear r ai d.
The st ock i n quest i on, not wi t hst andi ng al l t he t hr eat s or
pr omi ses of a t r emendous squeeze of t he over - ext ended shor t
i nt er est , does not r al l y. I t keeps on goi ng down. I t can' t hel p
i t . Ther e has been t oo much st ock f ed t o t he mar ket f r om t he
i nsi de t o be di gest ed.
And t hi s i nsi de st ock t hat l i as been sol d by t he " pr omi nent
di r ect or s" and " l eadi ng i nsi der s" becomes a f oot bal l among t he
pr of essi onal t r ader s. I t keeps on goi ng down. Ther e seems t o be
no bot t om f or i t . The i nsi der s knowi ng t hat t r ade condi t i ons
wi l l adver sel y af f ect t he company' s f ut ur e ear ni ngs do not dar e
t o suppor t t hat st ock unt i l t he next t ur n f or t he bet t er i n t he
company' s busi ness. Then t her e wi l l be i nsi de buyi ng and i nsi de
si l ence.
I have done my shar e of t r adi ng and have kept f ai r l y wel l
post ed on t he st ock mar ket f or many year s and I can say t hat I
do not r ecal l an i nst ance when a bear r ai d caused a st ock t o
decl i ne ext ensi vel y. What was cal l ed bear r ai di ng was not hi ng
but sel l i ng based on accur at e knowl edge of r eal condi t i ons. But
i t woul d not do t o say t hat t he st ock decl i ned on i nsi de sel l i ng
or on i nsi de non- buyi ng. Ever ybody woul d hast en t o sel l and when
ever ybody sel l s and nobody buys t her e i s t he di ckens t o pay.
The publ i c ought t o gr asp f i r ml y t hi s one poi nt : That t he
r eal r eason f or a pr ot r act ed decl i ne i s never bear r ai di ng. When
a st ock keeps on goi ng down you can bet t her e i s somet hi ng wr ong
wi t h i t , ei t her wi t h t he mar ket f or i t or wi t h t he company. I f
t he decl i ne wer e unj ust i f i ed t he st ock woul d soon sel l bel ow i t s
r eal val ue and t hat woul d br i ng i n buyi ng t hat woul d check t he
decl i ne. As a mat t er of f act , t he onl y t i me a bear can make bi g
money sel l i ng a st ock i s when t hat st ock i s t oo hi gh. And you
can gambl e your l ast cent on t he cer t ai nt y t hat i nsi der s wi l l
not pr ocl ai mt hat f act t o t he wor l d.
Of cour se, t he cl assi c exampl e i s t he New Haven. Ever ybody
knows t oday what onl y a f ew knew at t he t i me. The st ock sol d at


255 i n 1902 and was t he pr emi er r ai l r oad i nvest ment of New
Engl and. A man i n t hat par t of t he count r y measur ed hi s
r espect abi l i t y and st andi ng i n t he communi t y by hi s hol di ngs of
i t . I f somebody had sai d t hat t he company was on t he r oad t o
i nsol vency he woul d not have been sent t o j ai l f or sayi ng i t .
They woul d have cl apped hi m i n an i nsane asyl um wi t h ot her
l unat i cs. But when a new and aggr essi ve pr esi dent was pl aced i n
char ge by Mr . Mor gan and t he debacl e began, i t was not cl ear
f r om t he f i r st t hat t he new pol i ci es woul d l and t he r oad wher e
i t di d. But as pr oper t y af t er pr oper t y began t o be saddl ed i n
t he Consol i dat ed Road at i nf l at ed pr i ces, a f ew cl ear si ght ed
obser ver s began t o doubt t he wi sdom of t he Mel l en pol i ci es. A
t r ol l ey syst em was bought f or t wo mi l l i on and sol d t o t he New
Haven f or $10, 000, 000; wher eupon a r eckl ess man or t wo commi t t ed
l ese maj est e by sayi ng t hat t he management was act i ng
r eckl essl y. Hi nt i ng t hat not even t he New Haven coul d st and such
ext r avagance was l i ke i mpugni ng t he st r engt h of Gi br al t ar .
Of cour se, t he f i r st t o see br eaker s ahead wer e t he
i nsi der s. They became awar e of t he r eal condi t i on of t he company
and t hey r educed t hei r hol di ngs of t he st ock. On t hei r sel l i ng
as wel l as on t hei r non- suppor t , t he pr i ce of New Engl and' s
gi l t edged r ai l r oad st ock began t o yi el d. Quest i ons wer e asked,
and expl anat i ons wer e demanded as usual ; and t he usual
expl anat i ons wer e pr ompt l y f or t hcomi ng. " Pr omi nent i nsi der s"
decl ar ed t hat t her e was not hi ng wr ong t hat t hey knew of and t hat
t he decl i ne was due t o r eckl ess bear sel l i ng. So t he " i nvest or s"
of New Engl and kept t hei r hol di ngs of New Yor k, New Haven &
Har t f or d St ock. Why shoul dn' t t hey? Di dn' t i nsi der s say t her e
was not hi ng wr ong and cr y bear sel l i ng? Di dn' t di vi dends
cont i nue t o be decl ar ed and pai d?
I n t he meant i me t he pr omi sed squeeze of t he bear s di d not
come but new l ow r ecor ds di d. The i nsi der sel l i ng became mor e
ur gent and l ess di sgui sed. Never t hel ess publ i c spi r i t ed men i n
Bost on wer e denounced as st ock- j obber s and demagogues f or
demandi ng a genui ne expl anat i on f or t he st ock' s depl or abl e
decl i ne t hat meant appal l i ng l osses t o ever ybody i n New Engl and
who had want ed a saf e i nvest ment and a st eady di vi dend payer .
That hi st or i c br eak f r om $255 t o $12 a shar e never was and
never coul d have been a bear dr i ve. I t was not st ar t ed and i t
was not kept up by bear oper at i ons. The i nsi der s sol d r i ght
al ong and al ways at hi gher pr i ces t han t hey coul d have done i f
t hey had t ol d t he t r ut h or al l owed t he t r ut h t o be t ol d. I t di d
not mat t er whet her t he pr i ce was 250 or 200 or 150 or t oo or 50
or 25, i t st i l l was t oo hi gh f or t hat st ock, and t he i nsi der s
knew i t and t he publ i c di d not . The publ i c mi ght pr of i t abl y


consi der t he di sadvant ages under whi ch i t l abour s when i t t r i es
t o make money buyi ng and sel l i ng t he st ock of a company
concer ni ng whose af f ai r s onl y a f ew men ar e i n posi t i on t o know
t he whol e t r ut h.
The st ocks whi ch have had t he wor st br eaks i n t he past 20
year s di d not decl i ne on bear r ai di ng. But t he easy accept ance
of t hat f or m of expl anat i on has been r esponsi bl e f or l osses by
t he publ i c amount i ng t o mi l l i ons upon mi l l i ons of dol l ar s. I t
has kept peopl e f r om sel l i ng who di d not l i ke t he way hi s st ock
was act i ng and woul d have l i qui dat ed i f t hey had not expect ed
t he pr i ce t o go r i ght back af t er t he bear s st opped t hei r
r ai di ng. I used t o hear Keene bl amed i n t he ol d days. Bef or e hi m
t hey used t o accuse Char l ey Woer i shof f er or Addi son Cammack.
Lat er on I became t he st ock excuse.
I r ecal l t he case of I nt er val e Oi l . Ther e was a pool i n i t
t hat put t he st ock up and f ound some buyer s on t he advance. The
mani pul at or s r an t he pr i ce t o 50. Ther e t he pool sol d and t her e
was a qui ck br eak. The usual demand f or expl anat i ons f ol l owed.
Why was I nt er val e so weak? Enough peopl e asked t hi s quest i on t o
make t he answer i mpor t ant news. One of t he f i nanci al news
t i cker s cal l ed up t i r e br oker s who knew t he ost about I nt er val e
Oi l ' s advance and ought t o he equal l y wel l post ed as t o t he
decl i ne. What di d t hese br oker s, member s of t he bul l pool , say
when t he news agency asked t hem f or a r eason t hat coul d
be. pr i nt ed and sal t br oadcast over t he count r y? Why, t hat Lar r y
Li ver mor e was r ai di ng t he mar ked And t hat wasn' t enough. They
added t hat t hey wer e goi ng t o " get " hi m. But of cour se, t he
I nt er val e pool cont i nued t o sel l . The st ock onl y st ood t hen
about $12 a shar e and t hey coul d sel l i t down t o i o or l ower and
t hei r aver age sel l i ng pr i ce woul d st i l l be above cost .
I t was wi se and pr oper f or i nsi der s t o sel l on t he decl i ne.
But f or out si der s who had pai d 35 or 40, i t was a di f f er ent
mat t er . Readi ng what t he t i cker s pr i nt ed t her e out si der s hel d on
and wai t ed f or Lar r y Li ver mor e t o get what was comi ng t o hi m at
t he hands of t he i ndi gnant i nsi de pool .
I n a bul l mar ket and par t i cul ar l y i n booms t he publ i c at
f i r st makes money whi ch i t l at er l oses si mpl y by over st ayi ng t he
bul l mar ket . Thi s t al k of " bear r ai ds" hel ps t hem t o over st ay.
The publ i c shoul d bewar e of expl anat i ons t hat expl ai n onl y what
unnamed i nsi der s wi sh t he publ i c t o bel i eve.



CHAPTER XXI V

THE publ i c al ways want s t o be t ol d. That i s what makes
t i p- gi vi ng and t i p- t aki ng uni ver sal pr act i ces. I t i s pr oper t hat
br oker s shoul d gi ve t hei r cust omer s t r adi ng advi ce t hr ough t he
medi um of t hei r mar ket l et t er s as wel l as by wor d of mout h. But
br oker s shoul d not dwel l t oo st r ongl y on act ual condi t i ons
because t he cour se of t he mar ket i s al ways f r om si x t o ni ne
mont hs ahead of act ual condi t i ons. Today' s ear ni ngs do not
j ust i f y br oker s i n advi si ng t hei r cust omer s t o buy st ocks unl ess
t her e i s some assur ance t hat si x or ni ne mont hs f r om t oday t he
busi ness out l ook wi l l war r ant t he bel i ef t hat t he same r at e of
ear ni ngs wi l l be mai nt ai ned. I f on l ooki ng t hat f ar ahead you
can see, r easonabl y cl ear l y, t hat condi t i ons ar e devel opi ng
whi ch wi l l change t he pr esent act ual power , t he ar gument about
st ocks bei ng cheap t oday wi l l di sappear . The t r ader must l ook'
f ar ahead, but t he br oker i s concer ned wi t h get t i ng commi ssi ons
now; . hence t he i nescapabl e f al l acy of t he aver age mar ket l et t er .
Br oker s make t hei r l i vi ng out of commi ssi ons f r omt he publ i c and
yet t hey wi l l t r y t o i nduce t he publ i c t hr ough t hei r mar ket
l et t er s or by wor d of mout h t o buy t he same st ocks i n whi ch t hey
have r ecei ved sel l i ng or der s f r omi nsi der s or mani pul at or s.
I t of t en happens t hat an i nsi der goes t o t he head of a br o-
ker age concer n and says: " I wi sh you' d make a mar ket i n whi ch t o
di spose of 50, 000 shar es of my st ock. "
The br oker asks f or f ur t her det ai l s. Let us say t hat t he
quot ed pr i ce of t hat st ock i s 50. The i nsi der t el l s hi m: " I wi l l
gi ve you cal l s on 5000 shar es at 45 and 5000 shar es ever y poi nt
up f or t he ent i r e f i f t y t housand shar es. I al so wi l l gi ve you a
put on 50, 000 shar es at t he mar ket . "
Now, t hi s i s pr et t y easy money f or t he br oker , i f he has a
l ar ge f ol l owi ng and of cour se t hi s i s pr eci sel y t he ki nd
of br oker t he i nsi der seeks. A house wi t h di r ect wi r es t o
br anches and connect i ons i n var i ous par t s of t he count r y can
usual l y get a l ar ge f ol l owi ng i n a deal of t hat ki nd. Remember
t hat i n any event t he br oker i s pl ayi ng absol ut el y saf e by
r eason of t he put . I f he can get hi s publ i c t o f ol l ow he wi l l
be abl e t o di spose of hi s ent i r e l i ne at a bi g pr of i t i n
addi t i on t o hi s r egul ar commi ssi ons.
I have i n mi nd t he expl oi t s of an " i nsi der " who i s wel l
known i n Wal l St r eet . He wi l l cal l up t he head cust omer s' man of
a l ar ge br oker age house. At t i mes he goes even f ur t her and cal l s
up one of t he I j uni or par t ner s of t he f i r m. He wi l l say
somet hi ng l i ke t hi s " Say, ol d man, I want t o show you t hat I
appr eci at e what you have done f or me at var i ous t i mes. I am


goi ng t o gi ve you a chance t o make some r eal money. We ar e
f or mi ng a new company t o absor b t he asset s of one of our
compani es and we' l l t ake over t hat st ock at a bi g advance over
pr esent quot at i ons. I ' m goi ng t o send i n t o you 50o
shar es of Bant amShops at $65. The st ock i s now quot ed at 7a. "
The gr at ef ul i nsi der t el l s t he t hi ng t o a dozen of t he head
men i n var i ous bi g br oker age houses. Now si nce t hese r eci pi ent s
of t he i nsi der ' s bount y ar e i n Wal l St r eet what ar e t hey goi ng
t o do when t hey get t hat st ock t hat al r eady shows t hema pr of i t ?
Of cour se, advi se ever y man and woman t hey can r each t o buy t hat
st ock. The ki nd donor knew t hi s. They wi l l hel p t o cr eat e a
mar ket i n whi ch t he ki nd i nsi der can sel l hi s good t hi ngs at
hi gh pr i ces t o t he poor publ i c.
Ther e ar e ot her devi ces of st ock- sel l i ng pr omot er s t hat
shoul d be bar r ed. The Exchanges shoul d not al l ow t r adi ng i n
l i st ed st ocks t hat ar e of f er ed out si de t o t he publ i c on t he
par t i al payment pl an. To have t he pr i ce of f i ci al l y quot ed gi ves
a sor t of sanct i on t o any st ock. Mor eover , t he of f i ci al evi dence
of a f r ee mar ket , and at t i mes t he di f f er ence i n pr i ces, i s al l
t he i nducement needed.
Anot her common sel l i ng devi ce t hat cost s t he unt hi nki ng
publ i c many mi l l i ons of dol l ar s and sends nobody t o j ai l because
i t i s per f ect l y l egal , i s t hat of i ncr easi ng t he capi t al st ock
excl usi vel y by r eason of mar ket exi genci es. The pr ocess does not
r eal l y amount t o much mor e t han changi ng t he col or of t he st ock
cer t i f i cat es.
The j uggl i ng wher eby s or 4 or even i o shar es of new st ock
ar e gi ven i n exchange f or one of t he ol d, i s usual l y pr ompt ed by
a desi r e t o make t he ol d mer chandi se mor e easi l y vendi bl e. The
ol d pr i ce was $t per pound package and har d t o move. At 25 cent s
f or a quar t er - pound box i t mi ght go bet t er ; and per haps at 27 or
30 cent s.
Why does not t he publ i c ask why t he st ock i s made easy t o
buy? I t i s a case of t he Wal l St r eet phi l ant hr opi st oper at i ng
agai n, but t he wi se t r ader bewar es of t he Gr eeks bear i ng gi f t s.
I t i s al l t he war ni ng needed. The publ i c di sr egar ds i t and l oses
mi l l i ons of dol l ar s annual l y.
The l aw puni shes whoever or i gi nat es or ci r cul at es r umor s
cal cul at ed t o af f ect adver sel y t he cr edi t or busi ness of
i ndi vi dual s or cor por at i ons, t hat i s, t hat t end t o depr ess t he
val ues of secur i t i es by i nf l uenci ng t he publ i c t o sel l .
Or i gi nal l y, t he chi ef i nt ent i on may have been t o r educe t he
danger of pani c by puni shi ng anyone who doubt ed al oud t he
sol vency of banks i n t i mes of st r ess. But of cour se, i t ser ves
al so t o pr ot ect t he publ i c agai nst sel l i ng st ocks bel ow t hei r


r eal val ue. I n ot her wor ds t he l aw of t he l and puni shes t he
di ssemi nat or of bear i sh i t ems of t hat nat ur e.
How i s t he publ i c pr ot ect ed agai nst t he danger of buyi ng
st ocks above t hei r r eal val ue? Who puni shes t he di st r i but or of
unj ust i f i ed bul l i sh news i t ems? Nobody; and yet , t he publ i c
l oses mor e money buyi ng st ocks on anonymous i nsi de advi ce when
t hey ar e t oo hi gh t han i t does sel l i ng out st ocks bel ow t hei r
val ue as a consequence of bear i sh advi ce dur i ng socal l ed
" r ai ds. "
I f a l aw wer e passed t hat woul d puni sh bul l l i ar s as t he
l aw now puni shes bear l i ar s, I bel i eve t he publ i c woul d save
mi l l i ons.
Nat ur al l y, pr omot er s, mani pul at or s and ot her benef i ci ar i es
of anonymous opt i mi sm wi l l t el l you t hat anyone who t r ades on
r umor s and unsi gned st at ement s has onl y hi msel f t o bl ame f or hi s
l osses. One mi ght as wel l ar gue t hat any one who i s si l l y enough
t o be a dr ug addi ct i s not ent i t l ed t o pr ot ect i on
The St ock Exchange shoul d hel p. I t i s vi t al l y i nt er est ed i n
pr ot ect i ng t he publ i c agai nst unf ai r pr act i ces. I f a man i n
posi t i on t o know wi shes t o make t he publ i c accept hi s st at ement s
of f act or even hi s opi ni ons, l et hi m si gn hi s name. Si gni ng
bul l i sh i t ems woul d not necessar i l y make t hemt r ue. But i t woul d
make t he " i nsi der s" and " di r ect or s" mor e car ef ul .
The publ i c ought al ways t o keep i n mi nd t he el ement al s of
st ock t r adi ng. When a st ock i s goi ng up no el abor at e expl anat i on
i s needed as t o why i t i s goi ng up. I t t akes cont i nuous t o
buyi ng t o make a st ock keep on goi ng up. As l ong as i t does so,
wi t h onl y smal l and nat ur al r eact i ons f r omt i me t o t i me, i t i s a
pr et t y saf e pr oposi t i on t o t r ai l al ong wi t h i t . But i f af t er a
l ong st eady r i se a st ock t ur ns and gr adual l y begi ns t o go down,
wi t h onl y occasi onal smal l r al l i es, i t i s obvi ous t hat t he l i ne
of l east r esi st ance has changed f r om upwar d t o downwar d. Such
bei ng t he case why shoul d any one ask f or expl anat i ons? Ther e
ar e pr obabl y ver y good r easons why i t shoul d go down, but t hese
r easons ar e known onl y t o a f ew peopl e who ei t her keep t hose
r easons t o t hemsel ves, or el se act ual l y t el l t he publ i c t hat t he
st ock i s cheap. The nat ur e of t he game as i t i s pl ayed i s such
t hat t he publ i c shoul d r eal i se t hat t he t r ut h cannot be t ol d by
t he f ew who know.
Many of t he so- cal l ed st at ement s at t r i but ed t o " i nsi der s"
or of f i ci al s have no basi s i n f act . Somet i mes t he i nsi der s ar e
not even asked t o make a st at ement , anonymous or si gned. These
st or i es ar e i nvent ed by somebody or ot her who has a l ar ge
i nt er est i n t he mar ket . At a cer t ai n st age of an advance i n t he
mar ket - pr i ce of a secur i t y t he bi g i nsi der s ar e not aver se t o


get t i ng t he hel p of t he pr of essi onal el ement t o t r ade i n t hat ,
st ock. But whi l e t he i nsi der mi ght t el l t he bi g pl unger t he
r i ght t i me t o buy, you can bet he wi l l never t el l when i s t he
t i me t o sel l . That put s . t he bi g pr of essi onal i n t he same
posi t i on as t he publ i c, onl y he has t o have a mar ket bi g enough
f or hi m t o get out on. Then i s when you get t he most mi sl eadi ng
" i nf or mat i on. " Of cour se, t her e ar e cer t ai n i nsi der s who cannot
be t r ust ed at any st age of t he game. As a r ul e t he men who ar e
at t he head of bi g cor por at i ons may act i n t he mar ket upon t hei r
i nsi de knowl edge, but t hey don' t act ual l y t el l l i es. They mer el y
say not hi ng, f or t hey have di scover ed t hat t her e ar e t i mes when
si l ence i s gol den.
have sai d many t i mes and cannot say i t t oo of t en t hat t he
exper i ence of year s as a st ock oper at or has convi nced me t hat no
man can consi st ent l y and cont i nuousl y beat t he st ock mar ket
t hough he may make money i n i ndi vi dual st ocks on cer t ai n
occasi ons. No mat t er how exper i enced a t r ader i s t he possi bi l i t y
of hi s maki ng l osi ng pl ays i s al ways pr esent because specul at i on
cannot be made 100 per cent saf e. Wal l St r eet pr of essi onal s know
t hat act i ng on " i nsi de" t i ps wi l l br eak a man mor e qui ckl y t han
f ami ne, pest i l ence, cr op f ai l ur es, pol i t i cal r eadj ust ment s or
what mi ght be cal l ed nor mal acci dent s. Ther e i s no asphal t
boul evar d t o success i n Wal l St r eet or anywher e el se. Why
addi t i onal l y bl ock t r af f i c?