Fifty years in Wall Street
When I discovered that my little pile of two million dollars in what I
considered good securities would no longer exchange for greenbacks, I
had a very disagreeable sensation of having been “cornered” by the high
toned and chivalrous representatives of the State of Georgia, which,
through its lawmakers, claimed the sovereign right to do wrong to the
citizens of a sister State.
In the Harlem “corner,” which is referred to in another place, contracts
to deliver at 110 were settled at 179.
About three million dollars were taken out of the pockets of the bears.
Several prominent houses went down in the struggle. The result of the
“corner” was that the bulls were saddled with the entire capital stock
of the property.
One broker, who had sold calls at 150 and was requested to fulfil his
contracts when the stock had advanced to 250, was very much in the same
position as Glendower’s spirits, which were called from the vasty deep
but would not come. “I don’t see anything here,” he said, “about
delivering. You can call, but I don’t mind it.”
There were two “corners” in Harlem. The Common Council was cornered in
one and the Legislature in the other.
In the Rock Island “corner” the bulls bought 20,000 shares more than
existed, and the price rose from 110 to 150.
London financiers have a fearful horror of “corners.” Hence the London
Stock Exchange is very chary about listing our railroads, especially
those with a moderate number of shares.
“Corners” are seldom profitable, and the parties connected with them can
hardly escape getting badly hurt unless they are prepared to own and
carry the entire property. Even in that event, it is usually put out of
the speculative market for a considerable time.
The Hudson “corner” was one of the most successful. It paid a profit of
12 per cent. There was a profit of 4½ on the Rock Island “corner.”
The first “corner” of which there is any record in Wall Street was in
Morris Canal, an old “fancy” now almost forgotten except for its
“corner.” It had been forced upward as fancies frequently are, until it
was far above its intrinsic value, and several operators began to sell
“short.”
After this operation had gone on for some time a pool was formed to
protect it, and the pool bought it all up and locked it up in a trunk.
The operation was new to the Street and the bears were astounded, but
when called upon to settle they became furious, and accused the
manipulators of the “corner” of entering into a conspiracy. The “bulls”
asked the “bears” why they had sold what they did not possess and could
not procure.
The dispute was referred to the arbitration of the Board of Brokers, and
that eminent body, then unsophisticated in the arts of speculation, took
what seemed to them an equitable view of the case, and decided it in
favor of the “shorts,” who, on the ground of conspiracy on the part of
the clique, were relieved from fulfilling their obligations.
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CHAPTER XIII.
THE COMMODORE’S “CORNERS.”
THE GREAT HUDSON “CORNER.”—COMMODORE VANDERBILT THE “BOSS” OF THE
SITUATION.—THE “CORNER” FORCED UPON HIM.—HOW HE MANAGED THE TRICK OF
GETTING THE BEARS TO “TURN” THE STOCK, AND THEN CAUGHT THEM.—HIS
ABLE DEVICE OF UNLOADING WHILE FORCING THE BEARS TO COVER AT HIGH
FIGURES.—THE HARLEM “CORNER.”—THE COMMON COUNCIL BETRAYED THE
COMMODORE, BUT WERE CAUGHT IN THEIR OWN TRAP, AND LOST MILLIONS.—THE
LEGISLATURE ATTEMPT THE SAME GAME, AND MEET WITH A SIMILAR FATE.
In the Hudson “corner,” the stock jumped from 112 to 180. Commodore
Vanderbilt was the “Boss” of the situation in this “corner.” He got the
“bulge” completely on all the other parties connected with it, and what
is more, he had the balance of the sympathy of the Street with him, for
he was not the aggressor in getting up the “corner.” The fighting at
first was forced upon him, but he acted on the defensive in a way that
made his opponents sorry for their rashness. Though he did not know much
about Shakespeare, he acted in accordance with old Polonius’ advice to
his son by pushing the opposition to the wall.
As soon as he gained the mastery, he became severely aggressive, as he
was in everything.
The beginning of this story of the Hudson “corner” is somewhat romantic.
The Commodore was sunning himself on a pile of logs on the Jersey side
of the Hudson while his yacht lay in the stream, and he was in the mood
for enjoying a long and well-earned vacation, attempting to lay aside
for a time the toil and trouble of eking out a precarious existence in
speculation. While basking in the noon-day sun and gazing with delight
on the luxurious foliage that arose from the New Jersey bank of the
river, he was aroused from his charming reverie by a messenger from Wall
Street, who conveyed to him the important intelligence that a wicked and
unregenerate clique of “bears” had conspired to sell Hudson stock
“short,” and that it was declining with great rapidity under the
repeated and unmerciful blows of their hammers.
The Commodore arose and shook off his lethargy, as a lion may be
supposed to shake the dew from his mane prior to his preparation for a
spring upon an unfortunate foe.
The Commodore hastened down to Wall Street and instructed his brokers to
take all the sellers’ options offered in Hudson. Cash stock was then
taken as quickly as possible until the market was bare. A brief
calculation showed that the buyers had secured either as cash or
contract stock all the Hudson stock in existence with the exception of a
small number of shares which were not expected to come upon the market.
The prolific brain of the Commodore then invented a new move in the
game. A number of leading “bear” houses were requested to “turn” Hudson,
which means to buy it for cash from the cornering party and sell it back
to them on buyers’ options for periods varying from ten to thirty days.
This able ruse was intended to impress the bears with the idea that the
cornering party was weak. It seemed as if they were short of cash. So
the leading bears grasped at the good chance, as they imagined, of
turning several thousand shares, and instantly threw the cash stock on
the market. It was privately picked up by the brokers of the great
“cornerer.”
Everything having thus far progressed in favor of the ruse the trap was
sprung upon the unsuspecting party. The sellers’ options began to
mature, and there was no Hudson to be obtained.
The “corner” was complete, and the stock rose to 180. It had been 112 a
few mornings before, when the Commodore was basking in the sun, and
found that the bears were taking advantage of his absence. The loss on a
hundred shares was $6,800.
There were about 50,000 shares contracted for to be delivered at this
rate of profit by the “cornerers.” It will thus be seen that they were
well fixed.
The bears were in terrible anguish.
But the worst part of the deal for these poor animals had yet to come.
The bears who had turned the stock were notified that they must stand
and deliver. They complained bitterly of the ingratitude of the bulls,
whom they had only sought to oblige, by turning the stock. The bulls
were implacable, however, and demanded their property. They proposed a
compromise which was most exacting. They were willing to lend stock at
five per cent. per day. Some of the bears paid this, thinking the
“corner” would be of short duration, but it continued for over two
weeks, and, after paying five per cent. a day for several days, these
poor victims bought the stock at the high rate and settled.
This double move in turning the stock was the ablest trick that had ever
been accomplished in cornering. It made Vanderbilt king of strategists
in that line.
But the best part of the stratagem was that wherein the bulls saved
themselves from being saddled with the whole stock, and made immense
profits out of the deal.
While some of the bears were purchasing to cover at 170, Vanderbilt’s
private brokers were selling at 140, the clique thus craftily unloading
at good paying figures. This was one of the best inside moves in the
whole history of “corners.”
The bulls thus saved themselves from the risk of being loaded with
probably the whole, or at any rate the greater part of the capital
stock, and through the Commodore’s able management the load was
comparatively light at the end of the deal, the property remaining as
good a speculative as before, which is a rare exception in “corners.”
The “corner” in Harlem was not less skilfully managed than the one in
Hudson, but it had fewer complications. It was all plain sailing, so to
speak, compared with the former, yet it clearly illustrated that the
Commodore had a genius for “corners.” When he managed the Harlem
“corner” he had had no experience in railroad matters, and he had
reached the ripe age of sixty-nine.
I place the Hudson “corner” first in order because it was, in several
respects, the greatest, though it happened at a later date than the
Harlem.
It is a curious fact that in nearly all “corners” with which the
Commodore was connected, he was on the defensive, and seldom the
aggressor at the beginning of the fight. He was always placed in such a
position that he had to fight hard to defend his property, or let it go
to the dogs.
Buying stock in Harlem was his first venture in railroad transactions.
He bought it as an investment. This was in 1863. Thirty years prior to
this he had been requested to go into Harlem, but he declined,
ironically remarking: “I’m a steamboat man, a competitor of these steam
contrivances that you tell us will run on dry land. Go ahead. I wish you
well, but I never shall have anything to do with ’em.”
When the Commodore went into Harlem it was selling at eight or nine
dollars a share. It had been down as low as three dollars about the time
I arrived in Wall Street. He put some money in the road, began
improvements and the stock soon rose to 30. Many people predicted that
the Commodore would lose all the money in railroads that he had made in
steamboats.
The stock, however, gradually rose to 50, and speculators began to
perceive that there was some inside movement going on. This was made
apparent when, one day in April, 1863, the Common Council of this city
passed an ordinance authorizing the Commodore to build a street railroad
down Broadway to the Battery. So Jake Sharp’s enterprise was not
original, as the Commodore was over twenty years ahead of him.
The Common Council were not immaculate in those days either, though the
Jaehnes and Waites escaped punishment. They basely deceived the
Commodore after taking his money; but he punished them severely. As soon
as the franchise was granted, Harlem advanced to 75, and the Aldermen
began to sell it “short.” They thought they had the Commodore fast in
their clutches, and took their friends into the secret. They expected to
sell enough of stock to make several millions. Their plan was to sell
“short” all that the market would take, and then repeal the ordinance,
which would cause the stock to drop probably below 50. Drew was one of
the great bears in this deal with the Aldermen.
The Commodore got wind of the scheme, went on buying, and got others to
help him, taking all the “shorts” that were offered. The operators had
soon sold a great deal more Harlem stock than there was actually in
existence. There were 110,000 shares of Harlem. When the Aldermen and
their friends thought they had made millions, they repealed the
ordinance, and Judge Brady, in the Court of Common Pleas, at the same
time issued an injunction prohibiting the laying of rails on the
Broadway road.