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Fifty years in Wall Street

Henry Clews

of the National Treasury to that of New York. ------------------------------------------------------------------------ CHAPTER XXV. KEENE’S CAREER. HE STARTS IN SPECULATION AS A CALIFORNIA BROKER.—A LUCKY HIT IN A MINING STOCK PUTS HIM ON THE ROAD TO BE A MILLIONAIRE.—HIS SPECULATIVE ENCOUNTER WITH THE BONANZA KINGS.—HE MAKES FOUR MILLIONS, STARTS FOR EUROPE AND STOPS AT WALL STREET, WHERE HE FORMS AN ALLIANCE WITH GOULD, WHO “EUCHRES” HIM AND OTHERS.—SELOVER DROPS GOULD IN AN AREA WAY.—KEENE GOES ALONE AND ADDS NINE MILLIONS MORE TO HIS FORTUNE.—HE THEN SPECULATES RECKLESSLY IN EVERYTHING.—SUFFERS A SUDDEN REVERSAL AND GETS SWAMPED.—OVERWHELMING DISASTER IN A BEAR CAMPAIGN, LED BY GOULD AND CAMMACK, IN WHICH KEENE LOSES SEVEN MILLIONS.—HIS DESPERATE ATTEMPTS TO RECOVER A PART ENTAIL FURTHER LOSSES, AND HE APPROACHES THE END OF HIS THIRTEEN MILLIONS.—HIS PRINCELY LIBERALITY AND SOCIAL RELATIONS WITH SAM WARD. One of the most remarkable up-and-down lives known to Wall Street is that of James R. Keene. His rise and fall are both of recent date. Mr. Keene is of English parentage, and was born in London, about 48 years ago. He came to this country at the age of 17, lived in the South and studied law there. He removed to San Francisco in 1853, and became well informed in mining matters through several mining cases that were put into his hands while practising at the bar in that city. I am told he was also connected with a Western newspaper for some time. He caught the speculative fever shortly after his arrival in California, and, as it seems, abandoned both law and journalism to become a broker. Keene had hard work for some time to make both ends meet, and his struggle for existence in the wild West made serious inroads on his health. His physician told him he must give up work, and advised him to take a long sea voyage if he intended to prolong his life. Acting on this advice, he secured his passage to the East. This was the turning point in both his health and fortune. Prior to his departure, Mr. Keene was urged to invest a few hundred dollars in a mining stock then selling very low. The length of his journey and the change of scene caused him almost to forget about his investment, and the methods of communication between the far West and the far East in those days were so very slow that he had hardly any chance of being informed of his lucky venture until his return. As an illustration of this slow transit of news at that time, it may be stated that gold was discovered January 19, 1848, but the news did not reach the Eastern States until the following December. It was authoritatively announced in the President’s annual message, and created great excitement. Mr. Alfred Robinson, with about twenty companions, were the first to leave New York for the scene of the new El Dorado, on the bark “John Benton.” After nearly a year’s absence Keene was surprised to find, on his return, that mining stocks had taken a prodigious bound upward and carried the one in which he had invested with them. The mine had turned out to be a veritable bonanza, and the stock which had cost him only a few hundred dollars was then worth over $200,000. Had Mr. Keene’s health not required his absence from the scene of speculation the chances are that he would have disposed of his stock as soon as it should have realized a few thousand dollars. This was a wonderful realization for one who had been comparatively poor, and was sufficient to turn the head of any ordinary man; but it only made Keene more anxious for greater success, which he set himself diligently to achieve. The speculative craze was then intense and epidemic. Waiters and chambermaids bloomed into millionaires with the rapidity of mushroom growth. Mr. Keene secured a seat in the Board, and began to do an immense business. Flood, Mackay, Fair and O’Brien were then the prominent operators. The speculative contagion spread rapidly over the coast, and soon imparted its influence to the entire continent. Keene’s further investments were crowned with similar success to that of his first venture, and even in a greater ratio of profit. Seeing the great and rapid advance in the stocks of the Comstock mines, he naturally reasoned, like old Daniel Drew, that what had gone up so high and so fast was bound to come down. There were but few people on the coast at that time, however, in a mood to reason so soberly, and it required more than ordinary nerve to make the experiment of selling “short.” Mr. Keene, however, had the courage of his convictions, and made an onslaught upon the market. There Was a strong contingent to oppose him, for the wealthy syndicate just named, with the Bank of California behind them, were his bitter foes, and they did their best to crush him. In spite of their efforts, however, the market began to yield under the pressure of Keene’s “short” sales. In a little while the list gave way and stocks began to topple from their dizzy eminence, even quicker than they had climbed to that unprecedented height. Keene netted millions in their fall. He cleared two and a-half millions in the Belcher and Crown Point mines, and over half a million in Ophir. So, in a few years, this poor lawyer, journalist, curbstone broker and invalid, found himself the happy possessor of millions, his name covered with speculative glory, and the fame of his fabulous fortune heralded in every city, town, hamlet and mining camp between the two oceans. Keene was still found on the right side of the market when the great bubble burst, when the Bank of California went under, and its president, Mr. Ralston, committed suicide while pretending to take a bath in the Pacific Ocean. In 1877 Mr. Keene started on a voyage for Europe for the good of his health, and made a friendly call in Wall Street to see how business was transacted there. He found the speculative attraction irresistible. Mahomet had come to the mountain and was held by its magnetic power. Although Mr. Keene had been a grand success in California, he had a good deal to learn when he came to Wall Street. He soon discovered that California tactics would not do here. He began to sell “short,” but found the market failed to yield to the touch of his bearish wand as it had done in San Francisco. When he sold ten thousand shares of a certain stock the decline, instead of being a slump, as he expected, was only an insignificant fraction, and the market soon reacted. Mr. Keene quickly discovered that he was throwing water into a sieve, and stopped sacrificing his California gold so lavishly. A pool was then formed by Mr. Keene and Jay Gould to put down Western Union. Keene and Selover sold the stock in large blocks, but it was absorbed by some party or parties unknown as fast as it was thrown out. It was gravely suspected that Mr. Gould was the wicked partner who was playing this absorbing game behind the scenes. Major Selover brooded over the matter so seriously that his suspicions began to take tangible form and “body themselves forth” in violence. The Major and Keene met one morning at the rear entrance of the Stock Exchange, in New street, and interchanged intelligent glances on the subject, after the fashion of those passed between Bill Nye and his companion at the card table with the Heathen Chinee. Selover walked down the street with blood in his eye, and meeting Mr. Gould on the corner of New street and Exchange Place, caught him up by the collar of the coat and a part of his pants and dropped him in the area way of a barber’s shop. The little man promptly picked himself up, went quietly to his office, and made a transaction by which Selover lost $15,000 more. This was his method of retaliation. Mr. Keene next went into the Atlantic and Pacific Telegraph pool, and was again fortunate. It has been frequently asserted that he lost heavily in this deal, but I have it on good authority that he came out ahead. In the deal with Gould in Western Union, he and Gould netted on joint account $1,300,000. It is popularly believed that Gould “euchred” Keene in this pool, but these are the bare facts. Keene looked over the speculative field, and found that there had been great depreciation in values prevailing here since the panic of 1873. He had arrived in the nick of time to take advantage of the situation. He was backed by four millions of money, and the few losses which he at first sustained were not felt by him, and only seemed to initiate him properly. This new blood was just what Wall Street then wanted to put the wheels of speculation in motion. Mr. Keene informed himself about the principal stocks dealt in at the Exchange. He did so with remarkable rapidity. They were all down to panic prices, and seeing that most of them were intrinsically cheap, he bought heavily. Soon the turn came which resulted in the high tide of speculation which continued with but slight reactions all through 1879-80. The advance was immense, as can be seen in the tabular statement at the end of this book, and the profits were enormous. Keene’s millions were doubled and trebled. He must have felt himself a modern Crœsus. Fully nine millions were added to the four which he brought from California. He stood in the centre of that great pile, figuratively speaking, the cynosure of all eyes from Maine to California, and his fame was noised abroad in Europe. Gould and other old speculators began to grow green with envy at Keene’s unprecedented success. He seemed likely to exceed the wildest dreams that ever the avarice of Monte Cristo or Daniel Drew had conjured up, and with him the imaginary profits of Col. Sellers had become material realities. His investments were nearly all in good, reliable securities. No dubious paper acceptances nor rotten railroad items were mixed up with his tangible fortune, which was without parallel in Wall Street for its size and rapidity of accumulation. The history of speculation was ransacked in vain for an illustration of such amazing success in so short a period. But here, I regret to say, this marvellous prosperity ends. In an evil hour Mr. Keene was induced to spread himself out all over creation, while he still retained his immense interest in stocks. He was so flushed with successive victories that he began to regard failure impossible, and thought he was a man of destiny in speculation, such as Napoleon considered himself in war. He speculated in everything that came along—in wheat, lard, opium and fast horses. Keene’s attempt to get a corner in all the grain in the country, however, was a signal failure. The very week that Foxhall won the Grand Prix in Paris he himself was sadly beaten in the speculative race by the steady going farmers of the West, who sent their wheat to market quicker than he could purchase it with his thirteen million dollars, and all the credit which that implied. All of a sudden, reversal in the tide of speculation set in. Mr. Cammack was quick to perceive that Mr. Keene was extending his lines and his ventures. He had a conversation with Mr. Gould. They became convinced that the Californian must soon be obliged to leave some of his enterprises in a weak and unguarded position. It was impossible that he could take care of them all. These two champion bears united their efforts to upset the market, and each day brought additional force to their aid. By dint of perseverance their efforts commenced to bear fruit, and it was apparent that they would soon be rewarded with success. The bears began to multiply while the bulls diminished, and the remnant of the latter that were left were anything but rampant at that time.