Reminiscences of a Stock Operator
the old-fashioned silver-rimmed spectacles that he had put on to look
at the tape.
“Do I think so? No, I don’t think so; I know so. Absolutely! Why,
deacon, when H. O. Havemeyer and his friends buy Sugar as they’re doing
now they’re never satisfied with anything less than forty points net. I
shouldn’t be surprised to see the market get away from them any minute
and shoot up before they’ve got their full lines. There ain’t as much
of it kicking around the brokers’ offices as there was a month ago.”
“He’s buying Sugar, eh?” repeated the deacon absently.
“Buying it? Why, he’s scooping it in as fast as he can without putting
up the price on himself.”
“So?” said the deacon. That was all.
But it was enough to nettle the tipster, and he said, “Yes, sir-ree!
And I call that very good information. Why, it’s absolutely straight.”
“Is it?”
“Yes; and it ought to be worth a whole lot. Are you going to use it?”
“Oh, yes. I’m going to use it.”
“When?” asked the information bringer suspiciously.
“Right away.” And the deacon called: “Frank!” It was the first name of
his shrewdest broker, who was then in the adjoining room.
“Yes, sir,” said Frank.
“I wish you’d go over to the Board and sell ten thousand Sugar.”
“Sell?” yelled the tipster. There was such suffering in his voice that
Frank, who had started out at a run, halted in his tracks.
“Why, yes,” said the deacon mildly.
“But I told you H. O. Havemeyer was buying it!”
“I know you did, my friend,” said the deacon calmly; and turning to the
broker: “Make haste, Frank!”
The broker rushed out to execute the order and the tipster turned red.
“I came in here,” he said furiously, “with the best information I ever
had. I brought it to you because I thought you were my friend, and
square. I expected you to act on it--”
“I am acting on it,” interrupted the deacon in a tranquillising voice.
“But I told you H.O. and his gang were buying!”
“That’s right. I heard you.”
“Buying! Buying! I said buying!” shrieked the tipster.
“Yes, buying! That is what I understood you to say,” the deacon assured
him. He was standing by the ticker, looking at the tape.
“But you are selling it.”
“Yes; ten thousand shares.” And the deacon nodded. “Selling it, of
course.”
He stopped talking to concentrate on the tape and the tipster
approached to see what the deacon saw, for the old man was very foxy.
While he was looking over the deacon’s shoulder a clerk came in with a
slip, obviously the report from Frank. The deacon barely glanced at it.
He had seen on the tape how his order had been executed.
It made him say to the clerk, “Tell him to sell another ten thousand
Sugar.”
“Deacon, I swear to you that they really are buying the stock!”
“Did Mr. Havemeyer tell you?” asked the deacon quietly.
“Of course not! He never tells anybody anything. He would not bat an
eyelid to help his best friend make a nickel. But I know this is true.”
“Do not allow yourself to become excited, my friend.” And the deacon
held up a hand. He was looking at the tape. The tip-bringer said,
bitterly:
“If I had known you were going to do the opposite of what I expected
I’d never have wasted your time or mine. But I am not going to feel
glad when you cover that stock at an awful loss. I’m sorry for you,
deacon. Honest! If you’ll excuse me I’ll go elsewhere and act on my own
information.”
“I’m acting on it. I think I know a little about the market; not as
much, perhaps, as you and your friend H. O. Havemeyer, but still a
little. What I am doing is what my experience tells me is the wise
thing to do with that information you brought me. After a man has been
in Wall Street as long as I have he is grateful for anybody who feels
sorry for him. Remain calm, my friend.”
The man just stared at the deacon, for whose judgment and nerve he had
great respect.
Pretty soon the clerk came in again and handed a report to the deacon,
who looked at it and said: “Now tell him to buy thirty thousand Sugar.
Thirty thousand!”
The clerk hurried away and the tipster just grunted and looked at the
old gray fox.
“My friend,” the deacon explained kindly, “I did not doubt that you
were telling me the truth as you saw it. But even if I had heard H. O.
Havemeyer tell you himself, I still would have acted as I did. For
there was only one way to find out if anybody was buying the stock in
the way you said H. O. Havemeyer and his friends were buying it, and
that was to do what I did. The first ten thousand shares went fairly
easily. It was not quite conclusive. But the second ten thousand was
absorbed by a market that did not stop rising. The way the twenty
thousand shares were taken by somebody proved to me that somebody was
in truth willing to take all the stock that was offered. It doesn’t
particularly matter at this point who that particular somebody may be.
So I have covered my shorts and am long ten thousand shares, and I
think that your information was good as far as it went.”
“And how far does it go?” asked the tipster.
“You have five hundred shares in this office at the average price of
the ten thousand shares,” said the deacon. “Good day, my friend. Be
calm the next time.”
“Say, deacon,” said the tipster, “won’t you please sell mine when you
sell yours? I don’t know as much as I thought I did.”
That’s the theory. _That is why I never buy stocks cheap._ Of course I
always try to buy effectively--in such a way as to help my side of the
market. When it comes to selling stocks, it is plain that nobody can
sell unless somebody wants those stocks.
If you operate on a large scale you will have to bear that in mind all
the time. A man studies conditions, plans his operations carefully and
proceeds to act. He swings a pretty fair line and he accumulates a big
profit--on paper. Well, that man can’t sell at will. You can’t expect
the market to absorb fifty thousand shares of one stock as easily as
it does one hundred. He will have to wait until he has a market there
to take it. There comes the time when he thinks the requisite buying
power is there. When that opportunity comes he must seize it. As a
rule he will have been waiting for it. _He has to sell when he can,
not when he wants to._ To learn the time, he has to watch and test. It
is no trick to tell when the market can take what you give it. But in
starting a movement it is unwise to take on your full line unless you
are convinced that conditions are exactly right. _Remember that stocks
are never too high for you to begin buying or too low to begin selling.
But after the initial transaction, don’t make a second unless the first
shows you a profit. Wait and watch._ That is where your tape reading
comes in--to enable you to decide as to the proper time for beginning.
_Much depends upon beginning at exactly the right time._ It took me
years to realize the importance of this. It also cost me some hundreds
of thousands of dollars.
I don’t mean to be understood as advising persistent pyramiding. _A
man can pyramid and make big money that he couldn’t make if he didn’t
pyramid; of course._ But what I meant to say was this: Suppose a man’s
line is five hundred shares of stock. I say that he ought not to buy
it all at once; not if he is speculating. If he is merely gambling the
only advice I have to give him is, don’t!
Suppose he buys his first hundred, and that promptly shows him a loss.
Why should he go to work and get more stock? He ought to see at once
that he is in wrong; at least temporarily.
_VIII_
The Union Pacific incident in Saratoga in the summer of 1906 made me
more independent than ever of tips and talk--that is, of the opinions
and surmises and suspicions of other people, however friendly or
however able they might be personally. Events, not vanity, proved
for me that I could read the tape more accurately than most of the
people about me. I also was better equipped than the average customer
of Harding Brothers in that I was utterly free from speculative
prejudices. The bear side doesn’t appeal to me any more than the bull
side, or vice versa. My one steadfast prejudice is against being wrong.
Even as a lad I always got my own meanings out of such facts as I
observed. It is the only way in which the meaning reaches me. I cannot
get out of facts what somebody tells me to get. They are my facts,
don’t you see? If I believe something you can be sure it is because
I simply must. When I am long of stocks it is because my reading of
conditions has made me bullish. But you find many people, reputed to be
intelligent, who are bullish because they have stocks. I do not allow
my possessions--or my prepossessions either--to do any thinking for me.
That is why I repeat that I never argue with the tape. To be angry at
the market because it unexpectedly or even illogically goes against you
is like getting mad at your lungs because you have pneumonia.
I had been gradually approaching the full realization of how much more
than tape reading there was to stock speculation. Old man Partridge’s
insistence on the vital importance of being continuously bullish in a
bull market doubtless made my mind dwell on the need above all other
things of determining the kind of market a man is trading in. _I began
to realize that the big money must necessarily be in the big swing.
Whatever might seem to give a big swing its initial impulse, the fact
is that its continuance is not the result of manipulations by pools
or artifice by financiers, but depends upon basic conditions. And no
matter who opposes it, the swing must inevitably run as far and as fast
and as long as the impelling forces determine._
After Saratoga I began to see more clearly--perhaps I should say more
maturely--that since the entire list moves in accordance with the
main current there was not so much need as I had imagined to study
individual plays or the behaviour of this or the other stock. Also,
by thinking of the swing a man was not limited in his trading. He
could buy or sell the entire list. In certain stocks a short line is
dangerous after a man sells more than a certain percentage of the
capital stock, the amount depending on how, where and by whom the stock
is held. But he could sell a million shares of the general list--if he
had the price--without the danger of being squeezed. A great deal of
money used to be made periodically by insiders in the old days out of
the shorts and their carefully fostered fears of corners and squeezes.
_Obviously the thing to do was to be bullish in a bull market and
bearish in a bear market._ Sounds silly, doesn’t it? But I had to grasp
that general principle firmly before I saw that to put it into practice
really meant to anticipate probabilities. It took me a long time to
learn to trade on those lines. But in justice to myself I must remind
you that up to then I had never had a big enough stake to speculate
that way. A big swing will mean big money if your line is big, and to
be able to swing a big line you need a big balance at your broker’s.
I always had--or felt that I had--to make my daily bread out of the
stock market. It interfered with my efforts to increase the stake
available for the more profitable but slower and therefore more
immediately expensive method of trading on swings.
But not only did my confidence in myself grow stronger but my brokers
ceased to think of me as a sporadically lucky Boy Plunger. They had
made a great deal out of me in commissions, but now I was in a fair way
to become their star customer and as such to have a value beyond the
actual volume of my trading. _A customer who makes money is an asset to
any broker’s office._
The moment I ceased to be satisfied with merely studying the tape I
ceased to concern myself exclusively with the daily fluctuations in