Reminiscences of a Stock Operator
me to take myself and my business elsewhere and not interfere with the
owners’ dividends.
Once, when the big concern I’d been trading with for months shut down
on me I made up my mind to take a little more of their money away
from them. That bucket shop had branches all over the city, in hotel
lobbies, and in near-by towns. I went to one of the hotel branches
and asked the manager a few questions and finally got to trading. But
as soon as I played an active stock my especial way he began to get
messages from the head office asking who it was that was operating. The
manager told me what they asked him and I told him my name was Edward
Robinson, of Cambridge. He telephoned the glad news to the big chief.
But the other end wanted to know what I looked like. When the manager
told me that I said to him, “Tell him I am a short fat man with dark
hair and a bushy beard!” But he described me instead, and then he
listened and his face got red and he hung up and told me to beat it.
“What did they say to you?” I asked him politely.
“They said, ‘You blankety-blank fool, didn’t we tell you to take no
business from Larry Livingston? And you deliberately let him trim us
out of $700!’” He didn’t say what else they told him.
I tried the other branches one after another, but they all got to know
me, and my money wasn’t any good in any of their offices. I couldn’t
even go in to look at the quotations without some of the clerks making
cracks at me. I tried to get them to let me trade at long intervals by
dividing my visits among them all. But that didn’t work.
Finally there was only one left to me and that was the biggest and
richest of all--the Cosmopolitan Stock Brokerage Company.
The Cosmopolitan was rated as A-1 and did an enormous business. It
had branches in every manufacturing town in New England. They took
my trading all right, and I bought and sold stocks and made and lost
money for months, but in the end it happened with them as usual. They
didn’t refuse my business point-blank, as the small concerns had. Oh,
not because it wasn’t sportsmanship, but because they knew it would
give them a black eye to publish the news that they wouldn’t take a
fellow’s business just because that fellow happened to make a little
money. But they did the next worse thing--that is, they made me put
up a three-point margin and compelled me to pay a premium at first
of a half point, then a point, and finally, a point and a half. Some
handicap, that! How? Easy! Suppose Steel was selling at 90 and you
bought it. Your ticket read, normally: “_Bot ten Steel at 90⅛._” If you
put up a point margin it meant that if it broke 89¼ you were wiped out
automatically. In a bucket shop the customer is not importuned for more
margin or put to the painful necessity of telling his broker to sell
for anything he can get.
But when the Cosmopolitan tacked on that premium they were hitting
below the belt. It meant that if the price was 90 when I bought,
instead of making my ticket: “_Bot Steel at 90⅛_,” it read: “_Bot
Steel at 91⅛_.” Why, that stock could advance a point and a quarter
after I bought it and I’d still be losing money if I closed the trade.
And by also insisting that I put up a three-point margin at the very
start they reduced my trading capacity by two-thirds. Still, that was
the only bucket shop that would take my business at all, and I had to
accept their terms or quit trading.
Of course I had my ups and downs, but was a winner on balance. However,
the Cosmopolitan people were not satisfied with the awful handicap they
had tacked on me, which should have been enough to beat anybody. They
tried to double-cross me. They didn’t get me. I escaped because of one
of my hunches.
The Cosmopolitan, as I said, was my last resort. It was the richest
bucket shop in New England, and as a rule they put no limit on a trade.
I think I was the heaviest individual trader they had--that is, of the
steady, every-day customers. They had a fine office and the largest and
completest quotation board I have ever seen anywhere. It ran along the
whole length of the big room and every imaginable thing was quoted.
I mean stocks dealt in on the New York and Boston Stock Exchanges,
cotton, wheat, provisions, metals--everything that was bought and sold
in New York, Chicago, Boston and Liverpool.
You know how they traded in bucket shops. You gave your money to a
clerk and told him what you wished to buy or sell. He looked at the
tape or the quotation board and took the price from there--the last
one, of course. He also put down the time on the ticket so that it
almost read like a regular broker’s report--that is, that they had
bought or sold for you so many shares of such a stock at such a price
at such a time on such a day and how much money they received from
you. When you wished to close your trade you went to the clerk--the
same or another, it depended on the shop--and you told him. He took the
last price or if the stock had not been active he waited for the next
quotation that came out on the tape. He wrote that price and the time
on your ticket, O.K.’d it and gave it back to you, and then you went to
the cashier and got whatever cash it called for. Of course, when the
market went against you and the price went beyond the limit set by your
margin, your trade automatically closed itself and your ticket became
one more scrap of paper.
In the humbler bucket shops, where people were allowed to trade in as
little as five shares, the tickets were little slips--different colors
for buying and selling--and at times, as for instance in boiling bull
markets, the shops would be hard hit because all the customers were
bulls and happened to be right. Then the bucket shop would deduct both
buying and selling commissions and if you bought a stock at 20 the
ticket would read 20¼. You thus had only ¾, of a point’s run for your
money.
But the Cosmopolitan was the finest in New England. It had thousands
of patrons and I really think I was the only man they were afraid of.
Neither the killing premium nor the three-point margin they made me put
up reduced my trading much. I kept on buying and selling as much as
they’d let me. I sometimes had a line of 5000 shares.
Well, on the day the thing happened that I am going to tell you, I was
short thirty-five hundred shares of Sugar. I had seven big pink tickets
for five hundred shares each. The Cosmopolitan used big slips with a
blank space on them where they could write down additional margin. Of
course, the bucket shops never ask for more margin. The thinner the
shoestring the better for them, for their profit lies in your being
wiped. In the smaller shops if you wanted to margin your trade still
further they’d make out a new ticket, so they could charge you the
buying commission and only give you a run of ¾ of a point on each
point’s decline, for they figured the selling commission also exactly
as if it were a new trade.
Well, this day I remember I had up over $10,000 in margins.
I was only twenty when I first accumulated ten thousand dollars in
cash. And you ought to have heard my mother. You’d have thought that
ten thousand dollars in cash was more than anybody carried around
except old John D., and she used to tell me to be satisfied and go into
some regular business. I had a hard time convincing her that I was not
gambling, but making money by figuring. But all she could see was that
ten thousand dollars was a lot of money and all I could see was more
margin.
I had put out my 3500 shares of Sugar at 105¼. There was another fellow
in the room, Henry Williams, who was short 2500 shares. I used to sit
by the ticker and call out the quotations for the board boy. The price
behaved as I thought it would. It promptly went down a couple of points
and paused a little to get its breath before taking another dip. The
general market was pretty soft and everything looked promising. Then
all of a sudden I didn’t like the way Sugar was doing its hesitating.
I began to feel uncomfortable. I thought I ought to get out of the
market. Then it sold at 103--that was low for the day--but instead of
feeling more confident I felt more uncertain. I knew something was
wrong somewhere, but I couldn’t spot it exactly. But if something was
coming and I didn’t know where from, I couldn’t be on my guard against
it. That being the case I’d better be out of the market.
You know, I don’t do things blindly. I don’t like to. I never did.
Even as a kid I had to know why I should do certain things. But this
time I had no definite reason to give to myself, and yet I was so
uncomfortable that I couldn’t stand it. I called to a fellow I knew,
Dave Wyman, and said to him: “Dave, you take my place here. I want you
to do something for me. Wait a little before you call out the next
price of Sugar, will you?”
He said he would, and I got up and gave him my place by the ticker so
he could call out the prices for the boy. I took my seven Sugar tickets
out of my pocket and walked over to the counter, to where the clerk was
who marked the tickets when you closed your trades. But I didn’t really
know why I should get out of the market, so I just stood there, leaning
against the counter, my tickets in my hand so that the clerk couldn’t
see them. Pretty soon I heard the clicking of a telegraph instrument
and I saw Tom Burnham, the clerk, turn his head quickly and listen.
Then I felt that something crooked was hatching, and I decided not to
wait any longer. Just then Dave Wyman by the ticker, began: “Su--”
and quick as a flash I slapped my tickets on the counter in front of
the clerk and yelled, “Close Sugar!” before Dave had finished calling
the price. So, of course, the house had to close my Sugar at the last
quotation. What Dave called turned out to be 103 again.
According to my dope Sugar should have broken 103 by now. The engine
wasn’t hitting right. I had the feeling that there was a trap in the
neighbourhood. At all events, the telegraph instrument was now going
like mad and I noticed that Tom Burnham, the clerk, had left my tickets
unmarked where I laid them, and was listening to the clicking as if he
were waiting for something. So I yelled at him: “Hey, Tom, what in hell
are you waiting for? Mark the price on these tickets--103! Get a gait
on!”
Everybody in the room heard me and began to look toward us and ask what
was the trouble, for, you see, while the Cosmopolitan had never laid
down, there was no telling, and a run on a bucket shop can start like a
run on a bank. If one customer gets suspicious the others follow suit.
So Tom looked sulky, but came over and marked my tickets “Closed at
103” and shoved the seven of them over toward me. He sure had a sour
face.
Say, the distance from Tom’s place to the cashier’s cage wasn’t over
eight feet. But I hadn’t got to the cashier to get my money when Dave
Wyman by the ticker yelled excitedly: “Gosh! Sugar, 108!” But it was
too late; so I just laughed and called over to Tom, “It didn’t work
that time, did it, old boy?”
Of course, it was a put-up job. Henry Williams and I together were
short six thousand shares of Sugar. That bucket shop had my margin and
Henry’s, and there may have been a lot of other Sugar shorts in the
office; possibly eight or ten thousand shares in all. Suppose they had
$20,000 in Sugar margins. That was enough to pay the shop to thimblerig
the market on the New York Stock Exchange and wipe us out. In the old
days whenever a bucket shop found itself loaded with too many bulls on
a certain stock it was a common practice to get some broker to wash
down the price of that particular stock far enough to wipe out all
the customers that were long of it. This seldom cost the bucket shop
more than a couple of points on a few hundred shares, and they made
thousands of dollars.