Reminiscences of a Stock Operator
declined to enter into a working alliance with him, I would have sworn
that our business paths would never cross. I was not sure I’d ever see
him again. But on the very next day he wrote me a letter thanking me
for my offers of help and inviting me to come and see him. I answered
that I would. He wrote again. I called.
I got to see a great deal of him. It was always a pleasure for me
to listen to him, he knew so much and he expressed his knowledge so
interestingly. I think he is the most magnetic man I ever met.
We talked of many things, for he is a widely read man with an
amazing grasp of many subjects and a remarkable gift for interesting
generalization. The wisdom of his speech is impressive; and as for
plausibility, he hasn’t an equal. I have heard many people accuse Percy
Thomas of many things, including insincerity, but I sometimes wonder
if his remarkable plausibility does not come from the fact that he
first convinces himself so thoroughly as to acquire thereby a greatly
increased power to convince others.
Of course we talked about market matters at great length. I was not
bullish on cotton, but he was. I could not see the bull side at all,
but he did. He brought up so many facts and figures that I ought to
have been overwhelmed, but I wasn’t. I couldn’t disprove them because
I could not deny their authenticity, but they did not shake my belief
in what I read for myself. But he kept at it until I no longer felt
sure of my own information as gathered from the trade papers and the
dailies. That meant I couldn’t set the market with my own eyes. A man
cannot be convinced against his own convictions, but he can be talked
into a state of uncertainty and indecision, which is even worse, for
that means that he cannot trade with confidence and comfort.
I cannot say that I got all mixed up, exactly, but I lost my poise; or
rather, I ceased to do my own thinking. I cannot give you in detail
the various steps by which I reached the state of mind that was to
prove so costly to me. I think it was his assurances of the accuracy
of his figures, which were exclusively his, and the undependability of
mine, which were not exclusively mine, but public property. He harped
on the utter reliability, as proved time and again, of all his ten
thousand correspondents throughout the South. In the end I came to read
conditions as he himself read them--because we were both reading from
the same page of the same book, held by him before my eyes. He has a
logical mind. Once I accepted his facts it was a cinch that my own
conclusions, derived from his facts, would agree with his own.
When he began his talks with me about the cotton situation I not only
was bearish but I was short of the market. Gradually, as I began
to accept his facts and figures, I began to fear I had been basing
my previous position on misinformation. Of course I could not feel
that way and not cover. And once I had covered because Thomas made
me think I was wrong, I simply had to go long. It is the way my mind
works. You know, I have done nothing in my life but trade in stocks
and commodities. I naturally think that if it is wrong to be bearish
it must be right to be a bull. And if it is right to be a bull it is
imperative to buy. As my old Palm Beach friend said Pat Hearne used to
say, “You can’t tell till you bet!” I must prove whether I am right on
the market or not; and the proofs are to be read only in my brokers’
statements at the end of the month.
I started in to buy cotton and in a jiffy I had my usual line, about
sixty thousand bales. It was the most asinine play of my career.
Instead of standing or falling by my own observation and deductions I
was merely playing another man’s game. It was eminently fitting that my
silly plays should not end with that. I not only bought when I had no
business to be bullish but I didn’t accumulate my line in accordance
with the promptings of experience. I wasn’t trading right. Having
listened, I was lost.
The market was not going my way. I am never afraid or impatient when
I am sure of my position. But the market didn’t act the way it should
have acted had Thomas been right. Having taken the first wrong step I
took the second and the third, and of course it muddled me all up. I
allowed myself to be persuaded not only into not taking my loss but
into holding up the market. That is a style of play foreign to my
nature and contrary to my trading principles and theories. Even as a
boy in the bucket shops I had known better. But I was not myself. I was
another man--a Thomasized person.
I not only was long of cotton but I was carrying a heavy line of
wheat. That was doing famously and showed me a handsome profit. My
fool efforts to bolster up cotton had increased my line to about one
hundred and fifty thousand bales. I may tell you that about this time
I was not feeling very well. I don’t say this to furnish an excuse for
my blunders, but merely to state a pertinent fact. I remember I went to
Bayshore for a rest.
While there I did some thinking. It seemed to me that my speculative
commitments were overlarge. I am not timid as a rule, but I got to
feeling nervous and that made me decide to lighten my load. To do this
I must clean up either the cotton or the wheat.
It seems incredible that knowing the game as well as I did and with
an experience of twelve or fourteen years of speculating in stocks
and commodities _I did precisely the wrong thing_. _The cotton showed
me a loss and I kept it. The wheat showed me a profit and I sold it
out._ It was an utterly foolish play, but all I can say in extenuation
is that it wasn’t really my deal, but Thomas’. _Of all speculative
blunders there are few greater than trying to average a losing game._
My cotton deal proved it to the hilt a little later. _Always sell
what shows you a loss and keep what shows you a profit._ That was so
obviously the wise thing to do and was so well known to me that even
now I marvel at myself for doing the reverse.
And so I sold my wheat, deliberately cut short my profit in it. After I
got out of it the price went up twenty cents a bushel without stopping.
If I had kept it I might have taken a profit of about eight million
dollars. And having decided to keep on with the losing proposition I
bought more cotton!
I remember very clearly how every day I would buy cotton, more cotton.
And why do you think I bought it? To keep the price from going down!
If that isn’t a supersucker play, what is? I simply kept putting up
more and more money--more money to lose eventually. My brokers and my
intimate friends couldn’t understand it; and they don’t to this day.
Of course if the deal had turned out differently I would have been a
wonder. More than once I was warned against placing too much reliance
on Percy Thomas’ brilliant analyses. To this I paid no heed, but kept
on buying cotton to keep it from going down. I was even buying it in
Liverpool. I accumulated four hundred and forty thousand bales before I
realized what I was doing. And then it was too late. So I sold out my
line.
I lost nearly all that I had made out of all my other deals in stocks
and commodities. I was not completely cleaned out, but I had left fewer
hundreds of thousands than I had millions before I met my brilliant
friend Percy Thomas. For me of all men to violate all the laws that
experience had taught me to observe in order to prosper was more than
asinine.
_To learn that a man can make foolish plays for no reason whatever was
a valuable lesson._ It cost me millions to learn that another dangerous
enemy to a trader is his susceptibility to the urgings of a magnetic
personality when plausibly expressed by a brilliant mind. It has always
seemed to me, however, that I might have learned my lesson quite as
well if the cost had been only one million. But Fate does not always
let you fix the tuition fee. She delivers the educational wallop and
presents her own bill, knowing you have to pay it, no matter what the
amount may be. Having learned what folly I was capable of I closed that
particular incident. Percy Thomas went out of my life.
There I was, with more than nine-tenths of my stake, as Jim Fisk used
to say, gone where the woodbine twineth--up the spout. I had been a
millionaire rather less than a year. My millions I had made by using
brains, helped by luck. I had lost them by reversing the process. I
sold my two yachts and was decidedly less extravagant in my manner of
living.
But that one blow wasn’t enough. Luck was against me. I ran up first
against illness and then against the urgent need of two hundred
thousand dollars in cash. A few months before that sum would have
been nothing at all; but now it meant almost the entire remnant of my
fleet-winged fortune. I had to supply the money and the question was:
Where would I get it? I didn’t want to take it out of the balance I
kept at my brokers’ because if I did I wouldn’t have much of a margin
left for my own trading; and I needed trading facilities more than
ever if I was to win back my millions quickly. There was only one
alternative that I could see, and that was to take it out of the stock
market!
Just think of it! If you know much about the average customer of the
average commission house you will agree with me that the hope of making
the stock market pay your bill is one of the most prolific sources of
loss in Wall Street. You will chip out all you have if you adhere to
your determination.
Why, in Harding’s office one winter a little bunch of high flyers
spent thirty or forty thousand dollars for an overcoat--and not one
of them lived to wear it. It so happened that a prominent floor
trader--who since has become world-famous as one of the dollar-a-year
men--came down to the Exchange wearing a fur overcoat lined with
sea otter. In those days, before furs went up sky high, that coat
was valued at only ten thousand dollars. Well, one of the chaps in
Harding’s office, Bob Keown, decided to get a coat lined with Russian
sable. He priced one uptown. The cost was about the same, ten thousand
dollars.
“That’s the devil of a lot of money,” objected one of the fellows.
“Oh, fair! Fair!” admitted Bob Keown amiably. “About a week’s
wages--unless you guys promise to present it to me as a slight but
sincere token of the esteem in which you hold the nicest man in the
office. Do I hear the presentation speech? No? Very well. I shall let
the stock market buy it for me!”
“Why do you want a sable coat?” asked Ed Harding.
“It would look particularly well on a man of my inches,” replied Bob,
drawing himself up.
“And how did you say you were going to pay for it?” asked Jim Murphy,
who was the star tip-chaser of the office.
“By a judicious investment of a temporary character, James. That’s
how,” answered Bob, who knew that Murphy merely wanted a tip.
Sure enough, Jimmy asked, “What stock are you going to buy?”
“Wrong as usual, friend. This is no time to buy anything. I propose to
sell five thousand Steel. It ought to go down ten points at the least.
I’ll just take two and a half points net. That is conservative, isn’t
it?”
“What do you hear about it?” asked Murphy eagerly. He was a tall thin
man with black hair and a hungry look, due to his never going out to
lunch for fear of missing something on the tape.
“I hear that coat’s the most becoming I ever planned to get.” He turned
to Harding and said, “Ed, sell five thousand U.S. Steel common at the
market. To-day, darling!”
He was a plunger, Bob was, and liked to indulge in humorous talk. It
was his way of letting the world know that he had an iron nerve. He
sold five thousand Steel, and the stock promptly went up. Not being
half as big an ass as he seemed when he talked, Bob stopped his loss