Reminiscences of a Stock Operator
but because I like to know all the facts of the case. By letting a man
have his say in full you are able to decide at once. It is a great
time-saver. It averts debates and prolonged discussions that get
nowhere. Nearly every business proposition that is brought to me can be
settled, as far as my participation in it is concerned, by my saying
yes or no. But I cannot say yes or no right off unless I have the
complete proposition before me.
Dan Williamson did the talking and I did the listening. He told me he
had heard a great deal about my operations in the stock market and how
he regretted that I had gone outside of my bailiwick and come a cropper
in cotton. Still it was to my bad luck that he owed the pleasure of
that interview with me. He thought my forte was the stock market, that
I was born for it and that I should not stray from it.
“And that is the reason, Mr. Livingston,” he concluded pleasantly, “why
we wish to do business with you.”
“Do business how?” I asked him.
“Be your brokers,” he said. “My firm would like to do your stock
business.”
“I’d like to give it to you,” I said, “but I can’t.”
“Why not?” he asked.
“I haven’t any money,” I answered.
“That part is all right,” he said with a friendly smile. “I’ll furnish
it.” He took out a pocket checkbook, wrote out a check for twenty-five
thousand dollars to my order, and gave it to me.
“What’s this for?” I asked.
“For you to deposit in your own bank. You will draw your own checks. I
want you to do your trading in our office. I don’t care whether you win
or lose. If that money goes I will give you another personal check. So
you don’t have to be so very careful with this one. See?”
I knew that the firm was too rich and prosperous to need anybody’s
business, much less to give a fellow the money to put up as margin.
And then he was so nice about it! Instead of giving me a credit with
the house he gave me the actual cash, so that he alone knew where
it came from, the only string being that if I traded I should do so
through his firm. And then the promise that there would be more if that
went! Still, there must be a reason.
“What’s the idea?” I asked him.
“The idea is simply that we want to have a customer in this office who
is known as a big active trader. Everybody knows that you swing a big
line on the short side, which is what I particularly like about you.
You are known as a plunger.”
“I still don’t get it,” I said.
“I’ll be frank with you, Mr. Livingston. We have two or three very
wealthy customers who buy and sell stocks in a big way. I don’t want
the Street to suspect them of selling long stock every time we sell
ten or twenty thousand shares of any stock. If the Street knows that
you are trading in our office it will not know whether it is your
short selling or the other customers’ long stock that is coming on the
market.”
I understood at once. He wanted to cover up his brother-in-law’s
operations with my reputation as a plunger! It so happened that I had
made my biggest killing on the bear side a year and a half before, and,
of course, the Street gossips and the stupid rumor-mongers had acquired
the habit of blaming me for every decline in prices. To this day when
the market is very weak they say I am raiding it.
I didn’t have to reflect. I saw at a glance that Dan Williamson was
offering me a chance to come back and come back quickly. I took the
check, banked it, opened an account with his firm and began trading. It
was a good active market, broad enough for a man not to have to stick
to one or two specialties. I had begun to fear, as I told you, that I
had lost the knack of hitting it right. But it seems I hadn’t. In three
weeks’ time I had made a profit of one hundred and twelve thousand
dollars out of the twenty-five thousand that Dan Williamson lent me.
I went to him and said, “I’ve come to pay you back that twenty-five
thousand dollars.”
“No, no!” he said and waved me away exactly as if I had offered him a
castor-oil cocktail. “No, no, my boy. Wait until your account amounts
to something. Don’t think about it yet. You’ve only got chicken feed
there.”
There is where I made the mistake that I have regretted more than any
other I ever made in my Wall Street career. It was responsible for long
and dreary years of suffering. I should have insisted on his taking the
money. I was on my way to a bigger fortune than I had lost and walking
pretty fast. For three weeks my average profit was 150 per cent per
week. From then on my trading would be on a steadily increasing scale.
But instead of freeing myself from all obligation I let him have his
way and did not compel him to accept the twenty-five thousand dollars.
Of course, since he didn’t draw out the twenty-five thousand dollars he
had advanced me I felt I could not very well draw out my profit. I was
very grateful to him, but I am so constituted that I don’t like to owe
money or favours. I can pay the money back with money, but the favours
and kindnesses I must pay back in kind--and you are apt to find these
moral obligations mighty high priced at times. Moreover there is no
statute of limitations.
I left the money undisturbed and resumed my trading. I was getting on
very nicely. I was recovering my poise and I was sure it would not be
very long before I should get back into my 1907 stride. Once I did
that, all I’d ask for would be for the market to hold out a little
while and I’d more than make up my losses. But making or not making
the money was not bothering me much. What made me happy was that I was
losing the habit of being wrong, of not being myself. It had played
havoc with me for months but I had learned my lesson.
Just about that time I turned bear and I began to sell short several
railroad stocks. Among them was Chesapeake & Atlantic. I think I put
out a short line in it; about eight thousand shares.
One morning when I got downtown Dan Williamson called me into his
private office before the market opened and said to me: “Larry, don’t
do anything in Chesapeake & Atlantic just now. That was a bad play of
yours, selling eight thousand short. I covered it for you this morning
in London and went long.”
I was sure Chesapeake & Atlantic was going down. The tape told it to
me quite plainly; and besides I was bearish on the whole market, not
violently or insanely bearish, but enough to feel comfortable with a
moderate short line out. I said to Williamson, “What did you do that
for? I am bearish on the whole market and they are all going lower.”
But he just shook his head and said, “I did it because I happen to know
something about Chesapeake & Atlantic that you couldn’t know. My advice
to you is not to sell that stock short until I tell you it is safe to
do so.”
What could I do? That wasn’t an asinine tip. It was advice that came
from the brother-in-law of the chairman of the board of directors. Dan
was not only Alvin Marquand’s closest friend but he had been kind and
generous to me. He had shown his faith in me and confidence in my word.
I couldn’t do less than to thank him. And so my feelings again won over
my judgment and I gave in. To subordinate my judgment to his desires
was the undoing of me. Gratitude is something a decent man can’t help
feeling, but it is for a fellow to keep it from completely tying him
up. The first thing I knew I not only had lost all my profit but I owed
the firm one hundred and fifty thousand dollars besides. I felt pretty
badly about it, but Dan told me not to worry.
“I’ll get you out of this hole,” he promised. “I know I will. But I
can only do it if you let me. You will have to stop doing business on
your own hook. I can’t be working for you and then have you completely
undo all my work in your behalf. Just lay off the market and give me a
chance to make some money for you. Won’t you, Larry?”
Again I ask you: What could I do? I thought of his kindliness and
I could not do anything that might be construed as lacking in
appreciation. I had grown to like him. He was very pleasant and
friendly. I remember that all I got from him was encouragement. He kept
on assuring me that everything would come out O.K. One day, perhaps
six months later, he came to me with a pleased smile and gave me some
credit slips.
“I told you I would pull you out of that hole,” he said, “and I have.”
And then I discovered that not only had he wiped out the debt entirely
but I had a small credit balance besides.
I think I could have run that up without much trouble, for the market
was right, but he said to me, “I have bought you ten thousand shares
of Southern Atlantic.” That was another road controlled by his
brother-in-law, Alvin Marquand, who also ruled the market destinies of
the stock.
When a man does for you what Dan Williamson did for me you can’t say
anything but “Thank you”--no matter what your market views may be. You
may be sure you’re right, but as Pat Hearne used to say: “You can’t
tell till you bet!” and Dan Williamson had bet for me--with his money.
Well, Southern Atlantic went down and stayed down and I lost, I forget
how much, on my ten thousand shares before Dan sold me out. I owed him
more than ever. But you never saw a nicer or less importunate creditor
in your life. Never a whimper from him. Instead, encouraging words and
admonitions not to worry about it. In the end the loss was made up for
me in the same generous but mysterious way.
He gave no details whatever. They were all numbered accounts. Dan
Williamson would just say to me, “We made up your Southern Atlantic
loss with profits on this other deal,” and he’d tell me how he had sold
seventy-five hundred shares of some other stock and made a nice thing
out of it. I can truthfully say that I never knew a blessed thing about
those trades of mine until I was told that the indebtedness was wiped
out.
After that happened several times I began to think, and I got to look
at my case from a different angle. Finally I tumbled. It was plain that
I had been used by Dan Williamson. It made me angry to think it, but
still angrier that I had not tumbled to it quicker. As soon as I had
gone over the whole thing in my mind I went to Dan Williamson, told
him I was through with the firm, and I quit the office of Williamson &
Brown. I had no words with him or any of his partners. What good would
that have done me? But I will admit that I was sore--at myself quite as
much as at Williamson & Brown.
The loss of the money didn’t bother me. Whenever I have lost money
in the stock market I have always considered that I have learned
something; that if I have lost money I have gained experience, so that
the money really went for a tuition fee. A man has to have experience
and he has to pay for it. But there was something that hurt a whole lot
in that experience of mine in Dan Williamson’s office, and that was the
loss of a great opportunity. The money a man loses is nothing; he can
make it up. But opportunities such as I had then do not come every day.
The market, you see, had been a fine trading market. I was right; I
mean, I was reading it accurately. The opportunity to make millions was
there. But I allowed my gratitude to interfere with my play. I tied
my own hands. I had to do what Dan Williamson in his kindness wished
done. Altogether it was more unsatisfactory than doing business with a
relative. Bad business!
And that wasn’t the worst thing about it. It was that after that there
was practically no opportunity for me to make big money. The market
flattened out. Things drifted from bad to worse. I not only lost all I
had but got into debt again--more heavily than ever. Those were long
lean years, 1911, 1912, 1913 and 1914. There was no money to be made.
The opportunity simply wasn’t there and so I was worse off than ever.