Reminiscences of a Stock Operator
had always paid my debts in full and this new experience was most
mortifying to me. I knew I’d pay off everybody some day if I lived,
but everybody who read the article wouldn’t know it. I was ashamed to
go out after I saw the report in the newspapers. But it all wore off
presently and I cannot tell you how intense was my feeling of relief to
know that I wasn’t going to be harried any more by people who didn’t
understand how a man must give his entire mind to his business--if he
wishes to succeed in stock speculation.
My mind now being free to take up trading with some prospect of
success, unvexed by debts, the next step was to get another stake. The
Stock Exchange had been closed from July thirty-first to the middle of
December, 1914, and Wall Street was in the dumps. There hadn’t been any
business whatever in a long time. I owed all my friends. I couldn’t
very well ask them to help me again just because they had been so
pleasant and friendly to me, when I knew that nobody was in a position
to do much for anybody.
It was a mighty difficult task, getting a decent stake, for with the
closing of the Stock Exchange there was nothing that I could ask any
broker to do for me. I tried in a couple of places. No use.
Finally I went to see Dan Williamson. This was in February, 1915. I
told him that I had rid myself of the mental incubus of debt and I was
ready to trade as of old. You will recall that when he needed me he
offered me the use of twenty-five thousand dollars without my asking
him.
Now that I needed him he said, “When you see something that looks good
to you and you want to buy five hundred shares go ahead and it will be
all right.”
I thanked him and went away. He had kept me from making a great deal of
money and the office had made a lot in commissions from me. I admit
I was a little sore to think that Williamson & Brown didn’t give me a
decent stake. I intended to trade conservatively at first. It would
make my financial recovery easier and quicker if I could begin with a
line a little better than five hundred shares. But, anyhow, I realised
that, such as it was, there was my chance to come back.
I left Dan Williamson’s office and studied the situation in general
and my own problem in particular. It was a bull market. That was as
plain to me as it was to thousands of traders. But my stake consisted
merely of an offer to carry five hundred shares for me. That is, I had
no leeway, limited as I was. I couldn’t afford even a slight setback at
the beginning. I must build up my stake with my very first play. That
initial purchase of mine of five hundred shares must be profitable. I
had to make real money. I knew unless I had sufficient trading capital
I would not be able to use good judgment. Without adequate margins it
would be impossible to take the cold-blooded, dispassionate attitude
toward the game that comes from the ability to afford a few minor
losses such as I often incurred in testing the market before putting
down the big bet.
I think now that I found myself then at the most critical period of
my career as a speculator. If I failed this time there was no telling
where or when, if ever, I might get another stake for another try. It
was very clear that I simply must wait for the exact psychological
moment.
I didn’t go near Williamson & Brown’s. I mean, I purposely kept away
from them for six long weeks of steady tape reading. I was afraid
that if I went to the office, knowing that I could buy five hundred
shares, I might be tempted into trading at the wrong time or in the
wrong stock. A trader, in addition to studying basic conditions,
remembering market precedents and keeping in mind the psychology of
the outside public as well as the limitations of his brokers, must
also know himself and provide against his own weaknesses. There is no
need to feel anger over being human. I have come to feel that it is as
necessary to know how to read myself as to know how to read the tape. I
have studied and reckoned on my own reactions to given impulses or to
the inevitable temptations of an active market, quite in the same mood
and spirit as I have considered crop conditions or analysed reports of
earnings.
So day after day, broke and anxious to resume trading, I sat in front
of a quotation-board in another broker’s office where I couldn’t buy or
sell as much as one share of stock, studying the market, not missing a
single transaction on the tape, watching for the psychological moment
to ring the full-speed-ahead bell.
By reason of conditions known to the whole world the stock I was most
bullish on in those critical days of early 1915 was Bethlehem Steel. I
was morally certain it was going way up, but in order to make sure that
I would win on my very first play, as I must, I decided to wait until
it crossed par.
I think I have told you it has been my experience that _whenever a
stock crosses 100 or 200 or 300 for the first time, it nearly always
keeps going up for 30 to 50 points--and after 300 faster than after
100 or 200_. One of my first big coups was in Anaconda, which I bought
when it crossed 200 and sold a day later at 260. My practice of buying
a stock just after it crossed par dated back to my early bucket-shop
days. It is an old trading principle.
You can imagine how keen I was to get back to trading on my old scale.
I was so eager to begin that I could not think of anything else; but I
held myself in leash. I saw Bethlehem Steel climb, every day, higher
and higher, as I was sure it would, and yet there I was checking my
impulse to run over to Williamson & Brown’s office and buy five hundred
shares. I knew I simply had to make my initial operation as nearly a
cinch as was humanly possible.
Every point that stock went up meant five hundred dollars I had not
made. The first ten points’ advance meant that I would have been able
to pyramid, and instead of five hundred shares I might now be carrying
one thousand shares that would be earning for me one thousand dollars
a point. But I sat tight and instead of listening to my loud-mouthed
hopes or to my clamorous beliefs I heeded only the level voice of my
experience and the counsel of common sense. Once I got a decent stake
together I could afford to take chances. But without a stake, taking
chances, even slight chances, was a luxury utterly beyond my reach. Six
weeks of patience--but, in the end, a victory for common sense over
greed and hope!
I really began to waver and sweat blood when the stock got up to 90.
Think of what I had not made by not buying, when I was so bullish.
Well, when it got to 98 I said to myself, “Bethlehem is going through
100, and when it does the roof is going to blow clean off!” The tape
said the same thing more than plainly. In fact, it used a megaphone.
I tell you, I saw _100_ on the tape when the ticker was only printing
_98_. And I knew that wasn’t the voice of my hope or the sight of my
desire, but the assertion of my tape-reading instinct. So I said to
myself, “I can’t wait until it gets through 100. I have to get it now.
It is as good as gone through par.”
I rushed to Williamson & Brown’s office and put in an order to buy five
hundred shares of Bethlehem Steel. The market was then 98. I got five
hundred shares at 98 to 99. After that she shot right up, and closed
that night, I think, at 114 or 115. I bought five hundred shares more.
The next day Bethlehem Steel was 145 and I had my stake. But I earned
it. Those six weeks of waiting for the right moment were the most
strenuous and wearing six weeks I ever put in. But it paid me, for I
now had enough capital to trade in fair-sized lots. I never would have
got anywhere just on five hundred shares of stock.
There is a great deal in starting right, whatever the enterprise may
be, and I did very well after my Bethlehem deal--so well, indeed,
that you would not have believed it was the selfsame man trading. As a
matter of fact I wasn’t the same man, for where I had been harassed and
wrong I was now at ease and right. There were no creditors to annoy and
no lack of funds to interfere with my thinking or with my listening to
the truthful voice of experience, and so I was winning right along.
All of a sudden, as I was on my way to a sure fortune, we had the
_Lusitania_ break. Every once in a while a man gets a crack like that
in the solar plexus, probably that he may be reminded of the sad fact
that no human being can be so uniformly right on the market as to be
beyond the reach of unprofitable accidents. I have heard people say
that no professional speculator need have been hit very hard by the
news of the torpedoing of the _Lusitania_, and they go on to tell how
they had it long before the Street did. I was not clever enough to
escape by means of advance information, and all I can tell you is that
on account of what I lost through the _Lusitania_ break and one or two
other reverses that I wasn’t wise enough to foresee, I found myself
at the end of 1915 with a balance at my brokers’ of about one hundred
and forty thousand dollars. That was all I actually made, though I was
consistently right on the market throughout the greater part of the
year.
I did much better during the following year. I was very lucky. I was
rampantly bullish in a wild bull market. Things were certainly coming
my way so that there wasn’t anything to do but to make money. It
made me remember a saying of the late H. H. Rogers, of the Standard
Oil Company, to the effect that there were times when a man could no
more help making money than he could help getting wet if he went out
in a rainstorm without an umbrella. It was the most clearly defined
bull market we ever had. It was plain to everybody that the Allied
purchases of all kinds of supplies here made the United States the most
prosperous nation in the world. We had all the things that no one else
had for sale, and we were fast getting all the cash in the world.
I mean that the wide world’s gold was pouring into this country in
torrents. Inflation was inevitable, and, of course, that meant rising
prices for everything.
All this was so evident from the first that little or no manipulation
for the rise was needed. That was the reason why the preliminary
work was so much less than in other bull markets. And not only was
the war-bride boom more naturally developed than all others but it
proved unprecedentedly profitable for the general public. That is, the
stock-market winnings during 1915 were more widely distributed than in
any other boom in the history of Wall Street. That the public did not
turn all their paper profits into good hard cash or that they did not
long keep what profits they actually took was merely history repeating
itself. Nowhere does history indulge in repetitions so often or so
uniformly as in Wall Street. When you read contemporary accounts of
booms or panics the one thing that strikes you most forcibly is how
little either stock speculation or stock speculators to-day differ from
yesterday. The game does not change and neither does human nature.
I went along with the rise in 1916. I was as bullish as the next man,
but of course I kept my eyes open. I knew, as everybody did, that there
must be an end, and I was on the watch for warning signals. I wasn’t
particularly interested in guessing from which quarter the tip would
come and so I didn’t stare at just one spot. I was not, and I never
have felt that I was, wedded indissolubly to one or the other side of
the market. That a bull market has added to my bank account or a bear
market has been particularly generous I do not consider sufficient
reason for sticking to the bull or the bear side after I receive the
get-out warning. _A man does not swear eternal allegiance to either the
bull or the bear side. His concern lies with being right._