Reminiscences of a Stock Operator
Well, Reading never stopped going up. It rose something like one
hundred points in a few weeks. One day old Westlake ran smack up
against John W. in the Street, but he made out he hadn’t seen him and
was walking on. John W. Gates caught up with him, his face all smiles
and held out his hand. Old Westlake shook it dazedly.
“I want to thank you for that tip you gave me on Reading,” said Gates.
“I didn’t give you any tip,” said Westlake, frowning.
“Sure you did. And it was a Jim Hickey of a tip too. I made sixty
thousand dollars.”
“Made sixty thousand dollars?”
“Sure! Don’t you remember? You told me to sell Reading; so I bought it!
I’ve always made money coppering your tips, Westlake,” said John W.
Gates pleasantly. “Always!”
Old Westlake looked at the bluff Westerner and presently remarked
admiringly, “Gates, what a rich man I’d be if I had your brains!”
The other day I met Mr. W. A. Rogers, the famous cartoonist, whose
Wall Street drawings brokers so greatly admire. His daily cartoons in
the New York _Herald_ for years gave pleasure to thousands. Well, he
told me a story. It was just before we went to war with Spain. He was
spending an evening with a broker friend. When he left he picked up his
derby hat from the rack, at least he thought it was his hat, for it was
the same shape and fitted him perfectly.
The Street at that time was thinking and talking of nothing but war
with Spain. Was there to be one or not? If it was to be war the market
would go down; not so much on our own selling as on pressure from
European holders of our securities. If peace, it would be a cinch to
buy stocks, as there had been considerable declines prompted by the
sensational clamorings of the yellow papers. Mr. Rogers told me the
rest of the story as follows:
“My friend, the broker, at whose house I had been the night before,
stood in the Exchange the next day anxiously debating in his mind which
side of the market to play. He went over the pros and cons, but it
was impossible to distinguish which were rumors and which were facts.
There was no authentic news to guide him. At one moment he thought war
was inevitable, and on the next he almost convinced himself that it
was utterly unlikely. His perplexity must have caused a rise in his
temperature, for he took off his derby to wipe his fevered brow. He
couldn’t tell whether he should buy or sell.
“He happened to look inside of his hat. There in gold letters was
the word WAR. That was all the hunch he needed. Was it not a tip
from Providence via my hat? So he sold a raft of stock, war was duly
declared, he covered on the break and made a killing.” And then W. A.
Rogers finished, “I never got back that hat!”
But the prize tip story of my collection concerns one of the most
popular members of the New York Stock Exchange, J. T. Hood. One day
another floor trader, Bert Walker, told him that he had done a good
turn to a prominent director of the Atlantic & Southern. In return the
grateful insider told him to buy all the A. & S. he could carry. The
directors were going to do something that would put the stock up at
least twenty-five points. All the directors were not in the deal, but
the majority would be sure to vote as wanted.
Bert Walker concluded that the dividend rate was going to be raised. He
told his friend Hood and they each bought a couple of thousand shares
of A. & S. The stock was very weak, before and after they bought, but
Hood said that was obviously intended to facilitate accumulation by
the inside clique, headed by Bert’s grateful friend.
On the following Thursday, after the market closed, the directors of
the Atlantic & Southern met and passed the dividend. The stock broke
six points in the first six minutes of trading Friday morning.
Bert Walker was sore as a pup. He called on the grateful director, who
was broken-hearted about it and very penitent. He said that he had
forgotten that he had told Walker to buy. That was the reason he had
neglected to call him up to tell him of a change in the plans of the
dominant faction in the board. The remorseful director was so anxious
to make up that he gave Bert another tip. He kindly explained that a
couple of his colleagues wanted to get cheap stock and against his
judgment resorted to coarse work. He had to yield to win their votes.
But now that they all had accumulated their full lines there was
nothing to stop the advance. It was a double-riveted, lead-pipe cinch
to buy A. & S. now.
Bert not only forgave him but shook hands warmly with the high
financier. Naturally he hastened to find his friend and fellow-victim,
Hood, to impart the glad tidings to him. They were going to make a
killing. The stock had been tipped for a rise before and they bought.
But now it was fifteen points lower. That made it a cinch. So they
bought five thousand shares, joint account.
As if they had rung a bell to start it, the stock broke badly on
what quite obviously was inside selling. Two specialists cheerfully
confirmed the suspicion. Hood sold out their five thousand shares. When
he got through Bert Walker said to him, “If that blankety-blank blanker
hadn’t gone to Florida day before yesterday I’d lick the stuffing out
of him. Yes, I would. But you come with me.”
“Where to?” asked Hood.
“To the telegraph office. I want to send that skunk a telegram that
he’ll never forget. Come on.”
Hood went on. Bert led the way to the telegraph office. There, carried
away by his feelings--they had taken quite a loss on the five thousand
shares--he composed a masterpiece of vituperation. He read it to Hood
and finished, “That will come pretty near to showing him what I think
of him.”
He was about to slide it toward the waiting clerk when Hood said, “Hold
on, Bert!”
“What’s the matter?”
“I wouldn’t send it,” advised Hood earnestly.
“Why not?” snapped Bert.
“It will make him sore as the dickens.”
“That’s what we want, isn’t it?” said Bert, looking at Hood in surprise.
But Hood shook his head disapprovingly and said in all seriousness,
“We’ll never get another tip from him if you send that telegram!”
A professional trader actually said that. Now what’s the use of talking
about sucker tip-takers? Men do not take tips because they are bally
asses but because they like those hope cocktails I spoke of. Old Baron
Rothschild’s recipe for wealth winning applies with greater force than
ever to speculation. Somebody asked him if making money in the Bourse
was not a very difficult matter, and he replied that, on the contrary,
he thought it was very easy.
“That is because you are so rich,” objected the interviewer.
“Not at all. I have found an easy way and I stick to it. I simply
cannot help making money. I will tell you my secret if you wish. It is
this: _I never buy at the bottom and I always sell too soon_.”
Investors are a different breed of cats. Most of them go in strong for
inventories and statistics of earnings and all sorts of mathematical
data, as though that meant facts and certainties. _The human factor
is minimised as a rule._ Very few people like to buy into a one-man
business. But the wisest investor I ever knew was a man who began by
being a Pennsylvania Dutchman and followed it up by coming to Wall
Street and seeing a great deal of Russell Sage.
He was a great investigator, an indefatigable Missourian. He believed
in asking his own questions and in doing his seeing with his own eyes.
He had no use for another man’s spectacles. This was years ago. It
seems he held quite a little Atchison. Presently he began to hear
disquieting reports about the company and its management. He was told
that Mr. Reinhart, the president, instead of being the marvel he was
credited with being, in reality was a most extravagant manager whose
recklessness was fast pushing the company into a mess. There would be
the deuce to pay on the inevitable day of reckoning.
This was precisely the kind of news that was as the breath of life
to the Pennsylvania Dutchman. He hurried over to Boston to interview
Mr. Reinhart and ask him a few questions. The questions consisted of
repeating the accusations he had heard and then asking the president of
the Atchison, Topeka & Santa Fe Railroad if they were true.
Mr. Reinhart not only denied the allegations emphatically but said
even more: He proceeded to prove by figures that the allegators
were malicious liars. The Pennsylvania Dutchman had asked for exact
information and the president gave it to him, showing him what the
company was doing and how it stood financially, to a cent.
The Pennsylvania Dutchman thanked President Reinhart, returned to New
York and promptly sold all his Atchison holdings. A week or so later he
used his idle funds to buy a big lot of Delaware, Lackawanna & Western.
Years afterward we were talking of lucky swaps and he cited his own
case. He explained what prompted him to make it.
“You see,” he said, “I noticed that President Reinhart, when he wrote
down figures, took sheets of letter paper from a pigeonhole in his
mahogany roll-top desk. It was fine heavy linen paper with beautifully
engraved letterheads in two colors. It was not only very expensive
but worse--it was unnecessarily expensive. He would write a few
figures on a sheet to show me exactly what the company was earning on
certain divisions or to prove how they were cutting down expenses or
reducing operating costs, and then he would crumple up the sheet of
the expensive paper and throw it in the waste-basket. Pretty soon he
would want to impress me with the economies they were introducing and
he would reach for a fresh sheet of the beautiful notepaper with the
engraved letterheads in two colors. A few figures--and bingo, into the
waste-basket! More money wasted without a thought. It struck me that
if the president was that kind of a man he would scarcely be likely
to insist upon having or rewarding economical assistants. I therefore
decided to believe the people who had told me the management was
extravagant instead of accepting the president’s version and I sold
what Atchison stock I held.
“It so happened that I had occasion to go to the offices of the
Delaware, Lackawanna & Western a few days later. Old Sam Sloan was the
president. His office was the nearest to the entrance and his door
was wide open. It was always open. Nobody could walk into the general
offices of the D.L.&W. in those days and not see the president of the
company seated at his desk. Any man could walk in and do business with
him right off, if he had any business to do. The financial reporters
used to tell me that they never had to beat around the bush with old
Sam Sloan, but would ask their questions and get a straight yes or
no from him, no matter what the stock-market exigencies of the other
directors might be.
“When I walked in I saw the old man was busy. I thought at first that
he was opening his mail, but after I got inside close to the desk I saw
what he was doing. I learned afterwards that it was his daily custom to
do it. After the mail was sorted and open, instead of throwing away the
empty envelopes he had them gathered up and taken to his office. In
his leisure moments he would rip the envelope all around. That gave him
two bits of paper, each with one clean blank side. He would pile these
up and then he would have them distributed about, to be used in lieu of
scratch pads for such figuring as Reinhart had done for me on engraved
notepaper. No waste of empty envelopes and no waste of the president’s
idle moments. Everything utilised.
“It struck me that if that was the kind of man the D.L.&W. had for
president, the company was managed economically in all departments. The
president would see to that! Of course I knew the company was paying