Reminiscences of a Stock Operator
Wall Street. After we finally got out of the jam my father explained
to me that the man who was shouting ‘Shylock’ was So-and-So. I have
forgotten the name, but he was the biggest operator in clique stocks
in the city and was understood to have made--and lost--more money than
any other man in Wall Street with the exception of Jacob Little. I
remember Jacob Little’s name because I thought it was a funny name for
a man to have. The other man, the Shylock, was a notorious locker-up
of money. His name has also gone from me. But I remember he was tall
and thin and pale. In those days the cliques used to lock up money by
borrowing it or, rather, by reducing the amount available to Stock
Exchange borrowers. They would borrow it and get a certified check.
They wouldn’t actually take the money out and use it. Of course that
was rigging. It was a form of manipulation, I think.”
I agree with the old chap. It was a phase of manipulation that we don’t
have nowadays.
_XX_
I myself never spoke to any of the great stock manipulators that the
Street still talks about. I don’t mean leaders; I mean manipulators.
They were all before my time, although when I first came to New York,
_James R. Keene, greatest of them all_, was in his prime. But I was
a mere youngster then, exclusively concerned with duplicating, in a
reputable broker’s office, the success I had enjoyed in the bucket
shops of my native city. And, then, too, at the time Keene was busy
with the U.S. Steel stocks--his manipulative masterpiece--I had no
experience with manipulation, no real knowledge of it or of its value
or meaning, and, for that matter, no great need of such knowledge.
If I thought about it at all I suppose I must have regarded it as a
well-dressed form of thimble-rigging, of which the lowbrow form was
such tricks as had been tried on me in the bucket shops. Such talk as I
since have heard on the subject has consisted in great part of surmises
and suspicions; of guesses rather than intelligent analyses.
More than one man who knew him well has told me that Keene was the
boldest and most brilliant operator that ever worked in Wall Street.
That is saying a great deal, for there have been some great traders.
Their names are now all but forgotten, but nevertheless they were kings
in their day--for a day! They were pulled up out of obscurity into the
sunlight of financial fame by the ticker tape--and the little paper
ribbon didn’t prove strong enough to keep them suspended there long
enough for them to become historical fixtures. At all events Keene was
by all odds the best manipulator of his day--and it was a long and
exciting day.
He capitalized his knowledge of the game, his experience as an operator
and his talents when he sold his services to the Havemeyer brothers,
who wanted him to develop a market for the Sugar stocks. He was broke
at the time or he would have continued to trade on his own hook; and
he was some plunger! He was successful with Sugar; made the shares
trading favourites, and that made them easily vendible. After that, he
was asked time and again to take charge of pools. I am told that in
these pool operations he never asked nor accepted a fee, but paid for
his share like the other members of the pool. The market conduct of
the stock, of course, was exclusively in his charge. Often there was
talk of treachery--on both sides. His feud with the Whitney-Ryan clique
arose from such accusations. It is not difficult for a manipulator to
be misunderstood by his associates. They don’t see his needs as he
himself does. I know this from my own experience.
It is a matter of regret that Keene did not leave an accurate record
of his greatest exploit--the successful manipulation of the U.S.
Steel shares in the spring of 1901. As I understand it, Keene never
had an interview with J. P. Morgan about it. Morgan’s firm dealt with
or through Talbot J. Taylor & Co., at whose office Keene made his
headquarters. Talbot Taylor was Keene’s son-in-law. I am assured that
Keene’s fee for his work consisted of the pleasure he derived from the
work. That he made millions trading in the market he helped to put
up that spring is well known. He told a friend of mine that in the
course of a few weeks he sold in the open market for the underwriters’
syndicate more than seven hundred and fifty thousand shares. Not bad
when you consider two things: That they were new and untried stocks of
a corporation whose capitalization was greater than the entire debt of
the United States at that time; and second, that men like D. G. Reid,
W. B. Leeds, the Moore brothers, Henry Phipps, H. C. Frick and the
other Steel magnates also sold hundreds of thousands of shares to the
public at the same time in the same market that Keene helped to create.
Of course, general conditions favoured him. Not only actual business
but sentiment and his unlimited financial backing made possible his
success. What we had was not merely a big bull market but a boom and a
state of mind not likely to be seen again. The undigested-securities
panic came later, when Steel common, which Keene had marked up to 55 in
1901, sold at 10 in 1903 and at 8⅞ in 1904.
We can’t analyse Keene’s manipulative campaigns. His books are not
available; the adequately detailed record is nonexistent. For example,
it would be interesting to see how he worked in Amalgamated Copper.
H. H. Rogers and William Rockefeller had tried to dispose of their
surplus stock in the market and had failed. Finally they asked Keene
to market their line, and he agreed. Bear in mind that H. H. Rogers
was one of the ablest business men of his day in Wall Street and that
William Rockefeller was the boldest speculator of the entire Standard
Oil coterie. They had practically unlimited resources and vast prestige
as well as years of experience in the stock-market game. And yet they
had to go to Keene. I mention this to show you that there are some
tasks which it requires a specialist to perform. Here was a widely
touted stock, sponsored by America’s greatest capitalists, that could
not be sold except at a great sacrifice of money and prestige. Rogers
and Rockefeller were intelligent enough to decide that Keene alone
might help them.
Keene began to work at once. He had a bull market to work in and sold
two hundred and twenty thousand shares of Amalgamated at around par.
After he disposed of the insiders’ line the public kept on buying and
the price went ten points higher. Indeed the insiders got bullish on
the stock they had sold when they saw how eagerly the public was taking
it. There was a story that Rogers actually advised Keene to go long
of Amalgamated. It is scarcely credible that Rogers meant to unload on
Keene. He was too shrewd a man not to know that Keene was no bleating
lamb. Keene worked as he always did--that is, _doing his big selling
on the way down after the big rise_. Of course his tactical moves were
directed by his needs and by the minor currents that changed from day
to day. In the stock market, as in warfare, it is well to keep in mind
the difference between strategy and tactics.
One of Keene’s confidential men--he is the best fly fisherman I
know--told me only the other day that during the Amalgamated campaign
Keene would find himself almost out of stock one day--that is, out
of the stock he had been forced to take in marking up the price; and
on the next day he would buy back thousands of shares. On the day
after that, he would sell on balance. Then he would leave the market
absolutely alone, to see how it would take care of itself and also to
accustom it to do so. When it came to the actual marketing of the line
he did what I told you: he sold it on the way down. The trading public
is always looking for a rally, and, besides, there is the covering by
the shorts.
The man who was closest to Keene during that deal told me that after
Keene sold the Rogers-Rockefeller line for something like twenty or
twenty-five million dollars in cash Rogers sent him a check for two
hundred thousand. This reminds you of the millionaire’s wife who gave
the Metropolitan Opera House scrub-woman fifty cents reward for finding
the one-hundred-thousand-dollar pearl necklace. Keene sent the check
back with a polite note saying he was not a stock broker and that he
was glad to have been of some service to them. They kept the check
and wrote him that they would be glad to work with him again. Shortly
after that it was that H. H. Rogers gave Keene the friendly tip to buy
Amalgamated at around 130!
A brilliant operator, James R. Keene! His private secretary told me
that when the market was going his way Mr. Keene was irascible; and
those who knew him say his irascibility was expressed in sardonic
phrases that lingered long in the memory of his hearers. But when he
was losing he was in the best of humour, a polished man of the world,
agreeable, epigrammatic, interesting.
He had in superlative degree the qualities of mind that are associated
with successful speculators anywhere. That he did not argue with the
tape is plain. He was utterly fearless but never reckless. He could and
did turn in a twinkling, if he found he was wrong.
Since his day there have been so many changes in Stock Exchange rules
and so much more rigorous enforcement of old rules, so many new taxes
on stock sales and profits, and so on, that the game seems different.
Devices that Keene could use with skill and profit can no longer be
utilised. Also, we are assured, the business morality of Wall Street is
on a higher plane. Nevertheless it is fair to say that in any period
of our financial history Keene would have been a great manipulator
because he was a great stock operator and knew the game of speculation
from the ground up. He achieved what he did because conditions at the
time permitted him to do so. He would have been as successful in his
undertakings in 1922 as he was in 1901 or in 1876, when he first came
to New York from California and made nine million dollars in two years.
There are men whose gait is far quicker than the mob’s. They are bound
to lead--no matter how much the mob changes.
As a matter of fact, the change is by no means as radical as you’d
imagine. The rewards are not so great, for it is no longer pioneer
work and therefore it is not pioneer’s pay. But in certain respects
manipulation is easier than it was; in other ways much harder than in
Keene’s day.
There is no question that advertising is an art, and manipulation
is the art of advertising through the medium of the tape. The tape
should tell the story the manipulator wishes its readers to see. The
truer the story the more convincing it is bound to be, and the more
convincing it is the better the advertising is. A manipulator to-day,
for instance, has not only to make a stock look strong but also to make
it be strong. Manipulation therefore must be based on sound trading
principles. That is what made Keene such a marvellous manipulator; he
was a consummate trader to begin with.
The word “manipulation” has come to have an ugly sound. It needs an
alias. I do not think there is anything so very mysterious or crooked
about the process itself when it has for an object the selling of
a stock in bulk, provided, of course, that such operations are not
accompanied by misrepresentation. There is little question that a
manipulator necessarily seeks his buyers among speculators. He turns to
men who are looking for big returns on their capital and are therefore
willing to run a greater than normal business risk. I can’t have much
sympathy for the man who, knowing this, nevertheless blames others for
his own failure to make easy money. He is a devil of a clever fellow
when he wins. But when he loses money the other fellow was a crook; a