Reminiscences of a Stock Operator
and Gordon--and possibly Jim Barnes--handled that little tipping job
mighty well.
I had no idea that I had such a following. Why, that morning the buying
orders came in from all over the country--orders to buy thousands of
shares of a stock that nobody wanted at any price three days before.
And don’t forget that, as a matter of fact, all that the public had to
go by was my newspaper reputation as a successful plunger; something
for which I had to thank an imaginative reporter or two.
Well, sir, on that, the third day of the rise, I sold Consolidated
Stove; and on the fourth day and the fifth; and the first thing I
knew I had sold for Jim Barnes the one hundred thousand shares of
stock which the Marshall National Bank held as collateral on the
three-million-five-hundred-thousand-dollar loan that needed paying
off. If the most successful manipulation consists of that in which the
desired end is gained at the least possible cost to the manipulator,
the Consolidated Stove deal is by all means the most successful of my
Wall Street career. Why, at no time did I have to take any stock. I
didn’t have to buy first in order to sell the more easily later on.
I did not put up the price to the highest possible point and then
begin my real selling. I didn’t even do my principal selling on
the way down, but on the way up. It was like a dream of Paradise to
find an adequate buying power created for you without your stirring
a finger to bring it about, particularly when you were in a hurry. I
once heard a friend of Governor Flower’s say that in one of the great
bull-leader’s operations for the account of a pool in B. R. T. the pool
sold fifty thousand shares of the stock at a profit, but Flower & Co.
got commissions on more than two hundred and fifty thousand shares and
W. P. Hamilton says that to distribute two hundred and twenty thousand
shares of Amalgamated Copper, James R. Keene must have traded in at
least seven hundred thousand shares of the stock during the necessary
manipulation. Some commission bill! Think of that and then consider
that the only commissions that I had to pay were the commissions on the
one hundred thousand shares I actually sold for Jim Barnes. I call that
some saving.
Having sold what I had engaged to sell for my friend Jim, and all the
money the syndicate had agreed to raise not having been sent in, and
feeling no desire to buy back any of the stock I had sold, I rather
think I went away somewhere for a short vacation. I do not remember
exactly. But I do remember very well that I let the stock alone and
that it was not long before the price began to sag. One day, when the
entire market was weak, some disappointed bull wanted to get rid of his
Consolidated Stove in a hurry, and on his offerings the stock broke
below the call price, which was 40. Nobody seemed to want any of it. As
I told you before, I wasn’t bullish on the general situation and that
made me more grateful than ever for the miracle that had enabled me to
dispose of the one hundred thousand shares without having to put the
price up twenty or thirty points in a week, as the kindly tipsters had
prophesied.
Finding no support, the price developed a habit of declining regularly
until one day it broke rather badly and touched 32. That was the lowest
that had ever been recorded for it, for, as you will remember, Jim
Barnes and the original syndicate had pegged it at 37 in order not to
have their one hundred thousand shares dumped on the market by the bank.
I was in my office that day peacefully studying the tape when Joshua
Wolff was announced. I said I would see him. He rushed in. He is not a
very large man, but he certainly seemed all swelled up--with anger, as
I instantly discovered.
He ran to where I stood by the ticker and yelled, “Hey? What the
devil’s the matter?”
“Have a chair, Mr. Wolff,” I said politely and sat down myself to
encourage him to talk calmly.
“I don’t want any chair! I want to know what it means!” he cried at the
top of his voice.
“What does what mean?”
“What in hell are you doing to it?”
“What am I doing to what?”
“That stock! That stock!”
“What stock?” I asked him.
But that only made him see red, for he shouted, “Consolidated Stove!
What are you doing to it?”
“Nothing! Absolutely nothing. What’s wrong?” I said.
He stared at me fully five seconds before he exploded: “Look at the
price! Look at it!”
He certainly was angry. So I got up and looked at the tape.
I said, “The price of it is now 31¼.”
“Yeh! Thirty-one and a quarter, and I’ve got a raft of it.”
“I know you have sixty thousand shares. You have had it a long time,
because when you originally bought your Gray Stove----”
But he didn’t let me finish. He said, “But I bought a lot more. Some of
it cost me as high as 40! And I’ve got it yet!”
He was glaring at me so hostilely that I said, “I didn’t tell you to
buy it.”
“You didn’t what?”
“I didn’t tell you to load up with it.”
“I didn’t say you did. But you were going to put it up----”
“Why was I?” I interrupted.
He looked at me, unable to speak for anger. When he found his voice
again, he said, “You were going to put it up. You had the money to buy
it.”
“Yes. But I didn’t buy a share,” I told him.
That was the last straw.
“You didn’t buy a share, and you had over four millions in cash to buy
with? You didn’t buy any?”
“Not a share!” I repeated.
He was so mad by now that he couldn’t talk plainly. Finally he managed
to say, “What kind of a game do you call that?”
He was inwardly accusing me of all sorts of unspeakable crimes. I sure
could see a long list of them in his eyes. It made me say to him: “What
you really mean to ask me, Wolff, is, why I didn’t buy from you above
50 the stock you bought below 40. Isn’t that it?”
“No, it isn’t. You had a call at 40 and four millions in cash to put up
the price with.”
“Yes, but I didn’t touch the money and the syndicate has not lost a
cent by my operations.”
“Look here, Livingston--” he began.
But I didn’t let him say any more.
“You listen to me, Wolff. You knew that the two hundred thousand shares
you and Gordon and Kane held were tied up, and that there wouldn’t be
an awful lot of floating stock to come on the market if I put up the
price, as I’d have to do for two reasons: The first to make a market
for the stock; and the second to make a profit out of the call at 40.
But you weren’t satisfied to get 40 for the sixty thousand shares you’d
been lugging for months or with your share of the syndicate profits, if
any; so you decided to take on a lot of stock under 40 to unload on me
when I put the price up with the syndicate’s money, as you were sure
I meant to do. You’d buy before I did and you’d unload before I did;
in all probability I’d be the one to unload on. I suspect you figured
on my having to put the price up to 60. It was such a cinch that you
probably bought ten thousand shares strictly for unloading purposes,
and to make sure somebody held the bag if I didn’t, you tipped off
everybody in the United States, Canada and Mexico without thinking
of my added difficulties. All your friends knew what I was supposed
to do. Between their buying and mine you were going to be all hunky.
Well, your intimate friends to whom you gave the tip passed it on to
their friends after they had bought their lines, and the third stratum
of tip-takers planned to supply the fourth, fifth and possibly sixth
strata of suckers, so that when I finally came to do some selling I’d
find myself anticipated by a few thousands of wise speculators. It was
a friendly thought, that notion of yours, Wolff. You can’t imagine
how surprised I was when Consolidated Stove began to go up before I
even thought of buying a single share; or how grateful, either, when
the underwriting syndicate sold one hundred thousand shares around 40
to the people who were going to sell those same shares to me at 50 or
60. I sure was a sucker not to use the four millions to make money for
them, wasn’t I? The cash was supplied to buy stock with, but only if I
thought it necessary to do so. Well, I didn’t.”
Joshua had been in Wall Street long enough not to let anger interfere
with business. He cooled off as he heard me, and when I was through
talking he said in a friendly tone of voice, “Look here, Larry, old
chap, what shall we do?”
“Do whatever you please.”
“Aw, be a sport. What would you do if you were in our place?”
“If I were in your place,” I said solemnly, “do you know what I’d do?”
“What?”
“I’d sell out!” I told him.
He looked at me a moment, and without another word turned on his heel
and walked out of my office. He’s never been in it since.
Not long after that, Senator Gordon also called. He, too, was quite
peevish and blamed me for their troubles. Then Kane joined the anvil
chorus. They forgot that their stock had been unsalable in bulk when
they formed the syndicate. All they could remember was that I didn’t
sell their holdings when I had the syndicate’s millions and the stock
was active at 44, and that now it was 30 and dull as dishwater. To
their way of thinking I should have sold out at a good fat profit.
Of course they also cooled down in due time. The syndicate wasn’t out
a cent and the main problem remained unchanged: to sell their stock. A
day or two later they came back and asked me to help them out. Gordon
was particularly insistent, and in the end I made them put in their
pooled stock at 25½. My fee for my services was to be one-half of
whatever I got above that figure. The last sale had been at about 30.
There I was with their stock to liquidate. Given general market
conditions and specifically the behaviour of Consolidated Stove, there
was only one way to do it, and that was, of course, to sell on the way
down and without first trying to put up the price, and I certainly
would have got stock by the ream on the way up. But on the way down
I could reach those buyers who always argue that a stock is cheap
when it sells fifteen or twenty points below the top of the movement,
particularly when that top is a matter of recent history. A rally is
due, in their opinion. After seeing Consolidated Stove sell up to close
to 44 it sure looked like a good thing below 30.
It worked out as always. Bargain hunters bought it in sufficient volume
to enable me to liquidate the pool’s holdings. But do you think that
Gordon or Wolff or Kane felt any gratitude? Not a bit of it. They are
still sore at me, or so their friends tell me. They often tell people
how I did them. They cannot forgive me for not putting up the price on
myself, as they expected.
As a matter of fact I never would have been able to sell the bank’s
hundred thousand shares if Wolff and the rest had not passed around
those red-hot bull tips of theirs. If I had worked as I usually
do--that is, in a logical natural way--I would have had to take
whatever price I could get. I told you we ran into a declining market.
The only way to sell on such a market is to sell not necessarily
recklessly but really regardless of price. No other way was possible,
but I suppose they do not believe this. They are still angry. I am not.
Getting angry doesn’t get a man anywhere. More than once it has been
borne in on me that a speculator who loses his temper is a goner. In
this case there was no aftermath to the grouches. But I’ll tell you
something curious. One day Mrs. Livingston went to a dressmaker who had
been warmly recommended to her. The woman was competent and obliging
and had a very pleasing personality. At the third or fourth visit, when
the dressmaker felt less like a stranger, she said to Mrs. Livingston:
“I hope Mr. Livingston puts up Consolidated Stove soon. We have some
that we bought because we were told he was going to put it up, and we’d