Part 22

“I couldn’t hear you and him whispering,” he chuckled. “But I heard every word of the message he sent to the New York office for you. I learned telegraphy years ago after I had a big row over a mistake in a message. Since then when I do what you did just now--give an order by word of mouth to an operator--I want to be sure the operator sends the message as I give it to him. I know what he sends in my name. But you will be sorry you sold that Anaconda. It’s going to 500.”

“Not this trip, Ollie,” I said.

He stared at me and said, “You’re pretty cocky about it.”

“Not I; the tape,” I said. There wasn’t any ticker there so there wasn’t any tape. But he knew what I meant.

“I’ve heard of those birds,” he said, “who look at the tape and instead of seeing prices they see a railroad time-table of the arrival and departure of stocks. But they were in padded cells where they couldn’t hurt themselves.”

I didn’t answer him anything because about that time the boy brought me a memorandum. They had sold five thousand shares at 299¾. I knew our quotations were a little behind the market. The price on the board at Palm Beach when I gave the operator the order to sell was 301. I felt so certain that at that very moment the price at which the stock was actually selling on the Stock Exchange in New York was less, that if anybody had offered to take the stock off my hands at 296 I’d have been tickled to death to accept. What happened shows you that I am right in never trading at limits. Suppose I had limited my selling price to 300? I’d never have got it off. No, sir! When you want to get out, get out.

Now, my stock cost me about 300. They got off five hundred shares--full shares, of course--at 299¾. The next thousand they sold at 299⅝. Then a hundred at ½; two hundred at ⅜ and two hundred at ¼. The last of my stock went at 298¾. It took Harding’s cleverest floor man fifteen minutes to get rid of that last one hundred shares. They didn’t want to crack it wide open.

The moment I got the report of the sale of the last of my long stock I started to do what I had really come ashore to do--that is, to sell stocks. I simply had to. There was the market after its outrageous rally, begging to be sold. Why, people were beginning to talk bullish again. The course of the market, however, told me that the rally had run its course. It was safe to sell them. It did not require reflection.

The next day Anaconda opened below 296. Oliver Black, who was waiting for a further rally, had come down early to be Johnny-on-the-spot when the stock crossed 320. I don’t know how much of it he was long of or whether he was long of it all. But he didn’t laugh when he saw the opening prices, nor later in the day when the stock broke still more and the report came back to us in Palm Beach that there was no market for it at all.

Of course that was all the confirmation any man needed. My growing paper profit kept reminding me that I was right, hour by hour. Naturally I sold some more stocks. Everything! It was a bear market. They were all going down. The next day was Friday, Washington’s Birthday. I couldn’t stay in Florida and fish because I had put out a very fair short line, for me. I was needed in New York. Who needed me? I did! Palm Beach was too far, too remote. Too much valuable time was lost telegraphing back and forth.

I left Palm Beach for New York. On Monday I had to lie in St. Augustine three hours, waiting for a train. There was a broker’s office there, and naturally I had to see how the market was acting while I was waiting. Anaconda had broken several points since the last trading day. As a matter of fact, it didn’t stop going down until the big break that fall.

I got to New York and traded on the bear side for about four months. The market had frequent rallies as before, and I kept covering and putting them out again. I didn’t, strictly speaking, sit tight. Remember, I had lost every cent of the three hundred thousand dollars I made out of the San Francisco earthquake break. I had been right, and nevertheless had gone broke. I was now playing safe--because after being down a man enjoys being up, even if he doesn’t quite make the top. The way to make money is to make it. The way to make big money is to be right at exactly the right time. In this business a man has to think of both theory and practice. A speculator must not be merely a student, he must be both a student and a speculator.

I did pretty well, even if I can now see where my campaign was tactically inadequate. When summer came the market got dull. It was a cinch that there would be nothing doing in a big way until well along in the fall. Everybody I knew had gone or was going to Europe. I thought that would be a good move for me. So I cleaned up. When I sailed for Europe I was a trifle more than three-quarters of a million to the good. To me that looked like some balance.

I was in Aix-les-Bains enjoying myself. I had earned my vacation. It was good to be in a place like that with plenty of money and friends and acquaintances and everybody intent upon having a good time. Not much trouble about having that, in Aix. Wall Street was so far away that I never thought about it, and that is more than I could say of any resort in the United States. I didn’t have to listen to talk about the stock market. I didn’t need to trade. I had enough to last me quite a long time, and besides, when I got back I knew what to do to make much more than I could spend in Europe that summer.

One day I saw in the Paris Herald a dispatch from New York that Smelters had declared an extra dividend. They had run the price of the stock and the entire market had come back quite strong. Of course that changed everything for me in Aix. The news simply meant that the bull cliques were still fighting desperately against conditions--against common sense and against common honesty, for they knew what was coming and were resorting to such schemes to put up the market in order to unload stocks before the storm struck them. It is possible they really did not believe the danger was as serious or as close at hand as I thought. The big men of the Street are as prone to be wishful thinkers as the politicians or the plain suckers. I myself can’t work that way. In a speculator such an attitude is fatal. Perhaps a manufacturer of securities or a promoter of new enterprises can afford to indulge in hope-jags.

At all events, I knew that all bull manipulation was foredoomed to failure in that bear market. The instant I read the dispatch I knew there was only one thing to do to be comfortable, and that was to sell Smelters short. Why, the insiders as much as begged me on their knees to do it, when they increased the dividend rate on the verge of a money panic. It was as infuriating as the old “dares” of your boyhood. They dared me to sell that particular stock short.

I cabled some selling orders in Smelter and advised my friends in New York to go short of it. When I got my report from the brokers I saw the price they got was six points below the quotations I had seen in the Paris Herald. It shows you what the situation was.

My plans had been to return to Paris at the end of the month and about three weeks later sail for New York, but as soon as I received the cabled reports from my brokers I went back to Paris. The same day I arrived I called at the steamship offices and found there was a fast boat leaving for New York the next day. I took it.

There I was, back in New York, almost a month ahead of my original plans, because it was the most comfortable place to be short of the market in. I had well over half a million in cash available for margins. My return was not due to my being bearish but to my being logical.

I sold more stocks. As money got tighter call-money rates went higher and prices of stocks lower. I had foreseen it. At first, my foresight broke me. But now I was right and prospering. However, the real joy was in the consciousness that as a trader I was at last on the right track. I still had much to learn but I knew what to do. No more floundering, no more half-right methods. Tape reading was an important part of the game; so was beginning at the right time; so was sticking to your position. But my greatest discovery was that a man must study general conditions, to size them so as to be able to anticipate probabilities. In short, I had learned that I had to work for my money. I was no longer betting blindly or concerned with mastering the technic of the game, but with earning my successes by hard study and clear thinking. I also found out that nobody was immune from the danger of making sucker plays. And for a sucker play a man gets sucker pay; for the paymaster is on the job and never loses the pay envelope that is coming to you.

Our office made a great deal of money. My own operations were so successful that they began to be talked about and, of course, were greatly exaggerated. I was credited with starting the breaks in various stocks. People I didn’t know by name used to come and congratulate me. They all thought the most wonderful thing was the money I had made. They did not say a word about the time when I first talked bearish to them and they thought I was a crazy bear with a stock-market loser’s vindictive grouch. That I had foreseen the money troubles was nothing. That my brokers’ bookkeeper had used a third of a drop of ink on the credit side of the ledger under my name was a marvellous achievement to them.

Friends used to tell me that in various offices the Boy Plunger in Harding Brothers’ office was quoted as making all sorts of threats against the bull cliques that had tried to mark up prices of various stocks long after it was plain that the market was bound to seek a much lower level. To this day they talk of my raids.

From the latter part of September on, the money market was megaphoning warnings to the entire world. But a belief in miracles kept people from selling what remained of their speculative holdings. Why a broker told me a story the first week of October that made me feel almost ashamed of my moderation.

You remember that money loans used to be made on the floor of the Exchange around the Money Post. Those brokers who had received notice from their banks to pay call loans knew in a general way how much money they would have to borrow afresh. And of course the banks knew their position so far as loanable funds were concerned, and those which had money to loan would send it to the Exchange. This bank money was handled by a few brokers whose principal business was time loans. At about noon the renewal rate for the day was posted. Usually this represented a fair average of the loans made up to that time. Business was as a rule transacted openly by bids and offers, so that everyone knew what was going on. Between noon and about two o’clock there was ordinarily not much business done in money, but after delivery time--namely, 2:15 P.M.--brokers would know exactly what their cash position for the day would be, and they were able either to go to the Money Post and lend the balances that they had over or to borrow what they required. This business also was done openly.

Well, sometime early in October the broker I was telling you about came to me and told me that brokers were getting so they didn’t go to the Money Post when they had money to loan. The reason was that members of a couple of well-known commission houses were on watch there, ready to snap up any offerings of money. Of course no lender who offered money publicly could refuse to lend to these firms. They were solvent and the collateral was good enough. But the trouble was that once these firms borrowed money on call there was no prospect of the lender getting that money back. They simply said they couldn’t pay it back and the lender would willy-nilly have to renew the loan. So any Stock Exchange house that had money to loan to its fellows used to send its men about the floor instead of to the Post, and they would whisper to good friends, “Want a hundred?” meaning, “Do you wish to borrow a hundred thousand dollars?” The money brokers who acted for the banks presently adopted the same plan, and it was a dismal sight to watch the Money Post. Think of it!

Why, he also told me that it was a matter of Stock Exchange etiquette in those October days for the borrower to make his own rate of interest. You see, it fluctuated between 100 and 150 per cent per annum. I suppose by letting the borrower fix the rate the lender in some strange way didn’t feel so much like a usurer. But you bet he got as much as the rest. The lender naturally did not dream of not paying a high rate. He played fair and paid whatever the others did. What he needed was the money and was glad to get it.

Things got worse and worse. Finally there came the awful day of reckoning for the bulls and the optimists and the wishful thinkers and those vast hordes that, dreading the pain of a small loss at the beginning, were now about to suffer total amputation--without anaesthetics. A day I shall never forget, October 24, 1907.

Reports from the money crowd early indicated that borrowers would have to pay whatever the lenders saw fit to ask. There wouldn’t be enough to go around. That day the money crowd was much larger than usual. When delivery time came that afternoon there must have been a hundred brokers around the Money Post, each hoping to borrow the money that his firm urgently needed. Without money they must sell what stocks they were carrying on margin--sell at any price they could get in a market where buyers were as scarce as money--and just then there was not a dollar in sight.