Part 32

I not only was long of cotton but I was carrying a heavy line of wheat. That was doing famously and showed me a handsome profit. My fool efforts to bolster up cotton had increased my line to about one hundred and fifty thousand bales. I may tell you that about this time I was not feeling very well. I don’t say this to furnish an excuse for my blunders, but merely to state a pertinent fact. I remember I went to Bayshore for a rest.

While there I did some thinking. It seemed to me that my speculative commitments were overlarge. I am not timid as a rule, but I got to feeling nervous and that made me decide to lighten my load. To do this I must clean up either the cotton or the wheat.

It seems incredible that knowing the game as well as I did and with an experience of twelve or fourteen years of speculating in stocks and commodities I did precisely the wrong thing. The cotton showed me a loss and I kept it. The wheat showed me a profit and I sold it out. It was an utterly foolish play, but all I can say in extenuation is that it wasn’t really my deal, but Thomas’. Of all speculative blunders there are few greater than trying to average a losing game. My cotton deal proved it to the hilt a little later. Always sell what shows you a loss and keep what shows you a profit. That was so obviously the wise thing to do and was so well known to me that even now I marvel at myself for doing the reverse.

And so I sold my wheat, deliberately cut short my profit in it. After I got out of it the price went up twenty cents a bushel without stopping. If I had kept it I might have taken a profit of about eight million dollars. And having decided to keep on with the losing proposition I bought more cotton!

I remember very clearly how every day I would buy cotton, more cotton. And why do you think I bought it? To keep the price from going down! If that isn’t a supersucker play, what is? I simply kept putting up more and more money--more money to lose eventually. My brokers and my intimate friends couldn’t understand it; and they don’t to this day. Of course if the deal had turned out differently I would have been a wonder. More than once I was warned against placing too much reliance on Percy Thomas’ brilliant analyses. To this I paid no heed, but kept on buying cotton to keep it from going down. I was even buying it in Liverpool. I accumulated four hundred and forty thousand bales before I realized what I was doing. And then it was too late. So I sold out my line.

I lost nearly all that I had made out of all my other deals in stocks and commodities. I was not completely cleaned out, but I had left fewer hundreds of thousands than I had millions before I met my brilliant friend Percy Thomas. For me of all men to violate all the laws that experience had taught me to observe in order to prosper was more than asinine.

To learn that a man can make foolish plays for no reason whatever was a valuable lesson. It cost me millions to learn that another dangerous enemy to a trader is his susceptibility to the urgings of a magnetic personality when plausibly expressed by a brilliant mind. It has always seemed to me, however, that I might have learned my lesson quite as well if the cost had been only one million. But Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill, knowing you have to pay it, no matter what the amount may be. Having learned what folly I was capable of I closed that particular incident. Percy Thomas went out of my life.

There I was, with more than nine-tenths of my stake, as Jim Fisk used to say, gone where the woodbine twineth--up the spout. I had been a millionaire rather less than a year. My millions I had made by using brains, helped by luck. I had lost them by reversing the process. I sold my two yachts and was decidedly less extravagant in my manner of living.

But that one blow wasn’t enough. Luck was against me. I ran up first against illness and then against the urgent need of two hundred thousand dollars in cash. A few months before that sum would have been nothing at all; but now it meant almost the entire remnant of my fleet-winged fortune. I had to supply the money and the question was: Where would I get it? I didn’t want to take it out of the balance I kept at my brokers’ because if I did I wouldn’t have much of a margin left for my own trading; and I needed trading facilities more than ever if I was to win back my millions quickly. There was only one alternative that I could see, and that was to take it out of the stock market!

Just think of it! If you know much about the average customer of the average commission house you will agree with me that the hope of making the stock market pay your bill is one of the most prolific sources of loss in Wall Street. You will chip out all you have if you adhere to your determination.

Why, in Harding’s office one winter a little bunch of high flyers spent thirty or forty thousand dollars for an overcoat--and not one of them lived to wear it. It so happened that a prominent floor trader--who since has become world-famous as one of the dollar-a-year men--came down to the Exchange wearing a fur overcoat lined with sea otter. In those days, before furs went up sky high, that coat was valued at only ten thousand dollars. Well, one of the chaps in Harding’s office, Bob Keown, decided to get a coat lined with Russian sable. He priced one uptown. The cost was about the same, ten thousand dollars.

“That’s the devil of a lot of money,” objected one of the fellows.

“Oh, fair! Fair!” admitted Bob Keown amiably. “About a week’s wages--unless you guys promise to present it to me as a slight but sincere token of the esteem in which you hold the nicest man in the office. Do I hear the presentation speech? No? Very well. I shall let the stock market buy it for me!”

“Why do you want a sable coat?” asked Ed Harding.

“It would look particularly well on a man of my inches,” replied Bob, drawing himself up.

“And how did you say you were going to pay for it?” asked Jim Murphy, who was the star tip-chaser of the office.

“By a judicious investment of a temporary character, James. That’s how,” answered Bob, who knew that Murphy merely wanted a tip.

Sure enough, Jimmy asked, “What stock are you going to buy?”

“Wrong as usual, friend. This is no time to buy anything. I propose to sell five thousand Steel. It ought to go down ten points at the least. I’ll just take two and a half points net. That is conservative, isn’t it?”

“What do you hear about it?” asked Murphy eagerly. He was a tall thin man with black hair and a hungry look, due to his never going out to lunch for fear of missing something on the tape.

“I hear that coat’s the most becoming I ever planned to get.” He turned to Harding and said, “Ed, sell five thousand U.S. Steel common at the market. To-day, darling!”

He was a plunger, Bob was, and liked to indulge in humorous talk. It was his way of letting the world know that he had an iron nerve. He sold five thousand Steel, and the stock promptly went up. Not being half as big an ass as he seemed when he talked, Bob stopped his loss at one and a half points and confided to the office that the New York climate was too benign for fur coats. They were unhealthy and ostentatious. The rest of the fellows jeered. But it was not long before one of them bought some Union Pacific to pay for the coat. He lost eighteen hundred dollars and said sables were all right for the outside of a woman’s wrap, but not for the inside of a garment intended to be worn by a modest and intelligent man.

After that, one after another of the fellows tried to coax the market to pay for that coat. One day I said I would buy it to keep the office from going broke. But they all said that it wasn’t a sporting thing to do; that if I wanted the coat for myself I ought to let the market give it to me. But Ed Harding strongly approved of my intention and that same afternoon I went to the furrier’s to buy it. I found out that a man from Chicago had bought it the week before.

That was only one case. There isn’t a man in Wall Street who has not lost money trying to make the market pay for an automobile or a bracelet or a motor boat or a painting. I could build a huge hospital with the birthday presents that the tight-fisted stock market has refused to pay for. In fact, of all hoodoos in Wall Street I think the resolve to induce the stock market to act as a fairy godmother is the busiest and most persistent.

Like all well-authenticated hoodoos this has its reason for being. What does a man do when he sets out to make the stock market pay for a sudden need? Why, he merely hopes. He gambles. He therefore runs much greater risks than he would if he were speculating intelligently, in accordance with opinions or beliefs logically arrived at after a dispassionate study of underlying conditions. To begin with, he is after an immediate profit. He cannot afford to wait. The market must be nice to him at once if at all. He flatters himself that he is not asking more than to place an even-money bet. Because he is prepared to run quick--say, stop his loss at two points when all he hopes to make is two points--he hugs the fallacy that he is merely taking a fifty-fifty chance. Why, I’ve known men to lose thousands of dollars on such trades, particularly on purchases made at the height of a bull market just before a moderate reaction. It certainly is no way to trade.

Well, that crowning folly of my career as a stock operator was the last straw. It beat me. I lost what little my cotton deal had left me. It did even more harm, for I kept on trading--and losing. I persisted in thinking that the stock market must perforce make money for me in the end. But the only end in sight was the end of my resources. I went into debt, not only to my principal brokers but to other houses that accepted business from me without my putting up an adequate margin. I not only got in debt but I stayed in debt from then on.

XIII

There I was, once more broke, which was bad, and dead wrong in my trading, which was a sight worse. I was sick, nervous, upset and unable to reason calmly. That is, I was in the frame of mind in which no speculator should be when he is trading. Everything went wrong with me. Indeed, I began to think that I could not recover my departed sense of proportion. Having grown accustomed to swinging a big line--say, more than a hundred thousand shares of stock--I feared I would not show good judgment trading in a small way. It scarcely seemed worthwhile being right when all you carried was a hundred shares of stock. After the habit of taking a big profit on a big line I wasn’t sure I would know when to take my profit on a small line. I can’t describe to you how weaponless I felt.