Chapter VIII: Part 8

It was a mighty difficult task, getting a decent stake, for with the closing of the Stock Exchange there was nothing that I could ask any broker to do for me. I tried in a couple of places. No use.

Finally I went to see Dan Williamson. This was in February, 1915. I told him that I had rid myself of the mental incubus of debt and I was ready to trade as of old. You will recall that when he needed me he offered me the use of twenty-five thousand dollars without my asking him.

Now that I needed him he said, “When you see something that looks good to you and you want to buy five hundred shares go ahead and it will be all right.”

I thanked him and went away. He had kept me from making a great deal of money and the office had made a lot in commissions from me. I admit I was a little sore to think that Williamson & Brown didn’t give me a decent stake. I intended to trade conservatively at first. It would make my financial recovery easier and quicker if I could begin with a line a little better than five hundred shares. But, anyhow, I realised that, such as it was, there was my chance to come back.

I left Dan Williamson’s office and studied the situation in general and my own problem in particular. It was a bull market. That was as plain to me as it was to thousands of traders. But my stake consisted merely of an offer to carry five hundred shares for me. That is, I had no leeway, limited as I was. I couldn’t afford even a slight setback at the beginning. I must build up my stake with my very first play. That initial purchase of mine of five hundred shares must be profitable. I had to make real money. I knew unless I had sufficient trading capital I would not be able to use good judgment. Without adequate margins it would be impossible to take the cold-blooded, dispassionate attitude toward the game that comes from the ability to afford a few minor losses such as I often incurred in testing the market before putting down the big bet.

I think now that I found myself then at the most critical period of my career as a speculator. If I failed this time there was no telling where or when, if ever, I might get another stake for another try. It was very clear that I simply must wait for the exact psychological moment.

I didn’t go near Williamson & Brown’s. I mean, I purposely kept away from them for six long weeks of steady tape reading. I was afraid that if I went to the office, knowing that I could buy five hundred shares, I might be tempted into trading at the wrong time or in the wrong stock. A trader, in addition to studying basic conditions, remembering market precedents and keeping in mind the psychology of the outside public as well as the limitations of his brokers, must also know himself and provide against his own weaknesses. There is no need to feel anger over being human. I have come to feel that it is as necessary to know how to read myself as to know how to read the tape. I have studied and reckoned on my own reactions to given impulses or to the inevitable temptations of an active market, quite in the same mood and spirit as I have considered crop conditions or analysed reports of earnings.

So day after day, broke and anxious to resume trading, I sat in front of a quotation-board in another broker’s office where I couldn’t buy or sell as much as one share of stock, studying the market, not missing a single transaction on the tape, watching for the psychological moment to ring the full-speed-ahead bell.

By reason of conditions known to the whole world the stock I was most bullish on in those critical days of early 1915 was Bethlehem Steel. I was morally certain it was going way up, but in order to make sure that I would win on my very first play, as I must, I decided to wait until it crossed par.

I think I have told you it has been my experience that _whenever a stock crosses 100 or 200 or 300 for the first time, it nearly always keeps going up for 30 to 50 points--and after 300 faster than after 100 or 200_. One of my first big coups was in Anaconda, which I bought when it crossed 200 and sold a day later at 260. My practice of buying a stock just after it crossed par dated back to my early bucket-shop days. It is an old trading principle.

You can imagine how keen I was to get back to trading on my old scale. I was so eager to begin that I could not think of anything else; but I held myself in leash. I saw Bethlehem Steel climb, every day, higher and higher, as I was sure it would, and yet there I was checking my impulse to run over to Williamson & Brown’s office and buy five hundred shares. I knew I simply had to make my initial operation as nearly a cinch as was humanly possible.

Every point that stock went up meant five hundred dollars I had not made. The first ten points’ advance meant that I would have been able to pyramid, and instead of five hundred shares I might now be carrying one thousand shares that would be earning for me one thousand dollars a point. But I sat tight and instead of listening to my loud-mouthed hopes or to my clamorous beliefs I heeded only the level voice of my experience and the counsel of common sense. Once I got a decent stake together I could afford to take chances. But without a stake, taking chances, even slight chances, was a luxury utterly beyond my reach. Six weeks of patience--but, in the end, a victory for common sense over greed and hope!

I really began to waver and sweat blood when the stock got up to 90. Think of what I had not made by not buying, when I was so bullish. Well, when it got to 98 I said to myself, “Bethlehem is going through 100, and when it does the roof is going to blow clean off!” The tape said the same thing more than plainly. In fact, it used a megaphone. I tell you, I saw _100_ on the tape when the ticker was only printing _98_. And I knew that wasn’t the voice of my hope or the sight of my desire, but the assertion of my tape-reading instinct. So I said to myself, “I can’t wait until it gets through 100. I have to get it now. It is as good as gone through par.”

I rushed to Williamson & Brown’s office and put in an order to buy five hundred shares of Bethlehem Steel. The market was then 98. I got five hundred shares at 98 to 99. After that she shot right up, and closed that night, I think, at 114 or 115. I bought five hundred shares more.

The next day Bethlehem Steel was 145 and I had my stake. But I earned it. Those six weeks of waiting for the right moment were the most strenuous and wearing six weeks I ever put in. But it paid me, for I now had enough capital to trade in fair-sized lots. I never would have got anywhere just on five hundred shares of stock.

There is a great deal in starting right, whatever the enterprise may be, and I did very well after my Bethlehem deal--so well, indeed, that you would not have believed it was the selfsame man trading. As a matter of fact I wasn’t the same man, for where I had been harassed and wrong I was now at ease and right. There were no creditors to annoy and no lack of funds to interfere with my thinking or with my listening to the truthful voice of experience, and so I was winning right along.

All of a sudden, as I was on my way to a sure fortune, we had the _Lusitania_ break. Every once in a while a man gets a crack like that in the solar plexus, probably that he may be reminded of the sad fact that no human being can be so uniformly right on the market as to be beyond the reach of unprofitable accidents. I have heard people say that no professional speculator need have been hit very hard by the news of the torpedoing of the _Lusitania_, and they go on to tell how they had it long before the Street did. I was not clever enough to escape by means of advance information, and all I can tell you is that on account of what I lost through the _Lusitania_ break and one or two other reverses that I wasn’t wise enough to foresee, I found myself at the end of 1915 with a balance at my brokers’ of about one hundred and forty thousand dollars. That was all I actually made, though I was consistently right on the market throughout the greater part of the year.

I did much better during the following year. I was very lucky. I was rampantly bullish in a wild bull market. Things were certainly coming my way so that there wasn’t anything to do but to make money. It made me remember a saying of the late H. H. Rogers, of the Standard Oil Company, to the effect that there were times when a man could no more help making money than he could help getting wet if he went out in a rainstorm without an umbrella. It was the most clearly defined bull market we ever had. It was plain to everybody that the Allied purchases of all kinds of supplies here made the United States the most prosperous nation in the world. We had all the things that no one else had for sale, and we were fast getting all the cash in the world. I mean that the wide world’s gold was pouring into this country in torrents. Inflation was inevitable, and, of course, that meant rising prices for everything.

All this was so evident from the first that little or no manipulation for the rise was needed. That was the reason why the preliminary work was so much less than in other bull markets. And not only was the war-bride boom more naturally developed than all others but it proved unprecedentedly profitable for the general public. That is, the stock-market winnings during 1915 were more widely distributed than in any other boom in the history of Wall Street. That the public did not turn all their paper profits into good hard cash or that they did not long keep what profits they actually took was merely history repeating itself. Nowhere does history indulge in repetitions so often or so uniformly as in Wall Street. When you read contemporary accounts of booms or panics the one thing that strikes you most forcibly is how little either stock speculation or stock speculators to-day differ from yesterday. The game does not change and neither does human nature.

I went along with the rise in 1916. I was as bullish as the next man, but of course I kept my eyes open. I knew, as everybody did, that there must be an end, and I was on the watch for warning signals. I wasn’t particularly interested in guessing from which quarter the tip would come and so I didn’t stare at just one spot. I was not, and I never have felt that I was, wedded indissolubly to one or the other side of the market. That a bull market has added to my bank account or a bear market has been particularly generous I do not consider sufficient reason for sticking to the bull or the bear side after I receive the get-out warning. _A man does not swear eternal allegiance to either the bull or the bear side. His concern lies with being right._

_And there is another thing to remember, and that is that a market does not culminate in one grand blaze of glory. Neither does it end with a sudden reversal of form. A market can and does often cease to be a bull market long before prices generally begin to break._ My long expected warning came to me when I noticed that, one after another, _those stocks which had been the leaders of the market reacted several points from the top and--for the first time in many months--did not come back_. Their race evidently was run, and that clearly necessitated a change in my trading tactics.

It was simple enough. In a bull market the trend of prices, of course, is decidedly and definitely upward. Therefore whenever a stock goes against the general trend you are justified in assuming that there is something wrong with that particular stock. It is enough for the experienced trader to perceive that something is wrong. He must not expect the tape to become a lecturer. His job is to listen for it to say “Get out!” and not wait for it to submit a legal brief for approval.

As I said before, _I noticed that stocks which had been the leaders of the wonderful advance had ceased to advance. They dropped six or seven points and stayed there. At the same time the rest of the market kept on advancing under new standard bearers._ Since nothing wrong had developed with the companies themselves, the reason had to be sought elsewhere. Those stocks had gone with the current for months. When they ceased to do so, though the bull tide was still running strong, it meant that for those particular stocks the bull market was over. For the rest of the list the tendency was still decidedly upward.

There was no need to be perplexed into inactivity, for there were really no cross currents. I did not turn bearish on the market then, because the tape didn’t tell me to do so. The end of the bull market had not come, though it was within hailing distance. Pending its arrival there was still bull money to be made. _Such being the case, I merely turned bearish on the stocks which had stopped advancing and as the rest of the market had rising power behind it I both bought and sold._

The leaders that had ceased to lead I sold. I put out a short line of five thousand shares in each of them; and then I went long of the new leaders. The stocks I was short of didn’t do much, but my long stocks kept on rising. When finally these in turn ceased to advance I sold them out and went short--five thousand shares of each. By this time I was more bearish than bullish, because obviously the next big money was going to be made on the down side. While I felt certain that the bear market had really begun before the bull market had really ended, I knew the time for being a rampant bear was not yet. There was no sense in being more royalist than the king; especially in being so too soon. The tape merely said that patrolling parties from the main bear army had dashed by. Time to get ready.

I kept on both buying and selling until after about a month’s trading I had out a short line of sixty thousand shares--five thousand shares each in a dozen different stocks which earlier in the year had been the public’s favourites because they had been the leaders of the great bull market. It was not a very heavy line; but don’t forget that neither was the market definitely bearish.

Then one day the entire market became quite weak and prices of all stocks began to fall. When I had a profit of at least four points in each and every one of the twelve stocks that I was short of, I knew that I was right. The tape told me it was now safe to be bearish, so I promptly doubled up.

I had my position. I was short of stocks in a market that now was plainly a bear market. There wasn’t any need for me to push things along. The market was bound to go my way, and, knowing that, I could afford to wait. After I doubled up I didn’t make another trade for a long time. About seven weeks after I put out my full line, we had the famous “leak,” and stocks broke badly. It was said that somebody had advance news from Washington that President Wilson was going to issue a message that would bring back the dove of peace to Europe in a hurry. Of course the war-bride boom was started and kept up by the World War, and peace was a bear item. When one of the cleverest traders on the floor was accused of profiting by advance information he simply said he had sold stocks not on any news but because he considered that the bull market was overripe. I myself had doubled my line of shorts seven weeks before.

On the news the market broke badly and I naturally covered. It was the only play possible. _When something happens on which you did not count when you made your plans it behooves you to utilise the opportunity that a kindly fate offers you._ For one thing, on a bad break like that you have a big market, one that you can turn around in, and that is the time to turn your paper profits into real money. Even in a bear market a man cannot always cover one hundred and twenty thousand shares of stock without putting up the price on himself. He must wait for the market that will allow him to buy that much at no damage to his profit as it stands him on paper.

I should like to point out that I was not counting on that particular break at that particular time for that particular reason. But, as I have told you before, my experience of thirty years as a trader is that such _accidents are usually along the line of least resistance on_ which I base my position in the market. Another thing to bear in mind is this: _Never try to sell at the top._ It isn’t wise. _Sell after a reaction if there is no rally._

I cleared about three million dollars in 1916 by being bullish as long as the bull market lasted and then by being bearish when the bear market started. As I said before, a man does not have to marry one side of the market till death do them part.

That winter I went South, to Palm Beach, as I usually do for a vacation, because I am very fond of salt-water fishing. I was short of stocks and wheat, and both lines showed me a handsome profit. There wasn’t anything to annoy me and I was having a good time. Of course unless I go to Europe I cannot really be out of touch with the stock or commodities markets. For instance, in the Adirondacks I have a direct wire from my broker’s office to my house.

In Palm Beach I used to go to my broker’s branch office regularly. I noticed that cotton, in which I had no interest, was strong and rising. About that time--this was in 1917--I heard a great deal about the efforts that President Wilson was making to bring about peace. The reports came from Washington, both in the shape of press dispatches and private advice to friends in Palm Beach. That is the reason why one day I got the notion that the course of the various markets reflected confidence in Mr. Wilson’s success. With peace supposedly close at hand, stocks and wheat ought to go down and cotton up. I was all set as far as stocks and wheat went, but I had not done anything in cotton in some time.

At 2:20 that afternoon I did not own a single bale, but at 2:25 my belief that peace was impending made me buy fifteen thousand bales as a starter. I proposed to follow my old system of trading--that is, of buying my full line--which I have already described to you.

That very afternoon, after the market closed, we got the Unrestricted Warfare note. There wasn’t anything to do except to wait for the market to open the next day. I recall that at Gridley’s that night one of the greatest captains of industry in the country was offering to sell any amount of United States Steel at five points below the closing price that afternoon. There were several Pittsburgh millionaires within hearing. Nobody took the big man’s offer. They knew there was bound to be a whopping big break at the opening.

Sure enough, the next morning the stock and commodity markets were in an uproar, as you can imagine. Some stocks opened eight points below the previous night’s close. To me that meant a heaven-sent opportunity to cover all my shorts profitably. As I said before, _in a bear market it is always wise to cover if complete demoralisation suddenly develops_. That is the only way, if you swing a good-sized line, of turning a big paper profit into real money both quickly and without regrettable reductions. For instance, I was short fifty thousand shares of United States Steel alone. Of course I was short of other stocks, and when I saw I had the market to cover in, I did. My profits amounted to about one and a half million dollars. It was not a chance to disregard.

Cotton, of which I was long fifteen thousand bales, bought in the last half hour of the trading the previous afternoon, opened down five hundred points. Some break! It meant an overnight loss of three hundred and seventy-five thousand dollars. While it was perfectly clear that the only wise play in stocks and wheat was to cover on the break I was not so clear as to what I ought to do in cotton. There were various things to consider, and while I always take my loss the moment I am convinced I am wrong, I did not like to take that loss that morning. Then I reflected that I had gone South to have a good time fishing instead of perplexing myself over the course of the cotton market. And, moreover, I had taken such big profits in my wheat and in stocks that I decided to take my loss in cotton. I would figure that my profit had been a little more than one million instead of over a million and a half. It was all a matter of bookkeeping, as promoters are apt to tell you when you ask too many questions.

If I hadn’t bought that cotton just before the market closed the day before, I would have saved that four hundred thousand dollars. It shows you how quickly a man may lose big money on a moderate line. My main position was absolutely correct and I benefited by an accident of a nature diametrically opposite to the considerations that led me to take the position I did in stocks and wheat. Observe, please, that the speculative line of least resistance again demonstrated its value to a trader. Prices went as I expected, notwithstanding the unexpected market factor introduced by the German note. If things had turned out as I had figured I would have been 100 per cent right in all three of my lines, for with peace stocks and wheat would have gone down and cotton would have gone kiting up. I would have cleaned up in all three. Irrespective of peace or war, I was right in my position on the stock market and in wheat and that is why the unlooked-for event helped. In cotton I based my play on something that might happen outside of the market--that is, I bet on Mr. Wilson’s success in his peace negotiations. It was the German military leaders who made me lose the cotton bet.

When I returned to New York early in 1917 I paid back all the money I owed, which was over a million dollars. It was a great pleasure to me to pay my debts. I might have paid it back a few months earlier, but I didn’t for a very simple reason. I was trading actively and successfully and I needed all the capital I had. I owed it to myself as well as to the men I considered my creditors to take every advantage of the wonderful markets we had in 1915 and 1916. I knew that I would make a great deal of money and I wasn’t worrying because I was letting them wait a few months longer for money many of them never expected to get back. I did not wish to pay off my obligations in driblets or to one man at a time, but in full to all at once. So as long as the market was doing all it could for me I just kept on trading on as big a scale as my resources permitted.

I wished to pay interest, but all those creditors who had signed releases positively refused to accept it. The man I paid off the last of all was the chap I owed the eight hundred dollars to, who had made my life a burden and had upset me until I couldn’t trade. I let him wait until he heard that I had paid off all the others. Then he got his money. I wanted to teach him to be considerate the next time somebody owed him a few hundreds.

And that is how I came back.

After I paid off my debts in full I put a pretty fair amount into annuities. I made up my mind I wasn’t going to be strapped and uncomfortable and minus a stake ever again. Of course, after I married I put some money in trust for my wife. And after the boy came I put some in trust for him.

The reason I did this was not alone the fear that the stock market might take it away from me, but because I knew that a man will spend anything he can lay his hands on. By doing what I did my wife and child are safe from me.

More than one man I know has done the same thing, but has coaxed his wife to sign off when he needed the money, and he has lost it. But I have fixed it up so that no matter what I want or what my wife wants, that trust holds. It is absolutely safe from all attacks by either of us; safe from my market needs; safe even from a devoted wife’s love. I’m taking no chances!

_XV_

Among the hazards of speculation the happening of the unexpected--I might even say of the unexpectable--ranks high. _There are certain chances that the most prudent man is justified in taking--chances that he must take if he wishes to be more than a mercantile mollusk._ Normal business hazards are no worse than the risks a man runs when he goes out of his house into the street or sets out on a railroad journey. When I lose money by reason of some development which nobody could foresee I think no more vindictively of it than I do of an inconveniently timed storm. Life itself from the cradle to the grave is a gamble and what happens to me because I do not possess the gift of second sight I can bear undisturbed. But there have been times in my career as a speculator when I have both been right and played square and nevertheless I have been cheated out of my earnings by the sordid unfairness of unsportsmanlike opponents.

Against misdeeds by crooks, cowards and crowds a quick-thinking or far-sighted businessman can protect himself. I have never gone up against downright dishonesty except in a bucket shop or two because even there honesty was the best policy; the big money was in being square and not in welshing. I have never thought it good business to play any game in any place where it was necessary to keep an eye on the dealer because he was likely to cheat if unwatched. But against the whining welsher the decent man is powerless. Fair play is fair play. I could tell you a dozen instances where I have been the victim of my own belief in the sacredness of the pledged word or of the inviolability of a gentlemen’s agreement. I shall not do so because no useful purpose can be served thereby.

Fiction writers, clergymen and women are fond of alluding to the floor of the Stock Exchange as a boodlers’ battlefield and to Wall Street’s daily business as a fight. It is quite dramatic but utterly misleading. I do not think that my business is strife and contest. I never fight either individuals or speculative cliques. I merely differ in opinion--that is, in my reading of basic conditions. What playwrights call battles of business are not fights between human beings. They are merely tests of business vision. _I try to stick to facts and facts only, and govern my actions accordingly. That is Bernard M. Baruch’s recipe for success in wealth-winning._ Sometimes I do not see the facts--all the facts--clearly enough or early enough; or else I do not reason logically. Whenever any of these things happen I lose. I am wrong. And it always costs me money to be wrong.

No reasonable man objects to paying for his mistakes. There are no preferred creditors in mistake-making and no exceptions or exemptions. But I object to losing money when I am right. I do not mean, either, those deals that have cost me money because of sudden changes in the rules of some particular exchange. I have in mind certain hazards of speculation that from time to time remind a man that no profit should be counted safe until it is deposited in your bank to your credit.

After the Great War broke out in Europe there began the rise in the prices of commodities that was to be expected. It was as easy to foresee that as to foresee war inflation. Of course the general advance continued as the war prolonged itself. As you may remember, I was busy “coming back” in 1915. The boom in stocks was there and it was my duty to utilise it. My safest, easiest and quickest big play was in the stock market, and I was lucky, as you know.

By July, 1917, I not only had been able to pay off all my debts but was quite a little to the good besides. This meant that I now had the time, the money and the inclination to consider trading in commodities as well as in stocks. For many years I have made it my practice to study all the markets. The advance in commodity prices over the pre-war level ranged from 100 to 400 per cent. There was only one exception, and that was coffee. Of course there was a reason for this. The breaking out of the war meant the closing up of European markets and huge cargoes were sent to this country, which was the one big market. That led in time to an enormous surplus of raw coffee here, and that, in turn, kept the price low. Why, when I first began to consider its speculative possibilities coffee was actually selling below pre-war prices. If the reasons for this anomaly were plain, no less plain was it that the active and increasingly efficient operation by the German and Austrian submarines must mean an appalling reduction in the number of ships available for commercial purposes. This eventually in turn must lead to dwindling imports of coffee. With reduced receipts and an unchanged consumption the surplus stocks must be absorbed, and when that happened the price of coffee must do what the prices of all other commodities had done, which was, go way up.

It didn’t require a Sherlock Holmes to size up the situation. Why everybody did not buy coffee I cannot tell you. When I decided to buy it I did not consider it a speculation. It was much more of an investment. I knew it would take time to cash in, but I knew also that it was bound to yield a good profit. That made it a conservative investment operation--a banker’s act rather than a gambler’s play.

I started my buying operations in the winter of 1917. I took quite a lot of coffee. The market, however, did nothing to speak of. It continued inactive and as for the price, it did not go up as I had expected. The outcome of it all was that I simply carried my line to no purpose for nine long months. My contracts expired then and I sold out all my options. I took a whopping big loss on that deal and yet I was sure my views were sound. I had been clearly wrong in the matter of time, but I was confident that coffee must advance as all commodities had done, so that no sooner had I sold out my line than I started in to buy again. I bought three times as much coffee as I had so unprofitably carried during those nine disappointing months. Of course I bought deferred options--for as long a time as I could get.

I was not so wrong now. As soon as I had taken on my trebled line the market began to go up. People everywhere seemed to realise all of a sudden what was bound to happen in the coffee market. It began to look as if my investment was going to return me a mighty good rate of interest.

The sellers of the contracts I held were roasters, mostly of German names and affiliations, who had bought the coffee in Brazil confidently expecting to bring it to this country. But there were no ships to bring it, and presently they found themselves in the uncomfortable position of having no end of coffee down there and being heavily short of it to me up here.

Please bear in mind that I first became bullish on coffee while the price was practically at a pre-war level, and don’t forget that after I bought it I carried it the greater part of a year and then took a big loss on it. The punishment for being wrong is to lose money. The reward for being right is to make money. Being clearly right and carrying a big line, I was justified in expecting to make a killing. It would not take much of an advance to make my profit satisfactory to me, for I was carrying several hundred thousand bags. I don’t like to talk about my operations in figures because sometimes they sound rather formidable and people might think I was boasting. As a matter of fact I trade in accordance to my means and always leave myself an ample margin of safety. In this instance I was conservative enough. The reason I bought options so freely was because I couldn’t see how I could lose. Conditions were in my favour. I had been made to wait a year, but now I was going to be paid both for my waiting and for being right. I could see the profit coming--fast. There wasn’t any cleverness about it. It was simply that I wasn’t blind.

Coming sure and fast, that profit of millions! But it never reached me. No; it wasn’t side-tracked by a sudden change in conditions. The market did not experience an abrupt reversal of form. Coffee did not pour into the country. What happened? The unexpectable! What had never happened in anybody’s experience; what I therefore had no reason to guard against. I added a new one to the long list of hazards of speculation that I must always keep before me. It was simply that the fellows who had sold me the coffee, the shorts, knew what was in store for them, and in their efforts to squirm out of the position into which they had sold themselves, devised a new way of welshing. They rushed to Washington for help, and got it.

Perhaps you remember that the Government had evolved various plans for preventing further profiteering in necessities. You know how most of them worked. Well, the philanthropic coffee shorts appeared before the Price Fixing Committee of the War Industries Board--I think that was the official designation--and made a patriotic appeal to that body to protect the American breakfaster. They asserted that a professional speculator, one Lawrence Livingston, had cornered, or was about to corner, coffee. If his speculative plans were not brought to naught he would take advantage of the conditions created by the war and the American people would be forced to pay exorbitant prices for their daily coffee. It was unthinkable to the patriots who had sold me cargoes of coffee they couldn’t find ships for, that one hundred millions of Americans, more or less, should pay tribute to conscienceless speculators. They represented the coffee trade, not the coffee gamblers, and they were willing to help the Government curb profiteering actual or prospective.

Now I have a horror of whiners and I do not mean to intimate that the Price Fixing Committee was not doing its honest best to curb profiteering and wastefulness. But that need not stop me from expressing the opinion that the committee could not have gone very deeply into the particular problem of the coffee market. They fixed on a maximum price for raw coffee and also fixed a time limit for closing out all existing contracts. This decision meant, of course, that the Coffee Exchange would have to go out of business. There was only one thing for me to do and I did it, and that was to sell out my contracts. Those profits of millions that I had deemed as certain to come my way as any I ever made failed completely to materialise. I was and am as keen as anybody against the profiteer in the necessaries of life, but at the time the Price Fixing Committee made their ruling on coffee, all other commodities were selling at from 250 to 400 per cent above pre-war prices while raw coffee was actually below the average prevailing for some years before the war. I can’t see that it made any real difference who held the coffee. The price was bound to advance; and the reason for that was not the operations of conscienceless speculators, but the dwindling surplus for which the diminishing importations were responsible, and they in turn were affected exclusively by the appalling destruction of the world’s ships by the German submarines. The committee did not wait for coffee to start; they clamped on the brakes.

As a matter of policy and of expediency it was a mistake to force the Coffee Exchange to close just then. If the committee had let coffee alone the price undoubtedly would have risen for the reasons I have already stated, which had nothing to do with any alleged corner. But the high price--which need not have been exorbitant--would have been an incentive to attract supplies to this market. I have heard Mr. Bernard M. Baruch say that the War Industries Board took into consideration this factor--the insuring of a supply--in fixing prices, and for that reason some of the complaints about the high limit on certain commodities were unjust. When the Coffee Exchange resumed business, later on, coffee sold at twenty-three cents. The American people paid that price because of the small supply, and the supply was small because the price had been fixed too low, at the suggestion of philanthropic shorts, to make it possible to pay the high ocean freights and thus insure continued importations.

I have always thought that my coffee deal was the most legitimate of all my trades in commodities. I considered it more of an investment than a speculation. I was in it over a year. If there was any gambling it was done by the patriotic roasters with German names and ancestry. They had coffee in Brazil and they sold it to me in New York. The Price Fixing Committee fixed the price of the only commodity that had not advanced. They protected the public against profiteering before it started, but not against the inevitable higher prices that followed. Not only that, but even when green coffee hung around nine cents a pound, roasted coffee went up with everything else. It was only the roasters who benefited. If the price of green coffee had gone up two or three cents a pound it would have meant several millions for me. And it wouldn’t have cost the public as much as the later advance did.

Post-mortems in speculation are a waste of time. They get you nowhere. But this particular deal has a certain educational value. It was as pretty as any I ever went into. The rise was so sure, so logical, that I figured that I simply couldn’t help making several millions of dollars. But I didn’t.

On two other occasions I have suffered from the action of exchange committees making rulings that changed trading rules without warning. But in those cases my own position, while technically right, was not quite so sound commercially as in my coffee trade. You cannot be dead sure of anything in a speculative operation. It was the experience I have just told you that made me add the unexpectable to the unexpected in my list of hazards.

After the coffee episode I was so successful in other commodities and on the short side of the stock market, that I began to suffer from silly gossip. The professionals in Wall Street and the newspaper writers got the habit of blaming me and my alleged raids for the inevitable breaks in prices. At times my selling was called unpatriotic--whether I was really selling or not. The reason for exaggerating the magnitude and the effect of my operations, I suppose, was the need to satisfy the public’s insatiable demand for reasons for each and every price movement.

As I have said a thousand times, no manipulation can put stocks down and keep them down. There is nothing mysterious about this. The reason is plain to everybody who will take the trouble to think about it half a minute. Suppose an operator raided a stock--that is, put the price down to a level below its real value--what would inevitably happen? Why, the raider would at once be up against the best kind of inside buying. The people who know what a stock is worth will always buy it when it is selling at bargain prices. _If the insiders are not able to buy, it will be because general conditions are against their free command of their own resources, and such conditions are not bull conditions._ When people speak about raids the inference is that the raids are unjustified; almost criminal. But selling a stock down to a price much below what it is worth is mighty dangerous business. It is well to bear in mind that a raided stock that fails to rally is not getting much inside buying and where there is a raid--that is, unjustified short selling--there is usually apt to be inside buying; and when there is that, the price does not stay down. I should say that in ninety-nine cases out of a hundred, so-called raids are really legitimate declines, accelerated at times but not primarily caused by the operations of a professional trader, however big a line he may be able to swing.

The theory that most of the sudden declines or particular sharp breaks are the results of some plunger’s operations probably was invented as an easy way of supplying reasons to those speculators who, being nothing but blind gamblers, will believe anything that is told them rather than do a little thinking. The raid excuse for losses that unfortunate speculators so often receive from brokers and financial gossipers is really an inverted tip. The difference lies in this: A bear tip is distinct, positive advice to sell short. But the inverted tip--that is, the explanation that does not explain--serves merely to keep you from wisely selling short. _The natural tendency when a stock breaks badly is to sell it. There is a reason--an unknown reason but a good reason; therefore, get out._ But it is not wise to get out when the break is the result of a raid by an operator, because the moment he stops the price must rebound. Inverted tips!

_XVI_

Tips! How people want tips! They crave not only to get them but to give them. There is greed involved, and vanity. It is very amusing, at times, to watch really intelligent people fish for them. And the tip-giver need not hesitate about the quality, for the tip-seeker is not really after good tips, but after any tip. If it makes good, fine! If it doesn’t, better luck with the next. I am thinking of the average customer of the average commission house. There is a type of promoter or manipulator that believes in tips first, last and all the time. A good flow of tips is considered by him as a sort of sublimated publicity work, the best merchandising dope in the world, for, since tip-seekers and tip-takers are invariably tip-passers, tip-broadcasting becomes a sort of endless-chain advertising. The tipster-promoter labours under the delusion that no human being breathes who can resist a tip if properly delivered. He studies the art of handing them out artistically.

I get tips by the hundreds every day from all sorts of people. I’ll tell you a story about Borneo Tin. You remember when the stock was brought out? It was at the height of the boom. The promoter’s pool had taken the advice of a very clever banker and decided to float the new company in the open market at once instead of letting an underwriting syndicate take its time about it. It was good advice. The only mistake the members of the pool made came from inexperience. They did not know what the stock market was capable of doing during a crazy boom and at the same time they were not intelligently liberal. They were agreed on the need of marking up the price in order to market the stock, but they started the trading at a figure at which the traders and the speculative pioneers could not buy it without misgivings.

By rights the promoters ought to have got stuck with it, but in the wild bull market their hoggishness turned out to be rank conservatism. The public was buying anything that was adequately tipped. Investments were not wanted. The demand was for easy money; for the sure gambling profit. Gold was pouring into this country through the huge purchases of war material. They tell me that the promoters, while making their plans for bringing out Borneo stock, marked up the opening price three different times before their first transaction was officially recorded for the benefit of the public.

I had been approached to join the pool and I had looked into it but I didn’t accept the offer because if there is any market manoeuvring to do, I like to do it myself. I trade on my own information and follow my own methods. When Borneo Tin was brought out, knowing what the pool’s resources were and what they had planned to do, and also knowing what the public was capable of, I bought ten thousand shares during the first hour of the first day. Its market début was successful at least to that extent. As a matter of fact the promoters found the demand so active that they decided it would be a mistake to lose so much stock so soon. They found out that I had acquired my ten thousand shares about at the same time that they found out that they would probably be able to sell every share they owned if they merely marked up the price twenty-five or thirty points. They therefore concluded that the profit on my ten thousand shares would take too big a chunk out of the millions they felt were already as good as banked. So they actually ceased their bull operations and tried to shake me out. But I simply sat tight. They gave me up as a bad job because they didn’t want the market to get away from them, and then they began to put up the price, without losing any more stock than they could help.

They saw the crazy height that other stocks rose to and they began to think in billions. Well, when Borneo Tin got up to 120 I let them have my ten thousand shares. It checked the rise and the pool managers let up on their jacking-up process. On the next general rally they again tried to make an active market for it and disposed of quite a little, but the merchandising proved to be rather expensive. Finally they marked it up to 150. But the bloom was off the bull market for keeps, so the pool was compelled to market what stock it could on the way down to those people who love to buy after a good reaction, on the fallacy that a stock that has once sold at 150 must be cheap at 130 and a great bargain at 120. Also, they passed the tip to the floor traders, who often are able to make a temporary market, and later to the commission houses. Every little helped and the pool was using every device known. The trouble was that the time for bulling stocks had passed. The suckers had swallowed other hooks. The Borneo bunch didn’t or wouldn’t see it.

I was down in Palm Beach with my wife. One day I made a little money at Gridley’s and when I got home I gave Mrs. Livingston a five-hundred-dollar bill out of it. It was a curious coincidence, but that same night she met at a dinner the president of the Borneo Tin Company, a Mr. Wisenstein, who had become the manager of the stock pool. We didn’t learn until some time afterward that this Wisenstein deliberately manœuvred so that he sat next to Mrs. Livingston at dinner.

He laid himself out to be particularly nice to her and talked most entertainingly. In the end he told her, very confidentially, “Mrs. Livingston, I’m going to do something I’ve never done before. I am very glad to do it because you know exactly what it means.” He stopped and looked at Mrs. Livingston anxiously, to make sure she was not only wise but discreet. She could read it on his face, plain as print. But all she said was, “Yes.”

“Yes, Mrs. Livingston. It has been a very great pleasure to meet you and your husband, and I want to prove that I am sincere in saying this because I hope to see a great deal of both of you. I am sure I don’t have to tell you that what I am going to say is strictly confidential!” Then he whispered, “If you will buy some Borneo Tin you will make a great deal of money.”

“Do you think so?” she asked.

“Just before I left the hotel,” he said, “I received some cables with news that won’t be known to the public for several days at least. I am going to gather in as much of the stock as I can. If you get some at the opening to-morrow you will be buying it at the same time and at the same price as I. I give you my word that Borneo Tin will surely advance. You are the only person that I have told this to. Absolutely the only one!”

She thanked him and then she told him that she didn’t know anything about speculating in stocks. But he assured her it wasn’t necessary for her to know any more than he had told her. To make sure she heard it correctly he repeated his advice to her:

“All you have to do is to buy as much Borneo Tin as you wish. I can give you my word that if you do you will not lose a cent. I’ve never before told a woman--or a man, for that matter--to buy anything in my life. But I am so sure the stock won’t stop this side of 200 that I’d like you to make some money. I can’t buy all the stock myself, you know, and if somebody besides myself is going to benefit by the rise I’d rather it was you than some stranger. Much rather! I’ve told you in confidence because I know you won’t talk about it. Take my word for it, Mrs. Livingston, and buy Borneo Tin!”