I shook my head and said, “He is a good friend of mine.”

“He’s fifty years old and a stock broker,” said the book agent.

That was perfectly true, so I took him into Ed’s office. I did not hear

anything more from or about that book agent. But one evening some weeks

later when I was going uptown I ran across him in a Sixth Avenue L

train. He raised his hat very politely and I nodded back. He came over

and asked me, “How do you do, Mr. Livingston? And how is Mr. Harding?”

“He’s well. Why do you ask?” I felt he was holding back a story.

“I sold him two thousand dollars’ worth of books that day you took me

in to see him.”

“He never said a word to me about it,” I said.

“No; that kind doesn’t talk about it.”

“What kind doesn’t talk?”

“The kind that never makes mistakes on account of its being bad

business to make them. That kind always knows what he wants and

nobody can tell him different. That is the kind that’s educating my

children and keeps my wife in good humor. You did me a good turn, Mr.

Livingston. I expected it when I gave up the two hundred dollars you

were so anxious to present to me.”

“And if Mr. Harding hadn’t given you an order?”

“Oh, but I knew he would. I had found out what kind of man he was. He

was a cinch.”

“Yes. But if he hadn’t bought any books?” I persisted.

“I’d have come back to you and sold you something. Good day, Mr.

Livingston. I am going to see the mayor.” And he got up as we pulled up

at Park Place.

“I hope you sell him ten sets,” I said. His Honor was a Tammany man.

“I’m a Republican, too,” he said, and went out, not hastily, but

leisurely, confident that the train would wait. And it did.

I have told you this story in such detail because it concerned a

remarkable man who made me buy what I did not wish to buy. He was the

first man who did that to me. There never should have been a second,

but there was. You can never bank on there being but one remarkable

salesman in the world or on complete immunization from the influence of

personality.

When Percy Thomas left my office, after I had pleasantly but definitely

declined to enter into a working alliance with him, I would have sworn

that our business paths would never cross. I was not sure I’d ever see

him again. But on the very next day he wrote me a letter thanking me

for my offers of help and inviting me to come and see him. I answered

that I would. He wrote again. I called.

I got to see a great deal of him. It was always a pleasure for me

to listen to him, he knew so much and he expressed his knowledge so

interestingly. I think he is the most magnetic man I ever met.

We talked of many things, for he is a widely read man with an

amazing grasp of many subjects and a remarkable gift for interesting

generalization. The wisdom of his speech is impressive; and as for

plausibility, he hasn’t an equal. I have heard many people accuse Percy

Thomas of many things, including insincerity, but I sometimes wonder

if his remarkable plausibility does not come from the fact that he

first convinces himself so thoroughly as to acquire thereby a greatly

increased power to convince others.

Of course we talked about market matters at great length. I was not

bullish on cotton, but he was. I could not see the bull side at all,

but he did. He brought up so many facts and figures that I ought to

have been overwhelmed, but I wasn’t. I couldn’t disprove them because

I could not deny their authenticity, but they did not shake my belief

in what I read for myself. But he kept at it until I no longer felt

sure of my own information as gathered from the trade papers and the

dailies. That meant I couldn’t set the market with my own eyes. A man

cannot be convinced against his own convictions, but he can be talked

into a state of uncertainty and indecision, which is even worse, for

that means that he cannot trade with confidence and comfort.

I cannot say that I got all mixed up, exactly, but I lost my poise; or

rather, I ceased to do my own thinking. I cannot give you in detail

the various steps by which I reached the state of mind that was to

prove so costly to me. I think it was his assurances of the accuracy

of his figures, which were exclusively his, and the undependability of

mine, which were not exclusively mine, but public property. He harped

on the utter reliability, as proved time and again, of all his ten

thousand correspondents throughout the South. In the end I came to read

conditions as he himself read them--because we were both reading from

the same page of the same book, held by him before my eyes. He has a

logical mind. Once I accepted his facts it was a cinch that my own

conclusions, derived from his facts, would agree with his own.

When he began his talks with me about the cotton situation I not only

was bearish but I was short of the market. Gradually, as I began

to accept his facts and figures, I began to fear I had been basing

my previous position on misinformation. Of course I could not feel

that way and not cover. And once I had covered because Thomas made

me think I was wrong, I simply had to go long. It is the way my mind

works. You know, I have done nothing in my life but trade in stocks

and commodities. I naturally think that if it is wrong to be bearish

it must be right to be a bull. And if it is right to be a bull it is

imperative to buy. As my old Palm Beach friend said Pat Hearne used to

say, “You can’t tell till you bet!” I must prove whether I am right on

the market or not; and the proofs are to be read only in my brokers’

statements at the end of the month.

I started in to buy cotton and in a jiffy I had my usual line, about

sixty thousand bales. It was the most asinine play of my career.

Instead of standing or falling by my own observation and deductions I

was merely playing another man’s game. It was eminently fitting that my

silly plays should not end with that. I not only bought when I had no

business to be bullish but I didn’t accumulate my line in accordance

with the promptings of experience. I wasn’t trading right. Having

listened, I was lost.

The market was not going my way. I am never afraid or impatient when

I am sure of my position. But the market didn’t act the way it should

have acted had Thomas been right. Having taken the first wrong step I

took the second and the third, and of course it muddled me all up. I

allowed myself to be persuaded not only into not taking my loss but

into holding up the market. That is a style of play foreign to my

nature and contrary to my trading principles and theories. Even as a

boy in the bucket shops I had known better. But I was not myself. I was

another man--a Thomasized person.

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.

Broke again and incapable of assuming the offensive vigorously. In

debt and wrong! After all those long years of successes, tempered by

mistakes that really served to pave the way for greater successes, I

was now worse off than when I began in the bucket shops. I had learned

a great deal about the game of stock speculation, but I had not learned

quite so much about the play of human weaknesses. There is no mind

so machinelike that you can depend upon it to function with equal

efficiency at all times. I now learned that I could not trust myself to

remain equally unaffected by men and misfortunes at all times.

Money losses have never worried me in the slightest. But other

troubles could and did. I studied my disaster in detail and of course

found no difficulty in seeing just where I had been silly. I spotted

the exact time and place. A man must know himself thoroughly if he is

going to make a good job out of trading in the speculative markets. To

know what I was capable of in the line of folly was a long educational

step. I sometimes think that no price is too high for a speculator

to pay to learn that which will keep him from getting the swelled

head. A great many smashes by brilliant men can be traced directly to

the swelled head--an expensive disease everywhere to everybody, but

particularly in Wall Street to a speculator.

I was not happy in New York, feeling the way I did. I didn’t want to

trade, because I wasn’t in good trading trim. I decided to go away

and seek a stake elsewhere. The change of scene could help me to find

myself again, I thought. So once more I left New York, beaten by the

game of speculation. I was worse than broke, since I owed over one

hundred thousand dollars spread among various brokers.

I went to Chicago and there found a stake. It was not a very

substantial stake, but that merely meant that I would need a little

more time to win back my fortune. A house that I once had done business

with had faith in my ability as a trader and they were willing to prove

it by allowing me to trade in their office in a small way.

I began very conservatively. I don’t know how I might have fared had I

stayed there. But one of the most remarkable experiences in my career

cut short my stay in Chicago. It is an almost incredible story.

One day I got a telegram from Lucius Tucker. I had known him when he

was the office manager of a Stock Exchange firm that I had at times

given some business to, but I had lost track of him. The telegram read:

Come to New York at once.

L. TUCKER.

I knew that he knew from mutual friends how I was fixed and therefore

it was certain he had something up his sleeve. At the same time I had

no money to throw away on an unnecessary trip to New York; so instead

of doing what he asked me to do I got him on the long distance.

“I got your telegram,” I said. “What does it mean?”

“It means that a big banker in New York wants to see you,” he answered.

“Who is it?” I asked. I couldn’t imagine who it could be.

“I’ll tell you when you come to New York. No use otherwise.”

“You say he wants to see me?”

“He does.”

“What about?”

“He’ll tell you in person if you give him a chance,” said Lucius.

“Can’t you write me?”

“No.”

“Then tell me more plainly,” I said.

“I don’t want to.”

“Look here, Lucius,” I said, “just tell me this much: Is this a fool

trip?”

“Certainly not. It will be to your advantage to come.”

“Can’t you give me an inkling?”

“No,” he said. “It wouldn’t be fair to him. And besides, I don’t know

just how much he wants to do for you. But take my advice: Come, and

come quick.”

“Are you sure it is I that he wishes to see?”

“Nobody else but you will do. Better come, I tell you. Telegraph me

what train you take and I’ll meet you at the station.”

“Very well,” I said, and hung up.

I didn’t like quite so much mystery, but I knew that Lucius was

friendly and that he must have a good reason for talking the way he

did. I wasn’t faring so sumptuously in Chicago that it would break my

heart to leave it. At the rate I was trading it would be a long time

before I could get together enough money to operate on the old scale.

I came back to New York, not knowing what would happen. Indeed, more

than once during the trip I feared nothing at all would happen and that

I’d be out my railroad fare and my time. I could not guess that I was

about to have the most curious experience of my entire life.

Lucius met me at the station and did not waste any time in telling me

that he had sent for me at the urgent request of Mr. Daniel Williamson,

of the well-known Stock Exchange house of Williamson & Brown. Mr.

Williamson told Lucius to tell me that he had a business proposition

to make to me that he was sure I would accept since it would be very

profitable for me. Lucius swore he didn’t know what the proposition

was. The character of the firm was a guaranty that nothing improper

would be demanded of me.

Dan Williamson was the senior member of the firm, which was founded by

Egbert Williamson way back in the ’70’s. There was no Brown and hadn’t

been one in the firm for years. The house had been, very prominent

in Dan’s father’s time and Dan had inherited a considerable fortune

and didn’t go after much outside business. They had one customer who

was worth a hundred average customers and that was Alvin Marquand,

Williamson’s brother-in-law, who in addition to being a director in

a dozen banks and trust companies was the president of the great

Chesapeake and Atlantic Railroad system. He was the most picturesque

personality in the railroad world after James J. Hill, and was the

spokesman and dominant member of the powerful banking coterie known as

the Fort Dawson gang. He was worth from fifty million to five hundred

million dollars, the estimate depending upon the state of the speaker’s

liver. When he died they found out that he was worth two hundred and

fifty million dollars, all made in Wall Street. So you see he was some

customer.

Lucius told me he had just accepted a position with Williamson &

Brown--one that was made for him. He was supposed to be a sort of

circulating general business getter. The firm was after a general

commission business and Lucius had induced Mr. Williamson to open a

couple of branch offices, one in one of the big hotels uptown and the

other in Chicago. I rather gathered that I was going to be offered a

position in the latter place, possibly as office manager, which was

something I would not accept. I didn’t jump on Lucius because I thought

I’d better wait until the offer was made before I refused it.

Lucius took me into Mr. Williamson’s private office, introduced me to

his chief and left the room in a hurry, as though he wished to avoid

being called as witness in a case in which he knew both parties. I

prepared to listen and then to say no.

Mr. Williamson was very pleasant. He was a thorough gentleman,

with polished manners and a kindly smile. I could see that he made

friends easily and kept them. Why not? He was healthy and therefore

good-humored. He had slathers of money and therefore could not be

suspected of sordid motives. These things, together with his education

and social training, made it easy for him to be not only polite but

friendly, and not only friendly but helpful.

I said nothing. I had nothing to say and, besides, I always let the

other man have his say in full before I do any talking. Somebody

told me that the late James Stillman, president of the National City

Bank--who, by the way, was an intimate friend of Williamson’s--made

it his practice to listen in silence, with an impassive face, to

anybody who brought a proposition to him. After the man got through Mr.

Stillman continued to look at him, as though the man had not finished.

So the man, feeling urged to say something more, did so. Simply by

looking and listening Stillman often made the man offer terms much more

advantageous to the bank than he had meant to offer when he began to

speak.

I don’t keep silent just to induce people to offer a better bargain,

but because I like to know all the facts of the case. By letting a man

have his say in full you are able to decide at once. It is a great

time-saver. It averts debates and prolonged discussions that get

nowhere. Nearly every business proposition that is brought to me can be

settled, as far as my participation in it is concerned, by my saying

yes or no. But I cannot say yes or no right off unless I have the

complete proposition before me.

Dan Williamson did the talking and I did the listening. He told me he

had heard a great deal about my operations in the stock market and how

he regretted that I had gone outside of my bailiwick and come a cropper

in cotton. Still it was to my bad luck that he owed the pleasure of

that interview with me. He thought my forte was the stock market, that

I was born for it and that I should not stray from it.

“And that is the reason, Mr. Livingston,” he concluded pleasantly, “why

we wish to do business with you.”

“Do business how?” I asked him.

“Be your brokers,” he said. “My firm would like to do your stock

business.”

“I’d like to give it to you,” I said, “but I can’t.”

“Why not?” he asked.

“I haven’t any money,” I answered.

“That part is all right,” he said with a friendly smile. “I’ll furnish

it.” He took out a pocket checkbook, wrote out a check for twenty-five

thousand dollars to my order, and gave it to me.

“What’s this for?” I asked.

“For you to deposit in your own bank. You will draw your own checks. I

want you to do your trading in our office. I don’t care whether you win

or lose. If that money goes I will give you another personal check. So

you don’t have to be so very careful with this one. See?”

I knew that the firm was too rich and prosperous to need anybody’s

business, much less to give a fellow the money to put up as margin.

And then he was so nice about it! Instead of giving me a credit with

the house he gave me the actual cash, so that he alone knew where

it came from, the only string being that if I traded I should do so

through his firm. And then the promise that there would be more if that

went! Still, there must be a reason.

“What’s the idea?” I asked him.

“The idea is simply that we want to have a customer in this office who

is known as a big active trader. Everybody knows that you swing a big

line on the short side, which is what I particularly like about you.

You are known as a plunger.”

“I still don’t get it,” I said.

“I’ll be frank with you, Mr. Livingston. We have two or three very

wealthy customers who buy and sell stocks in a big way. I don’t want

the Street to suspect them of selling long stock every time we sell

ten or twenty thousand shares of any stock. If the Street knows that

you are trading in our office it will not know whether it is your

short selling or the other customers’ long stock that is coming on the

market.”

I understood at once. He wanted to cover up his brother-in-law’s

operations with my reputation as a plunger! It so happened that I had

made my biggest killing on the bear side a year and a half before, and,

of course, the Street gossips and the stupid rumor-mongers had acquired

the habit of blaming me for every decline in prices. To this day when

the market is very weak they say I am raiding it.

I didn’t have to reflect. I saw at a glance that Dan Williamson was

offering me a chance to come back and come back quickly. I took the

check, banked it, opened an account with his firm and began trading. It

was a good active market, broad enough for a man not to have to stick

to one or two specialties. I had begun to fear, as I told you, that I

had lost the knack of hitting it right. But it seems I hadn’t. In three

weeks’ time I had made a profit of one hundred and twelve thousand

dollars out of the twenty-five thousand that Dan Williamson lent me.

I went to him and said, “I’ve come to pay you back that twenty-five

thousand dollars.”

“No, no!” he said and waved me away exactly as if I had offered him a

castor-oil cocktail. “No, no, my boy. Wait until your account amounts

to something. Don’t think about it yet. You’ve only got chicken feed

there.”

There is where I made the mistake that I have regretted more than any

other I ever made in my Wall Street career. It was responsible for long

and dreary years of suffering. I should have insisted on his taking the

money. I was on my way to a bigger fortune than I had lost and walking

pretty fast. For three weeks my average profit was 150 per cent per

week. From then on my trading would be on a steadily increasing scale.

But instead of freeing myself from all obligation I let him have his

way and did not compel him to accept the twenty-five thousand dollars.

Of course, since he didn’t draw out the twenty-five thousand dollars he

had advanced me I felt I could not very well draw out my profit. I was

very grateful to him, but I am so constituted that I don’t like to owe

money or favours. I can pay the money back with money, but the favours

and kindnesses I must pay back in kind--and you are apt to find these

moral obligations mighty high priced at times. Moreover there is no

statute of limitations.

I left the money undisturbed and resumed my trading. I was getting on

very nicely. I was recovering my poise and I was sure it would not be

very long before I should get back into my 1907 stride. Once I did

that, all I’d ask for would be for the market to hold out a little

while and I’d more than make up my losses. But making or not making

the money was not bothering me much. What made me happy was that I was

losing the habit of being wrong, of not being myself. It had played

havoc with me for months but I had learned my lesson.

Just about that time I turned bear and I began to sell short several

railroad stocks. Among them was Chesapeake & Atlantic. I think I put

out a short line in it; about eight thousand shares.

One morning when I got downtown Dan Williamson called me into his

private office before the market opened and said to me: “Larry, don’t

do anything in Chesapeake & Atlantic just now. That was a bad play of

yours, selling eight thousand short. I covered it for you this morning

in London and went long.”

I was sure Chesapeake & Atlantic was going down. The tape told it to

me quite plainly; and besides I was bearish on the whole market, not

violently or insanely bearish, but enough to feel comfortable with a

moderate short line out. I said to Williamson, “What did you do that

for? I am bearish on the whole market and they are all going lower.”

But he just shook his head and said, “I did it because I happen to know

something about Chesapeake & Atlantic that you couldn’t know. My advice

to you is not to sell that stock short until I tell you it is safe to

do so.”

What could I do? That wasn’t an asinine tip. It was advice that came

from the brother-in-law of the chairman of the board of directors. Dan

was not only Alvin Marquand’s closest friend but he had been kind and

generous to me. He had shown his faith in me and confidence in my word.

I couldn’t do less than to thank him. And so my feelings again won over

my judgment and I gave in. To subordinate my judgment to his desires

was the undoing of me. Gratitude is something a decent man can’t help

feeling, but it is for a fellow to keep it from completely tying him

up. The first thing I knew I not only had lost all my profit but I owed

the firm one hundred and fifty thousand dollars besides. I felt pretty

badly about it, but Dan told me not to worry.

“I’ll get you out of this hole,” he promised. “I know I will. But I

can only do it if you let me. You will have to stop doing business on

your own hook. I can’t be working for you and then have you completely

undo all my work in your behalf. Just lay off the market and give me a

chance to make some money for you. Won’t you, Larry?”

Again I ask you: What could I do? I thought of his kindliness and

I could not do anything that might be construed as lacking in

appreciation. I had grown to like him. He was very pleasant and

friendly. I remember that all I got from him was encouragement. He kept

on assuring me that everything would come out O.K. One day, perhaps

six months later, he came to me with a pleased smile and gave me some

credit slips.

“I told you I would pull you out of that hole,” he said, “and I have.”

And then I discovered that not only had he wiped out the debt entirely

but I had a small credit balance besides.

I think I could have run that up without much trouble, for the market

was right, but he said to me, “I have bought you ten thousand shares

of Southern Atlantic.” That was another road controlled by his

brother-in-law, Alvin Marquand, who also ruled the market destinies of

the stock.

When a man does for you what Dan Williamson did for me you can’t say

anything but “Thank you”--no matter what your market views may be. You

may be sure you’re right, but as Pat Hearne used to say: “You can’t

tell till you bet!” and Dan Williamson had bet for me--with his money.

Well, Southern Atlantic went down and stayed down and I lost, I forget

how much, on my ten thousand shares before Dan sold me out. I owed him

more than ever. But you never saw a nicer or less importunate creditor

in your life. Never a whimper from him. Instead, encouraging words and

admonitions not to worry about it. In the end the loss was made up for

me in the same generous but mysterious way.

He gave no details whatever. They were all numbered accounts. Dan

Williamson would just say to me, “We made up your Southern Atlantic

loss with profits on this other deal,” and he’d tell me how he had sold

seventy-five hundred shares of some other stock and made a nice thing

out of it. I can truthfully say that I never knew a blessed thing about

those trades of mine until I was told that the indebtedness was wiped

out.

After that happened several times I began to think, and I got to look

at my case from a different angle. Finally I tumbled. It was plain that

I had been used by Dan Williamson. It made me angry to think it, but

still angrier that I had not tumbled to it quicker. As soon as I had

gone over the whole thing in my mind I went to Dan Williamson, told

him I was through with the firm, and I quit the office of Williamson &

Brown. I had no words with him or any of his partners. What good would

that have done me? But I will admit that I was sore--at myself quite as

much as at Williamson & Brown.

The loss of the money didn’t bother me. Whenever I have lost money

in the stock market I have always considered that I have learned

something; that if I have lost money I have gained experience, so that

the money really went for a tuition fee. A man has to have experience

and he has to pay for it. But there was something that hurt a whole lot

in that experience of mine in Dan Williamson’s office, and that was the

loss of a great opportunity. The money a man loses is nothing; he can

make it up. But opportunities such as I had then do not come every day.

The market, you see, had been a fine trading market. I was right; I

mean, I was reading it accurately. The opportunity to make millions was

there. But I allowed my gratitude to interfere with my play. I tied

my own hands. I had to do what Dan Williamson in his kindness wished

done. Altogether it was more unsatisfactory than doing business with a

relative. Bad business!

And that wasn’t the worst thing about it. It was that after that there

was practically no opportunity for me to make big money. The market

flattened out. Things drifted from bad to worse. I not only lost all I

had but got into debt again--more heavily than ever. Those were long

lean years, 1911, 1912, 1913 and 1914. There was no money to be made.

The opportunity simply wasn’t there and so I was worse off than ever.

It isn’t uncomfortable to lose when the loss is not accompanied by a

poignant vision of what might have been. That was precisely what I

could not keep my mind from dwelling on, and of course it unsettled me

further. I learned that the weaknesses to which a speculator is prone

are almost numberless. It was proper for me as a man to act the way I

did in Dan Williamson’s office, but it was improper and unwise for me

as a speculator to allow myself to be influenced by any consideration

to act against my own judgment. _Noblesse oblige_--but not in the stock

market, because the tape is not chivalrous and moreover does not reward

loyalty. I realise that I couldn’t have acted differently. I couldn’t

make myself over just because I wished to trade in the stock market.

But business is business always, and my business as a speculator is to

back my own judgment always.

It was a very curious experience. I’ll tell you what I think happened.

Dan Williamson was perfectly sincere in what he told me when he first

saw me. Every time his firm did a few thousand shares in any one stock

the Street jumped at the conclusion that Alvin Marquand was buying or

selling. He was the big trader of the office, to be sure, and he gave

this firm all his business; and he was one of the best and biggest

traders they have ever had in Wall Street. Well, I was to be used as a

smoke screen, particularly for Marquand’s selling.

Alvin Marquand fell sick shortly after I went in. His ailment was early

diagnosed as incurable, and Dan Williamson of course knew it long

before Marquand himself did. That is why Dan covered my Chesapeake &

Atlantic stock. He had begun to liquidate some of his brother-in-law’s

speculative holdings of that and other stocks.

Of course when Marquand died the estate had to liquidate his

speculative and semispeculative lines, and by that time we had run

into a bear market. By tying me up the way he did, Dan was helping the

estate a whole lot. I do not speak boastfully when I say that I was a

very heavy trader and that I was dead right in my views on the stock

market. I know that Williamson remembered my successful operations

in the bear market of 1907 and he couldn’t afford to run the risk of

having me at large. Why, if I had kept on the way I was going I’d have

made so much money that by the time he was trying to liquidate part

of Alvin Marquand’s estate I would have been trading in hundreds of

thousands of shares. As an active bear I would have done damage running

into the millions of dollars to the Marquand heirs, for Alvin left only

a little over a couple of hundred millions.

It was much cheaper for them to let me get into debt and then to pay

off the debt than to have me in some other office operating actively on

the bear side. That is precisely what I would have been doing but for

my feeling that I must not be outdone in decency by Dan Williamson.

I have always considered this the most interesting and most unfortunate

of all my experiences as a stock operator. As a lesson it cost me a

disproportionately high price. It put off the time of my recovery

several years. I was young enough to wait with patience for the strayed

millions to come back. But five years is a long time for a man to be

poor. Young or old, it is not to be relished. I could do without the

yachts a great deal easier than I could without a market to come back

on. The greatest opportunity of a lifetime was holding before my very

nose the purse I had lost. I could not put out my hand and reach for

it. A very shrewd boy, that Dan Williamson; as slick as they make

them; farsighted, ingenious, daring. He is a thinker, has imagination,

detects the vulnerable spot in any man and can plan cold-bloodedly to

hit it. He did his own sizing up and soon doped out just what to do to

me in order to reduce me to complete inoffensiveness in the market.

He did not actually do me out of any money. On the contrary, he was

to all appearances extremely nice about it. He loved his sister, Mrs.

Marquand, and he did his duty toward her as he saw it.

_XIV_

It has always rankled in my mind that after I left Williamson & Brown’s

office the cream was off the market. We ran smack into a long moneyless

period; four mighty lean years. There was not a penny to be made. As

Billy Henriquez once said, “It was the kind of market in which not even

a skunk could make a scent.”

It looked to me as though I was in Dutch with destiny. It might have

been the plan of Providence to chasten me, but really I had not been

filled with such pride as called for a fall. I had not committed any of

those speculative sins which a trader must expiate on the debtor side

of the account. I was not guilty of a typical sucker play. What I had

done, or, rather, what I had left undone, was something for which I

would have received praise and not blame--north of Forty-second Street.

In Wall Street it was absurd and costly. But by far the worst thing

about it was the tendency it had to make a man a little less inclined

to permit himself human feelings in the ticker district.

I left Williamson’s and tried other brokers’ offices. In every one

of them I lost money. It served me right, because I was trying to

force the market into giving me what it didn’t have to give--to wit,

opportunities for making money. I did not find any trouble in getting

credit, because those who knew me had faith in me. You can get an idea

of how strong their confidence was when I tell you that when I finally

stopped trading on credit I owed well over one million dollars.

The trouble was not that I had lost my grip but that during those

four wretched years the opportunities for making money simply didn’t

exist. Still I plugged along, trying to make a stake and succeeding

only in increasing my indebtedness. After I ceased trading on my

own hook because I wouldn’t owe my friends any more money I made a

living handling accounts for people who believed I knew the game well

enough to beat it even in a dull market. For my services I received a

percentage of the profits--when there were any. That is how I lived.

Well, say that is how I sustained life.

Of course, I didn’t always lose, but I never made enough to allow me

materially to reduce what I owed. Finally, as things got worse, I felt

the beginnings of discouragement for the first time in my life.

Everything seemed to have gone wrong with me. I did not go about

bewailing the descent from millions and yachts to debts and the

simple life. I didn’t enjoy the situation, but I did not fill up with

self-pity. I did not propose to wait patiently for time and Providence

to bring about the cessation of my discomforts. I therefore studied

my problem. It was plain that the only way out of my troubles was by

making money. To make money I needed merely to trade successfully. I

had so traded before and I must do so once more. More than once in the

past I had run up a shoestring into hundreds of thousands. Sooner or

later the market would offer me an opportunity.

I convinced myself that whatever was wrong was wrong with me and not

with the market. Now what could be the trouble with me? I asked myself

that question in the same spirit in which I always study the various

phases of my trading problems. I thought about it calmly and came to

the conclusion that my main trouble came from worrying over the money

I owed. I was never free from the mental discomfort of it. I must

explain to you that it was not mere consciousness of my indebtedness.

Any business man contracts debts in the course of his regular business.

Most of my debts were really nothing but business debts, due to

what were unfavourable business conditions for me, and no worse than

a merchant suffers from, for instance, when there is an unusually

prolonged spell of unseasonable weather.

Of course as time went on and I could not pay I began to feel less

philosophical about my debts. I’ll explain: I owed over a million

dollars--all of it stock-market losses, remember. Most of my creditors

were very nice and didn’t bother me; but there were two who did bedevil

me. They used to follow me around. Every time I made a winning each of

them was Johnny-on-the-spot, wanting to know all about it and insisting

on getting theirs right off. One of them, to whom I owed eight hundred

dollars, threatened to sue me, seize my furniture, and so forth. I

can’t conceive why he thought I was concealing assets, unless it was

that I didn’t quite look like a stage hobo about to die of destitution.

As I studied the problem I saw that it wasn’t a case that called for

reading the tape but for reading my own self. I quite cold-bloodedly

reached the conclusion that I would never be able to accomplish

anything useful so long as I was worried, and it was equally plain that

I should be worried so long as I owed money. I mean, as long as any

creditor had the power to vex me or to interfere with my coming back by

insisting upon being paid before I could get a decent stake together.

This was all so obviously true that I said to myself, “I must go

through bankruptcy.” What else could relieve my mind?

It sounds both easy and sensible, doesn’t it? But it was more than

unpleasant, I can tell you. I hated to do it. I hated to put myself

in a position to be misunderstood or misjudged. I myself never cared

much for money. I never thought enough of it to consider it worthwhile

lying for. But I knew that everybody didn’t feel that way. Of course I

also knew that if I got on my feet again I’d pay everybody off, for the

obligation remained. But unless I was able to trade in the old way I’d

never be able to pay back that million.

I nerved myself and went to see my creditors. It was a mighty difficult

thing for me to do, for all that most of them were personal friends or

old acquaintances.

I explained the situation quite frankly to them. I said: “I am not

going to take this step because I don’t wish to pay you but because,

in justice to both myself and you, I must put myself in a position to

make money. I have been thinking of this solution off and on for over

two years, but I simply didn’t have the nerve to come out and say so

frankly to you. It would have been infinitely better for all of us if

I had. It all simmers down to this: I positively cannot be my old self

while I am harassed or upset by these debts. I have decided to do now

what I should have done a year ago. I have no other reason than the one

I have just given you.”

What the first man said was to all intents and purposes what all of

them said. He spoke for his firm.

“Livingston,” he said, “we understand. We realise your position

perfectly. I’ll tell you what we’ll do: we’ll just give you a release.

Have your lawyer prepare any kind of paper you wish, and we’ll sign it.”

That was in substance what all my big creditors said. That is one

side of Wall Street for you. It wasn’t merely careless good nature

or sportsmanship. It was also a mighty intelligent decision, for it

was clearly good business. I appreciated both the good will and the

business gumption.

These creditors gave me a release on debts amounting to over a million

dollars. But there were the two minor creditors who wouldn’t sign off.

One of them was the eight-hundred-dollar man I told you about. I also

owed sixty thousand dollars to a brokerage firm which had gone into

bankruptcy, and the receivers, who didn’t know me from Adam, were on

my neck early and late. Even if they had been disposed to follow the

example set by my largest creditors I don’t suppose the court would

have let them sign off. At all events my schedule of bankruptcy

amounted to only about one hundred thousand dollars; though, as I said,

I owed well over a million.

It was extremely disagreeable to see the story in the newspapers. I

had always paid my debts in full and this new experience was most

mortifying to me. I knew I’d pay off everybody some day if I lived,

but everybody who read the article wouldn’t know it. I was ashamed to

go out after I saw the report in the newspapers. But it all wore off

presently and I cannot tell you how intense was my feeling of relief to

know that I wasn’t going to be harried any more by people who didn’t

understand how a man must give his entire mind to his business--if he

wishes to succeed in stock speculation.

My mind now being free to take up trading with some prospect of

success, unvexed by debts, the next step was to get another stake. The

Stock Exchange had been closed from July thirty-first to the middle of

December, 1914, and Wall Street was in the dumps. There hadn’t been any

business whatever in a long time. I owed all my friends. I couldn’t

very well ask them to help me again just because they had been so

pleasant and friendly to me, when I knew that nobody was in a position

to do much for anybody.

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.