MINING FINANCE AT GOLDFIELD
I had never visited San Francisco. Being close to the city of the
Golden Gate--within fifty miles--I decided to "take a look." So one
evening, in the late Fall of 1904, I packed my grip and within two
hours was comfortably housed in the old Palace Hotel.
The first man I met on entering the lobby was W. J. Arkell, formerly
one of the owners of _Frank Leslie's Weekly_ and of _Judge_.
"Hello, Bill!" I exclaimed. "What are you doing here?"
"Same as you," he answered. "Morse trimmed me in American Ice, and I'm
broke. I am in hock to the hotel. They think I am worth $2,000,000. I
haven't 20 cents."
During the evening we consoled each other over a series of silver gin
fizzes, several of which Arkell paid for with the stub of a pencil. My
companion promulgated a scheme for the quick putting on their feet of
two Eastern rovers adrift in the big Coast city, and that night there
was formed the W. J. Arkell Advertising Agency. Then the horse-tipping
firm of "Jack Hornaday" was established. I declared that I preferred to
have little to do with it except to show "Willie" how it had been done
in New York by Maxim & Gay.
"I will do it for you, Bill," I said; "but no more for me--I've had
enough."
"Jack Hornaday" advertisements appeared daily in all the San Francisco
papers. Capable clockers and handicappers were hired and some excellent
information was obtained. Race-goers got a run for their money.
But something happened. The race-track trust, which enjoyed a big pull
in the San Francisco _Examiner_ office, soon realized that somebody
outside of the inner circle was getting the public's money, and every
day that "Jack Hornaday" tipped a loser the _Examiner_ carried on its
sporting page a notice to the effect that "Jack Hornaday's" tip had
resulted very disastrously to his clients.
A PARTNERSHIP OF PURE NERVE
"Jack Hornaday" discontinued business.
I began to like San Francisco and the Coast. Being thrown among
Arkell's associates in the Palace Hotel lobby, from time to time I
naturally heard a great deal of talk about the new Nevada mining camp
of Tonopah.
"Rice," said Arkell one evening, "come with me up to Tonopah and be my
press agent. We will get hold of a mining property up there, promote a
company and make a barrel of money."
"What do you know about mines?" I asked.
"Well, I've lost enough in 'em to know a great deal," he answered.
"I don't know a mine from a hole in the ground, and I know nothing
about the stock-brokerage business; so I don't see how I can be of any
assistance," I said.
"Don't let that bother you," he replied. "I'll show you how. You come
with me."
"I will go on one condition," I said. "I am in for half on anything you
do."
We shook hands and it was a bargain.
We went to the depot. I had a trifle less than $150 in my pocket.
Arkell had $75.
"Suppose we get stranded out there, what will happen?" I propounded.
"Oh, forget it!" he answered. "How can a couple of Easterners like us,
wide awake and with phosphorus brains, get stranded in a place where
they dig silver and gold out of the ground?"
We journeyed to Tonopah--a thirty-six-hour ride. The altitude is 6,000
feet, and it was cold, nasty, penetrating Winter weather. During the
last hundred miles of our journey across the mountainous desert we
looked out of the car window and saw trainload after trainload of what
was said to be ore coming from the opposite direction, and we decided
that Tonopah was a sure-enough mining camp and that some of the
sensational stories about bonanza mines that we had heard were really
true.
BUCKING THE TIGER ON THE DESERT
Arriving In Tonopah after dusk, we sought hotel accommodations. The
best we could get was a bed in a forbidding looking one-story annex,
walled with undressed pine and roofed with tarpaulin. It was located
100 feet to the rear of the hotel, which was already crowded with
miners and soldiers of fortune drawn from all quarters of the world by
the mining excitement. Its aspect was so inhospitable that Arkell and I
decided not to retire for a little while. We gravitated out toward the
barroom, where the click of the roulette wheel caught our ears.
We sat down to watch the game. Soon we were buying stacks of checks and
ourselves bucking the tiger excitedly. In an hour the remnants of my
$150 passed to the ownership of the man behind the game, and Arkell had
put his last two-bit piece on the black and lost.
I looked at him. He looked at me.
"Umph!" he grunted. "Better hit the feathers!"
Meekly I followed him to the annex. When we got under the soiled gray
woolen blankets, I remarked: "I've got a cane and an umbrella and three
suits of clothes. Do you think we can sell them in the morning for
enough to provide breakfast money?"
"Oh, come off!" exclaimed my partner. "Wait till I present my card
around this burg in the morning; then we will get all the breakfast we
want."
We awoke hungry, as all men have a habit of doing when they are broke.
"I am going over to the Montana-Tonopah Mining Company's office," said
Arkell. "A mining engineer by the name of Malcolm Macdonald makes his
headquarters over there and he wants to sell some mining properties at
Goldfield and in other parts of the State for about three million
dollars."
"Three millions!" I exclaimed.
"Yes," said Arkell. "I'll get the facts and wire them to my friend Joe
Hoadley in New York."
"Say, Bill," I remonstrated, "they have a privately-owned jerkline
telegraph in this town, and if you send any 'phony' telegrams over the
wire, they'll be on to you. So don't do any of that kind of business."
"Nothing of the kind!" replied he promptly. "Any message I send to
Hoadley he'll answer."
"I guess you have it fixed on the other end," I remarked. He laughed.
We strolled over to the State Bank and Trust Company building, across
the street, and there met Malcolm Macdonald, a mining engineer from
Butte, Montana, and his friend, Mr. Dunlap, who was at the time
secretary of the Montana-Tonopah Mining Company. The conversation was
not more than five minutes old when Arkell suggested that he would like
to eat breakfast, but "didn't want any restaurants in his," intimating
that he would like to have some good, old-fashioned home cooking. Mr.
Dunlap remarked modestly that the camp was too young to boast of much
home cooking, but that if we would be his guests he would guarantee to
make arrangements for some special cooking at the Palace restaurant.
BIDDING $3,000,000 WHEN BROKE
After breakfast, which consisted of mountain trout, the flavor of which
was more delicious than anything I had tasted in many years--probably
because of the artificial hunger which an empty purse had created--we
returned to the office of the bank. There Arkell explained to Mr.
Macdonald that he wanted "a big mining proposition or nothing." He said
he represented big Eastern capital and that he was prepared to pay from
one to three millions for the right kind of property. Mr. Macdonald
named some mines and prospects which he said he was willing to
sacrifice for $3,000,000.
One of them was the Simmerone, of Goldfield, which Mr. Macdonald
offered for $1,000,000. We afterward learned that he had paid $32,000
for it. At that time there was a six-foot hole in the ground, and the
whole property contained less than five acres. A stockade had been
built around the workings on account of the extreme richness of the ore
that had been opened at grass-roots.
Mr. Macdonald also offered for sale a lead property at Reveille and a
lead-silver property at Tybo, both situated about 70 to 100 miles from
a railroad. (Later these properties, along with some others, were
promoted by Charles Minzesheimer & Company, a New York Stock Exchange
house, as the Nevada Smelters & Mines Company and passed on to the
public at a valuation of $5,000,000. The market value of the entire
capitalization of this company is now less than $10,000.) These "mines"
were to be put into the deal at $1,000,000 each.
MILLIONS IN THE VISTA HELD NO CHARMS
Arkell wrote a dispatch to the East in the presence of our newly-made
friends, describing the offering. Then he and I held a consultation,
and he vouchsafed the information that we would certainly get a free
automobile ride to Goldfield and have a chance to see there the new
boom mining camp.
I got "cold feet." Arkell's talk of visionary millions in that bleak
environment of snow-clad desert and wind-swept mountain didn't enthuse
me at all. I protested against the proposed trip to Goldfield, and
insisted that I should be allowed to telegraph to relatives for money
with which to return to the Coast.
But Arkell persisted. He declared that the expense of the trip to
Goldfield and back to Tonopah would be borne by the vendors of the
mines and that our return trip to San Francisco would be delayed only
one day. I left my grip, umbrella and cane in Tonopah, intending to
return the same evening, and boarded the automobile for Goldfield.
Arrived in Goldfield, we were escorted to the Simmerone. Arkell
appeared to be very much impressed, although he remarked to me a few
minutes later that he would not give $34 for the whole layout. And
therein he was wise. The Simmerone was later capitalized for 1,000,000
shares, each share of a par value of $1, ballooned on the San Francisco
and Goldfield stock exchanges to $1.65 a share, and then allowed to
recede to nothing bid, one cent per share asked. The rich ore "petered
out."
There was an indefinable something in the atmosphere of Goldfield--a
new, budding mining camp, at an altitude of 5,000 feet and on the
frontier--that stirred me, and I decided to stay awhile.
Arkell determined that he would go back to Tonopah and get an option on
the control of a mining company known as the Tonopah Home, which Mr.
Dunlap had mentioned to him in the automobile en route to Goldfield. He
said he would then go to San Francisco to promote it. The reason why he
decided to handle the Tonopah Home, I afterward discovered, was that it
was already incorporated and stock certificates had been printed,
thereby eliminating the delay and expense incident to preparing
something for the immediate consumption of the San Francisco public.
"How am I going to subsist here for a few days until I can begin to
make a living?" I asked Arkell.
"How am I going to get back to Tonopah and from there to San
Francisco?" Arkell asked me.
At that moment we stood in front of the Goldfield Bank and Trust
Company's building--a tin bank literally as well as figuratively. It
was constructed of corrugated iron and tin. A few months later, when
the bank went up the flume, the cash balance found in the safe
aggregated 80 cents.
"You take me into this bank and introduce me and I will cash a check,"
he said.
"A check on what?" I asked.
"On my bank in Canajoharie, New York," he said. "I was born and brought
up there, and they wouldn't let one of my checks go to protest.
Besides, I can get back to 'Frisco and protect it by telegraph, if
necessary, before it reaches Canajoharie."
We entered the bank. I introduced myself to the cashier as an Eastern
newspaper man, and then introduced W. J. Arkell as the former publisher
of _Leslie's Weekly_, _Judge_, and so on.
After a brief parley, Arkell exchanged his paper for real money to the
amount of $50. On leaving the bank, I said:
"Now, Bill, come across! I'm flat broke, on the desert."
He handed me $15. I was satisfied, because he needed all of the $35 to
get back to civilization.
"HUMAN INTEREST" VERSUS TECHNICAL MINING
After Arkell's departure for Tonopah I went to the office of the
Goldfield _News_ and asked for a job. I got it, at $10 a day. My first
assignment was to interview an old miner named Tom Jaggers. I wrote
what I considered a first-class human-interest story, and handed it to
the owner and editor, "Jimmy" O'Brien. He thought it was fair writing,
but not the sort of matter the Goldfield _News_ wanted. It wanted
technical mining stuff. Of course I didn't know a winze from a
windlass, nor a shaft from a stope, and some of the weird yarns I
handed in about mine developments certainly did make Mr. O'Brien jump
sideways at times.
Within a week I was discharged for incompetency.
I was not at all appalled at losing my job on the Goldfield _News_. I
had begun to like the life and was convinced there were some real gold
mines in the camp. I was a tenderfoot and knew little or nothing about
the mining business, but the visible aspect of shipment upon shipment
of high-grade ore leaving the camp by mule-team was convincing. What
probably impressed me most was the evident sincerity of the
trail-blazers who had been on the ground since the day the camp was
born. These men had suffered all kinds of hardships to hold their
ground and make a go of the camp which, when discovered, was situated
100 miles from a railroad station and at least 25 miles from a known
water-supply. Tradition said that men had died of thirst on the very
spot where Goldfield was now adding daily to the world's wealth.
My environment became an inspiration.
There were a few penny-mining-stock brokerage firms doing business with
the outside world, and the idea of starting an advertising agency
appealed to me strongly. Here was an opportunity for the great American
speculating public to take "a flyer" on something much more tangible
and lasting than a horse-race, I determined.
Failing to locate a furniture store I ordered a long, rough, pine board
table made by a carpenter, rented desk-room from the Goldfield Bank and
Trust Company right in front of the cashier's counter, and secured the
services of an expert male stenographer from Cripple Creek. The
Goldfield-Tonopah Advertising Agency was born.
BEGINNING THE ADVERTISING BUSINESS
The idea of applying to the American Newspaper Publishers' Association
for recognition did not occur to me. I did not know that such was the
practise of agents. I did believe, however, from my ad-writing
experience with the Maxim & Gay Company, in New York, that I could
write money-getting advertising copy. Further, my experience in making
contracts with advertising agents for the publication of Maxim & Gay's
advertising in the newspapers throughout the land had, it seemed,
conveyed to me sufficient information regarding that end of the
business to fortify me in my new field.
Next morning I entered the office of the Mims-Sutro Company, a newly
established brokerage firm, and urged advertising.
"We are already spending about $100 a month," said the manager.
"One hundred dollars a month!" I exclaimed. "Why, you ought to be
spending that much every hour!"
At first they thought me a fanatic on the subject, but within a
fortnight I succeeded in inducing them to spend $1,000 in a single day
for advertising. It was not, however, until after I had shown them how
to follow up their correspondence successfully that they began to
believe in me. I wired to nearly all of the important city newspapers
throughout the country for rates. After obtaining their replies I
decided to spend $500 in the Chicago Sunday _American_, and $500 in
the San Francisco _Examiner_ in one issue. I forwarded the copy with
the money, and it appeared promptly. The results were good--so good,
indeed, that within two months the Mims-Sutro Company was spending at
the rate of from $5,000 to $10,000 a week for advertising, and my
commissions amounted to thousands.
My contracts with the advertisers required them to pay me one-time
rates, and my contracts with the publishers permitted me to send in
copy at long-time rates, and the profit was about 45 per cent. And
inasmuch as I always sent cash with the order, my copy was in great
demand. Indeed, my agency was fairly inundated day after day with blank
contracts from newspapers all over the country, the managers of which
were clamoring for the Goldfield business. In addition to the
Mims-Sutro account, I soon had many others; in fact, I had all the
others. Within six months after my arrival in Goldfield my agency
netted me $65,000.
SOME ADVERTISING THAT PAID
My second best customer was January Jones, the noted Welsh miner, and
later, when the corporation of Patrick, Elliott & Camp swung into
business as promoter, I placed its advertising. I held it, too, until
the death of C. H. Eliott, when the control of that firm fell into
other hands and it ultimately went out of business. In the course of
three years my advertising agency inserted in the neighborhood of
$1,000,000 worth of advertising in the newspapers of the United States,
chiefly those of the big cities, and all of the advertising made money.
It simply had to make money, because the brokers who did the
advertising had little or nothing to begin operations with except the
mines, and the mines were not their property.
The most remarkable feature of that advertising campaign to me was that
I had never been a stock-broker, had never been a mine-promoter, and
had never been in a mining camp before; but still, despite my utter
lack of knowledge, to begin with, of the technical end of the business,
my advertisements pulled in the dollars.
I was an enthusiast. I believed in the merits of the camp, and my
enthusiasm undoubtedly carried itself to the readers of my
advertisements. But the quality of the advertising copy did not
entirely explain my success in bringing the money into Goldfield. The
stock offerings undoubtedly _struck a popular chord_. Tens of
thousands of people who for years had been imbibing the daily
financial chronicles of the newspapers, but whose incomes were not
sufficient to permit them to indulge in stock-market speculation in
rails and industrials, found in cheap mining stocks the thing they
were looking for--an opportunity for those with limited capital to
give full play to their gambling, or speculative, instinct.
Time and again promotions were almost completely subscribed by
telegraph in advance of mail responses reaching Goldfield; and it
frequently needed but the publication of a half-page advertisement in
40 or 50 big city newspapers, of a Sunday, to bring to Goldfield by
wire before Monday night sufficient reservations to guarantee
oversubscription in a few days.
It was easy to give full play to my penchant for experimenting, in the
evolution of mining-stock promotion in Goldfield. The old system, and
the one which recently has enjoyed much vogue among financial
advertisers, was the endeavor first to get names of investors rather
than immediate results from the advertisements, and to follow them up
by correspondence. In spending the first $1,000 appropriated for
advertising from Goldfield, I split the money between two newspapers on
one day. I constructed large display advertisements and appealed for
direct, quick replies. This succeeded.
BUILDING GOLD MINES WITH PUBLICITY
A little later I organized a news bureau as an adjunct of the
advertising agency.
It is acknowledged that this news bureau accomplished much for Nevada.
As a matter of fact, it is generally conceded by Goldfield pioneers and
by mining-stock brokers throughout the country that the news bureau was
directly responsible for bringing into the State of Nevada tens of
millions of dollars for investment, and was indirectly responsible for
the opening up of the Mohawk and other great gold mines of the
Goldfield camp and of the State.
The prospectors who located Goldfield were without means. George
Wingfield, the man who is now president of the merged Goldfield
Consolidated, came into the mining camps with only $150. No funds of
consequence were available from home sources. The money that later made
Goldfield the "greatest gold camp on earth" came from the outside, and
the news bureau secured it by focusing the attention of the American
public on the great speculative possibilities of investments in the
mining securities and leases of the camp. One of the leases, known as
the Hayes-Monnette, operated with Chicago money, afterward opened up
the great Mohawk ore deposit at a period when there was no money in the
treasury of the Mohawk Mining Company to do its own development work.
And there are scores of other instances which bear me out.
I was head of the news bureau, and the news bureau was Nevada's
publicity agent. I have always considered my work in this direction in
the light of an achievement. No one contributed a dollar to the news
bureau except myself.
HAIR-RAISING STORIES FOR DISTANT READERS
That news bureau, with its headquarters on the desert, at a time when
water was commanding $4 a barrel in Goldfield and coal could not be
obtained in the camp for love or money, was operated with as much
calculating judgment as it could have been were it subsidized by the
most powerful interests in America. Human-interest stories that were
written around the camp, its mines and its men, were turned out every
day by competent newspaper men. These were forwarded to the daily
newspapers in the big cities of the East and West for publication in
the news columns.
Most of the stories were accepted and published. Whenever hesitancy was
observed, publishers were tempted by the news bureau with large
advertising copy to continue to give the camp publicity.
Of such great assistance in arousing public interest did I find this
work that noted magazinists like James Hopper were imported to camp and
pressed into service by the news bureau to write readable stories. At
times, when public interest appeared to lag, the wires were used by the
camp's newspaper correspondents to obtain publicity for all kinds of
sensational happenings that were common on the desert. Reports of gold
discoveries, high play at gambling-tables, shooting affrays, gamblers'
feuds, stampedes, hold-ups, narrow escapes, murders, and so forth, were
used to rouse the public's attention to the fact that a mining camp
called Goldfield was on the horizon.
I felt confident that the speculating public was going to make a great
big "killing" in Goldfield. Tonopah, twenty-six miles to the north, was
making good in a wonderful way. It had already enriched Philadelphia
investors to the extent of millions. I could see no reason why
Goldfield should not at least duplicate the history of Tonopah. Never
in my life had I lived in an environment that inspirited me as this
one. The visages of those around me were, as a rule, roughly hewn; the
features of many were marked with all the blemishes that had been put
upon them by time, by sleepless nights, by anxiety and by contact with
the elements; but courage, sincerity and honesty of purpose were
written in every line of their faces.
I became imbued with the idea that investors who put their money into
Goldfield stocks were not only going to get an honest run for their
money, in that the mines were going to be developed and many would make
good, but that the opportunity for money-making, if embraced by the
public at that time, would earn a great reputation for the man who
educated the public to a full understanding of the situation.
THE MERCURY OF SPECULATION
Mining-stock speculators and investors at a distance who responded to
the red-hot publicity campaign which marked those early days of
Goldfield rolled up enormous profits, and I made no mistake. Terrific
losses came eighteen months later, as a result of a madness of
mining-stock speculation which followed on the heels of the great
Mohawk boom and the merger of various Goldfield producers into a
$36,000,000 corporation. This was taken advantage of by "wild-catters"
in every big city of the country, and the public was fleeced to a
finish. But of this more and a plenty later.
In those early days my agency advertised Goldfield Laguna at 15 cents
per share in order to finance the company for mine operations. Within
a year thereafter Goldfield Laguna sold at $2 a share on the San
Francisco Stock Exchange, and was absorbed by the Goldfield
Consolidated at that figure. And there were many others which
duplicated or exceeded the performance of Laguna.
At the time of which I tell, when Laguna was promoted at 15 cents,
Goldfield was about a year old. A population of about 1,500 had
gathered there from all sections of the country. There were mining
experts from Salt Lake, San Francisco and Colorado, and miners from
every part of the Western mining empire; saloon-keepers from Alaska and
Mexico; real-estate brokers from practically every Western State and a
scattering of "tin-horns." It was about as motley a gathering as one
could find anywhere in the world, but compositely they were a sturdy
lot.
The camp was enjoying its maiden boom. In sixty days real-estate values
had jumped from $25 for a lot on Main Street to $5,500. Roughly
constructed business houses banked the main thoroughfare for two or
three blocks. The heavy traffic incident to hauling in supplies from
Tonopah had ground the dirt of the street into an impalpable mass of
dust to the depth of fifteen inches, and the unchecked winds of the
desert, sweeping from the Sierra Nevadas to the high uplifts east of
Goldfield, whipped the dust into blinding clouds that daily made life
almost unendurable.
Practically the entire population was housed in tents that dotted the
foothills. At night-time these presented the appearance of an army
encampment. Provisions were scarce and barely met the requirements. The
principal eating-place was the Mocha Café, which consisted of a 14 by
18 tent with an earthen floor and a roughly constructed lunch-counter.
Here men stood in line for hours, waiting to pay a dollar for a dirty
cup of coffee, a small piece of salty ham and two eggs that had long
survived the hens that laid them.
The popular rendezvous was the Northern saloon and gambling house,
owned and managed by "Tex" Rickard and associates. Here fully
seventy-five per cent. of the camp's male population gathered nightly
and played faro, roulette and stud-poker, talked mines and mining, sold
properties, and shielded themselves from the blasts that came with
piercing intensity from the snow-capped peaks of the Sierras. The
brokers of the camp gathered every night in the Northern and held
informal sessions, frequently trading to the extent of 30,000 or 40,000
shares of the more active stocks.
The mining stocks which were advertised through my agency in those
early Goldfield days were generally of the 10, 20 and 30-cent per share
variety. The incorporators of the companies were enthusiastic on the
point of their "prospect" making good, but I argued to myself that if
the chances of any mining prospect of this character proving to be a
mine were only about one in 25 or one in 50, and my agency advertised
25 or 50 companies of the average quality, and one of them made good in
a handsome way, he who purchased an equal number of shares in each
would at least "break even" with the profits from the one winner.
Later this principle was "knocked into a cocked hat" for conservatism
by Mohawk of Goldfield advancing from 10 cents to $20 a share, proving
that if Mohawk had been one among 50 companies, the shares of which
were purchased by an investor at 10 cents, he would have gained
handsomely. Early purchasers of Mohawk gathered 200 to 1 for their
money, many times more than could usually be won on a long shot at the
horse-races, and not so very much less than was formerly won by lucky
prize-winners in the Louisiana Lottery. And Mohawk was only one of a
dozen of the early ones which advanced in price on the exchanges and
curb markets more than 1,000 per cent.
At this early stage in Goldfield, "wild-catting" was not indulged in
from the camp, unless this long-shot gambling in shares of "prospects"
can by a grave stretch of imagination be termed such, the
promoter-brokers being able to offer stocks of close-in properties.
Among the prizes were Red Top, which advanced within two years
thereafter from 8 cents to $5.50 per share; Daisy, which sky-rocketed
from 10 cents to $6; Goldfield Mining, which soared from 10 cents to
$2; Jumbo, which improved from 50 cents to $5; Jumbo Extension, which
rose from 15 cents to above $3; Great Bend, which jumped from 20 cents
to around $2.50; Silver Pick, which moved up from 10 cents to $2.65;
Atlanta, which was promoted at 10 and 15 cents and sold up to $1.25;
Kewanas, which was lifted from 25 cents to $2.25, and others.
"Wild-catting" in a small way was prosecuted in Goldfield's fair name
even in those days, with Denver as the headquarters of the swindlers.
_Eighteen months later, when the Mohawk mine of Goldfield was in the
midst of its greatest half-year of production, at the rate of
$1,000,000 a month, and the consolidation of the important mining
companies of the camp was in progress, "wild-catting" became general
from office buildings in the large cities. There were more than 2000
companies incorporated during this last period, not one of which made
good, and the public lost from $150,000,000 to $200,000,000 as the
result of this operation alone. Fully $150,000,000 more was lost by the
ballooning to levels unwarranted by mine showings of listed Goldfield
stocks on the New York Curb and the San Francisco Stock Exchange, at
the same time._
But I am ahead of my story.
It was late in the Spring of 1905. I had been at work in Goldfield more
than six months, and my campaign of publicity was beginning to gather
momentum. The mines, however, were not at the moment keeping lively
pace. The Mohawk was yet undiscovered.
THE BIRTH OF BULLFROG
At this juncture the new mining camp of Bullfrog, 65 miles south of
Goldfield, was born. My publicity facilities were sought by owners of
properties in Bullfrog "to put the camp on the map."
C. H. Elliott, a Goldfield pioneer, put an automobile at the disposal
of myself and my stenographer, and we departed for Bullfrog. Elliott
and his associates had staked out a townsite which they called
Rhyolite. I was presented with seven corner lots on my arrival, to help
along my enthusiasm.
There, on the saloon floor of a gambling house, which was the chief
place of resort in the camp, I met for the first time George Wingfield,
then the principal owner of the Tonopah Club at Tonopah, a gambling
house which had lifted him from the impecunious tin-horn gambler class
to the millionaire division; United States Senator George S. Nixon,[1]
his partner; T. L. Oddie, later elected Governor of Nevada; Sherwood
Aldrich, now one of the principal owners of the Chino and Ray
Consolidated mines, and worth millions, and others who have since
accumulated great riches.
[1] On the death of Mr. Nixon in Washington, D.C., in June,
1912, Mr. Wingfield was appointed his Successor as U.S.
Senator by Governor Oddie. Mr. Wingfield's Goldfield
newspaper felicitated its owner and pronounced the
appointment to be logical and deserved. Mr. Wingfield,
however, after hearing from Washington as to the manner
in which the news of his appointment was received by members
of the Senate, notified Governor Oddie three weeks later
that he must decline the honor. He gave other reasons.
They were on the ground and buying properties. Mr. Aldrich purchased
the controlling interest in the Tramps Consolidated for about $150,000.
It was incorporated for 2,000,000 shares of a par value of $1 each, a
year later boomed to $3 a share on the New York Curb, and is now
selling at 3 cents, without ever having paid a dividend.
Mr. Elliott had a large stock interest in the Amethyst mine and the
National Bank mine, which were capitalized for 1,000,000 shares
respectively, and he presented me with 10,000 shares of stock in
each. He and his partner sold the control of the Amethyst to
Malcolm Macdonald of Tonopah. Later, when Amethyst's neighbor,
Montgomery-Shoshone, was selling at $20 per share, the market price of
Amethyst was pushed up to above $1 a share on the San Francisco Stock
Exchange, and I took my profit. The Amethyst has since turned out to be
a rank mining failure, as has practically every other property in the
camp, not one ever having earned a dividend.
The Bullfrog National Bank stock, representing another property that
looked for a while as if it would make good, I disposed of on the San
Francisco Stock Exchange at 40 cents a share, and I sold the town lots
at figures which netted me, in all, in excess of $20,000 for my one
day's trip to Bullfrog.
During my stay in Bullfrog I became very much impressed with the
Montgomery-Shoshone mine. This property, in fact, was the powerful
magnet which attracted everybody to the camp.
I was escorted through a tunnel seventy feet long. On each side as I
walked were walls of talc. I was told these assayed in places anywhere
from $200 to $2,000 a ton. Information was also forthcoming that the
width of the ore-body was more than seventy feet. (It afterward turned
out that the tunnel had been run along the ore-body and not across it,
and that the ore-body was about 10 feet wide.) Some specimen ore was
given me to assay, and the returns were staggering, running all the way
from $500 to $2,500 a ton.
In my enthusiasm I wrote stories about the property for publication
which must have induced the reader to believe that when all the riches
of that great treasure-house were mined, gold would be demonetized. As
a matter of fact, the stories from my news bureau, picturing the riches
of that Golconda, are said to have been indirectly responsible for the
purchase of control of the property by Charles M. Schwab and his
associates.
The history of the Montgomery-Shoshone is mournful but highly
instructive. For purposes of exposition of pitfalls in mining-stock
speculation it possesses striking qualifications. Here are the facts:
Malcolm Macdonald, mining engineer, acquired a half interest in the
mine from Tom Edwards, a Tonopah merchant, for $100,000, on time
payments. On the strength of the showing in the 70-foot tunnel an
effort was made to sell the control to the Tonopah Mining Company at a
profit. It did not succeed. Oscar Adams Turner, of New York and
Baltimore, the promoter of the highly successful Tonopah Mining
Company, which to date has paid back to the original stockholders $16
for every $1 invested, examined the Montgomery-Shoshone, and turned it
down because the property did not show him any well-defined veins or
other marks of permanency, and the ore-body appeared to him to be only
a superficial deposit of no great extent.
Many a good "prospect" has been condemned by mining men of the highest
standing, and has afterwards made good, particularly in Nevada. Mr.
Turner's turn-down did not daunt the owners.
ENTER, CHARLES M. SCHWAB
Engineer Macdonald incorporated a company for 1,250,000 shares of the
par value of $1 each, to own and operate the mine. Investors were
permitted by him to subscribe for small blocks of treasury stock at $2
per share. Shortly afterward Mr. Macdonald and the owner of the other
half interest, Bob Montgomery, sold a controlling interest to Mr.
Schwab and associates for a sum which has never been made public. Mr.
Schwab at once reorganized the company, took in two adjoining
properties that were undeveloped, and changed the capitalization to
500,000 shares of the par value of $5 each. He, in turn, permitted his
friends and the public to subscribe for the new stock at $15 per share.
Later the shares advanced to $22 on the New York Curb.
Undoubtedly Mr. Schwab thought well of the proposition, for he loaned
the company $500,000 to build a reduction works on the ground.
To date the mine has failed to pay for its equipment. Work on the
property has been abandoned and the mill has been advertised for sale.
_The company still owes Mr. Schwab about $225,000, the net profits on
the ore in six years being insufficient to repay his loan to the
company. In fact, the enterprise has proved to be one of the sorriest
failures in Nevada. The mine in six years produced $2,000,000 GROSS,
and although mine and mill were operated in an economical way, the net
proceeds from the ores were insufficient to pay off the Schwab debt.
Recently the shares have been nominally quoted at from 2 to 5 cents on
the New York Curb. The public's loss mounts into millions._
Investigation proves to me that Mr. Schwab was merely a mining
"come-on" and allowed his enthusiasm to run away with him, but the
public suffered just as much as if Mr. Schwab had perpetrated a
cold-blooded swindle.
I have heard the question propounded by a stockholder, "What possible
excuse could a man, with a good business head like that of Mr. Schwab,
have for promoting the Montgomery-Shoshone at a valuation of $15 a
share, or $7,500,000 for the property, afterward allowing the stock to
be quoted up to $22 a share on the New York Curb, or at a valuation of
$11,000,000 for the property, when, as a result of six years of mine
operations, the company is practically insolvent?"
An excuse acceptable to mining men might be offered were the
Montgomery-Shoshone property situated in a nest of other great mines,
intrinsically worth many times the valuation placed on the
Montgomery-Shoshone at the time of its promotion. "Prospects" of this
variety, according to approved mining experience, are sometimes
entitled to appraisement of great prospective value when neighboring
mines have demonstrated deep-seated enrichment. But there was no such
excuse in this case, because the deepest hole in the ground in the
entire camp was less than 200 feet at the time the Montgomery-Shoshone
was promoted by Mr. Schwab, and there was not a proved mine in or near
the camp.
I was present in Reno about three years ago when Mr. Schwab passed
through the divorce city en route to California. At that time
Montgomery-Shoshone had already cracked in price to around $3 a share,
and stories were being published in Nevada that Mr. Schwab had been
snubbed by members of an exclusive Pittsburg club for recommending
Montgomery-Shoshone for investment. Mr. Schwab, in hurriedly discussing
the matter at the railroad station, was quoted to the effect that the
property had been grossly misrepresented to him. This statement was
widely published in Nevada. Thereupon, Don Gillies, Mr. Schwab's
engineer in Nevada, who, with Malcolm Macdonald, was believed to be Mr.
Schwab's mining adviser, telegraphed Mr. Schwab and asked point-blank
whether he referred to him. Mr. Schwab answered that he did not. This
denial was also given wide publicity. There was only one reasonable
corollary, then, and that was that Mr. Schwab referred to Mr.
Macdonald.
In fine, it appears that Mr. Schwab may have actually purchased the
Montgomery-Shoshone on the sole representations of the vendor, the
interested party, and may have actually promoted the property on the
strength of the unverified representations of the vendor. It might be
that the vendor did not misrepresent at all; he may have been too
enthusiastic only, and communicated his enthusiasm to Mr. Schwab.
Possibly Mr. Schwab relied on newspaper accounts, and promoted the
property on the strength of them. A letter from Mr. Schwab, which
appears farther on, lends some color to this idea.
Even before this time Mr. Schwab had been in the mining game at
Tonopah. His Tonopah venture was the Tonopah Extension. The control of
the Tonopah Extension Mining Company was bought by John McKane, later a
member of the English House of Commons, from Thomas Lockhart at 15
cents per share. The capitalization was 1,000,000 shares. John McKane
interested Robert C. Hall, a member of the Pittsburg Stock Exchange, in
the proposition. He, in turn, made a deal with Mr. Schwab. The stock
was then sky-rocketed to above $17 a share on the San Francisco and
Pittsburg stock exchanges and the New York Curb. Afterward the price
was allowed to recede to around 65 cents per share. During the past
half-year it has maintained an average quotation of $2.00 per share.
Although the market price of the shares at the time Mr. Schwab was
believed to own the control was allowed to be advanced to a valuation
for the mine of $17,000,000, the company has since failed to pay as
much as $1,000,000 in dividends, and a quite recent appraisement by
Henry Krumb, a noted engineer, of the net value of the ore in sight in
the mine did not place it at so much as $1,000,000. The accuracy of
this report is disputed, on the ground that the ore-exposures at the
time did not permit of fair sampling. This allows for a discrepancy,
but hardly of $16,000,000.
After Tonopah Extension declined from around $17 a share to below $1.00
a share, it was alleged by Tonopah stockholders that Mr. Schwab and his
associates had unloaded at the top. Mr. Schwab replied that he owned
just as much stock after the market collapse as he did when he went
into the enterprise. This was met with an allegation by some
stockholders that while Mr. Schwab could probably prove that his
interest was as large at the later period as it had been at the outset,
it did not mean that Mr. Schwab and his _confrères_ had not unloaded at
the top and bought back at the bottom.
The following letter from Mr. Schwab to Sam C. Dunham, formerly U.S.
Census Commissioner to Alaska, afterward editor of the Tonopah
_Miner_, and later mining editor of the _Mining Financial News_ of New
York when I was managing editor, denies personal guilt, although it
leaves the reader free to believe that if Mr. Schwab personally did
not unload his stock at high prices, his associates might have done
so.
CHARLES M. SCHWAB
111 BROADWAY
NEW YORK
November 1, 1907.
Mr. SAM C. DUNHAM,
Editor _The Tonopah Miner_,
Tonopah, Nevada,
MY DEAR MR. DUNHAM:
My attention has been called to your issue of Saturday, October 26,
1907. To such criticisms as that issue contained of me, I generally
do not reply, as it is useless and only leads to further
discussion. But your paper heretofore has been so uniformly kind to
me, so fair in every respect, and as I have always regarded you as
a friend, our relations having been so pleasant, it makes me feel
that I would like to make a short reply to the criticisms
mentioned, as showing the consistency of my position.
The only thing I criticised about Nevada was the inaccuracy of
statements emanating from Nevada. You seem to attack me because of
this statement, and the strength of my position is fully confirmed
by your article because little, if anything, stated therein is true
or accurate.
I will take up your statements one by one. You say I bought from
John McKane $25,000 worth of stock of the Tonopah Extension Mining
Company at 15 cents per share. This is absolutely untrue.
You say I bought 100,000 shares of Extension stock from Robert C.
Hall at $6 per share, and paid for this stock with paper mill
stock. No single part of that statement is correct. I never gave
Mr. Hall any paper mill stock, nor did I buy 100,000 shares from
him. The amount purchased from him was 60,000 shares. The price
which you state I paid him for the stock is not correct, and, as I
stated, I gave no paper mill stock in exchange.
You say further that at the last annual meeting of Tonopah
Extension stockholders, held in Pittsburg last May, it developed
that I had disposed of all the stock I purchased from Mr. Hall and
over two-thirds of my original holdings of 166,000 shares. This is
absolutely untrue. I am holding to-day exactly the amount I held
after all purchases were made by me, and from the beginning,
aggregating some 285,000 shares, and I think if you take the
trouble to look up the records you will find my statement in this
connection to be true. When I originally bought Extension there was
also some stock in my name belonging to others, which I
subsequently transferred to them, leaving my own holdings of
285,000 shares where they now remain, intact, in my personal
possession.
Going on down the article, you say that I purchased control of
Shoshone and Polaris for less than $2 per share. This statement of
yours is inaccurate. You say I sold a large block of Shoshone stock
at $20 per share. This is also without any truth whatever. The fact
is that 3,000 shares were sold at this figure, $20, and these 3,000
shares came from the treasury of the company, all of which you will
find a matter of record.
It is true that I have loaned the company nearly $500,000 to build
the new mill, and I shall be glad to have any other stockholder in
the company assume his pro rata share of this amount.
You wonder why I criticise statements from Nevada.
Respectfully yours,
(_Signed_) C. M. Schwab
The general impression in Nevada, as I have gathered it, is that Mr.
Schwab's mining enterprises have been great disappointments to him, but
that he did not lose any very large sum of money, and that the public
did. His enemies go so far as to allege that he, his brother, and his
brother-in-law, Dr. M. R. Ward, made millions out of the public.
I have an opinion, and I may be allowed to express it. Mr. Schwab, at
the time he became a promoter of Nevada mines, was an expert
steelmaker. He knew little or nothing about silver, gold and copper
mines. The fact that friends in Philadelphia, who knew as little about
the game as he did, had made a fortune in Tonopah (on the advice of a
man who did know) should not have influenced him. Because the Mizpah
mine at Tonopah, promoted by Oscar A. Turner as the Tonopah Mining
Company, had made good in a phenomenal way, Pennsylvania stockholders
had rolled up fabulous profits in the venture. Under this hypnotism Mr.
Schwab "fell" for Tonopah Extension.
Later, when Tonopah Extension showed a market enhancement of more than
$16,000,000, Mr. Schwab was in an ideal frame of mind to succumb to
Montgomery-Shoshone.
And when Montgomery-Shoshone in the Bullfrog boom showed a market
enhancement of $8,000,000, it did not take much argument to get him
into Greenwater, another "bloomer," which is described further on.
Market profits were evidently alluring to Mr. Schwab. He failed to
realize that his own great name was in large measure responsible for
the rise in price of his securities.
Sam C. Dunham has informed me that Mr. Schwab told him he refunded
to his personal friends in Pittsburg, who subscribed for
Montgomery-Shoshone stock on his recommendation, between $2,000,000 and
$3,000,000. This ought to be convincing that Mr. Schwab was guiltless
of any intent to profit at the expense of others.
Mr. Schwab's lack of caution, however, is instructive to the losing
speculator. It furnishes a startling example of the danger in banking
alone on an honored name for the success of an enterprise, and it also
drives home the truth of the adage, "Every shoemaker should stick to
his last."
Incidentally, Mr. Schwab's mining career points another moral. It is
this: Don't think, Mr. Speculator, because a promoter represents the
chances of profit-making in a mining enterprise to be enormous, and you
later find his expectations are not realized, that the promoter is
_ipso facto_ a crook. Big financiers are apt to make mistakes and
so are little ones. Undoubtedly grave misrepresentations are made every
day, and insidious methods are used to beguile you into forming a
higher opinion regarding the merit of various securities than is
warranted by the facts. But mine promoters are only human, and honest
ones not infrequently are carried away by their own enthusiasm and
themselves lose their all in the same venture in which they induce you
to participate.
WHY THE BOTTOM FELL OUT
When Montgomery-Shoshone was enjoying its market hey-day the Bullfrog
Gold Bar Mining Company was promoted at around 15 cents a share on the
usual million-share capitalization. A year later the price jumped to
$2.65 on the San Francisco Stock Exchange, and the stock was widely
distributed among investors. Recently the company was in the sheriff's
hands. The biggest losers in this venture were Alabama people, who had
great confidence in the promoters.
Other Bullfrog derelicts in which the public lost vast sums of money
were Gibraltar, Bullfrog Steinway, Shoshone National Bank, Bullfrog
Homestake, Bullfrog Extension, Denver Rush Extension, Mayflower, Four
Aces, Golden Scepter, Montgomery Mountain, Original Bullfrog, etc.,
etc.
Mining-stock brokers of the cities went into ecstasies over Bullfrog
during the height of the boom in that camp. Philadelphia mining-stock
brokers fed Tramps Consolidated of Bullfrog to their clients. Pittsburg
brokers recommended Montgomery-Shoshone. Butte brokers placed large
blocks of Amethyst. Gold Bar was distributed by brokers of the South.
New York brokers were behind Gibraltar, Four Aces, Denver Rush,
Montgomery Mountain, Eclipse, Golden Scepter, National Bank and a score
of others.
Practically every dollar of the millions invested in Bullfrog stocks
has been lost.
The cause of the failure of the Bullfrog district to make good was not
the absence of gold-bearing rock, for there is much of it in the
district, but it has been found that the per ton values are too low to
make the mines a commercial success. Bullfrog is situated on the desert
and has no timber and but very little water. Promoters and investors
did not realize this until mills were constructed. Then it was too
late. If the camp were situated on the timbered shores of the Hudson
River, the stocks of many of the mines of the district would probably
be in great demand at above par.
Probably the most remarkable fact regarding Bullfrog is that its
securities were more strongly recommended by Eastern brokers than the
Goldfield issues and became more fashionable at this early period in
Goldfield's history. Eastern brokers then had little confidence in
Goldfield; and at the very time when the stocks of Goldfield
representing inside properties, which later made good in an
extraordinary way, were being offered, they advised their customers not
to buy. The general cry then was that it was a fly-by-night offshoot of
the first great Tonopah boom, and the idea prevailed in the East,
because of the ascending influence of George Wingfield, then principal
owner of Tonopah's leading gambling hell, that Goldfield was a haven
for gambler's and wildcatters.
It was during the early days of the Bullfrog boom that my friend W. J.
Arkell's career as a mining promoter came to a sudden end. It will be
remembered that when he left Goldfield to go to Tonopah to make the
Tonopah Home deal his cash capital was $35. He closed the transaction
for the option on the million shares of Tonopah Home's capitalization
at a price around five cents a share. Then our "partnership," of three
days' duration, came to an end. Arkell journeyed back to San Francisco
and there declared me out.
Arkell was a prominent figure for a while as a San Francisco
mining-stock promoter. He listed Tonopah Home on the San Francisco
Stock Exchange. Then he started in to sky rocket the price. The rise
continued until the stock sold at 38 cents, an advance of about 700 per
cent, in a few months.
Then the psychological moment for Arkell arrived.
It leaked out that he had been financing his stock-market campaign by
buying reams of his own stock on one-third margin and at the same time
selling it, in like quantity, for all cash through other brokers. This
was equivalent to borrowing 66 2-3 per cent. of the market value. The
brokers and banks did the carrying. When Arkell's tactics were
discovered, indiscriminate short-selling by market sharp-shooters
ensued. Arkell's own hypothecated stock was used to make deliveries.
In order to hold his ground and to get the floating supply of the stock
off the market, Arkell engineered a consolidation. The Tonopah Home
Consolidated was incorporated, and holders of Tonopah Home stock were
invited to exchange their original certificates for shares in the
consolidated company.
Just then somebody threw a brick. The names of United States Senator
George S. Nixon and Hon. T. L. Oddie, later Governor of Nevada, had
been published as directors of the new company, and when these
gentlemen saw the half-page display advertisements in which their names
were used, and were informed that Arkell appeared to be on the ragged
edge, they telegraphed to the San Francisco Stock Exchange denying
connection.
Tonopah Home broke wildly on the announcement in the Exchange to
something like 3 cents a share. Then it dropped to nothing. Arkell's
methods were too "raw," and I knew the smash had to come, sooner or
later.
'Twas late in October, 1905. Bullfrog was still in its hey-day.
Goldfield's initial boom seemed to be flickering. Work was going on day
and night in the mines, but for want of fresh discoveries the camp was
being deserted by some of the late-comers.
Out-of-town newspaper correspondents came upon the scene, and stories
and pictures of the camp, labeled "A Busted Mining-Camp Boom," etc.,
soon appeared in the Los Angeles and San Francisco newspapers.
Goldfield mine-owners were accused of beguiling the public. Promoters
were gibbeted as common bunco men. Peculiarly enough, Bullfrog, younger
sister of Goldfield, which has since proved to be such a graveyard of
mining hopes, was immune. There men of substance were in control, the
writers said, while Goldfield was portrayed as a stamping ground for
gamblers and "wild-catters." The stories had their effect even in
Goldfield. Leading men of the camp began looking about for new fields
to conquer. The majority of Goldfield mine-owners had not "fallen" for
Bullfrog, but the success of the Bullfrog stock company promotions in
the East inspirited them.
The great mining-camp boom of Manhattan, 80 miles north of Goldfield,
which followed, owes much of its success to these fortuitous
circumstances. I was one of the first to get the Manhattan fever.
W. F. ("Billy") Bond, a Goldfield broker-promoter whose ear was always
glued to the ground, showed me a specimen of ore literally plastered
with free gold. He said it came from Manhattan and that Manhattan was
another Cripple Creek. It was only the night before that I had lost a
good many thousand dollars "bucking the tiger." Faro was the pastime of
practically everybody in Goldfield in those days, and I played for want
of some other means of recreation and lost heavily.
I was as broke as the day I entered the camp. I bought blankets, a suit
of canvas clothes lined with sheep-skin, and a folding iron cot, all on
credit. I packed the outfit off to Tonopah. There I climbed aboard an
old, rickety stage-coach of the regulation Far-Western type, and
started for Manhattan. We rode over a snow-clad desert, up mountains
and down canyons--a perilous journey that I would not care to
duplicate. The $10 I had in my pocket, after paying my fare, was
borrowed money. When I arrived that night at Manhattan, situated in a
canyon at an altitude of 7,000 feet, I set up my cot on the snow,
wrapped myself in my blankets and slept in the open. There were only
three huts and less than a score of tents in the camp.
The next morning I strayed through the diggings. Sacks of ore in which
gold was visible to the naked eye were piled high on every side. The
Stray Dog, the Jumping Jack and the Dexter were the three principal
producers. They honeycombed one another. I questioned some of the
prospectors as to the names of the single claims adjoining the Stray
Dog, Jumping Jack and Dexter. They informed me that there was one group
of claims adjoining that could be bought for $5,000. With $10 in my
pocket I proceeded to purchase it. I gave a check for $100, signed a
contract to pay the balance of $5,000 in 30 days or forfeit the $100,
and immediately started back to Goldfield to induce the president of
the bank to honor my check on presentation. He did.
When I returned to Goldfield I carried with me many specimens of
high-grade ore. They were placed on display in a jewelry store. There
was great excitement, and before night a stampede from Goldfield to
Manhattan ensued which in magnitude surpassed the first Goldfield rush.
A few days later I returned to Manhattan and sold my option for $20,000
cash. While I was there I met C. H. Elliott. Mr. Eliott had "cleaned
up" in Bullfrog. He told me that he had formed a corporation
partnership in Goldfield with L. L. Patrick, one of the owners of the
great Combination mine--which was later sold to the Goldfield
Consolidated for $4,000,000--and Sol. Camp, a mining engineer from
Colorado. The name of the concern was Patrick, Elliott & Camp, Inc. It
was organized to promote mining companies. Mr. Patrick is now president
of the First National Bank of Goldfield.
Mr. Elliott asked me to stay in camp for another day until he could
pick up a good property. He made a deal with some cowboys for a large
acreage embracing the April Fool group of claims, scene of the original
gold discovery. Twenty leases on this property were in operation, and
the surface showings were promising. If the ore "went down," the mine
would prove to be a bonanza. Mr. Elliott incorporated a company known
as the Seyler-Humphrey to own and operate the ground.
We returned to Goldfield. My publicity bureau telegraphed the news of
the Manhattan discoveries to a long chain of newspapers East and West.
Then I put out a big line of "display" advertisements in the big
cities, offering for sale stock of the Seyler-Humphrey. The entire
issue of 1,000,000 shares of Seyler-Humphrey was oversubscribed at 25
cents a share within two weeks. This was the result of $15,000 worth of
advertising, and the profits of the firm were $100,000. In quick
succession Mr. Elliott promoted the Manhattan Combination and the
Manhattan Buffalo. Within six weeks the firm's promotion profits
amounted to approximately $250,000.
HOW ABOUT THE PUBLIC'S CHANCES?
I asked Mr. Elliott one evening, shortly after Patrick, Elliott & Camp
earned their first $250,000 from their three Manhattan promotions,
whether he did not think the public was entitled to subscribe for this
stock at a lower price and at a smaller profit to his corporation.
I recall that he said: "The article we sell is something that somebody
wants and is willing to pay for. What we have sold them is worth what
we have charged. The fact that we are on the ground and have endured
hardships entitles us to a good profit, provided the gold showings on
the surface of the properties are not exaggerated. The sale of the
stocks has been accelerated by your gift of presentation through
advertisements. Big department stores and advertising specialists in
the cities pay from $15,000 to $30,000 a year for that kind of talent,
and we on the desert also have a right to avail ourselves of it."
"But suppose the properties don't make good?" I queried.
He answered: "It is not a case of excessive optimism for one to expect
that Manhattan properties will make into mines, in the presence of such
wonderful surface showings; and so long as we are not knowingly guilty
of deception, no harm is done. If the Manhattan stocks we have promoted
make good, $5 will be a reasonable price for them, and if they don't
make good, one cent will be too high for them. So why question the
ethics of charging 25 cents per share for Seyler-Humphrey when we might
have sold it for 15 cents and still have made money; or of charging 15
cents for Manhattan Buffalo when we could have sold it at a profit for
10 cents? The public knows it is gambling. If people want to buy stocks
where they won't lose all of their investment under any circumstances,
they know they can buy Union Pacific, Pennsylvania Railroad or New York
Central. The profits there, however, are limited, just like the losses.
In the case of mining stocks, representing prospects under actual
development, the public can lose or gain tremendously."
Mr. Elliott, who confessed to me that he often played the horse-races
when in San Francisco, then wrote out a list of stocks and prices,
representing what he said was a "book" on stocks, comparable to a
gambler's book on the horse-races, reading substantially as follows:
Stock Price Odds
Union Pacific $165.00 6 to 5
Reading 155.00 8 to 5
Missouri Pacific 56.00 2 to 1
Erie 28.00 3 to 1
Seyler-Humphrey .25 20 to 1
Manhattan Buffalo .15 30 to 1
Manhattan Combination .10 50 to 1
"There," said Mr. Elliott, "you have the different prices on railroad
and mining securities with their chances of winning for the speculator
marked against them. When a man goes to a horse-race and plays the
favorite, he does exactly what the man does who gives his broker an
order to buy Union Pacific for him at current quotations. It is about 6
to 5 against the investment making a profit over current quotations on
any given day, although the investor will hardly gain 6 for his 5 if
the stock enjoys its highest probable advance. It is about 20 to 1
against the man buying Seyler-Humphrey making money, but he will gain
20 for his one if the mine proves to be a bonanza. However, the rail is
an investment and the mining a speculation."
"Do you mean to say that the odds against a man making money on Union
Pacific on any given day are only 6 to 5 when he buys the stock _on
margin_?"
"Not on your life!" he said. "A margin trader on the New York Stock
Exchange, unless he has sufficient capital behind him to hold out
against 'inside' manipulation, which has for its purpose the 'shaking
out' of the speculator, has not got _any_ chance! He is bound to lose
his money in the end. I am talking about people who buy stocks, pay for
them in full and get possession of their certificates and 'sit tight'
with them."
Mr. Elliott was a plunger and lost large sums in the gambling-houses of
Goldfield and Tonopah. He lost $20,000 in a night's play in the Tonopah
Club, then owned by George Wingfield and associates. When asked to
settle he tendered a check for $5,000 and a certificate for 100,000
shares of Goldfield Laguna Mining Company stock, then selling at 15
cents. This was accepted. Within a year Laguna sold freely at $2 a
share.
This incident illustrates how the foundations were laid for some of the
big fortunes which were amassed in the Goldfield mining boom. When
George Wingfield came to Tonopah in 1901 he brought with him $150,
borrowed from George S. Nixon, then president of a national bank at
Winnemucca, Nevada, and later United States Senator. Mr. Wingfield's
fortune is now conservatively estimated at between $5,000,000 and
$6,000,000.
Success having been won by the Patrick Elliott & Camp promotions, I was
considering whether or not much of the money-making that was being done
by the promoters around Goldfield was not due to my own peculiar
ability to reach the public, and I even meditated on my fitness to
become a promoter on my own account. The best properties in Manhattan,
by common consent, were the Stray Dog, the Jumping Jack and the Dexter.
These were sure-enough producers of the yellow metal. They were
shippers and were held in high esteem by mining men. I found it
impossible to purchase the Dexter because the company was already
promoted and the stock widely distributed at around $1 a share. George
Wingfield was then and is still interested in the Dexter. The Jumping
Jack was unincorporated. The stock of the Stray Dog was practically
intact in the hands of the owners. The price asked for the Jumping Jack
was $85,000. Stray Dog was held at $500,000.
JUMPING JACK MANHATTAN
I was again in funds as the result of my profits in the Manhattan boom,
and it was again my wont, for want of any other pastime, to play faro
at night. I found myself gossiped about with men like January Jones,
Zeb Kendall, C. H. Elliott, Al. Myers and others who rolled in money
one day and were broke the next.
The second largest gambling-house in Goldfield was owned by "Larry"
Sullivan and Peter Grant, both from Portland, Oregon. Sullivan claimed
that he was attracted to Goldfield by the stories which appeared in the
Sunday magazine section of a Coast newspaper, the copy for which had
been carefully and methodically written in the back room of our
Goldfield news bureau. Sullivan and Grant were making money, and plenty
of it. I patronized the Sullivan house, of occasion, and Sullivan
usually presided over the games when I was there. One evening I cashed
in $2,500 of winnings. The money was piled on the table in $20
gold-pieces by the dealer. As I was about to place it in a sack to
store away in the safe of the house until the morrow, Sullivan began to
josh me like this:
"Say, young feller, why don't you cut me in on some of your mining
deals? I'm game!"
"Are you? Well, stack up $2,500 against that money, and I'll see if you
are."
He went to the safe and lugged to the table a big canvas sack
containing $20 gold-pieces. Stacking the money on the table in piles of
$400 each, he matched my stake.
"Well?" said he.
"Put that money in a sack," said I, "and go and get that big coonskin
coat of yours, take a night ride by automobile to Tonopah, and in the
morning go by stage to Manhattan. When you get there look up the owner
of the Jumping Jack mine. I have met him. He is a member of the Ancient
Order of Hibernians. An Irishman can buy that property from him much
cheaper than anybody else. You go and buy it."
"What will I pay?" asked Larry.
"He wants $85,000, but get it as cheap as you can," I replied.
"What? With this $5,000?"
"Yes," said I. "Pay him the $5,000 down and sign a contract to pay the
balance in 60 or 90 days; but fetch him back to Goldfield, and have him
bring the deeds."
A few days later Sullivan returned to Goldfield, aglow with excitement.
Climbing out of the stage-coach, he pulled me into his private office.
"Say," he said, "I've got that guy with me and he's got the deeds. I
bought the Jumping Jack for $45,000. He'll do anything you want him to
do."
"Good!" I said.
The owner was introduced to me, and I turned him over to my lawyer, the
late Senator Pyne. Mr. Pyne drew up a paper by which the transferred
title of the property to the Jumping Jack Manhattan Mining Company,
capitalized for 1,000,000 shares, 300,000 shares of which were placed
in the treasury for mining purposes, and 700,000, representing
ownership stock, put in escrow, to be delivered to Sullivan and myself
on the payment of 6-1/2 cents a share. A board of directors was
selected.
At this juncture Sullivan, who knew as much about the mining promotion
and mining-brokerage business as an ostrich knows about ocean tides,
inquired what my next move would be. Sullivan seemed to be bewildered,
yet full of faith. My situation was this: I had conceived a
rip-snorting promotion campaign for the best property that had yet been
offered the public from Manhattan, but I had no cash to present it.
Turning to Sullivan I said:
"Do you know the Goldfield manager of the Western Union Telegraph
Company?"
"Yes, I know him well."
"Call him up by 'phone or send word to him that you will guarantee
payment of any telegrams I file here to-night or during the next three
days; I want to send some wires," said I.
"I'll do it," said Sullivan, and within a few minutes I was advised
that Sullivan's credit was unquestioned.
I returned to the news bureau and there drafted a 300-word telegram,
setting forth the merits of the Jumping Jack Manhattan property and
offering short-time options on big blocks of the stock. The message was
sent to practically all of the well-known brokerage houses in the
country which handled mining stocks. The bill for telegraph tolls was
$1,200. When Sullivan learned of its size he nearly collapsed.
"How far do you intend to go?" he gasped.
"Well," said I, "how can you lose? Your friend, Frank Golden, president
of the Nye & Ormsby County Bank, has accepted the presidency of the
company at our request, and the other officers we have secured are all
representative citizens of this community, and, besides, the Nye &
Ormsby County Bank has agreed to receive subscriptions. Can you beat
that for a layout? Never in my experience in this camp, with all the
promotions I have advertised, has the public had a dish quite so
palatable offered to it--a producing mine, in the first place; a
high-class directorate headed by a bank president, in the second place;
and a real bank as selling agent, in the third and last place. And it
will go like wildfire!"
I labored all that night in my advertising agency on some
strongly-worded advertising copy recommending to the public the
purchase of stock in Jumping Jack Manhattan. In the morning I induced
Sullivan to advance $10,000 to pay the advertising bills. The copy was
dispatched by first mail to the important daily newspapers of the
country, with instructions to publish on the day following receipt of
copy.
Within six days all of the advertising had appeared. The effect was
magical. The display advertisements assisted the brokers in the various
cities, who had asked for reservations of the stock, to dispose of
their allotments in a few days. Within ten days after the initial
offering of the promotion by telegraph to the Eastern brokers, Sullivan
showed me telegraphic orders for 1,280,000 shares of Jumping Jack
Manhattan stock at 25 cents a share, an oversubscription of 280,000
shares. Before the stock certificate books were printed and delivered
from the local printing office, we were, in fact, oversold.
That week and the next, Sullivan gave me _carte blanche_ to speculate
in local mining stocks with partnership money, and within a fortnight
we had made another small fortune from Manhattan securities. These were
advancing in price on the San Francisco Stock Exchange by leaps and
bounds.
I recall one overnight winning that we made, amounting to about
$12,000, which came so easy I felt almost ashamed to take the money.
Manhattan Seyler-Humphrey stock, promoted by Patrick, Elliott & Camp at
25 cents per share, was now listed on the Goldfield and San Francisco
stock exchanges. It was in fair demand at 30 cents.
A dispatch reached Goldfield from New York, purporting to be signed by
John W. Gates, reading as follows:
"At what price will you give me an option good 48 hours on 200,000
shares of Manhattan Seyler-Humphrey? Answer to Hotel Willard,
Washington, to-night."
This was to Patrick, Elliott & Camp. Within half an hour a half-dozen
similar messages reached other Goldfield brokers.
I happened to be in the office of Patrick, Elliott & Camp when the
first telegram was received, and I lost no time in going out on the
street and annexing all the Goldfield offerings of the stock at current
quotations. At first Lou Bleakmore, manager for Patrick, Elliott &
Camp, "smelled a rat," but when he learned that I was buying the stock
he became convinced that I believed John W. Gates really wanted some
Seyler-Humphrey, and he shot buying orders for his own firm into San
Francisco.
Personally I considered the message a snare. Somebody in the East, I
guessed, had bitten off a block of Seyler-Humphrey at around 25 cents
when it was promoted a few weeks prior and had made up his mind that he
would turn a trick. The Goldfield brokers having received telegrams, I
assumed that the same message had been sent to brokers in San
Francisco, where the stock was also listed. It seemed to me that an
advance would certainly be recorded on the following day. Sure enough,
the next morning the stock advanced to 38 cents a share, and the market
boiled. At this figure, and a little higher, I unloaded in the
neighborhood of 100,000 shares in Goldfield and San Francisco. A good
deal of this stock had been picked up by me the night before. But I
recall that one block of 10,000 shares had been allotted to me weeks
before at the brokers' price of 20 cents, and another block of 10,000
shares had been given me as a bonus for my publicity measures.
After turning over to the treasury of the Jumping Jack Manhattan Mining
Company the amount netted from the sale of treasury stock, and paying
off the amount still due on the original purchase price, Sullivan and
I, within three weeks of my little dare, had cleaned up a net profit of
$250,000.
"Do you want a cut?" I asked Sullivan when our joint profits reached
the quarter-million mark.
"No, I'm game. Stay with it," he returned.
Next day the L. M. Sullivan Trust Company, destined to make and lose
millions in the great Goldfield boom that followed and to mold for me
an exciting career as a promoter, was formed with a paid-up capital of
$250,000. Sullivan was made president and I vice-president and general
manager.