EXCITING TIMES
The year 1888 from start to finish was one whirl of excitement
in my business life. The mental effort of handling the enormous
business--it must be remembered ours was a one-man concern--was
most exhausting. I became weary of making money and longed for a
dull period that I might rest. But there was no dull period that
year.
In January we received from our London friends confidential
information of the arrangement with the syndicate.
Its enormous holdings were, so far as possible, to be unloaded on
American buyers. This was for us to accomplish. The spot stock had
to be sold against for future delivery and held until maturity of
the sales. Of course, the sales were made at a discount from the
spot price, and as time went on this increased. When the buyers at
one level were filled up, the price was lowered until a new level,
that would tempt further buyers, was reached, and so it went on.
The trade conceived the idea that our London friends and ourselves
were selling the market short. They never dreamed that we were
unloading for the syndicate, which was daily bidding £167 for spot,
while we were selling futures far below that figure. They did not
know that at four o'clock London time, when the official market
closed on the thirtieth day of April, the syndicate would cease
buying and that a collapse would then be inevitable. It was not
our business to enlighten them, and strange to relate, not one man
asked us our opinion of the market. They bought of us day after
day and apparently believed that when the time for delivery came
we would be unable to make it and would have to settle with them
at their own figure.
A great many of our sales were made on the Exchange. On this
business we could and did call margins, but there were some weak
people whom we could not avoid selling and in such a market there
were sure to be failures among that class.
As previously explained we guaranteed all sales, and whenever a
customer defaulted we at once sold double the quantity we had sold
him, to some strong concern. This made us short of the market, and
while we made some loss on the initial transaction, our profit on
the second sale always more than extinguished it.
The first man who defaulted brought to our office a deed for a farm
in Pennsylvania and offered it to us for the four thousand dollars
he owed. I handed it back to him, told him to give it to his wife,
and forgave him the debt.
The next man was a bigger fish. He owed us nineteen thousand eight
hundred dollars. We made up the account, and when I handed him
the statement I told him we would not press him and if he was ever
able to pay us twenty-five cents on the dollar we would give him a
receipt in full. In later years he was worth a good deal of money,
though I believe he has since lost it, but he never paid us a
dollar.
After him came a few small men, who altogether owed us perhaps ten
thousand dollars. We told them all if they ever felt able to pay
we would be glad to have the money, but would never press them for
it.
Of the whole lot, only one ever paid. His account was only a few
hundred dollars, and I had forgotten it, when one day he called at
the office, said his father had died, leaving him a little money,
and he wanted to pay us. He asked, "What rate of interest will you
charge me"? I replied, "Nothing; and if you cannot afford it, you
may leave us out entirely." He insisted on paying the principal.
Our treatment of these people was not good business in the general
sense. We could have put them all off the floor of the Exchange
and to a small degree it would have been to our advantage to do so,
but they had our sympathy in their trouble and we could afford to
lose the money.
The weeks flew by and we were approaching the end of April. The
discount on future deliveries was now enormous. In London £167 was
bid daily for spot and we were selling futures at £50 discount.
Under normal conditions futures should be at a slight premium over
spot.
In London in 1888 the last business day of April was on Friday; I
think it was the 29th. Saturday the market was closed, and as Monday
was a holiday, the first business day of May was on Tuesday.
Just before the gavel fell at the London Exchange at four o'clock
on Friday, £167 was bid for spot and the syndicate ceased buying.
On the curb, five minutes later, there were sellers, but no buyers,
at £135; but this price was not official. The last official price
was £167. On Tuesday morning the first offer to sell spot was at
£93 and the market had collapsed.
The losses were frightful. On the last day of April and on the first
two or three days of May we made all of our April and part of our
May deliveries on contracts. The differences between the contract
prices and the market on those deliveries amounted to three hundred
thousand dollars and we had thousands of tons yet to be delivered
over the summer and fall months. Fortunately the losses fell upon
firms well able to stand them and there were no failures.
We had a very narrow escape from slipping up on the last of our
May deliveries.
Through some misunderstanding the London steamer by which the stuff
should have reached us. sailed without it. It was then rushed to
Liverpool and shipped by the Oceanic of the White Star Line. The
steamer arrived at New York on the afternoon of the 29th; the 30th
was a holiday, and we had to make our delivery before two o'clock
on the 3lst. Meanwhile the stuff must be taken out of steamer,
weighed up and carted to store, warehouse receipts and weighers'
returns delivered at the office and invoices made out, all of which
took much time. Through our influence with the steamer people
and the expenditure of a little money, work was carried on day and
night and the deliveries went through all right.
As our profit on that lot was thirty thousand dollars it was a
matter of some importance.
When the syndicate commenced operations in the second commodity,
a large New York firm, with foreign branches, in order to conceal
its operations requested us to act for it as a selling agency on the
Exchange, all the business being done in our name. The commissions
on this account ran into large figures and contributed materially
to my income that year.
An incident in connection with this business, showing how good
fortune was favoring us at that time, I will relate:
One of our sales for future delivery was a lot of two hundred
thousand pounds. After 'Change it was, with the other transactions,
reported to the firm. When, the following morning, the contract
was sent to the buyer, he returned it, claiming it was a mistake
and that he had not made the purchase. Having reported the sale
the day previous and the market now being a little lower, we did
not like to explain the matter to our principal and let it stand
as a purchase of our own.
Before the time for delivery matured, we resold at a profit of
exactly ten thousand dollars.
By midsummer we had accumulated a large sum of money. In addition
to this capital of our own, our resources through our credit with
banking connections made it easy for us to accept a proposition
from a certain firm to finance for it on very liberal terms an
operation which the firm had undertaken. This was in a commodity
of which we were well informed though not doing business in it.
The operation proved a failure and in October the firm suspended.
We were carrying an enormous quantity of the stuff, and when
liquidation was completed had made a loss of sixty-eight thousand
dollars, of which we never recovered a single dollar.
At the end of the year, after charging off all the losses, amounting
to about one hundred thousand dollars, I had made a net profit of
one hundred and twenty thousand dollars.