Part 13

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.”