Part 2

“But couldn’t you let me have them at 93?” she persisted.

“I’m very sorry, Mrs. Hunt, but I don’t see how I could. If you buy them in the open market now, you will be in exactly the same position as before you sold them, and you will make a great deal of money, because they are going up now. Let me buy them for you at 96½.”

“At 93, you mean,” with a tentative smile.

“At whatever price they may be selling for,” he corrected, patiently.

“Why did you let me sell them, Mr. Colwell?” she asked, plaintively.

“But, my dear madam, if you buy them now, you will be no worse off than if you had kept the original lot.”

“Well, I don’t see why it is that I have to pay 96½ now for the very same bonds I sold last Tuesday at 93. If it was some other bonds,” she added, “I wouldn’t mind so much.”

“My dear Mrs. Hunt, it makes no difference which bonds you hold. They have all risen in price, yours and mine and everybody’s; your lot was the same as any other lot. You see that, don’t you?”

“Ye-es; but——”

“Well, then, you are exactly where you were before you bought any. You’ve lost nothing, because you received your money back intact.”

“I’m willing to buy them,” she said resolutely, “at 93.”

“Mrs. Hunt, I wish I could buy them for you at that price. But there are none for sale cheaper than 96½.”

“Oh, why did I let you sell my bonds!” she said, disconsolately.

“Well, you worried so much because they had declined that——”

“Yes, but I didn’t know anything about business matters. You know I didn’t, Mr. Colwell,” she finished, accusingly.

He smiled in his good-natured way. “Shall I buy the bonds for you?” he asked. He knew the plans of the syndicate in charge, and being sure the bonds would advance, he thought she might as well share in the profits. At heart he felt sorry for her.

She smiled back. “Yes,” she told him, “at 93.” It did not seem right to her, notwithstanding his explanations, that she should pay 96½ for them, when the price a few days ago was 93.

“But how can I, if they are 96½?”

“Mr. Colwell, it is 93 or nothing.” She was almost pale at her own boldness. It really seemed to her as if the price had only been waiting for her to sell out in order to advance. And though she wanted the bonds, she did not feel like yielding.

“Then I very much fear it will have to be nothing.”

“Er—good morning, Mr. Colwell,” on the verge of tears.

“Good morning, Mrs. Hunt.” And before he knew it, forgetting all that had gone before, he added: “Should you change your mind, I should be glad to——”

“I know I wouldn’t pay more than 93 if I lived to be a thousand years.” She looked expectantly at him, to see if he had repented, and she smiled—the smile that is a woman’s last resort, that says, almost articulately: “I know you will, of course, do as I ask. My question is only a formality. I know your nobility, and I fear not.” But he only bowed her out, very politely.

On the Stock Exchange the price of _Man. Elec. L. H. & P. Co. 5s_ rose steadily. Mrs. Hunt, too indignant to feel lachrymose, discussed the subject with her Cousin Emily and her husband. Emily was very much interested. Between her and Mrs. Hunt they forced the poor man to make strange admissions, and, deliberately ignoring his feeble protests, they worked themselves up to the point of believing that, while it would be merely generous of Mr. Colwell to let his friend’s widow have the bonds at 93, it would be only his obvious duty to let her have them at 96½. The moment they reached this decision Mrs. Hunt knew how to act. And the more she thought the more indignant she became. The next morning she called on her late husband’s executor and friend.

Her face wore the look often seen on those ardent souls who think their sacred and inalienable rights have been trampled upon by the tyrant Man, but who at the same time feel certain the hour of retribution is near.

“Good morning, Mr. Colwell. I came to find out exactly what you propose to do about my bonds.” Her voice conveyed the impression that she expected violent opposition, perhaps even bad language, from him.

“Good morning, Mrs. Hunt. Why, what do you mean?”

His affected ignorance deepened the lines on her face. Instead of bluster he was using _finesse_!

“I think you ought to know, Mr. Colwell,” she said, meaningly.

“Well, I really don’t. I remember you wouldn’t heed my advice when I told you not to sell out, and again when I advised you to buy them back.”

“Yes, at 96½,” she burst out, indignantly.

“Well, if you had, you would to-day have a profit of over $7,000.”

“And whose fault is it that I haven’t?” She paused for a reply. Receiving none, she went on: “But never mind; I have decided to accept your offer,” very bitterly, as if a poor widow could not afford to be a chooser; “I’ll take those bonds at 96½.” And she added, under her breath: “Although it really ought to be 93.”

“But, Mrs. Hunt,” said Colwell, in measureless astonishment, “you can’t do that, you know. You wouldn’t buy them when I wanted you to, and I can’t buy them for you now at 96½. Really, you ought to see that.”

Cousin Emily and she had gone over a dozen imaginary interviews with Mr. Colwell—of varying degrees of storminess—the night before, and they had, in an idle moment, and not because they really expected it, represented Mr. Colwell as taking that identical stand. Mrs. Hunt was, accordingly, prepared to show both that she knew her moral and technical rights, and that she was ready to resist any attempt to ignore them. So she said, in a voice so ferociously calm that it should have warned any guilty man: “Mr. Colwell, will you answer me one question?”

“A thousand, Mrs. Hunt, with pleasure.”

“No; only one. Have you kept the bonds that I bought, or have you not?”

“What difference does that make, Mrs. Hunt?”

He evaded the answer!

“Yes or no, please. Have you, or have you not, those same identical bonds?”

“Yes; I have. But——”

“And to whom do those bonds belong, by rights?” She was still pale, but resolute.

“To me, certainly.”

“To _you_, Mr. Colwell?” She smiled. And in her smile were a thousand feelings; but not mirth.

“Yes, Mrs. Hunt, to me.”

“And do you propose to keep them?”

“I certainly do.”

“Not even if I pay 96½ will you give them to me?”

“Mrs. Hunt,” Colwell said with warmth “when I took those bonds off your hands at 93 it represented a loss on paper of $3,000——”

She smiled in pity—pity for his judgment in thinking her so hopelessly stupid.

“And when you wanted me to sell them back to you at 93 after they had risen to 96½, if I had done as you wished, it would have meant an actual loss of $3,000 to me.”

Again she smiled—the same smile, only the pity was now mingled with rising indignation.

“For Harry’s sake I was willing to pocket the first loss, in order that you might not worry. But I didn’t see why I should make you a present of $3,000,” he said, very quietly.

“I never asked you to do it,” she retorted, hotly.

“If you had lost any money through my fault, it would have been different. But you had your original capital unimpaired. You had nothing to lose, if you bought back the same bonds at practically the same price. Now you come and ask me to sell you the bonds at 96½ that are selling in the market for 104, as a reward, I suppose, for your refusal to take my advice.”

“Mr. Colwell, you take advantage of my position to insult me. And Harry trusted you so much! But let me tell you that I am not going to let you do just as you please. No doubt you would like to have me go home and forget how you’ve acted toward me. But I am going to consult a lawyer, and see if I am to be treated this way by a _friend_ of my husband’s. You’ve made a mistake, Mr. Colwell.”

“Yes, madam, I certainly have. And, in order to avoid making any more, you will oblige me greatly by never again calling at this office. By all means consult a lawyer. Good morning, madam,” said the politest man in Wall Street.

“We’ll see,” was all she said; and she left the room.

Colwell paced up and down his office nervously. It was seldom that he allowed himself to lose his temper, and he did not like it. The ticker whirred away excitedly, and in an absent-minded, half-disgusted way he glanced sideways at it.

“_Man. Elec. 5s, 106⅛_,” he read on the tape.

THE BREAK IN TURPENTINE

In the beginning of the beginning the distillers of turpentine carried competition to the quarrelling point. Then they carried the quarrel to the point of silence, which was most to be feared, for it meant that no time was to be wasted in words. All were losing money; but each hoped that the others were losing more, proportionately, and therefore would go under all the sooner. The survivors thought they could manage to keep on surviving, for on what twelve would starve four could feast.

It is seen periodically in the United States: an industry apparently suffering from suicidal mania. It is incomprehensible, inexplicable, though mediocrities mutter: “Over-production!” and shake their heads complacently, proud of having diagnosed the trouble. Here was the turpentine business, once great and lucrative, now ruin-producing; formerly affording a comfortable livelihood to many thousands and now giving ever-diminishing wages to ever-diminishing numbers.

It was Mr. Alfred Neustadt, a banker in a famous turpentine district, who first called his brother-in-law’s attention to the pitiable sight. Mr. Jacob Greenbaum’s soul thrilled during Neustadt’s recital. He perceived golden possibilities that dazzled him: He decided to form a Turpentine Trust.

First he bought for a song all the bankrupt stills; seven of them. Later on, in his scheme of trust creation, these self-same distilleries would be turned over to the “octopus,” at nice fat figures, as Greenbaum put it, self-admiringly, to his brother-in-law. Then he secured options on nine others, the tired-unto-death plants. In this way he was able to control “a large productive capacity” at an expenditure positively marvellous—it was so small. It was also in his brother-in-law’s name. Then the banking house of Greenbaum, Lazarus & Co. stepped in, interested accomplices, duped or coerced into selling enough other distillers to assure success, cajoled the more stubborn, wheedled the more credulous, gave way gracefully to the shrewder and gathered them all into the fold. The American Turpentine Company was formed, with a capital stock of $30,000,000 or 300,000 shares at $100 each. The cash needed, to pay Mr. Greenbaum, Neustadt and others who sold their plants for “part cash and part stock,” was provided by an issue of $25,000,000 of 6 per cent bonds, underwritten by a syndicate composed of Greenbaum, Lazarus & Co., I. & S. Wechsler, Morris Steinfelder’s Sons, Reis & Stern, Kohn, Fischel & Co., Silberman & Lindheim, Rosenthal, Shaffran & Co. and Zeman Bros.

They were men who never “speculated”; sometimes they “conducted financial operations.” They had shears, not fleeces.

The prospectus of the “Trust” was a masterpiece of persuasiveness and vagueness, of slim statistics and alluring generalities. In due course of time the public subscribed for the greater part of the $25,000,000 of bonds, and both bonds and stock were “listed” on the New York Stock Exchange—that is, they were placed on the list of securities which members may buy or sell on the “floor” of the Exchange.

Tabularly expressed, the syndicate’s operations were as follows:

Authorized stock $30,000,000 Authorized bonds 25,000,000 ___________ Total $55,000,000 Actual worth of property 12,800,000 ___________ _Aqua Pura_ $42,200,000

Paid to owners for 41 distilleries representing 90 per cent of the turpentine production (and 121 per cent of the consumption!) of the United States:

Cash from bond sales $8,975,983 Bonds 12,000,000 Stock 18,249,800 ___________ Total $39,225,783 Syndicate’s commission, stock 12,988,500 Retained in Co.’s treasury, unissued 2,000,000 Expenses and discounts on bonds, etc. 785,717 ___________ Total $55,000,000

These figures were not for publication. They told the exact truth.

The public knew nothing of the company’s earning capacity, save a few tentative figures from the prospectus, which was a sort of financial gospel according to Greenbaum, but which did not create fanatical devotees among investors. The stock, unlike the Kipling ship, had not found itself. It was not market-proven, not seasoned; no one knew how much dependence to put on it; wherefore the banks would not take it as collateral security on loans and wherefore the “speculative community” (as the newspapers call the stock gamblers) would not touch it, since in a pinch it might prove utterly unvendible. It remained for the syndicate to make a “market” for it, to develop such a condition of affairs that anyone at any time could, without overmuch difficulty and without causing over-great fluctuations, sell readily American Turpentine Company stock. The syndicate would have to earn its commission.

All the manufacturers who had received stock in part payment were told most impressively by Mr. Greenbaum not to sell their holdings under any circumstances at any price below $75 a share. Not knowing Mr. Greenbaum, they readily and solemnly promised to obey him. They even permitted themselves to think, after talking to him, that they would some day receive $80 per share for all their holdings. This precluded any untimely “unloading” by the only people outside the syndicate that held any Turpentine stock at all.

Mr. Greenbaum took charge of the market conduct of “Turp,” as the tape called the stock of the American Turpentine Company. At first, the price was marked up by means of “matched” orders—preconcerted and therefore not bona fide transactions. Mr. Greenbaum told one of his brokers to sell 1,000 shares of “Turp” to another of his brokers and shortly afterwards the second broker sold the same 1,000 shares to a third, by pre-arrangement—this being the matching process—with the result that the tape recorded transactions of 2,000 shares. After the “matching” had gone on for some time, readers of the tape were supposed to imagine that the stock was legitimately active and strong—two facts which in turn were supposed to whet the buying appetite. It was against the rule of the Exchange to “match” orders, but how could convictions be secured?

“Turp” began at 25 and as the syndicate had all the stock in the market, it was easily manipulated upward to 35. Every day, many thousands of shares, according to the Stock Exchange’s official records, “changed hands”—from Greenbaum’s right to his left and back again—and the price rose steadily. But something was absent. The manipulation was not convincing. It did not make the general public nibble. The only buyers were the “room traders,” that is, the professional stock gamblers who were members of the Exchange and speculated for themselves exclusively; and those customers of the commission houses who, because they were bound to speculate daily or die and because they studied the ticker-ribbon so assiduously, were known by the generic name of “tape-worms.” These gentry, in and out of the Exchange, provided the tape in its curious language foretold a rise, would buy anything—from capitalized impudence, as in the case of Back Bay Gas, whose property was actually worth nil and its capital stock was $100,000,000, up to Government bonds.

Now, the room traders and the tape-worms reasoned not illogically that the “Greenbaum gang” had all the stock and that perforce the “gang” had to find a market for it; and the only way to do this was by a nice “bull” or upward movement. When a stock rises and rises and rises the newspapers are full of pleasant stories about it and the lambs read but do not run away; they buy on the assumption that, as the stock has already risen ten points it may rise ten more. This explains why they make so much money in Wall Street—for the natives.

Greenbaum and his associates were exceptionally shrewd business men, thoroughly familiar with Wall Street and its methods, cautious yet bold, far-seeing yet eminently of the day. They were practical financiers. They marked up the price of “Turp” ten points; but they could not arouse public interest in it so that people would buy it. Indeed, at the end of three weeks, during which the “Street” had been flooded with impressive advice, printed and spoken, to buy because the price was going higher, all they had for their trouble was more stock-–6,000 shares from Ira D. Keep, a distiller, who sold out at 38 because he needed the money; and they also were obliged to buy back from the “room traders” at 35 and 36 and higher, the same stock the “gang” had sold at 30 and 31 and 32 and 34. Then the manipulators had to “support” the stock at the higher level, that is, they had to keep it from declining, which could be done only by continuous buying. By doing this the public might imagine there was considerable merit in a stock which was in such good demand from intelligent people as to remain firm, notwithstanding its previous substantial rise. And if somebody wanted “Turp” why shouldn’t the public want it? The public generally asks itself that question. It is in the nature of a nibble and rejoices the hearts of the financial anglers.

Every attempt to sell “Turp” met with failure. At length it was decided to allow the price to sink back to an “invitingly low” level. It was done. But still the invited public refused to buy. Efforts to encourage a short interest to over-extend itself unto “squeezable” proportions failed similarly. The Street was afraid to go “short” of a stock which was so closely held. The philosophy of short selling is simple; it really amounts to betting that values will decline. A man who “sells short” sells what he does not possess, but hopes to buy, later on, at a lower price. But since he must deliver what he sells he borrows it from some one else, giving the lender ample security. To “cover” or to “buy in” is to purchase stock previously sold short. Obviously, it is unwise to be short of a stock which is held by such a few that it may be difficult to borrow it. To “squeeze” shorts is to advance the price in order to force “covering.” This is done when the short interest is large enough to make it worth while.

In the course of the next few months, after a series of injudicious fluctuations which gave to “Turp” a bad name, even as Wall Street names went, despite glowing accounts of the company’s wonderful business and after distributing less than 35,000 shares, the members of the “Turpentine Skindicate,” as it was popularly called, sorrowfully acknowledged that, while they had skilfully organized the trust and had done fairly well with the bonds, they certainly were not howling successes as manipulators. During the following eight months they sold more stock. They spared not the widow nor the orphan. They even “stuck” their intimate friends. They had sold for something what had cost them nothing; it was natural to wish to sell more.

Now, manipulators of stocks are born, not made. The art is most difficult, for stocks should be manipulated in such wise that they will not look manipulated. Anybody can buy stocks or can sell them. But not every one can sell stocks and at the same time convey the impression that he is buying them, and that prices therefore must inevitably go much higher. It requires boldness and consummate judgment, knowledge of technical stock-market conditions, infinite ingenuity and mental agility, absolute familiarity with human nature, a careful study of the curious psychological phenomena of gambling and long experience with the Wall Street public and with the wonderful imagination of the American people; to say nothing of knowing thoroughly the various brokers to be employed, their capabilities, limitations and personal temperaments; also, their price.

Adequate manipulative machinery, moreover, can be perfected only with much toil and patience and money. Professional Wall Street will always tell you that “the tape tells the story.” The little paper ribbon, therefore, must be made to tell such stories as the manipulator desires should be told to the public; he must produce certain effects which should preserve an appearance of alluring spontaneity and, above all, of legitimacy and candor; he must be a great artist in mendacity and at the same time have the superb self-confidence of a grizzly.

Several members of the syndicate had many of these qualities, but none had them all. It was decided to put “Turp” stock in the hands of Samuel Wimbleton Sharpe, the best manipulator Wall Street had ever known. “Jakey” Greenbaum said he would conduct the negotiations with the great plunger.

Sharpe was a financial free-lance, free-booter and free-thinker. He had made his first fortune in the mining camps of Arizona and finding that field too narrow had come to New York, where he could gamble to his heart’s content. He was all the things that an ideal manipulator should be and several more. He had arrived in New York with a sneer on his lips and a loaded revolver in his financial hands. The other “big operators” looked at him in pained astonishment. “I carry my weapons openly,” Sharpe told them, “and you conceal your dirks. Don’t hurt yourselves trying to look honest. I never turn my back on such as you.” Of this encounter was born a hostility that never grew faint. Sharpe had nothing of his own to unload on anyone else, no property to overcapitalize and sell to an undiscriminating public by means of artistic lies and his enemies often did. So they called him a gambler, very bitterly, and he called them philanthropists, very cheerfully. If he thought a stock was unduly high he sold it confidently, aggressively, stupendously. If he thought a stock was too low he bought it boldly, ready to take all the offerings and bid for more. And once on the march, he might be temporarily checked, be forced by the enemy to halt for a day or a week or a month; but inevitably he arrived. And such an arrival!

And as a manipulator of stock-values he had no equal. On the bull side he rushed a stock upward so steadily, so boldly and brilliantly, but, above all, so persuasively, that lesser gamblers almost fought to be allowed to take it off his hands at incredibly high prices. And when in the conduct of one of his masterly bear campaigns he saw fit to “hammer” the market, values melted away as by magic—Satanic magic, the poor lambs thought. All stocks looked “sick,” looked as though prices would go much lower; murmurs of worse things to come were in the air, vague, disquieting, ruin-breeding. The atmosphere of the Street was supersaturated with apprehension, and the black shadow of Panic brooded over the Stock Exchange, chilling the little gamblers’ hearts, wiping out the last of the little gamblers’ margins. And even the presidents of the solid, conservative banks studied the ticker uneasily in their offices.