Chapter 20
I myself never spoke to any of the great stock manipulators that the Street still talks about. I don’t mean leaders; I mean manipulators. They were all before my time, although when I first came to New York, James R. Keene, greatest of them all, was in his prime. But I was a mere youngster then, exclusively concerned with duplicating, in a reputable broker’s office, the success I had enjoyed in the bucket shops of my native city. And, then, too, at the time Keene was busy with the U.S. Steel stocks—his manipulative masterpiece—I had no experience with manipulation, no real knowledge of it or of its value or meaning, and, for that matter, no great need of such knowledge. If I thought about it at all I suppose I must have regarded it as a well-dressed form of thimble-rigging, of which the lowbrow form was such tricks as had been tried on me in the bucket shops. Such talk as I since have heard on the subject has consisted in great part of surmises and suspicions; of guesses rather than intelligent analyses.
I never spoke to any of the great stock manipulators people on the Street still talk about. I don’t mean leaders. I mean manipulators. They were all before my time, although James R. Keene, the greatest of them all, was in his prime when I first came to New York. But I was just a youngster then. I was focused entirely on repeating, in a reputable broker’s office, the success I had enjoyed in the bucket shops of my hometown. And at the time Keene was busy with U.S. Steel stocks, his masterpiece of manipulation, I had no experience with manipulation. I had no real knowledge of it, its value, or its meaning. For that matter, I had no great need for such knowledge. If I thought about manipulation at all, I suppose I must have seen it as a respectable-looking form of thimble-rigging. Its crude version was tricks like those people had tried on me in the bucket shops. Most of the talk I’ve heard about manipulation since then has consisted of speculation and suspicion, guesses rather than intelligent analysis.
More than one man who knew him well has told me that Keene was the boldest and most brilliant operator that ever worked in Wall Street. That is saying a great deal, for there have been some great traders. Their names are now all but forgotten, but nevertheless they were kings in their day—for a day! They were pulled up out of obscurity into the sunlight of financial fame by the ticker tape—and the little paper ribbon didn’t prove strong enough to keep them suspended there long enough for them to become historical fixtures. At all events Keene was by all odds the best manipulator of his day—and it was a long and exciting day.
More than one person who knew Keene well has told me he was the boldest and most brilliant trader ever to work on Wall Street. That is saying a lot, because there have been some great traders. Their names are now almost forgotten, but they were kings in their day, if only for a day! The ticker tape pulled them out of obscurity and into the sunlight of financial fame. But that little paper ribbon was not strong enough to hold them there long enough to become permanent figures in history. In any case, Keene was by far the best market manipulator of his day. And his day was long and exciting.
He capitalized his knowledge of the game, his experience as an operator and his talents when he sold his services to the Havemeyer brothers, who wanted him to develop a market for the Sugar stocks. He was broke at the time or he would have continued to trade on his own hook; and he was some plunger! He was successful with Sugar; made the shares trading favourites, and that made them easily vendible. After that, he was asked time and again to take charge of pools. I am told that in these pool operations he never asked nor accepted a fee, but paid for his share like the other members of the pool. The market conduct of the stock, of course, was exclusively in his charge. Often there was talk of treachery—on both sides. His feud with the Whitney-Ryan clique arose from such accusations. It is not difficult for a manipulator to be misunderstood by his associates. They don’t see his needs as he himself does. I know this from my own experience.
He put his knowledge of the game, his trading experience, and his talents to work for the Havemeyer brothers. They hired him to develop a market for Sugar stocks. He was broke at the time. Otherwise, he would have continued trading on his own, and he was quite a risk taker! He succeeded with Sugar, making the shares popular with traders and therefore easy to sell. After that, he was asked again and again to take charge of pools. I am told he never asked for or accepted a fee for these pool operations. Instead, he paid for his share like the other pool members. Of course, he alone controlled how the stock was traded in the market. There was often talk of betrayal on both sides. His feud with the Whitney-Ryan clique arose from such accusations. A manipulator can easily be misunderstood by his associates. They don’t see his needs as he does. I know this from my own experience.
It is a matter of regret that Keene did not leave an accurate record of his greatest exploit—the successful manipulation of the U.S. Steel shares in the spring of 1901. As I understand it, Keene never had an interview with J. P. Morgan about it. Morgan’s firm dealt with or through Talbot J. Taylor & Co., at whose office Keene made his headquarters. Talbot Taylor was Keene’s son-in-law. I am assured that Keene’s fee for his work consisted of the pleasure he derived from the work. That he made millions trading in the market he helped to put up that spring is well known. He told a friend of mine that in the course of a few weeks he sold in the open market for the underwriters’ syndicate more than seven hundred and fifty thousand shares. Not bad when you consider two things: That they were new and untried stocks of a corporation whose capitalization was greater than the entire debt of the United States at that time; and second, that men like D. G. Reid, W. B. Leeds, the Moore brothers, Henry Phipps, H. C. Frick and the other Steel magnates also sold hundreds of thousands of shares to the public at the same time in the same market that Keene helped to create.
It is a shame that Keene left no accurate record of his greatest exploit: his successful manipulation of U.S. Steel shares in the spring of 1901. As I understand it, Keene never met with J. P. Morgan about it. Morgan’s firm dealt with or through Talbot J. Taylor & Co., where Keene had his headquarters. Talbot Taylor was Keene’s son-in-law. I am told that Keene’s only fee for the work was the pleasure he got from it. It is well known that he made millions trading in the market he helped drive up that spring. Keene told a friend of mine that he sold more than 750,000 shares on the open market for the underwriters’ syndicate in a few weeks. Not bad, considering two things. First, the shares were new and untested. The corporation’s capitalization was greater than the entire debt of the United States at the time. Second, men like D. G. Reid, W. B. Leeds, the Moore brothers, Henry Phipps, H. C. Frick and the other Steel magnates were also selling hundreds of thousands of shares to the public. They sold them at the same time, in the same market that Keene helped create.
Of course, general conditions favoured him. Not only actual business but sentiment and his unlimited financial backing made possible his success. What we had was not merely a big bull market but a boom and a state of mind not likely to be seen again. The undigested-securities panic came later, when Steel common, which Keene had marked up to 55 in 1901, sold at 10 in 1903 and at 8⅞ in 1904.
Of course, general conditions were in his favor. Actual business conditions, market sentiment, and his unlimited financial backing made his success possible. We had not just a big bull market but a boom and a state of mind unlikely to be seen again. The panic over undigested securities came later. Steel common, which Keene had driven up to 55 in 1901, sold for 10 in 1903 and 8⅞ in 1904.
We can’t analyse Keene’s manipulative campaigns. His books are not available; the adequately detailed record is nonexistent. For example, it would be interesting to see how he worked in Amalgamated Copper. H. H. Rogers and William Rockefeller had tried to dispose of their surplus stock in the market and had failed. Finally they asked Keene to market their line, and he agreed. Bear in mind that H. H. Rogers was one of the ablest business men of his day in Wall Street and that William Rockefeller was the boldest speculator of the entire Standard Oil coterie. They had practically unlimited resources and vast prestige as well as years of experience in the stock-market game. And yet they had to go to Keene. I mention this to show you that there are some tasks which it requires a specialist to perform. Here was a widely touted stock, sponsored by America’s greatest capitalists, that could not be sold except at a great sacrifice of money and prestige. Rogers and Rockefeller were intelligent enough to decide that Keene alone might help them.
We can’t analyze Keene’s stock manipulation campaigns. His records aren’t available, and no sufficiently detailed account exists. For example, it would be interesting to see how he handled Amalgamated Copper. H. H. Rogers and William Rockefeller had tried to sell their surplus stock on the market and failed. Finally, they asked Keene to sell their holdings, and he agreed. Keep in mind that H. H. Rogers was one of the ablest businessmen on Wall Street in his day. William Rockefeller was the boldest speculator in the entire Standard Oil group. Both men had virtually unlimited resources, enormous prestige, and years of stock market experience. Yet they had to turn to Keene. I mention this to show that some tasks require a specialist. Here was a heavily promoted stock backed by America’s greatest capitalists. Yet it could be sold only at a great cost in money and prestige. Rogers and Rockefeller were smart enough to decide that Keene alone might be able to help them.
Keene began to work at once. He had a bull market to work in and sold two hundred and twenty thousand shares of Amalgamated at around par. After he disposed of the insiders’ line the public kept on buying and the price went ten points higher. Indeed the insiders got bullish on the stock they had sold when they saw how eagerly the public was taking it. There was a story that Rogers actually advised Keene to go long of Amalgamated. It is scarcely credible that Rogers meant to unload on Keene. He was too shrewd a man not to know that Keene was no bleating lamb. Keene worked as he always did—that is, doing his big selling on the way down after the big rise. Of course his tactical moves were directed by his needs and by the minor currents that changed from day to day. In the stock market, as in warfare, it is well to keep in mind the difference between strategy and tactics.
Keene got to work at once. He had a bull market to work in and sold 220,000 shares of Amalgamated at around par. After he sold the insiders’ holdings, the public kept buying, and the price rose another ten points. In fact, the insiders grew bullish on the stock they had sold when they saw how eagerly the public was buying it. There was a story that Rogers actually advised Keene to buy Amalgamated for himself. It is hard to believe that Rogers meant to unload stock on Keene. He was too shrewd not to know that Keene was no helpless lamb. Keene worked as he always did, doing his big selling as the price fell after the big rise. Of course, his tactical moves depended on his needs and on the minor currents that changed from day to day. In the stock market, as in warfare, it is wise to remember the difference between strategy and tactics.
One of Keene’s confidential men—he is the best fly fisherman I know—told me only the other day that during the Amalgamated campaign Keene would find himself almost out of stock one day—that is, out of the stock he had been forced to take in marking up the price; and on the next day he would buy back thousands of shares. On the day after that, he would sell on balance. Then he would leave the market absolutely alone, to see how it would take care of itself and also to accustom it to do so. When it came to the actual marketing of the line he did what I told you: he sold it on the way down. The trading public is always looking for a rally, and, besides, there is the covering by the shorts.
One of Keene’s trusted associates told me about this just the other day. He’s the best fly fisherman I know. During the Amalgamated campaign, Keene would sometimes find himself with almost none of the stock he had been forced to buy while driving up its price. The next day, he would buy back thousands of shares. The day after that, he would sell more shares than he bought. Then he would leave the market completely alone. He wanted to see how it would take care of itself and get it used to doing so. When it came time to sell his holdings, he did what I told you: he sold as the price fell. The trading public is always looking for a rally, and short sellers also buy shares to cover their positions.
The man who was closest to Keene during that deal told me that after Keene sold the Rogers-Rockefeller line for something like twenty or twenty-five million dollars in cash Rogers sent him a check for two hundred thousand. This reminds you of the millionaire’s wife who gave the Metropolitan Opera House scrub-woman fifty cents reward for finding the one-hundred-thousand-dollar pearl necklace. Keene sent the check back with a polite note saying he was not a stock broker and that he was glad to have been of some service to them. They kept the check and wrote him that they would be glad to work with him again. Shortly after that it was that H. H. Rogers gave Keene the friendly tip to buy Amalgamated at around 130!
The man closest to Keene during the deal told me what happened. Keene sold the Rogers-Rockefeller line for about twenty or twenty-five million dollars in cash. Afterward, Rogers sent him a check for two hundred thousand dollars. This reminds you of the millionaire’s wife who gave a Metropolitan Opera House scrub-woman fifty cents for finding her one-hundred-thousand-dollar pearl necklace. Keene sent the check back with a polite note. He said he was not a stockbroker and was glad to have been of some service to them. They kept the check and wrote that they would be glad to work with him again. Shortly afterward, H. H. Rogers gave Keene the friendly tip to buy Amalgamated at around 130!
A brilliant operator, James R. Keene! His private secretary told me that when the market was going his way Mr. Keene was irascible; and those who knew him say his irascibility was expressed in sardonic phrases that lingered long in the memory of his hearers. But when he was losing he was in the best of humour, a polished man of the world, agreeable, epigrammatic, interesting.
James R. Keene was a brilliant trader! His private secretary told me that Mr. Keene was irritable when the market went his way. Those who knew him say he expressed his irritation in sarcastic remarks that his listeners remembered for a long time. But when he was losing, he was in the best of moods. He was a polished man of the world, pleasant, witty, and interesting.
He had in superlative degree the qualities of mind that are associated with successful speculators anywhere. That he did not argue with the tape is plain. He was utterly fearless but never reckless. He could and did turn in a twinkling, if he found he was wrong.
He had the qualities of mind associated with successful speculators everywhere to an exceptional degree. Clearly, he did not argue with the stock ticker. He was completely fearless but never reckless. If he found he was wrong, he could and did change course in an instant.
Since his day there have been so many changes in Stock Exchange rules and so much more rigorous enforcement of old rules, so many new taxes on stock sales and profits, and so on, that the game seems different. Devices that Keene could use with skill and profit can no longer be utilised. Also, we are assured, the business morality of Wall Street is on a higher plane. Nevertheless it is fair to say that in any period of our financial history Keene would have been a great manipulator because he was a great stock operator and knew the game of speculation from the ground up. He achieved what he did because conditions at the time permitted him to do so. He would have been as successful in his undertakings in 1922 as he was in 1901 or in 1876, when he first came to New York from California and made nine million dollars in two years. There are men whose gait is far quicker than the mob’s. They are bound to lead—no matter how much the mob changes.
Since his day there have been so many changes in Stock Exchange rules, so much stricter enforcement of old rules, so many new taxes on stock sales and profits, and so on, that the game seems different. Devices that Keene could use with skill and profit can no longer be put to use. Also, we are assured, the business morality of Wall Street is on a higher plane. Nevertheless, it is fair to say that in any period of our financial history Keene would have been a great manipulator. That is because he was a great stock operator and knew the game of speculation from the ground up. He achieved what he did because conditions at the time allowed him to. He would have been as successful in his undertakings in 1922 as he was in 1901 or in 1876. In 1876 he first came to New York from California and made nine million dollars in two years. There are men whose pace is far quicker than the mob’s. They are bound to lead, no matter how much the mob changes.
As a matter of fact, the change is by no means as radical as you’d imagine. The rewards are not so great, for it is no longer pioneer work and therefore it is not pioneer’s pay. But in certain respects manipulation is easier than it was; in other ways much harder than in Keene’s day.
In fact, the change is not nearly as radical as you might imagine. The rewards are not as great because the work is no longer pioneering, so it no longer pays like pioneering work. But in some ways, manipulation is easier than it was in Keene’s day. In other ways, it is much harder.
There is no question that advertising is an art, and manipulation is the art of advertising through the medium of the tape. The tape should tell the story the manipulator wishes its readers to see. The truer the story the more convincing it is bound to be, and the more convincing it is the better the advertising is. A manipulator to-day, for instance, has not only to make a stock look strong but also to make it be strong. Manipulation therefore must be based on sound trading principles. That is what made Keene such a marvellous manipulator; he was a consummate trader to begin with.
There is no doubt that advertising is an art. Manipulation is the art of advertising through the stock ticker tape. The tape should tell the story the manipulator wants readers to see. The truer the story, the more convincing it will be. And the more convincing the story, the better the advertising. Today, for example, a manipulator must not only make a stock look strong but also make it actually strong. Manipulation must therefore be based on sound trading principles. That is what made Keene such a remarkable manipulator. He was an exceptionally skilled trader to begin with.
The word “manipulation” has come to have an ugly sound. It needs an alias. I do not think there is anything so very mysterious or crooked about the process itself when it has for an object the selling of a stock in bulk, provided, of course, that such operations are not accompanied by misrepresentation. There is little question that a manipulator necessarily seeks his buyers among speculators. He turns to men who are looking for big returns on their capital and are therefore willing to run a greater than normal business risk. I can’t have much sympathy for the man who, knowing this, nevertheless blames others for his own failure to make easy money. He is a devil of a clever fellow when he wins. But when he loses money the other fellow was a crook; a manipulator! In such moments and from such lips the word connotes the use of marked cards. But this is not so.
The word “manipulation” has come to sound ugly. It needs another name. I do not think the process itself is particularly mysterious or dishonest when its purpose is to sell stock in bulk. That is, of course, provided the operation does not involve misrepresentation. There is little doubt that a manipulator must look for buyers among speculators. He turns to people looking for big returns on their capital. They are therefore willing to take greater risks than in normal business. I cannot have much sympathy for someone who knows this but still blames others for his own failure to make easy money. When he wins, he is a devilishly clever fellow. But when he loses money, the other fellow was a crook, a manipulator! At such moments, from such people, the word suggests the use of marked cards. But that is not so.
Usually the object of manipulation is to develop marketability—that is, the ability to dispose of fair-sized blocks at some price at any time. Of course a pool, by reason of a reversal of general market conditions, may find itself unable to sell except at a sacrifice too great to be pleasing. They then may decide to employ a professional, believing that his skill and experience will enable him to conduct an orderly retreat instead of suffering an appalling rout.
Usually, the goal of manipulation is to make a stock marketable. That means being able to sell fairly large blocks at some price whenever necessary. Of course, general market conditions may reverse, leaving a pool unable to sell except at an unacceptably large loss. The pool may then decide to hire a professional. Its members believe his skill and experience will allow him to manage an orderly retreat instead of suffering a disastrous rout.
You will notice that I do not speak of manipulation designed to permit considerable accumulation of a stock as cheaply as possible, as, for instance, in buying for control, because this does not happen often nowadays.
You will notice that I do not discuss manipulation intended to accumulate a large amount of stock as cheaply as possible. One example is buying stock to gain control of a company. I do not discuss this kind of manipulation because it does not happen often nowadays.
When Jay Gould wished to cinch his control of Western Union and decided to buy a big block of the stock, Washington E. Connor, who had not been seen on the floor of the Stock Exchange for years, suddenly showed up in person at the Western Union Post. He began to bid for Western Union. The traders to a man laughed—at his stupidity in thinking them so simple—and they cheerfully sold him all the stock he wanted to buy. It was too raw a trick, to think he could put up the price by acting as though Mr. Gould wanted to buy Western Union. Was that manipulation? I think I can only answer that by saying “No; and yes!”
When Jay Gould wanted to secure his control of Western Union, he decided to buy a large block of its stock. Washington E. Connor had not been seen on the floor of the Stock Exchange for years. Now he suddenly appeared in person at the Western Union Post. He began bidding for Western Union stock. Every trader laughed at Connor’s stupidity in thinking them so gullible. They cheerfully sold him all the stock he wanted. They thought it was too obvious a trick. How could Connor expect to drive up the price by acting as though Mr. Gould wanted to buy Western Union? Was that manipulation? I think I can only answer, “No, and yes!”
In the majority of cases the object of manipulation is, as I said, to sell stock to the public at the best possible price. It is not alone a question of selling but of distributing. It is obviously better in every way for a stock to be held by a thousand people than by one man—better for the market in it. So it is not alone the sale at a good price but the character of the distribution that a manipulator must consider.
As I said, in most cases, the goal of manipulation is to sell stock to the public at the best possible price. It is not just a matter of selling the stock, but of distributing it. Clearly, it is better in every way for a thousand people to hold a stock than for one person to hold it. That is better for the market in the stock. So a manipulator must consider not only selling at a good price, but also how the stock is distributed.
There is no sense in marking up the price to a very high level if you cannot induce the public to take it off your hands later. Whenever inexperienced manipulators try to unload at the top and fail, old-timers look mighty wise and tell you that you can lead a horse to water but you cannot make him drink. Original devils! As a matter of fact, it is well to remember a rule of manipulation, a rule that Keene and his able predecessors well knew. It is this: Stocks are manipulated to the highest point possible and then sold to the public on the way down.
There is no point in pushing a stock’s price very high if you cannot get the public to buy it from you later. Whenever inexperienced manipulators try to sell at the top and fail, old-timers look very wise. They tell you that you can lead a horse to water, but you cannot make him drink. How original of them! In fact, it is worth remembering a rule of manipulation that Keene and his skilled predecessors knew well. The rule is: Stocks are pushed to the highest possible price and then sold to the public as the price falls.
Let me begin at the beginning. Assume that there is some one—an underwriting syndicate or a pool or an individual—that has a block of stock which it is desired to sell at the best price possible. It is a stock duly listed on the New York Stock Exchange. The best place for selling it ought to be the open market, and the best buyer ought to be the general public. The negotiations for the sale are in charge of a man. He—or some present or former associate—has tried to sell the stock on the Stock Exchange and has not succeeded. He is—or soon becomes—sufficiently familiar with stock-market operations to realise that more experience and greater aptitude for the work are needed than he possesses. He knows personally or by hearsay several men who have been successful in their handling of similar deals, and he decides to avail himself of their professional skill. He seeks one of them as he would seek a physician if he were ill or an engineer if he needed that kind of expert.
Let me start at the beginning. Suppose an underwriting syndicate, a pool, or an individual has a block of stock to sell for the best possible price. The stock is listed on the New York Stock Exchange. The open market ought to be the best place to sell it, and the general public ought to be the best buyer. A man is in charge of arranging the sale. He, or a current or former associate, has tried to sell the stock on the Stock Exchange without success. He knows enough about stock market operations, or soon learns enough, to realize that the job requires more experience and skill than he has. He knows, either personally or by reputation, several men who have successfully handled similar deals. So he decides to use their professional skills. He seeks one out just as he would seek a doctor if he were ill or an engineer if he needed that kind of expert.
Suppose he has heard of me as a man who knows the game. Well, I take it that he tries to find out all he can about me. He then arranges for an interview, and in due time calls at my office.
Suppose he has heard that I know the game. Well, I assume he tries to find out all he can about me. Then he arranges a meeting and comes to my office.
Of course, the chances are that I know about the stock and what it represents. It is my business to know. That is how I make my living. My visitor tells me what he and his associates wish to do, and asks me to undertake the deal.
Of course, I probably know about the stock and what it represents. It’s my job to know. That’s how I make my living. My visitor tells me what he and his associates want to do and asks me to handle the deal.
It is then my turn to talk. I ask for whatever information I deem necessary to give me a clear understanding of what I am asked to undertake. I determine the value and estimate the market possibilities of that stock. That and my reading of current conditions in turn help me to gauge the likelihood of success for the proposed operation.
Then it is my turn to talk. I ask for whatever information I need to understand clearly what I am being asked to do. I determine the stock’s value and assess its market potential. That assessment, along with my reading of current conditions, helps me judge the proposed operation’s chances of success.
If my information inclines me to a favourable view I accept the proposition and tell him then and there what my terms will be for my services. If he in turn accepts my terms—the honorarium and the conditions—I begin my work at once.
If my information gives me a favorable view, I accept the proposal. I tell him right then what my terms are for my services. If he accepts my fee and conditions, I begin work immediately.
I generally ask and receive calls on a block of stock. I insist upon graduated calls as the fairest to all concerned. The price of the call begins at a little below the prevailing market price and goes up; say, for example, that I get calls on one hundred thousand shares and the stock is quoted at 40. I begin with a call for some thousands of shares at 35, another at 37, another at 40, and at 45 and 50, and so on up to 75 or 80.
I usually ask for and receive calls on a block of stock. I insist on calls at graduated prices because they are fairest to everyone involved. The call prices start a little below the current market price and rise from there. For example, say I get calls on 100,000 shares when the stock is quoted at 40. I start with a call on several thousand shares at 35, another at 37, and others at 40, 45, and 50. The prices continue to rise to 75 or 80.
If as the result of my professional work—my manipulation—the price goes up, and if at the highest level there is a good demand for the stock so that I can sell fair-sized blocks of it I of course call the stock. I am making money; but so are my clients making money. This is as it should be. If my skill is what they are paying for they ought to get value. Of course, there are times when a pool may be wound up at a loss, but that is seldom, for I do not undertake the work unless I see my way clear to a profit. This year I was not so fortunate in one or two deals, and I did not make a profit. There are reasons, but that is another story, to be told later—perhaps.
If my professional work, my manipulation, drives the price up, there may be strong demand at the highest price. If I can sell fairly large blocks of stock at that price, I of course call the stock. I make money, but so do my clients. That is as it should be. If they are paying for my skill, they should get value for their money. Of course, a pool may sometimes be wound up at a loss. But that seldom happens, because I do not take on the work unless I see a clear way to make a profit. This year, I was not so fortunate in one or two deals, and I did not make a profit. There are reasons, but that is another story, to be told later, perhaps.
The first step in a bull movement in a stock is to advertise the fact that there is a bull movement on. Sounds silly, doesn’t it? Well, think a moment. It isn’t as silly as it sounded, is it? The most effective way to advertise what, in effect, are your honourable intentions is to make the stock active and strong. After all is said and done, the greatest publicity agent in the wide world is the ticker, and by far the best advertising medium is the tape. I do not need to put out any literature for my clients. I do not have to inform the daily press as to the value of the stock or to work the financial reviews for notices about the company’s prospects. Neither do I have to get a following. I accomplish all these highly desirable things by merely making the stock active. When there is activity there is a synchronous demand for explanations; and that means, of course, that the necessary reasons—for publication—supply themselves without the slightest aid from me.
The first step in a stock’s bull movement is to advertise that a bull movement is underway. Sounds silly, doesn’t it? Well, think for a moment. It doesn’t sound so silly now, does it? The most effective way to advertise what are, in effect, your honorable intentions is to make the stock active and strong. After all, the greatest publicity agent in the world is the ticker, and by far the best advertising medium is the tape. I don’t need to publish any literature for my clients. I don’t have to tell the daily press about the stock’s value. Nor do I have to get financial reviews to publish notices about the company’s prospects. I don’t even have to build a following. I achieve all these desirable things simply by making the stock active. When there is activity, people immediately demand explanations. That means the necessary reasons for publication appear on their own, without the slightest help from me.
Activity is all that the floor traders ask. They will buy or sell any stock at any level if only there is a free market for it. They will deal in thousands of shares wherever they see activity, and their aggregate capacity is considerable. It necessarily happens that they constitute the manipulator’s first crop of buyers. They will follow you all the way up and they thus are a great help at all the stages of the operation. I understand that James R. Keene used habitually to employ the most active of the room traders, both to conceal the source of the manipulation and also because he knew that they were by far the best business-spreaders and tip-distributors. He often gave calls to them—verbal calls—above the market, so that they might do some helpful work before they could cash in. He made them earn their profit. To get a professional following I myself have never had to do more than to make a stock active. Traders don’t ask for more. It is well, of course, to remember that these professionals on the floor of the Exchange buy stocks with the intention of selling them at a profit. They do not insist on its being a big profit; but it must be a quick profit.
Activity is all that floor traders ask for. They will buy or sell any stock at any price, as long as there is a free market for it. They will trade thousands of shares wherever they see activity, and together they can trade a considerable amount. Naturally, they are the manipulator’s first group of buyers. They will follow you all the way up, helping at every stage of the operation. I understand that James R. Keene regularly employed the most active floor traders. He did this both to conceal the source of the manipulation and because he knew they were the best at spreading business and distributing tips. He often gave them verbal calls above the market price, so they had to do some helpful work before they could cash in. He made them earn their profit. To attract a professional following, I have never had to do more than make a stock active. Traders don’t ask for more. Of course, it is worth remembering that these professionals on the Exchange floor buy stocks intending to sell them at a profit. They don’t insist on a big profit, but it must be quick.
I make the stock active in order to draw the attention of speculators to it, for the reasons I have given. I buy it and I sell it and the traders follow suit. The selling pressure is not apt to be strong where a man has as much speculatively held stock sewed up—in calls—as I insist on having. The buying, therefore, prevails over the selling, and the public follows the lead not so much of the manipulator as of the room traders. It comes in as a buyer. This highly desirable demand I fill—that is, I sell stock on balance. If the demand is what it ought to be it will absorb more than the amount of stock I was compelled to accumulate in the earlier stages of the manipulation; and when this happens I sell the stock short—that is, technically. In other words, I sell more stock than I actually hold. It is perfectly safe for me to do so since I am really selling against my calls. Of course, when the demand from the public slackens, the stock ceases to advance. Then I wait.
I make the stock active to draw speculators' attention to it, for the reasons I have given. I buy and sell the stock, and the traders do the same. Selling pressure is unlikely to be strong when I have tied up as much speculative stock in calls as I insist on having. So buying outweighs selling, and the public follows the lead of the floor traders more than the manipulator. The public starts buying. I meet this highly desirable demand by selling more stock than I buy. If demand is as strong as it should be, it will absorb more stock than I had to accumulate in the early stages of the manipulation. When that happens, I technically sell the stock short. In other words, I sell more stock than I actually own. It is perfectly safe for me to do this because I am really selling against my calls. Of course, when public demand slows, the stock stops rising. Then I wait.
Say, then, that the stock has ceased to advance. There comes a weak day. The entire market may develop a reactionary tendency or some sharp-eyed trader may perceive that there are no buying orders to speak of in my stock, and he sells it, and his fellows follow. Whatever the reason may be, my stock starts to go down. Well, I begin to buy it. I give it the support that a stock ought to have if it is in good odour with its own sponsors. And more: I am able to support it without accumulating it—that is, without increasing the amount I shall have to sell later on. Observe that I do this without decreasing my financial resources. Of course what I am really doing is covering stock I sold short at higher prices when the demand from the public or from the traders or from both enabled me to do it. It is always well to make it plain to the traders—and to the public, also—that there is a demand for the stock on the way down. That tends to check both reckless short selling by the professionals and liquidation by frightened holders—which is the selling you usually see when a stock gets weaker and weaker, which in turn is what a stock does when it is not supported. These covering purchases of mine constitute what I call the stabilising process.
Suppose, then, that the stock has stopped rising. A weak day comes along. The entire market may begin to decline. Or some sharp-eyed trader may notice that there are hardly any buy orders for my stock. He sells, and his fellow traders follow. Whatever the reason, my stock starts to fall. So I begin to buy it. I give the stock the support it ought to have if its own sponsors think well of it. And I can do more. I can support the stock without accumulating it. In other words, I don't increase the amount I will have to sell later. Notice that I do this without reducing my financial resources. Of course, what I am really doing is covering stock I sold short at higher prices. I sold it when demand from the public, traders, or both made that possible. It is always wise to show traders and the public that there is demand for the stock as it falls. That tends to discourage reckless short selling by professionals. It also discourages frightened holders from selling. Such selling usually occurs when a stock keeps getting weaker. And a stock keeps getting weaker when it is not supported. These purchases to cover my short sales make up what I call the stabilising process.
As the market broadens I of course sell stock on the way up, but never enough to check the rise. This is in strict accordance with my stabilising plans. It is obvious that the more stock I sell on a reasonable and orderly advance the more I encourage the conservative speculators, who are more numerous than the reckless room traders; and in addition the more support I shall be able to give to the stock on the inevitable weak days. By always being short I always am in a position to support the stock without danger to myself. As a rule I begin my selling at a price that will show me a profit. But I often sell without having a profit, simply to create or to increase what I may call my riskless buying power. My business is not alone to put up the price or to sell a big block of stock for a client but to make money for myself. That is why I do not ask my clients to finance my operations. My fee is contingent upon my success.
As the market broadens, I naturally sell stock as the price rises, but never enough to stop the rise. This is strictly in line with my plans to stabilize the stock. The more stock I sell during a reasonable, orderly rise, the more I encourage conservative speculators. They are more numerous than the reckless traders on the exchange floor. I can also give the stock more support on the inevitable weak days. By always being short, I can always support the stock without putting myself at risk. As a rule, I start selling at a price that gives me a profit. But I often sell without a profit, simply to create or increase what I might call my riskless buying power. My business is not just to raise the price or sell a large block of stock for a client. It is also to make money for myself. That is why I do not ask my clients to finance my operations. My fee depends on my success.
Of course what I have described is not my invariable practice. I neither have nor adhere to an inflexible system. I modify my terms and conditions according to circumstances.
Of course, I don't always follow the approach I've described. I don't have or stick to a rigid system. I change my terms and conditions depending on the circumstances.
A stock which it is desired to distribute should be manipulated to the highest possible point and then sold. I repeat this both because it is fundamental and because the public apparently believes that the selling is all done at the top. Sometimes a stock gets waterlogged, as it were; it doesn’t go up. That is the time to sell. The price naturally will go down on your selling rather further than you wish, but you can generally nurse it back. As long as a stock that I am manipulating goes up on my buying I know I am hunky, and if need be I buy it with confidence and use my own money without fear—precisely as I would any other stock that acts the same way. It is the line of least resistance. You remember my trading theories about that line, don’t you? Well, when the price line of least resistance is established I follow it, not because I am manipulating that particular stock at that particular moment but because I am a stock operator at all times.
A stock you want to distribute should be manipulated to the highest possible price and then sold. I repeat this because it is fundamental. I also repeat it because the public apparently believes that all the selling happens at the top. Sometimes a stock gets waterlogged, so to speak, and won’t go up. That is the time to sell. Naturally, your selling will drive the price down farther than you want, but you can usually nurse it back up. As long as a stock I’m manipulating goes up when I buy it, I know I’m in good shape. If necessary, I buy it with confidence and use my own money without fear. I would do exactly the same with any other stock that behaves that way. That is the line of least resistance. You remember my trading theories about that line, don’t you? Well, once the price’s line of least resistance is established, I follow it. I follow it not because I’m manipulating that particular stock at that particular moment, but because I’m always a stock operator.
When my buying does not put the stock up I stop buying and then proceed to sell it down; and that also is exactly what I would do with that same stock if I did not happen to be manipulating it. The principal marketing of the stock, as you know, is done on the way down. It is perfectly astonishing how much stock a man can get rid of on a decline.
When my buying does not put the stock up, I stop buying and then proceed to sell it down. That is also exactly what I would do with that same stock if I did not happen to be manipulating it. As you know, the bulk of the stock is marketed on the way down. It is perfectly astonishing how much stock a man can get rid of on a decline.
I repeat that at no time during the manipulation do I forget to be a stock trader. My problems as a manipulator, after all, are the same that confront me as an operator. All manipulation comes to an end when the manipulator cannot make a stock do what he wants it to do. When the stock you are manipulating doesn’t act as it should, quit. Don’t argue with the tape. Do not seek to lure the profit back. Quit while the quitting is good—and cheap.
I repeat, while manipulating a stock, I never forget that I am also a stock trader. After all, the problems I face as a manipulator are the same as those I face as a trader. All manipulation ends when the manipulator cannot make a stock do what he wants. When the stock you are manipulating doesn’t act as it should, quit. Don’t argue with the tape. Don’t try to lure the profit back. Quit while you still can, and before it costs too much.