Chapter 21

I am well aware that all these generalities do not sound especially impressive. Generalities seldom do. Possibly I may succeed better if I give a concrete example. I’ll tell you how I marked up the price of a stock 30 points, and in so doing accumulated only seven thousand shares and developed a market that would absorb almost any amount of stock.

I know all these general statements do not sound especially impressive. General statements rarely do. Perhaps I can do better with a specific example. I’ll tell you how I raised a stock’s price by 30 points. In doing so, I accumulated only seven thousand shares and created a market that would absorb almost any amount of stock.

It was Imperial Steel. The stock had been brought out by reputable people and it had been fairly well tipped as a property of value. About 30 per cent of the capital stock was placed with the general public through various Wall Street houses, but there had been no significant activity in the shares after they were listed. From time to time somebody would ask about it and one or another insider—members of the original underwriting syndicate—would say that the company’s earnings were better than expected and the prospects more than encouraging. This was true enough and very good as far as it went, but not exactly thrilling. The speculative appeal was absent, and from the investor’s point of view the price stability and dividend permanency of the stock were not yet demonstrated. It was a stock that never behaved sensationally. It was so gentlemanly that no corroborative rise ever followed the insiders’ eminently truthful reports. On the other hand, neither did the price decline.

It was Imperial Steel. Reputable people had brought the stock to market, and it had been recommended as a valuable investment. About 30 percent of the company’s stock was sold to the general public through various Wall Street firms. But after the shares were listed, there was no significant trading activity. From time to time, someone would ask about the stock. One insider or another, a member of the original underwriting syndicate, would say the company’s earnings were better than expected and its prospects more than encouraging. That was true enough and good as far as it went, but not exactly thrilling. The stock had no appeal to speculators. And for investors, it had yet to prove that its price was stable and its dividends would last. The stock never behaved sensationally. It was so gentlemanly that its price never rose to back up the insiders’ perfectly truthful reports. On the other hand, the price did not fall either.

Imperial Steel remained unhonoured and unsung and untipped, content to be one of those stocks that don’t go down because nobody sells and that nobody sells because nobody likes to go short of a stock that is not well distributed; the seller is too much at the mercy of the loaded-up inside clique. Similarly, there is no inducement to buy such a stock. To the investor Imperial Steel therefore remained a speculation. To the speculator it was a dead one—the kind that makes an investor of you against your will by the simple expedient of falling into a trance the moment you go long of it. The chap who is compelled to lug a corpse a year or two always loses more than the original cost of the deceased; he is sure to find himself tied up with it when some really good things come his way.

Imperial Steel remained unnoticed, unsung, and unmentioned in stock tips. It was one of those stocks that don't fall because nobody sells them. And nobody sells them because nobody likes to sell short a stock whose shares are concentrated in a few hands. A short seller is too much at the mercy of the insiders who hold large amounts of the stock. At the same time, there was no reason to buy such a stock. For an investor, Imperial Steel was therefore a gamble. For a speculator, it was dead. It was the kind of stock that turns you into an investor against your will. The moment you buy it, it falls into a trance. A fellow forced to carry a corpse for a year or two always loses more than the deceased originally cost him. He's sure to find his money tied up in the corpse when some really good opportunities come along.

One day the foremost member of the Imperial Steel syndicate, acting for himself and associates, came to see me. They wished to create a market for the stock, of which they controlled the undistributed 70 per cent. They wanted me to dispose of their holdings at better prices than they thought they would obtain if they tried to sell in the open market. They wanted to know on what terms I would undertake the job.

One day, the leading member of the Imperial Steel syndicate came to see me. He was acting for himself and his associates. They wanted to create a market for the stock. They controlled the 70 percent that had not yet been distributed. They wanted me to sell their holdings at better prices than they thought they could get in the open market. They asked what terms I would require to take the job.

I told him that I would let him know in a few days. Then I looked into the property. I had experts go over the various departments of the company—industrial, commercial and financial. They made reports to me which were unbiased. I wasn’t looking for the good or the bad points, but for the facts, such as they were.

I told him I would let him know in a few days. Then I investigated the property. I had experts examine the company’s industrial, commercial, and financial departments. They gave me unbiased reports. I wasn’t looking for the good points or the bad points, just the facts as they were.

The reports showed that it was a valuable property. The prospects justified purchases of the stock at the prevailing market price—if the investor were willing to wait a little. Under the circumstances an advance in the price would in reality be the commonest and most legitimate of all market movements—to wit, the process of discounting the future. There was therefore no reason that I could see why I should not conscientiously and confidently undertake the bull manipulation of Imperial Steel.

The reports showed that it was a valuable property. Its prospects justified buying the stock at the current market price, if the investor was willing to wait a little. Under the circumstances, a price increase would be the most common and legitimate kind of market movement. It would simply reflect the market taking future prospects into account. So I saw no reason why I could not, in good conscience and with confidence, undertake a bull manipulation of Imperial Steel.

I let my man know my mind and he called at my office to talk the deal over in detail. I told him what my terms were. For my services I asked no cash, but calls on one hundred thousand shares of the Imperial Steel stock. The price of the calls ran up from 70 to 100. That may seem like a big fee to some. But they should consider that the insiders were certain they themselves could not sell one hundred thousand shares, or even fifty thousand shares, at 70. There was no market for the stock. All the talk about wonderful earnings and excellent prospects had not brought in buyers, not to any great extent. In addition, I could not get my fee in cash without my clients first making some millions of dollars. What I stood to make was not an exorbitant selling commission. It was a fair contingent fee.

I told my man what I had in mind, and he came to my office to discuss the deal in detail. I told him my terms. For my services, I asked for no cash. Instead, I wanted calls on one hundred thousand shares of Imperial Steel stock. The exercise prices of the calls ranged from 70 to 100. That may seem like a large fee to some. But they should consider that the insiders were certain they could not sell one hundred thousand shares at 70. They could not even sell fifty thousand at that price. There was no market for the stock. All the talk about wonderful earnings and excellent prospects had not brought in buyers to any great extent. Besides, I could not turn my fee into cash unless my clients first made millions of dollars. What I stood to make was not an excessive sales commission. It was a fair contingent fee.

Knowing that the stock had real value and that general market conditions were bullish and therefore favourable for an advance in all good stocks, I figured that I ought to do pretty well. My clients were encouraged by the opinions I expressed, agreed to my terms at once, and the deal began with pleasant feelings all around.

I knew the stock had real value and that the overall market was bullish. That meant conditions were favorable for all good stocks to rise, so I figured I should do pretty well. My clients were encouraged by what I said and agreed to my terms right away. The deal got off to a pleasant start for everyone.

I proceeded to protect myself as thoroughly as I could. The syndicate owned or controlled about 70 per cent of the outstanding stock. I had them deposit their 70 per cent under a trust agreement. I didn’t propose to be used as a dumping ground for the big holders. With the majority holdings thus securely tied up, I still had 30 per cent of scattered holdings to consider, but that was a risk I had to take. Experienced speculators do not expect ever to engage in utterly riskless ventures. As a matter of fact, it was not much more likely that all the untrusteed stock would be thrown on the market at one fell swoop than that all the policyholders of a life-insurance company would die at the same hour, the same day. There are unprinted actuarial tables of stock-market risks as well as of human mortality.

I set out to protect myself as thoroughly as I could. The syndicate owned or controlled about 70 percent of the outstanding stock. I had them deposit their 70 percent under a trust agreement. I had no intention of letting the big holders dump their stock on me. With the majority holdings securely tied up, I still had to consider the 30 percent held by scattered shareholders. But that was a risk I had to take. Experienced speculators don’t expect to take part in ventures with no risk at all. In fact, it was only slightly more likely that all the stock outside the trust would be dumped on the market at once than that all the policyholders of a life insurance company would die at the same hour on the same day. There are unpublished actuarial tables for stock market risks, just as there are for human mortality.

Having protected myself from some of the avoidable dangers of a stock-market deal of that sort, I was ready to begin my campaign. Its objective was to make my calls valuable. To do this I must put up the price and develop a market in which I could sell one hundred thousand shares—the stock in which I held options.

After protecting myself from some of the avoidable risks of that kind of stock-market deal, I was ready to begin my campaign. My goal was to make my call options valuable. To do that, I had to raise the stock price and create a market where I could sell 100,000 shares. Those were the shares I held options on.

The first thing I did was to find out how much stock was likely to come on the market on an advance. This was easily done through my brokers, who had no trouble in ascertaining what stock was for sale at or a little above the market. I don’t know whether the specialists told them what orders they had on their books or not. The price was nominally 70, but I could not have sold one thousand shares at that price. I had no evidence of even a moderate demand at that figure or even a few points lower. I had to go by what my brokers found out. But it was enough to show me how much stock there was for sale and how little was wanted.

The first thing I did was find out how much stock was likely to go on sale if the price rose. My brokers easily found out how much stock was for sale at or slightly above the market price. I don’t know whether the specialists told them what orders they had on their books. The stated price was 70, but I couldn’t have sold one thousand shares at that price. I had no evidence of even moderate demand at 70, or even a few points lower. I had to rely on what my brokers found out. But that was enough to show me how much stock was for sale and how little buyers wanted.

As soon as I had a line on these points I quietly took all the stock that was for sale at 70 and higher. When I say “I” you will understand that I mean my brokers. The sales were for account of some of the minority holders because my clients naturally had cancelled whatever selling orders they might have given out before they tied up their stock.

As soon as I understood these points, I quietly bought all the stock offered at 70 or higher. When I say “I,” I mean my brokers. Some of the minority holders were selling the stock. My clients, of course, had canceled any sell orders they might have placed before tying up their stock.

I didn’t have to buy very much stock. Moreover, I knew that the right kind of advance would bring in other buying orders—and, of course, selling orders also.

I didn’t have to buy much stock. I also knew that the right kind of price rise would bring in more buy orders and, of course, sell orders too.

I didn’t give bull tips on Imperial Steel to anybody. I didn’t have to. My job was to seek directly to influence sentiment by the best possible kind of publicity. I do not say that there should never be bull propaganda. It is as legitimate and indeed as desirable to advertise the value of a new stock as to advertise the value of woolens or shoes or automobiles. Accurate and reliable information should be given by the public. But what I meant was that the tape did all that was needed for my purpose. As I said before, the reputable newspapers always try to print explanations for market movements. It is news. Their readers demand to know not only what happens in the stock market but why it happens. Therefore without the manipulator lifting a finger the financial writers will print all the available information and gossip, and also analyse the reports of earnings, trade condition and outlook; in short, whatever may throw light on the advance. Whenever a newspaperman or an acquaintance asks my opinion of a stock and I have one I do not hesitate to express it. I do not volunteer advice and I never give tips, but I have nothing to gain in my operations from secrecy. At the same time I realise that the best of all tipsters, the most persuasive of all salesmen, is the tape.

I didn’t give anyone bullish tips on Imperial Steel. I didn’t have to. My job was to influence sentiment directly through the best possible publicity. I’m not saying bullish propaganda is never appropriate. Advertising the value of a new stock is just as legitimate and desirable as advertising the value of woolens, shoes, or automobiles. The public should provide accurate and reliable information. But for my purposes, the stock ticker did everything needed. As I said before, reputable newspapers always try to explain market movements. That’s news. Their readers want to know not just what happens in the stock market, but why. So financial writers print all the available information and gossip without the market manipulator lifting a finger. They also analyze earnings reports, trade conditions, and the outlook. In short, they cover whatever may explain the rise in price. Whenever a reporter or acquaintance asks my opinion of a stock, I don’t hesitate to share it if I have one. I don’t offer unsolicited advice, and I never give tips. But secrecy gives me no advantage in my operations. At the same time, I know that the stock ticker is the best tipster and the most persuasive salesman of all.

When I had absorbed all the stock that was for sale at 70 and a little higher I relieved the market of that pressure, and naturally that made clear for trading purposes the line of least resistance in Imperial Steel. It was manifestly upward. The moment that fact was perceived by the observant traders on the floor they logically assumed that the stock was in for an advance the extent of which they could not know; but they knew enough to begin buying. Their demand for Imperial Steel, created exclusively by the obviousness of the stock’s rising tendency—the tape’s infallible bull tip!—I promptly filled. I sold to the traders the stock that I had bought from the tired-out holders at the beginning. Of course this selling was judiciously done; I contented myself with supplying the demand. I was not forcing my stock on the market and I did not want too rapid an advance. It wouldn’t have been good business to sell out the half of my one hundred thousand shares at that stage of the proceedings. My job was to make a market on which I might sell my entire line.

Once I had bought all the stock offered at 70 and a little higher, I had removed that selling pressure from the market. Naturally, this made the easiest direction for Imperial Steel to move clear to traders. It was plainly upward. As soon as the observant traders on the floor saw this, they logically assumed the stock was going to rise. They could not know how far, but they knew enough to start buying. Their demand for Imperial Steel came entirely from its obvious tendency to rise. It was the ticker tape’s infallible tip that the stock would go up! I promptly filled their orders, selling them the stock I had bought from the worn-out holders at the start. Of course, I sold carefully. I was content to supply the demand. I wasn’t forcing my stock onto the market, and I didn’t want the price to rise too quickly. It would not have been good business to sell half of my one hundred thousand shares at that stage. My job was to create a market where I could sell my entire holding.

But even though I sold only as much as the traders were anxious to buy, the market was temporarily deprived of my own buying power, which I had hitherto exerted steadily. In due course the traders’ purchases ceased and the price stopped rising. As soon as that happened there began the selling by disappointed bulls or by those traders whose reasons for buying disappeared the instant the rising tendency was checked. But I was ready for this selling, and on the way down I bought back the stock I had sold to the traders a couple of points higher. This buying of stock I knew was bound to be sold in turn checked the downward course; and when the price stopped going down the selling orders stopped coming in.

But even though I sold only as much as the traders were eager to buy, the market temporarily lost my buying power. Until then, I had been buying steadily. Eventually, the traders stopped buying, and the price stopped rising. As soon as the price stopped rising, disappointed bulls began to sell. So did traders whose reasons for buying vanished the moment the price stopped rising. But I was ready for this selling. As the price fell, I bought back the stock I had sold to the traders a couple of points higher. I knew this stock was bound to be sold, and my buying slowed the decline. When the price stopped falling, the selling orders stopped coming in.

I then began all over again. I took all the stock that was for sale on the way up—it wasn’t very much—and the price began to rise a second time; from a higher starting point than 70. Don’t forget that on the way down there are many holders who wish to heaven they had sold theirs but won’t do it three or four points from the top. Such speculators always vow they will surely sell out if there is a rally. They put in their orders to sell on the way up, and then they change their minds with the change in the stock’s price-trend. Of course there is always profit taking from safe-playing quick runners to whom a profit is always a profit to be taken.

Then I started all over again. I bought all the stock offered for sale as the price rose. There wasn’t much. The price began to rise a second time, starting from a higher point than 70. Don’t forget that when the price falls, many holders wish to heaven they had sold their stock. But they won’t sell it when the price is only three or four points below its peak. Such speculators always vow they’ll sell if the price rallies. They place orders to sell as the price rises. Then they change their minds when the stock’s price trend changes. Of course, there is always some profit taking by cautious traders who move quickly. For them, a profit is always a profit worth taking.

All I had to do after that was to repeat the process; alternately buying and selling; but always working higher.

After that, all I had to do was repeat the process, buying and selling in turn, but always working higher.

Sometimes, after you have taken all the stock that is for sale, it pays to rush up the price sharply, to have what might be called little bull flurries in the stock you are manipulating. It is excellent advertising, because it makes talk and also brings in both the professional traders and that portion of the speculating public that likes action. It is, I think, a large portion. I did that in Imperial Steel, and whatever demand was created by those spurts I supplied. My selling always kept the upward movement within bounds both as to extent and as to speed. In buying on the way down and selling on the way up I was doing more than marking up the price: I was developing the marketability of Imperial Steel.

Sometimes, after you have bought all the stock for sale, it pays to push the price up sharply. You create what might be called little bull flurries in the stock you are manipulating. These flurries are excellent advertising. They get people talking and bring in professional traders and the part of the speculating public that likes action. I think that is a large part of the public. I did this with Imperial Steel, and I supplied whatever demand those spurts created. My selling always kept the price from rising too far or too fast. By buying as the price fell and selling as it rose, I was doing more than raising the price. I was making Imperial Steel easier to trade.

After I began my operations in it there never was a time when a man could not buy or sell the stock freely; I mean by this, buy or sell a reasonable amount without causing over-violent fluctuations in the price. The fear of being left high and dry if he bought, or squeezed to death if he sold, was gone. The gradual spread among the professionals and the public of a belief in the permanence of the market for Imperial Steel had much to do with creating confidence in the movement; and, of course, the activity also put an end to a lot of other objections. The result was that after buying and selling a good many thousands of shares I succeeded in making the stocks sell at par. At one hundred dollars a share everybody wanted to buy Imperial Steel. Why not? Everybody now knew that it was a good stock; that it had been and still was a bargain. The proof was the rise. A stock that could go thirty points from 70 could go up thirty more from par. That is the way a good many argued.

After I began trading Imperial Steel, anyone could always buy or sell the stock freely. I mean they could trade a reasonable number of shares without causing extreme price swings. Buyers no longer feared being left stranded, and sellers no longer feared being squeezed to death. Professionals and the public gradually came to believe that there would always be a market for Imperial Steel. That belief did much to build confidence in the stock’s movement. Of course, the trading activity also put an end to many other objections. After buying and selling many thousands of shares, I succeeded in getting the stock up to par. At $100 a share, everybody wanted to buy Imperial Steel. Why not? Everybody now knew it was a good stock. It had been a bargain and still was. The rise in price was proof. A stock that could rise thirty points from 70 could rise another thirty from par. That was how many people reasoned.

In the course of marking up the price those thirty points I accumulated only seven thousand shares. The price on this line averaged me almost exactly 85. That meant a profit of fifteen points on it; but, of course, my entire profit, still on paper, was much more. It was a safe enough profit, for I had a market for all I wanted to sell. The stock would sell higher on judicious manipulation and I had graduated calls on one hundred thousand shares beginning at 70 and ending at 100.

As I pushed the price up those thirty points, I accumulated only seven thousand shares. I paid an average of almost exactly 85 for those shares. That meant a profit of fifteen points on them. But, of course, my total profit, still on paper, was much larger. It was a safe enough profit, because I had a market for all I wanted to sell. The stock would sell higher with careful manipulation, and I had graduated calls on one hundred thousand shares, starting at 70 and ending at 100.

Circumstances prevented me from carrying out certain plans of mine for converting my paper profits into good hard cash. It had been, if I do say so myself, a beautiful piece of manipulation, strictly legitimate and deservedly successful. The property of the company was valuable and the stock was not dear at the higher price. One of the members of the original syndicate developed a desire to secure the control of the property—a prominent banking house with ample resources. The control of a prosperous and growing concern like the Imperial Steel Corporation is possibly more valuable to a banking firm than to individual investors. At all events, this firm made me an offer for all my options on the stock. It meant an enormous profit for me, and I instantly took it. I am always willing to sell out when I can do so in a lump at a good profit. I was quite content with what I made out of it.

Circumstances kept me from carrying out certain plans to turn my paper profits into hard cash. If I do say so myself, it had been a beautiful piece of manipulation. It was completely legitimate and deservedly successful. The company’s assets were valuable, and the stock was not expensive even at the higher price. One member of the original syndicate, a prominent banking house with ample resources, wanted to gain control of the company. Control of a prosperous, growing company like the Imperial Steel Corporation is possibly more valuable to a banking firm than to individual investors. In any case, the firm offered to buy all my options on the stock. The offer meant an enormous profit for me, and I accepted it immediately. I am always willing to sell everything at once when I can make a good profit. I was quite satisfied with what I made from the deal.

Before I disposed of my calls on the hundred thousand shares I learned that these bankers had employed more experts to make a still more thorough examination of the property. Their reports showed enough to bring me in the offer I got. I kept several thousand shares of the stock for investment. I believe in it.

Before I sold my call options on the 100,000 shares, I learned that the bankers had hired more experts. They were to examine the property even more thoroughly. Their reports revealed enough to bring me the offer I received. I kept several thousand shares as an investment. I believe in the stock.

There wasn’t anything about my manipulation of Imperial Steel that wasn’t normal and sound. As long as the price went up on my buying I knew I was O.K. The stock never got waterlogged, as a stock sometimes does. When you find that it fails to respond adequately to your buying you don’t need any better tip to sell. You know that if there is any value to a stock and general market conditions are right you can always nurse it back after a decline, no matter if it’s twenty points. But I never had to do anything like that in Imperial Steel.

There was nothing unusual or unsound about how I manipulated Imperial Steel. As long as the price rose when I bought shares, I knew I was doing fine. The stock never became waterlogged, as stocks sometimes do. When a stock doesn't respond enough to your buying, you don't need a better signal to sell. If a stock has value and overall market conditions are right, you can always nurse it back after a decline, even a twenty-point drop. But I never had to do anything like that with Imperial Steel.

In my manipulation of stocks I never lose sight of basic trading principles. Perhaps you wonder why I repeat this or why I keep on harping on the fact that I never argue with the tape or lose my temper at the market because of its behaviour. You would think—wouldn’t you?—that shrewd men who have made millions in their own business and in addition have successfully operated in Wall Street at times would realise the wisdom of playing the game dispassionately. Well, you would be surprised at the frequency with which some of our most successful promoters behave like peevish women because the market does not act the way they wish it to act. They seem to take it as a personal slight, and they proceed to lose money by first losing their temper.

When I manipulate stocks, I never lose sight of basic trading principles. Perhaps you wonder why I repeat this point. Why do I keep saying that I never argue with the tape or get angry at the market for how it behaves? You would think that shrewd men who have made millions in their own businesses would see the wisdom of trading without emotion. Especially when they have also traded successfully on Wall Street at times. Wouldn't you? Well, you would be surprised how often some of our most successful promoters behave like peevish women. They do this because the market does not act the way they want it to. They seem to take the market's behavior as a personal slight. They lose their temper first, and then they lose money.

There has been much gossip about a disagreement between John Prentiss and myself. People have been led to expect a dramatic narrative of a stock-market deal that went wrong or some double-crossing that cost me—or him—millions; or something of that sort. Well, it wasn’t.

There has been a lot of gossip about a disagreement between John Prentiss and me. People have been led to expect a dramatic story about a stock-market deal gone wrong. Or perhaps some double-crossing that cost me or him millions, or something like that. Well, it was nothing of the sort.

Prentiss and I had been friendly for years. He had given me at various times information that I was able to utilise profitably, and I had given him advice which he may or may not have followed. If he did he saved money.

Prentiss and I had been friends for years. From time to time, he had given me information I used to make money. I had given him advice, though he may or may not have followed it. If he did, he saved money.

He was largely instrumental in the organisation and promotion of the Petroleum Products Company. After a more or less successful market début general conditions changed for the worse and the new stock did not fare as well as Prentiss and his associates had hoped. When basic conditions took a turn for the better Prentiss formed a pool and began operations in Pete Products.

He played a major role in organizing and promoting the Petroleum Products Company. The stock had a more or less successful market debut, but then general conditions worsened. The new stock did not do as well as Prentiss and his associates had hoped. When underlying conditions improved, Prentiss formed a pool and began trading in Pete Products.

I cannot tell you anything about his technique. He didn’t tell me how he worked and I didn’t ask him. But it was plain that notwithstanding his Wall Street experience and his undoubted cleverness, whatever it was he did proved of little value and it didn’t take the pool long to find out that they couldn’t get rid of much stock. He must have tried everything he knew, because a pool manager does not ask to be superseded by an outsider unless he feels unequal to the task, and that is the last thing the average man likes to admit. At all events he came to me and after some friendly preliminaries he said he wanted me to take charge of the market for Pete Products and dispose of the pool’s holdings, which amounted to a little over one hundred thousand shares. The stock was selling at 102 to 103.

I can’t tell you anything about his methods. He didn’t tell me how he worked, and I didn’t ask him. But despite his Wall Street experience and obvious cleverness, whatever he did proved to be of little value. The pool soon found that it couldn’t sell much stock. He must have tried everything he knew. A pool manager doesn’t ask an outsider to replace him unless he feels he can’t handle the job. And that’s the last thing the average man likes to admit. In any case, he came to me, and after some friendly conversation, he said he wanted me to take charge of the market for Pete Products. He wanted me to sell the pool’s holdings, which came to a little over one hundred thousand shares. The stock was selling at 102 to 103.

The thing looked dubious to me and I declined his proposition with thanks. But he insisted that I accept. He put it on personal grounds, so that in the end I consented. I constitutionally dislike to identify myself with enterprises in the success of which I cannot feel confidence, but I also think a man owes something to his friends and acquaintances. I said I would do my best, but I told him I did not feel very cocky about it and I enumerated the adverse factors that I would have to contend with. But all Prentiss said to that was that he wasn’t asking me to guarantee millions in profits to the pool. He was sure that if I took hold I’d make out well enough to satisfy any reasonable being.

The venture looked risky to me, and I thanked him but declined his offer. But he insisted that I accept. He made it a personal matter, so I finally agreed. By nature, I dislike associating myself with ventures I cannot feel confident will succeed. But I also think a man owes something to his friends and acquaintances. I said I would do my best, but I told him I didn’t feel very confident. I listed the obstacles I would have to deal with. But all Prentiss said was that he wasn’t asking me to guarantee millions in profits for the pool. He was sure that if I took it on, I’d do well enough to satisfy any reasonable person.

Well, there I was, engaged in doing something against my own judgment. I found, as I feared, a pretty tough state of affairs, due in great measure to Prentiss’ own mistakes while he was manipulating the stock for account of the pool. But the chief factor against me was time. I was convinced that we were rapidly approaching the end of a bull swing and therefore that the improvement in the market, which had so encouraged Prentiss, would prove to be merely a short-lived rally. I feared that the market would turn definitely bearish before I could accomplish much with Pete Products. However, I had given my promise and I decided to work as hard as I knew how.

Well, there I was, doing something against my own judgment. As I had feared, I found a pretty tough situation. Much of it was due to Prentiss’ own mistakes while he was manipulating the stock for the pool. But my biggest problem was time. I was convinced that the bull market was rapidly nearing its end. So I believed the market’s improvement, which had so encouraged Prentiss, would prove to be only a short-lived rally. I feared the market would turn definitely bearish before I could accomplish much with Pete Products. But I had given my promise, and I decided to work as hard as I knew how.

I started to put up the price. I had moderate success. I think I ran it up to 107 or thereabouts, which was pretty fair, and I was even able to sell a little stock on balance. It wasn’t much, but I was glad not to have increased the pool’s holdings. There were a lot of people not in the pool who were just waiting for a small rise to dump their stock, and I was a godsend to them. Had general conditions been better I also would have done better. It was too bad that I wasn’t called in earlier. All I could do now, I felt, was to get out with as little loss as possible to the pool.

I started pushing the price up, with moderate success. I think I got it up to around 107, which was pretty good. I even managed to sell a little more stock than I bought. It wasn’t much, but I was glad I hadn’t increased the pool’s holdings. Many people outside the pool were just waiting for a small rise so they could dump their stock. I was a godsend to them. If general conditions had been better, I would have done better too. It was a shame I hadn’t been called in earlier. Now, I felt all I could do was get out with as little loss to the pool as possible.

I sent for Prentiss and told him my views. But he started to object. I then explained to him why I took the position I did. I said: “Prentiss, I can feel very plainly the pulse of the market. There is no follow-up in your stock. It is no trick to see just what the public’s reaction is to my manipulation. Listen: When Pete Products is made as attractive to traders as possible and you give it all the support needed at all times and notwithstanding all that you find that the public leaves it alone you may be sure that there is something wrong, not with the stock but with the market. There is absolutely no use in trying to force matters. You are bound to lose if you do. A pool manager should be willing to buy his own stock when he has company. But when he is the only buyer in the market he’d be an ass to buy it. For every five thousand shares I buy the public ought to be willing or able to buy five thousand more. But I certainly am not going to do all the buying. If I did, all I would succeed in doing would be to get soaked with a lot of long stock that I don’t want. There is only one thing to do, and that is to sell. And the only way to sell is to sell.”

I sent for Prentiss and told him what I thought. But he began to object, so I explained why I had taken that position. I said: “Prentiss, I can feel the pulse of the market very clearly. Nobody is following my lead in buying your stock. It’s easy to see how the public is reacting to my manipulation. “Listen: Suppose Pete Products is made as attractive to traders as possible. You give it all the support it needs at all times. Even so, the public leaves it alone. Then you can be sure that something is wrong, not with the stock, but with the market. There’s absolutely no use trying to force things. If you do, you’re bound to lose. “A pool manager should be willing to buy his own stock when others are buying too. But if he’s the only buyer in the market, he’d be a fool to buy it. For every five thousand shares I buy, the public should be willing or able to buy another five thousand. But I certainly won’t do all the buying. If I did, I’d only end up stuck with a lot of long stock I don’t want. There’s only one thing to do, and that’s to sell. And the only way to sell is to sell.”

“You mean, sell for what you can get?” asked Prentiss.

“You mean, sell for whatever you can get?” asked Prentiss.

“Right!” I said. I could see he was getting ready to object. “If I am to sell the pool’s stock at all you can make up your mind that the price is going to break through par and——”

“Right!” I said. I could see he was about to object. “If I’m going to sell the pool’s stock at all, you can be sure the price will break through par and...”

“Oh, no! Never!” he yelled. You’d have imagined I was asking him to join a suicide club.

“Oh, no! Never!” he yelled. You’d have thought I was asking him to join a suicide club.

“Prentiss,” I said to him, “it is a cardinal principle of stock manipulation to put up a stock in order to sell it. But you don’t sell in bulk on the advance. You can’t. The big selling is done on the way down from the top. I cannot put up your stock to 125 or 130. I’d like to, but it can’t be done. So you will have to begin your selling from this level. In my opinion all stocks are going down, and Petroleum Products isn’t going to be the one exception. It is better for it to go down now on the pool’s selling than for it to break next month on selling by some one else. It will go down anyhow.”

“Prentiss,” I said to him, “a basic principle of stock manipulation is to raise a stock’s price so you can sell it. But you can’t sell large amounts while the price is rising. The biggest sales happen as the price falls from its peak. I can’t raise your stock to 125 or 130. I’d like to, but it can’t be done. So you’ll have to start selling at this price. In my opinion, all stocks are going down, and Petroleum Products won’t be the one exception. It’s better for the stock to fall now because the pool is selling than to plunge next month because someone else is selling. It will go down anyway.”

I can’t see that I said anything harrowing, but you could have heard his howls in China. He simply wouldn’t listen to such a thing. It would never do. It would play the dickens with the stock’s record, to say nothing of inconvenient possibilities at the banks where the stock was held as collateral on loans, and so on.

I don’t think I said anything shocking, but you could have heard his howls in China. He simply wouldn’t hear of such a thing. It would never do. It would ruin the stock’s record, not to mention the potential problems at banks holding the stock as collateral for loans, and so on.

I told him again that in my judgment nothing in the world could prevent Pete Products from breaking fifteen or twenty points, because the entire market was headed that way, and I once more said it was absurd to expect his stock to be a dazzling exception. But again my talk went for nothing. He insisted that I support the stock.

I told him again that, in my judgment, nothing in the world could prevent Pete Products from falling fifteen or twenty points. The entire market was headed down, and I said again that it was absurd to expect his stock to be a dazzling exception. But once again, my words had no effect. He insisted that I support the stock.

Here was a shrewd business man, one of the most successful promoters of the day, who had made millions in Wall Street deals and knew much more than the average man about the game of speculation, actually insisting on supporting a stock in an incipient bear market. It was his stock, to be sure, but it was nevertheless bad business. So much so that it went against the grain and I again began to argue with him. But it was no use. He insisted on putting in supporting orders.

Here was a shrewd businessman and one of the most successful promoters of his day. He had made millions in Wall Street deals and knew much more than the average person about speculation. Yet he was insisting on supporting a stock as a bear market was just beginning. It was his stock, of course, but supporting it was still bad business. It bothered me so much that I started arguing with him again. But it was no use. He insisted on placing orders to support the stock.

Of course when the general market got weak and the decline began in earnest Pete Products went with the rest. Instead of selling I actually bought stock for the insiders’ pool—by Prentiss’ orders.

Of course, when the overall market weakened and the decline began in earnest, Pete Products fell with the rest. Instead of selling, I actually bought stock for the insiders’ pool, on Prentiss’ orders.

The only explanation is that Prentiss did not believe the bear market was right on top of us. I myself was confident that the bull market was over. I had verified my first surmise by tests not alone in Pete Products but in other stocks as well. I didn’t wait for the bear market to announce its safe arrival before I started selling. Of course I didn’t sell a share of Pete Products, though I was short of other stocks.

The only explanation is that Prentiss did not believe the bear market was right on top of us. I myself was confident that the bull market was over. I had confirmed my first hunch by tests, not only in Pete Products but in other stocks as well. I didn’t wait for the bear market to announce its safe arrival before I started selling. Of course I didn’t sell a share of Pete Products, though I was short of other stocks.

The Pete Products pool, as I expected, was hung up with all they held to begin with and with all they had to take in their futile effort to hold up the price. In the end they did liquidate; but at much lower figures than they would have got if Prentiss had let me sell when and as I wished. It could not be otherwise. But Prentiss still thinks he was right—or says he does. I understand he says the reason I gave him the advice I did was that I was short of other stocks and the general market was going up. It implies, of course, that the break in Pete Products that would have resulted from selling out the pool’s holdings at any price would have helped my bear position in other stocks.

As I expected, the Pete Products pool was stuck with all the stock it held at the start. It was also stuck with all the stock it had to buy in its futile effort to support the price. In the end, the pool did sell off its holdings, but at much lower prices. It would have received more if Prentiss had let me sell when and how I wanted. It could not have turned out otherwise. But Prentiss still thinks he was right, or says he does. I understand he says I gave him that advice because I was short of other stocks and the general market was rising. Of course, he is implying that selling all the pool’s holdings at any price would have driven Pete Products down. He implies that this drop would have helped my short position in other stocks.

That is all tommyrot. I was not bearish because I was short of stocks. I was bearish because that was the way I sized up the situation, and I sold stocks short only after I turned bearish. There never is much money in doing things wrong end to; not in the stock market. My plan for selling the pool’s stock was based on what the experience of twenty years told me alone was feasible and therefore wise. Prentiss ought to have been enough of a trader to see it as plainly as I did. It was too late to try to do anything else.

That is all nonsense. I wasn’t bearish because I had sold stocks short. I was bearish because of how I judged the situation. I sold stocks short only after I turned bearish. There is never much money in doing things backward, not in the stock market. My plan for selling the pool’s stock was based on what twenty years of experience told me was the only workable approach. That made it the wise approach. Prentiss should have been enough of a trader to see that as clearly as I did. It was too late to try anything else.

I suppose Prentiss shares the delusion of thousands of outsiders who think a manipulator can do anything. He can’t. The biggest thing Keene did was his manipulation of U.S. Steel common and preferred in the spring of 1901. He succeeded not because he was clever and resourceful and not because he had a syndicate of the richest men in the country back of him. He succeeded partly because of those reasons but chiefly because the general market was right and the public’s state of mind was right.

I suppose Prentiss shares the mistaken belief of thousands of outsiders who think a market manipulator can do anything. He can’t. Keene’s biggest achievement was manipulating U.S. Steel common and preferred shares in the spring of 1901. He did not succeed simply because he was clever and resourceful, or because a syndicate of the country’s richest men backed him. Those things helped, but he succeeded chiefly because the overall market and the public’s mood were right.

It isn’t good business for a man to act against the teachings of experience and against common sense. But the suckers in Wall Street are not all outsiders. Prentiss’ grievance against me is what I have just told you. He feels sore because I did my manipulation not as I wanted to but as he asked me to.

It’s bad business to ignore experience and common sense. But not all the suckers on Wall Street are outsiders. I’ve just told you what Prentiss has against me. He’s angry because I handled the manipulation as he asked, not as I wanted to.

There isn’t anything mysterious or underhanded or crooked about manipulation designed to sell a stock in bulk provided such operations are not accompanied by deliberate misrepresentations. Sound manipulation must be based on sound trading principles. People lay great stress on old-time practices, such as wash sales. But I can assure you that the mere mechanics of deception count for very little. The difference between stock-market manipulation and the over-the-counter sale of stocks and bonds is in the character of the clientele rather than in the character of the appeal. J. P. Morgan & Co. sell an issue of bonds to the public—that is, to investors. A manipulator disposes of a block of stock to the public—that is, to speculators. An investor looks for safety, for permanence of the interest return on the capital he invests. The speculator looks for a quick profit.

There is nothing mysterious, underhanded, or dishonest about manipulating a stock to sell it in bulk, provided the operation does not involve deliberate lies. Sound manipulation must be based on sound trading principles. People put great emphasis on old practices, such as wash sales. But I can assure you that the mechanics of deception alone count for very little. The difference between stock market manipulation and over-the-counter sales of stocks and bonds lies in the customers, not the appeal. J. P. Morgan & Co. sells a bond issue to the public, meaning investors. A manipulator sells a block of stock to the public, meaning speculators. An investor looks for safety and a steady return of interest on the capital invested. A speculator looks for a quick profit.

The manipulator necessarily finds his primary market among speculators—who are willing to run a greater than normal business risk so long as they have a reasonable chance to get a big return on their capital. I myself never have believed in blind gambling. I may plunge or I may buy one hundred shares. But in either case I must have a reason for what I do.

A market manipulator’s main customers are necessarily speculators. They are willing to take greater than normal business risks as long as they have a reasonable chance of making a large return on their capital. I have never believed in gambling blindly. I may make a huge bet, or I may buy one hundred shares. But either way, I must have a reason for what I do.

I distinctly remember how I got into the game of manipulation—that is, in the marketing of stocks for others. It gives me pleasure to recall it because it shows so beautifully the professional Wall Street attitude toward stock-market operations. It happened after I had “come back”—that is, after my Bethlehem Steel trade in 1915 started me on the road to financial recovery.

I clearly remember how I got into stock manipulation, or marketing stocks for others. I enjoy recalling it because it shows so beautifully how Wall Street professionals viewed stock market operations. It happened after I had “come back.” My Bethlehem Steel trade in 1915 had started me on the road to financial recovery.

I traded pretty steadily and had very good luck. I have never sought newspaper publicity, but neither have I gone out of my way to hide myself. At the same time, you know that professional Wall Street exaggerates both the successes and the failures of whichever operator happens to be active; and, of course, the newspapers hear about him and print rumors. I have been broke so many times, according to the gossips, or have made so many millions, according to the same authorities, that my only reaction to such reports is to wonder how and where they are born. And how they grow! I have had broker friend after broker friend bring the same story to me, a little changed each time, improved, more circumstantial.

I traded pretty steadily and had very good luck. I have never sought newspaper publicity, but I haven't gone out of my way to hide, either. At the same time, you know how Wall Street professionals exaggerate the successes and failures of any trader who's active. Of course, newspapers hear about the trader and print rumors. According to the gossips, I've been broke so many times and made so many millions. So my only reaction to such reports is to wonder how and where they start. And how they grow! Broker friend after broker friend has brought me the same story, a little different each time, improved and more detailed.

All this preface is to tell you how I first came to undertake the manipulation of a stock for someone else. The stories the newspapers printed of how I had paid back in full the millions I owed did the trick. My plungings and my winnings were so magnified by the newspapers that I was talked about in Wall Street. The day was past when an operator swinging a line of two hundred thousand shares of stock could dominate the market. But, as you know, the public always desires to find successors to the old leaders. It was Mr. Keene’s reputation as a skillful stock operator, a winner of millions on his own hook, that made promoters and banking houses apply to him for selling large blocks of securities. In short, his services as manipulator were in demand because of the stories the Street had heard about his previous successes as a trader.

All this background explains how I first came to manipulate a stock for someone else. The newspaper stories about how I had fully repaid the millions I owed were what did it. The newspapers exaggerated my big bets and winnings so much that people talked about me on Wall Street. The days when a trader with a position of two hundred thousand shares could dominate the market were over. But, as you know, the public always wants to find successors to the old leaders. Mr. Keene had a reputation as a skillful stock trader who had made millions on his own. That reputation led promoters and banking houses to ask him to sell large blocks of securities. In short, his services as a market manipulator were in demand because Wall Street had heard stories about his earlier successes as a trader.

But Keene was gone—passed on to that heaven where he once said he wouldn’t stay a moment unless he found Sysonby there waiting for him. Two or three other men who made stock-market history for a few months had relapsed into the obscurity of prolonged inactivity. I refer particularly to certain of those plunging Westerners who came to Wall Street in 1901 and after making many millions out of their Steel holdings remained in Wall Street. They were in reality superpromoters rather than operators of the Keene type. But they were extremely able, extremely rich and extremely successful in the securities of the companies which they and their friends controlled. They were not really great manipulators, like Keene or Governor Flower. Still, the Street found in them plenty to gossip about and they certainly had a following among the professionals and the sportier commission houses. After they ceased to trade actively the Street found itself without manipulators; at least, it couldn’t read about them in the newspapers.

But Keene was gone. He had passed on to heaven, where he once said he would not stay a moment unless Sysonby was waiting for him. Two or three other men who had made stock market history for a few months had slipped back into obscurity through long inactivity. I am thinking especially of certain bold Western speculators who came to Wall Street in 1901. They made many millions from their Steel holdings and then stayed on Wall Street. They were really major promoters rather than operators of Keene’s type. But they were extremely capable, extremely rich, and extremely successful in trading the securities of companies they and their friends controlled. They were not truly great market manipulators like Keene or Governor Flower. Still, Wall Street found plenty to gossip about in their activities. They certainly had a following among professionals and the more adventurous commission houses. After they stopped trading actively, Wall Street found itself without manipulators. At least, it could not read about them in the newspapers.

You remember the big bull market that began when the Stock Exchange resumed business in 1915. As the market broadened and the Allies’ purchases in this country mounted into billions we ran into a boom. As far as manipulation went, it wasn’t necessary for anybody to lift a finger to create an unlimited market for a war bride. Scores of men made millions by capitalizing contracts or even promises of contracts. They became successful promoters, either with the aid of friendly bankers or by bringing out their companies on the Curb market. The public bought anything that was adequately touted.

You remember the big bull market that began when the Stock Exchange reopened in 1915. The market grew, and the Allies’ purchases in this country reached billions of dollars. A boom followed. No one had to manipulate the market to create unlimited demand for a war bride. Scores of men made millions by turning contracts, or even promises of contracts, into capital. They became successful promoters with help from friendly bankers or by listing their companies on the Curb market. The public bought anything that was promoted well enough.

When the bloom wore off the boom, some of these promoters found themselves in need of help from experts in stock salesmanship. When the public is hung up with all kinds of securities, some of them purchased at higher prices, it is not an easy task to dispose of untried stocks. After a boom the public is positive that nothing is going up. It isn’t that buyers become more discriminating, but that the blind buying is over. It is the state of mind that has changed. Prices don’t even have to go down to make people pessimistic. It is enough if the market gets dull and stays dull for a time.

When the boom lost its shine, some promoters found they needed help from experts at selling stocks. The public was stuck with all kinds of securities, some bought at higher prices. Under those conditions, untried stocks were not easy to sell. After a boom, the public is sure that nothing will go up. Buyers do not become more selective. Instead, the blind buying is over. What has changed is their state of mind. Prices do not even have to fall to make people pessimistic. It is enough for the market to become dull and stay that way for a while.

In every boom companies are formed primarily if not exclusively to take advantage of the public’s appetite for all kinds of stocks. Also there are belated promotions. The reason why promoters make that mistake is that being human they are unwilling to see the end of the boom. Moreover, it is good business to take chances when the possible profit is big enough. The top is never in sight when the vision is vitiated by hope. The average man sees a stock that nobody wanted at twelve dollars or fourteen dollars a share suddenly advance to thirty—which surely is the top—until it rises to fifty. That is absolutely the end of the rise. Then it goes to sixty; to seventy; to seventy-five. It then becomes a certainty that this stock, which a few weeks ago was selling for less than fifteen, can’t go any higher. But it goes to eighty; and to eighty-five. Whereupon the average man, who never thinks of values but of prices, and is not governed in his actions by conditions but by fears, takes the easiest way—he stops thinking that there must be a limit to the advances. That is why those outsiders who are wise enough not to buy at the top make up for it by not taking profits. The big money in booms is always made first by the public—on paper. And it remains on paper.

In every boom, companies are formed mainly, if not solely, to exploit the public’s appetite for all kinds of stocks. Some stock promotions also come too late. Promoters make that mistake because, being human, they are unwilling to see the boom end. Besides, taking chances is good business when the possible profit is big enough. Hope clouds the view, so the peak is never in sight. The average person sees a stock that nobody wanted at twelve or fourteen dollars a share suddenly rise to thirty. Surely that is the peak, until the stock rises to fifty. That is absolutely the end of the rise. Then the stock goes to sixty, to seventy, to seventy-five. Now it is certain that this stock cannot go any higher. Just a few weeks ago, it was selling for less than fifteen. But it goes to eighty, and then to eighty-five. At that point, the average person takes the easiest path. He stops thinking that there must be a limit to the rise. He never thinks about values, only prices, and his actions are guided by fear, not conditions. That is why outsiders who are wise enough not to buy at the peak make up for it by not taking profits. The big money in booms is always made first by the public, on paper. And it remains on paper.