Chapter 6

19 min

In the spring of 1906 I was in Atlantic City for a short vacation. I was out of stocks and was thinking only of having a change of air and a nice rest. By the way, I had gone back to my first brokers, Harding Brothers, and my account had got to be pretty active. I could swing three or four thousand shares. That wasn’t much more than I had done in the old Cosmopolitan shop when I was barely twenty years of age. But there was some difference between my one-point margin in the bucket shop and the margin required by brokers who actually bought or sold stocks for my account on the New York Stock Exchange.

In the spring of 1906, I went to Atlantic City for a short vacation. I had no stock positions and was thinking only about a change of scenery and a good rest. By the way, I had returned to my first brokers, Harding Brothers, and my account had become pretty active. I could trade three or four thousand shares. That was not much more than I had traded at the old Cosmopolitan shop when I was barely twenty. But there was a difference between my one-point margin at the bucket shop and the margin my brokers required. They actually bought and sold stocks for my account on the New York Stock Exchange.

You may remember the story I told you about that time when I was short thirty-five hundred Sugar in the Cosmopolitan and I had a hunch something was wrong and I’d better close the trade? Well, I have often had that curious feeling. As a rule, I yield to it. But at times I have pooh-poohed the idea and have told myself that it was simply asinine to follow any of these sudden blind impulses to reverse my position. I have ascribed my hunch to a state of nerves resulting from too many cigars or insufficient sleep or a torpid liver or something of that kind. When I have argued myself into disregarding my impulse and have stood pat I have always had cause to regret it. A dozen instances occur to me when I did not sell as per hunch, and the next day I’d go downtown and the market would be strong, or perhaps even advance, and I’d tell myself how silly it would have been to obey the blind impulse to sell. But on the following day there would be a pretty bad drop. Something had broken loose somewhere and I’d have made money by not being so wise and logical. The reason plainly was not physiological but psychological.

You may remember the story I told you about the time I was short 3,500 shares of Sugar at the Cosmopolitan. I had a hunch that something was wrong and that I’d better close the trade. Well, I’ve often had that strange feeling. Usually, I follow it. But sometimes I’ve dismissed the idea. I’ve told myself it was foolish to follow a sudden blind impulse to reverse my position. I’ve blamed the hunch on nerves from too many cigars, too little sleep, a sluggish liver, or something like that. Whenever I’ve talked myself into ignoring the impulse and held my position, I’ve always regretted it. I can think of a dozen times when I didn’t sell, despite my hunch. The next day I’d go downtown and find the market strong, or perhaps even rising. I’d tell myself how silly it would have been to follow that blind impulse to sell. But the following day, the market would drop pretty badly. Something had gone wrong somewhere, and I’d have made money if I hadn’t been so wise and logical. Clearly, the reason for my hunch was not physiological but psychological.

I want to tell you only about one of them because of what it did for me. It happened when I was having that little vacation in Atlantic City in the spring of 1906. I had a friend with me who also was a customer of Harding Brothers. I had no interest in the market one way or another and was enjoying my rest. I can always give up trading to play, unless of course it is an exceptionally active market in which my commitments are rather heavy. It was a bull market, as I remember it. The outlook was favorable for general business and the stock market had slowed down but the tone was firm and all indications pointed to higher prices.

I want to tell you about just one of them because of what it did for me. It happened during my short vacation in Atlantic City in the spring of 1906. A friend was with me who was also a customer of Harding Brothers. I had no interest in the market either way and was enjoying my rest. I can always give up trading for fun, unless the market is exceptionally active and I have fairly large positions. As I remember it, the market was bullish. The outlook for business in general was favorable. The stock market had slowed down, but it remained firm, and all signs pointed to higher prices.

One morning after we had breakfasted and had finished reading all the New York morning papers, and had got tired of watching the sea gulls picking up clams and flying up with them twenty feet in the air and dropping them on the hard wet sand to open them for their breakfast, my friend and I started up the Boardwalk. That was the most exciting thing we did in the daytime.

One morning, my friend and I ate breakfast and read all the New York morning papers. Then we watched the seagulls pick up clams and fly twenty feet into the air. They dropped the clams onto the hard, wet sand to crack them open for breakfast. When we got tired of watching them, we started up the Boardwalk. That was the most exciting thing we did during the day.

It was not noon yet, and we walked up slowly to kill time and breathe the salt air. Harding Brothers had a branch office on the Boardwalk and we used to drop in every morning and see how they’d opened. It was more force of habit than anything else, for I wasn’t doing anything.

It was still before noon, so we walked up slowly to pass the time and breathe the salt air. Harding Brothers had a branch office on the Boardwalk. We used to stop in every morning to see how the market had opened. It was mostly a matter of habit, since I wasn’t trading.

The market, we found, was strong and active. My friend, who was quite bullish, was carrying a moderate line purchased several points lower. He began to tell me what an obviously wise thing it was to hold stocks for much higher prices. I wasn’t paying enough attention to him to take the trouble to agree with him. I was looking over the quotation board, noting the changes—they were mostly advances—until I came to Union Pacific. I got a feeling that I ought to sell it. I can’t tell you more. I just felt like selling it. I asked myself why I should feel like that, and I couldn’t find any reason whatever for going short of UP.

We found the market strong and active. My friend was quite bullish and held a moderate position in stocks he had bought several points lower. He began telling me how obviously wise it was to hold stocks until their prices rose much higher. I wasn’t paying enough attention to bother agreeing with him. I was looking over the quotation board, noting the changes. Most prices were rising. Then I came to Union Pacific. I got a feeling that I should sell it. I can’t tell you more than that. I just felt like selling it. I asked myself why I felt that way, but I couldn’t find any reason at all to sell Union Pacific short.

I stared at the last price on the board until I couldn’t see any figures or any board or anything else, for that matter. All I knew was that I wanted to sell Union Pacific and I couldn’t find out why I wanted to.

I stared at the last price on the board until I couldn’t see the numbers, the board, or anything else. All I knew was that I wanted to sell Union Pacific, and I couldn’t figure out why.

I must have looked queer, for my friend, who was standing alongside of me, suddenly nudged me and asked, “Hey, what’s the matter?”

I must have looked strange, because my friend was standing next to me and suddenly nudged me. “Hey, what’s the matter?” he asked.

“I don’t know,” I answered.

“Going to sleep?” he said.

“No,” I said. “I am not going to sleep. What I am going to do is to sell that stock.” I had always made money following my hunches.

“No,” I said. “I’m not going to sleep. I’m going to sell that stock.” I had always made money by following my hunches.

I walked over to a table where there were some blank order pads. My friend followed me. I wrote out an order to sell a thousand Union Pacific at the market and handed it to the manager. He was smiling when I wrote it and when he took it. But when he read the order he stopped smiling and looked at me.

I walked over to a table with some blank order forms. My friend followed me. I wrote an order to sell 1,000 shares of Union Pacific at the market price and handed it to the manager. He smiled as I wrote the order and handed it to him. But when he read it, he stopped smiling and looked at me.

“Is this right?” he asked me. But I just looked at him and he rushed it over to the operator.

“Is this right?” he asked me. But I just looked at him, and he rushed it over to the operator.

“What are you doing?” asked my friend.

“I’m selling it!” I told him.

“Selling what?” he yelled at me. If he was a bull how could I be a bear? Something was wrong.

“Selling what?” he yelled at me. If he was a bull, how could I be a bear? Something was wrong.

“A thousand UP.,” I said.

“A thousand UP,” I said.

“Why?” he asked me in great excitement.

“Why?” he asked me excitedly.

I shook my head, meaning I had no reason. But he must have thought I’d got a tip, because he took me by the arm and led me outside into the hall, where we could be out of sight and hearing of the other customers and rubbering chairwarmers.

I shook my head to show I had no reason. But he must have thought I’d gotten a tip. He took me by the arm and led me into the hall. There, the other customers and nosy hangers-on couldn’t see or hear us.

“What did you hear?” he asked me.

He was quite excited. UP. was one of his pets and he was bullish on it because of its earnings and its prospects. But he was willing to take a bear tip on it at second hand.

He was very excited. U.P. was one of his favorite stocks. He was bullish on it because of its earnings and prospects. But he was willing to act on a secondhand tip that the stock would fall.

“Nothing!” I said.

“You didn’t?” He was skeptical and showed it plainly.

“You didn’t?” He clearly didn’t believe it.

“I didn’t hear a thing.”

“Then why in blazes are you selling?”

“Then why the hell are you selling?”

“I don’t know,” I told him. I spoke gospel truth.

“I don’t know,” I told him. I was telling the absolute truth.

“Oh, come across, Larry,” he said.

“Oh, come on, Larry,” he said.

He knew it was my habit to know why I traded. I had sold a thousand shares of Union Pacific. I must have a very good reason to sell that much stock in the face of the strong market.

He knew I always had a reason for trading. I had sold a thousand shares of Union Pacific. I must have had a very good reason to sell so much stock when the market was strong.

“I don’t know,” I repeated. “I just feel that something is going to happen.”

“I don’t know,” I repeated. “I just feel like something is going to happen.”

“What’s going to happen?”

“I don’t know. I can’t give you any reason. All I know is that I want to sell that stock. And I’m going to let ’em have another thousand.”

“I don’t know. I can’t give you a reason. All I know is that I want to sell that stock. And I’m going to sell them another thousand shares.”

I walked back into the office and gave an order to sell a second thousand. If I was right in selling the first thousand I ought to have out a little more.

I walked back into the office and placed an order to sell another thousand shares. If I was right to sell the first thousand, I ought to sell a little more.

“What could possibly happen?” persisted my friend, who couldn’t make up his mind to follow my lead. If I’d told him that I had heard UP. was going down he’d have sold it without asking me from whom I’d heard it or why. “What could possibly happen?” he asked again.

“What could possibly happen?” my friend kept asking. He couldn’t decide whether to follow my lead. If I’d told him I’d heard UP. was going down, he would have sold it. He wouldn’t have asked who told me or why. “What could possibly happen?” he asked again.

“A million things could happen. But I can’t promise you that any of them will. I can’t give you any reasons and I can’t tell fortunes,” I told him.

“A million things could happen. But I can’t promise that any of them will. I can’t give you any reasons, and I can’t predict the future,” I told him.

“Then you’re crazy,” he said. “Stark crazy, selling that stock without rime or reason. You don’t know why you want to sell it?”

“Then you’re crazy,” he said. “Completely crazy, selling that stock for no reason. You don’t know why you want to sell it?”

“I don’t know why I want to sell it. I only know I do want to,” I said. “I want to, like everything.” The urge was so strong that I sold another thousand.

“I don’t know why I want to sell it. I just know I do,” I said. “I really want to.” The urge was so strong that I sold another thousand.

That was too much for my friend. He grabbed me by the arm and said, “Here! Let’s get out of this place before you sell the entire capital stock.”

That was too much for my friend. He grabbed my arm and said, “Hey! Let’s get out of here before you sell all the company’s stock.”

I had sold as much as I needed to satisfy my feeling, so I followed him without waiting for a report on the last two thousand shares. It was a pretty good jag of stock for me to sell even with the best of reasons. It seemed more than enough to be short of without any reason whatever, particularly when the entire market was so strong and there was nothing in sight to make anybody think of the bear side. But I remembered that on previous occasions when I had the same urge to sell and didn’t do it I always had reasons to regret it.

I had sold enough to satisfy my feeling, so I followed him without waiting for a report on the last two thousand shares. That was a lot of stock for me to sell short, even with the best reasons. It seemed more than enough to be short without any reason at all. The whole market was strong, and nothing suggested to anyone that it might fall. But I remembered that when I had felt the same urge to sell before and ignored it, I had always regretted it.

I have told some of these stories to friends, and some of them tell me it isn’t a hunch but the subconscious mind, which is the creative mind, at work. That is the mind which makes artists do things without their knowing how they came to do them. Perhaps with me it was the cumulative effect of a lot of little things individually insignificant but collectively powerful. Possibly my friend’s unintelligent bullishness aroused a spirit of contradiction and I picked on UP. because it had been touted so much. I can’t tell you what the cause or motive for hunches may be. All I know is that I went out of the Atlantic City branch office of Harding Brothers short three thousand Union Pacific in a rising market, and I wasn’t worried a bit.

I’ve told some of these stories to friends. Some say it isn’t a hunch, but the subconscious mind at work. They say the subconscious is the creative mind. It makes artists do things without knowing how they did them. Perhaps, in my case, it was the combined effect of many little things. Each was insignificant on its own, but together they were powerful. Possibly my friend’s foolish bullishness made me want to contradict him, and I chose UP. because it had been promoted so heavily. I can’t tell you what causes or motivates hunches. All I know is that I left the Atlantic City branch office of Harding Brothers short three thousand shares of Union Pacific in a rising market, and I wasn’t worried at all.

I wanted to know what price they’d got for my last two thousand shares. So after luncheon we walked up to the office. I had the pleasure of seeing that the general market was strong and Union Pacific higher.

I wanted to know what price they had gotten for my last two thousand shares. So after lunch, we walked to the office. I was pleased to see that the overall market was strong and Union Pacific was up.

“I see your finish,” said my friend. You could see he was glad he hadn’t sold any.

“I can see you’re finished,” my friend said. You could see he was glad he hadn’t sold any.

The next day the general market went up some more and I heard nothing but cheerful remarks from my friend. But I felt sure I had done right to sell UP., and I never get impatient when I feel I am right. What’s the sense? That afternoon Union Pacific stopped climbing, and toward the end of the day began to go off. Pretty soon it got down to a point below the level of the average of my three thousand shares. I felt more positive than ever that I was on the right side, and since I felt that way I naturally had to sell some more. So, toward the close, I sold an additional two thousand shares.

The next day, the overall market rose some more, and I heard nothing but cheerful remarks from my friend. But I was sure I had been right to sell UP. I never get impatient when I feel I’m right. What’s the point? That afternoon, Union Pacific stopped rising and began to fall toward the end of the day. Soon it fell below the average price at which I had sold my three thousand shares. I felt more certain than ever that I was on the right side. And since I felt that way, I naturally had to sell more. So, near the close, I sold another two thousand shares.

There I was, short five thousand shares of UP. on a hunch. That was as much as I could sell in Harding’s office with the margin I had up. It was too much stock for me to be short of, on a vacation; so I gave up the vacation and returned to New York that very night. There was no telling what might happen and I thought I’d better be Johnny-on-the-spot. There I could move quickly if I had to.

There I was, short 5,000 shares of UP. on a hunch. That was all I could sell through Harding’s office with the margin I had put up. It was too much stock to be short while on vacation. So I gave up my vacation and returned to New York that very night. There was no telling what might happen, and I thought I’d better be on the spot. In New York, I could move quickly if I had to.

The next day we got the news of the San Francisco earthquake. It was an awful disaster. But the market opened down only a couple of points. The bull forces were at work, and the public never is independently responsive to news. You see that all the time. If there is a solid bull foundation, for instance, whether or not what the papers call bull manipulation is going on the same time, certain news items fail to have the effect they would have if the Street was bearish. It is all in the state of sentiment at the time. In this case the Street did not appraise the extent of the catastrophe because it didn’t wish to. Before the day was over prices came back.

The next day we got the news of the San Francisco earthquake. It was an awful disaster. But the market opened down only a couple of points. The bull forces were at work, and the public never responds to news independently. You see that all the time. Say there is a solid bull foundation, for instance, whether or not what the papers call bull manipulation is going on at the same time. Then certain news items fail to have the effect they would have if the Street were bearish. It all depends on the state of sentiment at the time. In this case the Street did not size up the extent of the catastrophe, because it didn’t want to. Before the day was over, prices came back.

I was short five thousand shares. The blow had fallen, but my stock hadn’t. My hunch was of the first water, but my bank account wasn’t growing; not even on paper. The friend who had been in Atlantic City with me when I put out my short line in UP. was glad and sad about it.

I had sold five thousand shares short. The blow had fallen, but my stock price hadn’t. My hunch was excellent, but my bank account wasn’t growing, not even on paper. My friend had been with me in Atlantic City when I sold UP. short. He was both glad and sad about it.

He told me: “That was some hunch, kid. But, say, when the talent and the money are all on the bull side what’s the use of bucking against them? They are bound to win out.”

He told me: “That was quite a hunch, kid. But when all the experts and money are betting on prices rising, why fight them? They’re bound to win.”

“Give them time,” I said. I meant prices. I wouldn’t cover because I knew the damage was enormous and the Union Pacific would be one of the worst sufferers. But it was exasperating to see the blindness of the Street.

“Give them time,” I said. I meant prices. I wouldn’t cover my short position because I knew the damage was enormous. And Union Pacific would be one of the worst sufferers. But it was infuriating to see how blind Wall Street was.

“Give ’em time and your skin will be where all the other bear hides are stretched out in the sun, drying,” he assured me.

“Give them time, and your skin will be stretched out in the sun to dry, along with all the other bears’ hides,” he assured me.

“What would you do?” I asked him. “Buy UP. on the strength of the millions of dollars of damage suffered by the Southern Pacific and other lines? Where are the earnings for dividends going to come from after they pay for all they’ve lost? The best you can say is that the trouble may not be as bad as it is painted. But is that a reason for buying the stocks of the roads chiefly affected? Answer me that.”

“What would you do?” I asked him. “Buy UP because the Southern Pacific and other railroads suffered millions of dollars in damage? Where will the earnings for dividends come from after the railroads pay for all they’ve lost? The best you can say is that the trouble may not be as bad as people say. But is that a reason to buy stock in the railroads hit hardest? Answer me that.”

But all my friend said was: “Yes, that listens fine. But I tell you, the market doesn’t agree with you. The tape doesn’t lie, does it?”

But all my friend said was: “Yes, that sounds fine. But I’m telling you, the market doesn’t agree with you. The tape doesn’t lie, does it?”

“It doesn’t always tell the truth on the instant,” I said.

“It doesn’t always tell the truth right away,” I said.

“Listen. A man was talking to Jim Fisk a little before Black Friday, giving ten good reasons why gold ought to go down for keeps. He got so encouraged by his own words that he ended by telling Fisk that he was going to sell a few million. And Jim Fisk just looked at him and said, “Go ahead! Do! Sell it short and invite me to your funeral.”

“Listen. A man was talking to Jim Fisk shortly before Black Friday. He gave ten good reasons why gold prices should fall and stay down. His own words made him so confident that he finally told Fisk he was going to sell a few million. Jim Fisk just looked at him and said, “Go ahead! Do it! Sell it short and invite me to your funeral.”

“Yes,” I said; “and if that chap had sold it short, look at the killing he would have made! Sell some UP. yourself.”

“Yes,” I said, “and if that guy had sold it short, look how much he would have made! Sell some UP. yourself.”

“Not I! I’m the kind that thrives best on not rowing against wind and tide.”

“Not me! I do best when I don't row against the wind and tide.”

On the following day, when fuller reports came in, the market began to slide off, but even then not as violently as it should. Knowing that nothing under the sun could stave off a substantial break I doubled up and sold five thousand shares. Oh, by that time it was plain to most people, and my brokers were willing enough. It wasn’t reckless of them or of me, not the way I sized up the market. On the day following, the market began to go for fair. There was the dickens to pay. Of course I pushed my luck for all it was worth. I doubled up again and sold ten thousand shares more. It was the only play possible.

The next day, fuller reports came in, and the market began to fall. But even then, it didn’t fall as sharply as it should have. I knew nothing could prevent a substantial drop, so I doubled my position and sold five thousand shares. By then, the coming drop was obvious to most people, and my brokers were willing enough to sell. Neither they nor I were being reckless, at least not the way I saw the market. The next day, the market really began to fall. All hell broke loose. Of course, I pushed my luck as far as I could. I doubled my position again and sold ten thousand more shares. It was the only move I could make.

I wasn’t thinking of anything except that I was right—100 per cent right—and that this was a heaven-sent opportunity. It was up to me to take advantage of it. I sold more. Did I think that with such a big line of shorts out, it wouldn’t take much of a rally to wipe out my paper profits and possibly my principal? I don’t know whether I thought of that or not, but if I did it didn’t carry much weight with me. I wasn’t plunging recklessly. I was really playing conservatively. There was nothing that anybody could do to undo the earthquake, was there? They couldn’t restore the crumpled buildings overnight, free, gratis, for nothing, could they? All the money in the world couldn’t help much in the next few hours, could it?

All I could think about was that I was right, 100 percent right, and that this was a heaven-sent opportunity. It was up to me to take advantage of it. I sold more short. With such a large short position, did I think even a small price rebound could wipe out my paper profits and possibly my original investment? I don’t know whether I thought about that or not. But if I did, it didn’t carry much weight with me. I wasn’t taking reckless risks. I was really playing it safe. Nobody could undo the earthquake, could they? They couldn’t rebuild the collapsed buildings overnight, free of charge, for nothing, could they? All the money in the world couldn’t help much in the next few hours, could it?

I was not betting blindly. I wasn’t a crazy bear. I wasn’t drunk with success or thinking that because Frisco was pretty well wiped off the map the entire country was headed for the scrap heap. No, indeed! I didn’t look for a panic. Well, the next day I cleaned up. I made two hundred and fifty thousand dollars. It was my biggest winnings up to that time. It was all made in a few days. The Street paid no attention to the earthquake the first day or two. They’ll tell you that it was because the first despatches were not so alarming, but I think it was because it took so long to change the point of view of the public toward the securities markets. Even the professional traders for the most part were slow and shortsighted.

I wasn’t betting blindly. I wasn’t a crazy bear. I wasn’t drunk on success. I didn’t think the whole country was headed for ruin just because Frisco had been pretty well wiped off the map. Not at all! I didn’t expect a panic. Well, the next day I cleaned up. I made two hundred and fifty thousand dollars. It was my biggest win up to that point. I had made it all in a few days. Wall Street paid no attention to the earthquake for the first day or two. People will tell you that was because the first reports weren’t so alarming. But I think it took that long to change the public’s view of the securities markets. Even most professional traders were slow and shortsighted.

I have no explanation to give you, either scientific or childish. I am telling you what I did, and why, and what came of it. I was much less concerned with the mystery of the hunch than with the fact that I got a quarter of a million out of it. It meant that I could now swing a much bigger line than ever, if or when the time came for it.

I have no explanation to offer, scientific or childish. I'm telling you what I did, why I did it, and what happened. I cared much less about the mystery of the hunch than about the fact that I made a quarter of a million dollars from it. That meant I could now take a much bigger position than ever before, if or when the time came.

That summer I went to Saratoga Springs. It was supposed to be a vacation for me, but I kept an eye on the market. To begin with, I wasn’t so tired that it bothered me to think about it. And then, everybody I knew up there had or had had an active interest in it. We naturally talked about it. I have noticed that there is quite a difference between talking and trading. Some of these chaps remind you of the bold clerk who talks to his cantankerous employer as to a yellow dog—when he tells you about it.

That summer, I went to Saratoga Springs. It was supposed to be a vacation, but I kept an eye on the market. For one thing, I wasn’t so tired that thinking about the market bothered me. Also, everyone I knew there was actively interested in the market or had been in the past. Naturally, we talked about it. I’ve noticed there’s quite a difference between talking and trading. Some of these guys remind me of a clerk who claims he boldly talks to his bad-tempered boss like a yellow dog.

Harding Brothers had a branch office in Saratoga. Many of their customers were there. But the real reason, I suppose, was the advertising value. Having a branch office in a resort is simply high-class billboard advertising. I used to drop in and sit around with the rest of the crowd. The manager was a very nice chap from the New York office who was there to give the glad hand to friends and strangers and, if possible, to get business. It was a wonderful place for tips—all kinds of tips, horse-race, stock-market, and waiters’. The office knew I didn’t take any, so the manager didn’t come and whisper confidentially in my ear what he’d just got on the q. t. from the New York office. He simply passed over the telegrams, saying, “This is what they’re sending out,” or something of the kind.

Harding Brothers had a branch office in Saratoga. Many of their customers were there. But I suppose the real reason was the advertising value. A branch office in a resort is simply high-class billboard advertising. I used to drop in and sit around with the rest of the crowd. The manager was a very nice fellow from the New York office. He was there to welcome friends and strangers and, if possible, bring in business. It was a wonderful place for tips of all kinds: horse-race tips, stock-market tips, and tips for waiters. The people at the office knew I didn’t take any tips. So the manager didn’t whisper confidentially in my ear about what he’d just received on the quiet from the New York office. He simply handed me the telegrams, saying, “This is what they’re sending out,” or something like that.

Of course I watched the market. With me, to look at the quotation board and to read the signs is one process. My good friend Union Pacific, I noticed, looked like going up. The price was high, but the stock acted as if it were being accumulated. I watched it a couple of days without trading in it, and the more I watched it the more convinced I became that it was being bought on balance by somebody who was no piker, somebody who not only had a big bank roll but knew what was what. Very clever accumulation, I thought.

Of course I watched the market. For me, looking at the quotation board and reading the signs happen at once. I noticed that my good friend Union Pacific looked ready to rise. The price was high, but the stock acted as if someone were accumulating it. I watched the stock for a couple of days without trading it. The more I watched, the more convinced I became that someone was buying more than they were selling. This was no small-time trader. It was someone with a lot of money who also knew what they were doing. Very clever accumulation, I thought.

As soon as I was sure of this I naturally began to buy it, at about 160. It kept on acting all hunky, and so I kept on buying it, five hundred shares at a clip. The more I bought the stronger it got, without any spurt, and I was feeling very comfortable. I couldn’t see any reason why that stock shouldn’t go up a great deal more; not with what I read on the tape.

As soon as I was sure of this, I naturally began buying the stock at about 160. It kept acting well, so I kept buying 500 shares at a time. The more I bought, the stronger it got, without any sudden jumps, and I felt very comfortable. Based on what I saw on the ticker tape, I couldn’t see any reason the stock shouldn’t go much higher.

All of a sudden the manager came to me and said they’d got a message from New York—they had a direct wire of course—asking if I was in the office, and when they answered yes, another came saying: “Keep him there. Tell him Mr. Harding wants to speak to him.”

Suddenly, the manager came over and said they’d received a message from New York. They had a direct wire, of course. The message asked if I was in the office. When they said yes, another message came: “Keep him there. Tell him Mr. Harding wants to speak to him.”

I said I’d wait, and bought five hundred shares more of UP. I couldn’t imagine what Harding could have to say to me. I didn’t think it was anything about business. My margin was more than ample for what I was buying. Pretty soon the manager came and told me that Mr. Harding wanted me on the long-distance telephone.

I said I’d wait and bought another five hundred shares of UP. I couldn’t imagine what Harding wanted to say to me. I didn’t think it was about business. My margin was more than enough to cover what I was buying. Soon, the manager came and told me that Mr. Harding wanted to speak to me on a long-distance call.

“Hello, Ed,” I said.

But he said, “What the devil’s the matter with you? Are you crazy?”

But he said, “What the hell is wrong with you? Are you crazy?”

“Are you?” I said.

“What are you doing?” he asked.

“What do you mean?”

“Buying all that stock.”

“Why, isn’t my margin all right?”

“Wait, isn’t my margin all right?”

“It isn’t a case of margin, but of being a plain sucker.”

“It’s not about margin. It’s about being a plain sucker.”

“I don’t get you.”

“I don’t understand you.”

“Why are you buying all that Union Pacific?”

“It’s going up,” I said.

“Going up, hell! Don’t you know that the insiders are feeding it out to you? You’re just about the easiest mark up there. You’d have more fun losing it on the ponies. Don’t let them kid you.”

“Going up? Hell no! Don’t you know the insiders are selling it to you? You’re just about the easiest target up there. You’d have more fun losing your money betting on horses. Don’t let them fool you.”

“Nobody is kidding me,” I told him. “I haven’t talked to a soul about it.”

“Nobody is fooling me,” I told him. “I haven’t talked to anyone about it.”

But he came back at me: “You can’t expect a miracle to save you every time you plunge into that stock. Get out while you’ve still got a chance,” he said. “It’s a crime to be long of that stock at this level—when these highbinders are shoveling it out by the ton.”

But he fired back: “You can’t expect a miracle to save you every time you jump into that stock. Get out while you still have a chance,” he said. “It’s a crime to hold that stock at this price while those crooks are dumping it by the ton.”

“The tape says they’re buying it,” I insisted.

“Larry, I got heart disease when your orders began to come in. For the love of Mike, don’t be a sucker. Get out! Right away. It’s liable to bust wide open any minute. I’ve done my duty. Good-by!” And he hung up.

“Larry, I nearly had a heart attack when your orders started coming in. For God’s sake, don’t be a sucker. Get out! Right away. It could blow wide open any minute. I’ve done my duty. Goodbye!” And he hung up.

Ed Harding was a very clever chap, unusually well-informed and a real friend, disinterested and kind-hearted. And what was even more, I knew he was in position to hear things. All I had to go by, in my purchases of UP., was my years of studying the behaviour of stocks and my perception of certain symptoms which experience had taught me usually accompanied a substantial rise. I don’t know what happened to me, but I suppose I must have concluded that my tape reading told me the stock was being absorbed simply because very clever manipulation by the insiders made the tape tell a story that wasn’t true. Possibly I was impressed by the pains Ed Harding took to stop me from making what he was so sure would be a colossal mistake on my part. Neither his brains nor his motives were to be questioned. Whatever it was that made me decide to follow his advice, I cannot tell you; but follow it, I did.

Ed Harding was a very clever man, unusually well-informed, and a true friend. He was selfless and kind-hearted. What’s more, I knew he was in a position to hear things. When I bought UP., all I had to go on was my years of studying stock behavior. I had also noticed certain signs that experience had taught me usually came before a substantial rise. I don’t know what happened to me. But I suppose I must have concluded that the insiders had manipulated the stock very cleverly. They had made the tape tell a false story, so my tape reading suggested the stock was being bought up. Perhaps I was impressed by how hard Ed Harding tried to stop me. He was sure I was about to make a colossal mistake. There was no question about his intelligence or his motives. I can’t tell you what made me decide to follow his advice, but I did.

I sold out all my Union Pacific. Of course if it was unwise to be long of it, it was equally unwise not to be short of it. So after I got rid of my long stock I sold four thousand shares short. I put out most of it around 162.

I sold all my Union Pacific shares. Of course, if it was unwise to own the stock, it was equally unwise not to sell it short. So after selling my shares, I sold 4,000 shares short. I sold most of them at around 162.

The next day the directors of the Union Pacific Company declared a 10 per cent dividend on the stock. At first nobody in Wall Street believed it. It was too much like the desperate manœuvre of cornered gamblers. All the newspapers jumped on the directors. But while the Wall Street talent hesitated to act the market boiled over. Union Pacific led, and on huge transactions made a new high-record price. Some of the room traders made fortunes in an hour and I remember later hearing about a rather dull-witted specialist who made a mistake that put three hundred and fifty thousand dollars in his pocket. He sold his seat the following week and became a gentleman farmer the following month.

The next day, the directors of the Union Pacific Company declared a 10 percent dividend on the stock. At first, nobody on Wall Street believed it. It seemed too much like a desperate move by gamblers with no way out. All the newspapers attacked the directors. But while Wall Street experts hesitated to act, the market erupted. Union Pacific led the surge, reaching a record high on huge trading volume. Some floor traders made fortunes in an hour. I remember hearing later about a rather slow-witted specialist who made a mistake that put $350,000 in his pocket. He sold his seat on the exchange the following week and became a gentleman farmer the following month.

Of course I realised, the moment I heard the news of the declaration of the unprecedented 10 per cent dividend, that I got what I deserved for disregarding the voice of experience and listening to the voice of a tipster. My own convictions I had set aside for the suspicions of a friend, simply because he was disinterested and as a rule knew what he was doing.

Of course, I realized what I had done the moment I heard about the unprecedented 10 percent dividend. I had gotten what I deserved for ignoring the voice of experience and listening to a tipster. I had set aside my own convictions for a friend's suspicions, simply because he had no personal interest in the matter and usually knew what he was doing.

As soon as I saw Union Pacific making new high records I said to myself, “This is no stock for me to be short of.”

As soon as I saw Union Pacific reaching new highs, I said to myself, “I shouldn’t be shorting this stock.”

All I had in the world was up as margin in Harding’s office. I was neither cheered nor made stubborn by the knowledge of that fact. What was plain was that I had read the tape accurately and that I had been a ninny to let Ed Harding shake my own resolution. There was no sense in recriminations, because I had no time to lose; and besides, what’s done is done. So I gave an order to take in my shorts. The stock was around 165 when I sent in that order to buy in the four thousand UP. at the market. I had a three-point loss on it at that figure. Well, my brokers paid 172 and 174 for some of it before they were through. I found when I got my reports that Ed Harding’s kindly intentioned interference cost me forty thousand dollars. A low price for a man to pay for not having the courage of his own convictions! It was a cheap lesson.

Everything I had in the world was posted as margin in Harding’s office. Knowing that neither encouraged me nor made me stubborn. What was clear was that I had read the tape accurately. I had been a fool to let Ed Harding shake my resolve. There was no point in blaming anyone, because I had no time to lose. Besides, what’s done is done. So I gave an order to cover my short positions. The stock was around 165 when I sent the order to buy 4,000 shares of UP. at the market price. At that price, I had a three-point loss. But my brokers paid 172 and 174 for some of the shares before they finished buying. When I got the reports, I found that Ed Harding’s well-intentioned interference had cost me forty thousand dollars. A low price for a man to pay for not having the courage of his own convictions! It was a cheap lesson.

I wasn’t worried, because the tape said still higher prices. It was an unusual move and there were no precedents for the action of the directors, but I did this time what I thought I ought to do. As soon as I had given the first order to buy four thousand shares to cover my shorts I decided to profit by what the tape indicated and so I went along. I bought four thousand shares and held that stock until the next morning. Then I got out. I not only made up the forty thousand dollars I had lost but about fifteen thousand besides. If Ed Harding hadn’t tried to save me money I’d have made a killing. But he did me a very great service, for it was the lesson of that episode that, I firmly believe, completed my education as a trader.

I wasn’t worried because the tape showed that prices would rise even higher. It was an unusual move, and there was no precedent for what the directors had done. But this time I did what I thought I should do. I first ordered four thousand shares to cover my short position. Then I decided to profit from what the tape showed, so I bought four thousand shares and held them until the next morning. Then I sold them. I made back the forty thousand dollars I had lost, plus about fifteen thousand more. If Ed Harding hadn’t tried to save me money, I’d have made a killing. But he did me a great service. I firmly believe the lesson from that episode completed my education as a trader.

It was not that all I needed to learn was not to take tips but follow my own inclination. It was that I gained confidence in myself and I was able finally to shake off the old method of trading. That Saratoga experience was my last haphazard, hit-or-miss operation. From then on I began to think of basic conditions instead of individual stocks. I promoted myself to a higher grade in the hard school of speculation. It was a long and difficult step to take.

It wasn't just that I needed to learn to ignore tips and follow my own instincts. I gained confidence in myself and was finally able to abandon my old way of trading. That experience at Saratoga was my last haphazard, hit-or-miss trade. From then on, I began to think about basic conditions rather than individual stocks. I promoted myself to a higher grade in the hard school of speculation. It was a long and difficult step to take.