Chapter 01

Chapter I

I went to work when I was just out of grammar school. I got a job

as quotation-board boy in a stock-brokerage office. I was quick at

figures. At school I did three years of arithmetic in one. I was

particularly good at mental arithmetic. As quotation-board boy I

posted the numbers on the big board in the customers’ room. One of the

customers usually sat by the ticker and called out the prices. They

couldn’t come too fast for me. I have always remembered figures. No

trouble at all.

There were plenty of other employes in that office. Of course I made

friends with the other fellows, but the work I did, if the market was

active, kept me too busy from ten A.M. to three P.M. to let me do much

talking. I don’t care for it, anyhow, during business hours.

But a busy market did not keep me from thinking about the work. Those

quotations did not represent prices of stocks to me, so many dollars

per share. They were numbers. Of course, they meant something. They

were always changing. It was all I had to be interested in--the

changes. Why did they change? I didn’t know. I didn’t care. I didn’t

think about that. I simply saw that they changed. That was all I had to

think about five hours every day and two on Saturdays: that they were

always changing.

That is how I first came to be interested in the behaviour of prices.

I had a very good memory for figures. I could remember in detail how

the prices had acted on the previous day, just before they went up or

down. My fondness for mental arithmetic came in very handy.

I noticed that in advances as well as declines, stock prices were apt

to show certain habits, so to speak. There was no end of parallel cases

and these made precedents to guide me. I was only fourteen, but after

I had taken hundreds of observations in my mind I found myself testing

their accuracy, comparing the behaviour of stocks to-day with other

days. It was not long before I was anticipating movements in prices. My

only guide, as I say, was their past performances. I carried the “dope

sheets” in my mind. I looked for stock prices to run on form. I had

“clocked” them. You know what I mean.

You can spot, for instance, where the buying is only a trifle better

than the selling. A battle goes on in the stock market and the tape is

your telescope. You can depend upon it seven out of ten cases.

Another lesson I learned early is that there is nothing new in Wall

Street. There can’t be because speculation is as old as the hills.

Whatever happens in the stock market to-day has happened before and

will happen again. I’ve never forgotten that. I suppose I really manage

to remember when and how it happened. The fact that I remember that way

is my way of capitalizing experience.

I got so interested in my game and so anxious to anticipate advances

and declines in all the active stocks that I got a little book. I

put down my observations in it. It was not a record of imaginary

transactions such as so many people keep merely to make or lose

millions of dollars without getting the swelled head or going to the

poorhouse. It was rather a sort of record of my hits and misses, and

next to the determination of probable movements I was most interested

in verifying whether I had observed accurately; in other words, whether

I was right.

Say that after studying every fluctuation of the day in an active stock

I would conclude that it was behaving as it always did before it broke

eight or ten points. Well, I would jot down the stock and the price

on Monday, and remembering past performances I would write down what

it ought to do on Tuesday and Wednesday. Later I would check up with

actual transcriptions from the tape.

That is how I first came to take an interest in the message of the

tape. The fluctuations were from the first associated in my mind with

upward or downward movements. Of course there is always a reason for

fluctuations, but the tape does not concern itself with the why and

wherefore. It doesn’t go into explanations. I didn’t ask the tape why

when I was fourteen, and I don’t ask it to-day, at forty. The reason

for what a certain stock does to-day may not be known for two or three

days, or weeks, or months. But what the dickens does that matter? Your

business with the tape is now--not to-morrow. The reason can wait. But

you must act instantly or be left. Time and again I see this happen.

You’ll remember that Hollow Tube went down three points the other day

while the rest of the market rallied sharply. That was the fact. On the

following Monday you saw that the directors passed the dividend. That

was the reason. They knew what they were going to do, and even if they

didn’t sell the stock themselves they at least didn’t buy it. There was

no inside buying; no reason why it should not break.

Well, I kept up my little memorandum book perhaps six months. Instead

of leaving for home the moment I was through with my work, I’d jot down

the figures I wanted and would study the changes, always looking for

the repetitions and parallelisms of behaviour--learning to read the

tape, although I was not aware of it at the time.

One day one of the office boys--he was older than I--came to me where I

was eating my lunch and asked me on the quiet if I had any money.

“Why do you want to know?” I said.

“Well,” he said, “I’ve got a dandy tip on Burlington. I’m going to play

it if I can get somebody to go in with me.”

“How do you mean, play it?” I asked. To me the only people who

played or could play tips were the customers--old jiggers with oodles

of dough. Why, it cost hundreds, even thousands of dollars, to get

into the game. It was like owning your private carriage and having a

coachman who wore a silk hat.

“That’s what I mean; play it!” he said. “How much you got?”

“How much you need?”

“Well, I can trade in five shares by putting up $5.”

“How are you going to play it?”

“I’m going to buy all the Burlington the bucket shop will let me carry

with the money I give him for margin,” he said. “It’s going up sure.

It’s like picking up money. We’ll double ours in a jiffy.”

“Hold on!” I said to him, and pulled out my little dope book.

I wasn’t interested in doubling my money, but in his saying that

Burlington was going up. If it was, my note-book ought to show it.

I looked. Sure enough, Burlington, according to my figuring, was

acting as it usually did before it went up. I had never bought or sold

anything in my life, and I never gambled with the other boys. But all I

could see was that this was a grand chance to test the accuracy of my

work, of my hobby. It struck me at once that if my dope didn’t work in

practice there was nothing in the theory of it to interest anybody. So

I gave him all I had, and with our pooled resources he went to one of

the near-by bucket shops and bought some Burlington. Two days later we

cashed in. I made a profit of $3.12.

After that first trade, I got to speculating on my own hook in the

bucket shops. I’d go during my lunch hour and buy or sell--it never

made any difference to me. I was playing a system and not a favorite

stock or backing opinions. All I knew was the arithmetic of it. As a

matter of fact, mine was the ideal way to operate in a bucket shop,

where all that a trader does is to bet on fluctuations as they are

printed by the ticker on the tape.

It was not long before I was taking much more money out of the bucket

shops than I was pulling down from my job in the brokerage office. So I

gave up my position. My folks objected, but they couldn’t say much when

they saw what I was making. I was only a kid and office-boy wages were

not very high. I did mighty well on my own hook.

I was fifteen when I had my first thousand and laid the cash in front

of my mother--all made in the bucket shops in a few months, besides

what I had taken home. My mother carried on something awful. She wanted

me to put it away in the savings bank out of reach of temptation. She

said it was more money than she ever heard any boy of fifteen had made,

starting with nothing. She didn’t quite believe it was real money. She

used to worry and fret about it. But I didn’t think of anything except

that I could keep on proving my figuring was right. That’s all the fun

there is--being right by using your head. If I was right when I tested

my convictions with ten shares I would be ten times more right if I

traded in a hundred shares. That is all that having more margin meant

to me--I was right more emphatically. More courage? No! No difference!

If all I have is ten dollars and I risk it, I am much braver than when

I risk a million, if I have another million salted away.

Anyhow, at fifteen I was making a good living out of the stock market.

I began in the smaller bucket shops, where the man who traded in twenty

shares at a clip was suspected of being John W. Gates in disguise or

J. P. Morgan traveling incognito. Bucket shops in those days seldom

lay down on their customers. They didn’t have to. There were other

ways of parting customers from their money, even when they guessed

right. The business was tremendously profitable. When it was conducted

legitimately--I mean straight, as far as the bucket shop went--the

fluctuations took care of the shoestrings. It doesn’t take much of a

reaction to wipe out a margin of only three quarters of a point. Also,

no welsher could ever get back in the game. Wouldn’t have any trade.

I didn’t have a following. I kept my business to myself. It was a

one-man business, anyhow. It was my head, wasn’t it? Prices either

were going the way I doped them out, without any help from friends

or partners, or they were going the other way, and nobody could stop

them out of kindness to me. I couldn’t see where I needed to tell my

business to anybody else. I’ve got friends, of course, but my business

has always been the same--a one-man affair. That is why I have always

played a lone hand.

As it was, it didn’t take long for the bucket shops to get sore on me

for beating them. I’d walk in and plank down my margin, but they’d

look at it without making a move to grab it. They’d tell me there

was nothing doing. That was the time they got to calling me the Boy

Plunger. I had to be changing brokers all the time, going from one

bucket shop to another. It got so that I had to give a fictitious name.

I’d begin light, only fifteen or twenty shares. At times, when they got

suspicious, I’d lose on purpose at first and then sting them proper.

Of course after a while they’d find me too expensive and they’d tell

me to take myself and my business elsewhere and not interfere with the

owners’ dividends.

Once, when the big concern I’d been trading with for months shut down

on me I made up my mind to take a little more of their money away

from them. That bucket shop had branches all over the city, in hotel

lobbies, and in near-by towns. I went to one of the hotel branches

and asked the manager a few questions and finally got to trading. But

as soon as I played an active stock my especial way he began to get

messages from the head office asking who it was that was operating. The

manager told me what they asked him and I told him my name was Edward

Robinson, of Cambridge. He telephoned the glad news to the big chief.

But the other end wanted to know what I looked like. When the manager

told me that I said to him, “Tell him I am a short fat man with dark

hair and a bushy beard!” But he described me instead, and then he

listened and his face got red and he hung up and told me to beat it.

“What did they say to you?” I asked him politely.

“They said, ‘You blankety-blank fool, didn’t we tell you to take no

business from Larry Livingston? And you deliberately let him trim us

out of $700!’” He didn’t say what else they told him.

I tried the other branches one after another, but they all got to know

me, and my money wasn’t any good in any of their offices. I couldn’t

even go in to look at the quotations without some of the clerks making

cracks at me. I tried to get them to let me trade at long intervals by

dividing my visits among them all. But that didn’t work.

Finally there was only one left to me and that was the biggest and

richest of all--the Cosmopolitan Stock Brokerage Company.

The Cosmopolitan was rated as A-1 and did an enormous business. It

had branches in every manufacturing town in New England. They took

my trading all right, and I bought and sold stocks and made and lost

money for months, but in the end it happened with them as usual. They

didn’t refuse my business point-blank, as the small concerns had. Oh,

not because it wasn’t sportsmanship, but because they knew it would

give them a black eye to publish the news that they wouldn’t take a

fellow’s business just because that fellow happened to make a little

money. But they did the next worse thing--that is, they made me put

up a three-point margin and compelled me to pay a premium at first

of a half point, then a point, and finally, a point and a half. Some

handicap, that! How? Easy! Suppose Steel was selling at 90 and you

bought it. Your ticket read, normally: “_Bot ten Steel at 90⅛._” If you

put up a point margin it meant that if it broke 89¼ you were wiped out

automatically. In a bucket shop the customer is not importuned for more

margin or put to the painful necessity of telling his broker to sell

for anything he can get.

But when the Cosmopolitan tacked on that premium they were hitting

below the belt. It meant that if the price was 90 when I bought,

instead of making my ticket: “_Bot Steel at 90⅛_,” it read: “_Bot

Steel at 91⅛_.” Why, that stock could advance a point and a quarter

after I bought it and I’d still be losing money if I closed the trade.

And by also insisting that I put up a three-point margin at the very

start they reduced my trading capacity by two-thirds. Still, that was

the only bucket shop that would take my business at all, and I had to

accept their terms or quit trading.

Of course I had my ups and downs, but was a winner on balance. However,

the Cosmopolitan people were not satisfied with the awful handicap they

had tacked on me, which should have been enough to beat anybody. They

tried to double-cross me. They didn’t get me. I escaped because of one

of my hunches.

The Cosmopolitan, as I said, was my last resort. It was the richest

bucket shop in New England, and as a rule they put no limit on a trade.

I think I was the heaviest individual trader they had--that is, of the

steady, every-day customers. They had a fine office and the largest and

completest quotation board I have ever seen anywhere. It ran along the

whole length of the big room and every imaginable thing was quoted.

I mean stocks dealt in on the New York and Boston Stock Exchanges,

cotton, wheat, provisions, metals--everything that was bought and sold

in New York, Chicago, Boston and Liverpool.

You know how they traded in bucket shops. You gave your money to a

clerk and told him what you wished to buy or sell. He looked at the

tape or the quotation board and took the price from there--the last

one, of course. He also put down the time on the ticket so that it

almost read like a regular broker’s report--that is, that they had

bought or sold for you so many shares of such a stock at such a price

at such a time on such a day and how much money they received from

you. When you wished to close your trade you went to the clerk--the

same or another, it depended on the shop--and you told him. He took the

last price or if the stock had not been active he waited for the next

quotation that came out on the tape. He wrote that price and the time

on your ticket, O.K.’d it and gave it back to you, and then you went to

the cashier and got whatever cash it called for. Of course, when the

market went against you and the price went beyond the limit set by your

margin, your trade automatically closed itself and your ticket became

one more scrap of paper.

In the humbler bucket shops, where people were allowed to trade in as

little as five shares, the tickets were little slips--different colors

for buying and selling--and at times, as for instance in boiling bull

markets, the shops would be hard hit because all the customers were

bulls and happened to be right. Then the bucket shop would deduct both

buying and selling commissions and if you bought a stock at 20 the

ticket would read 20¼. You thus had only ¾, of a point’s run for your

money.

But the Cosmopolitan was the finest in New England. It had thousands

of patrons and I really think I was the only man they were afraid of.

Neither the killing premium nor the three-point margin they made me put

up reduced my trading much. I kept on buying and selling as much as

they’d let me. I sometimes had a line of 5000 shares.

Well, on the day the thing happened that I am going to tell you, I was

short thirty-five hundred shares of Sugar. I had seven big pink tickets

for five hundred shares each. The Cosmopolitan used big slips with a

blank space on them where they could write down additional margin. Of

course, the bucket shops never ask for more margin. The thinner the

shoestring the better for them, for their profit lies in your being

wiped. In the smaller shops if you wanted to margin your trade still

further they’d make out a new ticket, so they could charge you the

buying commission and only give you a run of ¾ of a point on each

point’s decline, for they figured the selling commission also exactly

as if it were a new trade.

Well, this day I remember I had up over $10,000 in margins.

I was only twenty when I first accumulated ten thousand dollars in

cash. And you ought to have heard my mother. You’d have thought that

ten thousand dollars in cash was more than anybody carried around

except old John D., and she used to tell me to be satisfied and go into

some regular business. I had a hard time convincing her that I was not

gambling, but making money by figuring. But all she could see was that

ten thousand dollars was a lot of money and all I could see was more

margin.

I had put out my 3500 shares of Sugar at 105¼. There was another fellow

in the room, Henry Williams, who was short 2500 shares. I used to sit

by the ticker and call out the quotations for the board boy. The price

behaved as I thought it would. It promptly went down a couple of points

and paused a little to get its breath before taking another dip. The

general market was pretty soft and everything looked promising. Then

all of a sudden I didn’t like the way Sugar was doing its hesitating.

I began to feel uncomfortable. I thought I ought to get out of the

market. Then it sold at 103--that was low for the day--but instead of

feeling more confident I felt more uncertain. I knew something was

wrong somewhere, but I couldn’t spot it exactly. But if something was

coming and I didn’t know where from, I couldn’t be on my guard against

it. That being the case I’d better be out of the market.

You know, I don’t do things blindly. I don’t like to. I never did.

Even as a kid I had to know why I should do certain things. But this

time I had no definite reason to give to myself, and yet I was so

uncomfortable that I couldn’t stand it. I called to a fellow I knew,

Dave Wyman, and said to him: “Dave, you take my place here. I want you

to do something for me. Wait a little before you call out the next

price of Sugar, will you?”

He said he would, and I got up and gave him my place by the ticker so

he could call out the prices for the boy. I took my seven Sugar tickets

out of my pocket and walked over to the counter, to where the clerk was

who marked the tickets when you closed your trades. But I didn’t really

know why I should get out of the market, so I just stood there, leaning

against the counter, my tickets in my hand so that the clerk couldn’t

see them. Pretty soon I heard the clicking of a telegraph instrument

and I saw Tom Burnham, the clerk, turn his head quickly and listen.

Then I felt that something crooked was hatching, and I decided not to

wait any longer. Just then Dave Wyman by the ticker, began: “Su--”

and quick as a flash I slapped my tickets on the counter in front of

the clerk and yelled, “Close Sugar!” before Dave had finished calling

the price. So, of course, the house had to close my Sugar at the last

quotation. What Dave called turned out to be 103 again.

According to my dope Sugar should have broken 103 by now. The engine

wasn’t hitting right. I had the feeling that there was a trap in the

neighbourhood. At all events, the telegraph instrument was now going

like mad and I noticed that Tom Burnham, the clerk, had left my tickets

unmarked where I laid them, and was listening to the clicking as if he

were waiting for something. So I yelled at him: “Hey, Tom, what in hell

are you waiting for? Mark the price on these tickets--103! Get a gait

on!”

Everybody in the room heard me and began to look toward us and ask what

was the trouble, for, you see, while the Cosmopolitan had never laid

down, there was no telling, and a run on a bucket shop can start like a

run on a bank. If one customer gets suspicious the others follow suit.

So Tom looked sulky, but came over and marked my tickets “Closed at

103” and shoved the seven of them over toward me. He sure had a sour

face.

Say, the distance from Tom’s place to the cashier’s cage wasn’t over

eight feet. But I hadn’t got to the cashier to get my money when Dave

Wyman by the ticker yelled excitedly: “Gosh! Sugar, 108!” But it was

too late; so I just laughed and called over to Tom, “It didn’t work

that time, did it, old boy?”

Of course, it was a put-up job. Henry Williams and I together were

short six thousand shares of Sugar. That bucket shop had my margin and

Henry’s, and there may have been a lot of other Sugar shorts in the

office; possibly eight or ten thousand shares in all. Suppose they had

$20,000 in Sugar margins. That was enough to pay the shop to thimblerig

the market on the New York Stock Exchange and wipe us out. In the old

days whenever a bucket shop found itself loaded with too many bulls on

a certain stock it was a common practice to get some broker to wash

down the price of that particular stock far enough to wipe out all

the customers that were long of it. This seldom cost the bucket shop

more than a couple of points on a few hundred shares, and they made

thousands of dollars.

That was what the Cosmopolitan did to get me and Henry Williams and the

other Sugar shorts. Their brokers in New York ran up the price to 108.

Of course it fell right back, but Henry and a lot of others were wiped

out. Whenever there was an unexplained sharp drop which was followed

by instant recovery, the newspapers in those days used to call it a

bucket-shop drive.

And the funniest thing was that not later than ten days after the

Cosmopolitan people tried to double-cross me a New York operator did

them out of over seventy thousand dollars. This man, who was quite a

market factor in his day and a member of the New York Stock Exchange,

made a great name for himself as a bear during the Bryan panic of

’96. He was forever running up against Stock Exchange rules that

kept him from carrying out some of his plans at the expense of his

fellow members. One day he figured that there would be no complaints

from either the Exchange or the police authorities if he took from

the bucket shops of the land some of their ill-gotten gains. In the

instance I speak of he sent thirty-five men to act as customers. They

went to the main office and to the bigger branches. On a certain day

at a fixed hour the agents all bought as much of a certain stock as

the managers would let them. They had instructions to sneak out at a

certain profit. Of course what he did was to distribute bull tips on

that stock among his cronies and then he went in to the floor of the

Stock Exchange and bid up the price, helped by the room traders, who

thought he was a good sport. Being careful to pick out the right stock

for that work, there was no trouble in putting up the price three or

four points. His agents at the bucket shops cashed in as prearranged.

A fellow told me the originator cleaned up seventy thousand dollars

net, and his agents made their expenses and their pay besides. He

played that game several times all over the country, punishing the

bigger bucket shops of New York, Boston, Philadelphia, Chicago,

Cincinnati and St. Louis. One of his favorite stocks was Western Union,

because it was so easy to move a semiactive stock like that a few

points up or down. His agents bought it at a certain figure, sold at

two points profit, went short and took three points more. By the way, I

read the other day that that man died, poor and obscure. If he had died

in 1896 he would have got at least a column on the first page of every

New York paper. As it was he got two lines on the fifth.