Chapter 11

Chapter XI

And now I’ll get back to October, 1907. I bought a yacht and made all

preparations to leave New York for a cruise in Southern waters. I am

really daffy about fishing and this was the time when I was going to

fish to my heart’s content from my own yacht, going wherever I wished

whenever I felt like it. Everything was ready. I had made a killing in

stocks, but at the last moment corn held me back.

I must explain that before the money panic which gave me my first

million I had been trading in grain at Chicago. I was short ten million

bushels of wheat and ten million bushels of corn. I had studied the

grain markets for a long time and was as bearish on corn and wheat as I

had been on stocks.

Well, they both started down, but while wheat kept on declining the

biggest of all the Chicago operators--I’ll call him Stratton--took it

into his head to run a corner in corn. After I cleaned up in stocks

and was ready to go South on my yacht I found that wheat showed me a

handsome profit, but in corn Stratton had run up the price and I had

quite a loss.

I knew there was much more corn in the country than the price

indicated. The law of demand and supply worked as always. But the

demand came chiefly from Stratton and the supply was not coming at

all, because there was an acute congestion in the movement of corn. I

remember that I used to pray for a cold spell that would freeze the

impassable roads and enable the farmers to bring their corn into the

market. But no such luck.

There I was, waiting to go on my joyously planned fishing trip and that

loss in corn holding me back. I couldn’t go away with the market as it

was. Of course Stratton kept pretty close tabs on the short interest.

He knew he had me, and I knew it quite as well as he did. But, as I

said, I was hoping I might convince the weather that it ought to get

busy and help me. Perceiving that neither the weather nor any other

kindly wonder-worker was paying any attention to my needs I studied how

I might work out of my difficulty by my own efforts.

I closed out my line of wheat at a good profit. But the problem in corn

was infinitely more difficult. If I could have covered my ten million

bushels at the prevailing prices I instantly and gladly would have done

so, large though the loss would have been. But, of course, the moment I

started to buy in my corn Stratton would be on the job as squeezer in

chief, and I no more relished running up the price on myself by reason

of my own purchases than cutting my own throat with my own knife.

Strong though corn was, my desire to go fishing was even stronger, so

it was up to me to find a way out at once. I must conduct a strategic

retreat. I must buy back the ten million bushels I was short of and in

so doing keep down my loss as much as I possibly could.

It so happened that Stratton at that time was also running a deal in

oats and had the market pretty well sewed up. I had kept track of all

the grain markets in the way of crop news and pit gossip, and I heard

that the powerful Armour interests were not friendly, marketwise, to

Stratton. Of course I knew that Stratton would not let me have the

corn I needed except at his own price, but the moment I heard the

rumors about Armour being against Stratton it occurred to me that I

might look to the Chicago traders for aid. The only way in which they

could possibly help me was for them to sell me the corn that Stratton

wouldn’t. The rest was easy.

First, I put in orders to buy five hundred thousand bushels of corn

every eighth of a cent down. After these orders were in I gave to each

of four houses an order to sell simultaneously fifty thousand bushels

of oats at the market. That, I figured, ought to make a quick break in

oats. Knowing how the traders’ minds worked, it was a cinch that they

would instantly think that Armour was gunning for Stratton. Seeing the

attack opened in oats they would logically conclude that the next break

would be in corn and they would start to sell it. If that corner in

corn was busted, the pickings would be fabulous.

My dope on the psychology of the Chicago traders was absolutely

correct. When they saw oats breaking on the scattered selling they

promptly jumped on corn and sold it with great enthusiasm. I was

able to buy six million bushels of corn in the next ten minutes. The

moment I found that their selling of corn ceased I simply bought in

the other four million bushels at the market. Of course that made

the price go up again, but the net result of my manœuvre was that I

covered the entire line of ten million bushels within one-half cent of

the price prevailing at the time I started to cover on the traders’

selling. The two hundred thousand bushels of oats that I sold short

to start the traders’ selling of corn I covered at a loss of only

three thousand dollars. That was pretty cheap bear bait. The profits I

had made in wheat offset so much of my deficit in corn that my total

loss on all my grain trades that time was only twenty-five thousand

dollars. Afterwards corn went up twenty-five cents a bushel. Stratton

undoubtedly had me at his mercy. If I had set about buying my ten

million bushels of corn without bothering to think of the price there

is no telling what I would have had to pay.

A man can’t spend years at one thing and not acquire a habitual

attitude towards it quite unlike that of the average beginner. The

difference distinguishes the professional from the amateur. It is the

way a man looks at things that makes or loses money for him in the

speculative markets. The public has the dilettante’s point of view

toward his own effort. The ego obtrudes itself unduly and the thinking

therefore is not deep or exhaustive. The professional concerns himself

with doing the right thing rather than with making money, knowing that

the profit takes care of itself if the other things are attended to.

A trader gets to play the game as the professional billiard player

does--that is, he looks far ahead instead of considering the particular

shot before him. It gets to be an instinct to play for position.

I remember hearing a story about Addison Cammack that illustrates very

nicely what I wish to point out. From all I have heard, I am inclined

to think that _Cammack_ was one of the ablest stock traders the Street

ever saw. He was not a chronic bear as many believe, but he felt the

greater appeal of trading on the bear side, of utilizing in his behalf

the two great human factors of hope and fear. He is credited with

coining the warning: “Don’t sell stocks when the sap is running up the

trees!” and the old-timers tell me that his biggest winnings were made

on the bull side, so that it is plain he did not play prejudices but

conditions. At all events, he was a consummate trader. It seems that

once--this was way back at the tag end of a bull market--Cammack was

bearish, and J. Arthur Joseph, the financial writer and raconteur,

knew it. The market, however, was not only strong but still rising,

in response to prodding by the bull leaders and optimistic reports by

the newspapers. Knowing what use a trader like Cammack could make of

bearish information, Joseph rushed to Cammack’s office one day with

glad tidings.

“Mr. Cammack, I have a very good friend who is a transfer clerk in the

St. Paul office and he has just told me something which I think you

ought to know.”

“What is it?” asked Cammack listlessly.

“You’ve turned, haven’t you? You are bearish now?” asked Joseph,

to make sure. If Cammack wasn’t interested he wasn’t going to waste

precious ammunition.

“Yes. What’s the wonderful information?”

“I went around to the St. Paul office to-day, as I do in my

news-gathering rounds two or three times a week, and my friend

there said to me: ‘The Old Man is selling stock.’ He meant William

Rockefeller. ‘Is he really, Jimmy?’ I said to him, and he answered,

‘Yes; he is selling fifteen hundred shares every three-eighths of a

point up. I’ve been transferring the stock for two or three days now.’

I didn’t lose any time, but came right over to tell you.”

Cammack was not easily excited, and, moreover, was so accustomed to

having all manner of people rush madly into his office with all manner

of news, gossip, rumors, tips and lies that he had grown distrustful of

them all. He merely said now, “Are you sure you heard right, Joseph?”

“Am I sure? Certainly I am sure! Do you think I am deaf?” said Joseph.

“Are you sure of your man?”

“Absolutely!” declared Joseph. “I’ve known him for years. He has never

lied to me. He wouldn’t! No object! I know he is absolutely reliable

and I’d stake my life on what he tells me. I know him as well as I know

anybody in this world--a great deal better than you seem to know me,

after all these years.”

“Sure of him, eh?” And Cammack again looked at Joseph. Then he said,

“Well, you ought to know.” He called his broker, W. B. Wheeler. Joseph

expected to hear him give an order to sell at least fifty thousand

shares of St. Paul. William Rockefeller was disposing of his holdings

in St. Paul, taking advantage of the strength of the market. Whether it

was investment stock or speculative holdings was irrelevant. The one

important fact was that the best stock trader of the Standard Oil crowd

was getting out of St. Paul. What would the average man have done if he

had received the news from a trustworthy source? No need to ask.

But Cammack, the ablest bear operator of his day, who was bearish on

the market just then, said to his broker, “Billy, go over to the board

and buy fifteen hundred St. Paul every three-eighths up.” The stock was

then in the nineties.

“Don’t you mean sell?” interjected Joseph hastily. He was no novice in

Wall Street, but he was thinking of the market from the point of view

of the newspaper man and, incidentally, of the general public. The

price certainly ought to go down on the news of inside selling. And

there was no better inside selling than Mr. William Rockefeller’s. The

Standard Oil getting out and Cammack buying! It couldn’t be!

“No,” said Cammack; “I mean buy!”

“Don’t you believe me?”

“Yes!”

“Don’t you believe my information?”

“Yes.”

“Aren’t you bearish?”

“Yes.”

“Well, then?”

“That’s why I’m buying. Listen to me now: You keep in touch with that

reliable friend of yours and the moment the scaled selling stops, let

me know. Instantly! Do you understand?”

“Yes,” said Joseph, and went away, not quite sure he could fathom

Cammack’s motives in buying William Rockefeller’s stock. It was the

knowledge that Cammack was bearish on the entire market that made his

manœuvre so difficult to explain. However, Joseph saw his friend the

transfer clerk and told him he wanted to be tipped off when the Old Man

got through selling. Regularly twice a day Joseph called on his friend

to inquire.

One day the transfer clerk told him, “There isn’t any more stock coming

from the Old Man.” Joseph thanked him and ran to Cammack’s office with

the information.

Cammack listened attentively, turned to Wheeler and asked, “Billy,

how much St. Paul have we got in the office?” Wheeler looked it up and

reported that they had accumulated about sixty thousand shares.

Cammack, being bearish, had been putting out short lines in the other

Grangers as well as in various other stocks, even before he began to

buy St. Paul. He was now heavily short of the market. He promptly

ordered Wheeler to sell the sixty thousand shares of St. Paul that

they were long of, and more besides. He used his long holdings of St.

Paul as a lever to depress the general list and greatly benefit his

operations for a decline.

St. Paul didn’t stop on that move until it reached forty-four and

Cammack made a killing in it. He played his cards with consummate

skill and profited accordingly. The point I would make is his habitual

attitude toward trading. He didn’t have to reflect. He saw instantly

what was far more important to him than his profit on that one stock.

He saw that he had providentially been offered an opportunity to begin

his big bear operations not only at the proper time but with a proper

initial push. The St. Paul tip made him buy instead of sell because he

saw at once that it gave him a vast supply of the best ammunition for

his bear campaign.

To get back to myself. After I closed my trade in wheat and corn I went

South in my yacht. I cruised about in Florida waters, having a grand

old time. The fishing was great. Everything was lovely. I didn’t have a

care in the world and I wasn’t looking for any.

One day I went ashore at Palm Beach. I met a lot of Wall Street friends

and others. They were all talking about the most picturesque cotton

speculator of the day. A report from New York had it that Percy Thomas

had lost every cent. It wasn’t a commercial bankruptcy; merely the

rumor of the world-famous operator’s second Waterloo in the cotton

market.

I had always felt a great admiration for him. The first I ever heard of

him was through the newspapers at the time of the failure of the Stock

Exchange house of Sheldon & Thomas, when Thomas tried to corner cotton.

Sheldon, who did not have the vision or the courage of his partner, got

cold feet on the very verge of success. At least, so the Street said

at the time. At all events, instead of making a killing they made one

of the most sensational failures in years. I forget how many millions.

The firm was wound up and Thomas went to work alone. He devoted himself

exclusively to cotton and it was not long before he was on his feet

again. He paid off his creditors in full with interest--debts he was

not legally obliged to discharge--and withal had a million dollars

left to himself. His comeback in the cotton market was in its way as

remarkable as Deacon S. V. White’s famous stock-market exploit of

paying off one million dollars in one year. Thomas’ pluck and brains

made me admire him immensely.

Everybody in Palm Beach was talking about the collapse of Thomas’ deal

in March cotton. You know how the talk goes--and grows; the amount of

misinformation and exaggeration and improvements that you hear. Why,

I’ve seen a rumor about myself grow so that the fellow who started it

did not recognize it when it came back to him in less than twenty-four

hours, swollen with new and picturesque details.

The news of Percy Thomas’ latest misadventure turned my mind from the

fishing to the cotton market. I got files of the trade papers and read

them to get a line on conditions. When I got back to New York I gave

myself up to studying the market. Everybody was bearish and everybody

was selling July cotton. You know how people are. I suppose it is the

contagion of example that makes a man do something because everybody

around him is doing the same thing. Perhaps it is some phase or variety

in the herd instinct. In any case it was, in the opinion of hundreds

of traders, the wise and proper thing to sell July cotton--and so safe

too! You couldn’t call that general selling reckless; the word is too

conservative. The traders simply saw one side to the market and a great

big profit. They certainly expected a collapse in prices.

I saw all this, of course, and it struck me that the chaps who were

short didn’t have a terrible lot of time to cover in. The more I

studied the situation the clearer I saw this, until I finally decided

to buy July cotton. I went to work and quickly bought one hundred

thousand bales. I experienced no trouble in getting it because it

came from so many sellers. It seemed to me that I could have offered

a reward of one million dollars for the capture, dead or alive, of a

single trader who was not selling July cotton and nobody would have

claimed it.

I should say this was in the latter part of May. I kept buying more

and they kept on selling it to me until I had picked up all the

floating contracts and I had one hundred and twenty thousand bales. A

couple of days after I had bought the last of it it began to go up.

Once it started the market was kind enough to keep on doing very well

indeed--that is, it went up from forty to fifty points a day.

One Saturday--this was about ten days after I began operations--the

price began to creep up. I did not know whether there was any more July

cotton for sale. It was up to me to find out, so I waited until the

last ten minutes. At that time, I knew, it was usual for those fellows

to be short and if the market closed up for the day they would be

safely hooked. So I sent in four different orders to buy five thousand

bales each, at the market, at the same time. That ran the price up

thirty points and the shorts were doing their best to wriggle away. The

market closed at the top. All I did, remember, was to buy that last

twenty thousand bales.

The next day was Sunday. But on Monday, Liverpool was due to open up

twenty points to be on a parity with the advance in New York. Instead,

it came fifty points higher. That meant that Liverpool had exceeded

our advance by 100 per cent. I had nothing to do with the rise in that

market. This showed me that my deductions had been sound and that I

was trading along the line of least resistance. At the same time I was

not losing sight of the fact that I had a whopping big line to dispose

of. A market may advance sharply or rise gradually and yet not possess

the power to absorb more than a certain amount of selling.

Of course the Liverpool cables made our own market wild. But I noticed

the higher it went the scarcer July cotton seemed to be. I wasn’t

letting go any of mine. Altogether that Monday was an exciting and not

very cheerful day for the bears; but for all that, I could detect no

signs of impending bear panic; no beginnings of a blind stampede to

cover. And I had one hundred and forty thousand bales for which I must

find a market.

On Tuesday morning as I was walking to my office I met a friend at the

entrance of the building.

“That was quite a story in the _World_ this morning,” he said with a

smile.

“What story?” I asked.

“What? Do you mean to tell me you haven’t seen it?”

“I never see the _World_,” I said. “What is the story?”

“Why, it’s all about you. It says you’ve got July cotton cornered.”

“I haven’t seen it,” I told him and left him. I don’t know whether he

believed me or not. He probably thought it was highly inconsiderate of

me not to tell him whether it was true or not.

When I got to the office I sent out for a copy of the paper. Sure

enough, there it was, on the front page, in big headlines:

JULY COTTON CORNERED BY LARRY LIVINGSTON

Of course I knew at once that the article would play the dickens with

the market. If I had deliberately studied ways and means of disposing

of my one hundred and forty thousand bales to the best advantage I

couldn’t have hit upon a better plan. It would not have been possible

to find one. That article at that very moment was being read all over

the country either in the _World_ or in other papers quoting it. It had

been cabled to Europe. That was plain from the Liverpool prices. That

market was simply wild. No wonder, with such news.

Of course I knew what New York would do, and what I ought to do. The

market here opened at ten o’clock. At ten minutes after ten I did not

own any cotton. I let them have every one of my one hundred and forty

thousand bales. For most of my line I received what proved to be the

top prices of the day. The traders made the market for me. All I really

did was to see a heaven-sent opportunity to get rid of my cotton. I

grasped it because I couldn’t help it. What else could I do?

The problem that I knew would take a great deal of hard thinking to

solve was thus solved for me by an accident. If the _World_ had not

published that article I never would have been able to dispose of my

line without sacrificing the greater portion of my paper profits.

Selling one hundred and forty thousand bales of cotton without sending

the price down was a trick beyond my powers. But the _World_ story

turned it for me very nicely.

Why the _World_ published it I cannot tell you. I never knew. I suppose

the writer was tipped off by some friend in the cotton market and he

thought he was printing a scoop. I didn’t see him or anybody from the

_World_. I didn’t know it was printed that morning until after nine

o’clock; and if it had not been for my friend calling my attention to

it I would not have know it then.

Without it I wouldn’t have had a market _big_ enough to unload in. That

is one trouble about trading on a large scale. You cannot sneak out as

you can when you pike along. You cannot always sell out when you wish

or when you think it wise. You have to get out when you can; when you

have a market that will absorb your entire line. Failure to grasp the

opportunity to get out may cost you millions. You cannot hesitate. If

you do you are lost. Neither can you try stunts like running up the

price on the bears by means of competitive buying, for you may thereby

reduce the absorbing capacity. And I want to tell you that perceiving

your opportunity is not as easy as it sounds. A man must be on the

lookout so alertly that when his chance sticks in its head at his door

he must grab it.

Of course not everybody knew about my fortunate accident. In Wall

Street, and, for that matter, everywhere else, any accident that makes

big money for a man is regarded with suspicion. When the accident is

unprofitable it is never considered an accident but the logical outcome

of your hoggishness or of the swelled head. But when there is a profit

they call it loot and talk about how well unscrupulousness fares, and

how ill conservatism and decency.

It was not only the _evil-minded shorts_ smarting under punishment

brought about by their own recklessness who accused me of having

deliberately planned the coup. Other people thought the same thing.

One of the biggest men in cotton in the entire world met me a day or

two later and said, “That was certainly the slickest deal you ever put

over, Livingston. I was wondering how much you were going to lose when

you came to market that line of yours. You knew this market was not big

enough to take more than fifty or sixty thousand bales without selling

off, and how you were going to work off the rest and not lose all your

paper profits was beginning to interest me. I didn’t think of your

scheme. It certainly was slick.”

“I had nothing to do with it,” I assured him as earnestly as I could.

But all he did was to repeat: “Mighty slick, my boy. Mighty slick!

Don’t be so modest!”

It was after that deal that some of the papers referred to me as the

Cotton King. But, as I said, I really was not entitled to that crown.

It is not necessary to tell you that there is not enough money in the

United States to buy the columns of the New York _World_ or enough

personal pull to secure the publication of a story like that. It gave

me an utterly unearned reputation that time.

But I have not told this story to moralize on the crowns that are

sometimes pressed down upon the brows of undeserving traders or to

emphasize the need of seizing the opportunity, no matter where or

how it comes. My object merely was to account for the vast amount of

newspaper notoriety that came to me as a result of my deal in July

cotton. If it hadn’t been for the newspapers I never would have met

that remarkable man, Percy Thomas.