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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. O£ 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 little 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 90-1/8."
If you put up a point margin it meant that if it broke 89-1/4 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 90-l/8,"
it read: "Bot Steel at 91-1/8." 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 20-1/4. You thus
had only 3/4 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 3/4 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 3509 shares of Sugar at 105-1/4. 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 then 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 bis favorite stocks was Western Union, because it was so
easy to move a semiactive stock like that a few points up en-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.