Everything happened as I had foreseen. I was dead right and--I lost every cent I had! I was wiped out by something that was unusual. If the unusual never happened there would be no difference in people and then there wouldn’t be any fun in life. The game would become merely a matter of addition and subtraction. It would make of us a race of bookkeepers with plodding minds. It’s the guessing that develops a man’s brain power. Just consider what you have to do to guess right.
The market fairly boiled, as I had expected. The transactions were enormous and the fluctuations unprecedented in extent. I put in a lot of selling orders at the market. When I saw the opening prices I had a fit, the breaks were so awful. My brokers were on the job. They were as competent and conscientious as any; but by the time they executed my orders the stocks had broken twenty points more. The tape was way behind the market and reports were slow in coming in by reason of the awful rush of business. When I found out that the stocks I had ordered sold when the tape said the price was, say, 100 and they got mine off at 80, making a total decline of thirty or forty points from the previous night’s close, it seemed to me that I was putting out shorts at a level that made the stocks I sold the very bargains I had planned to buy. The market was not going to drop right through to China. So I decided instantly to cover my shorts and go long.
My brokers bought; not at the level that had made me turn, but at the prices prevailing in the Stock Exchange when their floor man got my orders. They paid an average of fifteen points more than I had figured on. A loss of thirty-five points in one day was more than anybody could stand.
The ticker beat me by lagging so far behind the market. I was accustomed to regarding the tape as the best little friend I had because I bet according to what it told me. But this time the tape double-crossed me. The divergence between the printed and the actual prices undid me. It was the sublimation of my previous unsuccess, the selfsame thing that had beaten me before. It seems so obvious now that tape reading is not enough, irrespective of the brokers’ execution, that I wonder why I didn’t then see both my trouble and the remedy for it.
I did worse than not see it; I kept on trading, in and out, regardless of the execution. You see, I never could trade with a limit. I must take my chances with the market. That is what I am trying to beat--the market, not the particular price. When I think I should sell, I sell. When I think stocks will go up, I buy. My adherence to that general principle of speculation saved me. To have traded at limited prices simply would have been my old bucket-shop method inefficiently adapted for use in a reputable commission broker’s office. I would never have learned to know what stock speculation is, but would have kept on betting on what a limited experience told me was a sure thing.
Whenever I did try to limit the prices in order to minimize the disadvantages of trading at the market when the ticker lagged, I simply found that the market got away from me. This happened so often that I stopped trying. I can’t tell you how it came to take me so many years to learn that instead of placing piking bets on what the next few quotations were going to be, my game was to anticipate what was going to happen in a big way.
After my May ninth mishap I plugged along, using a modified but still defective method. If I hadn’t made money some of the time I might have acquired market wisdom quicker. But I was making enough to enable me to live well. I liked friends and a good time. I was living down the Jersey Coast that summer, like hundreds of prosperous Wall Street men. My winnings were not quite enough to offset both my losses and my living expenses.
I didn’t keep on trading the way I did through stubbornness. I simply wasn’t able to state my own problem to myself, and, of course, it was utterly hopeless to try to solve it. I harp on this topic so much to show what I had to go through before I got to where I could really make money. My old shotgun and BB shot could not do the work of a high-power repeating rifle against big game.
Early that fall I not only was cleaned out again but I was so sick of the game I could no longer beat that I decided to leave New York and try something else some other place. I had been trading since my fourteenth year. I had made my first thousand dollars when I was a kid of fifteen, and my first ten thousand before I was twenty-one. I had made and lost a ten-thousand-dollar stake more than once. In New York I had made thousands and lost them. I got up to fifty thousand dollars and two days later that went. I had no other business and knew no other game. After several years I was back where I began. No--worse, for I had acquired habits and a style of living that required money; though that part didn’t bother me as much as being wrong so consistently.
_IV_
Well, I went home. But the moment I was back I knew that I had but one mission in life and that was to get a stake and go back to Wall Street. That was the only place in the country where I could trade heavily. Some day, when my game was all right, I’d need such a place. When a man is right he wants to get all that is coming to him for being right.
I didn’t have much hope, but, of course, I tried to get into the bucket shops again. There were fewer of them and some of them were run by strangers. Those who remembered me wouldn’t give me a chance to show them whether I had gone back as a trader or not. I told them the truth, that I had lost in New York whatever I had made at home; that I didn’t know as much as I used to think I did; and that there was no reason why it should not now be good business for them to let me trade with them. But they wouldn’t. And the new places were unreliable. Their owners thought twenty shares was as much as a gentleman ought to buy if he had any reason to suspect he was going to guess right.
I needed the money and the bigger shops were taking in plenty of it from their regular customers. I got a friend of mine to go into a certain office and trade. I just sauntered in to look them over. I again tried to coax the order clerk to accept a small order, even if it was only fifty shares. Of course he said no. I had rigged up a code with this friend so that he would buy or sell when and what I told him. But that only made me chicken feed. Then the office began to grumble about taking my friend’s orders. Finally one day he tried to sell a hundred St. Paul and they shut down on him.
We learned afterward that one of the customers saw us talking together outside and went in and told the office, and when my friend went up to the order clerk to sell that hundred St. Paul the guy said:
“We’re not taking any selling orders in St. Paul, not from you.”
“Why, what’s the matter, Joe?” asked my friend.
“Nothing doing, that’s all,” answered Joe.
“Isn’t that money any good? Look it over. It’s all there.” And my friend passed over the hundred--my hundred--in tens. He tried to look indignant and I was looking unconcerned; but most of the other customers were getting close to the combatants, as they always did when there was loud talking or the slightest semblance of a scrap between the shop and any customer. They wanted to get a line on the merits of the case in order to get a line on the solvency of the concern.
The clerk, Joe, who was a sort of assistant manager, came out from behind his cage, walked up to my friend, looked at him and then looked at me.
“It’s funny,” he said slowly--“it’s damned funny that you never do a single thing here when your friend Livingston isn’t around. You just sit and look at the board by the hour. Never a peep. But after he comes in you get busy all of a sudden. Maybe you are acting for yourself; but not in this office any more. We don’t fall for Livingston tipping you off.”
Well, that stopped my board money. But I had made a few hundred more than I had spent and I wondered how I could use them, for the need of making enough money to go back to New York with was more urgent than ever. I felt that I would do better the next time. I had had time to think calmly of some of my foolish plays; and then, one can see the whole better when one sees it from a little distance. The immediate problem was to make the new stake.
One day I was in a hotel lobby, talking to some fellows I knew, who were pretty steady traders. Everybody was talking stock market. I made the remark that nobody could beat the game on account of the rotten execution he got from his brokers, especially when he traded at the market, as I did.
A fellow piped up and asked me what particular brokers I meant.
I said, “The best in the land,” and he asked who might they be. I could see he wasn’t going to believe I ever dealt with first-class houses.
But I said, “I mean, any member of the New York Stock Exchange. It isn’t that they are crooked or careless, but when a man gives an order to buy at the market he never knows what that stock is going to cost him until he gets a report from the brokers. There are more moves of one or two points than of ten and fifteen. But the outside trader can’t catch the small rises or drops because of the execution. I’d rather trade in a bucket shop any day in the week, if they’d only let a fellow trade big.”