Anaconda was only quarter stock--that is, the par of the shares was only twenty-five dollars. It took four hundred shares of it to equal the usual one hundred shares of other stocks, the par value of which was one hundred dollars. I figured that when it crossed 300 it ought to keep on going and probably touch 340 in a jiffy.
I was bearish, remember, but I was also a tape-reading trader. I knew Anaconda, if it went the way I figured, would move very quickly. Whatever moves fast always appeals to me. I have learned patience and how to sit tight, but my personal preference is for fleet movements, and Anaconda certainly was no sluggard. My buying it because it crossed 300 was prompted by the desire, always strong in me, of confirming my observations.
Just then the tape was saying that the buying was stronger than the selling, and therefore the general rally might easily go a bit further. It would be prudent to wait before going short. Still I might as well pay myself wages for waiting. This would be accomplished by taking a quick thirty points out of Anaconda. Bearish on the entire market and bullish on that one stock! So I bought thirty-two thousand shares of Anaconda--that is, eight thousand full shares. It was a nice little flyer but I was sure of my premises and I figured that the profit would help to swell the margin available for bear operations later on.
On the next day the telegraph wires were down on account of a storm up North or something of the sort. I was in Harding’s office waiting for news. The crowd was chewing the rag and wondering all sorts of things, as stock traders will when they can’t trade. Then we got a quotation--the only one that day: Anaconda, 292.
There was a chap with me, a broker I had met in New York. He knew I was long eight thousand full shares and I suspect that he had some of his own, for when we got that one quotation he certainly had a fit. He couldn’t tell whether the stock at that very moment had gone off another ten points or not. The way Anaconda had gone up it wouldn’t have been anything unusual for it to break twenty points. But I said to him, “Don’t you worry, John. It will be all right to-morrow.” That was really the way I felt. But he looked at me and shook his head. He knew better. He was that kind. So I laughed, and I waited in the office in case some quotation trickled through. But no, sir. That one was all we got: Anaconda, 292. It meant a paper loss to me of nearly one hundred thousand dollars. I had wanted quick action. Well, I was getting it.
The next day the wires were working and we got the quotations as usual. Anaconda opened at 298 and went up to 302¾, but pretty soon it began to fade away. Also, the rest of the market was not acting just right for a further rally. I made up my mind that if Anaconda went back to 301 I must consider the whole thing a fake movement. On a legitimate advance the price should have gone to 310 without stopping. If instead it reacted it meant that precedents had failed me and I was wrong; _and the only thing to do when a man is wrong is to be right by ceasing to be wrong_. I had bought eight thousand full shares in expectation of a thirty or forty point rise. It would not be my first mistake; nor my last.
Sure enough, Anaconda fell back to 301. The moment it touched that figure I sneaked over to the telegraph operator--they had a direct wire to the New York office--and I said to him, “Sell all my Anaconda, eight thousand shares.” I said it in a low voice. I didn’t want anybody else to know what I was doing.
He looked up at me almost in horror. But I nodded and said, “All I’ve got!”
“Surely, Mr. Livingston, you don’t mean at the market?” and he looked as if he was going to lose a couple of millions of his own through bum execution by a careless broker. But I just told him, “Sell it! Don’t argue about it!”
The two Black boys, Jim and Ollie, were in the office, out of hearing of the operator and myself. They were big traders who had come originally from Chicago, where they had been famous plungers in wheat, and were now heavy traders on the New York Stock Exchange. They were very wealthy and were high rollers for fair.
As I left the telegraph operator to go back to my seat in front of the quotation board Oliver Black nodded to me and smiled.
“You’ll be sorry, Larry,” he said.
I stopped and asked him, “What do you mean?”
“To-morrow you’ll be buying it back.”
“Buying what back?” I said. I hadn’t told a soul except the telegraph operator.
“Anaconda,” he said. “You’ll be paying 320 for it. That wasn’t a good move of yours, Larry.” And he smiled again.
“What wasn’t?” And I looked innocent.
“Selling your eight thousand Anaconda at the market; in fact, insisting on it,” said Ollie Black.
I knew that he was supposed to be very clever and always traded on inside news. But how he knew my business so accurately was beyond me. I was sure the office hadn’t given me away.
“Ollie, how do you know that?” I asked him.
He laughed and told me: “I got it from Charlie Kratzer.” That was the telegraph operator.
“But he never budged from his place,” I said.
“I couldn’t hear you and him whispering,” he chuckled. “But I heard every word of the message he sent to the New York office for you. I learned telegraphy years ago after I had a big row over a mistake in a message. Since then when I do what you did just now--give an order by word of mouth to an operator--I want to be sure the operator sends the message as I give it to him. I know what he sends in my name. But you will be sorry you sold that Anaconda. It’s going to 500.”
“Not this trip, Ollie,” I said.
He stared at me and said, “You’re pretty cocky about it.”
“Not I; the tape,” I said. There wasn’t any ticker there so there wasn’t any tape. But he knew what I meant.
“I’ve heard of those birds,” he said, “who look at the tape and instead of seeing prices they see a railroad time-table of the arrival and departure of stocks. But they were in padded cells where they couldn’t hurt themselves.”
I didn’t answer him anything because about that time the boy brought me a memorandum. They had sold five thousand shares at 299¾. I knew our quotations were a little behind the market. The price on the board at Palm Beach when I gave the operator the order to sell was 301. I felt so certain that at that very moment the price at which the stock was actually selling on the Stock Exchange in New York was less, that if anybody had offered to take the stock off my hands at 296 I’d have been tickled to death to accept. What happened shows you that I am right in never trading at limits. Suppose I had limited my selling price to 300? I’d never have got it off. No, sir! _When you want to get out, get out._
Now, my stock cost me about 300. They got off five hundred shares--full shares, of course--at 299¾. The next thousand they sold at 299⅝. Then a hundred at ½; two hundred at ⅜ and two hundred at ¼. The last of my stock went at 298¾. It took Harding’s cleverest floor man fifteen minutes to get rid of that last one hundred shares. They didn’t want to crack it wide open.
The moment I got the report of the sale of the last of my long stock I started to do what I had really come ashore to do--that is, to sell stocks. I simply had to. There was the market after its outrageous rally, begging to be sold. Why, people were beginning to talk bullish again. The course of the market, however, told me that the rally had run its course. It was safe to sell them. It did not require reflection.
The next day Anaconda opened below 296. Oliver Black, who was waiting for a further rally, had come down early to be Johnny-on-the-spot when the stock crossed 320. I don’t know how much of it he was long of or whether he was long of it all. But he didn’t laugh when he saw the opening prices, nor later in the day when the stock broke still more and the report came back to us in Palm Beach that there was no market for it at all.
Of course that was all the confirmation any man needed. My growing paper profit kept reminding me that I was right, hour by hour. Naturally I sold some more stocks. Everything! It was a bear market. They were all going down. The next day was Friday, Washington’s Birthday. I couldn’t stay in Florida and fish because I had put out a very fair short line, for me. I was needed in New York. Who needed me? I did! Palm Beach was too far, too remote. Too much valuable time was lost telegraphing back and forth.
I left Palm Beach for New York. On Monday I had to lie in St. Augustine three hours, waiting for a train. There was a broker’s office there, and naturally I had to see how the market was acting while I was waiting. Anaconda had broken several points since the last trading day. As a matter of fact, it didn’t stop going down until the big break that fall.
I got to New York and traded on the bear side for about four months. The market had frequent rallies as before, and I kept covering and putting them out again. I didn’t, strictly speaking, sit tight. Remember, I had lost every cent of the three hundred thousand dollars I made out of the San Francisco earthquake break. I had been right, and nevertheless had gone broke. I was now playing safe--because after being down a man enjoys being up, even if he doesn’t quite make the top. _The way to make money is to make it. The way to make big money is to be right at exactly the right time._ In this business a man has to think of both theory and practice. A speculator must not be merely a student, he must be both a student and a speculator.