As soon as I had a line on these points I quietly took all the stock that was for sale at 70 and higher. When I say “I” you will understand that I mean my brokers. The sales were for account of some of the minority holders because my clients naturally had cancelled whatever selling orders they might have given out before they tied up their stock.
I didn’t have to buy very much stock. Moreover, I knew that the right kind of advance would bring in other buying orders--and, of course, selling orders also.
I didn’t give bull tips on Imperial Steel to anybody. I didn’t have to. My job was to seek directly to influence sentiment by the best possible kind of publicity. I do not say that there should never be bull propaganda. It is as legitimate and indeed as desirable to advertise the value of a new stock as to advertise the value of woolens or shoes or automobiles. Accurate and reliable information should be given by the public. But what I meant was that the tape did all that was needed for my purpose. As I said before, the reputable newspapers always try to print explanations for market movements. It is news. Their readers demand to know not only what happens in the stock market but why it happens. Therefore without the manipulator lifting a finger the financial writers will print all the available information and gossip, and also analyse the reports of earnings, trade condition and outlook; in short, whatever may throw light on the advance. Whenever a newspaperman or an acquaintance asks my opinion of a stock and I have one I do not hesitate to express it. I do not volunteer advice and I never give tips, but I have nothing to gain in my operations from secrecy. At the same time I realise that the best of all tipsters, the most persuasive of all salesmen, is the tape.
When I had absorbed all the stock that was for sale at 70 and a little higher I relieved the market of that pressure, and naturally that made clear for trading purposes the line of least resistance in Imperial Steel. It was manifestly upward. The moment that fact was perceived by the observant traders on the floor they logically assumed that the stock was in for an advance the extent of which they could not know; but they knew enough to begin buying. Their demand for Imperial Steel, created exclusively by the obviousness of the stock’s rising tendency--the tape’s infallible bull tip!--I promptly filled. I sold to the traders the stock that I had bought from the tired-out holders at the beginning. Of course this selling was judiciously done; I contented myself with supplying the demand. I was not forcing my stock on the market and I did not want too rapid an advance. It wouldn’t have been good business to sell out the half of my one hundred thousand shares at that stage of the proceedings. My job was to make a market on which I might sell my entire line.
But even though I sold only as much as the traders were anxious to buy, the market was temporarily deprived of my own buying power, which I had hitherto exerted steadily. In due course the traders’ purchases ceased and the price stopped rising. As soon as that happened there began the selling by disappointed bulls or by those traders whose reasons for buying disappeared the instant the rising tendency was checked. But I was ready for this selling, and on the way down I bought back the stock I had sold to the traders a couple of points higher. This buying of stock I knew was bound to be sold in turn checked the downward course; and when the price stopped going down the selling orders stopped coming in.
I then began all over again. I took all the stock that was for sale on the way up--it wasn’t very much--and the price began to rise a second time; from a higher starting point than 70. _Don’t_ forget that on the way down there are many holders who wish to heaven they had sold theirs but won’t do it three or four points from the top. Such speculators always vow they will surely sell out if there is a rally. They put in their orders to sell on the way up, and then they change their minds with the change in the stock’s price-trend. Of course there is always profit taking from safe-playing quick runners to whom a profit is always a profit to be taken.
All I had to do after that was to repeat the process; alternately buying and selling; but always working higher.
Sometimes, after you have taken all the stock that is for sale, it pays to rush up the price sharply, to have what might be called little bull flurries in the stock you are manipulating. It is excellent advertising, because it makes talk and also brings in both the professional traders and that portion of the speculating public that likes action. It is, I think, a large portion. I did that in Imperial Steel, and whatever demand was created by those spurts I supplied. My selling always kept the upward movement within bounds both as to extent and as to speed. In buying on the way down and selling on the way up I was doing more than marking up the price: I was developing the marketability of Imperial Steel.
After I began my operations in it there never was a time when a man could not buy or sell the stock freely; I mean by this, buy or sell a reasonable amount without causing over-violent fluctuations in the price. The fear of being left high and dry if he bought, or squeezed to death if he sold, was gone. The gradual spread among the professionals and the public of a belief in the permanence of the market for Imperial Steel had much to do with creating confidence in the movement; and, of course, the activity also put an end to a lot of other objections. The result was that after buying and selling a good many thousands of shares I succeeded in making the stocks sell at par. At one hundred dollars a share everybody wanted to buy Imperial Steel. Why not? Everybody now knew that it was a good stock; that it had been and still was a bargain. The proof was the rise. A stock that could go thirty points from 70 could go up thirty more from par. That is the way a good many argued.
In the course of marking up the price those thirty points I accumulated only seven thousand shares. The price on this line averaged me almost exactly 85. That meant a profit of fifteen points on it; but, of course, my entire profit, still on paper, was much more. It was a safe enough profit, for I had a market for all I wanted to sell. The stock would sell higher on judicious manipulation and I had graduated calls on one hundred thousand shares beginning at 70 and ending at 100.
Circumstances prevented me from carrying out certain plans of mine for converting my paper profits into good hard cash. It had been, if I do say so myself, a beautiful piece of manipulation, strictly legitimate and deservedly successful. The property of the company was valuable and the stock was not dear at the higher price. One of the members of the original syndicate developed a desire to secure the control of the property--a prominent banking house with ample resources. The control of a prosperous and growing concern like the Imperial Steel Corporation is possibly more valuable to a banking firm than to individual investors. At all events, this firm made me an offer for all my options on the stock. It meant an enormous profit for me, and I instantly took it. I am always willing to sell out when I can do so in a lump at a good profit. I was quite content with what I made out of it.
Before I disposed of my calls on the hundred thousand shares I learned that these bankers had employed more experts to make a still more thorough examination of the property. Their reports showed enough to bring me in the offer I got. I kept several thousand shares of the stock for investment. I believe in it.
There wasn’t anything about my manipulation of Imperial Steel that wasn’t normal and sound. As long as the price went up on my buying I knew I was O.K. The stock never got waterlogged, as a stock sometimes does. When you find that it fails to respond adequately to your buying you don’t need any better tip to sell. You know that if there is any value to a stock and general market conditions are right you can always nurse it back after a decline, no matter if it’s twenty points. But I never had to do anything like that in Imperial Steel.
In my manipulation of stocks I never lose sight of basic trading principles. Perhaps you wonder why I repeat this or why I keep on harping on the fact that I never argue with the tape or lose my temper at the market because of its behaviour. You would think--wouldn’t you?--that shrewd men who have made millions in their own business and in addition have successfully operated in Wall Street at times would realise the wisdom of playing the game dispassionately. Well, you would be surprised at the frequency with which some of our most successful promoters behave like peevish women because the market does not act the way they wish it to act. They seem to take it as a personal slight, and they proceed to lose money by first losing their temper.