IV.
All mundane things have an end, even bull markets and bear markets. The bull market saw Hayward & Co. doing a good business, as did everybody else in Wall Street. It ended, and the firm’s customers, after a few bad “slumps” in prices, were admonished to turn bears in order to recoup their losses. Bears believe prices are too high and should go lower; bulls, optimists, believe the opposite. The public can’t sell stocks “short” any more than the average man is left-handed. These customers were no exception, so they did nothing.
Hayward had “overstayed” the bull market, though not disastrously; that is, he was in error regarding the extent and duration of the upward movement of prices. He proceeded to fall into a similar error on the bear, or downward, side. The market had been extremely dull following what the financial writers called a “severe decline,” but which meant the loss of millions of dollars by speculators. A panic had been narrowly averted by a timely combination of “powerful interests,” after which the market became professional. In the absence of complaisant lambs, the financial cannibals known as “room traders” and “pikers” tried to “scalp eighths” out of each other for weeks—to take advantage of fractional fluctuations instead of waiting for big movements. Hayward’s customers, like everybody else’s customers, were not speculating. So he used their money to protect his own speculations. Office expenses were numerous and heavy, and commissions few and light.
Hayward was very bearish. He had sold stocks, sharing the belief of the majority of his fellows, that the lowest prices had not been reached. As a result he was heavily “short,” and he could not “cover” at a profit, because prices had advanced very slowly, but very steadily.
One day a big gambler in Chicago, bolder or keener than his Eastern brethren, thought the time was ripe for a “bull” or upward movement in general, and particularly in Consolidated Steel Rod Company’s stock. He was the chairman of the board of directors. Mr. William G. Dorr decided upon a plan whereby the stock would be made attractive to that class of speculative investors, so to speak, who liked to buy stocks making generous disbursements of profits to their holders. Mr. Dorr’s plan was kept a secret. The first step consisted of sending in large buying orders, handled by prominent brokers, and synchronously the publication, in the daily press, of various items, all reciting the wonderful prosperity of the Consolidated Steel Rod Company and its phenomenal earnings; also the unutterable cheapness of the stock at the prevailing price. Mr. Dorr and associates, of course, had previously taken advantage of the big “slump” or fall in values to buy back at 35 the same stock they had sold to the public some weeks before at 70. Having acquired this cheap stock, they “manipulated”—by means of further purchase—the price so that they could sell out at a profit.
It so happened, however, that once before dividend rumors about “Con. Steel Rod” had been disseminated, with the connivance of Dorr, and they had not come true, to the great detriment of credulous buyers and the greater profit of the insiders, who were “short” of the stock “up to their necks”—a typical bit of stock-jobbing whereat other and more artistic stock-jobbers had expressed the greatest indignation. Instead of putting the stock on a dividend-paying basis, the directors had decided—at the last hour—that it would not be conservative to do so, whereupon the stock had “broken” seventeen points. The lambs lost hundreds of thousands of dollars; the insiders gained as much. It was a “nice turn.”
Hayward remembered this, and when the stock, after several days of conspicuous activity and steady advances, rose to 52, he promptly sold “short” 5,000 shares—believing that the barefaced manipulation would not raise the stock much above that figure, and that before long it must decline. Only a month previously it had sold at 35 and nobody wanted any of it. He was all the more decided in his opinion that the “top” had been reached by prices, because Mr. Dorr, in a Chicago paper, had stated that the stockholders would probably receive an entire year’s dividend at one fell swoop by reason of the unexampled prosperity in the steel rod trade. Such an action was unprecedented. It had been talked about at various times in connection with other stocks, but it had never come true. Why should it come true in this instance?
Hayward, familiar with Dorr’s record, promptly “coppered” his “tip” to buy, banking on Dorr’s consistent mendacity. But Mr. William G. Dorr, shrewdest and boldest of all Western stock gamblers, fooled everybody—he actually told the truth. That week the directors did exactly as he had predicted. When a speculator of his calibre lies he fools only one half—the foolish half—of the Street. When he tells the truth he deceives everybody. Before Wall Street could recover from the shock the price of the stock was up 5 points, which meant that Hayward was out $25,000 on that deal alone. But, in addition, the general list was carried upward sympathetically. The semi-paralyzed bulls regained confidence as they saw the successful outcome of the Chicago gambler’s manœuvres in Consolidated Steel Rod. Money rates and bear hopes fell; stock values and bull courage rose! Hayward began “covering” Steel Rod. He “bought in” 5,000 shares, and after he finished he had lost $26,750 by the deal. He was still “short” about 12,000 shares of other stocks, on which his “paper” losses, at the last quoted prices, were over $35,000; but if he tried to buy back such a large amount of stock in a market so sensitive to any kind of bull impetus, he would send prices upward in a jiffy, increasing his own losses very materially.
He went to his office that morning in a tremor. He consulted the cashier, and found he had only $52,000 at the bank, of which two thirds belonged to his customers. He was already, morally speaking, an embezzler. He was ruined if he didn’t cover, and he was ruined if he did. His “seat” on the Stock Exchange was worth possibly $40,000, not a cent more; and as he personally owed his out-of-town correspondents nearly $38,000, he could not avoid being hopelessly ruined. Moreover, his bankruptcy would not be an “honest” failure, for, as he told himself bitterly, after the harm was done, “I had no business to speculate on my own hook with other people’s money.”
He had felt it rather than had seen it coming, for, gambler-like, he had closed his eyes and had buried his head in the sand of hope, trusting in luck to protect him from punishment. But now he was face to face with the question that every gambler dreads: “If I stood to lose all, how desperate a risk would I take in order to get it back?” The answer is usually so appallingly thief-like that the numerous Haywards of the Stock Exchange and the Board of Trade forthwith stop thinking with a suddenness that does credit to the remnants of their honesty. But it haunts them, does the ominous question and the commenced but unfinished answer.
As he left his office to go to the “Board Room” he put to himself the fateful query. But he would not let himself answer it until he had stopped at “Fred’s,” the official barroom of the Stock Exchange, and had taken a stiff drink of raw whiskey. Then the answer came.
He was ruined anyhow. If he failed without further ado, that is, without increasing his liabilities, he would be cursed by twenty-five of his customers and by fifteen of his fellow-brokers who were “lending” stocks to him. But if he made one last desperate effort, he might pull out of the hole; or, at the worst, why, the number of cursing customers would remain the same, but the fellow-brokers would rise to twenty or thirty.
He took another stiff drink. The market had become undoubtedly a bull market. The bears had been fighting the advance, and there still remained a stubborn short interest in certain stocks, as, for example, in American Sugar Company stock. Now if that short interest could be stampeded it might mean an eight or ten-point advance. If he bought 10,000 or 15,000 shares and sold them at an average profit of four or five points, he would put off the disaster, and if he made ten points he would be a great operator. He had, to be sure, no business to buy even 1,000 shares of Sugar; but then he had no business to be on the verge of bankruptcy.
The liquor was potent. Sally said to himself, aggrievedly: “I might as well be hung for a flock as for one measly old mutton.”
He walked a trifle unsteadily from “Fred’s” across the narrow asphalted New Street to the Stock Exchange. He paused at the entrance. There was no escape. Unless he could make a lucky strike, he would fail ignominiously.
“Pike’s Peak or bust!” he muttered to himself, and walked into the big room.
“Good-morning, Mr. Hayward,” said the doorkeeper. Hayward nodded absently, caught himself repeating, “Pike’s Peak or bust!” and walked straight toward the Sugar post.
He began to bid for stock. One thousand shares at 116; he got it. Another thousand; it was forthcoming at 116⅛. A third thousand; somebody was glad to sell it at 116½. So far, so bad. Then he bid 117 for 2,500 shares, and it was promptly sold. But when he bid “117 for any part of 5,000!” the crowd hesitated; the brokers were not altogether sure Hayward was “good for it”; his ability to pay for the stock was not undoubted. So Sally, taking advantage of the hesitation, bid 117¼ and 117½ for 5,000 Sugar, at which price “Billy” Thatcher, a two-dollar broker, sold it to him. It made 10,500 shares Hayward had bought, and the stock had risen only 1½ points. The shorts were not frightened a wee bit. But Sally was. He rushed out of the crowd to his telephone and made a pretence of “reporting” the transactions to his office, as he would have done had they been bona fide purchases. He was followed by a hundred sharply curious—and curiously sharp—eyes. They saw him hold the telephone receiver to his ear with an expression of great interest, as if he were listening to an important message. But the only message he heard was that of his heart-beats, that seemed to say, almost articulately: “You have played and you have lost; you have played and you have lost. Therefore, you are that much worse off than before. You must play again—and not lose!”
He left his telephone and rushed back to the Sugar crowd. He was less excited, less like a drunken man; his face was no longer flushed, but pale. And anon there flashed upon him, as if in candent letters, the words Pike’s Peak or bust! But Pike’s Peak glowed dully, feebly, while the alternative was of a lurid splendor. And he blinked his eyes and made a curious impatient motion with his hand, as one waves away an annoying insect.
He gave an order for 5,000 Sugar to his friend, Newton Hartley.
“Is this for yourself, Sally?” asked Hartley.
“No. It’s for one of the biggest men in the Street, Newt. It’s all right. Absolutely O. K.”
And thus reassured, Hartley bought the stock. The price was 118. The seller would hold Hartley responsible for the purchase money if Hayward “laid down”—refused to pay.
Sally wiped his forehead twice, quite unnecessarily. The shorts were not stampeding. Any attempt to sell out the 15,000 shares he had bought would result only in depressing the price, five points at least. It was worse than bad, the outlook for him.
He gave another order to buy 5,000 shares to “Billy” Lansing, an old and reliable two-dollar broker, but Lansing declined it. He tried another, but the order was not accepted. They mistrusted him; but he could not even bluster, for they excused themselves on the ground of having important orders elsewhere. So he had recourse to another personal friend—J. G. Thompson.
“Joe, buy 5,000 Sugar.”
“Are you sober?” said Thompson, seriously.
“See for yourself,” answered Sally, laughingly. He had nerve. “Old man, I’ve got a very big order from one of the biggest men in the Street. Some important developments are going on.”
“Sally, are you sure you’ve got an order from some one else?” asked the unconvinced broker. His incredulity was obviously in the nature of an insult, but it was pardonable, for there was too much at stake.
“Joe, come over to the office and I’ll show you.—Really, I can’t tell you. But I can advise you, as a friend, to buy Sugar for all you are worth.” And as he uttered the lie he looked straight into Thompson’s eyes.
“Hayward, are you sure? Are you sure you’re not making a mistake?” He wanted the commission of $100, but he did not feel certain of his friend.
“Oh, hell, no. I’ve got a lot more to buy. It’s all right. Go ahead, Joe.”
And Joe went ahead. He bought the 5,000 shares. The stock rose to 119½, and Hayward, warned by his experience with Hartley and Thompson, did not ask either friend or foe to buy another 5,000 shares for him. What he did was to distribute buying orders for 10,000 shares in lots of 500. Brokers now accepted his orders, for they were not so large as to be dangerous. And the stock rose to 122¾. A few shorts were frightened. He might win out after all; he might make Pike’s Peak. He began to bid up the stock. He even bought “cash” stock, that is, stock for which he paid cash, had to pay cash outright, receiving the certificates forthwith, presumably to hand over to some investor of millions. Everybody on the “floor” was talking about Hayward. The entire market had risen in sympathy with Sugar.
But at 124 it seemed as if the entire capital stock was for sale. He ceased buying. He had accumulated 38,000 shares. To pay for the stock necessitated about six and one-half millions! But if he could unload on an average of only 122 he might “come out even” in his other troubles.
He gave an order to sell 10,000 shares to a broker to whom he had always been a good friend. It was a fatal mistake. The broker, Louis W. Wechsler, had previously sold 1,000 shares to Hayward for “cash” at 122. He suspected what was coming, and declining the order, he himself went to Hayward’s office and asked for a check. The cashier sought to put him off with excuses, and Wechsler now being certain of the true state of affairs, returned to the Board and began to sell Sugar short for his own account. If a crash came he would make instead of losing it. Hayward was sure to be ruined, and Wechsler told himself sophistically that he was only profiting by the inevitable. In the meantime Sally had sold the 10,000 shares through another broker, and the price had declined to 121¾. But Wechsler’s 5,000 shares put it down to 120½. And somebody else sold more, and the shorts recovered from their fright, and the fatal hour was approaching when Hayward would have to settle. Pike’s Peak or bust! He did, indeed, need a veritable Pike’s Peak of dollars to pay for the 28,000 Sugar he had on hand. So he busted.
He threw up his hands. He acknowledged defeat to himself. The tension was over. He was no longer excited, but cool, almost cynical. On one of the little slips of paper on which brokers jot down memoranda of their transactions he scribbled a message in lead pencil. It was his last official lie, and would cost Hartley and Thompson and other friends, as well as his customers, many thousands of dollars. It was as follows:
“Owing to the refusal of their bank to extend the usual facilities to them, Hayward & Co. are compelled to announce their suspension.”
“Boy!” he yelled. And he gave the bit of paper to one of the Exchange messenger boys in gray. “Take this to the Chairman.”
And he walked slowly, almost swaggeringly, out of the New York Stock Exchange—for the last time—as the Chairman pounded with his gavel until the usual crowd gathered about the rostrum, and listened to the announcement of the failure of “Sally” Hayward, who began as a nice little telephone-boy and ended as a stock-gambler.