When the insiders jacked up the price of Tropical Trading with a view to frightening the shorts I didn’t try to check the rise by selling that stock. I was already short 30,000 shares of it which was as big a percentage of the floating supply as I thought wise to be short of. I did not propose to put my head into the noose so obligingly held open for me—the second rally was really an urgent invitation. What I did when TT touched 149 was to sell about 10,000 shares of Equatorial Commercial Corporation. This company owned a large block of Tropical Trading.

Equatorial Commercial, which was not as active a stock as TT, broke badly on my selling, as I had foreseen; and, of course, my purpose was achieved. When the traders—and the customers of the commission houses who had listened to the uncontradicted bull dope on TT—saw that the rise in Tropical synchronised with heavy selling and a sharp break in Equatorial, they naturally concluded that the strength of TT was merely a smoke-screen—a manipulated advance obviously designed to facilitate inside liquidation in Equatorial Commercial, which was largest holder of TT stock. It must be both long stock and inside stock in Equatorial, because no outsider would dream of selling so much short stock at the very moment when Tropical Trading was so very strong. So they sold Tropical Trading and checked the rise in that stock, the insiders very properly not wishing to take all the stock that was pressed for sale. The moment the insiders took away their support the price of TT declined. The traders and principal commission houses now sold some Equatorial also and I took in my short line in that at a small profit. I hadn’t sold it to make money out of the operation but to check the rise in TT.

Time and again the Tropical Trading insiders and their hard-working publicity man flooded the Street with all manner of bull items and tried to put up the price. And every time they did I sold Equatorial Commercial short and covered it with TT reacted and carried EC with it. It took the wind out of the manipulators’ sails. The price of TT finally went down to 125 and the short interest really grew so big that the insiders were enabled to run it up 20 or 25 points. This time it was a legitimate enough drive against an over-extended short interest; but while I foresaw the rally I did not cover, not wishing to lose my position. Before Equatorial Commercial could advance in sympathy with the rise in TT I sold a raft of it short—with the usual results. This gave the lie to the bull talk in TT which had got quite boisterous after the latest sensational rise.

By this time the general market had grown quite weak. As I told you, it was the conviction that we were in a bear market that started me selling TT short in the fishing-camp in Florida. I was short of quite a few other stocks but TT was my pet. Finally, general conditions proved too much for the inside clique to defy and TT hit the toboggan slide. It went below 120 for the first time in years; then below 110; below par; and still I did not cover. One day when the entire market was extremely weak Tropical Trading broke 90 and on the demoralisation I covered. Same old reason! I had the opportunity—the big market and the weakness and the excess of sellers over buyers. I may tell you, even at the risk of appearing to be monotonously bragging of my cleverness, that I took in my 30,000 shares of TT at practically the lowest prices of the movement. But I wasn’t thinking of covering at the bottom. I was intent on turning my paper profits into cash without losing much of the profit in the changing.

I stood pat throughout because I knew my position was sound. I wasn’t bucking the trend of the market or going against basic conditions but the reverse, and that was what made me so sure of the failure of an over-confident inside clique. What they tried to do others had tried before and it had always failed. The frequent rallies, even when I knew as well as anybody that they were due, could not frighten me. I knew I’d do much better in the end by staying pat than by trying to cover to put out a new short line at a higher price. By sticking to the position that I felt was right I made over a million dollars. I was not indebted to hunches or to skillful tape reading or to stubborn courage. It was a dividend declared by my faith in my judgment and not by my cleverness or by my vanity. Knowledge is power and power need not fear lies—not even when the tape prints them. The retraction follows pretty quickly.

A year later, TT was jacked up again to 150 and hung around there for a couple of weeks. The entire market was entitled to a good reaction for it had risen uninterruptedly and it did not bull any longer. I know because I tested it. Now, the group to which TT belonged had been suffering from very poor business and I couldn’t see anything to bull those stocks on anyhow, even if the rest of the market were due for a rise, which it wasn’t. So I began to sell Tropical Trading. I intended to put out 10,000 shares in all. The price broke on my selling. I couldn’t see that there was any support whatever. Then suddenly, the character of the buying changed.

I am not trying to make myself out a wizard when I assure you that I could tell the moment support came in. It instantly struck me that if the insiders in that stock, who never felt a moral obligation to keep the price up, were now buying the stock in the face of a declining general market there must be a reason. They were not ignorant asses nor philanthropists nor yet bankers concerned with keeping the price up to sell more securities over the counter. The price rose notwithstanding my selling and the selling of others. At 153 I covered my 10,000 shares and at 156 I actually went long because by that time the tape told me the line of least resistance was upward. I was bearish on the general market but I was confronted by a trading condition in a certain stock and not by a speculative theory in general. The price went out of sight, above 200. It was the sensation of the year. I was flattered by reports spoken and printed that I had been squeezed out of eight or nine millions of dollars. As a matter of fact, instead of being short I was long of TT all the way up. In fact, I held on a little too long and let some of my paper profits get away. Do you wish to know why I did? Because I thought the TT insiders would naturally do what I would have done had I been in their place. But that was something I had no business to think because my business is to trade—that is, to stick to the facts before me and not to what I think other people ought to do.

XIX

I do not know when or by whom the word “manipulation” was first used in connection with what really are no more than common merchandising processes applied to the sale in bulk of securities on the Stock Exchange. Rigging the market to facilitate cheap purchases of a stock which it is desired to accumulate is also manipulation. But it is different. It may not be necessary to stoop to illegal practices, but it would be difficult to avoid doing what some would think illegitimate. How are you going to buy a big block of a stock in a bull market without putting up the price on yourself? That would be the problem. How can it be solved? It depends upon so many things that you can’t give a general solution unless you say: possibly by means of very adroit manipulation. For instance? Well, it would depend upon conditions. You can’t give any closer answer than that.