Reminiscences of a Stock Operator

by Edwin Lefevre

As a matter of fact, the change is by no means as radical as you’d imagine. The rewards are not so great, for it is no longer pioneer work and therefore it is not pioneer’s pay. But in certain respects manipulation is easier than it was; in other ways much harder than in Keene’s day.

There is no question that advertising is an art, and manipulation is the art of advertising through the medium of the tape. The tape should tell the story the manipulator wishes its readers to see. The truer the story the more convincing it is bound to be, and the more convincing it is the better the advertising is. A manipulator to-day, for instance, has not only to make a stock look strong but also to make it be strong. Manipulation therefore must be based on sound trading principles. That is what made Keene such a marvellous manipulator; he was a consummate trader to begin with.

The word “manipulation” has come to have an ugly sound. It needs an alias. I do not think there is anything so very mysterious or crooked about the process itself when it has for an object the selling of a stock in bulk, provided, of course, that such operations are not accompanied by misrepresentation. There is little question that a manipulator necessarily seeks his buyers among speculators. He turns to men who are looking for big returns on their capital and are therefore willing to run a greater than normal business risk. I can’t have much sympathy for the man who, knowing this, nevertheless blames others for his own failure to make easy money. He is a devil of a clever fellow when he wins. But when he loses money the other fellow was a crook; a manipulator! In such moments and from such lips the word connotes the use of marked cards. But this is not so.

Usually the object of manipulation is to develop marketability—that is, the ability to dispose of fair-sized blocks at some price at any time. Of course a pool, by reason of a reversal of general market conditions, may find itself unable to sell except at a sacrifice too great to be pleasing. They then may decide to employ a professional, believing that his skill and experience will enable him to conduct an orderly retreat instead of suffering an appalling rout.

You will notice that I do not speak of manipulation designed to permit considerable accumulation of a stock as cheaply as possible, as, for instance, in buying for control, because this does not happen often nowadays.

When Jay Gould wished to cinch his control of Western Union and decided to buy a big block of the stock, Washington E. Connor, who had not been seen on the floor of the Stock Exchange for years, suddenly showed up in person at the Western Union Post. He began to bid for Western Union. The traders to a man laughed—at his stupidity in thinking them so simple—and they cheerfully sold him all the stock he wanted to buy. It was too raw a trick, to think he could put up the price by acting as though Mr. Gould wanted to buy Western Union. Was that manipulation? I think I can only answer that by saying “No; and yes!”

In the majority of cases the object of manipulation is, as I said, to sell stock to the public at the best possible price. It is not alone a question of selling but of distributing. It is obviously better in every way for a stock to be held by a thousand people than by one man—better for the market in it. So it is not alone the sale at a good price but the character of the distribution that a manipulator must consider.

There is no sense in marking up the price to a very high level if you cannot induce the public to take it off your hands later. Whenever inexperienced manipulators try to unload at the top and fail, old-timers look mighty wise and tell you that you can lead a horse to water but you cannot make him drink. Original devils! As a matter of fact, it is well to remember a rule of manipulation, a rule that Keene and his able predecessors well knew. It is this: Stocks are manipulated to the highest point possible and then sold to the public on the way down.

Let me begin at the beginning. Assume that there is some one—an underwriting syndicate or a pool or an individual—that has a block of stock which it is desired to sell at the best price possible. It is a stock duly listed on the New York Stock Exchange. The best place for selling it ought to be the open market, and the best buyer ought to be the general public. The negotiations for the sale are in charge of a man. He—or some present or former associate—has tried to sell the stock on the Stock Exchange and has not succeeded. He is—or soon becomes—sufficiently familiar with stock-market operations to realise that more experience and greater aptitude for the work are needed than he possesses. He knows personally or by hearsay several men who have been successful in their handling of similar deals, and he decides to avail himself of their professional skill. He seeks one of them as he would seek a physician if he were ill or an engineer if he needed that kind of expert.

Suppose he has heard of me as a man who knows the game. Well, I take it that he tries to find out all he can about me. He then arranges for an interview, and in due time calls at my office.