Of course what I have described is not my invariable practice. I neither have nor adhere to an inflexible system. I modify my terms and conditions according to circumstances.
A stock which it is desired to distribute should be manipulated to the highest possible point and then sold. I repeat this both because it is fundamental and because the public apparently believes that the selling is all done at the top. Sometimes a stock gets waterlogged, as it were; it doesn’t go up. That is the time to sell. The price naturally will go down on your selling rather further than you wish, but you can generally nurse it back. As long as a stock that I am manipulating goes up on my buying I know I am hunky, and if need be I buy it with confidence and use my own money without fear—precisely as I would any other stock that acts the same way. It is the line of least resistance. You remember my trading theories about that line, don’t you? Well, when the price line of least resistance is established I follow it, not because I am manipulating that particular stock at that particular moment but because I am a stock operator at all times.
When my buying does not put the stock up I stop buying and then proceed to sell it down; and that also is exactly what I would do with that same stock if I did not happen to be manipulating it. The principal marketing of the stock, as you know, is done on the way down. It is perfectly astonishing how much stock a man can get rid of on a decline.
I repeat that at no time during the manipulation do I forget to be a stock trader. My problems as a manipulator, after all, are the same that confront me as an operator. All manipulation comes to an end when the manipulator cannot make a stock do what he wants it to do. When the stock you are manipulating doesn’t act as it should, quit. Don’t argue with the tape. Do not seek to lure the profit back. Quit while the quitting is good—and cheap.
XXI
I am well aware that all these generalities do not sound especially impressive. Generalities seldom do. Possibly I may succeed better if I give a concrete example. I’ll tell you how I marked up the price of a stock 30 points, and in so doing accumulated only seven thousand shares and developed a market that would absorb almost any amount of stock.
It was Imperial Steel. The stock had been brought out by reputable people and it had been fairly well tipped as a property of value. About 30 per cent of the capital stock was placed with the general public through various Wall Street houses, but there had been no significant activity in the shares after they were listed. From time to time somebody would ask about it and one or another insider—members of the original underwriting syndicate—would say that the company’s earnings were better than expected and the prospects more than encouraging. This was true enough and very good as far as it went, but not exactly thrilling. The speculative appeal was absent, and from the investor’s point of view the price stability and dividend permanency of the stock were not yet demonstrated. It was a stock that never behaved sensationally. It was so gentlemanly that no corroborative rise ever followed the insiders’ eminently truthful reports. On the other hand, neither did the price decline.
Imperial Steel remained unhonoured and unsung and untipped, content to be one of those stocks that don’t go down because nobody sells and that nobody sells because nobody likes to go short of a stock that is not well distributed; the seller is too much at the mercy of the loaded-up inside clique. Similarly, there is no inducement to buy such a stock. To the investor Imperial Steel therefore remained a speculation. To the speculator it was a dead one—the kind that makes an investor of you against your will by the simple expedient of falling into a trance the moment you go long of it. The chap who is compelled to lug a corpse a year or two always loses more than the original cost of the deceased; he is sure to find himself tied up with it when some really good things come his way.
One day the foremost member of the Imperial Steel syndicate, acting for himself and associates, came to see me. They wished to create a market for the stock, of which they controlled the undistributed 70 per cent. They wanted me to dispose of their holdings at better prices than they thought they would obtain if they tried to sell in the open market. They wanted to know on what terms I would undertake the job.