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.
There has been much gossip about a disagreement between John Prentiss and myself. People have been led to expect a dramatic narrative of a stock-market deal that went wrong or some double-crossing that cost me—or him—millions; or something of that sort. Well, it wasn’t.
Prentiss and I had been friendly for years. He had given me at various times information that I was able to utilise profitably, and I had given him advice which he may or may not have followed. If he did he saved money.
He was largely instrumental in the organisation and promotion of the Petroleum Products Company. After a more or less successful market début general conditions changed for the worse and the new stock did not fare as well as Prentiss and his associates had hoped. When basic conditions took a turn for the better Prentiss formed a pool and began operations in Pete Products.
I cannot tell you anything about his technique. He didn’t tell me how he worked and I didn’t ask him. But it was plain that notwithstanding his Wall Street experience and his undoubted cleverness, whatever it was he did proved of little value and it didn’t take the pool long to find out that they couldn’t get rid of much stock. He must have tried everything he knew, because a pool manager does not ask to be superseded by an outsider unless he feels unequal to the task, and that is the last thing the average man likes to admit. At all events he came to me and after some friendly preliminaries he said he wanted me to take charge of the market for Pete Products and dispose of the pool’s holdings, which amounted to a little over one hundred thousand shares. The stock was selling at 102 to 103.
The thing looked dubious to me and I declined his proposition with thanks. But he insisted that I accept. He put it on personal grounds, so that in the end I consented. I constitutionally dislike to identify myself with enterprises in the success of which I cannot feel confidence, but I also think a man owes something to his friends and acquaintances. I said I would do my best, but I told him I did not feel very cocky about it and I enumerated the adverse factors that I would have to contend with. But all Prentiss said to that was that he wasn’t asking me to guarantee millions in profits to the pool. He was sure that if I took hold I’d make out well enough to satisfy any reasonable being.
Well, there I was, engaged in doing something against my own judgment. I found, as I feared, a pretty tough state of affairs, due in great measure to Prentiss’ own mistakes while he was manipulating the stock for account of the pool. But the chief factor against me was time. I was convinced that we were rapidly approaching the end of a bull swing and therefore that the improvement in the market, which had so encouraged Prentiss, would prove to be merely a short-lived rally. I feared that the market would turn definitely bearish before I could accomplish much with Pete Products. However, I had given my promise and I decided to work as hard as I knew how.
I started to put up the price. I had moderate success. I think I ran it up to 107 or thereabouts, which was pretty fair, and I was even able to sell a little stock on balance. It wasn’t much, but I was glad not to have increased the pool’s holdings. There were a lot of people not in the pool who were just waiting for a small rise to dump their stock, and I was a godsend to them. Had general conditions been better I also would have done better. It was too bad that I wasn’t called in earlier. All I could do now, I felt, was to get out with as little loss as possible to the pool.
I sent for Prentiss and told him my views. But he started to object. I then explained to him why I took the position I did. I said: “Prentiss, I can feel very plainly the pulse of the market. There is no follow-up in your stock. It is no trick to see just what the public’s reaction is to my manipulation. Listen: When Pete Products is made as attractive to traders as possible and you give it all the support needed at all times and notwithstanding all that you find that the public leaves it alone you may be sure that there is something wrong, not with the stock but with the market. There is absolutely no use in trying to force matters. You are bound to lose if you do. A pool manager should be willing to buy his own stock when he has company. But when he is the only buyer in the market he’d be an ass to buy it. For every five thousand shares I buy the public ought to be willing or able to buy five thousand more. But I certainly am not going to do all the buying. If I did, all I would succeed in doing would be to get soaked with a lot of long stock that I don’t want. There is only one thing to do, and that is to sell. And the only way to sell is to sell.”
“You mean, sell for what you can get?” asked Prentiss.