An old-timer heard me. He was one of those chaps that are always reminded of something. He said that William R. Travers, who was bearish, once met a friend who was bullish. They exchanged market views and the friend said, “Mr. Travers, how can you be bearish with the market so stiff?” and Travers retorted, “Yes! Th-the s-s-stiffness of d-death!” It was Travers who went to the office of a company and asked to be allowed to see the books. The clerk asked him, “Have you an interest in this company?” and Travers answered, “I sh-should s-say I had! I’m sh-short t-t-twenty thousand sh-shares of the stock!”
Well, the rallies grew feebler and feebler. I was pushing my luck for all I was worth. Every time I sold a few thousand shares of Great Northern preferred the price broke several points. I felt out weak spots elsewhere and let ’em have a few. All yielded, with one impressive exception; and that was Reading.
When everything else hit the toboggan slide Reading stood like the Rock of Gibraltar. Everybody said the stock was cornered. It certainly acted like it. They used to tell me it was plain suicide to sell Reading short. There were people in the office who were now as bearish on everything as I was. But when anybody hinted at selling Reading they shrieked for help. I myself had sold some short and was standing pat on it. At the same time I naturally preferred to seek and hit the soft spots instead of attacking the more strongly protected specialties. My tape reading found easier money for me in other stocks.
I heard a great deal about the Reading bull pool. It was a mighty strong pool. To begin with they had a lot of low-priced stock, so that their average was actually below the prevailing level, according to friends who told me. Moreover, the principal members of the pool had close connections of the friendliest character with the banks whose money they were using to carry their huge holdings of Reading. As long as the price stayed up the bankers’ friendship was staunch and steadfast. One pool member’s paper profit was upward of three millions. That allowed for some decline without causing fatalities. No wonder the stock stood up and defied the bears. Every now and then the room traders looked at the price, smacked their lips and proceeded to test it with a thousand shares or two. They could not dislodge a share, so they covered and went looking elsewhere for easier money. Whenever I looked at it I also sold a little more—just enough to convince myself that I was true to my new trading principles and wasn’t playing favourites.
In the old days the strength of Reading might have fooled me. The tape kept on saying, “Leave it alone!” But my reason told me differently. I was anticipating a general break, and there were not going to be any exceptions, pool or no pool.
I have always played a lone hand. I began that way in the bucket shops and have kept it up. It is the way my mind works. I have to do my own seeing and my own thinking. But I can tell you after the market began to go my way I felt for the first time in my life that I had allies—the strongest and truest in the world: underlying conditions. They were helping me with all their might. Perhaps they were a trifle slow at times bringing up the reserves, but they were dependable, provided I did not get too impatient. I was not pitting my tape-reading knack or my hunches against chance. The inexorable logic of events was making money for me.
The thing was to be right; to know it and to act accordingly. General conditions, my true allies, said “Down!” and Reading disregarded the command. It was an insult to us. It began to annoy me to see Reading holding firmly, as though everything was serene. It ought to be the best short sale in the entire list because it had not gone down and the pool was carrying a lot of stock that it would not be able to carry when the money stringency grew more pronounced. Some day the bankers’ friends would fare no better than the friendless public. The stock must go with the others. If Reading didn’t decline, then my theory was wrong; I was wrong; facts were wrong; logic was wrong.
I figured that the price held because the Street was afraid to sell it. So one day I gave to two brokers each an order to sell four thousand shares, at the same time.
You ought to have seen that cornered stock, that it was sure suicide to go short of, take a headlong dive when those competitive orders struck it. I let ’em have a few thousand more. The price was 111 when I started selling it. Within a few minutes I took in my entire short line at 92.
I had a wonderful time after that, and in February of 1907 I cleaned up. Great Northern preferred had gone down sixty or seventy points, and other stocks in proportion. I had made a good bit, but the reason I cleaned up was that I figured that the decline had discounted the immediate future. I looked for a fair recovery, but I wasn’t bullish enough to play for a turn. I wasn’t going to lose my position entirely. The market would not be right for me to trade in for a while. The first ten thousand I made in the bucket shops I lost because I traded in and out of season, every day, whether or not conditions were right. I wasn’t making that mistake twice. Also, don’t forget that I had gone broke a little while before because I had seen this break too soon and started selling before it was time. Now when I had a big profit I wanted to cash in so that I could feel I had been right. The rallies had broken me before. I wasn’t going to let the next rally wipe me out. Instead of sitting tight I went to Florida. I love fishing and I needed a rest. I could get both down there. And besides, there are direct wires between Wall Street and Palm Beach.