Transcriber’s Note

Table of Contents created by Transcriber and placed in the Public Domain.

Cover created by Transcriber and placed in the Public Domain.

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REMINISCENCES OF A STOCK OPERATOR

By Edwin Lefevre

with a new Introduction by Benton W. Davis

American Research Council · Larchmont, New York

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Copyright © 1923 by George H. Doran Company

All Rights Reserved

Reprinted by arrangement with Doubleday & Company, Inc.

Library of Congress Catalog Card Number: 64-23364 Printed in the United States of America

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To Jesse Lauriston Livermore

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CONTENTS

I	1
II	14
III	30
IV	39
V	55
VI	67
VII	80
VIII	87
IX	100
X	117
XI	131
XII	144
XIII	160
XIV	173
XV	190
XVI	199
XVII	215
XVIII	230
XIX	238
XX	245
XXI	257
XXII	273
XXIII	293
XXIV	304

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I1

I went to work when I was just out of grammar school. I got a job as quotation-board boy in a stock-brokerage office. I was quick at figures. At school I did three years of arithmetic in one. I was particularly good at mental arithmetic. As quotation-board boy I posted the numbers on the big board in the customers’ room. One of the customers usually sat by the ticker and called out the prices. They couldn’t come too fast for me. I have always remembered figures. No trouble at all.

There were plenty of other employes in that office. Of course I made friends with the other fellows, but the work I did, if the market was active, kept me too busy from ten A.M. to three P.M. to let me do much talking. I don’t care for it, anyhow, during business hours.

But a busy market did not keep me from thinking about the work. Those quotations did not represent prices of stocks to me, so many dollars per share. They were numbers. Of course, they meant something. They were always changing. It was all I had to be interested in—the changes. Why did they change? I didn’t know. I didn’t care. I didn’t think about that. I simply saw that they changed. That was all I had to think about five hours every day and two on Saturdays: that they were always changing.

That is how I first came to be interested in the behaviour of prices. I had a very good memory for figures. I could remember in detail how the prices had acted on the previous2 day, just before they went up or down. My fondness for mental arithmetic came in very handy.

I noticed that in advances as well as declines, stock prices were apt to show certain habits, so to speak. There was no end of parallel cases and these made precedents to guide me. I was only fourteen, but after I had taken hundreds of observations in my mind I found myself testing their accuracy, comparing the behaviour of stocks to-day with other days. It was not long before I was anticipating movements in prices. My only guide, as I say, was their past performances. I carried the “dope sheets” in my mind. I looked for stock prices to run on form. I had “clocked” them. You know what I mean.

You can spot, for instance, where the buying is only a trifle better than the selling. A battle goes on in the stock market and the tape is your telescope. You can depend upon it seven out of ten cases.

Another lesson I learned early is that there is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market to-day has happened before and will happen again. I’ve never forgotten that. I suppose I really manage to remember when and how it happened. The fact that I remember that way is my way of capitalizing experience.

I got so interested in my game and so anxious to anticipate advances and declines in all the active stocks that I got a little book. I put down my observations in it. It was not a record of imaginary transactions such as so many people keep merely to make or lose millions of dollars without getting the swelled head or going to the poorhouse. It was rather a sort of record of my hits and misses, and next to the determination of probable movements I was most interested in verifying whether I had observed accurately; in other words, whether I was right.

Say that after studying every fluctuation of the day in an active stock I would conclude that it was behaving as it always did before it broke eight or ten points. Well, I would3 jot down the stock and the price on Monday, and remembering past performances I would write down what it ought to do on Tuesday and Wednesday. Later I would check up with actual transcriptions from the tape.

That is how I first came to take an interest in the message of the tape. The fluctuations were from the first associated in my mind with upward or downward movements. Of course there is always a reason for fluctuations, but the tape does not concern itself with the why and wherefore. It doesn’t go into explanations. I didn’t ask the tape why when I was fourteen, and I don’t ask it to-day, at forty. The reason for what a certain stock does to-day may not be known for two or three days, or weeks, or months. But what the dickens does that matter? Your business with the tape is now—not to-morrow. The reason can wait. But you must act instantly or be left. Time and again I see this happen. You’ll remember that Hollow Tube went down three points the other day while the rest of the market rallied sharply. That was the fact. On the following Monday you saw that the directors passed the dividend. That was the reason. They knew what they were going to do, and even if they didn’t sell the stock themselves they at least didn’t buy it. There was no inside buying; no reason why it should not break.

Well, I kept up my little memorandum book perhaps six months. Instead of leaving for home the moment I was through with my work, I’d jot down the figures I wanted and would study the changes, always looking for the repetitions and parallelisms of behaviour—learning to read the tape, although I was not aware of it at the time.

One day one of the office boys—he was older than I—came to me where I was eating my lunch and asked me on the quiet if I had any money.

“Why do you want to know?” I said.

“Well,” he said, “I’ve got a dandy tip on Burlington. I’m going to play it if I can get somebody to go in with me.”

“How do you mean, play it?” I asked. To me the only4 people who played or could play tips were the customers—old jiggers with oodles of dough. Why, it cost hundreds, even thousands of dollars, to get into the game. It was like owning your private carriage and having a coachman who wore a silk hat.

“That’s what I mean; play it!” he said. “How much you got?”

“How much you need?”

“Well, I can trade in five shares by putting up $5.”

“How are you going to play it?”

“I’m going to buy all the Burlington the bucket shop will let me carry with the money I give him for margin,” he said. “It’s going up sure. It’s like picking up money. We’ll double ours in a jiffy.”

“Hold on!” I said to him, and pulled out my little dope book.

I wasn’t interested in doubling my money, but in his saying that Burlington was going up. If it was, my note-book ought to show it. I looked. Sure enough, Burlington, according to my figuring, was acting as it usually did before it went up. I had never bought or sold anything in my life, and I never gambled with the other boys. But all I could see was that this was a grand chance to test the accuracy of my work, of my hobby. It struck me at once that if my dope didn’t work in practice there was nothing in the theory of it to interest anybody. So I gave him all I had, and with our pooled resources he went to one of the near-by bucket shops and bought some Burlington. Two days later we cashed in. I made a profit of $3.12.

After that first trade, I got to speculating on my own hook in the bucket shops. I’d go during my lunch hour and buy or sell—it never made any difference to me. I was playing a system and not a favorite stock or backing opinions. All I knew was the arithmetic of it. As a matter of fact, mine was the ideal way to operate in a bucket shop, where all that a5 trader does is to bet on fluctuations as they are printed by the ticker on the tape.

It was not long before I was taking much more money out of the bucket shops than I was pulling down from my job in the brokerage office. So I gave up my position. My folks objected, but they couldn’t say much when they saw what I was making. I was only a kid and office-boy wages were not very high. I did mighty well on my own hook.

I was fifteen when I had my first thousand and laid the cash in front of my mother—all made in the bucket shops in a few months, besides what I had taken home. My mother carried on something awful. She wanted me to put it away in the savings bank out of reach of temptation. She said it was more money than she ever heard any boy of fifteen had made, starting with nothing. She didn’t quite believe it was real money. She used to worry and fret about it. But I didn’t think of anything except that I could keep on proving my figuring was right. That’s all the fun there is—being right by using your head. If I was right when I tested my convictions with ten shares I would be ten times more right if I traded in a hundred shares. That is all that having more margin meant to me—I was right more emphatically. More courage? No! No difference! If all I have is ten dollars and I risk it, I am much braver than when I risk a million, if I have another million salted away.

Anyhow, at fifteen I was making a good living out of the stock market. I began in the smaller bucket shops, where the man who traded in twenty shares at a clip was suspected of being John W. Gates in disguise or J. P. Morgan traveling incognito. Bucket shops in those days seldom lay down on their customers. They didn’t have to. There were other ways of parting customers from their money, even when they guessed right. The business was tremendously profitable. When it was conducted legitimately—I mean straight, as far as the bucket shop went—the fluctuations took care of the shoestrings. It doesn’t take much of a reaction to wipe out a6 margin of only three quarters of a point. Also, no welsher could ever get back in the game. Wouldn’t have any trade.

I didn’t have a following. I kept my business to myself. It was a one-man business, anyhow. It was my head, wasn’t it? Prices either were going the way I doped them out, without any help from friends or partners, or they were going the other way, and nobody could stop them out of kindness to me. I couldn’t see where I needed to tell my business to anybody else. I’ve got friends, of course, but my business has always been the same—a one-man affair. That is why I have always played a lone hand.

As it was, it didn’t take long for the bucket shops to get sore on me for beating them. I’d walk in and plank down my margin, but they’d look at it without making a move to grab it. They’d tell me there was nothing doing. That was the time they got to calling me the Boy Plunger. I had to be changing brokers all the time, going from one bucket shop to another. It got so that I had to give a fictitious name. I’d begin light, only fifteen or twenty shares. At times, when they got suspicious, I’d lose on purpose at first and then sting them proper. Of course after a while they’d find me too expensive and they’d tell me to take myself and my business elsewhere and not interfere with the owners’ dividends.

Once, when the big concern I’d been trading with for months shut down on me I made up my mind to take a little more of their money away from them. That bucket shop had branches all over the city, in hotel lobbies, and in near-by towns. I went to one of the hotel branches and asked the manager a few questions and finally got to trading. But as soon as I played an active stock my especial way he began to get messages from the head office asking who it was that was operating. The manager told me what they asked him and I told him my name was Edward Robinson, of Cambridge. He telephoned the glad news to the big chief. But the other end wanted to know what I looked like. When the manager told me that I said to him, “Tell him I am a short7 fat man with dark hair and a bushy beard!” But he described me instead, and then he listened and his face got red and he hung up and told me to beat it.

“What did they say to you?” I asked him politely.

“They said, ‘You blankety-blank fool, didn’t we tell you to take no business from Larry Livingston? And you deliberately let him trim us out of $700!’” He didn’t say what else they told him.

I tried the other branches one after another, but they all got to know me, and my money wasn’t any good in any of their offices. I couldn’t even go in to look at the quotations without some of the clerks making cracks at me. I tried to get them to let me trade at long intervals by dividing my visits among them all. But that didn’t work.

Finally there was only one left to me and that was the biggest and richest of all—the Cosmopolitan Stock Brokerage Company.

The Cosmopolitan was rated as A-1 and did an enormous business. It had branches in every manufacturing town in New England. They took my trading all right, and I bought and sold stocks and made and lost money for months, but in the end it happened with them as usual. They didn’t refuse my business point-blank, as the small concerns had. Oh, not because it wasn’t sportsmanship, but because they knew it would give them a black eye to publish the news that they wouldn’t take a fellow’s business just because that fellow happened to make a little money. But they did the next worse thing—that is, they made me put up a three-point margin and compelled me to pay a premium at first of a half point, then a point, and finally, a point and a half. Some handicap, that! How? Easy! Suppose Steel was selling at 90 and you bought it. Your ticket read, normally: “Bot ten Steel at 90⅛.” If you put up a point margin it meant that if it broke 89¼ you were wiped out automatically. In a bucket shop the customer is not importuned for more margin or put to the8 painful necessity of telling his broker to sell for anything he can get.

But when the Cosmopolitan tacked on that premium they were hitting below the belt. It meant that if the price was 90 when I bought, instead of making my ticket: “Bot Steel at 90⅛,” it read: “Bot Steel at 91⅛.” Why, that stock could advance a point and a quarter after I bought it and I’d still be losing money if I closed the trade. And by also insisting that I put up a three-point margin at the very start they reduced my trading capacity by two-thirds. Still, that was the only bucket shop that would take my business at all, and I had to accept their terms or quit trading.

Of course I had my ups and downs, but was a winner on balance. However, the Cosmopolitan people were not satisfied with the awful handicap they had tacked on me, which should have been enough to beat anybody. They tried to double-cross me. They didn’t get me. I escaped because of one of my hunches.

The Cosmopolitan, as I said, was my last resort. It was the richest bucket shop in New England, and as a rule they put no limit on a trade. I think I was the heaviest individual trader they had—that is, of the steady, every-day customers. They had a fine office and the largest and completest quotation board I have ever seen anywhere. It ran along the whole length of the big room and every imaginable thing was quoted. I mean stocks dealt in on the New York and Boston Stock Exchanges, cotton, wheat, provisions, metals—everything that was bought and sold in New York, Chicago, Boston and Liverpool.

You know how they traded in bucket shops. You gave your money to a clerk and told him what you wished to buy or sell. He looked at the tape or the quotation board and took the price from there—the last one, of course. He also put down the time on the ticket so that it almost read like a regular broker’s report—that is, that they had bought or sold for you so many shares of such a stock at such a price at9 such a time on such a day and how much money they received from you. When you wished to close your trade you went to the clerk—the same or another, it depended on the shop—and you told him. He took the last price or if the stock had not been active he waited for the next quotation that came out on the tape. He wrote that price and the time on your ticket, O.K.’d it and gave it back to you, and then you went to the cashier and got whatever cash it called for. Of course, when the market went against you and the price went beyond the limit set by your margin, your trade automatically closed itself and your ticket became one more scrap of paper.

In the humbler bucket shops, where people were allowed to trade in as little as five shares, the tickets were little slips—different colors for buying and selling—and at times, as for instance in boiling bull markets, the shops would be hard hit because all the customers were bulls and happened to be right. Then the bucket shop would deduct both buying and selling commissions and if you bought a stock at 20 the ticket would read 20¼. You thus had only ¾, of a point’s run for your money.

But the Cosmopolitan was the finest in New England. It had thousands of patrons and I really think I was the only man they were afraid of. Neither the killing premium nor the three-point margin they made me put up reduced my trading much. I kept on buying and selling as much as they’d let me. I sometimes had a line of 5000 shares.

Well, on the day the thing happened that I am going to tell you, I was short thirty-five hundred shares of Sugar. I had seven big pink tickets for five hundred shares each. The Cosmopolitan used big slips with a blank space on them where they could write down additional margin. Of course, the bucket shops never ask for more margin. The thinner the shoestring the better for them, for their profit lies in your being wiped. In the smaller shops if you wanted to margin your trade still further they’d make out a new ticket, so they10 could charge you the buying commission and only give you a run of ¾ of a point on each point’s decline, for they figured the selling commission also exactly as if it were a new trade.

Well, this day I remember I had up over $10,000 in margins.

I was only twenty when I first accumulated ten thousand dollars in cash. And you ought to have heard my mother. You’d have thought that ten thousand dollars in cash was more than anybody carried around except old John D., and she used to tell me to be satisfied and go into some regular business. I had a hard time convincing her that I was not gambling, but making money by figuring. But all she could see was that ten thousand dollars was a lot of money and all I could see was more margin.

I had put out my 3500 shares of Sugar at 105¼. There was another fellow in the room, Henry Williams, who was short 2500 shares. I used to sit by the ticker and call out the quotations for the board boy. The price behaved as I thought it would. It promptly went down a couple of points and paused a little to get its breath before taking another dip. The general market was pretty soft and everything looked promising. Then all of a sudden I didn’t like the way Sugar was doing its hesitating. I began to feel uncomfortable. I thought I ought to get out of the market. Then it sold at 103—that was low for the day—but instead of feeling more confident I felt more uncertain. I knew something was wrong somewhere, but I couldn’t spot it exactly. But if something was coming and I didn’t know where from, I couldn’t be on my guard against it. That being the case I’d better be out of the market.

You know, I don’t do things blindly. I don’t like to. I never did. Even as a kid I had to know why I should do certain things. But this time I had no definite reason to give to myself, and yet I was so uncomfortable that I couldn’t stand it. I called to a fellow I knew, Dave Wyman, and said to him: “Dave, you take my place here. I want you to do something11 for me. Wait a little before you call out the next price of Sugar, will you?”

He said he would, and I got up and gave him my place by the ticker so he could call out the prices for the boy. I took my seven Sugar tickets out of my pocket and walked over to the counter, to where the clerk was who marked the tickets when you closed your trades. But I didn’t really know why I should get out of the market, so I just stood there, leaning against the counter, my tickets in my hand so that the clerk couldn’t see them. Pretty soon I heard the clicking of a telegraph instrument and I saw Tom Burnham, the clerk, turn his head quickly and listen. Then I felt that something crooked was hatching, and I decided not to wait any longer. Just then Dave Wyman by the ticker, began: “Su—” and quick as a flash I slapped my tickets on the counter in front of the clerk and yelled, “Close Sugar!” before Dave had finished calling the price. So, of course, the house had to close my Sugar at the last quotation. What Dave called turned out to be 103 again.

According to my dope Sugar should have broken 103 by now. The engine wasn’t hitting right. I had the feeling that there was a trap in the neighbourhood. At all events, the telegraph instrument was now going like mad and I noticed that Tom Burnham, the clerk, had left my tickets unmarked where I laid them, and was listening to the clicking as if he were waiting for something. So I yelled at him: “Hey, Tom, what in hell are you waiting for? Mark the price on these tickets—103! Get a gait on!”

Everybody in the room heard me and began to look toward us and ask what was the trouble, for, you see, while the Cosmopolitan had never laid down, there was no telling, and a run on a bucket shop can start like a run on a bank. If one customer gets suspicious the others follow suit. So Tom looked sulky, but came over and marked my tickets “Closed at 103” and shoved the seven of them over toward me. He sure had a sour face.

12 Say, the distance from Tom’s place to the cashier’s cage wasn’t over eight feet. But I hadn’t got to the cashier to get my money when Dave Wyman by the ticker yelled excitedly: “Gosh! Sugar, 108!” But it was too late; so I just laughed and called over to Tom, “It didn’t work that time, did it, old boy?”

Of course, it was a put-up job. Henry Williams and I together were short six thousand shares of Sugar. That bucket shop had my margin and Henry’s, and there may have been a lot of other Sugar shorts in the office; possibly eight or ten thousand shares in all. Suppose they had $20,000 in Sugar margins. That was enough to pay the shop to thimblerig the market on the New York Stock Exchange and wipe us out. In the old days whenever a bucket shop found itself loaded with too many bulls on a certain stock it was a common practice to get some broker to wash down the price of that particular stock far enough to wipe out all the customers that were long of it. This seldom cost the bucket shop more than a couple of points on a few hundred shares, and they made thousands of dollars.

That was what the Cosmopolitan did to get me and Henry Williams and the other Sugar shorts. Their brokers in New York ran up the price to 108. Of course it fell right back, but Henry and a lot of others were wiped out. Whenever there was an unexplained sharp drop which was followed by instant recovery, the newspapers in those days used to call it a bucket-shop drive.

And the funniest thing was that not later than ten days after the Cosmopolitan people tried to double-cross me a New York operator did them out of over seventy thousand dollars. This man, who was quite a market factor in his day and a member of the New York Stock Exchange, made a great name for himself as a bear during the Bryan panic of ’96. He was forever running up against Stock Exchange rules that kept him from carrying out some of his plans at the expense of his fellow members. One day he figured that there13 would be no complaints from either the Exchange or the police authorities if he took from the bucket shops of the land some of their ill-gotten gains. In the instance I speak of he sent thirty-five men to act as customers. They went to the main office and to the bigger branches. On a certain day at a fixed hour the agents all bought as much of a certain stock as the managers would let them. They had instructions to sneak out at a certain profit. Of course what he did was to distribute bull tips on that stock among his cronies and then he went in to the floor of the Stock Exchange and bid up the price, helped by the room traders, who thought he was a good sport. Being careful to pick out the right stock for that work, there was no trouble in putting up the price three or four points. His agents at the bucket shops cashed in as prearranged.

A fellow told me the originator cleaned up seventy thousand dollars net, and his agents made their expenses and their pay besides. He played that game several times all over the country, punishing the bigger bucket shops of New York, Boston, Philadelphia, Chicago, Cincinnati and St. Louis. One of his favorite stocks was Western Union, because it was so easy to move a semiactive stock like that a few points up or down. His agents bought it at a certain figure, sold at two points profit, went short and took three points more. By the way, I read the other day that that man died, poor and obscure. If he had died in 1896 he would have got at least a column on the first page of every New York paper. As it was he got two lines on the fifth.

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14

II

Between the discovery that the Cosmopolitan Stock Brokerage Company was ready to beat me by foul means if the killing handicap of a three-point margin and a point-and-a-half premium didn’t do it, and hints that they didn’t want my business anyhow, I soon made up my mind to go to New York, where I could trade in the office of some member of the New York Stock Exchange. I didn’t want any Boston branch, where the quotations had to be telegraphed. I wanted to be close to the original source. I came to New York at the age of 21, bringing with me all I had, twenty-five hundred dollars.

I told you I had ten thousand dollars when I was twenty, and my margin on that Sugar deal was over ten thousand. But I didn’t always win. My plan of trading was sound enough and won oftener than it lost. If I had stuck to it I’d have been right perhaps as often as seven out of ten times. In fact, I always made money when I was sure I was right before I began. What beat me was not having brains enough to stick to my own game—that is, to play the market only when I was satisfied that precedents favored my play. There is a time for all things, but I didn’t know it. And that is precisely what beats so many men in Wall Street who are very far from being in the main sucker class. There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. No man can always have adequate reasons for buying15 or selling stocks daily—or sufficient knowledge to make his play an intelligent play.

I proved it. Whenever I read the tape by the light of experience I made money, but when I made a plain fool play I had to lose. I was no exception, was I? There was the huge quotation board staring me in the face, and the ticker going on, and people trading and watching their tickets turn into cash or into waste paper. Of course I let the craving for excitement get the better of my judgment. In a bucket shop where your margin is a shoestring you don’t play for long pulls. You are wiped too easily and quickly. The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street even among the professionals, who feel that they must take home some money every day, as though they were working for regular wages. I was only a kid, remember. [I did not know then what I learned later, what made me fifteen years later, wait two long weeks and see a stock on which I was very bullish go up thirty points before I felt that it was safe to buy it. I was broke and was trying to get back, and I couldn’t afford to play recklessly. I had to be right, and so I waited.] That was in 1915. It’s a long story. I’ll tell it later in its proper place. Now let’s go on from where after years of practice at beating them I let the bucket shops take away most of my winnings.

And with my eyes wide open, to boot! And it wasn’t the only period of my life when I did it, either. A stock operator has to fight a lot of expensive enemies within himself. Anyhow, I came to New York with twenty-five hundred dollars. There were no bucket shops here that a fellow could trust. The Stock Exchange and the police between them had succeeded in closing them up pretty tight. Besides, I wanted to find a place where the only limit to my trading would be the size of my stake. I didn’t have much of one, but I didn’t expect it to stay little forever. The main thing at the start was to find a place where I wouldn’t have to worry about getting16 a square deal. So I went to a New York Stock Exchange house that had a branch at home where I knew some of the clerks. They have long since gone out of business. I wasn’t there long, didn’t like one of the partners, and then I went to A. R. Fullerton & Co. Somebody must have told them about my early experiences, because it was not long before they all got to calling me the Boy Trader. I’ve always looked young. It was a handicap in some ways but it compelled me to fight for my own because so many tried to take advantage of my youth. The chaps at the bucket shops seeing what a kid I was, always thought I was a fool for luck and that was the only reason why I beat them so often.

Well, it wasn’t six months before I was broke. I was a pretty active trader and had a sort of reputation as a winner. I guess my commissions amounted to something. I ran up my account quite a little, but, of course, in the end I lost. I played carefully; but I had to lose. I’ll tell you the reason: it was my remarkable success in the bucket shops!

I could beat the game my way only in a bucket shop, where I was betting on fluctuations. My tape reading had to do with that exclusively. When I bought the price was there on the quotation board, right in front of me. Even before I bought I knew exactly the price I’d have to pay for my stock. And I always could sell on the instant. I could scalp successfully, because I could move like lightning. [I could follow up my luck or cut my loss in a second.] Sometimes, for instance, I was certain a stock would move at least a point. Well, I didn’t have to hog it, I could put up a point margin and double my money in a jiffy; or I’d take half a point. On one or two hundred shares a day, that wouldn’t be bad at the end of the month, what?

The practical trouble with that arrangement, of course, was that even if the bucket shop had the resources to stand a big steady loss, they wouldn’t do it. They wouldn’t have a customer around the place who had the bad taste to win all the time.

17 At all events, what was a perfect system for trading in bucket shops didn’t work in Fullerton’s office. There I was actually buying and selling stocks. The price of Sugar on the tape might be 105 and I could see a three-point drop coming. As a matter of fact, at the very moment the ticker was printing 105 on the tape the real price on the floor of the Exchange might be 104 or 103. By the time my order to sell a thousand shares got to Fullerton’s floor man to execute, the price might be still lower. I couldn’t tell at what price I had put out my thousand shares until I got a report from the clerk. When I surely would have made three thousand on the same transaction in a bucket shop I might not make a cent in a Stock Exchange house. Of course, I have taken an extreme case, but the fact remains that in A. R. Fullerton’s office the tape always talked ancient history to me, as far as my system of trading went, and I didn’t realise it.

And then, too, if my order was fairly big my own sale would tend further to depress the price. In the bucket shop I didn’t have to figure on the effect of my own trading. I lost in New York because the game was altogether different. It was not that I now was playing it legitimately that made me lose, but that I was playing it ignorantly. I have been told that I am a good reader of the tape. But reading the tape like an expert did not save me. I might have made out a great deal better if I had been on the floor myself, a room trader. In a particular crowd perhaps I might have adapted my system to the conditions immediately before me. But, of course, if I had got to operating on such a scale as I do now, for instance, the system would have equally failed me, on account of the effect of my own trading on prices.

In short, I did not know the game of stock speculation. I knew a part of it, a rather important part, which has been very valuable to me at all times. But if with all I had I still lost, what chance does the green outsider have of winning, or, rather, of cashing in?

It didn’t take me long to realise that there was something18 wrong with my play, but I couldn’t spot the exact trouble. There were times when my system worked beautifully, and then, all of a sudden, nothing but one swat after another. I was only twenty-two, remember; not that I was so stuck on myself that I didn’t want to know just where I was at fault, but that at that age nobody knows much of anything.

The people in the office were very nice to me. I couldn’t plunge as I wanted to because of their margin requirements, but old A. R. Fullerton and the rest of the firm were so kind to me that after six months of active trading I not only lost all I had brought and all that I had made there but I even owed the firm a few hundreds.

There I was, a mere kid, who had never before been away from home, flat broke; but I knew there wasn’t anything wrong with me; only with my play. I don’t know whether I make myself plain, but I never lose my temper over the stock market. I never argue with the tape. Getting sore at the market doesn’t get you anywhere.

I was so anxious to resume trading that I didn’t lose a minute, but went to old man Fullerton and said to him, “Say, A. R., lend me five hundred dollars.”

“What for?” says he.

“I’ve got to have some money.”

“What for?” he says again.

“For margin, of course,” I said.

“Five hundred dollars?” he said, and frowned. “You know they’d expect you to keep up a 10 per cent margin, and that means one thousand dollars on one hundred shares. Much better to give you a credit——”

“No,” I said, “I don’t want a credit here. I already owe the firm something. What I want is for you to lend me five hundred dollars so I can go out and get a roll and come back.”

“How are you going to do it?” asked old A. R.

“I’ll go and trade in a bucket shop,” I told him.

“Trade here,” he said.

19 “No,” I said. “I’m not sure yet I can beat the game in this office, but I am sure I can take money out of the bucket shops. I know that game. I have a notion that I know just where I went wrong here.”

He let me have it, and I went out of that office where the Boy Terror of the Bucket Shops, as they called him, had lost his pile. I couldn’t go back home because the shops there would not take my business. New York was out of the question; there weren’t any doing business at that time. They tell me that in the 90’s Broad Street and New Street were full of them. But there weren’t any when I needed them in my business. So after some thinking I decided to go to St. Louis. I had heard of two concerns there that did an enormous business all through the Middle West. Their profits must have been huge. They had branch offices in dozens of towns. In fact I had been told that there were no concerns in the East to compare with them for volume of business. They ran openly and the best people traded there without any qualms. A fellow even told me that the owner of one of the concerns was a vice-president of the Chamber of Commerce but that couldn’t have been in St. Louis. At any rate, that is where I went with my five hundred dollars to bring back a stake to use as margin in the office of A. R. Fullerton & Co., members of the New York Stock Exchange.

When I got to St. Louis I went to the hotel, washed up and went out to find the bucket shops. One was the J. G. Dolan Company, and the other was H. S. Teller & Co. I knew I could beat them. I was going to play dead safe—carefully and conservatively. My one fear was that somebody might recognize me and give me away, because the bucket shops all over the country had heard of the Boy Trader. They are like gambling houses and get all the gossip of the profesh.

Dolan was nearer than Teller, and I went there first. I was hoping I might be allowed to do business a few days before they told me to take my trade somewhere else. I walked in. It was a whopping big place and there must have been at20 least a couple of hundred people there staring at the quotations. I was glad, because in such a crowd I stood a better chance of being unnoticed. I stood and watched the board and looked them over carefully until I picked out the stock for my initial play.

I looked around and saw the order-clerk at the window where you put down your money and get your ticket. He was looking at me so I walked up to him and asked, “Is this where you trade in cotton and wheat?”

“Yes, sonny,” says he.

“Can I buy stocks too?”

“You can if you have the cash,” he said.

“Oh, I got that all right, all right,” I said like a boasting boy.

“You have, have you?” he says with a smile.

“How much stock can I buy for one hundred dollars?” I asked, peeved-like.

“One hundred; if you got the hundred.”

“I got the hundred. Yes; and two hundred too!” I told him.

“Oh, my!” he said.

“Just you buy me two hundred shares,” I said sharply.

“Two hundred what?” he asked, serious now. It was business.

I looked at the board again as if to guess wisely and told him, “Two hundred Omaha.”

“All right!” he said. He took my money, counted it and wrote out the ticket.

“What’s your name?” he asked me, and I answered, “Horace Kent.”

He gave me the ticket and I went away and sat down among the customers to wait for the roll to grow. I got quick action and I traded several times that day. On the next day too. In two days I made twenty-eight hundred dollars, and I was hoping they’d let me finish the week out. At the rate I was going, that wouldn’t be so bad. Then I’d tackle the other21 shop, and if I had similar luck there I’d go back to New York with a wad I could do something with.

On the morning of the third day, when I went to the window, bashful-like, to buy five hundred B.R.T. the clerk said to me, “Say, Mr. Kent, the boss wants to see you.”

I knew the game was up. But I asked him, “What does he want to see me about?”

“I don’t know.”

“Where is he?”

“In his private office. Go in that way.” And he pointed to a door.

I went in. Dolan was sitting at his desk. He swung around and said, “Sit down, Livingston.”

He pointed to a chair. My last hope vanished. I don’t know how he discovered who I was; perhaps from the hotel register.

“What do you want to see me about?” I asked him.

“Listen, kid. I ain’t got nothin’ agin yeh, see? Nothin’ at all. See?”

“No, I don’t see,” I said.

He got up from his swivel chair. He was a whopping big guy. He said to me, “Just come over here, Livingston, will yeh?” and he walked to the door. He opened it and then he pointed to the customers in the big room.

“D’yeh see them?” he asked me.

“See what?”

“Them guys. Take a look at ’em, kid. There’s three hundred of ’em! Three hundred suckers! They feed me and my family. See? Three hundred suckers! Then yeh come in, and in two days yeh cop more than I get out of the three hundred in two weeks. That ain’t business, kid—not for me! I ain’t got nothin’ agin yeh. Yer welcome to what ye’ve got. But yeh don’t any more. There ain’t any here for yeh!”

“Why, I——”

“That’s all. I seen yeh come in day before yesterday, and22 I didn’t like yer looks. On the level, I didn’t. I spotted yeh for a ringer. I called in that jackass there”—he pointed to the guilty clerk—“and asked what you’d done; and when he told me I said to him: ‘I don’t like that guy’s looks. He’s a ringer!’ And that piece of cheese says: ‘Ringer my eye, boss! His name is Horace Kent, and he’s a rah-rah boy playing at being used to long pants. He’s all right!’ Well, I let him have his way. That blankety-blank cost me twenty-eight hundred dollars. I don’t grudge it yeh, my boy. But the safe is locked for yeh.”

“Look here—” I began.

“You look here, Livingston,” he said. “I’ve heard all about yeh. I make my money coppering suckers’ bets, and yeh don’t belong here. I aim to be a sport and yer welcome to what yeh pried off’n us. But more of that would make me a sucker, now that I know who yeh are. So toddle along, sonny!”

I left Dolan’s place with my twenty-eight hundred dollars’ profit. Teller’s place was in the same block. I had found out that Teller was a very rich man who also ran up a lot of pool rooms. I decided to go to his bucket shop. I wondered whether it would be wise to start moderately and work up to a thousand shares or to begin with a plunge, on the theory that I might not be able to trade more than one day. They get wise mighty quick when they’re losing and I did want to buy one thousand B.R.T. I was sure I could take four or five points out of it. But if they got suspicious or if too many customers were long of that stock they might not let me trade at all. I thought perhaps I’d better scatter my trades at first and begin small.

It wasn’t as big a place as Dolan’s, but the fixtures were nicer and evidently the crowd was of a better class. This suited me down to the ground and I decided to buy my one thousand B.R.T. So I stepped up to the proper window and said to the clerk, “I’d like to buy some B.R.T. What’s the limit?”

23 “There’s no limit,” said the clerk. “You can buy all you please—if you’ve got the money.”

“Buy fifteen hundred shares,” I says, and took my roll from my pocket while the clerk starts to write the ticket.

Then I saw a red-headed man just shove that clerk away from the counter. He leaned across and said to me, “Say, Livingston, you go back to Dolan’s. We don’t want your business.”

“Wait until I get my ticket,” I said. “I just bought a little B.R.T.”

“You get no ticket here,” he said. By this time other clerks had got behind him and were looking at me. “Don’t ever come here to trade. We don’t take your business. Understand?”

There was no sense in getting mad or trying to argue, so I went back to the hotel, paid my bill and took the first train back to New York. It was tough. I wanted to take back some real money and that Teller wouldn’t let me make even one trade.

I got back to New York, paid Fullerton his five hundred, and started trading again with the St. Louis money. I had good and bad spells, but I was doing better than breaking even. After all, I didn’t have much to unlearn; only to grasp the one fact that there was more to the game of stock speculation than I had considered before I went to Fullerton’s office to trade. I was like one of those puzzle fans, doing the crossword puzzles in the Sunday supplement. He isn’t satisfied until he gets it. Well, I certainly wanted to find the solution to my puzzle. I thought I was done with trading in bucket shops. But I was mistaken.

About a couple of months after I got back to New York an old jigger came into Fullerton’s office. He knew A.R. Somebody said they’d once owned a string of race horses together. It was plain he’d seen better days. I was introduced to old McDevitt. He was telling the crowd about a bunch of Western race-track crooks who had just pulled off some24 skin game out in St. Louis. The head devil, he said, was a pool-room owner by the name of Teller.

“What Teller?” I asked him.

“Hi Teller; H. S. Teller.”

“I know that bird,” I said.

“He’s no good,” said McDevitt.

“He’s worse than that,” I said, “and I have a little matter to settle with him.”

“Meaning how?”

“The only way I can hit any of the short sports is through their pocketbook. I can’t touch him in St. Louis just now, but some day I will.” And I told McDevitt my grievance.

“Well,” says old Mac, “he tried to connect here in New York and couldn’t make it, so he’s opened a place in Hoboken. The word’s gone out that there is no limit to the play and that the house roll has got the Rock of Gibraltar faded to the shadow of a bantam flea.”

“What sort of a place?” I thought he meant pool room.

“Bucket shop,” said McDevitt.

“Are you sure it’s open?”

“Yes; I’ve seen several fellows who’ve told me about it.”

“That’s only hearsay,” I said. “Can you find out positively if it’s running, and also how heavy they’ll really let a man trade?”

“Sure, sonny,” said McDevitt. “I’ll go myself to-morrow morning, and come back and tell you.”

He did. It seems Teller was already doing a big business and would take all he could get. This was on Friday. The market had been going up all that week—this was twenty years ago, remember—and it was a cinch the bank statement on Saturday would show a big decrease in the surplus reserve. That would give the conventional excuse to the big room traders to jump on the market and try to shake out some of the weak commission-house accounts. There would be the usual reactions in the last half hour of the trading, particularly in stocks in which the public had been the most25 active. Those, of course, also would be the very stocks that Teller’s customers would be most heavily long of, and the shop might be glad to see some short selling in them. There is nothing so nice as catching the suckers both ways; and nothing so easy—with one-point margins.

That Saturday morning I chased over to Hoboken to the Teller place. They had fitted up a big customers’ room with a dandy quotation board and a full force of clerks and a special policeman in gray. There were about twenty-five customers.

I got talking to the manager. He asked me what he could do for me and I told him nothing; that a fellow could make much more money at the track on account of the odds and the freedom to bet your whole roll and stand to win thousands in minutes instead of piking for chicken feed in stocks and having to wait days, perhaps. He began to tell me how much safer the stock-market game was, and how much some of their customers made—you’d have sworn it was a regular broker who actually bought and sold your stocks on the Exchange—and how if a man only traded heavy he could make enough to satisfy anybody. He must have thought I was headed for some pool room and he wanted a whack at my roll before the ponies nibbled it away, for he said I ought to hurry up as the market closed at twelve o’clock on Saturdays. That would leave me free to devote the entire afternoon to other pursuits. I might have a bigger roll to carry to the track with me—if I picked the right stocks.

I looked as if I didn’t believe him, and he kept on buzzing me. I was watching the clock. At 11:15 I said, “All right,” and I began to give him selling orders in various stocks. I put up two thousand dollars in cash, and he was very glad to get it. He told me he thought I’d make a lot of money and hoped I’d come in often.

It happened just as I figured. The traders hammered the stocks in which they figured they would uncover the most stops, and, sure enough, prices slid off. I closed out my trades26 just before the rally of the last five minutes on the usual traders’ covering.

There was fifty-one hundred dollars coming to me. I went to cash in.

“I’m glad I dropped in,” I said to the manager, and gave him my tickets.

“Say,” he says to me, “I can’t give you all of it. I wasn’t looking for suc