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Reminiscences of a Stock Operator
you analysed the volume and character of the trading in Chester. The other reason was
that they did not put it up because they were afraid of getting stock if they tried to.
When the men who ought to want a stock don't want it, why should I want it? I figured
that no matter how prosperous other automobile companies might be, it was a cinch to
sell Chester short. Experiences had taught me to beware of buying a stock that refuses to
follow the group-leader.
I easily established the fact that not only there was no inside buying but that there was
actually inside selling. There were other symptomatic warnings against buying Chester,
though all I required was its inconsistent market behaviour. It was again the tape that
tipped me off and that was why I sold Chester short. One day, not very long afterward,
the stock broke wide open. Later on we learned officially, as it were that insiders had
indeed been selling it, knowing full well that the condition of the company was not
good. The reason, as usual, was disclosed after the break. But the warning came before
the break. I don't look out for the breaks; I look out for the warnings. I didn't know what
was the trouble with Chester; neither did I follow a hunch. I merely knew that something
must be wrong.
Only the other day we had what the newspapers called a sensational movement in
Guiana Gold. After selling on the Curb at 50 or close to it, it was listed on the Stock
Exchange. It started there at around 35, began to go down and finally broke 20.
Now, I'd never have called that break sensational because it was fully to be expected. If
you had asked you could have learned the history of the company. No end of people
knew it. It was told to me as follows: A syndicate was formed consisting of a half dozen
extremely well-known capitalists and a prominent banking-house. One of the members
was the head of the Belle Isle Exploration Company, which advanced Guiana over
$10,000,000 cash and received in return bonds and 250,000 shares out of a total of one
million shares of the Guiana Gold Mining Company. The stock went on a dividend basis
and it was mighty well advertised. The Belle Isle people thought it well to cash in and
they gave a call on their 250,000 shares to the bankers, who arranged to try to market
that stock and some of their own holdings as well. They thought of entrusting the market
manipulation to a professional whose fee was to be one third of the profits from the sale
of the 250,000 shares above 36. I understand that the agreement was drawn up and ready
to be signed but at the last moment the bankers decided to undertake the marketing
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