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Reminiscences of a Stock Operator
themselves and save the fee. So they organized an inside pool. The bankers had a call on
the Belle Isle holdings of 250,000 at 36. They put this in at 41. That is, insiders paid
their own banking colleagues a 5-point profit to start with. I don't know whether they
knew it or not.
It is perfectly plain that to the bankers the operation had every semblance of a cinch. We
had run into a bull market and the stocks of the group to which Guiana Gold belonged
were among the market leaders. The company was making big profits and paying
regular dividends. This together with the high character of the sponsors made the public
regard Guiana almost as an investment stock. I was told that about 400,000 shares were
sold to the public all the way up to 47.
The gold group was very strong. But presently Guiana began to sag. It declined ten
points. That was all right if the pool was marketing stock. But pretty soon the Street
began to hear that things were not altogether satisfactory and the property was not
bearing out the high expectations of the promoters. Then, of course, the reason for the
decline became plain. But before the reason was known I had the warning and had taken
steps to test the market for Guiana. The stock was acting pretty much as Chester Motors
did. I sold Guiana. The price went down. I sold more. The price went still lower. The
stock was repeating the performance of Chester and of a dozen other stocks whose
clinical history I remembered. The tape plainly told me that there was something wrong
something that kept insiders from buying it insiders who knew exactly why they should
not buy their own stock in a bull market. On the other hand, outsiders, who did not
know, were now buying because having sold at 45 and higher the stock looked cheap at
35 and lower. The dividend was still being paid. The stock was a bargain.
Then the news came. It reached me, as important market news often does, before it
reached the public. But the confirmation of the reports of striking barren rock instead of
rich ore merely gave me the reason for the earlier inside selling. I myself didn't sell on
the news. I had sold long before, on the stock's behaviour. My concern with it was not
philosophical. I am a trader and therefore looked for one sign : Inside buying. There
wasn't any. I didn't have to know why the insiders did not think enough of their own
stock to buy it on the decline. It was enough that their market plans plainly did not
include further manipulation for the rise. That made it a cinch to sell the stock short. The
public had bought almost a half million shares and the only change in ownership
possible was from one set of ignorant outsiders who would sell in the hope of stopping
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