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Reminiscences of a Stock Operator
Then I decided to return to New York. I had business to do now. My fishing I would do
some other time.
When I arrived in New York I made it a point to get a line on the company's business,
actual and prospective. What I learned strengthened my conviction that the insiders had
been worse than reckless in jacking up the price at a time when such an advance was not
justified either by the tone of the general market or by the company's earnings.
The rise, illogical and ill-timed though it was, had developed some public following and
this doubtless encouraged the insiders to pursue their unwise tactics. Therefore I sold
more stock. The insiders ceased their folly. So I tested the market again and again, in
accordance with my trading methods, until finally I was short 30,000 shares of the stock
of the Tropical Trading Company. By then the price was 133.
I had been warned that the TT insiders knew the exact whereabouts of every stock
certificate in the Street and the precise dimensions and identity of the short interest as
well as other facts of tactical importance. They were able men and shrewd traders.
Altogether it was a dangerous combination to go up against. But facts are facts and the
strongest of all allies are conditions.
Of course, on the way down from 153 to 133 the short interest had grown and the public
that buys on reactions began to argue as usual: That stock had been considered a good
purchase at 153 and higher. Now 20 points lower, it was necessarily a much better
purchase. Same stock; same dividend rate; same officers; same business. Great bargain!
The public's purchases reduced the floating supply and the insiders, knowing that a lot of
room traders were short, thought the time propitious for a squeezing. The price was duly
run up to 150. I daresay there was plenty of covering but I stayed pat. Why shouldn't I?
The insiders might know that a short line of 30,000 shares had not been taken in but why
should that frighten me? The reasons that had impelled me to begin selling at 153 and
keep at it on the way down to 133, not only still existed but were stronger than ever. The
insiders might desire to force me to cover but they adduced no convincing arguments.
Fundamental conditions were fighting for me. It was not difficult to be both fearless and
patient. A speculator must have faith in himself and in his judgment. The late Dickson
G. Watts, ex-President of the New York Cotton Exchange and famous author of
"Speculation as a Fine Art," says that courage in a speculator is merely confidence to act
on the decision of his mind. With me, I cannot fear to be wrong because I never think I
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