CHAPTER III

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HOW TO MAKE MONEY IN WALL STREET.

HOW TO TAKE ADVANTAGE OF PERIODICAL PANICS IN ORDER TO MAKE MONEY.—WHOLESOME ADVICE TO YOUNG SPECULATORS.—ALLEGED “POINTS” FROM BIG SPECULATORS END IN LOSS OR DISASTER.—PROFESSIONAL ADVICE THE SUREST AND CHEAPEST, AND HOW AND WHERE TO OBTAIN IT.

But few gain sufficient experience in Wall Street to command success until they reach that period of life in which they have one foot in the grave. When this time comes these old veterans of the Street usually spend long intervals of repose at their comfortable homes, and in times of panic, which recur sometimes oftener than once a year, these old fellows will be seen in Wall Street, hobbling down on their canes to their brokers’ offices.

Then they always buy good stocks to the extent of their bank balances, which have been permitted to accumulate for just such an emergency. The panic usually rages until enough of these cash purchases of stock is made to afford a big “rake in.” When the panic has spent its force, these old fellows, who have been resting judiciously on their oars in expectation of the inevitable event, which usually returns with the regularity of the seasons, quickly realize, deposit their profits with their bankers, or the overplus thereof, after purchasing more real estate that is on the up grade, for permanent investment, and retire for another season to the quietude of their splendid homes and the bosoms of their happy families.

If young men had only the patience to watch the speculative signs of the times, as manifested in the periodical egress of these old prophetic speculators from their shells of security, they would make more money at these intervals than by following up the slippery “tips” of the professional “pointers” of the Stock Exchange all the year round, and they would feel no necessity for hanging at the coat tails, around the hotels, of those specious frauds, who pretend to be deep in the councils of the big operators and of all the new “pools” in process of formation. I say to the young speculators, therefore, watch the ominous visits to the Street of these old men. They are as certain to be seen on the eve of a panic as spiders creeping stealthily and noiselessly from their cobwebs just before rain. If you only wait to see them purchase, then put up a fair margin for yourselves, keep out of the “bucket shops” as well as the “sample rooms,” and only visit Delmonico’s for light lunch in business hours, you can hardly fail to realize handsome profits on your ventures.

The habit of following points which are supposed to emanate from the big operators, nearly always ends in loss and sometimes in disaster to young speculators. The latter become slavish in their methods of thought, having their minds entirely subjected to others, who are presumed to do the thinking for them, and they consequently fail to cultivate the self-reliance that is indispensable to the success of any kind of business.

To the question often put, especially by men outside of Wall Street, “How can I make money in Wall Street?” there is probably no better answer than the one given by old Meyer Rothschild to a person who asked him a similar question. He said, “I buys ‘sheep’ and sells ‘dear.’”

Those who follow this method always succeed. There has hardly been a year within my recollection, going back nearly thirty years, when there have not been two or three squalls in “the Street,” during the year, when it was possible to purchase stocks below their intrinsic value. The squall usually passes over in a few days, and then the lucky buyers of stocks at panic prices come in for their profits ranging from five to ten per cent. on the entire venture.

The question of making money, then, becomes a mere matter of calculation, depending on the number of the squalls that may occur during any particular year.

If the venture is made at the right time—at the lucky moment, so to speak—and each successive venture is fortunate, as happens often to those who use their judgment in the best way, it is possible to realize a net gain of fifty per cent. per annum on the aggregate of the year’s investments.

In this way it is easy to see how the rich will get richer, and the poor poorer.

Sometimes men make money in Wall Street by strange turns in their fortunes that appear like having been governed by a special Providence, and this sometimes occurs when men appear to be utter wrecks.

One of the strangest examples of this kind, in my personal experience, occurred in the summer of 1885.

A man called at my office utterly broken down in spirit, but with a few hundred dollars left out of many thousands that he had possessed a few months previously.

“I read your letter of the third of July,” he said, “and had some mind to act on the advice which it contained, but was unfortunately dissuaded therefrom by reading an article in a city paper by a very able writer, who had got the bearish mania, then prevalent, on the brain, and who, I am informed, is now, like myself, almost ruined.”

“I hardly know what to do,” he continued. “I have a few hundred dollars left, which I will leave with you, and you can use your pleasure with it. I am going out to the country for the remainder of the summer. I will leave my address with you, and, if there is any good result, you can let me know of it. I really don’t hope for much, and of course, I need hardly tell you that, in the event of being ‘wiped out,’ you need not apply to me for more margin. Let this go with the rest,” he added, in a despairing tone.

The man walked sadly out, and I did not see him again for months. I invested his pittance on the _carte blanche_ order which he had given me, to the best of my judgment. The result was favorable, and his account began to accumulate. He was duly advised, according to our business methods, of his good luck, but I did not hear anything from him personally for several months.

One day, a portly gentleman, with rosy health beaming in his face, stepped into my private office, and was quite profuse in his thanks to me.

“Well,” I said; “I have but a hazy recollection of your acquaintance, if I know you at all.”

“Don’t you recollect,” he said, “the time I went to the country in summer, when I told you my case, and how I had been unfortunate in speculation?”

“And are you the man who went to the country in despair to die?” I asked, in surprise at his changed appearance.

“I am,” he replied, “and I owe the wonderful change which you now see to your timely advice. I staked almost my last dollar on that counsel, and now I am comfortably fixed through your management of the small fund placed at your disposal.”

How, this was an example of a man who did make money simply by taking the advice that was freely tendered him.

There are others who lose, in spite of all that the most honest judgment can do to prevent them.

Some men, when they have money, are so fearfully perverse that all attempts to get them to do the right thing only have the opposite effect, and they prefer to follow every wild rumor.

One day, for instance, a man gave me an order to buy a thousand shares of Erie without limit. The order was executed at 94. I had no sooner bought it than the stock went down.

My customer returned in a short time and ordered the stock to be sold. It was then 92½.

In half an hour afterwards he returned again and ordered it bought back again, without any limit as before. It was bought back at 95.

After consulting with other friends for some time he ordered it sold again. The market by that time was 90.

He then came back the fifth time, and said: “I first saw one man who told me to buy, and then another who told me to sell. I understand one is called a ‘bull’ and the other a ‘bear.’ About these names I don’t know much, but I do know now that I am a — jackass.”

This affords a good illustration of the way the average speculator is managed and perplexed in Wall Street. There is a means of avoiding such a peck of trouble, however, if he would only take a little wholesome advice, wait patiently for a proper opportunity, and not rush headlong to purchase on the “tips” of the delusive rumor mongers. He would then begin to learn how to make money in Wall Street.

As I have pointed out in another chapter, speculation is a business that must be studied as a specialty, and though it is popularly believed that any man who has money can speculate, yet the ordinary man, without special training in the business, is liable to make as great a mistake in this attempt, as the man who thinks he can act as his own lawyer, and who is said “to have a fool for a client.”

The common delusion, that expert knowledge is not required in speculation, has wrecked many fortunes and reputations in Wall Street, and is still very influential in its pernicious and illusory achievements.

When a man wants correct advice in law he goes to a professional lawyer in good standing, one who has made a reputation in the courts, and who has afforded other evidence to the public that he is thoroughly reliable. No man of average common sense would trust a case in law to a bar room “bummer” who would assert that he was well acquainted with Aaron J. Vanderpoel, Roscoe Conkling, and Wm. M. Evarts, and had got all the inside “tips” from these legal lights on the law relating to the case in question. The fellow would be laughed at, and, in all probability, if he persisted in this kind of talk, would be handed over to the city physician to be examined in relation to his sanity, but in Wall Street affairs men can every day make similar pretensions and pass for embodiments of speculative wisdom.

If speculators are caught and fleeced by following such counsel, the professional brokers who are members of the Stock Exchange, are no more to blame than the eminent lawyers to whom I have referred would be for the upshot of a case that had been taken into court on the advice which some irresponsible person had pretended to receive from these celebrities of the New York Bar.

Professional advice in Wall Street, as in legal affairs, is worth paying for, and costs far less in the end than the cheap “points” that are distributed profusely around the Street, thick as autumn leaves in Vallombrosa, and which only allure the innocent speculator to put his money where he is almost certain to lose it.

My advice to speculators who wish to make money in Wall Street, therefore, is to ignore the counsel of the barroom “tippers” and “tipplers,” turn their backs on “bucket shops,” and when they want “points” to purchase, let them go to those who have established a reputation for giving sound advice in such matters, and who have ample resources for furnishing correct information on financial topics, as well as a personal interest in making all the money they can for their clients.

There is no difficulty in finding out such reliable men and firms in the vicinity of Wall Street, if speculators will only read the newspapers, or make inquiry of the first messenger boy they may happen to meet.

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