Edwin Lefevre

“ Now, the room traders and the tape-worms reasoned not illogically that the “Greenbaum gang” had all the stock and that perforce the “gang” had to find a market for it; and the only way to do this was by a nice “bull” or upward movement. When a stock rises and rises and rises the newspapers are full of pleasant stories about it and the lambs read but do not run away; they buy on the assumption that, as the stock has already risen ten points it may rise ten more. This explains why they make so much money in Wall Street—for the natives. ”

“ A Wall Street worm will turn when the market misbehaves itself.
“What’s the matter?” he asked angrily. “What are you doing to Turpentine?”
Sharpe looked him full in the face, but his voice was even and emotionless as he replied: “Somebody has been selling on us. I don’t know who. I wish I did. I was afraid I might have to take 100,000 shares more, so I just sold as much as I could. I’ve marketed most of the pool’s stock. If it had not been for the jag of stock I struck around 60 and 62, Turpentine would be selling at 85 or 90 to-day. Come again next week, Greenbaum; and keep cool. ”

“ The philosophy of short selling is simple; it really amounts to betting that values will decline. A man who “sells short” sells what he does not possess, but hopes to buy, later on, at a lower price. But since he must deliver what he sells he borrows it from some one else, giving the lender ample security. To “cover” or to “buy in” is to purchase stock previously sold short. Obviously, it is unwise to be short of a stock which is held by such a few that it may be difficult to borrow it. To “squeeze” shorts is to advance the price in order to force “covering.” ”

“ It is always best on such occasions to act promptly, and so, after driving in the real shorts, I sold out our stock. The average selling price was 40. If it had not been for that mysterious selling it would have been 80. After commissions and other legitimate pool expenses, I find we have made nine points net, or $1,029,600, of which 25 per cent., or $250,000, come to me according to the agreement. It is too bad some people didn’t know enough to hold their stock for 90. But I find Wall Street is full of uncertainties—there is so much stupidity in the district. ”

“ Greenbaum was promptly admitted to Sharpe’s private office. It was a half-darkened room, the windows having wire-screens, summer and winter, in order that prying eyes across the street might not see his visitors or his confidential brokers, whose identity it was advisable should remain unknown to the Street. He was walking up and down the room, pausing from time to time to look at the tape. The ticker is the only telescope the stock-market general has; it tells him what his forces are doing and how the enemy is meeting his attacks. Every inch of the tape is so much ground ”

“ Greenbaum’s breach of faith had grown from the relatively small lot of 2,000 shares to five times that amount. It was to all appearances short stock, and it was duly “borrowed” by young Schiff. It was advisable that it should so appear. In the first place no member of the pool could supply the stock which he held, because Sharpe could trace the selling to the office, as he had the numbers of the stock certificates. And, again, short selling does not have the weakening effect that long selling has. When stock is sold short it is evident that sooner or later the seller will have to buy it back ”

“ And on another day there was a long string of purchases of “odd” lots—amounts less than 100 shares—by brokers that usually did business for the Greenbaum syndicate, meaning that friends of the syndicate had received a “tip” straight from “the inside” and were buying for investment.
Then, one fine, sunshiny day, when everybody felt very well and the general market was particularly firm, the loquacious tape told the watchful professional gamblers of Wall Street—oh, so plainly!—that there was “inside realizing” ”

“ Mr. Sharpe still bought and sold, but he sold twice as much as he bought, and the big block he had been obliged to take in the course of his manipulation diminished. On the next day he hoped to begin selling the pool stock.
That very day Mr. Greenbaum, as he returned to his office from his luncheon, felt well pleased with the meal and therefore with himself and therefore with everything. He scanned a yard or two of the tape and smiled. “Turp” was certainly very active and very strong.
“In such a market,” thought Mr. Greenbaum, “Sharpe can’t possibly tell he’s getting stock from me. ”

“ His look rested a fraction of a minute on each man’s eyes—a sharp, half-contemptuous, almost menacing look that made the older men uncomfortable and the younger resentful.
“Greenbaum tells me you wish to pool your Turpentine stock and have me market it for you.”
All nodded; a few said “yes”; one—Lindheim, aetat 27—said, flippantly, “That’s what.”
“Very well. What will each man’s proportion be?”
“I have a list here, Sharpe,” put in Greenbaum. He intentionally omitted the “Mr.” for effect upon his colleagues. Sharpe noted it, but did not mind it. ”

“ It was a favorite trick to offer to sell thousands of shares lower than people were willing to pay, in order to frighten the timid holders and make them sell; which in turn would make still others sell, until the movement became general enough to cause a substantial fall. ”

“ Sharpe, scornfully, “the same old crowd. You ought to have come to me before; it will take something to overcome your own reputations. How much will each take?”
“We’ll fix that O. K. if you take hold,” answered Greenbaum, laughingly. “We’ve got over 100,000 shares and we’d rather some one else held some of it. We ain’t hogs. Ha! Ha!”
“But, the distillers?”
“They are in the pool. I’ve got most of their stock in my office. ”

“ And Sharpe reduced very greatly the amount of “Turp” stock he had been obliged to take for manipulative purposes. So far he was buying more than he sold. Later he would sell more than he bought. When the demand exceeds the vendible supply, obviously the price rises; when the supply for sale exceeds the demand, a fall results. But the average selling price of a big line may be high enough to make the operation profitable, even though a decline occurs during the course of the selling. ”

“ Every day, many thousands of shares, according to the Stock Exchange’s official records, “changed hands”—from Greenbaum’s right to his left and back again—and the price rose steadily. But something was absent. The manipulation was not convincing. It did not make the general public nibble. The only buyers were the “room traders,” that is, the professional stock gamblers who were members of the Exchange and speculated for themselves exclusively ”

“ Greenbaum,” and led the dazed Trust-maker from the office. On his return Sharpe told him: “There is no need to accuse those fellows of breach of faith. They’d deny it.”
The next day Mr. Sharpe simply poured the remaining 25,000 shares of the pool’s stock on the market as one pours water from a pitcher into a cup. The bears had it all their own way. The loquacious tape said, ever so plainly: “This is nothing but inside liquidation, all the more dangerous and ominous since it is at such low figures and is so urgent in its character. Heaven alone can tell where it will end ”

“ They had sold for something what had cost them nothing; it was natural to wish to sell more.
Now, manipulators of stocks are born, not made. The art is most difficult, for stocks should be manipulated in such wise that they will not look manipulated. ”

“ And two days later Sharpe’s unsuspected brokers offered to pay 13⁄4 per cent for the dividend on 100,000 shares, said dividend to be declared within sixty days or the money forfeited. And the stock sold up to 663⁄4, and the public wanted it. A big, broad market had been established, in which one could buy or sell the stock with ease by the tens of thousands of shares. ”

“ The American Turpentine Company was formed, with a capital stock of $30,000,000 or 300,000 shares at $100 each. The cash needed, to pay Mr. Greenbaum, Neustadt and others who sold their plants for “part cash and part stock,” was provided by an issue of $25,000,000 of 6 per cent bonds, underwritten by a syndicate composed of Greenbaum, Lazarus & Co., I. & S. Wechsler, Morris Steinfelder’s Sons, Reis & Stern, Kohn, Fischel & Co., Silberman & Lindheim, Rosenthal, Shaffran & Co. and Zeman Bros.
They were men who never “speculated”; sometimes they “conducted financial operations.” ”