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.The low priceof Chester and its apathy was contrasted with the strength and activity in Black-woodand other motor stocks and the public logically enough listened to the touts and tipstersand wiseacres and began to buy Chester on the theory that it must presently move upwith the rest of the group.Instead of going up on this moderate public buying, Chester actually declined.Now, itwould have been no job to put it up in that bull market, considering that Blackwood, astock of the same group, was one of the sensational leaders of the general advance andwe were hearing nothing but the wonderful improvement in the demand for automobilesof all kinds and the record output.It was thus plain that the inside clique in Chester were not doing any of the things thatinside cliques invariably do in a bull market.For this failure to do the usual thing theremight be two reasons.Perhaps the insiders did not put it up because they wished toaccumulate more stock before advancing the price.But this was an untenable theory if- 186 -Reminiscences of a Stock Operatoryou analysed the volume and character of the trading in Chester.The other reason wasthat 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 figuredthat no matter how prosperous other automobile companies might be, it was a cinch tosell Chester short.Experiences had taught me to beware of buying a stock that refuses tofollow the group-leader.I easily established the fact that not only there was no inside buying but that there wasactually inside selling.There were other symptomatic warnings against buying Chester,though all I required was its inconsistent market behaviour.It was again the tape thattipped 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 hadindeed been selling it, knowing full well that the condition of the company was notgood.The reason, as usual, was disclosed after the break.But the warning came beforethe break.I don't look out for the breaks; I look out for the warnings.I didn't know whatwas the trouble with Chester; neither did I follow a hunch.I merely knew that somethingmust be wrong.Only the other day we had what the newspapers called a sensational movement inGuiana Gold.After selling on the Curb at 50 or close to it, it was listed on the StockExchange.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.Ifyou had asked you could have learned the history of the company.No end of peopleknew it.It was told to me as follows: A syndicate was formed consisting of a half dozenextremely well-known capitalists and a prominent banking-house.One of the memberswas 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 onemillion shares of the Guiana Gold Mining Company.The stock went on a dividend basisand it was mighty well advertised.The Belle Isle people thought it well to cash in andthey gave a call on their 250,000 shares to the bankers, who arranged to try to marketthat stock and some of their own holdings as well.They thought of entrusting the marketmanipulation to a professional whose fee was to be one third of the profits from the saleof the 250,000 shares above 36.I understand that the agreement was drawn up and readyto be signed but at the last moment the bankers decided to undertake the marketing- 187 -Reminiscences of a Stock Operatorthemselves and save the fee.So they organized an inside pool.The bankers had a call onthe Belle Isle holdings of 250,000 at 36.They put this in at 41.That is, insiders paidtheir own banking colleagues a 5-point profit to start with.I don't know whether theyknew it or not.It is perfectly plain that to the bankers the operation had every semblance of a cinch.Wehad run into a bull market and the stocks of the group to which Guiana Gold belongedwere among the market leaders.The company was making big profits and payingregular dividends.This together with the high character of the sponsors made the publicregard Guiana almost as an investment stock.I was told that about 400,000 shares weresold to the public all the way up to 47.The gold group was very strong.But presently Guiana began to sag.It declined tenpoints [ Pobierz całość w formacie PDF ]