The Romance and Tragedy of a Widely Known Business Man of New York Part 15

The buying continued and the market moved slowly toward a higher level. After a few days steady buying there would be a cessation for a day or two to allow the market to sag, then it would commence again. The princ.i.p.al sellers were our London friends, and though we were earning many commissions we felt that our friends were making a mistake and not gauging the market correctly.

At this time our Boston correspondent offered us one hundred tons to arrive by sailing vessel due in about three months. We secured refusal over night and cabled the offer to London, advising the purchase and expressing fully our opinion of the market.

The following morning I sat at my desk, and opening a cable read, "Market advanced through operations of a few weak French speculators."

Then followed a selling limit. I laid the cable down and took up the Boston telegram offering the hundred tons.

With the exception of my small interest in that purchase in January, 1880, I had refrained from speculation, and now I was considering whether or not I should buy those hundred tons. The option had nearly expired and action must be prompt. Calling a stenographer I dictated a telegram, "We accept"--and the deed was done.

On arrival of the vessel I sold out at a profit of twenty thousand dollars.

My profits for the year were sixty-one thousand dollars.

On February fourteenth, as a valentine, there came to "Redstone" our fourth daughter and the family circle was complete. With two sons and four daughters, the ban of "race suicide," theory of President Roosevelt, rests not on us.

CHAPTER XXIII

"A FEW WEAK FRENCH SPECULATORS"

Just outside of the city of Paris was located one of the largest, most complete manufacturing plants in the world, doing an enormous business, employing an army of skilled artisans, consuming vast quant.i.ties of raw material and making in profits a fortune every year.

The controlling interest was a man of large wealth, estimated at sixty millions of francs, and of national reputation. His gallery of paintings was famous in art circles the world over. His family moved in the highest strata of society and in their magnificent home entertained with regal splendor. The man was universally respected in business, in art, and social circles.

On the board of directors of one of the great Paris banks were two other men, almost equal in wealth and station to this manufacturer.

These three men, with a few a.s.sociates of minor importance, entered into a hare-brained scheme of speculation in our commodity, that in the very nature of things was bound to terminate in complete failure. When they realized this and the enormous losses which had been entailed, in an effort to recoup they took up another commodity, and then followed the wildest speculation, in any merchandise, that the world had ever seen.

When the final crash came, with their own magnificent fortunes swept away and the bank involved, the two directors found suicide's graves, and the other man went to prison.

Oh, the folly of it! This pa.s.sion and greed for wealth.

"Market advanced through operations of a few weak French speculators"--so read our cable. It seemed to us that their strength was far more in evidence than their weakness, indeed of the latter we could detect no sign. They had by their purchases advanced the market already fifteen or twenty per cent and they continued buying in all the world's markets, at advancing prices, everything that was offered.

The increased price was commencing to tell on consumption. Dealers and consumers ceased buying until their surplus stocks had become exhausted, and then bought in small lots only as they were compelled to. Meanwhile, stocks in the hands of the syndicate were acc.u.mulating rapidly with no visible outlet for reducing them.

A feature in the trade which alone should have been sufficient to prevent men of brains from going into such an operation was that the production could not be contracted for in advance. The high price stimulated production and day after day the syndicate had to buy in the producing markets large quant.i.ties at current prices.

These purchases at such high figures rapidly increased the average cost of the holdings.

The market advanced by leaps and bounds, until finally the price in London reached one hundred and sixty-seven pounds sterling per ton, with an equivalent value in all other markets. This represented an advance of more than one hundred per cent.

Then the members of the syndicate awakened from their pleasant dream to find a nightmare.

The hand of every man in the trade throughout the world was raised against them. They were in the meshes of an endless chain. For every ton they could sell they must buy five, or more, in order to sustain the price. If they stopped buying, even for a single day, the bottom would drop out. What was to be done?

In Wales was an industry, comprising many mills, that in the aggregate consumed large quant.i.ties of the article. The business had become almost paralyzed by the advance, and many mills were about to or had closed down. A representative of the syndicate communicated with all these mills and negotiated a contract for supplies covering requirements to April 30th, 1888.

The only possible way of making such a contract was by guaranteeing that the spot market should not fall below the price then ruling.

This meant that every day the syndicate must bid 167 per ton for all the spot stuff the market would sell--but, it stopped buying futures. As fast as the stuff could be brought to market it had to take it, but only as it arrived.

That was the first step. But there was still an enormous stock to be disposed of, together with all that would have to be taken, up to the end of April. How was that to be sold?

Our London friends had fought the syndicate from the start with the utmost vigor. The plan of campaign was to load them with such quant.i.ties that the burden must become too heavy to carry.

The London firm usually carried a large spot stock. This was poured into the syndicate in parcels, at advancing prices. Then all the little markets on the Continent were scoured and every ton available brought to London and disposed of in the same way.

The agent of our friends, in the producing market, bought large quant.i.ties daily. It was a six-weeks' voyage to London. In the interim there would be a heavy advance in price and as soon as the steamer arrived the syndicate had to buy these lots. There was no escape. The leading member of the syndicate went to London and a secret interview with our correspondent was arranged. His widely known antagonism to the syndicate made him the only man who could build a bridge for that unfortunate combination to cross on. He made his own terms, they were accepted, and that was the beginning of the end of the syndicate's operations in our commodity.

CHAPTER XXIV

EXCITING TIMES

The year 1888 from start to finish was one whirl of excitement in my business life. The mental effort of handling the enormous business--it must be remembered ours was a one-man concern--was most exhausting. I became weary of making money and longed for a dull period that I might rest. But there was no dull period that year.

In January we received from our London friends confidential information of the arrangement with the syndicate.

Its enormous holdings were, so far as possible, to be unloaded on American buyers. This was for us to accomplish. The spot stock had to be sold against for future delivery and held until maturity of the sales. Of course, the sales were made at a discount from the spot price, and as time went on this increased. When the buyers at one level were filled up, the price was lowered until a new level, that would tempt further buyers, was reached, and so it went on.

The trade conceived the idea that our London friends and ourselves were selling the market short. They never dreamed that we were unloading for the syndicate, which was daily bidding 167 for spot, while we were selling futures far below that figure. They did not know that at four o'clock London time, when the official market closed on the thirtieth day of April, the syndicate would cease buying and that a collapse would then be inevitable. It was not our business to enlighten them, and strange to relate, not one man asked us our opinion of the market. They bought of us day after day and apparently believed that when the time for delivery came we would be unable to make it and would have to settle with them at their own figure.

A great many of our sales were made on the Exchange. On this business we could and did call margins, but there were some weak people whom we could not avoid selling and in such a market there were sure to be failures among that cla.s.s.

As previously explained we guaranteed all sales, and whenever a customer defaulted we at once sold double the quant.i.ty we had sold him, to some strong concern. This made us short of the market, and while we made some loss on the initial transaction, our profit on the second sale always more than extinguished it.

The first man who defaulted brought to our office a deed for a farm in Pennsylvania and offered it to us for the four thousand dollars he owed. I handed it back to him, told him to give it to his wife, and forgave him the debt.

The next man was a bigger fish. He owed us nineteen thousand eight hundred dollars. We made up the account, and when I handed him the statement I told him we would not press him and if he was ever able to pay us twenty-five cents on the dollar we would give him a receipt in full. In later years he was worth a good deal of money, though I believe he has since lost it, but he never paid us a dollar.

After him came a few small men, who altogether owed us perhaps ten thousand dollars. We told them all if they ever felt able to pay we would be glad to have the money, but would never press them for it.

Of the whole lot, only one ever paid. His account was only a few hundred dollars, and I had forgotten it, when one day he called at the office, said his father had died, leaving him a little money, and he wanted to pay us. He asked, "What rate of interest will you charge me"? I replied, "Nothing; and if you cannot afford it, you may leave us out entirely." He insisted on paying the princ.i.p.al.

Our treatment of these people was not good business in the general sense. We could have put them all off the floor of the Exchange and to a small degree it would have been to our advantage to do so, but they had our sympathy in their trouble and we could afford to lose the money.

The weeks flew by and we were approaching the end of April. The discount on future deliveries was now enormous. In London 167 was bid daily for spot and we were selling futures at 50 discount.

Under normal conditions futures should be at a slight premium over spot.

In London in 1888 the last business day of April was on Friday; I think it was the 29th. Sat.u.r.day the market was closed, and as Monday was a holiday, the first business day of May was on Tuesday.

Just before the gavel fell at the London Exchange at four o'clock on Friday, 167 was bid for spot and the syndicate ceased buying.

On the curb, five minutes later, there were sellers, but no buyers, at 135; but this price was not official. The last official price was 167. On Tuesday morning the first offer to sell spot was at 93 and the market had collapsed.