BETWEEN SPRING and midsummer, 1958, the common stock ofthe E. L. Bruce Company, the nation’s leading maker ofhardwood floors, moved from a low of just under $17 a shareto a high of $190 a share. This startling, even alarming, risewas made in an ascending scale that was climaxed by a franticcrescendo in which the price went up a hundred dollars ashare in a single day. Nothing of the sort had happened for ageneration. Furthermore—and even more alarming—the rise didnot seem to have the slightest bit of relation to any suddenhunger on the part of the American public for new hardwoodfloors. To the consternation of almost everyone concerned,conceivably including even some of the holders of Bruce stock,it seemed to be entirely the result of a technical stock-marketsituation called a corner. With the exception of a general panicsuch as occurred in 1929, a corner is the most drastic andspectacular of all developments that can occur in the stockmarket, and more than once in the nineteenth and earlytwentieth centuries, corners had threatened to wreck thenational economy.
The Bruce situation never threatened to do that. For onething, the Bruce Company was so small in relation to theeconomy as a whole that even the wildest gyrations in its stockcould hardly have much national effect. For another, the Bruce“corner” was accidental—the by-product of a fight for corporatecontrol—rather than the result of calculated manipulations, asmost of the historic corners had been. Finally, this oneeventually turned out to be not a true corner at all, but only anear thing; in September, Bruce stock quieted down and settledat a reasonable level. But the incident served to stir upmemories, some of them perhaps tinged with nostalgia, amongthose flinty old Wall Streeters who had been around to see theclassic corners—or at least the last of them.
In June of 1922, the New York Stock Exchange began listingthe shares of a corporation called Piggly Wiggly Stores—a chainof retail self-service markets situated mostly in the South andWest, with headquarters in Memphis—and the stage was set forone of the most dramatic financial battles of that gaudy decadewhen Wall Street, only negligently watched over by the federalgovernment, was frequently sent reeling by the machinations ofoperators seeking to enrich themselves and destroy theirenemies. Among the theatrical aspects of this particular battle—abattle so celebrated in its time that headline writers referred toit simply as the “Piggly Crisis”—was the personality of the hero(or, as some people saw it, the villain), who was a newcomerto Wall Street, a country boy setting out defiantly, amid thecheers of a good part of rural America, to lay the slickmanipulators of New York by the heels. He was ClarenceSaunders, of Memphis, a plump, neat, handsome man offorty-one who was already something of a legend in his hometown, chiefly because of a house he was putting up there forhimself. Called the Pink Palace, it was an enormous structurefaced with pink Georgia marble and built around anawe-inspiring white-marble Roman atrium, and, according toSaunders, it would stand for a thousand years. Unfinishedthough it was, the Pink Palace was like nothing Memphis hadever seen before. Its grounds were to include a private golfcourse, since Saunders liked to do his golfing in seclusion. Eventhe makeshift estate where he and his wife and four childrenwere camping out pending completion of the Palace had itsown golf course. (Some people said that his preference forprivacy was induced by the attitude of the local country clubgovernors, who complained that he had corrupted their entiresupply of caddies by the grandeur of his tips.) Saunders, whohad founded the Piggly Wiggly Stores in 1919, had most of thestandard traits of the flamboyant American promoters—suspectgenerosity, a knack for attracting publicity, love of ostentation,and so on—but he also had some much less common traits,notably a remarkably vivid style, both in speech and writing,and a gift, of which he may or may not have been aware, forcomedy. But like so many great men before him, he had aweakness, a tragic flaw. It was that he insisted on thinking ofhimself as a hick, a boob, and a sucker, and, in doing so, hesometimes became all three.
This unlikely fellow was the man who engineered the last realcorner in a nationally traded stock.
THE game of Corner—for in its heyday it was a game, ahigh-stakes gambling game, pure and simple, embodying a goodmany of the characteristics of poker—was one phase of theendless Wall Street contest between bulls, who want the priceof a stock to go up, and bears, who want it to go down.
When a game of Corner was under way, the bulls’ basicmethod of operation was, of course, to buy stock, and thebears’ was to sell it. Since the average bear didn’t own any ofthe stock issue in contest, he would resort to the commonpractice of selling short. When a short sale is made, thetransaction is consummated with stock that the seller hasborrowed (at a suitable rate of interest) from a broker. Sincebrokers are merely agents, and not outright owners, they, inturn, must borrow the stock themselves. This they do bytapping the “floating supply” of stock that is in constantcirculation among investment houses—stock that privateinvestors have left with one house or another for tradingpurposes, stock that is owned by estates and trusts and hasbeen released for action under certain prescribed conditions,and so on. In essence, the floating supply consists of all thestock in a particular corporation that is available for trading andis not immured in a safe-deposit box or encased in a mattress.
Though the supply floats, it is scrupulously kept track of; theshort seller, borrowing, say, a thousand shares from his broker,knows that he has incurred an immutable debt. What hehopes—the hope that keeps him alive—is that the market priceof the stock will go down, enabling him to buy the thousandshares he owes at a bargain rate, pay off his debt, and pocketthe difference. What he risks is that the lender, for one reasonor another, may demand that he deliver up his thousandborrowed shares at a moment when their market price is at ahigh. Then the grinding truth of the old Wall Street jingle isborne in upon him: “He who sells what isn’t his’n must buy itback or go to prison.” And in the days when corners werepossible, the short seller’s sleep was further disturbed by thefact that he was operating behind blank walls; dealing only withagents, he never knew either the identity of the purchaser ofhis stock (a prospective cornerer?) or the identity of the ownerof the stock he had borrowed (the same prospective cornerer,attacking from the rear?).
Although it is sometimes condemned as being the tool of thespeculator, short selling is still sanctioned, in a severelyrestricted form, on all of the nation’s exchanges. In itsunfettered state, it was the standard gambit in the game ofCorner. The situation would be set up when a group of bearswould go on a well-organized spree of short selling, and wouldoften help their cause along by spreading rumors that thecompany back of the stock in question was on its last legs.
This operation was called a bear raid. The bulls’ mostformidable—but, of course, riskiest—counter-move was to try fora corner. Only a stock that many traders were selling shortcould be cornered; a stock that was in the throes of a realbear raid was ideal. In the latter situation, the would-becornerer would attempt to buy up the investment houses’
floating supply of the stock and enough of the privately heldshares to freeze out the bears; if the attempt succeeded, whenhe called for the short sellers to make good the stock they hadborrowed, they could buy it from no one but him. And theywould have to buy it at any price he chose to ask, their onlyalternatives—at least theoretically—being to go into bankruptcy orto jail for failure to meet their obligations.
In the old days of titanic financial death struggles, when AdamSmith’s ghost still smiled on Wall Street, corners were fairlycommon and were often extremely sanguinary, with hundredsof innocent bystanders, as well as the embattled principals,getting their financial heads lopped off. The most famouscornerer in history was that celebrated old pirate, CommodoreCornelius Vanderbilt, who engineered no less than threesuccessful corners during the eighteen-sixties. Probably hisclassic job was in the stock of the Harlem Railway. By dint ofsecretly buying up all its available shares while simultaneouslycirculating a series of untruthful rumors of imminent bankruptcyto lure the short sellers in, he achieved an airtight trap. Finally,with the air of a man doing them a favor by saving themfrom jail, he offered the cornered shorts at $179 a share thestock he had bought up at a small fraction of that figure. Themost generally disastrous corner was that of 1901 in the stockof Northern Pacific; to raise the huge quantities of cash theyneeded to cover themselves, the Northern Pacific shorts sold somany other stocks as to cause a national panic with world-widerepercussions. The next-to-last great corner occurred in 1920,when Allan A. Ryan, a son of the legendary Thomas FortuneRyan, in order to harass his enemies in the New York StockExchange, sought to corner the stock of the Stutz MotorCompany, makers of the renowned Stutz Bearcat. Ryanachieved his corner and the Stock Exchange short sellers wereduly squeezed. But Ryan, it turned out, had a bearcat by thetail. The Stock Exchange suspended Stutz dealings, lengthylitigation followed, and Ryan came out of the affair financiallyruined.
Then, as at other times, the game of Corner suffered from adifficulty that plagues other games—post-mortem disputes aboutthe rules. The reform legislation of the nineteen-thirties, byoutlawing any short selling that is specifically intended todemoralize a stock, as well as other manipulations leadingtoward corners, virtually ruled the game out of existence. WallStreeters who speak of the Corner these days are referring tothe intersection of Broad and Wall. In U.S. stock markets, onlyan accidental corner (or near-corner, like the Bruce one) isnow possible; Clarence Saunders was the last intentional playerof the game.
SAUNDERS has been variously characterized by people whoknew him well as “a man of limitless imagination and energy,”
“arrogant and conceited as all getout,” “essentially afour-year-old child, playing at things,” and “one of the mostremarkable men of his generation.” But there is no doubt thateven many of the people who lost money on his promotionalschemes believed that he was the soul of honesty. He wasborn in 1881 to a poor family in Amherst County, Virginia, andin his teens was employed by the local grocer at the pittancethat is orthodox for future tycoons taking on their first jobs—inhis case, four dollars a week. Moving ahead fast, he went onto a wholesale grocery company in Clarksville, Tennessee, andthen to one in Memphis, and, while still in his twenties,organized a small retail food chain called United Stores. He soldthat after a few years, did a stint as a wholesale grocer on hisown, and then, in 1919, began to build a chain of retailself-service markets, to which he gave the engaging name ofPiggly Wiggly Stores. (When a Memphis business associate onceasked him why he had chosen that name, he replied, “Sopeople would ask me what you just did.”) The stores flourishedso exuberantly that by the autumn of 1922 there were overtwelve hundred of them. Of these, some six hundred and fiftywere owned outright by Saunders’ Piggly Wiggly Stores, Inc.;the rest were independently owned, but their owners paidroyalties to the parent company for the right to adopt itspatented method of operations. In 1923, an era when agrocery store meant clerks in white aprons and often a thumbon the scale, this method was described by the New YorkTimes with astonishment: “The customer in a Piggly WigglyStore rambles down aisle after aisle, on both sides of which areshelves. The customer collects his purchases and pays as hegoes out.” Although Saunders did not know it, he had inventedthe supermarket.
A natural concomitant of the rapid rise of Piggly WigglyStores, Inc., was the acceptance of its shares for listing on theNew York Stock Exchange, and within six months of that eventPiggly Wiggly stock had become known as a dependable, ifunsensational, dividend-payer—the kind of widows’-and-orphans’
stock that speculators regard with the respectful indifferencethat crap-shooters feel about bridge. This reputation, however,was shortlived. In November, 1922, several small companies thathad been operating grocery stores in New York, New Jersey,and Connecticut under the name Piggly Wiggly failed and wentinto receivership. These companies had scarcely any connectionwith Saunders’ concern; he had merely sold them the right touse his firm’s catchy trade name, leased them some patentedequipment, and washed his hands of them. But when theseindependent Piggly Wigglys failed, a group of stock-marketoperators (whose identities never were revealed, because theydealt through tight-lipped brokers) saw in the situation aheaven-sent opportunity for a bear raid. If individual PigglyWiggly stores were failing, they reasoned, then rumors could bespread that would lead the uninformed public to believe thatthe parent firm was failing, too. To further this belief, theybegan briskly selling Piggly Wiggly short, in order to force theprice down. The stock yielded readily to their pressure, andwithin a few weeks its price, which earlier in the year hadhovered around fifty dollars a share, dropped to below forty.
At this point, Saunders announced to the press that he wasabout to “beat the Wall Street professionals at their own game”
with a buying campaign. He was by no means a professionalhimself; in fact, prior to the listing of Piggly Wiggly he hadnever owned a single share of any stock quoted on the NewYork Stock Exchange. There is little reason to believe that atthe beginning of his buying campaign he had any intention oftrying for a corner; it seems more likely that his announcedmotive—the unassailable one of supporting the price of thestock in order to protect his own investment and that of otherPiggly Wiggly stockholders—was all he had in mind. In anycase, he took on the bears with characteristic zest,supplementing his own funds with a loan of about ten milliondollars from a group of bankers in Memphis, Nashville, NewOrleans, Chattanooga, and St. Louis. Legend has it that hestuffed his ten million-plus, in bills of large denomination, into asuitcase, boarded a train for New York, and, his pocketsbulging with currency that wouldn’t fit in the suitcase, marchedon Wall Street, ready to do battle. He emphatically denied thisin later years, insisting that he had remained in Memphis andmasterminded his campaign by means of telegrams andlong-distance telephone calls to various Wall Street brokers.
Wherever he was at the time, he did round up a corps ofsome twenty brokers, among them Jesse L. Livermore, whoserved as his chief of staff. Livermore, one of the mostcelebrated American speculators of this century, was thenforty-five years old but was still occasionally, and derisively,referred to by the nickname he had earned a couple ofdecades earlier—the Boy Plunger of Wall Street. Since Saundersregarded Wall Streeters in general and speculators in particularas parasitic scoundrels intent only on battering down his stock,it seemed likely that his decision to make an ally of Livermorewas a reluctant one, arrived at simply with the idea of gettingthe enemy chieftain into his own camp.
On the first day of his duel with the bears, Saunders,operating behind his mask of brokers, bought 33,000 shares ofPiggly Wiggly, mostly from the short sellers; within a week hehad brought the total to 105,000—more than half of the200,000 shares outstanding. Meanwhile, ventilating his emotionsat the cost of tipping his hand, he began running a series ofadvertisements in which he vigorously and pungently told thereaders of Southern and Western newspapers what he thoughtof Wall Street. “Shall the gambler rule?” he demanded in oneof these effusions. “On a white horse he rides. Bluff is his coatof mail and thus shielded is a yellow heart. His helmet isdeceit, his spurs clink with treachery, and the hoofbeats of hishorse thunder destruction. Shall good business flee? Shall ittremble with fear? Shall it be the loot of the speculator?” OnWall Street, Livermore went on buying Piggly Wiggly.
The effectiveness of Saunders’ buying campaign was readilyapparent; by late January of 1923 it had driven the price ofthe stock up over 60, or higher than ever before. Then, tointensify the bear raiders’ jitters, reports came in from Chicago,where the stock was also traded, that Piggly Wiggly wascornered—that the short sellers could not replace the stock theyhad borrowed without coming to Saunders for supplies. Thereports were immediately denied by the New York StockExchange, which announced that the floating supply of PigglyWiggly was ample, but they may have put an idea intoSaunders’ head, and this, in turn, may have prompted acurious and—at first glance—mystifying move he made inmid-February, when, in another widely disseminated newspaperadvertisement, he offered to sell fifty thousand shares of PigglyWiggly stock to the public at fifty-five dollars a share. The adpointed out, persuasively enough, that the stock was paying adividend of a dollar four times a year—a return of more than7 percent. “This is to be a quick proposition, subject towithdrawal without prior notice,” the ad went on, calmly buturgently. “To get in on the ground floor of any big propositionis the opportunity that comes to few, and then only once in alifetime.”
Anyone who is even slightly familiar with modern economic lifecan scarcely help wondering what the Securities and ExchangeCommission, which is charged with seeing to it that all financialadvertising is kept factual, impersonal, and unemotional, wouldhave had to say about the hard sell in those last twosentences. But if Saunders’ first stock-offering ad would havecaused an S.E.C. examiner to turn pale, his second, publishedfour days later, might well have induced an apoplectic seizure.
A full-page affair, it cried out, in huge black type:
OPPORTUNITY! OPPORTUNITY!
It Knocks! It Knocks! It Knocks!
Do you hear? Do you listen? Do you understand?
Do you wait? Do you act now?…Has a new Daniel appeared and the lions eat him not?
Has a new Joseph come that riddles may be made plain?
Has a new Moses been born to a new Promised Land?
Why, then, asks the skeptical, can CLARENCE SAUNDERS … be sogenerous to the public?
After finally making it clear that he was selling common stockand not snake oil, Saunders repeated his offer to sell atfifty-five dollars a share, and went on to explain that he wasbeing so generous because, as a farsighted businessman, hewas anxious to have Piggly Wiggly owned by its customers andother small investors, rather than by Wall Street sharks. Tomany people, though, it appeared that Saunders was beinggenerous to the point of folly. The price of Piggly Wiggly onthe New York Stock Exchange was just then pushing 70; itlooked as if Saunders were handing anyone who had fifty-fivedollars in his pocket a chance to make fifteen dollars with norisk. The arrival of a new Daniel, Joseph, or Moses might bedebatable, but opportunity certainly did seem to be knocking, allright.
Actually, as the skeptical must have suspected, there was acatch. In making what sounded like such a costly andunbusinesslike offer, Saunders, a rank novice at Corner, haddevised one of the craftiest dodges ever used in the game. Oneof the great hazards in Corner was always that even though aplayer might defeat his opponents, he would discover that hehad won a Pyrrhic victory. Once the short sellers had beensqueezed dry, that is, the cornerer might find that the reams ofstock he had accumulated in the process were a dead weightaround his neck; by pushing it all back into the market in oneshove, he would drive its price down close to zero. And if, likeSaunders, he had had to borrow heavily to get into the gamein the first place, his creditors could be expected to close in onhim and perhaps not only divest him of his gains but drivehim into bankruptcy. Saunders apparently anticipated thishazard almost as soon as a corner was in sight, andaccordingly made plans to unload some of his stock beforewinning instead of afterward. His problem was to keep thestock he sold from going right back into the floating supply,thus breaking his corner; and his solution was to sell hisfifty-five-dollar shares on the installment plan. In his Februaryadvertisements, he stipulated that the public could buy sharesonly by paying twenty-five dollars down and the balance inthree ten-dollar installments, due June 1st, September 1st, andDecember 1st. In addition—and vastly more important—he saidhe would not turn over the stock certificates to the buyers untilthe final installment had been paid. Since the buyers obviouslycouldn’t sell the certificates until they had them, the stock couldnot be used to replenish the floating supply. Thus Saundershad until December 1st to squeeze the short sellers dry.
Easy as it may be to see through Saunders’ plan byhindsight, his maneuver was then so unorthodox that for awhile neither the governors of the Stock Exchange norLivermore himself could be quite sure what the man inMemphis was up to. The Stock Exchange began making formalinquiries, and Livermore began getting skittish, but he went onbuying for Saunders’ account, and succeeded in pushing PigglyWiggly’s price up well above 70. In Memphis, Saunders satback comfortably; he temporarily ceased singing the praises ofPiggly Wiggly stock in his ads, and devoted them to eulogizingapples, grapefruit, onions, hams, and Lady Baltimore cakes.
Early in March, though, he ran another financial ad, repeatinghis stock offer and inviting any readers who wanted to discussit with him to drop in at his Memphis office. He alsoemphasized that quick action was necessary; time was runningout.
By now, it was apparent that Saunders was trying for acorner, and on Wall Street it was not only the Piggly Wigglybears who were becoming apprehensive. Finally, Livermore,possibly reflecting that in 1908 he had lost almost a milliondollars trying to get a corner in cotton, could stand it nolonger. He demanded that Saunders come to New York andtalk things over. Saunders arrived on the morning of March12th. As he later described the meeting to reporters, there wasa difference of opinion; Livermore, he said—and his tone wasthat of a man rather set up over having made a piker out ofthe Boy Plunger—“gave me the impression that he was a littleafraid of my financial situation and that he did not care to beinvolved in any market crash.” The upshot of the conferencewas that Livermore bowed out of the Piggly Wiggly operation,leaving Saunders to run it by himself. Saunders then boarded atrain for Chicago to attend to some business there. At Albany,he was handed a telegram from a member of the StockExchange who was the nearest thing he had to a friend in thewhite-charger-and-coat-of-mail set. The telegram informed himthat his antics had provoked a great deal of head-shaking inthe councils of the Exchange, and urged him to stop creating asecond market by advertising stock for sale at a price so farbelow the quotation on the Exchange. At the next station,Saunders telegraphed back a rather unresponsive reply. If itwas a possible corner the Exchange was fretting about, he said,he could assure the governors that they could put their fearsaside, since he himself was maintaining the floating supply bydaily offering stock for loan in any amount desired. But hedidn’t say how long he would continue to do so.
A week later, on Monday, March 19th, Saunders ran anewspaper ad stating that his stock offer was about to bewithdrawn; this was the last call. At the time, or so he claimedafterward, he had acquired all but 1,128 of Piggly Wiggly’s200,000 outstanding shares, for a total of 198,872, some ofwhich he owned and the rest of which he “controlled”—areference to the installment-plan shares whose certificates hestill held. Actually, this figure was open to considerableargument (there was one private investor in Providence, forinstance, who alone held eleven hundred shares), but there isno denying that Saunders had in his hands practically everysingle share of Piggly Wiggly then available for trading—and thathe therefore had his corner. On that same Monday, it isbelieved, Saunders telephoned Livermore and asked if he wouldrelent long enough to see the Piggly Wiggly project through bycalling for delivery of all the shares that were owed Saunders;in other words, would Livermore please spring the trap?
Nothing doing, Livermore is supposed to have replied, evidentlyconsidering himself well out of the whole affair. So the followingmorning, Tuesday, March 20th, Saunders sprang the traphimself.
IT turned out to be one of Wall Street’s wilder days. PigglyWiggly opened at 75?, up 5? from the previous days’ closingprice. An hour after the opening, word arrived that Saundershad called for delivery of all his Piggly Wiggly stock. Accordingto the rules of the Exchange, stock called for under suchcircumstances had to be produced by two-fifteen the followingafternoon. But Piggly Wiggly, as Saunders well knew, simplywasn’t to be had—except, of course, from him. To be sure,there were a few shares around that were still held by privateinvestors, and frantic short sellers trying to shake them loosebid their price up and up. But by and large there wasn’t muchactual trading in Piggly Wiggly, because there was so little PigglyWiggly to be traded. The Stock Exchange post where it wasbought and sold became the center of a mob scene astwo-thirds of the brokers on the floor clustered around it, afew of them to bid but most of them just to push, whoop, andotherwise get in on the excitement. Desperate short sellersbought Piggly Wiggly at 90, then at 100, then at 110. Reportsof sensational profits made the rounds. The Providence investor,who had picked up his eleven hundred shares at 39 in theprevious autumn, while the bear raid was in full cry, came totown to be in on the kill, unloaded his holdings at an averageprice of 105, and then caught an afternoon train back home,taking with him a profit of over seventy thousand dollars. As ithappened, he could have done even better if he had bided histime; by noon, or a little after, the price of Piggly Wiggly hadrisen to 124, and it seemed destined to zoom straight throughthe lofty roof above the traders’ heads. But 124 was as high asit went, for that figure had barely been recorded when arumor reached the floor that the governors of the Exchangewere meeting to consider the suspension of further trading inthe stock and the postponement of the short sellers’ deadlinefor delivery. The effect of such action would be to give thebears time to beat ............