In the beginning of the beginning the distillers of turpentine carried competition to the quarrelling point. Then they carried the quarrel to the point of silence, which was most to be feared, for it meant that no time was to be wasted in words. All were losing money; but each hoped that the others were losing more, proportionately, and therefore would go under all the sooner. The survivors thought they could manage to keep on surviving, for on what twelve would starve four could feast.

It is seen periodically in the United States: an industry apparently suffering from suicidal mania. It is incomprehensible, inexplicable, though mediocrities mutter: “Over-production!” and shake their heads complacently, proud of having diagnosed the trouble. Here was the turpentine business, once great and lucrative, now ruin-producing; formerly affording a comfortable livelihood to many thousands and now giving ever-diminishing wages to ever-diminishing numbers.

It was Mr. Alfred Neustadt, a banker in a famous turpentine district, who first called his 34brother-in-law’s attention to the pitiable sight. Mr. Jacob Greenbaum’s soul thrilled during Neustadt’s recital. He perceived golden possibilities that dazzled him: He decided to form a Turpentine Trust.

First he bought for a song all the bankrupt stills; seven of them. Later on, in his scheme of trust creation, these self-same distilleries would be turned over to the “octopus,” at nice fat figures, as Greenbaum put it, self-admiringly, to his brother-in-law. Then he secured options on nine others, the tired-unto-death plants. In this way he was able to control “a large productive capacity” at an expenditure positively marvellous—it was so small. It was also in his brother-in-law’s name. Then the banking house of Greenbaum, Lazarus & Co. stepped in, interested accomplices, duped or coerced into selling enough other distillers to assure success, cajoled the more stubborn, wheedled the more credulous, gave way gracefully to the shrewder and gathered them all into the fold. 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 35cent 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.” They had shears, not fleeces.

The prospectus of the “Trust” was a masterpiece of persuasiveness and vagueness, of slim statistics and alluring generalities. In due course of time the public subscribed for the greater part of the $25,000,000 of bonds, and both bonds and stock were “listed” on the New York Stock Exchange—that is, they were placed on the list of securities which members may buy or sell on the “floor” of the Exchange.

Tabularly expressed, the syndicate’s operations were as follows:
Authorized stock     $30,000,000
Authorized bonds     25,000,000
      ___________
Total     $55,000,000
Actual worth of property     12,800,000
      ___________
Aqua Pura     $42,200,000

Paid to owners for 41 distilleries representing 90 per cent of the turpentine production (and 121 36per cent of the consumption!) of the United States:
Cash from bond sales     $8,975,983
Bonds     12,000,000
Stock     18,249,800
      ___________
Total     $39,225,783
Syndicate’s commission, stock     12,988,500
Retained in Co.’s treasury, unissued     2,000,000
Expenses and discounts on bonds, etc.     785,717
      ___________
Total     $55,000,000

These figures were not for publication. They told the exact truth.

The public knew nothing of the company’s earning capacity, save a few tentative figures from the prospectus, which was a sort of financial gospel according to Greenbaum, but which did not create fanatical devotees among investors. The stock, unlike the Kipling ship, had not found itself. It was not market-proven, not seasoned; no one knew how much dependence to put on it; wherefore the banks would not take it as collateral security on loans and wherefore the “speculative community” (as the newspapers call the stock gamblers) would not touch it, since in a pinch it might prove utterly unvendible. It remained for the syndicate to make a “market” for it, to develop such a condition of affairs that anyone at 37any time could, without overmuch difficulty and without causing over-great fluctuations, sell readily American Turpentine Company stock. The syndicate would have to earn its commission.

All the manufacturers who had received stock in part payment were told most impressively by Mr. Greenbaum not to sell their holdings under any circumstances at any price below $75 a share. Not knowing Mr. Greenbaum, they readily and solemnly promised to obey him. They even permitted themselves to think, after talking to him, that they would some day receive $80 per share for all their holdings. This precluded any untimely “unloading” by the only people outside the syndicate that held any Turpentine stock at all.

Mr. Greenbaum took charge of the market conduct of “Turp,” as the tape called the stock of the American Turpentine Company. At first, the price was marked up by means of “matched” orders—preconcerted and therefore not bona fide transactions. Mr. Greenbaum told one of his brokers to sell 1,000 shares of “Turp” to another of his brokers and shortly afterwards the second broker sold the same 1,000 shares to a third, by pre-arrangement—this being the matching process—with the result that the tape recorded transactions 38of 2,000 shares. After the “matching” had gone on for some time, readers of the tape were supposed to imagine that the stock was legitimately active and strong—two facts which in turn were supposed to whet the buying appetite. It was against the rule of the Exchange to “match” orders, but how could convictions be secured?

“Turp” began at 25 and as the syndicate had all the stock in the market, it was easily manipulated upward to 35. 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; and those customers of the commission houses who, because they were bound to speculate daily or die and because they studied the ticker-ribbon so assiduously, were known by the generic name of “tape-worms.” These gentry, in and out of the Exchange, provided the tape in its curious language foretold a rise, would buy anything—from 39capitalized impudence, as in the case of Back Bay Gas, whose property was actually worth nil and its capital stock was $100,000,000, up to Government bonds.

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.

Greenbaum and his associates were exceptionally shrewd business men, thoroughly familiar with Wall Street and its methods, cautious yet bold, far-seeing yet eminently of the day. They were practical financiers. They marked up the price of “Turp” ten points; but they could not arouse public interest in it so that people would buy it. Indeed, at the end of three weeks, during which the “Street” had been flooded with impressive advice, printed and spoken, to buy because the price was going higher, all they had for their 40trouble was more stock-–6,000 shares from Ira D. Keep, a distiller, who sold out at 38 because he needed the money; and they also were obliged to buy back from the “room traders” at 35 and 36 and higher, the same stock the “gang” had sold at 30 and 31 and 32 and 34. Then the manipulators had to “support” the stock at the higher level, that is, they had to keep it from declining, which could be done only by continuous buying. By doing this the public might imagine there was considerable merit in a stock which was in such good demand from intelligent people as to remain firm, notwithstanding its previous substantial rise. And if somebody wanted “Turp” why shouldn’t the public want it? The public generally asks itself that question. It is in the nature of a nibble and rejoices the hearts of the financial anglers.

Every attempt to sell “Turp” met with failure. At length it was decided to allow the price to sink back to an “invitingly low” level. It was done. But still the invited public refused to buy. Efforts to encourage a short interest to over-extend itself unto “squeezable” proportions failed similarly. The Street was afraid to go “short” of a stock which was so closely held. The philosophy of short selling is simple; it really amounts to betting 41that 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.” This is done when the short interest is large enough to make it worth while.

In the course of the next few months, after a series of injudicious fluctuations which gave to “Turp” a bad name, even as Wall Street names went, despite glowing accounts of the company’s wonderful business and after distributing less than 35,000 shares, the members of the “Turpentine Skindicate,” as it was popularly called, sorrowfully acknowledged that, while they had skilfully organized the trust and had done fairly well with the bonds, they certainly were not howling successes as manipulators. During the following eight months they sold more stock. They spared not the widow nor the orphan. They even “stuck” their intimate friends. They had sold 42for 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. Anybody can buy stocks or can sell them. But not every one can sell stocks and at the same time convey the impression that he is buying them, and that prices therefore must inevitably go much higher. It requires boldness and consummate judgment, knowledge of technical stock-market conditions, infinite ingenuity and mental agility, absolute familiarity with human nature, a careful study of the curious psychological phenomena of gambling and long experience with the Wall Street public and with the wonderful imagination of the American people; to say nothing of knowing thoroughly the various brokers to be employed, their capabilities, limitations and personal temperaments; also, their price.

Adequate manipulative machinery, moreover, can be perfected only with much toil and patience and money. Professional Wall Street will always tell you that “the tape tells the story.” The little paper ribbon, therefore, must be made to tell such stories as the manipulator desires should 43be told to the public; he must produce certain effects which should preserve an appearance of alluring spontaneity and, above all, of legitimacy and candor; he must be a great artist in mendacity and at the same time have the superb self-confidence of a grizzly.

Several members of the syndicate had many of these qualities, but none had them all. It was decided to put “Turp” stock in the hands of Samuel Wimbleton Sharpe, the best manipulator Wall Street had ever known. “Jakey” Greenbaum said he would conduct the negotiations with the great plunger.

Sharpe was a financial free-lance, free-booter and free-thinker. He had made his first fortune in the mining camps of Arizona and finding that field too narrow had come to New York, where he could gamble to his heart’s content. He was all the things that an ideal manipulator should be and several more. He had arrived in New York with a sneer on his lips and a loaded revolver in his financial hands. The other “big operators” looked at him in pained astonishment. “I carry my weapons openly,” Sharpe told them, “and you conceal your dirks. Don’t hurt yourselves trying to look honest. I never turn my back on such as you.” Of this encounter was born a hostility 44that never grew faint. Sharpe had nothing of his own to unload on anyone else, no property to overcapitalize and sell to an undiscriminating public by means of artistic lies and his enemies often did. So they called him a gambler, very bitterly, and he called them philanthropists, very cheerfully. If he thought a stock was unduly high he sold it confidently, aggressively, stupendously. If he thought a stock was too low he bought it boldly, ready to take all the offerings and bid for more. And once on the march, he might be temporarily checked, be forced by the enemy to halt for a day or a week or a month; but inevitably he arrived. And such an arrival!

And as a manipulator of stock-values he had no equal. On the bull side he rushed a stock upward so steadily, so boldly and brilliantly, but, above all, so persuasively, that lesser gamblers almost fought to be allowed to take it off his hands at incredibly high prices. And when in the conduct of one of his masterly bear campaigns he saw fit to “hammer” the market, values melted away as by magic—Satanic magic, the poor lambs thought. All stocks looked “sick,” looked as though prices would go much lower; murmurs of worse things to come were in the air, vague, disquieting, ruin-breeding. The atmosphere of the 45Street was supersaturated with apprehension, and the black shadow of Panic brooded over the Stock Exchange, chilling the little gamblers’ hearts, wiping out the last of the little gamblers’ margins. And even the presidents of the solid, conservative banks studied the ticker uneasily in their offices.

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; every quotation represents so many shots.

There was something feline in Sharpe’s stealthy, soundless steps, in his mustaches, in the conformation of his face—broad of forehead and triangulating chin-ward. In his eyes, too, there was something tigerish—unmelodramatically cold hearted and coldly curious as they looked upon Mr. Jacob Greenbaum. Unconsciously the unfanciful Trust-maker asked himself whether Sharpe’s heart-beats 46were not ticker ticks, impassively indicating the pulse of the stock-market.

“Hallo, Greenbaum.”

“How do you do, Mr. Sharpe?” quoth the millionaire senior partner of the firm of Greenbaum, Lazarus & Co. “I hope you are well?” He bent his head to one side, his eyes full of a caressing scrutiny, as though to ascertain the exact condition of Sharpe’s health. “Yes, you must be. I haven’t seen you look so fine in a long time.”

“You didn’t come up here just to tell me this, Greenbaum, did you? How’s your Turpentine? Oh!”—with a long whistle—“I see. You want me to go into it, hey?” And he laughed—a sort of half-chuckle, half-snarl.

Greenbaum looked at him admiringly; then, with a tentative smile, he said: “I am discovered!”

Nearly every American may be met as an equal on the field of Humor. To jest in business matters of the greatest importance bespoke the national trait. Moreover, if Sharpe declined, Greenbaum could treat the entire affair—the proposal and the rejection—as parts of a joke.

“Well?” said Sharpe, unhumorously.

“What’s the matter with a pool?”

47“How big?” coldly.

“Up to the limit.” Again the Trust-maker smiled, uncertainly.

“You haven’t all the capital stock, I hope.”

“Well, call it 100,000 shares,” said Greenbaum, more uncertainly and less jovially.

“Who is to be in it besides you?”

“Oh, you know; the same old crowd.”

“Oh, I know,” mimicked Mr. 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. I’ll see that it does not come out until I say so.”

There was a pause. Between Sharpe’s eyebrows were two deep lines. At length, he said:

“Bring your friends here, this afternoon. Good-by, Greenbaum. And, I say, Greenbaum.”

“Yes?”

“No funny tricks at any stage of the game.”

48“What’s the use of saying such things, Mr. Sharpe?” with an experimental frown.

“The use is so you won’t try any. Come at four,” and Mr. Sharpe began to pace up and down the room. Greenbaum hesitated, still frowning tentatively; but he said nothing and at length went out.

Sharpe looked at the tape. “Turp” was 29?.

He resumed his restless march back and forth. It was only when the market “went against him” that Mr. Sharpe did not pace about the room in the mechanical way of a menagerie animal, glancing everywhere but seeing nothing. When something unexpected happened in the market Sharpe stood immobile beside the ticker, because his overworked nerves were tense—like a tiger into whose cage there enters a strange and eatable animal.

On the minute of four there called on Mr. Sharpe the senior partners of the firms 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 ushered not into the private office, but into a sumptuously furnished room, the walls of which were covered with dashing oil paintings 49of horses and horse-races. The visitors seated themselves about a long oaken table.

Mr. Sharpe appeared at the threshold.

“How do you do, gentlemen? Don’t move, please; don’t move.” He made no motion to shake hands with any of them, but Greenbaum came to him and held out his fat dexter resolutely and Sharpe took it. Then Greenbaum sat down and said, “We’re here,” and smiled, blandly.

Sharpe stood at the head of the polished, shining table, and glanced slowly down the double row of alert faces. 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.

50Sharpe read aloud:
Greenbaum, Lazarus & Co     38,000 shares.
I. & S. Wechsler     14,000 shares.
Morris Steinfelder’s Sons     14,000 shares.
Reis & Stern     11,000 shares.
Kohn, Fischel & Co     10,000 shares.
Silberman & Lindheim     9,000 shares.
Rosenthal, Shaffran & Co     9,800 shares.
Zeman Bros     8,600 shares.
      ______________
       
Total     114,400 shares.

“Is that correct, gentlemen?” asked Sharpe.

Greenbaum nodded his head and smiled affably as befitted the holder of the biggest block. Some said “Yes”; others, “That is correct.” Young Lindheim said, “That’s what.” The founders of the firm—his uncle and his father—were dead, and he had inherited the entire business from the two. His flippancy was not inherited from either.

“It is understood,” said Sharpe, slowly, “that I am to have complete charge of the pool, and conduct operations as I see fit. I want no advice and no questions. If there is any asking to be done, I’ll do it. If my way does not suit you we’ll call the deal off right here, because it’s the only way I have. I know my business, and if you know yours you’ll keep your mouths shut in this office and out of it.”

51No one said a word, not even Lindheim.

“Each of you will continue to carry the stock for which he has agreed to stand in the pool. You’ve had it a year and couldn’t sell it, and you might keep it a few weeks more, until I sell it for you. It must be subject to my call at one minute’s notice. I’ve looked into the company’s business, and I think the stock can easily sell at 75 or 80.”

Something like a gasp of astonishment came from those eight hardened speculators. Then Greenbaum smiled, knowingly, as if that were his programme, memorized and spoken by Sharpe.

“It is also understood,” went on Sharpe, very calmly, “that none of you has any other stock for sale at any price, excepting his proportion in this pool, and that proportion, of course, is not to be sold excepting by me.” No one said a word, and he continued:

“My profit will be 25 per cent of the pool’s winnings, figuring on the stock having been put in at 29. The remaining profits will be divided pro rata among you; the necessary expenses will be shared similarly. I think that’s all. And, gentlemen, no unloading on the sly—not one share.”

“I want you to understand, Mr. Sharpe, that 52we are not in the habit of—” began Greenbaum with perfunctory dignity. He felt it was his duty to remonstrate before his colleagues.

“Oh, that’s all right, Greenbaum. I know you. That’s why I’m particular. We’ve all been in Wall Street more than a month or two. I simply said, ‘No shenanigan.’ And, Greenbaum,” he added, very distinctly, while his eyes took on that curious, cold, menacing look, “I mean it, every d——d word of it. I want the numbers of all your stock-certificates. Excuse me, gentlemen. I am very busy. Good-afternoon.”

And that is how the famous bull pool in Turpentine came to be formed. They thought he might have been nicer, more diplomatic; but as they had sought him, not he them, they bore with his eccentricities. Each pool manager had his way, just as there are various kinds of pools.

“Sam is not half a bad fellow,” Greenbaum told them, as if apologizing for a dear friend’s weaknesses. “He wants to make out he is a devil of a cynic, but he’s all right. If you humor him you can make him do anything. I always let him have his way.”

On the very next day began the historical advance 53in Turpentine. It opened up at 30. The specialists—brokers who made a specialty of dealing in it—took 16,000 shares, causing an advance to 32?. Everybody who had been “landed” with the shares at higher figures, and had bitterly regretted it ever since, now began to feel hopeful. As never before a stock had been manipulated, with intent to deceive and malice prepense, so did Sharpe manipulate Turpentine stock. The tape told the most wonderful stories in the world, not the less wonderful because utterly untrue. Thus, one day the leading commission houses in the Street were the buyers, which inevitably led to talk of “important developments”; and the next day brokers identified with certain prominent financiers took calmly, deliberately, nonchalantly, all the offerings; which clearly indicated that the aforementioned financiers had acquired a “controlling interest”—the majority of the stock—of the American Turpentine Company. 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 54very 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”; said, almost articulately to them, that the people mos............