The next problem was what to do. There must be a different way. Could I improve my approach? It had been proved to me that it was wrong to listen to nightclub customers, head-waiters, stage-hands. They were only amateurs like myself and, however confidently they offered their tips, they did not know any more than I did.
I gazed at page after page of my brokerage statements which said: Bought 90 cents, sold 82 . . . Bought 65 cents, sold 48 . . .
Who could help me to discover the secrets of the stock market? I had started to read Canadian financial publications as well as Canadian stock tables. I had begun increasingly to glance at advisory news sheets which gave tips about stocks listed on the Toronto Stock Exchange.
I had already decided that if I were to go on, I would need professional help, so I subscribed to some advisory services which gave financial information. After all, I reasoned, these were the experts. I would follow their professional advice and quit buying stock on the odd tip from a stranger or an amateur stockfancier like myself. If I followed their skilled, sensible teaching, I must succeed.
There were financial advisory services that offered a trial subscription of four copies of their information-sheets for one dollar. You could have these as a goodwill taste before you began seriously to buy their valuable service.
I put down a dozen or so dollars for trial subscriptions and eagerly read the sheets they sent me.
In New York, there are reputable financial services, but the Canadian sheets that I bought were strictly for the sucker trade. How was I to know this? These financial advice sheets delighted and excited me. They made stock market speculation sound so urgent and easy.
They would come out with huge headlines saying:
“Buy this stock now before it is too late!”
“Buy to the full extent of your resources!”
“If your broker advises you against it, get rid of your broker!”
“This stock will give you a profit of 100% or more!”
This, of course, seemed like real, red-hot information. This was much more authentic than the odd tip picked up in a restaurant.
I read these promotion sheets eagerly. They were always filled with much unselfishness and brotherly love. One of them said:
“For the first time in the history of Canadian finance the little fellow will have the fantastic opportunity of getting in on the ground floor of a brilliant new development.”
“The plutocrats of Wall Street have been trying to acquire all the stock in our company, but in clear defiance of the evil traditions we are only interested in the participation of investors of moderate means. People like you. . . .”
But this was me! They understood my position exactly. I was the typical little fellow to be pitied for the way he was pushed around by the Wall Street plutocrats. I should only have been pitied for my stupidity.
I would rush to the telephone to buy the stock they recommended. It invariably went down. I could not understand this but I was not the slightest bit worried. They must know what they were talking about. The next stock must go up. It seldom did.
I did not know it but I was already coming up against one of the great pitfalls of the small operator-the almost insoluble problem of when to enter the market. These sudden drops immediately after he has invested his money are one of the most mystifying phenomena facing the amateur. It took me years to realize that when these financial tipsters advise the small operator to buy a stock, those professionals who have bought the stock much earlier on inside information are selling.
Simultaneously with the withdrawal of the inside-track money, the small sucker money is coming in. They are not firstest with the mostest, but lastest with the leastest. They are far too late, and their money is always too small to support the stock at its false high point once the professionals are out.
I know this now, but at that time I had no idea why stocks behaved like that. I thought it was just bad luck that they dropped after I bought them. When I look back I know that I was all set at this period to lose everything I had.
When I did invest $100 I almost always lost $20 or $30 at once. But a few stocks did go up and I was comparatively happy.
Even when I had to go to New York I continued to telephone my orders to brokers in Toronto.
I did that because I did not even know you could transact Canadian stock exchange business through a New York broker. The Toronto brokers would telephone tips and I always bought the stock they or the Canadian financial advisory services suggested. Like all small hit-and-miss operators, I put down my losses to bad luck. I knew – I was certain-that one day I would have good luck. I was not wrong all the time – in some ways it would have been better if I had been. Once in a while I made a few dollars. It was always a complete accident.
Here is an example. The Canadian stock tables had become obsessive reading with me. One day when I was looking through them I saw a stock called CALDER BOUSQUET. I still do not know what it was or what the company produces. But it was such a pretty name. I liked the sound of it, so I bought 5,000 shares at 18 cents, for a total of $900.
Then I had to fly to Madrid on a dancing engagement. One month later when I came back I opened the paper and looked for the name. It had gone up to 36 cents. That was double the price I had paid. I sold it – and made $900. It was just blind luck.
It was doubly blind luck because not only had it gone up for no good reason but if I had not been dancing in Spain I would certainly have sold the stock when it rose to 22 cents. I could not get Canadian stock quotations while I was in Spain so I was saved from selling too soon by being in blissful ignorance concerning the stock’s movements.
This was a strange, mad period, but it only seems so in retrospect. At that time I felt I was really beginning to be a big-time operator. I was proud of myself because I was working on tips of a more educated nature than my previous head-waiter, dressing-room information. My Canadian brokers called me, my financial services advised me, and if I did get a tip I felt I was getting it from the source. I cultivated more and more the society of prosperous businessmen in cocktail lounges who told me about oil companies which were going to strike it rich. They whispered where there was uranium in Alaska; they confided about sensational developments in Quebec. All these were guaranteed to make a great fortune in the future if you could only get into the stocks now. I did, but they did not make me any money.
By the end of 1953, when I returned to New York, my $11,000 was down to $5,800. Once again I had to reconsider my position. The businessmen’s tips did not produce the Eldorado they promised. The advisory services did not provide the information which enables you to make money in the stock market. Their stocks tended much more to go down than up. I could not get quotes for some of my Canadian stocks in the New York newspapers, yet stock quotations fascinated me so much that I began to read the financial columns in papers like The New York Times, the New York Herald Tribune, and The Wall Street Journal. I did not buy any of the stocks that the New York exchanges quoted, but I still remember the impact of the beautiful names of some of the stocks and the appeal of some of the mysterious phrases like “over the counter.”
The more I read, the more I became interested in the New York market. I decided to sell all my Canadian stock except for OLD SMOKY GAS & OILS – and I kept this one because the man who gave me the stock in the first place advised me that fantastic developments were expected. As usual, no fantastic developments took place, and after five months in New York I gave up the unequal struggle. I sold my last Canadian stock, which I had bought for 19 cents, for 10 cents. In the meantime I had begun to wonder if the bigger jungle nearer home, the New York Stock Exchange, would not be easier to assail. I called a friend of mine, a New York theatrical agent, Eddie Elkort, and asked him if he knew a New York broker. He gave me the name of a man whom I will call Lou Keller.
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