Daily Speculations The Web Site of Victor Niederhoffer and Laurel Kenner


An Excerpt from '10 Years in Wall Street', by Worthington Fowler







WALL STREET, April 3d, 1865. The bears were on a “bender,” that day; the market was full of honey-combs, on which they were feasting, for Erie had been hurled down from 90 to 42. Then was Daniel Drew’s hour of triumph. For nine months stocks had been on the downward track, and he had predicted it. In the summer of 1864, he showed by an ingenious argument, that Erie was selling too high; stated in his homely vernacular, it was as follows, viz.:

“Them Erye sheers are a sellin’ naow for a leetle more’n they’re wuth. It costs a heap naow to pay runnin’ expenses. The Erye Railroad Company has to pay up’ards of 20,000 for an ingyne what cost only $10,000 afore the war. Coal and iron has riz, so has men. Whar are dividends a comin’ from? You, boys, better not be too fond of your sheers.”

The “old man” was right. Erie at par, was a capital short sale.

In the fall of 1864, he commenced a campaign in that stock, which was to last four years, a campaign in which he took revenge on old enemies, wiped out old losses, filled his treasury with plunder, until 1868, when he retired from the field a heavy loser, by the closing battle. During three years of that time, Erie was like a one-stringed Chinese lyre in his hands, on which he played two tunes; when its price was high, he sung “who’ll buy my Erye? who’ll buy my valuable Erye? buy it, oh buy!” When it was low, he sung “who’ll sell me Erye, who’ll sell me worthless Erye? sell me Erye, sell, sell!” And the “street” listening entranced to his mellifluous voice, bought it of him at a very high price, and sold it to him at a very low price. Every night Uncle Daniel dreamed of money-bags, and every day his dream turned out true. He coined money out of his musical performances on his one-stringed Chinese lyre—Erie.

In October, 1864, Erie fell with a crash to 85. This fall tempted two prominent members of the Harlem Combination, L.W.J., and J.M.T. to take up Erie and corner it. No corner could be engineered without the concurrence of the leading director, who was, of course, none other than Daniel Drew. Accordingly the would-be cornerers broached the matter to him. Nothing could have suited him better, for now he saw an opportunity offered to pay off old scores in Harlem. He loaned them a very large sum, and made an agreement with them not to sell any Erie above a certain price. The cornerers thereupon bought an immense block of Erie above.

The price quickly rose to 105, and everything looked rose-colored, not only to them, but to Uncle Daniel. “Love laughs at locksmiths;” Daniel Drew laughs at contracts, for he generally finds a gap in them, through which, though it may not be “as wide as a church door,” he manages to slip, when it is for his interest to do so. The cornerers found themselves loaded with fresh stock at summit prices, and began to sag under their burden.

December passed into January, and Erie broke down to 80, then lurched heavily upward to 87.

Now was the hour for the “old man” to act. He arose and saddled his coal-black steed named Panic, and descended like Thalaba the destroyer into the Dom-Daniel caverns to evoke to his aid the spirits of financial fear and distrust. He sold a large amount of Erie, and thereupon made ready to depress the price. Having conveyed to one of his minions 20,- 000 worth of convertible bonds he instigated the procuring of an injunction forbidding the payment of any dividends by the Erie company.

Then he constricted the money market, and called upon L.W.J. and J.M.T. for the money which he had loaned them. This demand compelled them to throw overboard their stock. The price fell twenty per cent. The would-be-cornerers had lost a million, and the Harlem “calls” were partially avenged.




Now Uncle Daniel prepared to reap a more substantial harvest. When Erie had reached the neighborhood of 50, he covered his shorts at an enormous profit. Grant and Sheridan were pounding at the gates of Richmond, and another great stampede now took place. Wall Street then might have been taken for Landseer’s picture of Highland bulls in a storm. They who had bought Erie at 80, and thought it cheap at that, now sold it at 45, and said it was not worth 20. It was offered and sold in blocks of five thousand and ten thousand shares. As fast as it reared itself upwards, fresh blows threw it back lower than before. It touched bottom at 42.

The two leading bears, Uncle Daniel and Dr. S., (whom we have before described,) now became metamorphosed into bulls, and formed an alliance to lift Erie out of the slough into which it had fallen. Having bought all the stock they could buy under cover, when concealment was no longer possible they bought openly immense amounts. A rumor went through the street that all this stock, which daily was sent into G, their broker, was merely to cover their shorts.

The fever for selling hardly flagged as Erie rose to 49, at which price E.B.K, whose forgeries soon after startled the street, sold D & S ten thousand shares, seller 60. In three days the price of Erie was 63, when it broke and fell back to 54. Again the cry went up, “Sell! Sell!“ on every side. The conspirators gathered from this a fresh supply of shorts. Then Erie rose to 65.

D and S were still gluttonous for shorts.




The whole street was full of traps, baited to catch short sales. All these traps were connected with the great slaughter-trap set by D & S. The bears furnished their own bait, as follows: The price of Erie ought to go lower. First, because it has to borrow the money for its dividends. Second, because it has risen twenty-three per cent. in two weeks. Third, because it is not intrinsically worth 20. Fourth, because ten thousand shares are coming from Europe, etc., etc.

These baits were quickly swallowed, and in thirty days the traps were full of game—shorts.

All this time Erie had been rising with the usual downward spasms for the purpose of encouraging the ensnared ones. As it rose, B & S bagged the game, in other words, compelled the bears to cover. It touched 85 and the shorts were all taken in; then broke in a panic to 68. Tobin here stepped forward and arrested the fall by taking ten thousand shares on his sinewy shoulders. Dr. S now retired from the field with a profit of several hundred thousands, and Uncle Daniel “went it alone” on a new twist.

Once more the traps were set and baited as before. Once more the bears seeing the mistake they had made by closing their contracts, swallowed the bait in crowds. Erie, early in July, rose to 82, then dropped back to 76, and looked very weak. The bears were again jubilant. For three weeks, Erie vibrated dully between 76 and 80. Like some huge monster of the deep, its torpidity was feigned, for it was only waiting for more shorts. Many of the short sellers were pupils and imitators of Uncle Daniel in his old bearish policy, and they could hardly persuade themselves now, that the “old man” was not on their side instead of working against them.

He stood one day on the steps of his broker’s office, and soliloquized thus, as he looked at the noisy crowd, where “his young barbarians were all at PIILY,” selling Erie:

“Happy creeturs! how merry they be. Wel, wel, I guess I must pinch ‘em.”

He did “pinch ‘em.” That very day Erie rose to 85. The market fairly smoked with excitement. There was no pause in the upward movement during the next forty-eight hours.

The 31st day of July was a scorcher. From the blistering pavements of Broad Street, wave after wave of heat rose and vibrated in mid-air, while the merciless sun kept radiating new volumes. W.R.T., wiping his flaming forehead with the finest of cambric, was overheard to whisper to a brother broker in his peculiar stutter, “B—B—Big th—th—thing in Erie.”

The price rose to 92, fell back to 87, mounted to 95, fell back to 94, then galloped to 98.

All the time from March till the middle of June, I had been patronizing the “Lobster” with orders on the most liberal scale, buying or selling on an average, two or three thousand shares per day. Twice my margin had been swelled to thirty thousand, and twice it had shrunk back to its original amount, fifteen thousand. I had paid my active broker nearly fifteen thousand dollars commissions by these quick turns.

Now this helping to support brokers is a weary business, unless one can make a little money by it.




It was this conviction that led me to sell two hundred Erie short at 76, with the intention of staying short, whatever might betide. When Erie rose to 80, I also “averaged” by selling a second lot of two hundred shares. But when it jumped to 85, under the nipping fingers of Uncle Daniel, I thought the matter should be inquired into, and accordingly proceeded to consult R. Some men are born poets, others are born railroad directors. R belonged to the latter class. For aught that may be said to the contrary, a railroad stock- certificate may have been the ominous plaything of his childhood, and he may have organized mimic boards of directors among his school-fellows. At all events, he was now a railroad director, and although we do not assert that he belonged to the Erie Direction, he was always presumed to know a thing or two about Erie.

It should be remembered, he was the lucky speculator mentioned in our third chapter; but in 1865 he was very much changed from the slender youth of 1857. He was thick-set now, with jowls which hung down like the dewlaps of a prize ox. As for the color of his face, to say that it was red would feebly express it. It was not suffused by “the patriot’s shame,” nor by the celestial roseate tinge, which has been, with doubtful truth, at least in this age of brass, called “love’s proper hue.” It fairly glowed and blazed, on the morning when I consulted him. He lay in bed in his chamber, and the very sheets borrowed a ruddy tint from that burning, blood-red face.

He was man of few words. Men of his kidney always are. But the substance of what he said was, “Keep your position, and let Daniel squeeze you.” Not doubting that this advice was given in good faith, I kept my position.

When Erie reached 94, it grew scarce for delivery. In fact my broker told me it could not be borrowed either for love or money, and that unless I could deliver it in fifteen minutes, he should be under the painful necessity of buying it in, and closing me out with a loss of $6,400. In fifteen minutes the stock was bought in, and in an unguarded moment my broker entrusted me with the duty of reporting it at his office, whereby a very large cat jumped out of the bag. It appears that the faithless Lobster, not satisfied with the commissions to the amount of $15,000, which he had already extracted out of his customer, desired to make an additional sum by speculating on my margins. When I reported the four hundred shares of Erie to the Lobster’s book keeper, “This,” said he, consulting his books, “makes you long of Erie, at 94.”

“How so,” replied I.

“Four hundred shares of Erie, bought at 81, appears on my books to your credit. That closed up your shorts. This last lot makes you long four hundred, at 94.”

Sure enough, my shorts had been bought in without my knowledge, and the Lobster expected to put the difference between 81 and 94, or $5,200, into his own pocket. The ingenuousness of his book-keeper saved one this amount, and in one hour I made $800 on my four hundred shares by selling it at 96. I need not add that my account was removed from the office of the Lobster as soon as his treachery had been discovered.




“New brooms sweep clean.” At least I thought so, two hours later, when I raked in three thousand by selling Erie at 981 and taking it in at 92k, in the office of my new broker. Suddenly Erie sprang up again to 96. Groesbeck, Drew’s broker, had called upon the “short” gentlemen aforesaid, for thirty thousand shares. Then Uncle Daniel began to twang his Chinese lyre, “Buy my Erie, buy, oh buy!”

Never did the market so bristle with “points” as at four o’clock on the afternoon of that day. Fifty men could have been seen whispering in the ears of fifty other men, or grasping them affectionately by the arm and leading them apart from the roaring crowd, to tell them that Erie was the thing to buy. The jackals who hunt in the track of the lions of the market, were all ‘loping about to induce the outsiders to relieve plethoric gentlemen of their heavy loads of stock.

At this juncture, R , the railroad director, drew me aside and imparted his point. “Daniel Drew is going to put Erie up to HO in less than twenty- four hours. Buy all you can swing.” R‘s advice, respecting my short Erie, had somewhat impaired my confidence in his judgment, and yet still I believed him honest. I bought eight hundred shares at 97. That evening Erie broke, and the next day sold at 90, lessening my margin by $5,600. During the entire three months’ campaign which we have been describing, something was going on below the surface which was shortly to disclose itself and rock Wall Street to its foundations.

One night in June, about eleven o’clock, after the crowd of operators had thinned out, a bloated inebriate stood in the bar-room of the Fifth Avenue hotel. He had recently won a hundred thousand dollars in gold, and now “flown with insolence and wine,” was “bluffing” the little knot of operators who surrounded him; by bidding 146 for one million of gold or any part of it. No one dared to sell it. A tall, slender man, named W.H. at last approached him, and waited quietly until he renewed his bid.

“I’ll sell you that million,” murmured the tall broker.

“I’ll take another million,” said the inebriate.

“Sold,” said the tall man, who then offered to sell one million more, but the inebriate was full enough now. The next morning, gold fell seven per cent., and the rash buyer was ruined, while the seller had made more than $100,000. The person who sold that gold through the tall broker, was E. B. Ketchum.

This operator, afterwards so notorious, had been speculating for more than a year, to an enormous amount. In 1864, he was reported to have made $1,500,000. The gold break in March had made him the loser of millions. When Erie was hoisted by Uncle Daniel, he covered at 76, one lot of ten thousand shares, which he had sold for delivery, at 49. This transaction cost him $270,000, and was only one in a series of losses, which footed up an aggregate that made even the thorough-paced Wall Street man stand aghast.

For months the fatal drain had been going on, lie lost money by selling short, and then he lost money by buying stocks. The capital of the banking-house to which he belonged was four millions, and still a large sum of money was lacking to meet his engagements. In an evil hour he forged gold certificates, to how large an amount will never be exactly known, for some of those who advanced money upon them refused to tell their losses but these forgeries are known to have run up to several millions.

On the 15th of August, something was plainly brooding over the market. Mysterious whispers were afloat. That evening the same tall broker above-mentioned sold out for the account of E. B. K forty thousand shares of stock. The secret was known. K was a fugitive. Stocks fell in a fierce panic. The next day Erie was driven back to 76. Uncle Daniel bought twelve thousand shares of the Ketchum Erie, and laid his plans for another corner.