Here’s another fantastic real life example from “Reminiscences of the Stock Operator“, shedding light on how big boys manipulate the market. Livingston (Jesse Livermore) recounted a story of a big time player and how he maneuver his way to short the market:
“”Mr. Cammack, I have a very good friend who is a transfer clerk in the St. Paul office and he has just told me something which I think you ought to know.”
“What is it?” asked Cammack listlessly.
“You’ve turned, haven’t you? You are bearish now?” asked Joseph, to make sure. If Cammack wasn’t interested he wasn’t going to waste precious ammunition.
“Yes. What’s the wonderful information?”
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“I went around to the St. Paul office to-day, as I do in my news-gathering rounds two or three times a week, and my friend there said to me: ‘The Old Man is selling stock.’ He meant William Rockefeller. ‘Is he really, Jimmy?’ I said to him, and he answered, ‘Yes; he is selling fifteen hundred shares every three-eighths of a point up. I’ve been transferring the stock for two or three days now.’ I didn’t lose any time, but came right over to tell you.”
Cammack was not easily excited, and, moreover, was so accustomed to having all manner of people rush madly into his office with all manner of news, gossip, rumors, tips and lies that he had grown distrustful of them all.
He merely said now, “Are you sure you heard right, Joseph?”
“Am I sure? Certainly I am sure! Do you think” I am deaf?” said Joseph.
“Are you sure of your man?”
“Absolutely!” declared Joseph. “I’ve known him for years. He has never lied to me. He wouldn’t! No object! I know he is absolutely reliable and I’d stake my life on what he tells me. I know him as well as I know anybody in this world a great deal better than you seem to know me, after all these years.”
“Sure of him, eh?” And Cammack again looked at Joseph.
Then he said, “Well, you ought to know.”
He called his broker, W. B. Wheeler. Joseph expected to hear him give an order to sell at least fifty thousand shares of St. Paul. William Rockefeller was disposing of his holdings in St. Paul, taking advantage of the strength of the market. Whether it was investment stock or speculative holdings was irrelevant. The one important fact was that the best stock trader of the Standard Oil crowd was getting out of St. Paul. What would the average man have done if he had received the news from a trustworthy source? No need to ask. But Cammack, the ablest bear operator of his day, who was bearish on the market just then, said to his broker, “Billy, go over to the board and buy fifteen hundred St. Paul every three-eighths up.” The stock was then in the nineties.
“Don’t you mean sell?” interjected Joseph hastily. He was no novice in Wall Street, but he was thinking of the market from the point of view of the newspaper man and, incidentally, of the general public. The price certainly ought to go down on the news of inside selling. And there was no better inside selling than Mr. William Rockefeller’s. The Standard Oil getting out and Cammack buying! It couldn’t be!
“No,” said Cammack; “I mean buy!”
“Don’t you believe me?”
“Don’t you believe my information?”
“Aren’t you bearish?”
“That’s why I’m buying. Listen to me now: You keep in touch with that reliable friend of yours and the moment the scaled selling stops, let me know. Instantly! Do you understand?”
“Yes,” said Joseph, and went away, not quite sure he could fathom Cammack’s motives in buying William Rockefeller’s stock. It was the knowledge that Cammack was bearish on the entire market that made his manoeuvre so difficult to explain. However, Joseph saw his friend the transfer clerk and told him he wanted to be tipped off when the Old Man got through selling.
Regularly twice a day Joseph called on his friend to inquire. One day the transfer clerk told him, “There isn’t any more stock coming from the Old Man.” Joseph thanked him and ran to Cammack’s office with the information. Cammack listened attentively, turned to Wheeler and asked, “Billy, how much St. Paul have we got in the office?” Wheeler looked it up and reported that they had accumulated about sixty thousand shares.
Cammack, being bearish, had been putting out short lines in the other Grangers as well as in various other stocks, even before he began to buy St. Paul. He was now heavily short of the market. He promptly ordered Wheeler to sell the sixty thousand shares of St. Paul that they were long of, and more besides. He used his long holdings of St. Paul as a lever to depress the general list and greatly benefit his operations for a decline. St. Paul didn’t stop on that move until it reached forty-four and Cammack made a killing in it. He played his cards with consummate skill and profited accordingly. The point I would make is his habitual attitude toward trading. He didn’t have to reflect. He saw instantly what was far more important to him than his profit on that one stock. He saw that he had providentially been offered an opportunity to begin his big bear operations not only at the proper time but with a proper initial push. The St. Paul tip made him buy instead of sell because he saw at once that it gave him a vast supply of the best ammunition for his bear campaign.”