Jesse Livermore learned about the best stock tips the hard way.
Having learned his lesson, he enjoyed discussing how their willingness to take stock tips had hit other traders in their pockets.
In this excerpt from Reminiscences of a Stock Operator, ‘Larry Livingston’ (aka Jesse Livermore) tells the tale of Walker, Hood and the Atlantic & Southern tips:
But the prize tip story of my collection concerns one of the most popular members of the New York Stock Exchange, J. T. Hood. One day another floor trader, Bert Walker, told him that he had done a good turn to a prominent director of the Atlantic & Southern. In return the grateful insider told him to buy all the A. & S. he could carry.
The directors were going to do something that would put the stock up at least twenty-five points. All the directors were not in the deal, but the majority would be sure to vote as wanted.
Bert Walker concluded that the dividend rate was going to be raised. He told his friend Hood and they each bought a couple of thousand shares of A. & S. The stock was very weak, before and after they bought, but Hood said that was obviously intended to facilitate accumulation by the inside clique, headed by Bert’s grateful friend.
On the following Thursday, after the market closed, the directors of the Atlantic & Southern met and passed the dividend. The stock broke six points in the first six minutes of trading Friday morning.
Bert Walker was sore as a pup. He called on the grateful director, who was broken-hearted about it and very penitent. He said that he had forgotten that he had told Walker to buy. That was the reason he had neglected to call him up to tell him of a change in the plans of the dominant faction in the board. The remorseful director was so anxious to make up that he gave Bert another tip. He kindly explained that a couple of his colleagues wanted to get cheap stock and against his judgment resorted to coarse work.
He had to yield to win their votes. But now that they all had accumulated their full lines there was nothing to stop the advance. It was a double, riveted, lead-pipe cinch to buy A. & S. now.
Bert not only forgave him but shook hands warmly with the high financier. Naturally he hastened to find his friend and fellow-victim, Hood, to impart the glad tidings to him.
They were going to make a killing. The stock had been tipped for a rise before and they bought. But now it was fifteen points lower. That made it a cinch. So they bought five thousand shares, joint account.
As if they had rung a bell to start it, the stock broke badly on what quite obviously was inside selling. Two specialists cheerfully confirmed the suspicion. Hood sold out their five thousand shares. When he got through Bert Walker said to him, “If that blankety blank blanker hadn’t gone to Florida day before yesterday I’d lick the stuffing out of him.
Yes, I would. But you come with me.”
“Where to?” asked Hood.
“To the telegraph office. I want to send that skunk a telegram that he’ll never forget. Come on.”
Hood went on. Bert led the way to the telegraph office. There, carried away by his feelings they had taken quite a loss on the five thousand shares he composed a masterpiece of vituperation. He read it to Hood and finished, “That will come pretty near to showing him what I think of him.”
He was about to slide it toward the waiting clerk when Hood said, “Hold on, Bert!”
“What’s the matter?”
“I wouldn’t send it,” advised Hood earnestly.
“Why not?” snapped Bert.
“It will make him sore as the dickens.”
“That’s what we want, isn’t it?” said Bert, looking at Hood in surprise. But Hood shook his head disapprovingly and said in all seriousness,
“We’ll never get another tip from him if you send that telegram!”
A professional trader actually said that. Now what’s the use of talking about sucker tip-takers?