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The Romance and Tragedy

W >> William Ingraham Russell >> The Romance and Tragedy




I wanted to succeed. I felt I had succeeded.

In my twentieth year under the largest salary I was ever paid, my
income was five hundred dollars--in my thirty-fourth year it was
thirty thousand and earned by my own efforts, out of a business
that I alone had created; for the business of that time bore no
relation whatever to the one in which I succeeded my old employer.
Surely I had cause for congratulation, no matter how dull business
might be for the time being.

Knollwood had been growing these years with astonishing rapidity,
and our social circle was now a fairly large one.

The characteristics, so attractive the first year of our residence
there, were still unchanged. The newcomers were all nice people
and the right hand of good-fellowship was extended and accepted in
the true spirit.

In addition to the many beautiful new houses there had been erected
a small but very pretty stone church of Episcopalian denomination.

At the time the building of the church was planned, I remember a
conversation on the subject that afterwards seemed prophetic.

I was talking on the train with a gentleman, an officer of the New
York Life Insurance Company, who, while he did not reside in the
Park, lived in the vicinity and mingled socially with our people.
I told him we were going to build a church. "What"? he said. "Don't
do it; you have a charming social circle now that will surely be
ruined if you do." I expressed surprise at his remark, and he only
shook his head and with more earnestness added, "Mark my words,
that church will be the commencement of social trouble; cliques will
form, friction and gossip will arise, and your delightful social
life will be a thing of the past."

It is a fact that his words came true, and yet I contributed to
the cost of the building and support of the church, and under the
same conditions would do it again.

At the end of December I found my income had been cut in half.
I had made but fifteen thousand dollars, but the year had been so
enjoyable in my home life I was entirely satisfied. The additional
time dull business had permitted me to spend with my family was
worth all it cost.




CHAPTER XXI

THE DAM GIVES WAY



Dull business, the dam which checked the onward flow of the stream
of our prosperity in 1885, was slowly but steadily carried away
in the early months of 1886. Consumers and dealers again became
liberal buyers and their lead was soon followed by the speculative
fraternity. Our office was crowded with business and a further
increase in the clerical force was imperative. Long hours and hard
work was the rule, while resulting profits continually mounting
higher was the reward.

Our customers as a class were a fine lot of men, all of substantial
means, most of them wealthy. We had no friction, we were popular
with all, and other things being equal we commanded the preference
from almost the entire trade.

Of course, some competition had developed--our success was sure to
attract it; but it was still of insignificant proportions, and we
gave it no thought. We had been first in the field and our position
was well entrenched.

As to the speculative branch, there we had no competition. It required
banking facilities and credit to do that business, Our competitors
had neither, while we were prepared to handle any proposition that
might be presented, regardless of the amount of money involved.

Our London connection had now become very valuable to us and was
the source of a good proportion of our profits. Business between
the two markets was of almost daily occurrence, while the quantities
dealt in were large. Our speculative customers were of great help
to us in this direction and indeed we could not have properly taken
care of them if we had depended on the New York market alone. They
had increased in numbers, and finding the business profitable their
individual operations became more important.

How true it is that "nothing succeeds like success."

Our success had become known by this time, not only to every one
in the trade, but also to many outside of it. Large banking houses,
known to us at that time only by reputation, sought our business,
offering most flattering terms and unusual facilities. Friends,
acquaintances, and not a few strangers begged of us to accept large
amounts of money for speculative operations at our discretion.
Large consumers discontinued asking us for quotations and sent us
their orders without limit as to price. So great was the confidence of
the consuming trade in our judgment that a letter from us advising
them to cover their requirements for any specified period never
failed to bring the orders.

With our speculative clients this was even more pronounced. We had
but to say "Buy," and they bought; "Sell," and they sold. All this
was a great responsibility and we realized it, never forgetting
that only the utmost conservatism would maintain our position. That
I was proud of that position was only natural.

Business activity was maintained until the close of the year, and
again I had made a record. My profits were thirty-six thousand
dollars.

Our social life at Knollwood this year had been going on at a rapid
pace and its more formal character began to take shape.

The frequent pleasant little dinner-parties of four to six couples,
where bright and entertaining conversation was general, had gone
through a course of evolution and become functions where two or
three times the number sat at the board and struggled through so many
courses that one became wearied of sitting still. Those enjoyable
amateur dramatic performances, followed by light refreshment and
a couple of hours' dancing, had been displaced by the grand ball
with its elaborate supper. But there still remained one feature,
unique and delightful:

The New Year reception--every New Year's day for many years
a reception was held at the Casino. The residents, loaning from
their homes rugs, draperies, paintings, statuary, and fine furniture,
transformed that large auditorium into an immense drawing-room. The
green-houses contributed palms and blooming plants in profusion. In
the enormous fire-place burned great logs. At one end of the room
a long table from which was served, as wanted, all that could be
desired by the inner man. The stage, set with pretty garden scene
and rattan furniture, where the men lounged as they had their smoke.
Music by a fine orchestra, interspersed with occasional songs by
our own local talent.

The reception was from six until nine, then the rugs were gathered
up, the furniture moved from the center of the floor, and dancing
was enjoyed until midnight.

For miles around, every one that was eligible never failed to
be present on those occasions. It was the one great social event
of each year, and long after the circle was broken the custom was
still kept up, until finally it died out owing to the indifference
of the new-comers. For such a community it was a beautiful custom,
and in its inception served to cement the spirit of cordiality and
good-will.




CHAPTER XXII

THE CALM BEFORE THE STORM



The new year opened as the old one had closed, with marked activity
in all branches of my business; nor was there any perceptible change
until late in the spring, then began a gradually diminishing demand
that made a comparatively dull summer. Not but what there was a
fair amount of business doing all the time, but the great rush was
over.

It was only the calm before the storm. Early in the fall it became
evident to me there was a new factor in the market. Somebody, outside
the regular trade, was quietly buying up the odd lots floating
around.

The buying was not aggressive, far from it. Whoever was buying
wanted the stuff, not a higher market. The greatest caution was
observed in making the purchases so that the market might be affected
as little as possible. Every effort was made to conceal the source
from which the demand emanated. I knew it was not from any of the
New York trade, and I could not believe, judging from the broker who
was doing the buying, that it could be for account of any American
speculator. If I was right in this conclusion, then of necessity
it must be for foreign account.

In order that my readers shall fully understand what follows it is
necessary they should know the basis of our arrangement with our
London friends, which was this:

They were to cable us daily limits for buying or selling as the
case might be. These limits included our commission. We were to
guarantee our customers, that is to say, the London firm took no
risk of buyers. If we were to sell a parcel for future delivery
and before the delivery was made our customer should fail we would
have to stand the loss, if any, on the re-sale.

A few months after the connection was established the firm found
fault because so little business was done, while in many cases the
limit was so close to the market that only the commission or part
of it stood in the way of a sale.

The original arrangement was then qualified and thereafter the limits
were sent net, it being understood that when necessary we would
sell at limit, that is, do the business for nothing; but to offset
this concession, we were at all times to have for our commission
all we could get over the limit.

It proved a most fortunate change for us.

The buying continued and the market moved slowly toward a higher
level. After a few days steady buying there would be a cessation
for a day or two to allow the market to sag, then it would commence
again. The principal sellers were our London friends, and though we
were earning many commissions we felt that our friends were making
a mistake and not gauging the market correctly.

At this time our Boston correspondent offered us one hundred tons
to arrive by sailing vessel due in about three months. We secured
refusal over night and cabled the offer to London, advising the
purchase and expressing fully our opinion of the market.

The following morning I sat at my desk, and opening a cable read,
"Market advanced through operations of a few weak French speculators."
Then followed a selling limit. I laid the cable down and took up
the Boston telegram offering the hundred tons.

With the exception of my small interest in that purchase in January,
1880, I had refrained from speculation, and now I was considering
whether or not I should buy those hundred tons. The option had
nearly expired and action must be prompt. Calling a stenographer
I dictated a telegram, "We accept"--and the deed was done.

On arrival of the vessel I sold out at a profit of twenty thousand
dollars.

My profits for the year were sixty-one thousand dollars.

On February fourteenth, as a valentine, there came to "Redstone" our
fourth daughter and the family circle was complete. With two sons
and four daughters, the ban of "race suicide," theory of President
Roosevelt, rests not on us.




CHAPTER XXIII

"A FEW WEAK FRENCH SPECULATORS"



Just outside of the city of Paris was located one of the largest,
most complete manufacturing plants in the world, doing an enormous
business, employing an army of skilled artisans, consuming vast
quantities of raw material and making in profits a fortune every
year.

The controlling interest was a man of large wealth, estimated at
sixty millions of francs, and of national reputation. His gallery
of paintings was famous in art circles the world over. His family
moved in the highest strata of society and in their magnificent
home entertained with regal splendor. The man was universally
respected in business, in art, and social circles.

On the board of directors of one of the great Paris banks were two
other men, almost equal in wealth and station to this manufacturer.

These three men, with a few associates of minor importance, entered
into a hare-brained scheme of speculation in our commodity, that
in the very nature of things was bound to terminate in complete
failure. When they realized this and the enormous losses which had
been entailed, in an effort to recoup they took up another commodity,
and then followed the wildest speculation, in any merchandise, that
the world had ever seen.

When the final crash came, with their own magnificent fortunes
swept away and the bank involved, the two directors found suicide's
graves, and the other man went to prison.

Oh, the folly of it! This passion and greed for wealth.

"Market advanced through operations of a few weak French speculators"--so
read our cable. It seemed to us that their strength was far more in
evidence than their weakness, indeed of the latter we could detect
no sign. They had by their purchases advanced the market already
fifteen or twenty per cent and they continued buying in all the
world's markets, at advancing prices, everything that was offered.

The increased price was commencing to tell on consumption. Dealers
and consumers ceased buying until their surplus stocks had become
exhausted, and then bought in small lots only as they were compelled
to. Meanwhile, stocks in the hands of the syndicate were accumulating
rapidly with no visible outlet for reducing them.

A feature in the trade which alone should have been sufficient to
prevent men of brains from going into such an operation was that
the production could not be contracted for in advance. The high
price stimulated production and day after day the syndicate had to
buy in the producing markets large quantities at current prices.
These purchases at such high figures rapidly increased the average
cost of the holdings.

The market advanced by leaps and bounds, until finally the price
in London reached one hundred and sixty-seven pounds sterling per
ton, with an equivalent value in all other markets. This represented
an advance of more than one hundred per cent.

Then the members of the syndicate awakened from their pleasant
dream to find a nightmare.

The hand of every man in the trade throughout the world was raised
against them. They were in the meshes of an endless chain. For
every ton they could sell they must buy five, or more, in order to
sustain the price. If they stopped buying, even for a single day,
the bottom would drop out. What was to be done?

In Wales was an industry, comprising many mills, that in the aggregate
consumed large quantities of the article. The business had become
almost paralyzed by the advance, and many mills were about to or
had closed down. A representative of the syndicate communicated
with all these mills and negotiated a contract for supplies covering
requirements to April 30th, 1888.

The only possible way of making such a contract was by guaranteeing
that the spot market should not fall below the price then ruling.
This meant that every day the syndicate must bid £167 per ton for
all the spot stuff the market would sell--but, it stopped buying
futures. As fast as the stuff could be brought to market it had to
take it, but only as it arrived.

That was the first step. But there was still an enormous stock to
be disposed of, together with all that would have to be taken, up
to the end of April. How was that to be sold?

Our London friends had fought the syndicate from the start with
the utmost vigor. The plan of campaign was to load them with such
quantities that the burden must become too heavy to carry.

The London firm usually carried a large spot stock. This was poured
into the syndicate in parcels, at advancing prices. Then all the
little markets on the Continent were scoured and every ton available
brought to London and disposed of in the same way.

The agent of our friends, in the producing market, bought large
quantities daily. It was a six-weeks' voyage to London. In the
interim there would be a heavy advance in price and as soon as the
steamer arrived the syndicate had to buy these lots. There was no
escape. The leading member of the syndicate went to London and a
secret interview with our correspondent was arranged. His widely
known antagonism to the syndicate made him the only man who could
build a bridge for that unfortunate combination to cross on. He
made his own terms, they were accepted, and that was the beginning
of the end of the syndicate's operations in our commodity.




CHAPTER XXIV

EXCITING TIMES



The year 1888 from start to finish was one whirl of excitement
in my business life. The mental effort of handling the enormous
business--it must be remembered ours was a one-man concern--was
most exhausting. I became weary of making money and longed for a
dull period that I might rest. But there was no dull period that
year.

In January we received from our London friends confidential
information of the arrangement with the syndicate.

Its enormous holdings were, so far as possible, to be unloaded on
American buyers. This was for us to accomplish. The spot stock had
to be sold against for future delivery and held until maturity of
the sales. Of course, the sales were made at a discount from the
spot price, and as time went on this increased. When the buyers at
one level were filled up, the price was lowered until a new level,
that would tempt further buyers, was reached, and so it went on.

The trade conceived the idea that our London friends and ourselves
were selling the market short. They never dreamed that we were
unloading for the syndicate, which was daily bidding £167 for spot,
while we were selling futures far below that figure. They did not
know that at four o'clock London time, when the official market
closed on the thirtieth day of April, the syndicate would cease
buying and that a collapse would then be inevitable. It was not
our business to enlighten them, and strange to relate, not one man
asked us our opinion of the market. They bought of us day after
day and apparently believed that when the time for delivery came
we would be unable to make it and would have to settle with them
at their own figure.

A great many of our sales were made on the Exchange. On this
business we could and did call margins, but there were some weak
people whom we could not avoid selling and in such a market there
were sure to be failures among that class.

As previously explained we guaranteed all sales, and whenever a
customer defaulted we at once sold double the quantity we had sold
him, to some strong concern. This made us short of the market, and
while we made some loss on the initial transaction, our profit on
the second sale always more than extinguished it.

The first man who defaulted brought to our office a deed for a farm
in Pennsylvania and offered it to us for the four thousand dollars
he owed. I handed it back to him, told him to give it to his wife,
and forgave him the debt.

The next man was a bigger fish. He owed us nineteen thousand eight
hundred dollars. We made up the account, and when I handed him
the statement I told him we would not press him and if he was ever
able to pay us twenty-five cents on the dollar we would give him a
receipt in full. In later years he was worth a good deal of money,
though I believe he has since lost it, but he never paid us a
dollar.

After him came a few small men, who altogether owed us perhaps ten
thousand dollars. We told them all if they ever felt able to pay
we would be glad to have the money, but would never press them for
it.

Of the whole lot, only one ever paid. His account was only a few
hundred dollars, and I had forgotten it, when one day he called at
the office, said his father had died, leaving him a little money,
and he wanted to pay us. He asked, "What rate of interest will you
charge me"? I replied, "Nothing; and if you cannot afford it, you
may leave us out entirely." He insisted on paying the principal.

Our treatment of these people was not good business in the general
sense. We could have put them all off the floor of the Exchange
and to a small degree it would have been to our advantage to do so,
but they had our sympathy in their trouble and we could afford to
lose the money.

The weeks flew by and we were approaching the end of April. The
discount on future deliveries was now enormous. In London £167 was
bid daily for spot and we were selling futures at £50 discount.
Under normal conditions futures should be at a slight premium over
spot.

In London in 1888 the last business day of April was on Friday; I
think it was the 29th. Saturday the market was closed, and as Monday
was a holiday, the first business day of May was on Tuesday.

Just before the gavel fell at the London Exchange at four o'clock
on Friday, £167 was bid for spot and the syndicate ceased buying.
On the curb, five minutes later, there were sellers, but no buyers,
at £135; but this price was not official. The last official price
was £167. On Tuesday morning the first offer to sell spot was at
£93 and the market had collapsed.

The losses were frightful. On the last day of April and on the first
two or three days of May we made all of our April and part of our
May deliveries on contracts. The differences between the contract
prices and the market on those deliveries amounted to three hundred
thousand dollars and we had thousands of tons yet to be delivered
over the summer and fall months. Fortunately the losses fell upon
firms well able to stand them and there were no failures.

We had a very narrow escape from slipping up on the last of our
May deliveries.

Through some misunderstanding the London steamer by which the stuff
should have reached us. sailed without it. It was then rushed to
Liverpool and shipped by the Oceanic of the White Star Line. The
steamer arrived at New York on the afternoon of the 29th; the 30th
was a holiday, and we had to make our delivery before two o'clock
on the 3lst. Meanwhile the stuff must be taken out of steamer,
weighed up and carted to store, warehouse receipts and weighers'
returns delivered at the office and invoices made out, all of which
took much time. Through our influence with the steamer people
and the expenditure of a little money, work was carried on day and
night and the deliveries went through all right.

As our profit on that lot was thirty thousand dollars it was a
matter of some importance.

When the syndicate commenced operations in the second commodity,
a large New York firm, with foreign branches, in order to conceal
its operations requested us to act for it as a selling agency on the
Exchange, all the business being done in our name. The commissions
on this account ran into large figures and contributed materially
to my income that year.

An incident in connection with this business, showing how good
fortune was favoring us at that time, I will relate:

One of our sales for future delivery was a lot of two hundred
thousand pounds. After 'Change it was, with the other transactions,
reported to the firm. When, the following morning, the contract
was sent to the buyer, he returned it, claiming it was a mistake
and that he had not made the purchase. Having reported the sale
the day previous and the market now being a little lower, we did
not like to explain the matter to our principal and let it stand
as a purchase of our own.

Before the time for delivery matured, we resold at a profit of
exactly ten thousand dollars.

By midsummer we had accumulated a large sum of money. In addition
to this capital of our own, our resources through our credit with
banking connections made it easy for us to accept a proposition
from a certain firm to finance for it on very liberal terms an
operation which the firm had undertaken. This was in a commodity
of which we were well informed though not doing business in it.

The operation proved a failure and in October the firm suspended.

We were carrying an enormous quantity of the stuff, and when
liquidation was completed had made a loss of sixty-eight thousand
dollars, of which we never recovered a single dollar.

At the end of the year, after charging off all the losses, amounting
to about one hundred thousand dollars, I had made a net profit of
one hundred and twenty thousand dollars.




CHAPTER XXV

"COME AND DANCE IN THE BARN"



Although very fond of horses and driving it was not until 1888 that
we indulged ourselves in that direction.

When we built "Redstone" we planned where we would put the stable
when ready for it, but were in no hurry about building.

For fast horses I had no liking. My taste was for high-stepping
carriage horses. A pair that could pull a heavy T-cart with four
people eight or nine miles an hour and keep it up without urging,
were fast enough in my opinion. I wanted high-spirited, blooded
animals, fine carriages, and perfect appointments. Until I could
afford such, I preferred to go without.

In the spring I bought a pair of Black Vermont Morgans. They were
beauties and the whole family fell in love with them at once. For
the summer I secured the use of a neighbor's unoccupied stable
and then commenced the erection of my own. After this was finished
I matched my first horses with another pair exactly like them and
also bought a small pony for the younger children and a larger one
for the boys.

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