My Adventures with Your Money
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Title: My Adventures with Your Money
Author: George Graham Rice
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*** START OF THE PROJECT GUTENBERG EBOOK MY ADVENTURES WITH YOUR MONEY ***
Transcriber's Note: Minor typographical errors have been corrected
without note. Irregularities and inconsistencies in the text have
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MY ADVENTURES WITH YOUR MONEY
BY GEORGE GRAHAM RICE
RICHARD G. BADGER
THE GORHAM PRESS
BOSTON
Copyright, 1911, by The Ridgway Company
Copyright, 1913, by Richard G. Badger
All rights reserved
THE GORHAM PRESS, BOSTON, MASS., U.S.A.
To The American Damphool Speculator, surnamed the American Sucker,
otherwise described herein as The Thinker Who Thinks He Knows But
Doesn't--_greetings_!
This book is for you! Read as you run, and may you run as you read.
G. G. R.
NEW YORK, March 15, 1913.
CONTENTS
PAGE
I THE RISE AND FALL OF MAXIM & GAY 11
_The Birth of an Idea to Coin Money._
_The Higher Mathematics of the Operation._
_How "The One Best Bet" Was Coined._
_Real Inside Turf Information._
_The Public Asks to Be Mystified._
_Prestige Restored by a Clerk's Ruse._
_A Boastful Race Player Gives Aid._
_Fortune Changes Her Mood and Smiles Again._
_The Kentucky Colonel Falls in Line._
_Betting the Public's Money at Great Profit._
_$130,000 Is Lost and Won in a Day._
_A Disastrous Newspaper Wind-up._
II MINING FINANCE AT GOLDFIELD 46
_A Partnership of Pure Nerve._
_Bucking the Tiger on the Desert._
_Bidding $3,000,000 When Broke._
_Millions in the Vista Held No Charms._
_"Human Interest" Versus Technical Mining._
_Beginning the Advertising Business._
_Some Advertising that Paid._
_Building Gold Mines with Publicity._
_Hair-Raising Stories for Distant Readers._
_The Mercury of Speculation._
_The Birth of Bullfrog._
_Enter, Charles M. Schwab._
_Why the Bottom Fell Out._
_How About the Public's Chances?_
_Jumping Jack Manhattan._
III THE BREWING OF A SATURNALIA OF SPECULATION 89
_Trying It on the Stray Dog._
_Advertising for Thinkers._
_Yes, "Business Is Business."_
_Fortunes that Were Missed._
_The Tale of Bullfrog Rush._
_Prize Fights and Mining Promotion._
_The Year of Big Figures._
_The Story of Goldfield Consolidated._
_At the Height of the Frenzy._
IV THE GREENWATER FIASCO 133
_Getting Into the Game._
_All the Copper in the World._
_The Collapse of Greenwater._
_The Shame and the Blame._
V ON THE EVE OF THE GREAT GOLDFIELD SMASH 144
_The Rise of Wingfield and Nipon._
_The Winnings of a Tenderfoot._
_I Am Landed High and Dry._
_The Beginning of the Raid._
_Some Pertinent Personalities._
_The Time When Money Talks._
_Clouds in the Western Sky._
_From Credit to Crash._
_Down with the Sullivan Trust Company._
_Some Hindsight that Came Too Late._
VI NIPISSING AND GOLDFIELD CON 179
_An Orgy in Market Manipulation._
_The Guggenheims Enter Nipissing._
_Nipissing on the Toboggan._
_Who Got the $75,000,000?_
_The Wonder Mining-Camp Stampede._
_Teague Attacks Senator Nixon._
"_Calling for a Show-Down._"
_Manipulating Goldfield Con._
_Enter, Nat. C. Goodwin & Co._
_The Story of the Goldfield Labor "Riots."_
_The Death of Governor Sparks._
VII RAWHIDE 219
_Real Gold at Rawhide._
_The Rawhide Coalition Mines Company._
_A Race of Gamblers._
VIII THE PRESS AGENT AND THE PUBLIC'S MONEY 227
_Publicity via Elinor Glyn._
_"Al" Miller's Siege._
_The Funeral Oration for Riley Grannan._
_Among the "Big Fellows."_
_The Reverse English._
_The Power of the Public Print._
_Rawhide Again._
IX THE WALL STREET GAME 264
_Good Big Fish vs. Bad Little Fish._
_Righteous Wall Street and the "Sucker" Public._
_The Marketing of Mining Stock._
_I Buck the Wall Street Game._
_The "Double-Crossing" of Rawhide Coalition._
_"Inside" Market Support._
X ENTER, B. H. SCHEFTELS AND COMPANY 288
_More Truth on the "Mining Financial News."_
_The Scheftels Principles._
_The Scheftels Company Against Margin Trading._
XI A FIGHT TO THE DEATH 308
_The Firing of the First Guns._
_The Story of Ely Central._
_The Assault on Ely Central._
_The Clash of Battle._
_A Bombshell in the Enemy's Camp._
_A Government Raid Is Rumored._
_The Raid on B. H. Scheftels and Co._
_A Tool's Confession._
_The Guggenheims._
XII THE LESSON OF IT ALL 362
FOREWORD
You are a member of a race of gamblers. The instinct to speculate
dominates you. You feel that you simply must take a chance. You can't
win, yet you are going to speculate and to continue to speculate--and
to lose. Lotteries, faro, roulette, and horse-race betting being
illegal, you play the stock game. In the stock game the cards
(quotations or market fluctuations) are shuffled and riffled and
STACKED behind your back, AFTER the dealer (the manipulator) knows on
what side you have placed your bet, and you haven't got a chance. When
you and your brother gamblers are long of stocks in thinly margined
accounts with brokers, the market is manipulated down, and when you
are short of them, the prices are manipulated up.
You are on guard against the Get-Rich-Quick man, and you flatter
yourself that you can detect his wiles at a glance. You can--one kind
of Get-Rich-Quick operator. But not the dangerous kind. Modern
Get-Rich-Quick Finance is insidious and unfrenzied. It is practised by
the highest, and you are probably one of its easy victims.
One class of Get-Rich-Quick operator uses crude methods, has little
standing in the community, operates with comparatively small capital,
and caters to those who do not think and have only small resources. He
is not particularly dangerous.
The other uses scientific methods--so scientific, indeed, that only
men "on the inside" readily recognize them; occupies a pedestal in the
community; is generally a man of excellent financial standing, a
member of a stock exchange; employs large capital; appeals to thinkers
or those who flatter themselves that they know the difference between
a gold bar and a gold brick, and seeks to separate from their money
all classes and conditions of men and women with accumulations large
or small.
The United States Government during the past few years, at the behest
of the big fellow, who seeks a monopoly of the game, has been raiding
the little fellow--the crude operator whose power to injure is as
nothing compared to the ravages that have been wrought by the
activities of his really formidable prototype.
I have a message to communicate to every investor and speculator, a
story to tell of my experience through the great Goldfield, Bullfrog,
Manhattan and Greenwater mining booms in Nevada of 1905-1908, in which
the public lost upwards of $200,000,000, and of a series of great
mining-stock promotions in Wall Street and other American financial
centers, in which the public sank $350,000,000 in 1910. The narration
of the facts demonstrates that the Government's Get-Rich-Quick crusade
has made it less easy for some of the small offenders to thrive, but
that the transcendentally greater culprits are at this very moment
plucking the public to a fare-you-well, and that the Government has
not lifted a finger against them.
No man, except a common thief, ever started out to promote a mining
company or any other company that he was convinced at the outset had
no merit; and the work of common thieves is quickly recognized and the
offenders are easily apprehended.
The more dangerous malefactors are the men in high places who take a
good property, overcapitalize it, appraise its value at many times
what it is worth, use artful publicity and market methods to beguile
the thinking public into believing the stock is worth par or more, and
foist it on investors at a figure which robs them of great sums of
money. There are more than a million victims of this practice in the
United States.
After years of experience behind the scenes, the conclusion is forced
upon me that the instinct to speculate is so strong in American men
and women that they choose to "take a chance" regardless of the fact
that at the outset they already half-realize they eventually must
lose.
Myself, in boyhood, a victim of the instinct to speculate, I, years
afterward, at the age of 30, learned to cater to the insatiable desire
in others. I spent fortunes for advertising and wrote my own
advertisements. I constructed on big lines powerful dollar-making
machinery that succeeded in getting the money for my enterprises, and
I was generally my own manager. Ten years of hard work in a field in
which I labored day and night has disclosed to me that the instinct to
gamble is all-conquering among women as well as men--the rich and the
poor, the young and the old, the wise and the foolish, the successful
and the unsuccessful.
Worse, if you have lost some of your hard-earned money in speculation,
your case is undoubtedly incurable, because you have a fresh
incentive, namely, to "get even." Experience, therefore, will teach
you nothing. The professional gambler's aphorism, "You can't kill a
sucker," had its genesis in a recognition of this fact, and now stock
promoters and manipulators of the multi-millionaire class subscribe to
its truth and on it predicate their operations.
Nearly everybody speculates (gambles); few win. Where does the money
go that is lost? Who gets it?
Are you aware that in catering to your instinct to "invest," methods
to get you to part with your money are so artfully and deftly applied
by the highest that they deceive you completely? Could you imagine it
to be a fact that in nearly all cases when you find you are ready to
embark on a given speculation, ways and means that are almost
scientific in their insidiousness have been used upon you?
What are these impalpable yet cunningly devised tricks that are
calculated to fool the wisest and which landed YOU? I narrate them
herein.
What are your chances of winning in any speculation where you play
another man's game? HAVE YOU ANY CHANCE AT ALL?
In playing the horse races in years past you had only one chance if
you persisted--YOU COULD LOSE.
In margin-trading on the New York Stock Exchange, New York Curb,
Boston Stock Exchange, Boston Curb, Chicago Board of Trade, Chicago
Stock Exchange, New York Cotton Exchange and kindred institutions,
experience among stock-brokers proves that if you stick to the game
you have only one chance--YOU CAN LOSE.
In railroad, industrial and mining-stock speculation, where you buy
the shares outright and hold them for stock market profits, you have
two chances; if you are of the average and your operations are for a
period continuous--YOU CAN BREAK EVEN IF YOU ARE VERY LUCKY, OR LOSE
IF YOU ARE NOT; and in justice to myself I must be allowed to explain
that I had a much better opinion of the public's chances ten years ago
than I have now, and that experience on the inside has taught me this.
The moral to the investor and speculator is "Never Again!" And yet you
WILL speculate again. Experience teaches that so long as the chance of
speculative gain exists in any enterprise, so long will the American
public continue in its efforts to appease its speculative appetite.
G. G. R.
MY ADVENTURES WITH YOUR MONEY
CHAPTER I
THE RISE AND FALL OF MAXIM & GAY
The place was New York. The time, March, 1901. My age was thirty. My
cash capital, tightly placed in my pocket, was $7.30, and I had no
other external resources. I was a rover and out of a job.
Since August of the year before I had been loafing. My last position,
seven months before, was that of a reporter for the New Orleans
_Times-Democrat_. My last newspaper assignment was the great Galveston
cyclonic hurricane in which 15,000 lives were lost and $100,000,000 in
property was destroyed. I covered that catastrophe for the New York
_Herald_ and other journals as well as for the New Orleans newspaper.
It was a "beat" and I netted a big sum for a few days' hard work, but
the money had all been spent for subsistence.
At the corner of Fortieth Street and Broadway I met an old-time
racetrack friend, Dave Campbell. His face wore a hardy, healthful hue,
but he bore unmistakable evidence of being down on his luck.
"Buy me a drink," he said.
"I've got thirty cents in change and I must have a cigar," I answered,
"and you know I like good ones."
"Well, I'll take a beer," he said, "and you can buy yourself a
perfecto."
No sooner said than done. The cigar and the drink were forthcoming. We
sat down. It was a café with the regulation news-ticker near the lunch
counter.
"Do you still bet on the horses?" asked Campbell.
"No, I haven't had a bet down in more than a year," I answered.
"Well, here's a letter I just received from Frank Mead at New Orleans,
and it ought to make you some money," he said.
"There's a 'pig' down here named Silver Coin," the letter said, "that
has been raced for work recently. I think he's fit and ready and that
within the next few days they will place him in a race that he can
win, and he will bring home the coonskins at odds of 10 to 1."
I had seen letters like that before, but my interest was aroused. I
picked up a copy of the New York _Morning Telegraph_ from the table.
Turning the pages, I noticed a number of tipsters' advertisements, all
claiming they were continually giving the public winners on the races.
THE BIRTH OF AN IDEA TO COIN MONEY
"Do these people make money?" I asked Campbell.
"Yes, they must," he answered, "because the ads have been running
every day for months and months."
"Well, if poorly written ads like these can make money, what would
well-written ads accomplish, and particularly from an information
bureau which might give real information?" I queried. A moment later
the ticker began its click, click, click.
"Here come the entries," said Campbell.
He went to the tape and ejaculated, "By Jiminy! Here's Silver Coin
entered for to-morrow."
The coincidence stirred me.
"I've got an idea for an advertisement," I said. "Get me a sheet of
paper."
It was supplied. I wrote:
+---------------------------+
| Bet Your Last Dollar On |
| SILVER COIN |
| To-day |
| At New Orleans |
| He Will Win At 10 to 1 |
+---------------------------+
And then I faltered. "I must have a name for the signature," I said.
I picked up the newspaper again and turned to the page containing the
entries for that day at the New Orleans races. A sire's name was given
as St. Maxim.
"Maxim!" I said. "That's a good name. I'll use it. Now for one that
will make euphony."
"Gay!" said Campbell. "How's that? It's sporty."
Thereupon I created the trade-mark of Maxim & Gay.
In a postscript to this advertisement I stated that the usual terms
for this information were $5 per day and $25 per week, and that the
day after next Maxim & Gay would have another selection, which would
not be given away free.
"Maxim & Gay" were without an address. Half a block away on Broadway,
at a real estate office, we were informed that upstairs they had some
rooms to let. I engaged one of these for $15 a month--no pay for a
week. Two tin signs were ordered painted, bearing the inscription,
"Maxim & Gay." One was placed at the entrance of the building and the
other on the door upstairs. The sign-painter extended credit.
Before bidding me adieu, Campbell exclaimed of a sudden:
"By golly! I can't understand that scheme. How can you make any money
giving out that Silver Coin tip for nothing?"
"Watch and see!" I said.
Around to the _Morning Telegraph_ office, then on Forty-second Street,
I went.
"Insert this ad and give me $7 worth of space," I said, as I shelled
out my last cent.
When the advertisement appeared the next morning, its aspect was
disappointing. The space occupied was only fifty-six agate lines, or
four inches, single-column measure. It looked puny. Would people
notice it?
That afternoon Campbell and I took possession of the new office of
Maxim & Gay. Luckily, a former tenant had left a desk and a chair
behind, in lieu of a settlement for rent. In walked a tall Texan.
"Hey there!" he cried. "Here's $5. It's yours. Keep it. Answer my
question, and no matter what way you answer it, it don't make any
difference. The $5 is yours."
I looked up in amazement.
"Give me the source of your information on Silver Coin," he said. "I
bet big money. If your dope is on the level, I'll bet a 'gob.' If it
ain't, your confession will be cheap at $5, which will be all the
money I'll lose."
I showed him the letter from Frank Mead.
"That's good enough for me," he said, turning on his heel.
Silver Coin won easily at 10 to 1.
The betting was so heavy in the New York pool-rooms that, at post
time, when 10 to 1 was readily obtainable at the race-track, 6 to 1
was the best price that could be obtained in New York. It is history
that the New York City pool-rooms at that time controlled by "Jimmy"
Mahoney were literally "burned up" with winning wagers. Pool-room
habitués argued it thus: "If the tip is not 'a good thing,' what
object in the world would these people have for publishing the ad? If
the horse loses, the cost of the advertisement is certainly lost. The
only way they can win is for the horse to win." It was good logic--as
far as it went.
THE HIGHER MATHEMATICS OF THE OPERATION
But it was really sophistry. If the horse lost, the inserter of the
Maxim & Gay advertisement would be out exactly $7. If the $7 was used
to bet on the horse, the most that Maxim & Gay could win would be $70.
I was taking the same losing risk as the bettor, with a greater chance
for gain. By investing $7 in the advertisement, it was possible for me
to win much more money from the public by obtaining their patronage
for the projected tipping bureau.
I recall that the experimental features of the advertisement appealed
to me strongly and struck me as being a splendid test of the
possibilities of the business. If the horse won and there were few
responses to the advertisement it would be convincing on the point
that there was no money in the tipster branch of the horse-racing
game. I argued that if the racing public would not believe that an
Information Bureau was what it cracked itself up to be, in the face of
a positive demonstration, how could it be expected to believe the
lurid claims of the fakers whose advertisements crowded the sporting
papers daily and in which they claimed _after_ the races were run
that they named in advance the winners at all sorts of big odds?
The next morning about ten o'clock, Campbell called at my home and
said that he had received another "good thing" by telegraph from Mead
and that the name of the horse was Annie Lauretta, with probable odds
of 40 to 1.
"Jiminy!" he exclaimed. "If we only get a few customers to-day and
this one wins, what will happen?"
Leisurely we walked to the office. "If we get ten subscribers to-day
to start with, we'll make a fine beginning," I said.
As we approached the Hotel Marlborough, which is opposite the building
on Broadway in which the Maxim & Gay Company had its modest little
office, our attention turned abruptly to a crowd of people who were
being lined up by half a dozen policemen.
"What theater has a sale of seats to-day?" Campbell asked.
"Don't know," I answered.
As we approached the office, we found that the line extended into our
own office building. As we ambled up the rickety stairs, we passed the
crowd in line, one by one, until we discovered, to our great
astonishment, that the line ended at our door.
We turned the key, walked in, locked the door, and stood aghast.
Holding up both hands, I gasped, "In heaven's name, what have we
done?" I was appalled.
"Give 'em Annie Lauretta," cried Campbell.
"But suppose Annie don't win," I expostulated.
"Smokes!" exclaimed Campbell. "Are you going to turn down all those $5
bills?"
"Let's see that telegram," I faltered.
I perused it over and over again.
"Mead's judgment on Silver Coin is good enough reason to warrant
advising people to put a wager on another one of his choices,"
Campbell argued. I agreed.
How to convey the information in merchantable form was the next
question. A typist in the Hotel Marlborough, across the way, was sent
for and asked to strike off the name "Annie Lauretta" 500 or 1,000
times on slips of paper. Envelopes were bought and a typed slip was
placed in each. The line increased until it was a block and a half
long.
When all was ready, the door was opened. Campbell passed the envelopes
out as each man handed me $5. I stuffed the money in the right-hand
drawer of the desk, and when that became choked, I stuffed it in the
left-hand drawer. Finally, the money came so thick and fast that I
picked up the waste-paper basket from the floor, lifted it to the top
of the desk and asked the buyers to throw their money into the
receptacle. When a man wanted change, I let him help himself.
For two and a half hours, or until within fifteen minutes of the
calling of the first race at New Orleans, the crowd thronged in and
out of our office. When the last man passed out we counted the money
and found the day's proceeds to be $2,755.
"What will we do next?" asked Campbell. "What's my job, and what do I
get?"
"How much do you want?" I asked.
"Ten dollars a day," he said.
Thereupon he got possession of the $10 and he admitted it was more
money than he had seen in a month.
"What will we do next?" he repeated.
"Let us take a walk," I said. "Lock the office until after the fourth
race, when we see what Annie Lauretta does."
We hied ourselves to a nearby resort and stood by the news ticker to
see what would happen to Annie. It was half an hour since the third
race had been reported.
"Fourth race--tick--tick--tick," it came. "A--Al----,"
"We've lost!" I cried.
"A--AL--ALPENA first."
There was grim silence.
"Tick--tick----,"
"Here she is!" yelled Campbell.
"A-N-N-I-E LAURETTA second--40--20--10" (meaning that the odds were 40
to 1, first, 20 to 1, second, and 10 to 1, third, and that those who
had played "across the board" had won second and third money at great
odds).
I boarded a Broadway car, rode down to the Stewart building and rented
one of the finest suites of offices in its sacred purlieus. I ordered a
leading furniture dealer to furnish it sumptuously. At night I walked
over to the _Morning Telegraph_ office, laid $250 on the counter,
ordered inserted a flaring full-page ad. announcing that Maxim & Gay
had given Annie Lauretta at 40, 20 and 10, second, and previously
Silver Coin at 10 to 1, won, and were ready for more business.
A telegram was sent to Frank Mead, instructing him to spend money in
every direction with a view to getting the very best information that
could be obtained from handicappers, clockers, trainers and every
other source he could reach. Mead continued to wire daily the name of
one horse, which we promptly labeled and thereafter advertised daily
as "The One Best Bet." Soon "One Best Bet" became a term to conjure
with.
The success of this enterprise was phenomenal. In the course of two
years it earned in excess of $1,500,000. There were some weeks when
the business netted over $20,000 profits. At the height of its career,
in the summer of 1902, at the Saratoga race meeting, when the
pool-rooms in New York were open, our net profits for the meeting of a
little less than three weeks were in excess of $50,000.
We established an office in Saratoga and our average daily sales on
race days were 300 envelopes at $5 each. In New York the average was
just as large, and, in addition, we had a large clientele in distant
cities to whom we sent the information by telegraph. The wire
business, in fact, increased to such an extent that it became
necessary to call upon the Western Union and Postal Telegraph
companies to furnish our office in the Stewart building with direct
loops.
I spent the money as fast as I made it. I believed in our own
information and made the fatal error of plunging on it. My error, as I
afterwards concluded, was in not risking the same amount on every
selection. Had I done this, I would not have suffered serious losses.
The trouble was that every time a horse on which I wagered won, I was
encouraged to bet several times as much on the next one, and by
doubling and trebling my bets, I played an unequal game.
The expense of gathering this information within a few weeks increased
to upwards of $1,000 a week, and it was not only our boast, but an
actuality, that the Bureau did really give more than value received.
Undoubtedly, the evil of the venture was the gambling it incited; but
the effort to secure reliable information was honest, and what young
man of my age and of my experiences, having indulged in a lark of the
Silver Coin variety, could withstand the temptation of seeing the
thing through?
Among the leading patrons of the Maxim & Gay Company were soon
numbered important horse owners on the turf, leading bookmakers and
many leaders of both sexes in the smart set. Maxim & Gay made it a
rule to sell no information of any kind to minors and often excluded
young men from the offices for this reason.
HOW "THE ONE BEST BET" WAS COINED
Our methods of advertising were unique. We used full pages whenever
possible, and it was a maxim in the establishment that small type was
never intended for commercial uses. We used in our big display
advertisements a nomenclature of the turf that had never before been
heard except in the vicinity of the stables, and we coined words and
phrases to suit almost every occasion. The word "clocker," meaning a
man who holds a watch on horses in their exercise gallops, was
original with us, and has since come into common use, as has the
phrase, "The One Best Bet," which we also coined.
It was our aim, in using the language of horsemen, to be technical
rather than vulgar, the theory being that, if we could convince
professional horsemen that we knew what we were talking about, the
general public would quickly fall in line.
One morning we were alarmed to see in the _Morning Telegraph_, on
the page opposite our own daily effort, the advertisement of a new
tipster who called himself "Dan Smith." Dan went Maxim & Gay "one
better" in the use of race-track terminology. He evidently employed a
number of negro clockers, for the horse lingo which he used in his
advertisements smelled of soiled hay and the manure pile. It was
awful! But it made a hit with race-goers, and before a week had passed
we recognized "Smith" as a dangerous competitor.
We were loth to believe that the use of this horsy language was
entirely responsible for Smith's success, for we knew that his tips
were not so good as ours. We investigated. His trick was this: In the
sheet that he sent out to his customers, he would name for every race
at least five horses as having a chance to win. He advised his
clients, in varying terms, to bet on every one of them, and if any one
of them won, he would print next morning what he had said on the
preceding day regarding the winner alone, leading the public to
believe that the only horse he had fancied was the actual winner.
I decided to organize another Bureau to knock out Dan Smith. The
intention was "to go" our competitor "a few better" in the use of
vulgar horse-racing colloquialisms and exaggerated claims, and thus
nauseate the betting public and "put the kibosh" on Dan. We created a
fictitious advertiser whom we named "Two Spot," and the next morning
there appeared at our instigation in the _Morning Telegraph_ a large
display advertisement, headed substantially as follows:
+-----------------------------+
| TWO SPOT |
| Turf Info. Merchant |
| Terms, $2 Daily; $10 Weekly |
+-----------------------------+
Following the style which Dan Smith had adopted in his racing sheets,
"Two Spot" mentioned in his first advertisement, as a sample of his
line of "dope," four or five horses to win each race, each one in more
grandiloquent terms than the other, but these were selected because
they, in reality, appeared to be the most likely losers of all the
entries.
A woman was sent over to the newly-organized office of "Two Spot" to
take charge of the salesroom. I was completely taken off my feet the
next day when she informed me that the receipts, as a result of the
first advertisement, were in excess of $300, and that the public not
only did not read between the lines, but had actually fallen for the
hoax.
To cap the climax, on the second day one of the "outsiders" which "Two
Spot" named derisively as the one best bet "walked in" at 40 to 1!
Next day "Two Spot" did a land-office business, and within a few days
we figured that the "Two Spot" venture would net $1,000 a week if
continued. "Two Spot" then went after the game hammer and tongs and
endeavored to gage the full credulity of the public.
The distinctive difference between "Two Spot" and Maxim & Gay was
this: Maxim & Gay, except in one instance, which is chronicled herein,
never pretended to have selected a winner when it had not, while "Two
Spot" enjoying the same source of information as Maxim & Gay, worded
his daily advices to clients so artfully as to be able to claim the
next morning in his advertisements à la Dan Smith, the credit of
having said something good about every winner.
The profits of Dan Smith's venture, I was informed, exceeded a quarter
of a million dollars the first year, and the profits of "Two Spot,"
whose career was cut short within a month by a realization on our part
that we could not afford to be identified with such an enterprise, was
divided among the employees of the "Two Spot" office. "Two Spot" had
been brought into being for the purpose of killing opposition and not
for profit-making. The scheme failed of its purpose.
To give an idea of the character of some of the raw kind of
advertising put out by "Two Spot," and for which the public fell, I
recall this excerpt from one of his tipping sheets:
I am my own clocker. I have slept under horse-blankets for thirty
years. I understand the lingo of horses. Last night, when I was
taking my forty winks in the barn of Commando, I heard him whinny
to Butterfly and tell her to keep out of his way to-day because he
was going to "tin-can" it from start to finish, and if Butterfly
tried to beat him, he would "savage" her. That makes it a cinch
for Commando. Bet the works on him to win.
REAL INSIDE TURF INFORMATION
Maxim & Gay repeated the "Silver Coin" method of advertising only once
during the entire career of the company. This happened in the spring
of 1902, when John Rogers, trainer for William C. Whitney, sent to the
post a mare named Smoke. Our information was that the mare would win,
and our selections for the day named her to win--and she did. Two days
later, she was again entered, against an inferior class of horses, and
the handicap was entirely in her favor. Notwithstanding this, we
inserted an advertisement which appeared in the newspapers on the
morning of the race, reading substantially as follows:
"_Don't bet on Smoke to-day. She will be favorite, but she will
not win. Rockstorm will beat her._"
Sure enough, Smoke opened up favorite in the betting. The betting
commissioners of Mr. Whitney placed large wagers on the horse with the
bookmakers. The bulk of the public's money, however, went on
Rockstorm, and before post time thousands of dollars of the "wise"
money followed suit.
Rockstorm won the race. Smoke led into the stretch, when up went her
tail and she "blew up."
Immediately I was cross-questioned by messengers from the judges'
stand. They asked our reason why we were so positive that Smoke would
lose. Mr. Whitney, I was informed, was actually suspicious that his
mare had been "pulled." The reason for the reversal of form, as I
explained at the time, was this:
William Dozier, our chief clocker at the race-track, who had witnessed
the preparation which Smoke received for the races, was of the opinion
that her training had been rushed too fast, and that her first race,
instead of putting her on edge, had caused a setback. Her first race,
in fact, had "soured" her. Being a veteran horseman, he was positive
that Smoke would lose. I afterwards learned that the training of Smoke
had been left to an understrapper, and that Mr. Rogers himself was not
responsible for her condition.
THE PUBLIC ASKS TO BE MYSTIFIED
The judges were apparently satisfied, but the public could not readily
understand the truth, and we didn't point it out in our
advertisements, because our policy was always to appear as mysterious
as possible as to the source of our information.
Mystery played an important rôle in our organization, and it would
have been better had we never succeeded in the Smoke coup. Up to this
time my personal identity had not been revealed at the race-track, and
even the bookmakers did not know who was the guiding spirit of Maxim &
Gay. "Jimmy" Rowe, trainer for James R. Keene; Peter Wimmer, trainer
for Captain S. S. Brown of Pittsburg, and John Rogers, trainer for
William C. Whitney, were at this early period at various times the
rumored sponsors for Maxim & Gay. The bookmakers and "talent"
generally conceived the idea that nobody but a very competent trainer
in the confidence of horse owners could possibly be responsible for so
much exact information regarding the horses. Of course, the track
officials who made it their business to know everything knew of my
connection with the organization. No sooner, however, did their
messengers ask an interview with me than the fact became public
property around the race-track and the mask was off.
The effect for a while was very bad, for our business fell off
considerably. "Bismarck" Korn, the well-known German bookmaker, put it
to me this way on the day of the Smoke incident:
"You are the first horse tipster I effer saw dat vore eyeclasses,
sported a cane, und vore tailor-made cloding. You look like a
musicianer--not like a horseman. You're a vonder!"
Gottfried Walbaum, another old-time bookmaker, chimed in: "Dat vas
obdaining money under false bredenses. I gafe your gompany dwendy-fife
dollars a veek for two months alreaty. You gif me my money pack! You
are a cheater!"
Riley Grannan, the plunger, said, "Got to hand it to you, kid! Any
time you can put one over on the Weisenheimers that have been making a
living on race-tracks for twenty years you are entitled to medals!"
The attitude of "Bismarck" and of Walbaum was amusing, that of Grannan
flattering. But it was poor business, because most of these
professional race-track people ceased for a while to subscribe for the
Maxim & Gay service.
For months I had purposely kept myself in the background, fearing a
dénouement of this very description. I recalled that in the late 80's,
in a town of northern Vermont, when John L. Sullivan was advertised to
appear in a sparring exhibition, his manager met him at the train,
and, although it didn't rain and the sun didn't shine, an umbrella was
raised to cover John L. while walking from the train to a waiting
landau. No sooner did Sullivan enter the vehicle than the blinds were
drawn. When the carriage reached the hotel, it stopped before a side
door. The manager alighted before Sullivan, again quickly raised the
umbrella and whisked the heavy-weight champion past the crowds and up
to his room without exposing him to the view of anybody whatsoever.
Throughout the day Sullivan was screened from public gaze. His face
was not seen by a single citizen of the town until he appeared on the
stage that night.
I asked the manager why he was so very careful to shield Sullivan from
the popular view prior to his appearance before the footlights. I
recall that he said:
"If the public thought John L. was just an ordinary human being with
black mustaches and a florid Celtic face, they wouldn't go to see him.
The public demand that they be mystified, and to have shown people off
the stage that Mr. Sullivan is just a plain, ordinary mortal would
disillusion them and keep money out of the house."
That piece of showman's wisdom was fresh in mind during the early
career of Maxim & Gay; and so long as Maxim & Gay kept race-track men
guessing as to who was directing its destinies, the organization was a
howling success. Its good periods were mixed with bad periods after
the mystery of sponsorship was cleared up to the satisfaction of the
professionals by the inquiry of the race-track judges into the Smoke
affair.
A few weeks after the Smoke coup, our chief clocker informed us that
the entries for a big stake race which would be run on the following
Saturday had revealed to him a "soft spot for a sure winner," as he
expressed himself, and he said we could advertise the happening in
advance with small chance of going wrong. This we proceeded to do.
Money poured in by telegraph from distant cities for the "good thing"
on Saturday. Our advertisement on the Thursday previous to the race
read like this:
+---------------------------------+
| The Hog-Killing of the Year |
| Will Come Off at Sheepshead Bay |
| On Saturday, at 4 O'clock. |
| Be Sure to Have a Bet Down. |
| Telegraph Us $5 for the |
| Information |
+---------------------------------+
One of our constant patrons resided in Louisville. He was among the
first to whom we telegraphed the information on Saturday morning. The
race was run and the horse _lost_.
About 4:30 P.M. we received a dispatch from our Louisville customer,
reading as follows: "The hog-killing came off on schedule time--here in
Louisville. I was the hog."
Another message from a pool-room habitué reached us, reading: "Good
game. Have sent for more money."
We were often in receipt of messages of similar character on occasions
when our selections failed to win and our customers lost their money;
but these communications were generally in good spirit.
On one occasion we had what we believed to be first-hand information
regarding a horse which was being prepared for a big betting coup by
Dave Gideon, one of the cleverest horsemen in the country. Following
our customary method of using vividly glowing advertisements, with the
blackest and heaviest gothic type in the print shop, we announced:
+----------------------------------------+
| A GIGANTIC HOG-KILLING |
| We have Inside Information of a Long |
| Shot that Should Win To-morrow at |
| 10 to 1 and Put Half of the Bookmakers |
| out of Business. |
| Be Sure to Have a Bet Down on |
| This One. Terms $5. |
+----------------------------------------+
The _argument_ of the advertisement, which appeared beneath these
display lines, was couched in the most glowing terms, and made it very
plain that our information came from a secret source, and, further,
that we had spent legitimately a snug sum of money to secure the
information. We also pointed out that the owner was one of the
shrewdest betting men on the turf and seldom went astray when he put
down a "plunge" bet on one of his own entries.
Next day the race was run. The horse did not finish "in the money."
The following day we received many letters, as we always did when one
of our heavily advertised "good things" lost. One of the most unique
of these epistles contained a remonstrance from a Philadelphia
subscriber. He wrote in this vein:
Dear Sir:--You have been advertising for some days that you would
have a gigantic hog-killing to-day. I was tempted by your
advertising bait and fell--and fell heavily with my entire
bank roll. My bucolic training should have warned me that
"hog-killings" are not customary in the early Spring, but I fell
anyway.
Permit me to state, having recovered my composure, that Armour
or Swift need have no fear of you as a competitor in the
pork-sticking line, for far from making a "hog-killing," you did
not even crack an egg. Pardon me. Thanks. Good-by.
Yours truly,
---- ----
PRESTIGE RESTORED BY A CLERK'S RUSE
In the Summer of the second year of Maxim & Gay's great money-gathering
career, the Information Bureau was "out of luck" and the patronage of
the Bureau fell away to almost nothing. At this period I was seriously
ill and confined to my home. A man in my office decided to take
advantage of my absence from the scene to improve business a bit on
his own hook.
It was the habit of our track salesmen, dressed in khaki, to appear
at the office at noon every day and receive a bundle of envelopes
containing the tips on the races, and then immediately to proceed to
the race-track, stand outside of the gates and vend them at $5 per
envelope.
One day these men, without their knowledge, were supplied with
envelopes containing blank sheets of paper instead of the mimeographed
list of tips. When a handful of town customers reached the office, they
were informed that the selections would be late that day and would be
on sale at the track only.
At about half-past one o'clock the 'phone bell rang, and word came
from the track messengers that apparently a mistake had been made, as
their envelopes contained blanks. They were being compelled to refund
money. They asked what to do.
"Wait," they were told. "We will send a messenger immediately with the
tips."
The messenger never reached the track.
There were no tips issued.
On that day May J. won at odds of 200 to 1.
The next morning, the newspapers contained full-page advertisements
announcing that Maxim & Gay had tipped May J. at 200 to 1 as the day's
"One Best Bet." It could not have been done without a "come-back" if
any tips had been issued.
A BOASTFUL RACE PLAYER GIVES AID
I was not present, but I learned as soon as I became convalescent that
on the afternoon of the day the advertisement appeared claiming credit
for May J. at 200 to 1, the office was thronged with new customers who
enrolled for weekly subscriptions at a rate that put new life into the
business. A few of the customers expressed some doubt as to whether
Maxim & Gay gave out the 200 to 1 shot or not.
That afternoon there appeared on the scene a race player who, laying
$5 down on the desk, said, "Give me your good things. I played May J.
yesterday at 200 to 1 and I am rolling in money."
"Where did you buy your information?"
"From your man at the entrance to the track," he answered.
"At what time?" he was asked.
"A quarter to two," he replied.
"Say, young man, there were a lot of people who came in here this
morning who said they were not sure we gave out that selection at all.
Would you make an affidavit that you bought the information from us?"
"You bet I will!" he said; and thereupon a notary public was called in
and the caller swore that he had bought the Maxim & Gay tips at the
entrance to the race-track and that they contained May J. at 200 to 1.
That affidavit was posted in the office during the remainder of the
day. When the clerk who performed this stunt was asked for more
information as to how he came to secure such an affidavit, he gave
absolute assurance that he did not offer the customer the smallest
kind of bribe to make it, and that nothing but an innate desire to
call himself "on top" had influenced the man to perjure himself.
But I could not tolerate the misleading advertising that had been done
as a result of misplaced energy, and the man responsible for it did
not remain with the company.
FORTUNE CHANGES HER MOOD AND SMILES AGAIN
Peculiarly enough, the May J. advertisement was followed by a series
of brilliant successes for Maxim & Gay in the selection of winners at
big odds, and, within a month our net earnings again reached $20,000
per week. Horse owners, horse trainers and society people who
frequented the club-house at the race-track were our steadiest
patrons.
The women particularly were most loyal to our bureau. The wife of a
young multi-millionaire of international prominence was one of our
most ardent followers. She would never think of putting down a bet
without first consulting Maxim & Gay's selections. On a notable
occasion, this lady arrived at the gate of the Morris Park race-track
with her husband, in their automobile, and took the long stroll to the
club-house. They were a trifle late for the first race; the horses
were already going to the post up the Eclipse chute.
Suddenly the lady discovered she had forgotten to purchase Maxim &
Gay's selections. Hastily calling her husband, she gave him a sharp
berating for not reminding her to buy the selections. They had a short
but earnest interview, which was suddenly terminated by the young man
doing a sprint of a quarter of a mile down the asphalt walk from the
club-house to the main entrance where the tips were sold by the
uniformed employees of Maxim & Gay.
Those who witnessed the sprint of the young financier attested to the
fact that he never showed as much swiftness of foot in his early
college days; but even his unusual speed failed to get him back on
time to acquaint his wife with the name of the horse selected by Maxim
& Gay for the first race, the race having been run and the Maxim & Gay
selection having won. The gentleman thereupon got a curtain lecture
from his better half that astonished and amused the society patrons on
the club-house balcony. Thereafter, he never forgot to get the Maxim &
Gay selections. In fact, he made assurance doubly sure by engaging the
colored attendant in charge of the field-glasses to deliver the
selections to him daily immediately upon his arrival at the course.
Our popularity with racehorse proprietors was mixed. Among the horse
owners with whom we transacted business was Colonel James E. Pepper,
the late noted distiller and owner of a big breeding farm and a stable
of runners. He was an ardent lover of horses, and maintained that his
native Kentucky knowledge of thoroughbreds afforded him an opportunity
to pick probable winners of horse-races better than any of "them ----
faking tipsters." He had great confidence in his judgment for a while.
THE KENTUCKY COLONEL FALLS IN LINE
After separating himself from much cash, while one of his very
intimate friends was "cleaning up" plenty of money on our selections,
he finally strolled into our office one morning and sheepishly stated
that one of his "fool friends" had asked him to step in and get our
"fool selections" for him. We explained that it was against our rule
to give out our choices before 12:30 P.M., whereat he grew exceedingly
wroth. He finally agreed to our conditions, paid his money and was
given an order to get the selections at the track-entrance from one of
our messengers.
Nearly all of our choices won that day. Colonel Pepper came in the
following morning and paid for another subscription, this time for a
week's service. We were "in our stride," the majority of our
selections winning from day to day, and Colonel Pepper had cause for
exultation. On one of these days we divulged, on our racing sheet, the
name of a "sleeper" that we were confident would win at 10 to 1, a big
betting coup having been planned by that Napoleon of the turf, John
Madden. The horse won at big odds, and Colonel Pepper made a "killing"
on the information.
For the next day, our clockers had spotted another horse that had been
got ready by the light of the moon, and we spread it pretty strong in
our advertisements that the horse we would name could just fall down,
get up again and then "roll home alone." The horse did not fall down;
but he won; he "rolled home alone" by about ten lengths. He belonged
to Colonel Pepper. It was anticipated that about 20 to 1 would be laid
against this fellow, but on account of our strong tip, he opened at 10
to 1 and was played down to 3 to 1. The bookmakers were badly crimped.
The next day, as soon as the office opened, Colonel Pepper, hotter
under the collar than even his name might indicate, stamped into the
outer room. Slamming his cane down on the big mahogany table, he
demanded in stentorian tones: "What in the ---- does this ----
business mean? Here I come and subscribe my good money to your ----
fool tips, and you-all are so low-down mean as to give my hoss for the
good thing yesterday! What does it mean, suh; what does it mean?"
The use of considerable diplomacy was necessary to calm down the irate
Colonel, who had no compunctions in winning a big bet on Mr. Madden's
"sleeper," but "---- it, suh, it is outrageous to treat _me_ so."
The Colonel never got over that incident, and while he won a big bet
on his own horse, he always claimed that Maxim & Gay had ruined the
betting odds for him and that but for the vigilance of our clockers
his winnings would have been twice as large. This was true, and time
and again we ruined the price for many another owner who thought he
was going to get away with something on the sly.
Bookmakers as a rule are very much self-satisfied about their
knowledge of the mathematics of the game. In order to show them that
they didn't know all about it, the Maxim & Gay Company inserted an
advertisement one day reading substantially as follows:
+---------------------------------------+
| YOU PAY US $5 |
| |
| WE REFUND $6 |
| |
| If the Horse We Name as |
| |
| THE ONE BEST BET |
| |
| To-day Does Not Win, We Will Not |
| Only Refund Our $5 Fee, Which Is |
| Paid Us for the Information, but Will |
| Pay Each Client an EXTRA DOLLAR |
| By Way of Forfeit. |
| |
| Pay Us $5 To-day for Our One Best |
| Bet, and if the Horse Does Not Win |
| We Will Pay You $6 To-morrow. |
| |
| MAXIM & GAY CO. |
+---------------------------------------+
Our receipts that day were approximately $5,000. The horse did not win.
We refunded $6,000 next day, and netted a considerable sum of money on
the operation.
It happened to be a two-horse race. Our horse was at odds of 1 to 6
in the betting, that is to say, the bookmakers laid only one dollar
against every six bet by the public. The other horse ruled at odds of
5 to 1, meaning that here the bookmakers laid five dollars against the
public's one.
The Maxim & Gay Company sent to the track $1,000 out of the $5,000 paid
in by its customers and wagered the $1,000 on the contending horse at
odds of 5 to 1, drawing down $4,000 in winnings. From this money it
paid its clients the thousand-dollar forfeit, netting $4,000 on the
operation, after of course returning to them their own $5,000.
Had the 1 to 6 shot won, the clients who had received the winning tip
would have been happy, while the Maxim & Gay Company would not have
been compelled to refund any money and would have been ahead $4,000 on
the operation, the $1,000 wagered and in that event lost in the betting
ring on the other horse being subtracted from the $5,000 paid in by its
customers. No matter which horse won our gain was sure to be $4,000 and
we had here the ideal of a "sure thing."
It was a case of "taking candy from a baby"; and yet many of the wise
bookmakers could not at first figure it out. Nearly all of them
subscribed for the information. As for the public, they did not seem to
catch on at all.
BETTING THE PUBLIC'S MONEY AT GREAT PROFIT
The Eastern racing season was about to close and it was decided to
remove the entire force of clerks to New Orleans for the Winter and
there to depart from the usual practice of selling tips only, and to
bet the money of the American public on the horses at the race-track in
whatever sums they wished to send. The company employed Sol
Lichtenstein, then the most noted bookmaker on the American turf, to
bet the money, and made him part of the organization, giving him an
interest in the profits.
The Maxim & Gay Company at this time had made close to $1,000,000, and
recklessly and improvidently I had let it slip through my fingers. It
was "easy come and easy go." As I review that period in my career, I
recall that the whole enterprise appeared to me in the light of an
experiment--just trying out an idea, and having a lot of fun doing it.
Because of its dazzling success I became so confident of my ability to
make money at any time that I didn't take serious heed whether I
accumulated or not. Besides, I had never loved money for money's sake.
All the pleasure was in the accomplishing.
The races at New Orleans were advertised to start on Thanksgiving Day.
On the 15th of October I ordered $20,000 worth of display advertising
to run in thirty leading newspapers in the United States four days a
week, until Thanksgiving. Credit was extended for the bill by one of
the oldest advertising agencies in America.
The advertisements told the public to send their money to Maxim & Gay,
Canal Street, New Orleans. On my arrival there, two days before
Thanksgiving, I called at the post-office, and asked if there was any
mail for Maxim & Gay. The post-office clerk appeared to be startled. He
gazed at me as if he were watching a burglar in the act. His demeanor
was almost uncanny. He didn't talk. He didn't even move. He just
looked. Finally I asked, "What is the matter?"
"Wait a minute," he muttered.
He left the window. He did not return. Instead, what appeared to me to
be a United States deputy marshal ambled up to my side and said, "See
here; the Postmaster wants to see you."
I was escorted into a secluded chamber in the post-office building, and
a few minutes later a post-office official, along with three or four
assistants, came into the room.
"What's the trouble?" I asked.
"You bring us a recommendation as to who you are and what you are and
all about yourself before we will answer any of your questions as to
how much mail there is here for you," the official said.
I smiled. The advertising, then, was a success.
Having been employed as a newspaper man in New Orleans a few years
before, I knew one of the leading lawyers of the city and several bank
officials. Within thirty minutes I had lawyer and bank men before the
Postmaster, vouching for my identity. Thereupon I was informed that
there were 1,650 pieces of registered mail, evidently containing
currency, and, in addition, twelve sacks of first-class mail matter,
which contained many money-orders, checks and inquiries. The official
said that in the money-order department they had notices of nearly
2,000 money-orders issued on New Orleans for the Maxim & Gay Company.
I sent a wagon for the mail, and notwithstanding the fact that a force
of four men under me opened the letters and stayed with the job for two
days, the task was not completed when the first race was called on
Thanksgiving Day. On adding up the receipts, we found a little over
$220,000.
The meeting continued 100 days, and our total receipts for the whole
period were $1,300,000.
Maxim & Gay's system of money-making at New Orleans was as follows:
We charged each client $10 per week for the information. We charged 5
per cent. of the net winnings in addition, and we further contracted to
settle with customers only at the closing odds for bets placed,
retaining for ourselves the difference between the opening odds and the
closing odds. The profit averaged approximately $7,000 a day for 100
days--to us.
As a guarantee of good faith, the Maxim & Gay Company agreed with its
clients that each day it would deposit in the post-office and mail to
them a letter bearing a postmark prior to the hour of the running of
the race, naming the horse their money was to be wagered on; and this
was always done. An honest effort, too, was always made to pick a horse
that was likely to win, for even a child can see that if we did not
intend to bet the money and wanted to pick losers, all we would have
had to do was to make book in the betting ring at the race-track and
not spend thousands of dollars in advertising for money to lay against
ourselves.
Did we invariably bet the money of our clients on the horse we named?
Yes, always--except once!
$130,000 IS LOST AND WON IN A DAY
That incident is not easily forgotten by several. On this day the entry
which we selected was one of Durnell & Hertz's string. The horse was
known to be partial to a dry track. The "dope" said he could not win in
heavy going. It was a beautiful sunshiny morning when we selected this
horse to win, and at noon the envelopes containing the name of the
horse were mailed in the post-office, as usual.
Something happened.
Half an hour before the race was run it began to rain in torrents and
the track became a sea of mud. Durnell & Hertz, realizing that they
were tempting fate to expect their horse to win under such conditions,
appeared in the judges' stand and asked permission to scratch their
entry. The judges refused. I asked Sol Lichtenstein, who had the
wagering of our client's money in charge, what he proposed to do about
betting on the horse under the changed conditions. He exclaimed, "Bet?
Do you want to burn up the money?"
"Well, if he wins," I replied, "we will have to pay, because if he wins
and you don't bet and we say we changed the selection on account of the
rainstorm, they will not believe us and we will have trouble."
"Very well," he said. "You bet my book all the money, and we will, for
the first time, book against our own choice. It's fair, because we must
pay if we lose, and there is no way out of it. But don't burn up that
money." I agreed.
The opening odds against the horse were 2 to 1. Had it been a dry
track, he would have opened a hot favorite at 4 to 5 or so. Slowly the
odds lengthened to 10 to 1, which was the ruling price at the close.
Durnell & Hertz bet on another horse to win. Standing before Sol
Lichtenstein's book, I said:
"Thirteen thousand on our selection, Sol."
"One hundred and thirty thousand to $13,000," he answered. "Here's your
ticket."
Sol and I repaired to the press-stand to see the race. Durnell &
Hertz's entry got off in the lead. At the quarter he was in front by
two lengths. At the half the gap of daylight was five lengths. At the
turn into the stretch the horse was leading by nearly a sixteenth of a
mile. Then I heard a noise behind me as if a miniature dynamite bomb
had exploded. Sol's heavy field-glasses had dropped to the floor.
Sol did not wait to see the finish. The horse won in a gallop.
At the office of Maxim & Gay accounts were figured and checks signed
for the full amount of our obligations, and they were immediately
mailed to all subscribers.
At midnight I met Sol in the lobby of the St. Charles Hotel. He looked
worn.
"I guess that will hold us!" he moaned.
"Hold us?" I answered. "Nothing better ever happened. It'll make us!"
"You poor nut!" he exclaimed. "Lose $130,000 in a day and it will make
you! Stop your noise!"
"Listen!" I rejoined. "At an expense of $3,000 for tolls I have
telegraphed a full-page ad to fifty leading city newspapers, telling
the public that we tipped this horse to-day at 10 to 1 and that we
mailed checks to our customers to-night for $130,000. The gain we will
reap in prestige and fresh business will repay our loss on the horse."
The next day the Western Union Telegraph Company found it necessary to
assign three cashiers to the work of issuing checks to the Maxim & Gay
Company for money telegraphed by new customers. Some individual
remittances were as high as $2,000. The money telegraphed us amounted
to about $150,000, and within ten days eighty per cent. of our own
dividend checks were returned to us by our customers, indorsed back to
us with instructions to double their bets, and within two weeks we were
able to figure that in the neighborhood of $375,000 was sent us as a
result.
A DISASTROUS NEWSPAPER WINDUP
During the progress of the New Orleans meeting, I purchased a
controlling interest in the New York _Daily America_--a newspaper
patterned after the _Morning Telegraph_--from a group of members of
the Metropolitan Turf Association, who had sunk about $75,000 in the
enterprise. The _Morning Telegraph_ was in the hands of a receiver. I
calculated that, by transferring the Maxim & Gay advertisements from
the _Morning Telegraph_ to the _Daily America_, I could make the _Daily
America_ pay and force the _Morning Telegraph_ out of the field. Later,
the late William C. Whitney, who was a shining light on the turf as
well as in finance, was induced to purchase the _Morning Telegraph_.
Then trouble began to brew for me.
One morning I was summoned to the offices of August Belmont on Nassau
Street.
"For the good of the turf, you must omit your Maxim & Gay
advertisements from the _Daily America_ and other newspapers
hereafter," declared Mr. Belmont on my entering his room.
"Why?" asked I.
"They flagrantly call attention to betting on the races," he replied.
"But you allow betting at the tracks."
"Yes," he replied, "but public sentiment is beginning to be aroused
against betting, and an attack is bound to result."
It occurred to me that at that very time Mr. Whitney was engaged in
disposing of his stock in various traction enterprises in New York to
Mr. Belmont and his syndicate, and that in all probability Mr. Whitney
had sought the assistance of Mr. Belmont to put the _Daily America_ out
of business in this way. It was apparent that the _Daily America_ would
lose money fast without the Maxim & Gay advertising. Maxim & Gay, too,
would practically be compelled to close up shop if it could not
advertise. I promised to consider.
Returning to the _Daily America_ office, I decided to pay no attention
to Mr. Belmont's request, having become convinced that it was conceived
in the interest of the _Morning Telegraph_.
A few days later I was again summoned over the 'phone to Mr. Belmont's
office. When I was ushered into Mr. Belmont's presence he said:
"If you don't quit advertising the Maxim & Gay Company in the _Daily
America_, I will see William Travers Jerome, and he will stop you."
Mr. Jerome was then District Attorney, and the idea of doing anything
that Mr. Jerome considered illegal appalled me.
"If Mr. Jerome sends word to me that the Maxim & Gay advertising is
illegal, I will discontinue it," I said.
I did not hear from Mr. Jerome, and so went on with the advertising.
Within a few weeks the Washington race meeting opened at Bennings.
When the Maxim & Gay staff reached there, we were all informed that
the Post-office department was about to begin an investigation into
our business affairs, and all of our staff voluntarily appeared before
the inspectors and underwent an examination. Our books were also
submitted. This investigation, coming on the heels of Mr. Belmont's
threat, convinced me that the influence of Mr. Belmont and Mr. Whitney
reached all the way to Washington, and I concluded that if I did not
discontinue the Maxim & Gay advertising in the _Daily America_, and
then, of course, discontinue the _Daily America_, they would make
serious trouble. So I hung out the white flag. I announced my
retirement from the Maxim & Gay Company and offered to sell my
newspaper to Mr. Whitney.
My exchequer was low. Nearly every dollar I had made in the Maxim & Gay
enterprise had been lost by me in plunging on the races myself.
During the following week Mr. Whitney received me at his palatial home
on Fifth Avenue just after his breakfast hour. He interviewed me for
about an hour, obtained my price on the paper, which was what I had put
into it, namely $60,000, and promised to cable to Colonel Harvey, then,
as now, the distinguished editor of the Harper publications, who was in
Paris, asking his advice, saying that Colonel Harvey advised him in all
newspaper matters. I did not hear from Mr. Whitney again; but I did
discover that my business manager was in close communication with Mr.
Whitney and that the state of my financial condition every evening was
being religiously reported to him.
A few weeks later I was compelled to put the paper in the hands of a
receiver, and a representative of Mr. Whitney bought it for $6,500, or
about 10 cents on the dollar, and put it to sleep, leaving the field
to the _Morning Telegraph_. From that moment the _Morning Telegraph_,
which for a short period had been refusing all tipster advertising,
resumed the acceptance of such business and has continued that policy
up to this day.
A year after I retired from Maxim & Gay, Attorney-General Knox decided
that racehorse tipping is an offense against the old lottery law, and
those who now advertise tips instruct that no money be sent by mail.
Having lost the _Daily America_ and having "blown" the Maxim & Gay
Company, I was again broke. But my credit was good, particularly among
race-track bookmakers. That Summer, 1904, I became a race-track
plunger, first on borrowed money and then on my winnings. By June I had
accumulated $100,000. In July I was nearly broke again. In August I was
flush once more, having recouped to the extent of about $50,000. Early
in September I went overboard; that is to say, I quit the track losing
all the cash I had and owing about $8,000 to a friendly bookmaker.
Disgusted with myself, I longed for a change of atmosphere. I stayed
around New York a few days, when the yearning to cut away from my
moorings and to rid myself of the fever to gamble became overpowering.
I bought a railroad ticket for California and, with $200 in my clothes,
traveled to a ranch within fifty miles of San Francisco, where I hoed
potatoes, and did other manual labor calculated to cure race-trackitis.
In less than six weeks I felt myself a new man, and decided to stick to
the simple life forevermore--away from race-tracks and other forms of
gambling.
But I didn't.
CHAPTER II
MINING FINANCE AT GOLDFIELD
I had never visited San Francisco. Being close to the city of the
Golden Gate--within fifty miles--I decided to "take a look." So one
evening, in the late Fall of 1904, I packed my grip and within two
hours was comfortably housed in the old Palace Hotel.
The first man I met on entering the lobby was W. J. Arkell, formerly
one of the owners of _Frank Leslie's Weekly_ and of _Judge_.
"Hello, Bill!" I exclaimed. "What are you doing here?"
"Same as you," he answered. "Morse trimmed me in American Ice, and I'm
broke. I am in hock to the hotel. They think I am worth $2,000,000. I
haven't 20 cents."
During the evening we consoled each other over a series of silver gin
fizzes, several of which Arkell paid for with the stub of a pencil. My
companion promulgated a scheme for the quick putting on their feet of
two Eastern rovers adrift in the big Coast city, and that night there
was formed the W. J. Arkell Advertising Agency. Then the horse-tipping
firm of "Jack Hornaday" was established. I declared that I preferred to
have little to do with it except to show "Willie" how it had been done
in New York by Maxim & Gay.
"I will do it for you, Bill," I said; "but no more for me--I've had
enough."
"Jack Hornaday" advertisements appeared daily in all the San Francisco
papers. Capable clockers and handicappers were hired and some excellent
information was obtained. Race-goers got a run for their money.
But something happened. The race-track trust, which enjoyed a big pull
in the San Francisco _Examiner_ office, soon realized that somebody
outside of the inner circle was getting the public's money, and every
day that "Jack Hornaday" tipped a loser the _Examiner_ carried on its
sporting page a notice to the effect that "Jack Hornaday's" tip had
resulted very disastrously to his clients.
A PARTNERSHIP OF PURE NERVE
"Jack Hornaday" discontinued business.
I began to like San Francisco and the Coast. Being thrown among
Arkell's associates in the Palace Hotel lobby, from time to time I
naturally heard a great deal of talk about the new Nevada mining camp
of Tonopah.
"Rice," said Arkell one evening, "come with me up to Tonopah and be my
press agent. We will get hold of a mining property up there, promote a
company and make a barrel of money."
"What do you know about mines?" I asked.
"Well, I've lost enough in 'em to know a great deal," he answered.
"I don't know a mine from a hole in the ground, and I know nothing
about the stock-brokerage business; so I don't see how I can be of any
assistance," I said.
"Don't let that bother you," he replied. "I'll show you how. You come
with me."
"I will go on one condition," I said. "I am in for half on anything you
do."
We shook hands and it was a bargain.
We went to the depot. I had a trifle less than $150 in my pocket.
Arkell had $75.
"Suppose we get stranded out there, what will happen?" I propounded.
"Oh, forget it!" he answered. "How can a couple of Easterners like us,
wide awake and with phosphorus brains, get stranded in a place where
they dig silver and gold out of the ground?"
We journeyed to Tonopah--a thirty-six-hour ride. The altitude is 6,000
feet, and it was cold, nasty, penetrating Winter weather. During the
last hundred miles of our journey across the mountainous desert we
looked out of the car window and saw trainload after trainload of what
was said to be ore coming from the opposite direction, and we decided
that Tonopah was a sure-enough mining camp and that some of the
sensational stories about bonanza mines that we had heard were really
true.
BUCKING THE TIGER ON THE DESERT
Arriving In Tonopah after dusk, we sought hotel accommodations. The
best we could get was a bed in a forbidding looking one-story annex,
walled with undressed pine and roofed with tarpaulin. It was located
100 feet to the rear of the hotel, which was already crowded with
miners and soldiers of fortune drawn from all quarters of the world by
the mining excitement. Its aspect was so inhospitable that Arkell and I
decided not to retire for a little while. We gravitated out toward the
barroom, where the click of the roulette wheel caught our ears.
We sat down to watch the game. Soon we were buying stacks of checks and
ourselves bucking the tiger excitedly. In an hour the remnants of my
$150 passed to the ownership of the man behind the game, and Arkell had
put his last two-bit piece on the black and lost.
I looked at him. He looked at me.
"Umph!" he grunted. "Better hit the feathers!"
Meekly I followed him to the annex. When we got under the soiled gray
woolen blankets, I remarked: "I've got a cane and an umbrella and three
suits of clothes. Do you think we can sell them in the morning for
enough to provide breakfast money?"
"Oh, come off!" exclaimed my partner. "Wait till I present my card
around this burg in the morning; then we will get all the breakfast we
want."
We awoke hungry, as all men have a habit of doing when they are broke.
"I am going over to the Montana-Tonopah Mining Company's office," said
Arkell. "A mining engineer by the name of Malcolm Macdonald makes his
headquarters over there and he wants to sell some mining properties at
Goldfield and in other parts of the State for about three million
dollars."
"Three millions!" I exclaimed.
"Yes," said Arkell. "I'll get the facts and wire them to my friend Joe
Hoadley in New York."
"Say, Bill," I remonstrated, "they have a privately-owned jerkline
telegraph in this town, and if you send any 'phony' telegrams over the
wire, they'll be on to you. So don't do any of that kind of business."
"Nothing of the kind!" replied he promptly. "Any message I send to
Hoadley he'll answer."
"I guess you have it fixed on the other end," I remarked. He laughed.
We strolled over to the State Bank and Trust Company building, across
the street, and there met Malcolm Macdonald, a mining engineer from
Butte, Montana, and his friend, Mr. Dunlap, who was at the time
secretary of the Montana-Tonopah Mining Company. The conversation was
not more than five minutes old when Arkell suggested that he would like
to eat breakfast, but "didn't want any restaurants in his," intimating
that he would like to have some good, old-fashioned home cooking. Mr.
Dunlap remarked modestly that the camp was too young to boast of much
home cooking, but that if we would be his guests he would guarantee to
make arrangements for some special cooking at the Palace restaurant.
BIDDING $3,000,000 WHEN BROKE
After breakfast, which consisted of mountain trout, the flavor of which
was more delicious than anything I had tasted in many years--probably
because of the artificial hunger which an empty purse had created--we
returned to the office of the bank. There Arkell explained to Mr.
Macdonald that he wanted "a big mining proposition or nothing." He said
he represented big Eastern capital and that he was prepared to pay from
one to three millions for the right kind of property. Mr. Macdonald
named some mines and prospects which he said he was willing to
sacrifice for $3,000,000.
One of them was the Simmerone, of Goldfield, which Mr. Macdonald
offered for $1,000,000. We afterward learned that he had paid $32,000
for it. At that time there was a six-foot hole in the ground, and the
whole property contained less than five acres. A stockade had been
built around the workings on account of the extreme richness of the ore
that had been opened at grass-roots.
Mr. Macdonald also offered for sale a lead property at Reveille and a
lead-silver property at Tybo, both situated about 70 to 100 miles from
a railroad. (Later these properties, along with some others, were
promoted by Charles Minzesheimer & Company, a New York Stock Exchange
house, as the Nevada Smelters & Mines Company and passed on to the
public at a valuation of $5,000,000. The market value of the entire
capitalization of this company is now less than $10,000.) These "mines"
were to be put into the deal at $1,000,000 each.
MILLIONS IN THE VISTA HELD NO CHARMS
Arkell wrote a dispatch to the East in the presence of our newly-made
friends, describing the offering. Then he and I held a consultation,
and he vouchsafed the information that we would certainly get a free
automobile ride to Goldfield and have a chance to see there the new
boom mining camp.
I got "cold feet." Arkell's talk of visionary millions in that bleak
environment of snow-clad desert and wind-swept mountain didn't enthuse
me at all. I protested against the proposed trip to Goldfield, and
insisted that I should be allowed to telegraph to relatives for money
with which to return to the Coast.
But Arkell persisted. He declared that the expense of the trip to
Goldfield and back to Tonopah would be borne by the vendors of the
mines and that our return trip to San Francisco would be delayed only
one day. I left my grip, umbrella and cane in Tonopah, intending to
return the same evening, and boarded the automobile for Goldfield.
Arrived in Goldfield, we were escorted to the Simmerone. Arkell
appeared to be very much impressed, although he remarked to me a few
minutes later that he would not give $34 for the whole layout. And
therein he was wise. The Simmerone was later capitalized for 1,000,000
shares, each share of a par value of $1, ballooned on the San Francisco
and Goldfield stock exchanges to $1.65 a share, and then allowed to
recede to nothing bid, one cent per share asked. The rich ore "petered
out."
There was an indefinable something in the atmosphere of Goldfield--a
new, budding mining camp, at an altitude of 5,000 feet and on the
frontier--that stirred me, and I decided to stay awhile.
Arkell determined that he would go back to Tonopah and get an option on
the control of a mining company known as the Tonopah Home, which Mr.
Dunlap had mentioned to him in the automobile en route to Goldfield. He
said he would then go to San Francisco to promote it. The reason why he
decided to handle the Tonopah Home, I afterward discovered, was that it
was already incorporated and stock certificates had been printed,
thereby eliminating the delay and expense incident to preparing
something for the immediate consumption of the San Francisco public.
"How am I going to subsist here for a few days until I can begin to
make a living?" I asked Arkell.
"How am I going to get back to Tonopah and from there to San
Francisco?" Arkell asked me.
At that moment we stood in front of the Goldfield Bank and Trust
Company's building--a tin bank literally as well as figuratively. It
was constructed of corrugated iron and tin. A few months later, when
the bank went up the flume, the cash balance found in the safe
aggregated 80 cents.
"You take me into this bank and introduce me and I will cash a check,"
he said.
"A check on what?" I asked.
"On my bank in Canajoharie, New York," he said. "I was born and brought
up there, and they wouldn't let one of my checks go to protest.
Besides, I can get back to 'Frisco and protect it by telegraph, if
necessary, before it reaches Canajoharie."
We entered the bank. I introduced myself to the cashier as an Eastern
newspaper man, and then introduced W. J. Arkell as the former publisher
of _Leslie's Weekly_, _Judge_, and so on.
After a brief parley, Arkell exchanged his paper for real money to the
amount of $50. On leaving the bank, I said:
"Now, Bill, come across! I'm flat broke, on the desert."
He handed me $15. I was satisfied, because he needed all of the $35 to
get back to civilization.
"HUMAN INTEREST" VERSUS TECHNICAL MINING
After Arkell's departure for Tonopah I went to the office of the
Goldfield _News_ and asked for a job. I got it, at $10 a day. My first
assignment was to interview an old miner named Tom Jaggers. I wrote
what I considered a first-class human-interest story, and handed it to
the owner and editor, "Jimmy" O'Brien. He thought it was fair writing,
but not the sort of matter the Goldfield _News_ wanted. It wanted
technical mining stuff. Of course I didn't know a winze from a
windlass, nor a shaft from a stope, and some of the weird yarns I
handed in about mine developments certainly did make Mr. O'Brien jump
sideways at times.
Within a week I was discharged for incompetency.
I was not at all appalled at losing my job on the Goldfield _News_. I
had begun to like the life and was convinced there were some real gold
mines in the camp. I was a tenderfoot and knew little or nothing about
the mining business, but the visible aspect of shipment upon shipment
of high-grade ore leaving the camp by mule-team was convincing. What
probably impressed me most was the evident sincerity of the
trail-blazers who had been on the ground since the day the camp was
born. These men had suffered all kinds of hardships to hold their
ground and make a go of the camp which, when discovered, was situated
100 miles from a railroad station and at least 25 miles from a known
water-supply. Tradition said that men had died of thirst on the very
spot where Goldfield was now adding daily to the world's wealth.
My environment became an inspiration.
There were a few penny-mining-stock brokerage firms doing business with
the outside world, and the idea of starting an advertising agency
appealed to me strongly. Here was an opportunity for the great American
speculating public to take "a flyer" on something much more tangible
and lasting than a horse-race, I determined.
Failing to locate a furniture store I ordered a long, rough, pine board
table made by a carpenter, rented desk-room from the Goldfield Bank and
Trust Company right in front of the cashier's counter, and secured the
services of an expert male stenographer from Cripple Creek. The
Goldfield-Tonopah Advertising Agency was born.
BEGINNING THE ADVERTISING BUSINESS
The idea of applying to the American Newspaper Publishers' Association
for recognition did not occur to me. I did not know that such was the
practise of agents. I did believe, however, from my ad-writing
experience with the Maxim & Gay Company, in New York, that I could
write money-getting advertising copy. Further, my experience in making
contracts with advertising agents for the publication of Maxim & Gay's
advertising in the newspapers throughout the land had, it seemed,
conveyed to me sufficient information regarding that end of the
business to fortify me in my new field.
Next morning I entered the office of the Mims-Sutro Company, a newly
established brokerage firm, and urged advertising.
"We are already spending about $100 a month," said the manager.
"One hundred dollars a month!" I exclaimed. "Why, you ought to be
spending that much every hour!"
At first they thought me a fanatic on the subject, but within a
fortnight I succeeded in inducing them to spend $1,000 in a single day
for advertising. It was not, however, until after I had shown them how
to follow up their correspondence successfully that they began to
believe in me. I wired to nearly all of the important city newspapers
throughout the country for rates. After obtaining their replies I
decided to spend $500 in the Chicago Sunday _American_, and $500 in
the San Francisco _Examiner_ in one issue. I forwarded the copy with
the money, and it appeared promptly. The results were good--so good,
indeed, that within two months the Mims-Sutro Company was spending at
the rate of from $5,000 to $10,000 a week for advertising, and my
commissions amounted to thousands.
My contracts with the advertisers required them to pay me one-time
rates, and my contracts with the publishers permitted me to send in
copy at long-time rates, and the profit was about 45 per cent. And
inasmuch as I always sent cash with the order, my copy was in great
demand. Indeed, my agency was fairly inundated day after day with blank
contracts from newspapers all over the country, the managers of which
were clamoring for the Goldfield business. In addition to the
Mims-Sutro account, I soon had many others; in fact, I had all the
others. Within six months after my arrival in Goldfield my agency
netted me $65,000.
SOME ADVERTISING THAT PAID
My second best customer was January Jones, the noted Welsh miner, and
later, when the corporation of Patrick, Elliott & Camp swung into
business as promoter, I placed its advertising. I held it, too, until
the death of C. H. Eliott, when the control of that firm fell into
other hands and it ultimately went out of business. In the course of
three years my advertising agency inserted in the neighborhood of
$1,000,000 worth of advertising in the newspapers of the United States,
chiefly those of the big cities, and all of the advertising made money.
It simply had to make money, because the brokers who did the
advertising had little or nothing to begin operations with except the
mines, and the mines were not their property.
The most remarkable feature of that advertising campaign to me was that
I had never been a stock-broker, had never been a mine-promoter, and
had never been in a mining camp before; but still, despite my utter
lack of knowledge, to begin with, of the technical end of the business,
my advertisements pulled in the dollars.
I was an enthusiast. I believed in the merits of the camp, and my
enthusiasm undoubtedly carried itself to the readers of my
advertisements. But the quality of the advertising copy did not
entirely explain my success in bringing the money into Goldfield. The
stock offerings undoubtedly _struck a popular chord_. Tens of
thousands of people who for years had been imbibing the daily
financial chronicles of the newspapers, but whose incomes were not
sufficient to permit them to indulge in stock-market speculation in
rails and industrials, found in cheap mining stocks the thing they
were looking for--an opportunity for those with limited capital to
give full play to their gambling, or speculative, instinct.
Time and again promotions were almost completely subscribed by
telegraph in advance of mail responses reaching Goldfield; and it
frequently needed but the publication of a half-page advertisement in
40 or 50 big city newspapers, of a Sunday, to bring to Goldfield by
wire before Monday night sufficient reservations to guarantee
oversubscription in a few days.
It was easy to give full play to my penchant for experimenting, in the
evolution of mining-stock promotion in Goldfield. The old system, and
the one which recently has enjoyed much vogue among financial
advertisers, was the endeavor first to get names of investors rather
than immediate results from the advertisements, and to follow them up
by correspondence. In spending the first $1,000 appropriated for
advertising from Goldfield, I split the money between two newspapers on
one day. I constructed large display advertisements and appealed for
direct, quick replies. This succeeded.
BUILDING GOLD MINES WITH PUBLICITY
A little later I organized a news bureau as an adjunct of the
advertising agency.
It is acknowledged that this news bureau accomplished much for Nevada.
As a matter of fact, it is generally conceded by Goldfield pioneers and
by mining-stock brokers throughout the country that the news bureau was
directly responsible for bringing into the State of Nevada tens of
millions of dollars for investment, and was indirectly responsible for
the opening up of the Mohawk and other great gold mines of the
Goldfield camp and of the State.
The prospectors who located Goldfield were without means. George
Wingfield, the man who is now president of the merged Goldfield
Consolidated, came into the mining camps with only $150. No funds of
consequence were available from home sources. The money that later made
Goldfield the "greatest gold camp on earth" came from the outside, and
the news bureau secured it by focusing the attention of the American
public on the great speculative possibilities of investments in the
mining securities and leases of the camp. One of the leases, known as
the Hayes-Monnette, operated with Chicago money, afterward opened up
the great Mohawk ore deposit at a period when there was no money in the
treasury of the Mohawk Mining Company to do its own development work.
And there are scores of other instances which bear me out.
I was head of the news bureau, and the news bureau was Nevada's
publicity agent. I have always considered my work in this direction in
the light of an achievement. No one contributed a dollar to the news
bureau except myself.
HAIR-RAISING STORIES FOR DISTANT READERS
That news bureau, with its headquarters on the desert, at a time when
water was commanding $4 a barrel in Goldfield and coal could not be
obtained in the camp for love or money, was operated with as much
calculating judgment as it could have been were it subsidized by the
most powerful interests in America. Human-interest stories that were
written around the camp, its mines and its men, were turned out every
day by competent newspaper men. These were forwarded to the daily
newspapers in the big cities of the East and West for publication in
the news columns.
Most of the stories were accepted and published. Whenever hesitancy was
observed, publishers were tempted by the news bureau with large
advertising copy to continue to give the camp publicity.
Of such great assistance in arousing public interest did I find this
work that noted magazinists like James Hopper were imported to camp and
pressed into service by the news bureau to write readable stories. At
times, when public interest appeared to lag, the wires were used by the
camp's newspaper correspondents to obtain publicity for all kinds of
sensational happenings that were common on the desert. Reports of gold
discoveries, high play at gambling-tables, shooting affrays, gamblers'
feuds, stampedes, hold-ups, narrow escapes, murders, and so forth, were
used to rouse the public's attention to the fact that a mining camp
called Goldfield was on the horizon.
I felt confident that the speculating public was going to make a great
big "killing" in Goldfield. Tonopah, twenty-six miles to the north, was
making good in a wonderful way. It had already enriched Philadelphia
investors to the extent of millions. I could see no reason why
Goldfield should not at least duplicate the history of Tonopah. Never
in my life had I lived in an environment that inspirited me as this
one. The visages of those around me were, as a rule, roughly hewn; the
features of many were marked with all the blemishes that had been put
upon them by time, by sleepless nights, by anxiety and by contact with
the elements; but courage, sincerity and honesty of purpose were
written in every line of their faces.
I became imbued with the idea that investors who put their money into
Goldfield stocks were not only going to get an honest run for their
money, in that the mines were going to be developed and many would make
good, but that the opportunity for money-making, if embraced by the
public at that time, would earn a great reputation for the man who
educated the public to a full understanding of the situation.
THE MERCURY OF SPECULATION
Mining-stock speculators and investors at a distance who responded to
the red-hot publicity campaign which marked those early days of
Goldfield rolled up enormous profits, and I made no mistake. Terrific
losses came eighteen months later, as a result of a madness of
mining-stock speculation which followed on the heels of the great
Mohawk boom and the merger of various Goldfield producers into a
$36,000,000 corporation. This was taken advantage of by "wild-catters"
in every big city of the country, and the public was fleeced to a
finish. But of this more and a plenty later.
In those early days my agency advertised Goldfield Laguna at 15 cents
per share in order to finance the company for mine operations. Within
a year thereafter Goldfield Laguna sold at $2 a share on the San
Francisco Stock Exchange, and was absorbed by the Goldfield
Consolidated at that figure. And there were many others which
duplicated or exceeded the performance of Laguna.
At the time of which I tell, when Laguna was promoted at 15 cents,
Goldfield was about a year old. A population of about 1,500 had
gathered there from all sections of the country. There were mining
experts from Salt Lake, San Francisco and Colorado, and miners from
every part of the Western mining empire; saloon-keepers from Alaska and
Mexico; real-estate brokers from practically every Western State and a
scattering of "tin-horns." It was about as motley a gathering as one
could find anywhere in the world, but compositely they were a sturdy
lot.
The camp was enjoying its maiden boom. In sixty days real-estate values
had jumped from $25 for a lot on Main Street to $5,500. Roughly
constructed business houses banked the main thoroughfare for two or
three blocks. The heavy traffic incident to hauling in supplies from
Tonopah had ground the dirt of the street into an impalpable mass of
dust to the depth of fifteen inches, and the unchecked winds of the
desert, sweeping from the Sierra Nevadas to the high uplifts east of
Goldfield, whipped the dust into blinding clouds that daily made life
almost unendurable.
Practically the entire population was housed in tents that dotted the
foothills. At night-time these presented the appearance of an army
encampment. Provisions were scarce and barely met the requirements. The
principal eating-place was the Mocha Café, which consisted of a 14 by
18 tent with an earthen floor and a roughly constructed lunch-counter.
Here men stood in line for hours, waiting to pay a dollar for a dirty
cup of coffee, a small piece of salty ham and two eggs that had long
survived the hens that laid them.
The popular rendezvous was the Northern saloon and gambling house,
owned and managed by "Tex" Rickard and associates. Here fully
seventy-five per cent. of the camp's male population gathered nightly
and played faro, roulette and stud-poker, talked mines and mining, sold
properties, and shielded themselves from the blasts that came with
piercing intensity from the snow-capped peaks of the Sierras. The
brokers of the camp gathered every night in the Northern and held
informal sessions, frequently trading to the extent of 30,000 or 40,000
shares of the more active stocks.
The mining stocks which were advertised through my agency in those
early Goldfield days were generally of the 10, 20 and 30-cent per share
variety. The incorporators of the companies were enthusiastic on the
point of their "prospect" making good, but I argued to myself that if
the chances of any mining prospect of this character proving to be a
mine were only about one in 25 or one in 50, and my agency advertised
25 or 50 companies of the average quality, and one of them made good in
a handsome way, he who purchased an equal number of shares in each
would at least "break even" with the profits from the one winner.
Later this principle was "knocked into a cocked hat" for conservatism
by Mohawk of Goldfield advancing from 10 cents to $20 a share, proving
that if Mohawk had been one among 50 companies, the shares of which
were purchased by an investor at 10 cents, he would have gained
handsomely. Early purchasers of Mohawk gathered 200 to 1 for their
money, many times more than could usually be won on a long shot at the
horse-races, and not so very much less than was formerly won by lucky
prize-winners in the Louisiana Lottery. And Mohawk was only one of a
dozen of the early ones which advanced in price on the exchanges and
curb markets more than 1,000 per cent.
At this early stage in Goldfield, "wild-catting" was not indulged in
from the camp, unless this long-shot gambling in shares of "prospects"
can by a grave stretch of imagination be termed such, the
promoter-brokers being able to offer stocks of close-in properties.
Among the prizes were Red Top, which advanced within two years
thereafter from 8 cents to $5.50 per share; Daisy, which sky-rocketed
from 10 cents to $6; Goldfield Mining, which soared from 10 cents to
$2; Jumbo, which improved from 50 cents to $5; Jumbo Extension, which
rose from 15 cents to above $3; Great Bend, which jumped from 20 cents
to around $2.50; Silver Pick, which moved up from 10 cents to $2.65;
Atlanta, which was promoted at 10 and 15 cents and sold up to $1.25;
Kewanas, which was lifted from 25 cents to $2.25, and others.
"Wild-catting" in a small way was prosecuted in Goldfield's fair name
even in those days, with Denver as the headquarters of the swindlers.
_Eighteen months later, when the Mohawk mine of Goldfield was in the
midst of its greatest half-year of production, at the rate of
$1,000,000 a month, and the consolidation of the important mining
companies of the camp was in progress, "wild-catting" became general
from office buildings in the large cities. There were more than 2000
companies incorporated during this last period, not one of which made
good, and the public lost from $150,000,000 to $200,000,000 as the
result of this operation alone. Fully $150,000,000 more was lost by the
ballooning to levels unwarranted by mine showings of listed Goldfield
stocks on the New York Curb and the San Francisco Stock Exchange, at
the same time._
But I am ahead of my story.
It was late in the Spring of 1905. I had been at work in Goldfield more
than six months, and my campaign of publicity was beginning to gather
momentum. The mines, however, were not at the moment keeping lively
pace. The Mohawk was yet undiscovered.
THE BIRTH OF BULLFROG
At this juncture the new mining camp of Bullfrog, 65 miles south of
Goldfield, was born. My publicity facilities were sought by owners of
properties in Bullfrog "to put the camp on the map."
C. H. Elliott, a Goldfield pioneer, put an automobile at the disposal
of myself and my stenographer, and we departed for Bullfrog. Elliott
and his associates had staked out a townsite which they called
Rhyolite. I was presented with seven corner lots on my arrival, to help
along my enthusiasm.
There, on the saloon floor of a gambling house, which was the chief
place of resort in the camp, I met for the first time George Wingfield,
then the principal owner of the Tonopah Club at Tonopah, a gambling
house which had lifted him from the impecunious tin-horn gambler class
to the millionaire division; United States Senator George S. Nixon,[1]
his partner; T. L. Oddie, later elected Governor of Nevada; Sherwood
Aldrich, now one of the principal owners of the Chino and Ray
Consolidated mines, and worth millions, and others who have since
accumulated great riches.
[1] On the death of Mr. Nixon in Washington, D.C., in June,
1912, Mr. Wingfield was appointed his Successor as U.S.
Senator by Governor Oddie. Mr. Wingfield's Goldfield
newspaper felicitated its owner and pronounced the
appointment to be logical and deserved. Mr. Wingfield,
however, after hearing from Washington as to the manner
in which the news of his appointment was received by members
of the Senate, notified Governor Oddie three weeks later
that he must decline the honor. He gave other reasons.
They were on the ground and buying properties. Mr. Aldrich purchased
the controlling interest in the Tramps Consolidated for about $150,000.
It was incorporated for 2,000,000 shares of a par value of $1 each, a
year later boomed to $3 a share on the New York Curb, and is now
selling at 3 cents, without ever having paid a dividend.
Mr. Elliott had a large stock interest in the Amethyst mine and the
National Bank mine, which were capitalized for 1,000,000 shares
respectively, and he presented me with 10,000 shares of stock in
each. He and his partner sold the control of the Amethyst to
Malcolm Macdonald of Tonopah. Later, when Amethyst's neighbor,
Montgomery-Shoshone, was selling at $20 per share, the market price of
Amethyst was pushed up to above $1 a share on the San Francisco Stock
Exchange, and I took my profit. The Amethyst has since turned out to be
a rank mining failure, as has practically every other property in the
camp, not one ever having earned a dividend.
The Bullfrog National Bank stock, representing another property that
looked for a while as if it would make good, I disposed of on the San
Francisco Stock Exchange at 40 cents a share, and I sold the town lots
at figures which netted me, in all, in excess of $20,000 for my one
day's trip to Bullfrog.
During my stay in Bullfrog I became very much impressed with the
Montgomery-Shoshone mine. This property, in fact, was the powerful
magnet which attracted everybody to the camp.
I was escorted through a tunnel seventy feet long. On each side as I
walked were walls of talc. I was told these assayed in places anywhere
from $200 to $2,000 a ton. Information was also forthcoming that the
width of the ore-body was more than seventy feet. (It afterward turned
out that the tunnel had been run along the ore-body and not across it,
and that the ore-body was about 10 feet wide.) Some specimen ore was
given me to assay, and the returns were staggering, running all the way
from $500 to $2,500 a ton.
In my enthusiasm I wrote stories about the property for publication
which must have induced the reader to believe that when all the riches
of that great treasure-house were mined, gold would be demonetized. As
a matter of fact, the stories from my news bureau, picturing the riches
of that Golconda, are said to have been indirectly responsible for the
purchase of control of the property by Charles M. Schwab and his
associates.
The history of the Montgomery-Shoshone is mournful but highly
instructive. For purposes of exposition of pitfalls in mining-stock
speculation it possesses striking qualifications. Here are the facts:
Malcolm Macdonald, mining engineer, acquired a half interest in the
mine from Tom Edwards, a Tonopah merchant, for $100,000, on time
payments. On the strength of the showing in the 70-foot tunnel an
effort was made to sell the control to the Tonopah Mining Company at a
profit. It did not succeed. Oscar Adams Turner, of New York and
Baltimore, the promoter of the highly successful Tonopah Mining
Company, which to date has paid back to the original stockholders $16
for every $1 invested, examined the Montgomery-Shoshone, and turned it
down because the property did not show him any well-defined veins or
other marks of permanency, and the ore-body appeared to him to be only
a superficial deposit of no great extent.
Many a good "prospect" has been condemned by mining men of the highest
standing, and has afterwards made good, particularly in Nevada. Mr.
Turner's turn-down did not daunt the owners.
ENTER, CHARLES M. SCHWAB
Engineer Macdonald incorporated a company for 1,250,000 shares of the
par value of $1 each, to own and operate the mine. Investors were
permitted by him to subscribe for small blocks of treasury stock at $2
per share. Shortly afterward Mr. Macdonald and the owner of the other
half interest, Bob Montgomery, sold a controlling interest to Mr.
Schwab and associates for a sum which has never been made public. Mr.
Schwab at once reorganized the company, took in two adjoining
properties that were undeveloped, and changed the capitalization to
500,000 shares of the par value of $5 each. He, in turn, permitted his
friends and the public to subscribe for the new stock at $15 per share.
Later the shares advanced to $22 on the New York Curb.
Undoubtedly Mr. Schwab thought well of the proposition, for he loaned
the company $500,000 to build a reduction works on the ground.
To date the mine has failed to pay for its equipment. Work on the
property has been abandoned and the mill has been advertised for sale.
_The company still owes Mr. Schwab about $225,000, the net profits on
the ore in six years being insufficient to repay his loan to the
company. In fact, the enterprise has proved to be one of the sorriest
failures in Nevada. The mine in six years produced $2,000,000 GROSS,
and although mine and mill were operated in an economical way, the net
proceeds from the ores were insufficient to pay off the Schwab debt.
Recently the shares have been nominally quoted at from 2 to 5 cents on
the New York Curb. The public's loss mounts into millions._
Investigation proves to me that Mr. Schwab was merely a mining
"come-on" and allowed his enthusiasm to run away with him, but the
public suffered just as much as if Mr. Schwab had perpetrated a
cold-blooded swindle.
I have heard the question propounded by a stockholder, "What possible
excuse could a man, with a good business head like that of Mr. Schwab,
have for promoting the Montgomery-Shoshone at a valuation of $15 a
share, or $7,500,000 for the property, afterward allowing the stock to
be quoted up to $22 a share on the New York Curb, or at a valuation of
$11,000,000 for the property, when, as a result of six years of mine
operations, the company is practically insolvent?"
An excuse acceptable to mining men might be offered were the
Montgomery-Shoshone property situated in a nest of other great mines,
intrinsically worth many times the valuation placed on the
Montgomery-Shoshone at the time of its promotion. "Prospects" of this
variety, according to approved mining experience, are sometimes
entitled to appraisement of great prospective value when neighboring
mines have demonstrated deep-seated enrichment. But there was no such
excuse in this case, because the deepest hole in the ground in the
entire camp was less than 200 feet at the time the Montgomery-Shoshone
was promoted by Mr. Schwab, and there was not a proved mine in or near
the camp.
I was present in Reno about three years ago when Mr. Schwab passed
through the divorce city en route to California. At that time
Montgomery-Shoshone had already cracked in price to around $3 a share,
and stories were being published in Nevada that Mr. Schwab had been
snubbed by members of an exclusive Pittsburg club for recommending
Montgomery-Shoshone for investment. Mr. Schwab, in hurriedly discussing
the matter at the railroad station, was quoted to the effect that the
property had been grossly misrepresented to him. This statement was
widely published in Nevada. Thereupon, Don Gillies, Mr. Schwab's
engineer in Nevada, who, with Malcolm Macdonald, was believed to be Mr.
Schwab's mining adviser, telegraphed Mr. Schwab and asked point-blank
whether he referred to him. Mr. Schwab answered that he did not. This
denial was also given wide publicity. There was only one reasonable
corollary, then, and that was that Mr. Schwab referred to Mr.
Macdonald.
In fine, it appears that Mr. Schwab may have actually purchased the
Montgomery-Shoshone on the sole representations of the vendor, the
interested party, and may have actually promoted the property on the
strength of the unverified representations of the vendor. It might be
that the vendor did not misrepresent at all; he may have been too
enthusiastic only, and communicated his enthusiasm to Mr. Schwab.
Possibly Mr. Schwab relied on newspaper accounts, and promoted the
property on the strength of them. A letter from Mr. Schwab, which
appears farther on, lends some color to this idea.
Even before this time Mr. Schwab had been in the mining game at
Tonopah. His Tonopah venture was the Tonopah Extension. The control of
the Tonopah Extension Mining Company was bought by John McKane, later a
member of the English House of Commons, from Thomas Lockhart at 15
cents per share. The capitalization was 1,000,000 shares. John McKane
interested Robert C. Hall, a member of the Pittsburg Stock Exchange, in
the proposition. He, in turn, made a deal with Mr. Schwab. The stock
was then sky-rocketed to above $17 a share on the San Francisco and
Pittsburg stock exchanges and the New York Curb. Afterward the price
was allowed to recede to around 65 cents per share. During the past
half-year it has maintained an average quotation of $2.00 per share.
Although the market price of the shares at the time Mr. Schwab was
believed to own the control was allowed to be advanced to a valuation
for the mine of $17,000,000, the company has since failed to pay as
much as $1,000,000 in dividends, and a quite recent appraisement by
Henry Krumb, a noted engineer, of the net value of the ore in sight in
the mine did not place it at so much as $1,000,000. The accuracy of
this report is disputed, on the ground that the ore-exposures at the
time did not permit of fair sampling. This allows for a discrepancy,
but hardly of $16,000,000.
After Tonopah Extension declined from around $17 a share to below $1.00
a share, it was alleged by Tonopah stockholders that Mr. Schwab and his
associates had unloaded at the top. Mr. Schwab replied that he owned
just as much stock after the market collapse as he did when he went
into the enterprise. This was met with an allegation by some
stockholders that while Mr. Schwab could probably prove that his
interest was as large at the later period as it had been at the outset,
it did not mean that Mr. Schwab and his _confrères_ had not unloaded at
the top and bought back at the bottom.
The following letter from Mr. Schwab to Sam C. Dunham, formerly U.S.
Census Commissioner to Alaska, afterward editor of the Tonopah
_Miner_, and later mining editor of the _Mining Financial News_ of New
York when I was managing editor, denies personal guilt, although it
leaves the reader free to believe that if Mr. Schwab personally did
not unload his stock at high prices, his associates might have done
so.
CHARLES M. SCHWAB
111 BROADWAY
NEW YORK
November 1, 1907.
Mr. SAM C. DUNHAM,
Editor _The Tonopah Miner_,
Tonopah, Nevada,
MY DEAR MR. DUNHAM:
My attention has been called to your issue of Saturday, October 26,
1907. To such criticisms as that issue contained of me, I generally
do not reply, as it is useless and only leads to further
discussion. But your paper heretofore has been so uniformly kind to
me, so fair in every respect, and as I have always regarded you as
a friend, our relations having been so pleasant, it makes me feel
that I would like to make a short reply to the criticisms
mentioned, as showing the consistency of my position.
The only thing I criticised about Nevada was the inaccuracy of
statements emanating from Nevada. You seem to attack me because of
this statement, and the strength of my position is fully confirmed
by your article because little, if anything, stated therein is true
or accurate.
I will take up your statements one by one. You say I bought from
John McKane $25,000 worth of stock of the Tonopah Extension Mining
Company at 15 cents per share. This is absolutely untrue.
You say I bought 100,000 shares of Extension stock from Robert C.
Hall at $6 per share, and paid for this stock with paper mill
stock. No single part of that statement is correct. I never gave
Mr. Hall any paper mill stock, nor did I buy 100,000 shares from
him. The amount purchased from him was 60,000 shares. The price
which you state I paid him for the stock is not correct, and, as I
stated, I gave no paper mill stock in exchange.
You say further that at the last annual meeting of Tonopah
Extension stockholders, held in Pittsburg last May, it developed
that I had disposed of all the stock I purchased from Mr. Hall and
over two-thirds of my original holdings of 166,000 shares. This is
absolutely untrue. I am holding to-day exactly the amount I held
after all purchases were made by me, and from the beginning,
aggregating some 285,000 shares, and I think if you take the
trouble to look up the records you will find my statement in this
connection to be true. When I originally bought Extension there was
also some stock in my name belonging to others, which I
subsequently transferred to them, leaving my own holdings of
285,000 shares where they now remain, intact, in my personal
possession.
Going on down the article, you say that I purchased control of
Shoshone and Polaris for less than $2 per share. This statement of
yours is inaccurate. You say I sold a large block of Shoshone stock
at $20 per share. This is also without any truth whatever. The fact
is that 3,000 shares were sold at this figure, $20, and these 3,000
shares came from the treasury of the company, all of which you will
find a matter of record.
It is true that I have loaned the company nearly $500,000 to build
the new mill, and I shall be glad to have any other stockholder in
the company assume his pro rata share of this amount.
You wonder why I criticise statements from Nevada.
Respectfully yours,
(_Signed_) C. M. Schwab
The general impression in Nevada, as I have gathered it, is that Mr.
Schwab's mining enterprises have been great disappointments to him, but
that he did not lose any very large sum of money, and that the public
did. His enemies go so far as to allege that he, his brother, and his
brother-in-law, Dr. M. R. Ward, made millions out of the public.
I have an opinion, and I may be allowed to express it. Mr. Schwab, at
the time he became a promoter of Nevada mines, was an expert
steelmaker. He knew little or nothing about silver, gold and copper
mines. The fact that friends in Philadelphia, who knew as little about
the game as he did, had made a fortune in Tonopah (on the advice of a
man who did know) should not have influenced him. Because the Mizpah
mine at Tonopah, promoted by Oscar A. Turner as the Tonopah Mining
Company, had made good in a phenomenal way, Pennsylvania stockholders
had rolled up fabulous profits in the venture. Under this hypnotism Mr.
Schwab "fell" for Tonopah Extension.
Later, when Tonopah Extension showed a market enhancement of more than
$16,000,000, Mr. Schwab was in an ideal frame of mind to succumb to
Montgomery-Shoshone.
And when Montgomery-Shoshone in the Bullfrog boom showed a market
enhancement of $8,000,000, it did not take much argument to get him
into Greenwater, another "bloomer," which is described further on.
Market profits were evidently alluring to Mr. Schwab. He failed to
realize that his own great name was in large measure responsible for
the rise in price of his securities.
Sam C. Dunham has informed me that Mr. Schwab told him he refunded
to his personal friends in Pittsburg, who subscribed for
Montgomery-Shoshone stock on his recommendation, between $2,000,000 and
$3,000,000. This ought to be convincing that Mr. Schwab was guiltless
of any intent to profit at the expense of others.
Mr. Schwab's lack of caution, however, is instructive to the losing
speculator. It furnishes a startling example of the danger in banking
alone on an honored name for the success of an enterprise, and it also
drives home the truth of the adage, "Every shoemaker should stick to
his last."
Incidentally, Mr. Schwab's mining career points another moral. It is
this: Don't think, Mr. Speculator, because a promoter represents the
chances of profit-making in a mining enterprise to be enormous, and you
later find his expectations are not realized, that the promoter is
_ipso facto_ a crook. Big financiers are apt to make mistakes and
so are little ones. Undoubtedly grave misrepresentations are made every
day, and insidious methods are used to beguile you into forming a
higher opinion regarding the merit of various securities than is
warranted by the facts. But mine promoters are only human, and honest
ones not infrequently are carried away by their own enthusiasm and
themselves lose their all in the same venture in which they induce you
to participate.
WHY THE BOTTOM FELL OUT
When Montgomery-Shoshone was enjoying its market hey-day the Bullfrog
Gold Bar Mining Company was promoted at around 15 cents a share on the
usual million-share capitalization. A year later the price jumped to
$2.65 on the San Francisco Stock Exchange, and the stock was widely
distributed among investors. Recently the company was in the sheriff's
hands. The biggest losers in this venture were Alabama people, who had
great confidence in the promoters.
Other Bullfrog derelicts in which the public lost vast sums of money
were Gibraltar, Bullfrog Steinway, Shoshone National Bank, Bullfrog
Homestake, Bullfrog Extension, Denver Rush Extension, Mayflower, Four
Aces, Golden Scepter, Montgomery Mountain, Original Bullfrog, etc.,
etc.
Mining-stock brokers of the cities went into ecstasies over Bullfrog
during the height of the boom in that camp. Philadelphia mining-stock
brokers fed Tramps Consolidated of Bullfrog to their clients. Pittsburg
brokers recommended Montgomery-Shoshone. Butte brokers placed large
blocks of Amethyst. Gold Bar was distributed by brokers of the South.
New York brokers were behind Gibraltar, Four Aces, Denver Rush,
Montgomery Mountain, Eclipse, Golden Scepter, National Bank and a score
of others.
Practically every dollar of the millions invested in Bullfrog stocks
has been lost.
The cause of the failure of the Bullfrog district to make good was not
the absence of gold-bearing rock, for there is much of it in the
district, but it has been found that the per ton values are too low to
make the mines a commercial success. Bullfrog is situated on the desert
and has no timber and but very little water. Promoters and investors
did not realize this until mills were constructed. Then it was too
late. If the camp were situated on the timbered shores of the Hudson
River, the stocks of many of the mines of the district would probably
be in great demand at above par.
Probably the most remarkable fact regarding Bullfrog is that its
securities were more strongly recommended by Eastern brokers than the
Goldfield issues and became more fashionable at this early period in
Goldfield's history. Eastern brokers then had little confidence in
Goldfield; and at the very time when the stocks of Goldfield
representing inside properties, which later made good in an
extraordinary way, were being offered, they advised their customers not
to buy. The general cry then was that it was a fly-by-night offshoot of
the first great Tonopah boom, and the idea prevailed in the East,
because of the ascending influence of George Wingfield, then principal
owner of Tonopah's leading gambling hell, that Goldfield was a haven
for gambler's and wildcatters.
It was during the early days of the Bullfrog boom that my friend W. J.
Arkell's career as a mining promoter came to a sudden end. It will be
remembered that when he left Goldfield to go to Tonopah to make the
Tonopah Home deal his cash capital was $35. He closed the transaction
for the option on the million shares of Tonopah Home's capitalization
at a price around five cents a share. Then our "partnership," of three
days' duration, came to an end. Arkell journeyed back to San Francisco
and there declared me out.
Arkell was a prominent figure for a while as a San Francisco
mining-stock promoter. He listed Tonopah Home on the San Francisco
Stock Exchange. Then he started in to sky rocket the price. The rise
continued until the stock sold at 38 cents, an advance of about 700 per
cent, in a few months.
Then the psychological moment for Arkell arrived.
It leaked out that he had been financing his stock-market campaign by
buying reams of his own stock on one-third margin and at the same time
selling it, in like quantity, for all cash through other brokers. This
was equivalent to borrowing 66 2-3 per cent. of the market value. The
brokers and banks did the carrying. When Arkell's tactics were
discovered, indiscriminate short-selling by market sharp-shooters
ensued. Arkell's own hypothecated stock was used to make deliveries.
In order to hold his ground and to get the floating supply of the stock
off the market, Arkell engineered a consolidation. The Tonopah Home
Consolidated was incorporated, and holders of Tonopah Home stock were
invited to exchange their original certificates for shares in the
consolidated company.
Just then somebody threw a brick. The names of United States Senator
George S. Nixon and Hon. T. L. Oddie, later Governor of Nevada, had
been published as directors of the new company, and when these
gentlemen saw the half-page display advertisements in which their names
were used, and were informed that Arkell appeared to be on the ragged
edge, they telegraphed to the San Francisco Stock Exchange denying
connection.
Tonopah Home broke wildly on the announcement in the Exchange to
something like 3 cents a share. Then it dropped to nothing. Arkell's
methods were too "raw," and I knew the smash had to come, sooner or
later.
'Twas late in October, 1905. Bullfrog was still in its hey-day.
Goldfield's initial boom seemed to be flickering. Work was going on day
and night in the mines, but for want of fresh discoveries the camp was
being deserted by some of the late-comers.
Out-of-town newspaper correspondents came upon the scene, and stories
and pictures of the camp, labeled "A Busted Mining-Camp Boom," etc.,
soon appeared in the Los Angeles and San Francisco newspapers.
Goldfield mine-owners were accused of beguiling the public. Promoters
were gibbeted as common bunco men. Peculiarly enough, Bullfrog, younger
sister of Goldfield, which has since proved to be such a graveyard of
mining hopes, was immune. There men of substance were in control, the
writers said, while Goldfield was portrayed as a stamping ground for
gamblers and "wild-catters." The stories had their effect even in
Goldfield. Leading men of the camp began looking about for new fields
to conquer. The majority of Goldfield mine-owners had not "fallen" for
Bullfrog, but the success of the Bullfrog stock company promotions in
the East inspirited them.
The great mining-camp boom of Manhattan, 80 miles north of Goldfield,
which followed, owes much of its success to these fortuitous
circumstances. I was one of the first to get the Manhattan fever.
W. F. ("Billy") Bond, a Goldfield broker-promoter whose ear was always
glued to the ground, showed me a specimen of ore literally plastered
with free gold. He said it came from Manhattan and that Manhattan was
another Cripple Creek. It was only the night before that I had lost a
good many thousand dollars "bucking the tiger." Faro was the pastime of
practically everybody in Goldfield in those days, and I played for want
of some other means of recreation and lost heavily.
I was as broke as the day I entered the camp. I bought blankets, a suit
of canvas clothes lined with sheep-skin, and a folding iron cot, all on
credit. I packed the outfit off to Tonopah. There I climbed aboard an
old, rickety stage-coach of the regulation Far-Western type, and
started for Manhattan. We rode over a snow-clad desert, up mountains
and down canyons--a perilous journey that I would not care to
duplicate. The $10 I had in my pocket, after paying my fare, was
borrowed money. When I arrived that night at Manhattan, situated in a
canyon at an altitude of 7,000 feet, I set up my cot on the snow,
wrapped myself in my blankets and slept in the open. There were only
three huts and less than a score of tents in the camp.
The next morning I strayed through the diggings. Sacks of ore in which
gold was visible to the naked eye were piled high on every side. The
Stray Dog, the Jumping Jack and the Dexter were the three principal
producers. They honeycombed one another. I questioned some of the
prospectors as to the names of the single claims adjoining the Stray
Dog, Jumping Jack and Dexter. They informed me that there was one group
of claims adjoining that could be bought for $5,000. With $10 in my
pocket I proceeded to purchase it. I gave a check for $100, signed a
contract to pay the balance of $5,000 in 30 days or forfeit the $100,
and immediately started back to Goldfield to induce the president of
the bank to honor my check on presentation. He did.
When I returned to Goldfield I carried with me many specimens of
high-grade ore. They were placed on display in a jewelry store. There
was great excitement, and before night a stampede from Goldfield to
Manhattan ensued which in magnitude surpassed the first Goldfield rush.
A few days later I returned to Manhattan and sold my option for $20,000
cash. While I was there I met C. H. Elliott. Mr. Eliott had "cleaned
up" in Bullfrog. He told me that he had formed a corporation
partnership in Goldfield with L. L. Patrick, one of the owners of the
great Combination mine--which was later sold to the Goldfield
Consolidated for $4,000,000--and Sol. Camp, a mining engineer from
Colorado. The name of the concern was Patrick, Elliott & Camp, Inc. It
was organized to promote mining companies. Mr. Patrick is now president
of the First National Bank of Goldfield.
Mr. Elliott asked me to stay in camp for another day until he could
pick up a good property. He made a deal with some cowboys for a large
acreage embracing the April Fool group of claims, scene of the original
gold discovery. Twenty leases on this property were in operation, and
the surface showings were promising. If the ore "went down," the mine
would prove to be a bonanza. Mr. Elliott incorporated a company known
as the Seyler-Humphrey to own and operate the ground.
We returned to Goldfield. My publicity bureau telegraphed the news of
the Manhattan discoveries to a long chain of newspapers East and West.
Then I put out a big line of "display" advertisements in the big
cities, offering for sale stock of the Seyler-Humphrey. The entire
issue of 1,000,000 shares of Seyler-Humphrey was oversubscribed at 25
cents a share within two weeks. This was the result of $15,000 worth of
advertising, and the profits of the firm were $100,000. In quick
succession Mr. Elliott promoted the Manhattan Combination and the
Manhattan Buffalo. Within six weeks the firm's promotion profits
amounted to approximately $250,000.
HOW ABOUT THE PUBLIC'S CHANCES?
I asked Mr. Elliott one evening, shortly after Patrick, Elliott & Camp
earned their first $250,000 from their three Manhattan promotions,
whether he did not think the public was entitled to subscribe for this
stock at a lower price and at a smaller profit to his corporation.
I recall that he said: "The article we sell is something that somebody
wants and is willing to pay for. What we have sold them is worth what
we have charged. The fact that we are on the ground and have endured
hardships entitles us to a good profit, provided the gold showings on
the surface of the properties are not exaggerated. The sale of the
stocks has been accelerated by your gift of presentation through
advertisements. Big department stores and advertising specialists in
the cities pay from $15,000 to $30,000 a year for that kind of talent,
and we on the desert also have a right to avail ourselves of it."
"But suppose the properties don't make good?" I queried.
He answered: "It is not a case of excessive optimism for one to expect
that Manhattan properties will make into mines, in the presence of such
wonderful surface showings; and so long as we are not knowingly guilty
of deception, no harm is done. If the Manhattan stocks we have promoted
make good, $5 will be a reasonable price for them, and if they don't
make good, one cent will be too high for them. So why question the
ethics of charging 25 cents per share for Seyler-Humphrey when we might
have sold it for 15 cents and still have made money; or of charging 15
cents for Manhattan Buffalo when we could have sold it at a profit for
10 cents? The public knows it is gambling. If people want to buy stocks
where they won't lose all of their investment under any circumstances,
they know they can buy Union Pacific, Pennsylvania Railroad or New York
Central. The profits there, however, are limited, just like the losses.
In the case of mining stocks, representing prospects under actual
development, the public can lose or gain tremendously."
Mr. Elliott, who confessed to me that he often played the horse-races
when in San Francisco, then wrote out a list of stocks and prices,
representing what he said was a "book" on stocks, comparable to a
gambler's book on the horse-races, reading substantially as follows:
Stock Price Odds
Union Pacific $165.00 6 to 5
Reading 155.00 8 to 5
Missouri Pacific 56.00 2 to 1
Erie 28.00 3 to 1
Seyler-Humphrey .25 20 to 1
Manhattan Buffalo .15 30 to 1
Manhattan Combination .10 50 to 1
"There," said Mr. Elliott, "you have the different prices on railroad
and mining securities with their chances of winning for the speculator
marked against them. When a man goes to a horse-race and plays the
favorite, he does exactly what the man does who gives his broker an
order to buy Union Pacific for him at current quotations. It is about 6
to 5 against the investment making a profit over current quotations on
any given day, although the investor will hardly gain 6 for his 5 if
the stock enjoys its highest probable advance. It is about 20 to 1
against the man buying Seyler-Humphrey making money, but he will gain
20 for his one if the mine proves to be a bonanza. However, the rail is
an investment and the mining a speculation."
"Do you mean to say that the odds against a man making money on Union
Pacific on any given day are only 6 to 5 when he buys the stock _on
margin_?"
"Not on your life!" he said. "A margin trader on the New York Stock
Exchange, unless he has sufficient capital behind him to hold out
against 'inside' manipulation, which has for its purpose the 'shaking
out' of the speculator, has not got _any_ chance! He is bound to lose
his money in the end. I am talking about people who buy stocks, pay for
them in full and get possession of their certificates and 'sit tight'
with them."
Mr. Elliott was a plunger and lost large sums in the gambling-houses of
Goldfield and Tonopah. He lost $20,000 in a night's play in the Tonopah
Club, then owned by George Wingfield and associates. When asked to
settle he tendered a check for $5,000 and a certificate for 100,000
shares of Goldfield Laguna Mining Company stock, then selling at 15
cents. This was accepted. Within a year Laguna sold freely at $2 a
share.
This incident illustrates how the foundations were laid for some of the
big fortunes which were amassed in the Goldfield mining boom. When
George Wingfield came to Tonopah in 1901 he brought with him $150,
borrowed from George S. Nixon, then president of a national bank at
Winnemucca, Nevada, and later United States Senator. Mr. Wingfield's
fortune is now conservatively estimated at between $5,000,000 and
$6,000,000.
Success having been won by the Patrick Elliott & Camp promotions, I was
considering whether or not much of the money-making that was being done
by the promoters around Goldfield was not due to my own peculiar
ability to reach the public, and I even meditated on my fitness to
become a promoter on my own account. The best properties in Manhattan,
by common consent, were the Stray Dog, the Jumping Jack and the Dexter.
These were sure-enough producers of the yellow metal. They were
shippers and were held in high esteem by mining men. I found it
impossible to purchase the Dexter because the company was already
promoted and the stock widely distributed at around $1 a share. George
Wingfield was then and is still interested in the Dexter. The Jumping
Jack was unincorporated. The stock of the Stray Dog was practically
intact in the hands of the owners. The price asked for the Jumping Jack
was $85,000. Stray Dog was held at $500,000.
JUMPING JACK MANHATTAN
I was again in funds as the result of my profits in the Manhattan boom,
and it was again my wont, for want of any other pastime, to play faro
at night. I found myself gossiped about with men like January Jones,
Zeb Kendall, C. H. Elliott, Al. Myers and others who rolled in money
one day and were broke the next.
The second largest gambling-house in Goldfield was owned by "Larry"
Sullivan and Peter Grant, both from Portland, Oregon. Sullivan claimed
that he was attracted to Goldfield by the stories which appeared in the
Sunday magazine section of a Coast newspaper, the copy for which had
been carefully and methodically written in the back room of our
Goldfield news bureau. Sullivan and Grant were making money, and plenty
of it. I patronized the Sullivan house, of occasion, and Sullivan
usually presided over the games when I was there. One evening I cashed
in $2,500 of winnings. The money was piled on the table in $20
gold-pieces by the dealer. As I was about to place it in a sack to
store away in the safe of the house until the morrow, Sullivan began to
josh me like this:
"Say, young feller, why don't you cut me in on some of your mining
deals? I'm game!"
"Are you? Well, stack up $2,500 against that money, and I'll see if you
are."
He went to the safe and lugged to the table a big canvas sack
containing $20 gold-pieces. Stacking the money on the table in piles of
$400 each, he matched my stake.
"Well?" said he.
"Put that money in a sack," said I, "and go and get that big coonskin
coat of yours, take a night ride by automobile to Tonopah, and in the
morning go by stage to Manhattan. When you get there look up the owner
of the Jumping Jack mine. I have met him. He is a member of the Ancient
Order of Hibernians. An Irishman can buy that property from him much
cheaper than anybody else. You go and buy it."
"What will I pay?" asked Larry.
"He wants $85,000, but get it as cheap as you can," I replied.
"What? With this $5,000?"
"Yes," said I. "Pay him the $5,000 down and sign a contract to pay the
balance in 60 or 90 days; but fetch him back to Goldfield, and have him
bring the deeds."
A few days later Sullivan returned to Goldfield, aglow with excitement.
Climbing out of the stage-coach, he pulled me into his private office.
"Say," he said, "I've got that guy with me and he's got the deeds. I
bought the Jumping Jack for $45,000. He'll do anything you want him to
do."
"Good!" I said.
The owner was introduced to me, and I turned him over to my lawyer, the
late Senator Pyne. Mr. Pyne drew up a paper by which the transferred
title of the property to the Jumping Jack Manhattan Mining Company,
capitalized for 1,000,000 shares, 300,000 shares of which were placed
in the treasury for mining purposes, and 700,000, representing
ownership stock, put in escrow, to be delivered to Sullivan and myself
on the payment of 6-1/2 cents a share. A board of directors was
selected.
At this juncture Sullivan, who knew as much about the mining promotion
and mining-brokerage business as an ostrich knows about ocean tides,
inquired what my next move would be. Sullivan seemed to be bewildered,
yet full of faith. My situation was this: I had conceived a
rip-snorting promotion campaign for the best property that had yet been
offered the public from Manhattan, but I had no cash to present it.
Turning to Sullivan I said:
"Do you know the Goldfield manager of the Western Union Telegraph
Company?"
"Yes, I know him well."
"Call him up by 'phone or send word to him that you will guarantee
payment of any telegrams I file here to-night or during the next three
days; I want to send some wires," said I.
"I'll do it," said Sullivan, and within a few minutes I was advised
that Sullivan's credit was unquestioned.
I returned to the news bureau and there drafted a 300-word telegram,
setting forth the merits of the Jumping Jack Manhattan property and
offering short-time options on big blocks of the stock. The message was
sent to practically all of the well-known brokerage houses in the
country which handled mining stocks. The bill for telegraph tolls was
$1,200. When Sullivan learned of its size he nearly collapsed.
"How far do you intend to go?" he gasped.
"Well," said I, "how can you lose? Your friend, Frank Golden, president
of the Nye & Ormsby County Bank, has accepted the presidency of the
company at our request, and the other officers we have secured are all
representative citizens of this community, and, besides, the Nye &
Ormsby County Bank has agreed to receive subscriptions. Can you beat
that for a layout? Never in my experience in this camp, with all the
promotions I have advertised, has the public had a dish quite so
palatable offered to it--a producing mine, in the first place; a
high-class directorate headed by a bank president, in the second place;
and a real bank as selling agent, in the third and last place. And it
will go like wildfire!"
I labored all that night in my advertising agency on some
strongly-worded advertising copy recommending to the public the
purchase of stock in Jumping Jack Manhattan. In the morning I induced
Sullivan to advance $10,000 to pay the advertising bills. The copy was
dispatched by first mail to the important daily newspapers of the
country, with instructions to publish on the day following receipt of
copy.
Within six days all of the advertising had appeared. The effect was
magical. The display advertisements assisted the brokers in the various
cities, who had asked for reservations of the stock, to dispose of
their allotments in a few days. Within ten days after the initial
offering of the promotion by telegraph to the Eastern brokers, Sullivan
showed me telegraphic orders for 1,280,000 shares of Jumping Jack
Manhattan stock at 25 cents a share, an oversubscription of 280,000
shares. Before the stock certificate books were printed and delivered
from the local printing office, we were, in fact, oversold.
That week and the next, Sullivan gave me _carte blanche_ to speculate
in local mining stocks with partnership money, and within a fortnight
we had made another small fortune from Manhattan securities. These were
advancing in price on the San Francisco Stock Exchange by leaps and
bounds.
I recall one overnight winning that we made, amounting to about
$12,000, which came so easy I felt almost ashamed to take the money.
Manhattan Seyler-Humphrey stock, promoted by Patrick, Elliott & Camp at
25 cents per share, was now listed on the Goldfield and San Francisco
stock exchanges. It was in fair demand at 30 cents.
A dispatch reached Goldfield from New York, purporting to be signed by
John W. Gates, reading as follows:
"At what price will you give me an option good 48 hours on 200,000
shares of Manhattan Seyler-Humphrey? Answer to Hotel Willard,
Washington, to-night."
This was to Patrick, Elliott & Camp. Within half an hour a half-dozen
similar messages reached other Goldfield brokers.
I happened to be in the office of Patrick, Elliott & Camp when the
first telegram was received, and I lost no time in going out on the
street and annexing all the Goldfield offerings of the stock at current
quotations. At first Lou Bleakmore, manager for Patrick, Elliott &
Camp, "smelled a rat," but when he learned that I was buying the stock
he became convinced that I believed John W. Gates really wanted some
Seyler-Humphrey, and he shot buying orders for his own firm into San
Francisco.
Personally I considered the message a snare. Somebody in the East, I
guessed, had bitten off a block of Seyler-Humphrey at around 25 cents
when it was promoted a few weeks prior and had made up his mind that he
would turn a trick. The Goldfield brokers having received telegrams, I
assumed that the same message had been sent to brokers in San
Francisco, where the stock was also listed. It seemed to me that an
advance would certainly be recorded on the following day. Sure enough,
the next morning the stock advanced to 38 cents a share, and the market
boiled. At this figure, and a little higher, I unloaded in the
neighborhood of 100,000 shares in Goldfield and San Francisco. A good
deal of this stock had been picked up by me the night before. But I
recall that one block of 10,000 shares had been allotted to me weeks
before at the brokers' price of 20 cents, and another block of 10,000
shares had been given me as a bonus for my publicity measures.
After turning over to the treasury of the Jumping Jack Manhattan Mining
Company the amount netted from the sale of treasury stock, and paying
off the amount still due on the original purchase price, Sullivan and
I, within three weeks of my little dare, had cleaned up a net profit of
$250,000.
"Do you want a cut?" I asked Sullivan when our joint profits reached
the quarter-million mark.
"No, I'm game. Stay with it," he returned.
Next day the L. M. Sullivan Trust Company, destined to make and lose
millions in the great Goldfield boom that followed and to mold for me
an exciting career as a promoter, was formed with a paid-up capital of
$250,000. Sullivan was made president and I vice-president and general
manager.
CHAPTER III
THE BREWING OF A SATURNALIA OF SPECULATION
Mr. Sullivan's gambling-house affiliation was not considered a drawback
to the trust company. George Wingfield, vice-president and heaviest
stockholder of the leading bank in Goldfield, was a gambler and Mr.
Wingfield also owned extensive interests in the mines. His mines were
making good, too. Owners of the gambling places now stood as much for
financial solidity in Goldfield as did savings-bank directors in the
East.
As for myself, I was unafraid. I vowed I would henceforth prove an
exception to the mining-camp rule and quit all forms of gambling. My
new position demanded this. And I found it easy to obey the
self-imposed inhibition. Soon the stock-market operations of the trust
company gave my speculative instinct all the vent it could possibly
have craved under any circumstances.
A few days later the sobering sense which impelled me to resolve that I
must absent myself from gaming tables evolved into a stern ambition to
accomplish big things for the trust company. I went about my business
like a man who sees dazzling before him a golden scepter and who is
imbued with the idea that if he exerts the power he can grasp the
prize. It had been agreed that the trust company would specialize in
the promotion of mining companies, and I determined that the trust
company should conduct its business as a trust company ought.
John Douglas Campbell, known on the desert as plain "Jack" Campbell,
was engaged by the trust company as its mining adviser and mine
manager. We agreed to pay him a salary of $20,000 a year, with a bonus
of stock in every new mining company we promoted, a stipend which was
later found to be equivalent to $50,000 a year.
Mr. Campbell had been identified with Tonopah and Goldfield mining
interests for three years, and was favorably known. For eight years
before coming to Tonopah he was employed as a mining superintendent in
Colorado by Sam Newhouse, the multi-millionaire mine operator of Utah.
In Colorado Mr. Campbell's reputation had been good. On coming to
Tonopah he was employed by John McKane, then associated with Charles M.
Schwab. Later he was placed in charge of the Kernick and
Fuller-McDonald leases on the Jumbo mine of Goldfield from which,
during a year's time, $1,000,000 in gold was taken out. After that Mr.
Campbell took hold of the Quartzite lease at Diamondfield, near
Goldfield, and he produced $200,000 in a few months from that holding.
He followed this up by a record production from the famous Reilly lease
on the Florence mine of Goldfield, amounting to $650,000 in two months.
It was within thirty days of the date of expiry of the Reilly lease
that Mr. Campbell was induced to take charge of the mining department
of the trust company.
Mr. Campbell's advent as our mine manager was immediately reflected in
the stock market by the advance of Jumping Jack Manhattan Mining
Company shares, which were now regularly listed on the San Francisco
Stock & Exchange Board, to 40 cents per share, up 15 points from the
promotion price. The sharp rise wrought an undoubted sensation in
stock-market circles. Brokers in the cities who had sold Jumping Jack
to their customers clamored for a new Sullivan promotion. Any new
mining venture for which the trust company would stand sponsor was
assured of heavy subscription and a broad public market.
TRYING IT ON THE STRAY DOG
The Stray Dog Manhattan mine was furnishing daily sensations in the way
of frequent strikes of fabulously rich ore. I urged that, no matter how
small the profit, the Sullivan Trust Company should begin its corporate
career with the promotion of a property as good as the Stray Dog. The
Stray Dog was for sale--at a price. One interest, of 350,000 shares,
owned by Vermilyea, Edmonds & Stanley, the law firm of highest standing
in Goldfield, could be acquired at 45 cents a share, and another
interest, of 350,000 shares, owned by prospectors who had located the
ground, could be had at 20 cents a share, all or none. The remainder of
the stock was in the treasury of the company. The total demanded for
700,000 shares of ownership stock was $227,500, all cash. A likely
property adjoining the Stray Dog, known as the Indian Camp, could be
purchased for $50,000 in its entirety. We knew that as soon as it
should become known that we had bought the Stray Dog, the value of
Indian Camp ground would double, and we therefore decided to annex the
Indian Camp at the same time we took over the Stray Dog.
The proposed outlay amounted to more money than we had, and I looked
about for assistance. Henry Peery, a Salt Lake mining man of substance,
had been negotiating for the Stray Dog in the interest of Utah bankers.
We agreed that Mr. Peery should be allowed to participate on the basis
of a one-third interest for him, and a two-thirds interest for the
trust company. Besides supplying his quota of the cash needed to swing
the deal, Mr. Peery agreed to furnish a president for the company, who,
he said, interested himself very frequently in mining enterprises. This
was Henry McCornick, the Salt Lake banker, son of the head of the firm
of McCornick & Company, reputed to be the richest private bankers west
of the Mississippi River. The deal was made.
We immediately proceeded to promote the Stray Dog Manhattan Mining
Company at 45 cents per share, the average cost to us of the stock
being 32-1/2 cents. It was impossible for any huge profit to accrue in
Stray Dog on any such margin as 12-1/2 cents per share between our cost
price and the selling price, because the expense of promotion appeared
bound almost to equal this. We figured that any promotion profits must
come out of the Indian Camp. The Indian Camp was capitalized for
1,000,000 shares, 650,000 of which were paid over to the trust company
and to Mr. Peery for the property. The remaining 350,000 shares were
placed in the treasury of the company to be sold for purposes of mine
development. The average per share cost to the trust company of its
ownership stock was a fraction less than 8 cents. We decided that as
soon as the Stray Dog was promoted we would offer Indian Camp shares on
a basis of 20 cents per share net to the brokers and 25 cents to the
public, and looked forward, if successful, to gaining about $75,000 net
on both ventures.
Immediately on taking over the control of Stray Dog and Indian Camp the
trust company purchased treasury stock in each of these companies, and
put a large force of men to work to open up the properties. Within
thirty days of the incorporation of the trust company Gold Hill in
Manhattan, on which were located the Stray Dog, Jumping Jack and Indian
Camp, swarmed with miners. The orders given to Engineer "Jack" Campbell
were to put a man to work wherever he could employ one, and to be
unsparing in expense so long as he could obtain results. Towering
gallows-frames and 25-horse-power gasoline engines were installed and
other necessary mining equipment ordered shipped to the properties.
Blacksmith shops, bunk-houses and storehouses were erected on the
ground. Day and night shifts of miners were employed. In order to
guarantee the constant presence on the properties of the engineer in
charge, the Sullivan Trust Company built for the engineer's use a
$6,000 dwelling house on Indian Camp ground.
Having convinced the natives that we were in dead earnest about our
mine-making intentions, we busied ourselves offering Stray Dog stock
for subscription at 45 cents per share. It was well known around the
camp that we had paid 45 cents per share for one block of 350,000
shares, and mining-camp followers were among the first to subscribe for
the stock. Then an effort was made to dispose of quantities of it to
the Eastern public by advertising and through mining-stock brokers.
That advertising campaign was approached with considerable caution. In
the first place, the subscription price of Stray Dog, 45 cents, was 80
per cent. higher than that of any other advertised promotion which had
yet been made from either the Goldfield or Manhattan camps; and in the
second place, the conduct of a mining-stock promotion campaign by a
Trust company appeared to me to justify more than ordinary care. There
were other factors that entered for the first time in Goldfield, too.
The initial successes of the big display advertising campaigns directed
from Goldfield appeared to have been due to the fact that the American
public had greeted mining-stock speculation as filling a long-felt
want, namely, a channel for speculation in which they could indulge
their gambling spirit with comparatively limited resources--resources
that were insufficient to give them a "look-in" on the big exchanges
where the high-priced rails and industrials are traded in.
ADVERTISING FOR THINKERS
Having "tried on the dog" my methods of advertising for nearly two
years, that is to say, having conducted an advertising agency for mine
promoters, and learned the business with their money, I had passed
through the experimental stage and now marshalled a cardinal principal
or two that I decided must guide me in the operations in which I had
become more directly interested.
I resolved never to allow an advertisement to go out of the office that
was unconvincing to a thinker. If my argument convinces the man of
affairs, I determined, it will certainly win over the man of no
affairs.
Dogmatically expressed, the idea was this:
Never appeal to the intelligence of fools, no matter how easily they
may part with their money. Turn your batteries on the thinking ones and
convince them, and the unthinking will to follow.
That principle was applied to the _argument_ of the advertisement.
The headlines were constructed on an entirely different principle,
namely, to be positive to an extreme.
The Bible was my exemplar. It says, "It is" or "It was," "Thou shalt"
or "Thou shalt not," and the Bible rarely explains or tells why.
The strength of a headline lies in its positiveness.
The logic which directed that the flaring headline of my big display
advertising copy embrace a very positive statement, and that the
_argument_ which followed in small type be convincing to the thinker,
was based on a recognition of the fact, that, while boldness of
statement invariably attracts attention, analysis is the final resort
of the thinker before becoming convinced.
More circumspection was used also in the process of selecting media for
the advertising. Newspapers that did not publish in their news-columns
mining-stock quotations of issues traded in on the New York Curb, the
Boston Stock Exchange, the Boston Curb, the Salt Lake Stock Exchange or
the San Francisco Stock Exchange were taboo, on the theory that by this
time trading in mining stocks had grown sufficiently popular to command
a regular following, and that it was easier to appeal to those who had
some experience in mining-stock speculations than to those who had
never before ventured.
Subsequent advertising campaigns were always conducted from this
viewpoint. I did not set the ocean on fire with my Stray Dog promotion,
the advertising campaign of which was conducted on these lines, but
this was due to circumstances which I explain further on. Later, when
the Sullivan Trust Company grew and prospered, and afterward when I
reached the East and learned more and more of the inside mechanism of
the big Wall Street promotion game in rails and industrials as well as
mining stocks, I found that my publicity principles were comparable to
those accepted by the Street generally.
_The mighty powers of Wall Street recognize the fact that it is not
in the nature of things that fools should have much money, and
thinkers, not fools, are the quarry of the successful modern-day
promoter, high or low, honest or dishonest._
_A little knowledge is a dangerous thing, and the man who thinks he
knows it all because he has accumulated much money in his own pet
business enterprise is a typical personage on whom the successful
modern-day multi-millionaire Wall Street financier trains his
batteries._
_The honest promoter aims at both the thinker who thinks he knows but
doesn't, and the thinker who really does know. He is compelled to
appeal to both classes because the membership of the first outnumbers
that of the second in the proportion of about 1,000 to 1._
_In fine, for every dollar of "wise" money which is thrown into the
vortex of speculation_, $1,000 is "unwise," or considered so.
The initial Stray Dog and Indian Camp promotion campaign was only half
successful at the outset. About 650,000 shares of Stray Dog and 350,000
shares of Indian Camp had been disposed of when the Manhattan boom
began to lose its intensity. Promotions had been made a little too
rapidly for public digestion. There were more miners at work than ever
in the Manhattan camp, but the demand for securities was not keeping
pace with the supply. Manhattan's initial boom appeared to be
flattening out just as Goldfield's first boom had.
We met with a setback from another direction. Henry McCornick's banking
connections in Salt Lake objected to the use of his name as president
of the Stray Dog. At the very height of our advertising campaign Mr.
McCornick resigned. We elected our engineer, "Jack" Campbell,
president, but damage was done.
YES, "BUSINESS IS BUSINESS"
The offices of the trust company were furnished on an elaborate scale,
resembling the interior of a banking institution of a large city. The
offices became the headquarters of Eastern mining-stock brokers
whenever they arrived in camp.
One morning J. C. Weir, a New York mining-stock broker, whose firm held
an option from the trust company on 100,000 shares of Stray Dog stock,
was ensconced in one of the two luxuriously furnished rooms used as
executive offices. Mr. Weir's firm was one of our selling agents in New
York. He was the dean of mining-stock brokers in New York City. In
those early days the telephone service of Goldfield was not yet
perfected, and it was only necessary for a person, in order to overhear
any talk over the telephone in our offices, to lift the receiver from
the nearest hook and listen. It was reported to me that Mr. Weir had
been availing himself of this method of learning things at first hand.
"Say, Rice," said Mr. Sullivan one morning, "Weir hears your messages
every time you are called on the 'phone. He takes advantage of you. I
wish you would let me fix him."
"All right; what do you want to do?" I answered.
"Say," said Mr. Sullivan, "Campbell, our engineer, is in Manhattan.
I'll call him up from the public station and tell him to 'phone you
some red-hot news about mine developments on Stray Dog, and I'll see to
it that Weir is in his office at the time you get the message. If Weir
don't steal the news and grab a big block of Stray Dog on the strength
of it, I'm a poor guesser."
All of our options to brokers were to expire on the 15th of March and
this was the 13th.
At four o'clock in the afternoon I was in my room. Mr. Weir was at the
desk in the room opposite. The 'phone bell rang.
"Hello," I said, "who is this?"
"Campbell, at Manhattan," was the response.
"What's the news, Jack?" I asked.
"We've just struck six feet of $2,000 ore! It's a whale! Never saw a
mine as big as this one in my life! Don't sell any more Stray Dog under
$5 a share!" shouted Mr. Campbell.
"Bully, Jack," I said, "but keep that information to yourself. Don't
tell your mother, and don't let any more miners go down the shaft.
Close it up until I am able to buy back some of the stock I sold so
cheap."
Fifteen minutes later Mr. Sullivan and I met Mr. Weir leaving the room.
"Weir," said I, "your option on Stray Dog expires on the 15th at noon.
So far, your New York office has ordered only 85,000 shares of the
100,000 that were allotted to you. We have decided to close
subscriptions on the moment and wish you would wire your New York
office not to sell any more."
"You are wrong," said Mr. Weir; "why, when I left New York we had
oversold our entire allotment! If the office has not notified you of
this, it has been a slip. We will, in fact, need at least 25,000 shares
more."
"You can't have them," said I.
"Not in a thousand years!" put in Mr. Sullivan.
Mr. Weir sent a bunch of code messages to New York. All the next day
Mr. Sullivan spent with Mr. Weir. He allowed Mr. Weir to cajole him
into letting him have the entire block of stock. Finally, it was agreed
between Mr. Weir and Mr. Sullivan that Mr. Sullivan would give him the
additional stock whether I consented or not. Surreptitiously, according
to Mr. Weir's idea, Mr. Sullivan was yielding to him, without my
knowledge and against my wishes.
Next day the Sullivan Trust Company shipped to Mr. Weir's firm in New
York 25,000 shares of Stray Dog attached to draft at 45 cents a share.
The draft was paid. The avenging angel kept hot on Mr. Weir's trail,
for right on the heels of the New York broker's Stray Dog purchase came
a calamity which almost obliterated the market values of Nevada mining
stocks and particularly those of the shares of Manhattan mining
companies. San Francisco was destroyed by earthquake and fire. Not less
than half of the capital invested in Manhattan stocks had come out of
the city of San Francisco. The earthquake was fatal to Manhattan.
The San Francisco Stock Exchange, which was the principal market for
Manhattan mining shares, was compelled to discontinue business for over
two months. Brokers and transfer companies lost their records, and the
Coast's property and money loss was so appalling that no more money was
forthcoming from that direction for mining enterprises. Every bank in
Nevada closed down, just as every California bank did, the Governors of
both States declaring a series of legal holidays to enable the
financial institutions to gain time. Nevada banks, as a rule, had
cleared through San Francisco banks, and practically all of Nevada's
cash was tied up by the catastrophe.
The Sullivan Trust Company faced a crisis. I had decided it was good
business to lend support to Jumping Jack in the stock market when the
Manhattan boom began to relax from its first tension, and had
accumulated several hundred thousand shares at an average of 35 cents.
The Trust company had only $8,000 in gold in its vaults on the day of
the 'quake. Moneys deposited in bank were not available. Of the $8,000
in gold coin, $6,500 was paid two days after the earthquake to the
Wells-Fargo Express Company for an automobile which was in transit at
the time, and for which Wells-Fargo demanded the coin. It was
impossible to hypothecate mining securities of any description in
Nevada or San Francisco. With the Sullivan Trust Company's funds tied
up in closed-up banks, and with an unsalable line of securities in its
vaults, it was "up against it."
For a period it looked as if we must go to the wall. For two months we
eked out a bare subsistence by the direct sale of Manhattan securities
at reduced prices to the Eastern brokers. This purchasing power came
largely from brokers who were "short" of stocks to the public on
commitments made at a much higher range of prices and needed the actual
certificates for deliveries.
It took the Nevada banks and the San Francisco Stock Exchange more than
sixty days to rehabilitate themselves. No sooner did the San Francisco
Stock Exchange open for business than it became possible for the
Sullivan Trust Company to borrow some much needed cash on Manhattan
securities, of which it had a plethora. Through members of the San
Francisco Stock Exchange, it obtained in this way in the neighborhood
of $100,000. Goldfield banks supplied another $100,000 a little later
by the same process. Then the clouds rolled by.
FORTUNES THAT WERE MISSED
Soon the Mohawk of Goldfield began to give unerring indications of
being the wonderful treasure-house it has since proved to be. Hayes and
Monnette, who owned a lease on a small section of the property, had
struck high-grade ore and were producing at the rate of $3,000 per day.
A few weeks later it was reported that the output had increased to
$5,000 a day.
The Mohawk being situated only a stone's throw from the Combination
mine, the idea that the Mohawk might turn out to be another Combination
was common in Goldfield. Hayes and Monnette were startled--almost
frightened--at their success. Yielding for the moment to the warning of
friends, who urged upon them the possibility of the ore soon pinching
out, Hayes and Monnette called at the offices of the Trust Company and
offered to sell their lease, which had six months to run, for $200,000
cash and $400,000 to be taken out of the net proceeds of the ore. My
gambling instinct was aroused.
"I will take it," I said.
I sent over to the State Bank & Trust Company, and had a check
certified for the $200,000. I was about to close the deal when Mr.
Sullivan and "Jack" Campbell protested.
"I ought to have fifteen days to examine the mine," urged Mr. Campbell.
"It is too big a chance to take," declared Mr. Sullivan.
When appealed to, Hayes and Monnette said that to allow a fifteen-day
examination would mean practically to shut down the property for that
period and would result in a positive loss to them because of the
limited period of their lease. The extent of the loss, if the deal fell
through, was too large to contemplate, and they refused.
Day by day, as Mr. Campbell and Mr. Sullivan dilly-dallied, the output
of the lease increased, and when, a fortnight later, all three of us
were unanimously in favor of the proposition, Hayes and Monnette flatly
refused to sell. Within half a year that lease on the Mohawk produced
in the neighborhood of $6,000,000 worth of ore gross, and netted the
leasers about $4,500,000. The Sullivan Trust Company certainly
"overlooked a bet" there.
During this period I spent an evening with Henry Peery and W. H.
("Daddy") Clark. Mr. Clark, like Mr. Peery, hailed from Salt Lake. Mr.
Clark had successfully promoted the Bullfrog Gibraltar. Seated around a
table in the Palm Restaurant, the conversation turned to new camps.
"Rice," said Mr. Clark, "I expect to be able to put you in on a
townsite deal in a couple of weeks that will make you some money if you
undertake to give the camp some publicity."
"Good," said I.
"I am having some assays run," he said, "of some samples which were
brought into camp last night by a couple of prospectors, and if they
turn out to be what the prospectors claim, or anything near it, we'll
need your services to put a new camp on the map."
That night Mr. Peery learned from the assayer that the lowest assay of
16 samples was $86, and the highest $475, per ton. Next morning Mr.
Peery informed me that he had remained all night with Mr. Clark to
learn where the ore came from. Mr. Peery said that Mr. Clark had told
him, in the wee sma' hours, that the place was Fairview Peak, fifty
miles east of Fallon.
"Rice," said Mr. Peery, "let's beat him to it. He's going to trek it
across the desert by mule team with a camp outfit to-morrow, and it
will take him a week to get there."
"Billy" Taylor, who was interested with Mr. Peery in a Bullfrog
enterprise, joined the party, and we each gave Mr. Peery a check for
$500, forming a pool of $1,500 to send a man to Fairview to buy
properties there. Mr. Peery wired the Bank of the Republic at Salt Lake
to pay Ben Luce $1,500, and instructed Mr. Luce by wire to take the
money, go to Fairview and do business.
It was nearly two weeks before we heard of either Mr. Clark or Mr.
Luce. Mr. Clark returned to camp and said he had purchased from a group
of itinerant prospectors the Nevada Hills property, scene of the big
find, for $5,000, and that it was a "world-beater."
"Did you meet any outsiders there?" queried Mr. Peery.
"Yes," said Mr. Clark, "I met a man named Luce who almost got ahead of
me. In fact, he did buy the property before I got there, but he had no
money, and they would not take his check for $500, which was the
deposit required. I had the gold with me, and that settled it."
A few days afterward, Mr. Luce came to Goldfield.
"I didn't get the big one," he said, "but I bought the Eagle's Nest,
near by, for $7,000, of which $500 was demanded to be paid down, and
there is ore in it and it looks good to me. I had no money with me when
I arrived in Fairview. They refused my check for the Nevada Hills, but
the Eagle's Nest boys took it for their first payment of $500."
Mr. Luce was not at home when Mr. Peery's despatch was delivered in
Salt Lake. When it reached him the bank was closed. In order to catch
the first train he was compelled to leave the money behind. He arrived
in Fairview minus the $1,500, and thereby lost the Nevada Hills for Mr.
Peery, Mr. Taylor and the Sullivan Trust Company.
Mr. Clark and his partners incorporated the Nevada Hills for 1,000,000
shares of the par value of $5 each and accepted subscriptions at $1 per
share.
Within a few months the Nevada Hills paid $375,000 in dividends out of
ore, and soon thereafter, at the height of the Goldfield boom, it was
reported that the owners of the control refused an offer of $6,000,000
for the property. The mine has turned out to be a bonanza. The stock of
the company sold recently on the New York Curb and San Francisco Stock
Exchange at a valuation for the mine of $3,000,000, and it is believed
by well-posted mining men to be worth that figure. George Wingfield,
president of the Goldfield Consolidated who followed the Sullivan Trust
Company into Fairview and bought the Fairview Eagle, which is
sandwiched in between the Nevada Hills and the Eagle's Nest, is now
president of the Nevada Hills. Treasury stock of the Fairview Eagle was
sold in Goldfield at 40 cents per share. Recently the Nevada Hills and
Fairview Eagle companies were merged.
"Jack" Campbell reported favorably on the Eagle's Nest, and we decided
to organize and promote a company to own and develop the property.
The Sullivan Trust Company bought Mr. Taylor's interest in the Eagle's
Nest for $8,000, Mr. Luce's for $8,000 (he had been awarded a quarter
interest for his work), and Mr. Peery's for $30,000. It made the
property the basis for the promotion of the Eagle's Nest Fairview
Mining Company, capitalized for 1,000,000 shares of the par value of $5
each. Governor John Sparks accepted our invitation to become president
of the company. The entire capitalization was sold to the public
through Eastern and Western stock brokers within thirty days at a
subscription price of 35 cents per share. After paying for the
property, our net profits were in the neighborhood of $150,000.
The Eagle's Nest deal enabled the trust company to repay most of the
money it had borrowed after the San Francisco earthquake and put the
company on Easy Street again.
THE TALE OF BULLFROG RUSH
Following the Eagle's Nest promotion, the Sullivan Trust Company became
sponsor for Bullfrog Rush. I had met Dr. J. Grant Lyman, owner of the
property, on the lawn of one of the cottages of the United States Hotel
in Saratoga a few years before, where he raced a string of horses and
mixed with good people, and I knew of nothing that was to his
discredit. Dr. Lyman bought the Bullfrog Rush property for $150,000. I
was present when he paid $100,000 of this money in cash at John S. Cook
& Company's bank in Goldfield. The Bullfrog Rush property was of large
acreage, enjoyed splendid surface showings, and was situated contiguous
to the Tramps Consolidated, which was then selling around $3 a share.
It looked like a fine prospect.
Dr. Lyman incorporated the company for 1,000,000 shares of the par
value of $1 each. The services of the Sullivan Trust Company were
employed to finance the enterprise for mine development. The Trust
company obtained an option on the treasury stock of the company at 35
cents per share, and proceeded to dispose of it through Eastern brokers
and direct to the public by advertising, at 45 cents per share to
brokers and 50 cents per share to investors. We sold 200,000 shares,
realizing $90,000 in less than thirty days, retained $20,000 for
commission and expenses, and turned into the treasury of the Bullfrog
Rush company $70,000, all of which was placed at the disposal of the
company for mine development.
Half a dozen tunnels were run and several shafts were sunk. Down to the
400-foot level the mine appeared to be of much promise. It was then
learned that the shaft at the 400-foot point had encountered a bed of
lime. It appeared that all the properties on Bonanza Mountain, where
the Bullfrog Rush was situated, including the Tramps Consolidated,
which was then selling in the market at a valuation of $3,000,000, were
bound to turn out to be rank mining failures. The entire hill,
according to our engineer, was a "slide," and below the 400-point ore
could not possibly exist.
We thereupon notified Dr. Lyman that we would discontinue the sale of
the stock until such time as the property gave better indications of
making a mine.
A few weeks later Dr. Lyman entered my private office unannounced. At
this period Jumping Jack, Stray Dog, Indian Camp, and Eagle's Nest were
all selling on the San Francisco Stock Exchange at an average of 35 per
cent. above promotion prices. The L. M. Sullivan Trust Company was
"making good" to investors. Bullfrog Rush had not yet been listed, and
we were afraid to give it a market quotation.
"I have formed here in Goldfield the Union Securities Company," Dr.
Lyman said, as he sat down close to my desk, "and I am going into the
promotion business myself. I don't believe a word of the reports you
have that the Bullfrog Rush is a failure. I am going on with the
promotion."
I protested. "We shall not permit it," I said. "Governor Sparks, who is
the best friend the Sullivan Trust Company has, accepted the presidency
of the Bullfrog Rush on our assurance that the property was a good one.
John S. Cook, the leading banker of this town, accepted the
treasurership on the same representations. Mr. Sullivan, president of
this trust company, is vice-president of the Rush. We are 'in bad'
enough as the matter already stands. Don't dare go on with the
promotion at this time."
Dr. Lyman left the office without uttering a word.
Two days later I received a dispatch from Governor Sparks saying that
a full-page advertisement of the Union Securities Company had appeared
in the _Nevada State Journal_ at Reno, offering Bullfrog Rush stock
for subscription. The Governor protested vigorously against the sale
of the stock. We had previously informed him as to the new conditions
which prevailed at the mine.
I sent Peter Grant, one of Mr. Sullivan's partners in the Palace, to
Dr. Lyman to protest. The answer came back that the _Nevada State
Journal_ advertisement was about to be reproduced in all the
newspapers of big circulation throughout the East, and that the orders
for the advertisements would not be canceled. Half an hour later Dr.
Lyman entered the office with Mr. Grant. Mr. Grant looked nettled. Dr.
Lyman glowered.
I bade Dr. Lyman take a chair.
"If you move a finger to stop me," he said, as he sat himself down
before me, "I'll expose every act of yours since you were born and show
up who the boss of this trust company is!"
Dr. Lyman was tall as a poplar and muscled like a Samson. He was fresh
from the East, red-cheeked and groomed like a Chesterfield. I was
cadaverous, desert-worn, office-fagged, and undersized by comparison.
In a glove fight, Dr. Lyman could probably have finished me in half a
round. But the disparity did not occur to me. The sense of injustice
made me forget everything except Dr. Lyman's blackmailing threat. I
jumped to my feet. Dr. Lyman backed up to the glass door. I aimed a
blow at him. He backed away to dodge it. In a second he had collided
with the big plate-glass pane, which fell with a crash. In another
instant he recovered his feet, turned on his heel and ran. His face was
covered with scratches, the result of his encounter with the broken
plate glass. Several clerks who followed him, thinking he had committed
some violent act, reported that he didn't stop running until he reached
the end of a street 600 feet away.
"Oh," he gasped, "I never want to see such a look in a man's eyes
again. I thought I saw him reach for a gun."
Such an idea was farthest from my mind, although I was very angry.
Conscience had made a coward of the doctor.
I was quick to decide upon a course of action.
The position of the trust company was this: With the exception of
Bullfrog Rush, we had a string of stock-market winners to our credit
with the public. If we allowed Dr. Lyman to go ahead with his promotion
of Bullfrog Rush, we should, unless we abandoned our rule to protect
our stocks in the market, be compelled some day to buy back all of the
stock he sold. The truth about the mine was bound to come out, and we
stood before the public as its sponsors.
I decided that the trust company should refund the money paid in by
stockholders of Bullfrog Rush and prevent Dr. Lyman from selling more
stock.
To the brokers, through whom we had sold much of the stock to the
public, we telegraphed that we would refund the exact amount paid us by
the brokers on delivery back to us of the certificates. We also wired
to Governor Sparks and asked his permission to insert an advertisement
in the newspapers over his signature, announcing that the property had
proved to be a mining failure and advising the public not to buy any
more shares. This pleased the Governor immensely, for he promptly wired
back his O.K. with congratulations over the stand we took.
That night a broadside warning to the public, bearing the signature of
Governor John Sparks, and a separate advertisement of the Sullivan
Trust Company, offering to refund the money paid for Bullfrog Rush
shares, were telegraphed to all the leading newspapers of the East.
Next day both of these announcements appeared side by side with the
half-page and full-page advertisements of Dr. Lyman's Union Securities
Company of Goldfield offering Bullfrog Rush for public subscription.
The newspapers, peculiarly enough, performed this stunt without a
quiver.
The public didn't buy any more Bullfrog shares.
The Bullfrog Rush incident cost the Sullivan Trust Company a little
less than $90,000, which was refunded to stockholders, and the
additional sum that was expended for advertising our denouncement of
the enterprise. Dr. Lyman was stripped of his entire investment in the
property. The newspapers lost many thousands of dollars, representing
Dr. Lyman's unpaid advertising bills. A number of mining-stock brokers
also forfeited some money; they were compelled to refund their
commissions.
J. C. Weir, the New York mining-stock broker, who does business under
the firm name of Weir Brothers & Company, had sold in the neighborhood
of 100,000 shares of Bullfrog Rush to his clients, and he took violent
exception to our decision not to refund an amount in excess of the net
price paid to us. He held that his firm ought not to be compelled to
disgorge its profits. We stood pat and argued that he ought to be proud
to share with us the glory of "making good" in such an unusual way to
stockholders. It was the first time in the history of Western mining
promotions that a thing like this had ever been done, and we pointed
out to Mr. Weir that it would gain reputation both for himself and the
trust company. For a period Mr. Weir carried on an epistolary warfare
with the trust company. For nearly two months he refused to yield.
Finally, we received a letter from Mr. Weir saying that since we
refused to come to his terms he would accept ours, and that he had
drawn on us for $4,500, with one lot of 10,000 shares of Bullfrog Rush
stock attached. On receipt of the letter I gave instructions to the
cashier promptly to honor the draft.
An hour later the cashier reported that the draft had been presented
and that an examination of the stock certificates showed that not a
single one of them had been sold by the trust company through Mr.
Weir's firm, and, in fact, had never been disposed of by the trust
company to anybody. A hurried examination of the stock-certificate
books of the Bullfrog Rush Company, which were in the hands of the
company's secretary in Goldfield, a clerk of Dr. Lyman, revealed the
fact that a large number of blank certificates had been torn out of the
certificate books without any entry appearing on the stubs.
The certificates returned to us by Mr. Weir bore dates of several
months prior, and our immediate assumption was that Dr. Lyman, at the
very moment when we were marketing the treasury stock under a binding
contract which forbade him or any one else to dispose of any Bullfrog
Rush stock under any circumstances, was clandestinely getting rid of
these shares. Mr. Weir, it appeared, had neglected to segregate Dr.
Lyman's certificates from those shipped him by the trust company.
Another hypothesis was that those certificates had never been sold at
all, but had merely been received from Dr. Lyman to be reforwarded to
us in order to claim a refund for what we had never been paid for.
Of course, we returned the draft unpaid. But that didn't end the
incident. My partner, Mr. Sullivan, took it upon himself to wire his
sentiments to Weir Brothers & Company, as follows: "You are so crooked
that if you swallowed a ten-penny nail and vomited, it would come out a
corkscrew." That was "Larry's" homely way of expressing his opinion.
Goldfield's year of wind and dust had brightened into the glow of
Summer. The still breath of August was diffused through the thin mild
air of the high altitude. This thin air, which nearly two years before
had prompted a camp wit to comment on the birth of my news bureau to
the effect that "the high elevation was ideal for the concoction of the
visionary stuff that dreams are made of," appeared unprophetic. There
was plenty of concrete evidence of the yellow metal to be seen.
Production from the mines was increasing daily and money from
speculators was pouring into the camp from every direction.
A mining-stock boom of gigantic proportions was brewing. Mohawk of
Goldfield, which was incorporated for 1,000,000 shares of the par value
of $1 each, and which in the early days went begging at 10 cents a
share, was now selling around $2 a share on the San Francisco Stock
Exchange, the Goldfield Stock Exchange and the New York Curb. Other
Goldfields had advanced in proportion. Combination Fraction was up from
25 cents to $1.15. Silver Pick, which was promoted at 15 cents a share,
was selling at 50 cents. Jumbo Extension advanced from 15 to 60. Red
Top, which was offered in large blocks at 8 cents per share two years
before, was selling at $1. Jumbo advanced from 25 cents to $1.25.
Atlanta moved up from 12 to 40. Fifty others, representing prospects,
enjoyed proportionate advances.
The Sullivan stocks were right in the swim. Jumping Jack was in hot
demand on the San Francisco Stock Exchange and New York Curb at 45
cents, Stray Dog at 70 cents, Indian Camp at 80 cents, and Eagle's Nest
at 50 cents. Subscribers to Indian Camp could cash in at a profit of
more than 200 per cent.
The country gave indications of going "Goldfield crazy." My Goldfield
publicity bureau was working overtime. James Hopper, the noted fiction
writer and magazinist, ably assisted by Harry Hedrick and other
competent mining reporters, was "on the job" and doing yeoman service.
The news-columns of the daily papers of the country teemed with stories
of the Goldfield excitement.
People began to flock into the camp in droves. The town was a scene of
bustle and life. Motley groups assembled at every corner and discussed
the great production being made from the Mohawk and the terrific market
advances being chronicled by mining stocks representing all sorts and
descriptions of Goldfield properties. Whenever Hayes and Monnette,
owners of the Mohawk lease, appeared on the streets, they were followed
by a mixed throng of the riffraff of the camp, who hailed them,
open-mouthed, as wonders.
The madness of speculation in mining shares in the camp itself was
beginning to exceed in its intensity the exciting play at the gaming
tables. There was a contagion of excitement even in the open spaces of
the street.
At each meeting of the Goldfield Stock Exchange the boardroom was
crowded. The sessions were tempestuous. Every step and every hallway
leading to the room was jammed with men and women over whose faces all
lights and shades of expression flitted. The bidding for mining issues
was frantic. Profits mounted high. Everybody seemed to be buying and no
one appeared to be willing to sell except at a substantial rise over
the last quotations. Castle-building and fumes of fancy usurped reason.
Bank deposits were increasing by leaps and bounds. The camp was rapidly
becoming drunk with the joy of fortune-making.
Manhattan now shone mostly in the reflected glory of Goldfield, but
Manhattan stocks were booming. This enabled the Sullivan Trust Company
to dispose of nearly all of its Manhattan securities which had been
carried over after the San Francisco catastrophe and to pile up a great
reserve of cash.
A big demand was developing for shares in Fairview companies. Nevada
Hills of Fairview was selling on the stock exchanges and curbs at $3
per share, or a valuation of $3,000,000 for the mine. Only a few months
before it had fallen into Goldfield and Salt Lake hands for $5,000.
Fairview Eagle's Nest, for which subscriptions had been accepted at 35
cents per share by the Sullivan Trust Company, was selling at 70 cents
on the San Francisco Stock Exchange.
The Sullivan Trust Company announced the offering of 1,000,000 shares,
embracing the entire capitalization of the Fairview Hailstone Mining
Company, at 25 cents. The stock was purchased by us at 8 cents. We sold
out in a week. San Francisco and Salt Lake were the principal buyers,
and it was unnecessary even to insert an advertisement offering the
stock. The brokers fell over one another to underwrite the offering by
telegraph.
PRIZE FIGHTS AND MINING PROMOTION
For a fortnight there was a lull in news of sensatorial gold
discoveries, but the approaching Gans-Nelson fight, which was arranged
to be held in Goldfield on Labor Day, September 3, furnished sufficient
exciting reading matter for the newspapers throughout the land to keep
the Goldfield news pot boiling. The Sullivan Trust Company had
guaranteed the promoters of the fight against loss to the extent of
$10,000, and other camp interests put up $50,000 more. Gans, the
fighter, was without funds to put up his forfeit and make the match,
and the Sullivan Trust Company had also advanced the money for that
purpose. Mr. Sullivan became Gans' manager. When Gans arrived in town
Mr. Sullivan interviewed him to this effect:
"Gans, if you lose this fight they'll kill you here in Goldfield;
they'll think you laid down. I and my friends are going to bet a ton of
money on you, and you must win."
Gans promised he would do his best.
"Tex" Rickard and his friends wagered on Nelson. The cashier of the
Sullivan Trust Company was instructed to cover all the money that any
one wanted to bet at odds of 10 to 8 and 10 to 7 on Gans, we taking the
long end. A sign was hung in the window reading: "A large sum of money
has been placed with us to wager on Gans. Nelson money promptly covered
inside." Mr. Sullivan was in his glory. Prize-fighting suited his
tastes better than high finance, and he was as busy as a one-armed
paper-hanger with the itch.
An argument arose about who should referee the fight. "Tex" Rickard
nominated George Siler, of Chicago, and Battling Nelson promptly
O.K.'d the selection. Mr. Sullivan openly objected. He thought it good
strategy. He sent for the newspaper men and gave out an interview in
which he declared that Mr. Siler was prejudiced against Gans because he
was a negro, and he did not believe Mr. Siler would give Gans a square
deal.
"Rice," whispered Sullivan after the newspaper men left the office, "I
am four-flushing about that race-prejudice yarn, but it won't do any
harm. Siler needs the job. He's broke and I'll make him eat out of my
hand before I'll agree to let him referee the fight. They've already
invited Siler to come here, and I won't be able to get another referee,
but I'll beat them at their own game. When Siler gets here I'll thrash
matters out with him and agree to his selection, but first I want him
to know who's boss."
Mr. Siler arrived. An hour later he was closeted with Mr. Sullivan in
one of the back rooms of the trust company offices. The dialogue which
ensued was substantially as follows:
_Mr. Siler._ You've got me dead wrong, Sullivan. I want to referee
this fight, and I want you to withdraw your objections.
_Mr. Sullivan._ Well, I've heard from sources which I can't tell you
anything about that you don't like Gans, and I can't stand for you.
_Mr. Siler._ I need this fight, and I've come all the way from
Chicago in the expectation of refereeing it. I couldn't give Gans the
worst of it if I wanted to. He is a clean fighter and I would not have
an excuse.
_Mr. Sullivan._ Gans is a clean fighter, but Nelson isn't; he uses
dirty tactics and he is a fouler for fair.
_Mr. Siler._ If he does any fouling in this fight I'll make him quit or
declare him out.
_Mr. Sullivan._ What guarantee have I got that you won't give Gans
the worst of it?
_Mr. Siler._ Well, I'll tell you, Sullivan, if you withdraw your
objections I'll guarantee you that I'll be this fair. If Nelson uses
foul tactics, or if he don't, I'll show my fairness to Gans by giving
him the benefit of every doubt. Now, will that satisfy you?
_Mr. Sullivan._ Yes, it'll satisfy me, but, remember, if you don't
keep your word you'll have just as much chance of getting out of this
town alive as Gans will have if he lays down! You understand?
_Mr. Siler._ Yes.
On the afternoon of the fight the Sullivan Trust Company cast accounts
and found that it had wagered $45,000 on Gans against a total of
$32,500 put up by the followers of Nelson.
Mr. Sullivan, after talking it over with me, had accepted the honorary
position of announcer at the ringside. Though not of aristocratic mien,
"Larry" was of fine physique, with a bold, bluff countenance, and I
felt confident that his cordial manner would appeal to that Far Western
assemblage.
Just before the prize-fighters entered the ring, "Larry" jumped into
the arena. Standing above the mass of moving heads and holding up both
hands, he hailed the great crowd thus:
"Gentlemen, we are assembled in this grand _areno_ to witness a square
fight. This fight is held under the auspices of 'Tex' Rickard, a man of
great _accumulations_----"
"Larry" did not get much farther. The audience laughed, and then jeered
and hooted until it became hoarse. His words were drowned in the
tempest of derision. I was informed by friends who were close to the
ringside that he went on in the same rambling way for a few minutes
more, but I can't testify to that fact from my own knowledge because
"acclumuations" and "areno" overcame me and I stopped up my ears.
The fight progressed for twenty rounds or more, when I began to doubt
the ability of Gans to win. Mr. Sullivan had a commissioner at the
ringside, who, up to this time, had been betting anybody and everybody
all the 10 to 6 that was wanted against Nelson. I hailed Mr. Sullivan
at the ringside.
"This doesn't look like the cinch for Gans you said it would be," I
whispered.
"Wait a minute," Mr. Sullivan replied, "I'll go to Gans' corner as soon
as this round is over and find out what's doing with him."
Mr. Sullivan went over to Gans' corner and came back.
"Gans says he can't win this fight, but he won't lose. He's a good
ring-general and he'll pull us out. Don't bet any more money. I'm going
to stay close to the ringside. Watch close."
It was apparent during the next ten rounds that Gans was availing
himself of every opportunity to impress upon the audience that Nelson
was inclined to use dirty fighting tactics, and soon Nelson was being
hooted for foul fighting. Gans, on the other hand, appeared to be
fighting fair and like a gentleman. Soon it was evident that Gans had
won the sympathy and favor of the audience.
The fight had continued through the fortieth round, when Mr. Sullivan
again repaired to Gans' corner and held another animated whispered
conversation with him.
In the forty-second round Gans of a sudden went down, rolled over and,
holding his hand under his belt, let out a yell of anguish that
indicated to the excited multitude that Nelson had fouled him
frightfully.
In another instant Mr. Sullivan had clambered into the ring. Confusion
reigned. The audience was on its feet. Pushing his fist into the
referee's face, Mr. Sullivan cried: "Now, Siler, you saw that foul,
didn't you? It's a foul, isn't it? Gans wins, doesn't he?"
All of this happened quick as a flash. Mr. Siler, pale as a ghost,
whispered something inaudibly.
Mr. Sullivan, turning to the assemblage and raising both arms to the
skies, yelled:
"Gentlemen, the referee declares Gans the winner on a foul!"
The audience acclaimed his decision with salvos of applause. There did
not appear to be a man in the crowd who doubted a foul had been
committed, although Nelson at once protested his innocence.
Next day Mr. Sullivan told me that in or near the twenty-fourth round
Gans had broken his wrist and knew he could not win the fight by a
knockout. He also said that Gans went down in the forty-second round in
order to save the day.
"_I_ won that fight," said Mr. Sullivan. "I told Gans while he was
in his corner after the fortieth round that if he lost he would be
laying down on his friends, that he had the audience with him, and that
it was time to take advantage of Nelson's foul tactics."
This was my first experience in prize-fighting, and my last. My
sympathies were, however, with the winner. Gans' tactics throughout up
to the last round were gentlemanly and those of Nelson unfair. Even the
partisans of Nelson who had wagered on him agreed after the fight that
the battle put up by the negro up to the forty-second round was a white
man's fight and he was entitled to win.
Nelson had been guilty of foul tactics in almost every round, but the
probabilities are that Gans was not disabled by a foul blow in the
forty-second round and that he took advantage of the sentiment in his
favor, which had been created by his manly battle up to that time, to
go down at a psychological moment.
I saw Mr. Siler after the contest, and he appeared pleased that his
decision was so well received, but he assured me that if he was invited
to referee another bout in any mining camp he would decline the job.
The Sullivan Trust Company, of course, won a big bet on the result, but
it lost a bigger one as an outcome of the battle on the very next day.
The impression created by Announcer Sullivan's attempt to reach lofty
flights of eloquence in his speech to the fight-audience was bad for
the trust company, and it required the use of over $100,000 on the day
following to meet the flood of selling orders in Sullivan stocks which
poured into the San Francisco Stock Exchange.
THE YEAR OF BIG FIGURES
I soon recouped these stock-market losses. At about four o'clock one
afternoon, a few days afterward, a miner who had been at work during
the day on the Loftus-Sweeney lease of the Combination Fraction, called
at the office of the trust company and asked me to buy 1,000 shares of
Combination Fraction stock for him. He divulged to me that just as he
was coming off shift he had learned that a prodigious strike of
high-grade ore had been made at depth. Combination Fraction had closed
that afternoon on the San Francisco Stock Exchange with sales at $1.15.
I went out on the street and proceeded to buy all the Combination
Fraction in sight. In half an hour I had corralled about 60,000 shares
at an average of $1.30. An hour later the owners of the lease obtained
the information on which I was working, and by eight o'clock that
night, when the Goldfield Stock Exchange began its evening session, the
price had jumped to $1.85. Within a week thereafter the price
sky-rocketed to $3.75, and at this figure I took profits of nearly
$150,000. Had I held on a little longer I could have doubled that
profit, for Combination Fraction a few weeks later sold at higher than
$6.
The Combination Fraction strike was followed by a number of others, and
the boom gathered force. By October, Goldfield Silver Pick had advanced
to $1 per share, up 600 per cent. Goldfield Red Top was selling at $2,
Jumbo at $2, and Mohawk at $5, showing profits of from 2,000 to 5,000
per cent. Others had gained proportionately. In fact, there were over
twenty Goldfield securities listed on the exchange that showed the
public a stock-market profit of anywhere from 100 per cent. to 5,000
per cent.
Mining machinery of every description was being shipped into camp, and
for half a mile around the Combination mine the landscape of assembled
gallows-frames resembled a great producing oil field. There were signs
of mining activity everywhere. For four miles east of the Combination
mine and six miles south every inch of ground had been located. Claims
situated miles away from the productive area were changing hands hourly
at high figures.
The Sullivan stocks kept pace in the markets with the other booming
securities, and it was plain that the trust company was riding on a
tidal wave of success. Our profits exceeded $1,500,000 at this period,
and we were just eight months old.
In a single fortnight the Sullivan Trust Company promoted the Lou
Dillon Goldfield Mining Company at 25 cents per share, a valuation of
$250,000 for the property, which cost $50,000; and the Silver Pick
Extension, which cost $25,000, at the same figure, netting several
hundred thousand dollars' profit on these two transactions. Options to
purchase the Lou Dillon and Silver Pick Extension, which were situated
within 500 feet of the Combination mine, had been in possession of the
Sullivan Trust Company for months, and had increased in value to such
an extent that on the day the subscriptions were opened in Goldfield
for Lou Dillon at 25 cents per share, a prospector named Phoenix, who
had received $50,000 from the Sullivan Trust Company for the entire
property, subscribed for 100,000 shares, or a tenth interest in the
enterprise, paying $25,000 therefor.
It was the rule of the Sullivan Trust Company to open subscriptions in
Goldfield on the day its advertising copy left the camp by mail for the
East. Newspaper publishers were always instructed to publish the
advertisements, which were generally of the full-page variety, on the
day following receipt. In the case of Lou Dillon it became necessary to
telegraph all newspapers east of Chicago not to publish the
advertisement because of oversubscription before the copy reached them,
and in the case of Silver Pick Extension the orders to publish the
advertisements were canceled by telegraph before the mail carrying the
copy reached Kansas City. San Francisco, Los Angeles and Salt Lake
subscribed for 50 per cent. of the entire offering of Lou Dillon and
Silver Pick Extension, and Goldfield for 25 per cent. As a matter of
fact, had we desired, we could have sold the entire offerings in
Goldfield, Tonopah and Reno without inserting any advertisements, so
great was the excitement in the State itself.
At this period the combined monthly payrolls of the mining companies
promoted by the Sullivan Trust Company totaled in excess of $50,000,
and excellent progress was being made in opening up the properties.
It was early Autumn in Goldfield, warm, dry and dusty, and never a
cloud in the sky. I was at my desk eighteen hours a day, and liked my
job. Things were coming our way.
The Sullivan Trust Company was in politics. Mr. Sullivan was popular
with the miners, and Governor Sparks was a large asset of the trust
company because he had been allowing the use of his name as president
of all the mining companies promoted by it. Nevertheless, when the
State election approached, the Governor had no money for campaign
expenses. He telegraphed the trust company from Carson:
"I will not stand for renomination."
We replied: "You are certain to be elected, and you will be renominated
by acclamation if you accept."
"I won't run unless you guarantee my election," he telegraphed.
We answered: "We guarantee."
The Governor was renominated by the Democrats. The Republicans placed
in nomination J. F. Mitchell, a mining engineer and mine owner, who was
very popular among mine operators.
There were thousands of miners domiciled in Goldfield. The Western
Federation of Miners dominated.
"Sullivan," I said, "isn't it a certainty that the miners will vote the
Democratic ticket because Mitchell has been put forward by the mine
owners? Is it necessary to spend any money with the Western
Federation?"
"Not a dollar!" replied Mr. Sullivan. "There's a meeting of the
executive committee to-morrow. I'm going to be around when they meet.
Without spending a cent I'll bring home the bacon. Watch me!"
Sullivan reported to me the next day that he had succeeded in his
mission.
"I didn't attend the meeting," he said, "but I did see the main
'squeeze.' He told me that a contribution to the Miner's Hospital would
be gratefully accepted, but that even that was not necessary, and that
Sparks would win in a walk."
The only campaign money advanced by the Sullivan Trust Company was
given to Mr. Sullivan to go to Reno. He asked for $1,000, and he used
it in conducting open house on the first floor of the Golden Hotel,
meeting people and greeting them. Reno appeared to be a Republican
stronghold, and Mr. Sullivan, by baiting the Catholics against the
Protestants, succeeded in holding down the Republican majority to an
extent that was wofully insufficient to overcome the Democratic
majority rolled up in Goldfield with the aid of the miners. Governor
Sparks was reëlected by a handsome majority. Had the occasion demanded
it, we would have "tapped a barrel." But it was not necessary.
THE STORY OF GOLDFIELD CONSOLIDATED
Rumors were rife in Goldfield of a merger of mammoth proportions which
was said to be on the tapis. Great as were the gold discoveries in
camp, they did not justify the terrific advances being chronicled in
the stock-market, and it was apparent that something extraordinary must
be hatching to justify the market's action.
George Wingfield, who had enjoyed a meteoric career, rising within five
years from a faro dealer in Tonopah to the ownership of control in the
Mohawk and many other mining companies and to part ownership of the
leading Goldfield bank, John S. Cook & Company, which was then credited
with having $7,000,000 on deposit, was said to be engineering the deal.
The names of the properties were not given, nor the figures. It
occurred to me that in any merger that was made the Jumbo and Red Top,
because of their central location, must be included. I sought out
Charles D. Taylor, who with his
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