A LITTLE HELP THe Original Bear of Wall Street

I apologize, but the closest I can come to describing the drama in the board room of the New York and Erie Railroad on that crisp November afternoon is to recall riding on the scariest roller coaster you've ever ridden upon. Without safety inspections. And that is the common element between a modern day coaster rider  and Mr. Jacob Little, the Antebellum Napoleon of the Board Room. When he was riding the Wall Street roller coaster, every once in awhile the cars jumped the rails and the riders got killed.  That has not been a reality for corporate managers in America for so long as to make it hard for modern readers to imagine it was ever true.  It ain’t a real game if you are “too big to fail” because then, you can’t lose. And Jacob could. And did.

Jacob Little (above) -  tall and slim and “careless in his attire, wearing a hat like that of a farmer, and not a very prosperous one” - was called “The Great Bull of Wall Street”.  The original traders, who bought hides from butchers, had invented the ‘futures market’, by buying and selling the hides of cattle that had not yet been slaughtered, and then later, those not yet born.  And if farmers thought the prices for hides were about to fall, they would hold onto more of their bulls, thus ensuring more calf's for next season, when the prices might be better. So, those who expected prices were going up, were expecting a “bull market”.  And a Bull Trader in the stock market is an aggressive  gambler, willing to use his horns to get to the food trough.  And that is an apt description of Jacob Little.

Jacob’s contemporary, Henry Clews, claimed that Jacob “…made and lost” nine fortunes on the Wall Street merry-go-round. And Matthew Smith, in his book “Sunshine and Shadow in New York” recorded a moment of introspection which Jacob experienced while walking past the mansions surrounding Union Square. “I have lost money enough today to buy this whole square. Yes, and half the people in it,” he said. And that was probably not an exaggeration.

At a time when railroads were the high tech, Jacob Little was known as the ‘Railway King’, and not because he knew anything about how to run a railroad.  Jacob was one of the first to realize there was far more money to be made in buying and selling railroad stock than in actually running a railroad. 

Between 1830 and 1855 the nation quadrupled its miles of railroad track, During that same time at least 125 railroad companies issued stock but never laid a single mile of track. They sold preferred stock and common stock, and bonds that had to be held for years, and bonds which could be converted into either preferred or common stock the same day you bought them. But they never bought an engine or a freight car.

And then there was the "futures’ market" in railroad stocks and bonds. There was even an ‘options’ market, which was the buying and selling of promises to buy or sell stock in railroads which might never exist. This was the Wall Street version of the Wild West; have printing press, will fleece all suckers. And even those railroads that were real, suffered from endless stock manipulation.

Consider the profitable Norwich and Worchester Railroad in Massachusetts, whose largest stockholders signed a secret agreement to stop investing in the new track or engines, and sell their Norwich stock only to each other. This created an artificial shortage of the stock, which drove up the price...for the time being  

The partners agreed to hold their shares until Norwich topped $90 a share. They would then dump the stock and leave the suckers owning a hollowed out and nearly worthless railroad;  And just to keep all the crooks honest, any member of the “cartel” who sold below $90 a share contracted to pay a $25,000 fine to their fellow conspirators.

Jacob Little was one of the largest conspirators in the Norwich stock scam, but he was the smart one. As the stock began to rise, Jacob quietly offered to sell his fellows a portion of his stock at $89 a share. Well, perhaps offer is the wrong word. Because after Jacob had done this several times it dawned on his New England  "partners" that they had to buy his stock in order to avoid a price collapse of their own inflated stock. 

And once Jacob had unloaded all his Norwich stock at $89 a share, he dutifully mailed a $25,000 check to his “partners”. By then he had profited several times that amount by shafting his partners exactly as they had planned on shafting the suckers. The partners let it be known that if the Bull of Wall Street showed his face in Boston again, they intended on claiming his ears.

It was maneuvers such as that which inspired a handful of the lesser wizards of Wall Street to plot Jacob’s demise. They called themselves "The Happy Family" but in reality were his fellow board members on the New York and Erie Railroad. And it seemed to them that Jacob was overextended.  Besides owning a large chunk of Erie stock, Jacob had recently bought several thousand ‘options’ pledging to buy even more. When those options matured in six months, if the option holders demanded it, Jacob would have to deliver the stock at whatever current market price.

Jacob was betting, of course, that the price would go down, and as a board member he had the power to help that happen.  But the Happy Family decided to use Jacob’s genius against him. First, they quietly bought up all of Jacob’s 6 month options. And then, as the six months ran out, they began to buy every share of Erie stock they could find, bidding the price up 15 points above the price of Jacob’s options. And Jacob seemed to remain so blissfully unaware of this impending doom that he actually bought even more options.

The ultimate thrill on this ride arrived at the annual stock holders meeting, 2:00 p.m. Friday, 16 November, 1855.  It was the maturity date for Jacob’s options. The meeting had droned on for an hour until the clock struck 3:00 pm. The market was closed for the day. It was not until it was no longer possible for Jacob to buy stock to meet his options, that he made his appearance.  Now they would bankrupt him. 

At Jacob's late appearance, one of the Happy Family, Nelson Robinson, could not help gloating. He greeted Jacob by saying, "Well, we've got the Erie locked up tight enough, every share of it. Now, stand to the rack like a man and acknowledge that the jig is up".

And then, one by one,  the wizards presented their options to their cornered prey. The stack was very impressive. The Napoleon of the Board Room had been broken and broke right before their eyes. But just as the operator was about say, "Exit the car to your right", Jacob Little pulled another ticket for the ride, right out of his derriere.

Actually he pulled it out of London. Jacob was late to the board meeting because he had stopped in the Erie’s stock transfer room to complete a transaction he had conducted out of sight of the Happy Family, on the London Stock Exchange.  There Jacob had bought Erie Railroad “convertible bonds”, 

Normally convertible bonds are  not worth the premium they sell for. If you are going to pay that much, you might as well buy the stock. But in this case the Happy Family had helpfully bid the price of Erie stock so high, they made the premium more than worth the price. 

And as Jacob fastidiously converted his convertible Erie railroad bonds into to enough shares of common Erie Stock required to fill the options, he was also diluting Erie Stock so that, when the market opened Saturday morning (they traded a half day Saturday in those days) the price of Erie stock took a nose dive. The wizards had been so intent on cutting off the limb that Jacob had climbed out on, that they failed to notice they were on the same limb. And Jacob just climbed down first.

Clearly somebody had leaked the plot, and, in retrospect that was inevitable. With Jacob always willing to bribe any trader or broker for an advantage,  somebody was bound to warn Jacob about the brewing coup d’etat.  But so brilliantly had Jacob gamed the system that future generations of Wall Street bulls used this same trick to transfer future fortunes into their bank accounts at the expense of future generations of suckers, until investors insisted the rules be changed - in this case a new law requiring a convertible bond be held for at least sixty days before it could be transferred into common or preferred stock.

None of this had anything to do with running a railroad. Except it siphoned profits out of providing better and safer service at a lower price - the supposed advantage of capitalism. 

Most Wall Street fairy tails end the story here, with The Napoleon of the Board Room winning until he faded into history. But inevitably Jacob lost one more fortune than he made. Less than a year later a Wall Street Panic left him (above center right) stunned and wandering Wall Street. 

Jacob Little, "The Great Bear of Wall Street” and "The Napoleon of the Board Room". died broke on Sunday, 28 March, 1865.  The Board of the New York Stock Exchange adjourned for the day to attend his funeral, but I can not say for certain whether they did this out of respect, or to confirm that Jacob was really dead.  But I can say that it has been the goal of Wall Street brokers ever since to rig the game so that they never run the risk of dying broke, ever again. And that makes it a very different game than the one that Jacob played.

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SELLING THE TOWER Victor Lustig, Confidence Man

I wish I had received one of the invitations. The 5 letters arrived in the late spring of 1925, via special delivery, and were written on stationary of the Ministère de Postes et Télégraphes.  Each letter invited the addressee to a confidential meeting with the Deputy Director General to be held after hours in a suite at the Hotel de Crillon (above), at number ten Champs-Elysees.  Each recipient was warned to discuss the invitation with no one.  They were surely intrigued. It was not often that scrap metal dealers are  treated to meetings in such an exclusive places.

The Hotel had been constructed by Louis XV as government offices, before being bought by the Crillon family and converted into a five star hotel. Its interior was adorned throughout with 17th Century tapestries, Louis XVI gilt and brocade furniture, sculptures, paintings and other valuable art works. Government ministries held public and closed door meetings in the hotel every day. Besides, who would reject the opportunity of seeing the room where Marie Antoinette took piano lessons, or where Charlie Chaplin slept? The five 'petit bourgeois' businessmen were suitably impressed.

The guests were greeted by an officious bureaucrat who identified himself as Msr. Robert Tourbillon, personal secretary to the Deputy Director, Msr Victor Lustig. The ministry, explained Msr Tourbilliuon, was about to offer a valuable business opportunity to these five men. However, he insisted, everything said in this room must remain confidential. If the guests did not agree with this stipulation they should leave at once. None of the businessmen budged from their seats.

A few minutes later Deputy Lustig (above)  bustled into the room, pompous and brusque, as you would expect any good French bureaucrat to be. After reminding his guests of the absolute need for secrecy, he quickly got down to the subject at hand. The men in the room may have read recently, explained Msr. Lustig, that the government was facing a major and expensive renovation of Msr. Eiffle’s Tower.

The tower had been controversial even before it opened on 31 March, 1888. 

Three hundred workers had spent 3 years welding 7,000 tons of iron, fashioned into 18,000 pieces connected by 2,500,000 rivets into the open framework tower.

It was half a proof of concept construction and half a work of art.  Completed, it stood 1,000 feet high, making it the tallest structure in the world; and one of the most despised.

The Paris press referred to it as “…a truly tragic street lamp.”  Three hundred influential artists and politicians publicly protested the “…useless and monstrous Eiffel Tower”.  Alexander Dumas called it a "loathsome construction".  Is Paris going to be associated with the grotesque, mercantile imaginings of a constructor of machines?” 

The inventor of the short story, Guy de Maupassant, asked, "What will be thought of our generation if we do not smash this lanky pyramid".  When asked why, despite his hatred, he ate lunch every day in the cafe (above), located on the second level of the tower... 

...de Maupassant explained he ate there because it was the only place in Paris where he did not have digest while looking at the damn thing.

Msr. Eiffel had retained ownership of the “"odious column of bolted metal” for twenty years. In 1909 possession finally passed to city of Paris.  By then the tower was making a profit, as de Maupassant’s angry patronage of the restaurant proved. And to a younger generation which had never known Paris without Msr. Eiffel’s tower, it had become a symbol of France, and a  massive radio broadcast tower.  So the tower stayed put.  But by 1925, years of defrayed maintenance were catching up with the structure.

Every seven years the tower required a year and a half of attention from dozens of workers, applying fifty tons of paint, using 15,000 brushes. That was expensive. 

Worse, rust and decay required replacement of many structural supports. To pay for all of that, the city government was in need of a loan from the national government. Beginning in 1925, the politicians began to prepare the public for a monumental refurbishing bill of the monument. 

Newspapers and magazines were filled with articles detailing the expense and difficulties involved. As expected, resistance surged.  And now, Msr. Lustig explained to the five businessmen , the government had come to the conclusion that the tower was no longer worth the expense. The decision had been secretly made to sell it all for scrap.

The five dealers had been chosen, they were told, because of their professional discretion. And, they were warned, if  word of the tower’s imminent demise were to become public ahead of time,  sentimentality might prevent the sale of seven tons of scrap iron. 

So, Msr. Lustig told the five men in the room, they had four days to present their sealed bids to Msr Tourbillon. The highest bidder would have the privilege of dismantling the Eiffel Tower and selling  the high grade iron in the Tower, which was worth the modern equivalent of $2.8 million. Lustig said the the bids would be expected to be in the half million dollar range.

Each of the dealers left the room with their minds buzzing. There was not much time to budget the project, to figure labor, equipment and insurance costs.  But only one,  that we know of, was desperate enough to ask for a second, private meeting with Msr. Lustig. 

An embarrassed Msr. Andre Poisson sheepishly explained that his wife had expressed concerns about the secrecy and haste.  Msr Lustig smiled and said he understood completely. It was shame money concerns were always complicating the lives of decent, honorable people. Why even he, a minor government official often struggled to make ends meet. 

Msr. Poisson understood immediately. In the language of bureaucrats everywhere, Msr. Lustig had just asked for a bribe. Msr. Poisson breathed a sigh of relief. He had no doubt now that the Eiffel Tower job was perfectly legitimate and that he now had the inside track. Twenty-four hours later Poisson handed over to Msr. Lustig a cashier’s check for $500,000 as his bid, and a suitcase filled with cash - the bribe. And then he returned to his office to await the public announcement of his contract to dismantle the Tower.

The announcement never came. However Msr Poisson's check was cashed. When Msr. Poisson called the Ministry of Post Office and Telegraphs and asked when the winning bid on the Eiffle Tower deconstruction was going to be announced,  he was told no such contract was being considered. In fact, the government was about to announce the refurbishing of the tower,. Worse, there was no Deputy Director General named Lustig. 

Slowly, Msr. Poisson came to the sickening realization that he was going to have explain to his wife that he had handed over a suit case filled with cash to buy the Brooklyn Bridge.....er, the Eiffel Tower. It seems he was so ashamed he told no one. In fact his name is a nom-de-fraud, since in French "Poisson" means "Fish", as one who is hooked - and every April Fools Day it is a French tradition to slap a paper fish on a subject's back and shout "April Poisson"  So quiet was the mark that six months later Msr Lustig returned to Paris, to run the scam again.

 

By then rumors of the scam had bubbled up to the ears of the Paris police, and they quickly identified the con men running the game. Msr. Torbilion was actually an American con man named “Dapper” Dan Collins. But the brains behind the game was none other than the prince of con men, Victor "The Count" Lustig.

Victor was originally a Czech, but and he had been stealing suckers' money on the Atlantic Cruise ships for a decade or more.  He would never be prosecuted for his sale of the Eiffel Tower, but he would be arrested for other scams in America.

And with the publication of his photo, his days as a con man were over. He would end his days in Alcatraz prison, dying of pneumonia in 1947, at just  57 years old.

This year the Eiffel Tower is 131 years old. To the best of Parisian authorities’ knowledge, it is sold about a thousands of times every day.

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BOO WHOM! Halloween Again

I do not understand why, once a year, I am expected to provide a sugar rush to every kid in the neighborhood. This is the annual fall shakedown. The bonfire of the bonbons. And should I try offering these adolescent vagabonds healthy treats like diced carrots, sliced celery, a couple cheese chunks on toothpicks or, God forbid, a little rice pilaf,  rather than being thanked for saving a young heart, my house would be egged, my windows soaped, and my cat redecorated.

What these ‘Kinder Mafia” demand is pure dextrose, not a mere saccharin rush. Their obsession with fructose, glucose, lactose, sucrose and maltose is neither healthy nor reasonable. They expect me to feed their sugar habit. . Oh, sure, they dress it up in fairy costumes and go door to door chanting, “Treat or trick”. But what they really mean is "Show me the Chocolate!"   This is not the holiday the ancient Druid priests envisioned, nor the Aztec mortuary artists. It is not a holiday. It is sugar wealth redistribution, confectionery socialism straight out of the barrel of a gummy bear.

The roots of Halloween were planted long before Christians had enough saints to celebrate "All Hallowed Saint’s Day". The Aztecs were celebrating Dia de los Muertos (Day of the Dead) even before they were speaking Spanish,  maybe 3,000 years ago.  And the Druids in Ireland were celebrating “Samhain” by carving turnip Jack-o-lanterns,  2,500 years before they saw their first pumpkin.  "And how", you may ask, "could offerings to Mictecacihuatl, the Aztec Goddess who was still born, become individually packaged bags of M&Ms’ handed out to a skeleton named Debbie or Bobby?  And I will answer you, ‘Only in a world where the love child of Salvador Dali and Ma Barker is allowed to design holidays, that’s where!

This is the night for hyperventilation and hypertension - when the line between the dead and the not-really-alive (also known as Donald Trump) becomes fuzzy, and everyone grows concerned about ghosts, spooks, ghouls and zombies entering our world.  But its common knowledge that ghosts can not manipulate physical objects. So they can only harm you psychologically, meaning Scientologists   are safe since they don’t believe in anything that might hint at L.Ron Hubbard's level of insanity. And nobody should be afraid of “spooks” because once you speak a spook’s name they are “spooken for” and thus rendered harmless; which is what Dick Cheney did to the spook Valerie Plame.

Now Dick Cheney was a real live ghoul, one of  those creatures who revel in death and horror and who keep coming back to life again - usually on Fox News - the network staffed by brain dead zombies. Rupert Murdoch's invention is the perfect example of how we are terrified of all the wrong things in this life and death.

I cannot imagine Dick Cheney and his fellow Federalist Society banshees  will cease being such soul sucking terror mongers just because they have finally passed beyond the veil of death. Hell, they will just be getting started!. 

Yes, on October 31st,  I will be answering my door bearing a bowl filled with tribute, because I don’t want to spend half of November pulling toilet paper out of my rain gutters. However, we could instead of this terror Halloween been celebrating "Reformation Day",  when, in 1546, Martin Luther nailed his “95 Things I Hate About The Pope” to the front door of the Wittenberg Castle Church. He was was later charged with deformation of church intellectual property. But I diverse...

So, logically, children could be going door to door, calling, “Treat or I’ll nail your butt to the door, you papist low life, and, oh, by the way have you got any Jews hiding in here?”  A bit hard to see children squeezing candy out of that transaction.  So I guess we were lucky we got the screwed up jawbreaker, mini-Snickers holiday we did get, and not an endless election season that lasts four long painful years and gets won by the Russians.

The truth (as if that ever mattered about holidays) is that Martin Luther defiantly nailing his arguments to the church door was probably no more real than George Washington chopping down a cheery tree. Neither thing really happened. And neither does ghosts or ghouls.  And this year you just might see Martin Luther costumes on Halloween Night.  I did see a George Washington once, but that was so long ago the costume was probably made in the United States.

This year Americans will spend over $6 billion on this mish-mash of a holiday. Almost all of our black and orange fix, like cocaine, is provided by overseas suppliers who have no other connection to us, and although that kind of chump change would barely support the occupation of  Afghanistan for a month, it does work out to about $65 per family each year. Our family is not spending anywhere near that much, so I figure Donald Trump and his Wall Street buddies must be spending like a billion each to make up for what us po' folks are'nt  spending anymore - call them  the ghoul creators.

About 4 million Americans will even be buying costumes for their dogs this year, like PetSmart’s spider web dog collar for $12, or PetCo’s dogie Pumpkin dress- up for $16. It gives a whole new meaning to the term "Puttin' on the dog".  Still, this canine costume capitalism is surprising. considering that dogs and skeletons would seem to be a natural costume combo,  popular with dogs as well as the humans. And once the holiday was over you would not have to store the costume -  you just let Rover bury it.

But as a nation we seem determined to spend as much as possible on this “dead holiday thing”.  We will be putting 2 million pirates (mostly boys, and far outnumbering the original pirates) on the streets that night, along with 4 million princesses - mostly girls and about equal to the number of real princesses) with adults to follow behind them, as back-up muscle. At the ring of the door bell us older folks, cowering in our homes, then answer the door armed with only a half-empty bowl of bite sized Three Musketeers, and hope that is enough to buy us protection for another year.

And that is where all smart adults should be on Monday night, dreading the sound that fills the night with horror and chills the bones; “Trick or treat, trick or treat, give us something good to eat. Or else.”  Yes, Trick or Treat, and bon appetit, my fellow cowering masses. And if you survive this night, you have just two years until the next horror ; election day 2018!  Boo Who? Boo You, that's who!

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