A Savage Life

by Michael Savage

  The bankruptcy of the yarn man served to shore up the position of the dry goods man against investments and credit borrowing. The boy learned to respect his father’s position even more firmly through this lesson in reality.

  Another of his father’s successful friends came to ruin in a different way. His daughter died from an overdose of heroin in an infamous New York hotel frequented by unsuccessful artists.

  Once again the man’s moderate approach to life seemed to be the right one. Though his children would not distinguish themselves in any great way they would not bring shame to the family, either.

  AS TIME WOULD HAVE IT, THE DRY GOODS MAN DIED IN middle age of a second heart attack. The boy, named Sam, now a shaky man of thirty-one, had on his own managed to accrue what would have been a small fortune to his father. The capital was not exactly earned illegally, but it could not be said that the money had been earned from legal endeavors, either. It seems that taxes were not paid on income derived from a bookstore that drew substantial profits by selling books purchased from illegitimate sources.

  The young man managed to save between eighty and ninety thousand dollars in a little more than three years. The cash sat in a safe cemented into the basement floor of Sam’s mother’s house. The young merchant let it sit there without making any investments. He distrusted Wall Street as a result of his father’s indoctrination over the years and never learned much about any other financial “opportunities” available to the small investor, either. However, he always heard that real estate was good. A nice, safe way to build a fortune. But each time Sam would make an offer to purchase a small parcel of land, the deal would not be consummated. He would make an unrealistically low offer, which would be rejected. On receiving back his deposit, he would feel as though he had somehow made money, simply because he had not lost any.

  The five or six parcels he failed to buy increased two or three times in value over the three years he kept track of their prices. This confirmed Sam’s appraisal of his business sense; he was a shrewd buyer but lacked the faith necessary to put his money into an investment. After three years of testing himself, he was ripe for making a dramatic move. He would no longer wait around to die, like his father, while enormous profits could be realized by signing his name to a few slips of paper.

  SAM WAS AN AVID READER. HE NOT ONLY SOLD BOOKS BUT inherited that love for the written word that was woven through the fabric of his people. He had just read a small book about useful plants of the world and was convinced that coffee and cocoa were highly underpriced products of the soil.

  Cocoa, he thought, is an agricultural product with good associations. It mixes well into a nice steamy hot drink, is easily whipped into chocolate, and in general seems to be loved in some form by most people. Sam reasoned that the cocoa growers would soon unify their positions demanding much higher prices. Coffee and cocoa were both grown only in the tropics; and the industrialized nations, which happened to be concentrated in the temperate zone, would learn to pay more for their addictions.

  Through an acquaintance in the shop, Sam learned of the commodity exchanges, where products of every kind were bought and sold by both those who utilized the products and those who merely speculated or invested on the rise or fall of prices.

  By making a few phone calls, he learned the name of a commodity man at the largest brokerage house in the city. After a few cordial conversations with the broker, during which he learned the rudiments of speculating in cocoa, Sam the speculator was anxious to cash in on his hunch.

  The broker told him that a minimum amount of five thousand dollars would be required. Anxious as the young man was, he did not rush over with the money. For several days he just phoned the broker to get the opening and closing prices and ask a few new questions. Finally, the broker pushed him a little. He suggested that the market appeared ready to rise and told Sam to get his deposit in an account.

  That evening the speculator decided to go to the safe and withdraw five thousand cash.

  In the morning he failed to open the bookstore for the first time in three years. Instead, the cash was converted into traveler’s checks in six separate banks. Sam thought this would throw the tax people off should they be following his cash flow. He also did not want to alarm the broker. The exchange at each bank went well with the exception of the fourth transaction, where the teller asked Sam why the money had such a peculiar smell. He acted dumb, muttering something about a trip to Spain while remembering that the years in the safe had probably caused his “dough” to mildew. Leaving the bank, he was sure the dumb clerk would report the incident to her superior. He only hoped the supervisor had become used to mildewed bills in this time of inflation, when many people were removing their stashes from little corners of their world.

  After the final transaction of traveler’s checks into the cashier’s check, a brief subway ride took him to the center of world finance. Following a few directionless meanderings, he found the brokerage house. It occupied an entire city block, was of brown glass and steel, and rose higher than any other building in the district. The young man felt better about his decision when he surveyed the magnitude of the structure. New thoughts came pouring from his brain. “So that’s how such buildings come to be.” He was thinking: “Men buy and sell, sell and buy, all over the world and this company takes a commission whether the investors make or lose. Either way the brokerage houses profit.”

  He was amused by the cleverness of the scheme but still felt positive about his decision to “get into it” as he weaved his way through a maze of people in the lobby who were glued to changing stock prices flashing above their heads. At once, he no longer sneered at these people. He understood them, was part of them for the first time. Those phony artist friends of his would not need to know about his new attitude towards them; it would be sufficient that at last he was part of reality.

  Once on the twenty-seventh floor, he found his way to the commodity broker. They both acted intimate with one another, as though through the telephone conversations they had discovered they were brothers and were now, at last, meeting for the first time since their separation at an orphanage.

  For a while they both just sat and watched the gigantic board, where prices for wheat, corn, soybeans, live cattle, hog bellies, coffee, cocoa, silver, platinum, and other items clicked and changed with mechanical excitement.

  Sam noticed that the broker was not alone before the big board. He was one of a dozen or so brokers in the large and well-designed room. As the young man casually glanced at the other faces, the cigarette-stained fingers of this very thin broker tapped nervously on his desk. The thin man whispered, “You see that man in the back . . . at the last desk? He earned over one million last year, just in trading cocoa.”

  The young man was impressed but not astonished. He knew people made that kind of money and here was one of them in the flesh. That the million-dollar earner did not look different from anybody else made him all the more believable. As the young man imagined what the rich man’s home and wife looked like, the kind of dinners prepared for them by their cook, and the manner in which they entertained themselves, he asked the broker, almost in a whisper, “He makes that much just from speculating in cocoa?”

  The thin, nervous broker educated him. “No. No. We are not allowed to speculate for our own accounts. He makes that on commissions alone. He is the man who handles the Hershey account. He buys and sells all their cocoa for them.”

  “So that’s how they get their chocolate!” Sam felt much more involved with the real world than ever before. He realized that soon he would be participating in the buying and selling of chocolate, just as this international corporation did from right there in that office, simply by having his broker watch the changing figures.

  He gave the check to his broker and watched him walk with it to an accounting office at the far end of the room and place it in a pneumatic tube. Jim, the broker, returned and said, “It’s done. Down the tubes, by now. Your account number is zero-o
ne-three-seven.”

  The young man was made a bit nervous by the broker’s choice of words, but he immediately realized the expression “down the tubes” probably originated in such investment houses to describe the passage of messages, checks, etc., through pneumatic tubes, which traversed the building. He further reassured himself by repeating the many names of the partners of the famous company.

  Sam made no investment that day at the suggestion of his broker. He was advised to wait “for a dip” in the rising price of cocoa and then “get in.” During his visit he was shown around the offices on the twenty-seventh floor, the rudiments of the cocoa market were explained and a packet of materials handed to him, explaining in more detail the nature of the commodity business.

  The broker led him to the elevators and told him to phone the next day at 9:30 A.M., one half hour before cocoa began trading, when they would “make a battle plan” for the day’s trading.

  On the subway ride back uptown to the bookshop, the investor felt elated. He glanced through the booklets, hoping somebody might see what he was reading, but decided to wait until that evening to carefully study each word.

  PROPPED UP ON THREE PILLOWS IN THE LARGE FOUR-POSTER bed he had crafted some years before, the speculator devoured the facts of his life. He learned that the New York Cocoa Exchange operated from ten A.M. to three P.M. and that each “contract” consisted of 30,000 net pounds of cocoa beans in shipping bags. For $2,300, he would be able to buy one contract of cocoa on a margin account basis. This sum represented less than 10 percent of the approximate cost of the 30,000 pounds of beans.

  He was reassured to learn that trading limits were established. Each contract could only rise or fall two cents from the previous day’s closing price. Each one-cent change represented $300 in the cost of the contract. So, if the price rose the daily limit of two cents per pound, he would be ahead $600 per contract. Conversely, he could lose that amount each day the price fell down the limit.

  Sam also learned that there were different delivery months. It being March he would trade in May, July, or September cocoa, or distant May contracts in beans, which would be delivered more than one year from the time of offering. Under the advice of his broker, Sam had focused on “near May” contracts. He learned that speculators like himself would trade only up to a few days before the first of the delivery month and then settle their accounts, usually by selling their contracts, hopefully at a higher price. Only those accounts that actually used the cocoa bean, such as Hershey or Nestlé, would take delivery of the beans to meet their production needs. In essence, these accounts purchased beans ahead of time both to assure a steady supply and also to buy at the lowest price. Speculators such as Sam always “offset” their position by selling before the delivery date. Sam dreaded the thought of making a mistake and getting a notice from a warehouse in Philadelphia notifying him that 214 burlap bags weighing 140 pounds each were awaiting his final payment for delivery.

  AT 9:30 A.M. THE NEXT MORNING HE PHONED HIS BROKER.

  “Hi, Sam. Look, I gotta be brief,” said Jim. “This is the busiest time for me. The London market indicates cocoa is selling from large liquidation accounts and gold is unchanged at $142.50.”

  That was all Jim said. As Sam soon learned, the broker never made recommendations to buy or sell. All he did was state a few technical facts. Since Sam was at a loss to make any decision, he remained dumbfounded, creating quite a pause. The busy broker quickly jabbed:

  “Tell you what, Sam. Let’s wait until the market stabilizes. Call me tomorrow, same time.”

  At the barest audible affirmation sound from the speculator, the broker switched buttons on his phone, leaving Sam dumbly on the line.

  That day in the bookshop, Sam went through the financial page of the previous day’s Wall Street Journal looking for facts in the multiple-columned quotations and otherwise found the paper quite interesting. The business outlook on world and national events was sensible and refreshing to Sam, who had been schooled along by whims of articulate but imbecilic academicians. Otherwise, his day was quite usual except for a more deeply ingrained expression of contempt on his face as he picked through a series of modern poetry for a customer.

  Ten years before, Sam had written much poetry himself. He came to sit at the feet of the most famous of the “beats” and once read himself on a rickety pier over the Hudson River. While others thought his poems worthy that night, Sam felt depressed and continued to write mainly maudlin statements concerning the fact that one day he too would be dead, but as a rule he became less quick to call himself a poet when newly introduced to people. Once the bookstore was under way and substantial profits realized, Sam became less and less involved in the world of poems. Nineteenth-century French novelists intrigued him, especially those who either made or lost fortunes or spent their entire lives trying to get rich and famous. He also remained an avid student of biography, prizing the lives of those who achieved greatness through bold moves made at crucial times in their career. Other than these areas, books became mere merchandise to sell.

  He stocked the newer poetry more as a sentimental link to his past than for business reasons. Those who were most interested in the stuff never seemed to be able to buy any of the slim paper volumes. They merely read the verse to themselves and left the books more soiled than they found them. Sam never bothered to chastise any of these poor customers. He understood them well. Besides, his business was becoming important in the neighborhood and he wanted to maintain good relations with these people. Already the grumblings about his being a “rip off” were getting back to him and he wanted to avoid a confrontation at all costs.

  AFTER A FEW DAYS OF CALLING HIS BROKER, SAM DECIDED to buy one contract at the market price of 64:95 cents per pound. His broker told him the trend appeared upwards, but that if things “turned around,” they could liquidate and take only a small loss, more than compensating for it on the next trade.

  Through the day Sam phoned Jim four times. He was careful not to say much on his side of the line, not wanting the book buyers to know he had become a speculator. As it turned out, May Cocoa closed at 65:10, just a few points above the point at which Sam bought it. While he knew he had made a good move, he didn’t bother figuring out his paper gain in dollars. He figured that one cent up, to a price of 65:95, would give him $300 profit, less $60 in commissions. Below that one-cent figure, he would merely take the ride.

  The next day, at exactly 9:30 A.M., he phoned his broker. A strange voice answered. Sam was stunned. “Is Jim there?” he asked.

  “No. Who is this? His train must be late. Call him back in a few minutes.” Then a disconnect. Sam was curious. “What kind of schmuck is this? Who misses a train when a market opens in thirty minutes?” came the inner logic.

  He finally got through at 9:55 P.M. Instead of wasting precious time in anger, he listened to Jim’s news that gold was down $3. “All right, let’s liquidate at 65:10, the least,” said Sam. “That should be enough to cover the commission,” he thought.

  As the day would have it, Sam was “executed” at 65:10. This gave him a gross profit of $45 but a net loss of $15 once the commissions were consistent, no matter how many contracts were traded. Whether you moved one, two, or multiple contracts, the commission remained at $60 per contract.

  Even though he lost, Sam felt good. May Cocoa closed down, the limit by the end of the trading session, at 63:10; and he congratulated himself for having made his decision as early in the day as he had. At least he had “felt correctly” about the day’s trading.

  AS THE DAYS WENT BY, SAM WATCHED MAY COCOA CLOSE lower until it was down to 58:00. The analyst at the brokerage house filed this report.

  “Fundamentals remain unchanged. Demand remains high while production is lower than anticipated. The 58-cent level remains a good entry position. If the price breaks 68 cents it should go to 78 cents.”

  The next day, May Cocoa turned around, and went up the limit to 60:00. The day after, it closed up 15
0 points at 61:50. That afternoon Sam decided to buy. He phoned the broker at 3:10 P.M. and told him to place a market order. Jim advised him that a pool of 310 buyers remained at the close of day and that even though Sam wanted to buy two contracts he might not find a seller.

  At eleven A.M. the next day, Sam phoned to find out if his orders had been executed. Jim told him yes, he had gotten two contracts for him when it opened up the limit, at 63:50, but at the moment the price was down to 61:75. It seems that buyers now outnumbered sellers.

  Sam was nauseous. Each contract was off 1.75 cents, or $515 each, for a total paper decrease of $1,030 plus commission, of course.

  Jim did not console him. “Look, stay in touch. This could close down the limit; at 59:50 we may have to make a decision.”

  Sam was aghast. He said to Jim, “Wait a minute. I thought the trading limits were two cents in any one trading day. How the hell could I buy at 63:50 and see it go to 59:50 in one day?”

  Jim explained to him, “It can fluctuate two cents up or down from the previous day’s close, in any one day.”

  Sam felt like cursing at Jim. “What kind of schmuck buys up the limit on a day when the price bounces down the limit one hour later?” He was sick to calculate that four cents down on each contract would mean he lost $2,400 in one day!

  Jim told him to phone back at three P.M. and hung up.

  Sam was in agony. Instead of seeing the price go from 63:50 to say 78:00, and making $9,000 in a few weeks, he might lose that amount in a few days. The thought suddenly occurred to him that for everyone who made a profit there must be at least one person who suffered a loss. The world became grim for him. The old hatred for capitalists rushed back upon him in a red wave.

  At three P.M. he learned that things were not quite as bad as he feared. May Cocoa closed down 150 points at 62:00, and his worst fears were mildly tempered.

  Jim told him to relax that weekend, it being a Friday afternoon, and to phone him at 9:30 A.M. on Monday morning, when they would make a new “battle plan.” Sam asked Jim what was influencing the cocoa market. The broker explained that fundamentally cocoa remained strong, but that it was being traded like precious metals, gold, silver, and platinum, by nervous investors who were reacting to world events. Each time gold went down in price, cocoa seemed to follow. When it went up, cocoa did likewise.