“But facts like that don’t matter to the public. They see a stock start to shoot up, and they don’t own it, so they get greedy and they buy. Profit fever-they start to think of themselves as manly cannibals in this meat market. The fact is, they’re jackasses, following carrots on sticks. All you’ve got to do is keep them supplied with carrots.”
The old man’s face crinkled in an anguished smile, and he spread his hands in an ancient old-world gesture. “Guilt. In the old days society was work-oriented and success was a measure of denial, self-sacrifice, thrift, hard work, all virtues. Big money used to be the symbol of that kind of achievement-remember Horatio Alger? Wealth was a reward for courage and clean living and hard work. Now wealth is only a symbol of your ability in choosing an accountant smart enough to allow you to dodge taxes. Today money is a prize, not a reward. People play the market because they’ve learned you don’t need to work-you only need luck. They’re out to get something for nothing. They’re gamblers-and they feel guilty because deep down they know they ought to be leaning over a hot sledgehammer to justify all the money they’re trying to make. They’re hagridden with anxieties and guilt-and we’re back to Freud.”
He shook his head in pain. “The human race is the constant victim of congenital idiocy. I have pointed out for fifty years to my clients that a fool and his money rush in where angels disdain to tread-what is it after all but money? Money! Money is useless, literally and actually. If it wasn’t useless you couldn’t use it for money. You see? So money is an abstraction itself, but the stock market is an abstraction once removed-we don’t even work with money, we work with paper arithmetic. We print paper and call it stock, and hang it on the hook end of a line and see if anybody swallows it. Money? It’s not what you have that makes you rich nowadays-it’s what you owe.”
The old man took a breath and began to talk again, but one of his phones rang and he reached for it. Hastings sat still, amused and entertained. The old man’s surgical wit was a good counterpoint against his own feeling of dull lassitude; he enjoyed listening to Cohen’s darting rapier talk.
Cohen finished his phone conversation and turned back to him. “You want to learn about us-you want to learn what the stock market is. You can’t do that, you know-nobody can say what the stock market is. The only thing that can be described is what it was. The only way to anticipate the market is to know how all the people in it are going to behave, and no man alive can do that-oh, I know the big portfolio houses are using computers to analyze the market and make forecasts, but no computer can give an accurate answer on the basis of incomplete inputs, and who can program a computer with every vagary of human neurosis that may affect the market tomorrow? It can’t be done.”
Cohen showed a gentle smile, his face a labyrinth of creases. “This on the phone was one of my oldest clients, a lady who’s been with me forty-one years. We’ve seen a lot together in that time. I almost feel we were around to see the first bulls and bears gather beneath the buttonwood tree on the old Wall Street, where all this madness got its start. I do remember some of the panics after the war-the First World War, that is. I moved into this very office in nineteen-nineteen, and I’ve been here ever since. Of course I have vivid memories of Black Thursday. October the twenty-fourth, nineteen-twenty-nine. The big fellows had gone to the well once too often, and confidence was cracking all over-you’d be amazed how many of us did see it coming, and got out well ahead of the crash. I was out of the market entirely by the end of September, and then I just sat back and watched. You could hear the bear traders’ artillery start to rumble, and the news spread like wildfire-the specialists on the floor were forced to execute whole notebooks full of stop-loss orders at a rate so fast it dumped millions of shares on the market. I was in the arena that day, and you couldn’t believe it. The floor was flooded up to my eyebrows with paper that got cheaper by the minute. Everybody decided to sell, and of course when that happens, there is no market any longer-no such thing as a market, just a junkyard, a dumping ground. And as prices go down, people who hold stock on margin are forced to sell into the new lows to pay off their margins, and that pushes prices down even faster. Once a crash starts, you can’t stop it. Of course, we all pretend Black Thursday was the big one, there’ll never be another like it, but it can happen again, and it very well may. On the twenty-eighth of May in nineteen-sixty-two we had a crash with a paper loss of twenty-one billion dollars in one day’s trading-that was double the loss of Black Thursday, it was the greatest dollar loss of any single day’s trading in the history of Wall Street. There was nothing your SEC boys could do about it-there never will be. And in the meantime we’ve got stocks selling at a hundred times earnings, new issues skyrocketing within twenty-four hours of going public. Do you know what ‘one hundred times earnings’ means? It’s like buying a building for one thousand dollars and being forced to rent it out at ten dollars a year. But people go right on buying it. They’re just crazy. All the golden, beautiful paper profits don’t produce a single new tangible object. There’s no creation here, no productivity, no material advance-only inflation. And now, with our foreign exchange snarled up and our domestic financial policies all out of line with this rate of spending, there’s a very good chance the entire international monetary system will collapse.
“Add it all up, and what do you get? You could easily have a stock-market debacle like nobody’s ever seen before. You’ll see Dow-Jones drop to ground zero. It’ll be like Weimar. The world economy will crumble to powder. It’ll be a blight, a disappearance.”
The old man’s smile was sly. “I paint a grim picture, no? It’s only one side of the coin, you know, but you need to be aware of it. On the other side, what can I say that you don’t know? You can get very rich very fast here, everybody knows that. Right now two new millionaires come into existence for every hour of every working day, did you know that? Six thousand new millionaires in this country every year. Most of them do it in the stock market, and most of them will never get around to spending the fortunes they make. Like me. They don’t enjoy the money-money’s just a symbol of victory down here, nobody actually uses it. There isn’t time. That’s a shame, isn’t it?”
The wistfulness of his tone made Hastings smile. Saul Cohen shook his head. “It makes odd mathematics, I know, but you will find there are more horses’ asses than there are horses.”
“That happens everywhere, Saul-not just down here.”
“We exaggerate it. Take the basics, which nobody stops to think about. A stock is selling at X dollars. Why? What makes it worth X dollars today and X plus two or X minus five tomorrow? The value of a share depends not on its real worth but on what one fool thinks another fool is willing to pay for it. Most often that judgment comes not from rational appraisal but from whispered tips and floating rumors that have less reliability than a tout’s tip at Aqueduct. And the euphemisms, I ask you. Does a broker ever admit the market is falling? No. It makes readjustments, it eases, it makes technical corrections, it retrenches. It never falls.”
“Wall Street’s got no monopoly on rose-colored glasses. When did you last hear a Pentagon general admit we hadn’t won the war in Vietnam?”
“What are you, Russ, a cynic or an optimist?”
It made him grin. “Both. I’m as inconsistent as the next guy. But my job doesn’t include indicting investors because they’re horses’ asses. It’s my job to enforce the full-disclosure provisions of the law. Truth in securities-if there is any such thing. See that nobody manipulates prices. Investigate unusual activity, weed out fraud, nail manipulators. That much I can do, Saul. But I can’t keep people from making fools of themselves. That’s up to them.”