Financial Folklore

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Now for a speculator, ten days are an eternity. Being ten minutes behind the news can cost millions. It seemed to me that this scheme was impossibly risky even for someone like Fisk. Fisk, after all, was a gambler not a fool.

Third, I was surprised that Confederate bonds were selling at eighty cents on the dollar in London so late in the war. Everybody knew that if the rebellion was suppressed, the bonds would be worthless, and in the early days of 1865 one did not have to be Ulysses S. Grant to know that the Confederacy was doomed. The English business community, to be sure, had been strongly pro-Confederacy, but they not fools, any more than Fisk was.

So I checked the London Times of 1865, and sure enough, Confederate bonds were not at eighty, and they hadn’t been in years. They were already trading at twenty-eight when news of Richmond’s fall came. There was no sign of Fisk’s supposedly massive short sales. Nor were there any reports in the Times later of Fisk’s scheme, as there should have been. Nor did Fisk himself ever refer to this incident, as he certainly would have, for Jim Fisk was not one to hide his light under a bushel.

There was no alternative to accepting the fact that it was all a tall tale, and much to my disappointment, I couldn’t use it in the book. (I had to save it and use it in a column.)

But how did such a basically implausible story come into being in the first place? I suspect it came about like any folktale: as an expression of a fundamental aspect of the human condition.

Investors, like everyone else, are condemned to live their lives on the fnife-edge between the future that can never be foreseen and the past that can never be revisited. But if they could revisit the past, what fortunes could be made! Selling short in early October 1929; loading up on Xerox in 1958; buying oil futures on the thinnest of margins the day before Iraq invaded Kuwait. With financial coups like those, making it to the Forbes Four Hundred list would be a morning’s work, with time left over for a couple of sets of tennis.

It seemed to me that this supposed scheme was impossibly risky even for someone like Jubilee Jim. Fisk, after all, was a gambler, not a fool.

Today it is all a pipe dream. But before the transmission of information became instantaneous with the invention of the telegraph, it was sometimes actually possible, in effect, to revisit the past. A man learning of important news could ride a fast horse—or sail a swift ship—into the past, or at least into the parts of the world still in ignorance, and turn this knowledge into wealth. Nathan Rothschild, learning via carrier pigeon of the outcome of the Battle of Waterloo, made a bundle on the London Stock Exchange with his monopoly of the information.

Early in the nineteenth century, one of New York’s advantages over Philadelphia was the fact that it was two sailing days closer to London. Chestnut Street brokers learned to dread the sudden arrival of a stagecoach full of Wall Streeters, for it invariably meant that important news from London had reached the New Yorkers, who were intent on making a killing while still in exclusive possession of it.

The domestic telegraph brought an end to such shenanigans in this country, and when the first successful Atlantic cable went into operation in 1866, the ten-day time gap between London and New York vanished as well. This had an immediate impact. Before the cable, the London and New York markets necessarily operated independently of each other because prices in one could not reflect current prices in the other.

Once the cable proved reliable, however, the two markets inevitably began to merge. A high price in New York for, say, gold, and a low one in London could now be arbitraged out of existence via the cable in short order. By 1870 Wall Streeters were spending a million dollars a year on cable charges to do exactly that. Fisk’s apocryphal scheme had become utterly impossible.

But Wall Streeters, like Mondaymorning quarterbacks and armchair admirals, are fond of playing the game of “if only.” One can almost see a couple of top-hatted brokers having an after-work drink or two at a bar circa 1870, reminiscing about the good old days of the Civil War and how much money they could have made if only …

As they dreamed up the scheme over their third whiskeys, perhaps they realized it would have needed a man of genius and infinite financial courage to carry it out. “Jim Fisk could have done it” soon became “Jim Fisk did it.” The story spread, a folktale was born.