Pigs Always Get Slaughtered

By Stefan Kanfer

Wall Street is a thoroughfare with a river at one end and a cemetery at the other. Not long ago, brokers were fantasizing at the water's edge, wondering whether they should buy the Boston Whaler or peddle a few more shares and go for the 46-ft. cabin cruiser. Today they are at the other end of the street, dressed in black, standing at the grave and stealing furtive looks at one another, wondering who will be the next to go.

No one can say the warning wasn't loud and clear. Loud, anyway. There was the eminent economist Charlie Sheen, strutting through Wall Street, the movie, only to find himself lost in his penthouse, staring out at the city and wondering, "Who am I?"

There was Sherman McCoy, the doomed bond trader of The Bonfire of the Vanities, a self-styled Master of the Universe, undone by ambition, facing disgrace, jail and the most hideous possibility of all, subways.

There was bewhiskered Ivan Boesky staring out from behind bars: Santa Claus as perp. There were the elaborate designs of Michael Milken and Robert Campeau, rasping apart like Velcro.

And there was the unwritten law: Bulls Can Make Money. Bears Can Make Money. Pigs Always Get Slaughtered.

But no one paid attention. Just as Marxism is being dismantled by its managers, the market is being undone by its junkmen. Or is it? Capitalism seems to thrive on periodic collapses. After all, the Drexel affair is only the latest float in a parade of American infamies. They date back to the early 19th century, when a hustler named Daniel Drew delivered some livestock to the plutocrats Henry and John Jay Astor. On the last three days of the trip from Ohio to New York, Drew refused to let his cattle drink. Just before they clomped up to the weighing station, he let the animals slake their thirst at a shallow creek.

Appraising the swollen cattle as they weighed in, Henry Astor allowed as how he had bought "a fine herd." The next morning he looked out over a group of scrawny, dehydrated creatures. "I have been sold watered stock!" he bellowed, and Wall Street gained a new term for swindle.

After the Civil War, speculator Jim Fisk attempted to corner the gold market. The price escalated until President U.S. Grant stepped in and unloaded $4 million worth of Government gold certificates. The tactic worked, but prices on the stock exchange kept on plummeting for two years. The small investor, as always, suffered the most. But it was Fisk whose complaint entered history: "A fellow can't have a little innocent fun, without everyone raising a haloo and going wild."

In 1920 Charles Ponzi promised a return of 50% in less than two months. The plot was ingeniously simple: he paid the early customers (and himself) with money from the later ones. When the whistle blew he was $3 million in arrears. Ponzi served a three-year sentence. Paroled, he advertised a new scheme, 200% in 60 days. He was rearrested and eventually deported to his native Italy. Only two things were left behind: the usual dupes and the name Ponzi schemes, still used to describe illegal methods of fleecing the sheep.

Nine years afterward, the same sort of naifs were asking themselves a question: If you could purchase a $1,000 car for $100 down, why couldn't you acquire stock the same way? In 1929 that kind of instant gratification was called buying on margin. As the market crashed, the president of the New York Stock Exchange remained confident. Federal regulations were unnecessary, said Richard Whitney. "The exchange is a perfect institution." After he left office, Whitney was indicted for selling stock on insufficient capital. He was $6 million short, even after he dipped into funds of the New York Yacht Club, where he was treasurer. Whitney was conveyed to Sing Sing. He was said to be the only inmate ever called Mister by fellow prisoners and wardens.

A generation later came Bernie Cornfeld with his exhortation, "Do you sincerely want to be rich?" His company, Investors Overseas Services, specialized in mutual funds. "We're in the business of totally converting the proletariat to the leisured class," Cornfeld boasted. An IOS manager recalled the process in less exalted terms: "We bought stocks at $90, not because they were worth $90, but because we believed that tomorrow they would be at $120. When we went home nights, we just hoped the goddam company would still be there in the morning."

One morning the goddam company was not there. The vastly overextended IOS had fallen victim to the bear market of 1970. So had Cornfeld, who gave up his castles in France and Switzerland, as well as his jet and Rolls-Royce. Today he is dealing real estate in Europe, his celebrated harem now "down to sort of a skeleton crew of three or four."

And then there was . . . But the catalog is endless. Events of the past week can only lend credence to playwright Henrik Ibsen's observance, "Those heroes of finance are like beads on a string -- when one slips off, the rest follow." Is there any possibility of knotting that string? Or is scandal as much a part of the market as the NASDAQ? Can the greedy be saved from themselves? Or does Midas play as big a role as Oedipus in the human psyche?

The indications are not promising. Reformers are at work and investors are wary, but memories are short. Those with big eyes and small incomes are advised to heed the warning of Richard Armour:

That money talks

I'll not deny,

I heard it once:

It said, "Good-bye."