Daniel Drew
Born: 1797, Carmel, New York Died: 1879, New York City Known as: "The Old Man of the Street" Peak net worth: ~$30 million
One of the fiercest stock operators of the mid-1800s. Drew originated the term "watering stocks" — as a cattle drover, he would deny his cows water until just before sale, then give them salt and let them drink, boosting their weight and thus sale price. He applied the same logic to securities: inflate the apparent value, then sell.
The Erie Railroad (1866)
Drew's most famous exploit. Erie needed a loan of $3.5 million. In exchange, Drew received 28,000 shares of unissued stock and $3 million in convertible bonds. He then started selling short. Erie shares became scarce and the price rose — it looked like Drew would be cornered. Bulls were laughing in their sleeves.
At the critical moment, Drew converted his bonds into 58,000 new shares and threw them onto the market. Supply overwhelmed demand. "The bulls were paralyzed... the stock had declined from 95 to 50, wiping out the broadest margins."
This remains the canonical example of why a seemingly successful corner can fail if the squeezed party has access to an unexpected supply of shares.
Rivalry With Vanderbilt
Drew locked horns repeatedly with Cornelius Vanderbilt over control of the Erie Railroad. Along with Jim Fisk and Jay Gould, Drew battled Vanderbilt by issuing 150,000 counterfeit Erie shares. When Vanderbilt sent the sheriff to arrest them, the trio fled to New Jersey with Erie's ledgers and $8 million from its treasury — barricading in a hotel with an armed guard. The political corruption that followed to buy judges and legislators was a national scandal. Eventually a peace was negotiated: Erie's treasury bought back the illegitimate shares.
Decline
Drew went bankrupt in 1876, leaving only watch and chain ($150), a sealskin coat ($150), clothing ($100), a bible and hymn books ($130). He died in 1879.
His story is the prototype for the speculator destroyed by the same tactics that once made him: he understood how to manipulate markets but not how to stop.
Sources
- reminiscences-of-a-stock-operator — Ch 18–19 (Markman annotations)