Palace/Gallery

Henry Keep

tradingspeculationhistorymarketsoperatorsbears

Henry Keep

Born: ~1818, poor household Died: 1869, leaving his family $4.5 million Known as: "William the Silent" Notable for: Defeating Addison G. Jerome in the Old Southern corner (1863); founder of the blind pool; died wealthy where Jerome died broke

The archetype of the patient, silent operator. While Jerome was flamboyant and public, Keep was the opposite — quiet, circumspect, strategic. Named after William I, Prince of Orange (William the Silent), who earned his nickname for quiet circumspection and political cunning.

Origins

Born in a poorhouse; ran away from foster parents as a youth. Made a living gathering Canadian currency for 20 cents in the U.S. and running it north to collect 25 cents. Opened an exchange office in a small town; eloped with the daughter of a townsman who had sworn to shoot him. Made his way to New York.

The Blind Pool

Keep was the first to master the blind pool — several speculators pooling capital to manage a corner, sharing profits or losses proportionally. The pool members never knew: what stock would be chosen, when it would be bought or sold, how the corner would be accomplished. Keep was trusted implicitly; participants accepted unfavorable terms without question because his record was so strong.

"So as to prevent any one member from using information gained during the meetings to secretly work against his fellows at the market, no one was to know when the stock would be bought or sold, how the corner would be accomplished, or even which stock was chosen for the manipulation." At peak influence, Keep could raise $1 million in a week; one participant netted over $2 million through a $100,000 investment.

The Old Southern Corner (1863)

Addison G. Jerome had cornered the Michigan Southern & Northern Indiana Railroad (Old Southern) and was known as the "Napoleon of the Open Board." His market tips were considered as good as cash in bank; he was liberal to the point of extravagance and had a great following.

Keep was a director of Old Southern. He turned bearish on the stock. His method was characteristically indirect:

  1. He authorized the issuance of 14,000 shares of new Old Southern stock
  2. He borrowed additional shares from the Jerome ring and sold them into the market — creating the illusion of a rising and vulnerable short interest while actually flooding supply
  3. He also borrowed $35 million from Wall Street in September 1863 — tightening monetary conditions across the market
  4. When credit tightened and stocks fell, Old Southern "came down like an avalanche"

Jerome lost his fortune; he died of a heart attack in 1864. Keep died wealthy in 1869 at 51.

Philosophy: Cooping the Chickens

Keep once told a friend:

"Would you like to know how I made my money? I did it by cooping the chickens; I did not wait till the whole brood was hatched. I caught the first little chicken that chipped the shell, and put it in the coop. I then went after more. If there were no more chickens, I had one safe at least. I never despised small gains. What I earned, I took care of. I never periled what I had, for the sake of grasping what I had not secured."

This is the anti-Livermore philosophy in miniature: Livermore's method required holding through pain to capture the full move; Keep's method was to take what was available now and secure it before reaching for more. Both approaches produced wealthy men — the difference is temperament and position sizing, not correctness.

Related

Sources