James R. Keene
Active: 1870s–1910s, New York Known for: One of the great Wall Street operators of the Gilded Age; pool operator; executor of market distributions for J.P. Morgan and others; cited by Livermore as the supreme exemplar of "ticker-sense" — accumulated experience acting faster than conscious reasoning
The British Guiana Crisis (1895)
Lefevre wrote an article about Keene in 1909 that Livermore cited as the best illustration of what he calls ticker-sense. The story:
The U.S. and Britain were in a boundary dispute over British Guiana and Venezuela. The U.S. Secretary of State sent a strongly worded message invoking the Monroe Doctrine. Wall Street was bullish and paid no attention to the news. A newspaper reporter called on Keene and was surprised he was calm despite being long 50,000 shares.
Keene asked: "Have you read it?"
The reporter confirmed he had read the headlines. Keene said: "Read the message: read the last paragraph."
The reporter read it — the finding was to be enforced "by every means," which meant potential military force. Talk of war began circulating.
Keene's reaction: "Well? You mean 'hell' don't you? That's what will break loose tomorrow when London begins to sell American stocks by the shipload! You'll see nothing but WAR!! in the English papers tomorrow."
Still, Keene hesitated — a man of his experience, imagination, and temperament had to work through it. Only after he had freed himself from the handicap of his existing market commitments and fully grasped that a new market condition had been created did he act. He sold from his entire long position of 50,000 shares and reversed to short 73,000 shares — by the close of that day.
The next day, London sold heavily and the market broke.
"Even the great Keene had to take two steps. All that day he sold and sold."
What This Illustrates
Keene's story is Livermore's prime example of the professional attitude: not hunches, but absorbed experience enabling rapid situation diagnosis. Keene did not act on instinct; he worked through the logical chain — what will London do when they read this? what will that selling do to prices? — and then acted decisively once the diagnosis was complete. The delay was not hesitation born of fear; it was the final execution of clear thinking.
The story also illustrates Livermore's point that knowing what to do is not enough — you must do it quickly. Keene made his fortune by doing it the same day.
Career Arc
California origins: Born in London 1838; raised in Virginia; went West with $10,000 and built it to $150,000 speculating in Comstock Lode mining stocks; became the leading mining-stock broker of San Francisco; arrived in New York in 1876 worth $6,000,000.
The wheat disaster (1878): Attempted to corner wheat — disastrous result. Henry Clews: "In an evil hour Mr. Keene was induced to spread himself all over creation... He was so flushed with successive victories that he began to regard failure impossible, and thought he was a man of destiny in speculation, such as Napoleon considered himself in war."
Recovery through Sugar: H. O. Havemeyer (Sugar Trust) gave Keene a fresh start by hiring him to make a market for Sugar stocks. Keene succeeded brilliantly — made Sugar a trading favorite and placed himself financially. "The stock had never established itself as a speculative favorite. Mr. Keene made it that."
Pool operator for hire: After Sugar, Keene was asked repeatedly to take charge of pools. He never asked a fee — he paid his share like other pool members and profited from the work itself. His fee was the pleasure he derived from the craft.
Feud with Whitney-Ryan: The Whisky Trust pool (Distilling and Cattle Feeding Co.) ran up to $73 then opened one morning at $55. The American Tobacco pool fell apart when a member went bearish and broke the market. These episodes created a permanent rift between Keene and the Whitney-Ryan group.
The U.S. Steel Campaign (1901)
Keene's masterpiece. J. P. Morgan formed U.S. Steel in 1901 — the defining moment of American industry at the dawn of the twentieth century. Its capitalization exceeded the entire debt of the United States at that time. Everyone thought distributing 500 million preferred + 500 million common was impossible.
Morgan entrusted Keene with the task — with $25 million in working capital and no fee structure. Lefevre described the assignment: "It was the greatest work of his lifetime; not the most picturesque, nor possibly the most captivating, but certainly the most important. Imagine a Napoleon, after commanding a brigade for years, being placed in command of a huge army."
Keene sold more than 750,000 shares to the underwriters' syndicate in a few weeks — in the very market he helped create. Conditions were favorable: genuine boom, speculative mania, eager public. "What we had was not merely a big bull market but a boom and a state of mind not likely to be seen again."
The aftermath: Steel common (which Keene had marked up to 55 in 1901) sold at 10 in 1903 and at 8¾ in 1904. Lesson: even the greatest manipulation cannot permanently override fundamental overvaluation.
The Amalgamated Copper Campaign (~1905)
H. H. Rogers and William Rockefeller (Standard Oil coterie) needed to dispose of their Amalgamated Copper line and had failed to do so on their own. They came to Keene. He was broke at the time — the 1903 "Rich Man's Panic" had left him out of the game.
The tactical method: Keene bought and sold 220,000 shares. His day-to-day tactic:
- Mark up the price by buying back thousands of shares (creating an artificial rally)
- The next day, sell the balance on that rally
- Leave the market absolutely alone — "to see how it would take care of itself and also to accustom it to do so"
- Repeat, adjusting to the daily tape currents
Keene's big selling was always on the way down after the big rise. "The trading public is always looking for a rally, and, besides, there is the covering by the shorts."
The fee: Rogers sent Keene a check for $200,000 for selling a $20-25M line of stock. Livermore: "This reminds you of the millionaire's wife who gave the Metropolitan Opera House scrub-woman fifty cents reward for finding the one-hundred-thousand-dollar pearl necklace."
Character
Livermore's assessment: "He had in superlative degree the qualities of mind that are associated with successful speculators anywhere. He was utterly fearless but never reckless. He could and did turn in a twinkling, if he found he was wrong."
In winning: irascible; sardonic phrases that lingered in the memory of his hearers. In losing: polished man of the world, agreeable, epigrammatic, interesting.
His private secretary told Livermore: "when the market was going his way Mr. Keene was irascible; and those who knew him say his irascibility was expressed in sardonic phrases that lingered long in the memory of his hearers. But when he was losing he was in the best of humour."
The fundamental quality: Did not argue with the tape. Made his decisions; acted on them; reversed without ego when wrong. "The change is by no means as radical as you'd imagine. The rewards are not so great... but there are men whose gait is far quicker than the mob's. They are bound to lead — no matter how much the mob changes."
Related
Sources
- reminiscences-of-a-stock-operator — Ch 17, Ch 20