From legendary short seller to god of American capital

Chapter 269 The Stock Price Collapsed Prematurely

Chapter 269 The Stock Price Collapsed Prematurely (4.5K words, another chapter coming soon, please check for typos)

By 10:18 a.m. on Saturday, General Electric's stock price had fallen below the $90 mark.

Larry, who was at Paine Weber, stared intently at the trading screen, extending a finger and rhythmically tapping it on the railing.

The stock price fell smoothly below the $90 mark!

The instant the stock price broke down, Larry could even feel the dull, violent sound of the stop-loss orders that had been passively triggered and then sold off by traders as they broke through the psychological barrier.

"It's a pity we can't see any trading volume here!" Larry sighed to himself. Without the support of volume, judging the market situation solely based on price fluctuations is ultimately just wishful thinking.

At that time, the New York Stock Exchange was not open to the public. Only floor traders with trading seats were allowed to enter the NYSE to observe live trading.

Larry can only judge trading volume by the frequency of price quotes per unit of time and the magnitude of price declines.

On Wednesday, the stock price fell below $78. On Thursday and Friday, Larry let General Electric's stock rise without having any of the clever ideas of "closing his short positions first and then shorting at the right time".

Because no one can guarantee that future market trends will unfold as they predict.

It would be incredibly foolish to lose your position for the sake of small gains from directional fluctuations.

Now, General Electric's stock price has started to fall again. But for Larry, this decline is far from enough. Judging from the current trend, the stock's decline is still technical; after a natural rebound to a certain high level, the stock price naturally turned downwards due to a lack of further buying support.

This is like placing a swing on a high position.

Larry is concerned about whether the big short seller behind the scenes will continue to intervene; only when he does intervene will it have a more violent impact on the stock price.

General Electric's real support level today is $80. This level is not only near the previous low of $78, but also a psychological "break-even" line for many high-cost participants in GE's IPO.

Therefore, it's more important to see how the stock price falls below $80 today! Especially after news caused the price drop...

Larry knew there was bound to be some news coming out!

Meanwhile, inside the New York Stock Exchange.

James Keane's personal floor trader, Quincy with his slicked-back hair, was idly biting his nails.

When the deliveryman found him, he was spitting his bitten fingernail far away.

Seeing the deliveryman, Quincy turned his head and lazily glanced at him. "What the hell is it now? This time, you have to say it all at once!"

"Mr. Keane's trading order for you!" The order clerk handed over an order form.

Quincy frowned as he took the document, glancing at the transaction slip with a slight surprise.

"What the hell! This isn't a buy order to prop up the market! It's a short sell order... Mr. Keane, what are you trying to do? Are you going to dump the market too?!"

After grumbling for a few seconds, Quincy slowly stood up, wiped his shaved fingers on his pants, and walked straight to the middle counter.

Since General Electric went public, the central trading desk has always been the busiest and most crowded area in the entire exchange. This moment was no exception. Numerous floor traders crowded around the desk, constantly issuing buy and sell orders for General Electric.

"How much is GE now?" Quincy asked the quoter loudly.

"The latest price is $88 3/4!" the other party replied.

Quincy frowned, glanced subconsciously at the trading order book, and then gestured to the group of people to sell, "General Electric, 1 shares, anyone want them?"

The traders turned to look at him, and clearly, their opinions were deeply divided. Some believed that Mr. Morgan would eventually step in to support the stock price. Therefore, buy orders continued to pour in.

On the other hand, after the short positions broke through the $90 support level, the stock price did not quickly recover; this caused many short positions to be dumped into the market.

Therefore, whenever a trader announces a large order of "1 shares", everyone should immediately check whether the trader's gesture indicates a buy or sell order.

Naturally, about half of the traders on the floor showed signs of disappointment each time.

Seeing Quincy's sell signal, some people frowned and turned away. But one person walked up to Quincy, slapped his order form on the ground, and exclaimed, "I'll take all 10,000 shares! $88.78, that's a good price!"

Quincy glanced at him, then slapped the order form on his hand.

Quincy muttered, "Are you willing to do anything at this price? Like, continue taking my sell orders?"

The man glanced at the order form, nodded, and said, "If you still have stock, then we can continue the transaction!"

Quincy smiled and pulled a handwritten order from his pocket—an order to sell 2000 shares of General Electric! It was Quincy shorting his own stock.

"Sell another 2000 shares, but you'll have to offer a higher price, let's say $89.50... You know, if you help me this time, I'll come back to you next time I sell." Quincy winked at him, then added, "We're all doing favors for each other... We can't be that rigid, can we?"

The man paused for a moment, holding the transaction slip, then understood that Quincy wanted him to go easy on him.

Then, the man looked up and smiled at him, and then wrote down the transaction price of $89.5 on the transaction slip.

Quincy walked away happily with the transaction slip in his hand.

The person he was trading with turned around and walked to the small institutional seating area next to the trading hall.

In the innermost cubicle, the trader in the blue jacket looked at him seriously and asked in a solemn tone, "How many shares have you collected in total?"

"We've acquired 34,500 shares in total. We can sell them off and dump them in a moment, Mr. Frank Vanderlip."

The man in the blue jacket nodded, his eyes bright as he looked at the transaction slip in his hand. A smile spread across his face, and he said with a sigh, "Exactly! We should have given him unlimited firing rights. How could we have so easily driven down the stock price if we hadn't accumulated some extra GE stock?"

His assistant chuckled, "Yes, what's interesting is that those people actually thought we were Morgan's people, that we were propping up the stock price!"

"That's exactly the effect I wanted to achieve," Van der Lipp said seriously. "Oh, by the way, that floor trader from Paine Weber I asked you to watch, has he closed out his short positions these past couple of days?"

The assistant paused for a moment, thought carefully, and said decisively, "No, sir. I'm sure I've never seen him."

Van der Lip's expression turned serious again. He stroked his chin and said, "I always had a feeling it was a hidden danger! When the stock fell below the psychological barrier on Wednesday, it was he who preemptively broke through the $100 buy orders. He's a master!"

"Sir, do you believe he's not acting as a client, but rather placing an order for himself?"

"He's the client, I mean the person behind him, and that guy seems a bit tricky." After saying that, Van der Lip took out his pocket watch, looked at it, and frowned. "Our prepared information should get us in at 11:30... You should go back quickly and buy some more shares. After I leave, we'll dump the shares together."

"Understood, sir!" With that, the assistant turned and left.

Meanwhile, Peter Pan of Paine Weber had just emerged from the crowd at the middle counter. He had just completed an order at the New York branch, selling another 1 shares at $88 3/4.

However, the assistant and Peter Pan just happened not to see each other.

The clock hand pointed to 11 a.m.

At this point, those Wall Street figures who had received the message from Mr. Morgan that "General Electric's stock price will not be supported" had already rushed to their posts.

Orders to sell General Electric from securities firms of all sizes and other institutions poured into the central counter of the New York Stock Exchange like snowflakes.

As soon as the assistant arrived at the counter, he noticed something was wrong. Several new traders had already started dumping shares without any regard for the consequences.

$87 3/4!

$87!

$86.5!

The sudden sell orders left the traders in the room completely bewildered. The stock price had barely been placed when the orders were already plummeting.

The assistant frowned. He hadn't expected that so many new trading orders would flood the market in the short time he had been away.

He is now playing the role of a "market supporter," and some bullish traders now see him as a savior who can stop the stock market from falling.

Seeing the assistant approach the counter, the people's eyes lit up, and they hurriedly said to him, "You've finally arrived! Someone's dumping shares! Mr. Morgan will definitely support the market, right?"

The assistant was also confused, but he didn't care that others mistook him for Morgan's man.

What surprised him was the emergence of new dumpers.

Those people looked at him like wolves eyeing meat. A quick-witted young man hurriedly stepped forward. "Sir, are you still interested in buying General Electric stock? That's great! I have 3500 shares here. What's your price?"

Before he could finish speaking, the others, as if waking from a dream, rushed over.

"I want to sell 700 shares. My order size is small, please process mine first!"

"I have 1500 shares to sell, the price is negotiable."

……

The trading assistant, suspicious, continued to buy stocks from them, but after collecting less than 1 shares, he realized something was wrong!

Following those sell orders, more traders were pouring in. The newcomers learned from the traders who had just sold their shares that only the assistant was currently making large-scale purchases of GE stock. So they rushed straight towards him, still clutching their sell orders.

Another trader shouted, "Sir, I have some shares to sell. What's your price?"

"Please make a deal with me first, I was here first!"

No, there's definitely something wrong here!

As agreed, the news of the market crash should not have entered the market until 11:30.

At that time, I and Mr. Van der Lip will dump the shares together, and then General Electric's stock price will collapse! But why are there so many short orders dumping shares at only 11 o'clock?

Was the news leaked in advance?

Upon realizing this possibility, the assistant was startled, and beads of sweat immediately appeared on his forehead. He then rudely pushed away all the trading slips presented to him, shouting, "That's enough for today! I'm not accepting any more stocks!"

The people surrounding him were stunned for a few seconds. When they saw him turn to leave, they hurriedly chased after him, holding up the transaction slips and begging him to take on a few hundred more shares.

The assistant didn't dare stop, pushing through the crowd and hurrying out. Behind him, a group of traders from the trading floor followed closely behind.

Behind these people, even more were surging towards this side...

Meanwhile, the last price recorded by the clerk at the counter was $84 3/4. GE's stock price didn't subsequently fall because the trembling bulls, seeing the horde of bears swarming in like wolves, dared not even bring out their buy orders, fearing they would be instantly torn to shreds.

Meanwhile, the latest news from Wall Street began to circulate widely in the market.

The traders in the room whispered among themselves, sharing the latest news they had received.

"Have you heard? Edison and J.P. Morgan have fallen out, and Mr. Morgan is no longer involved in General Electric!"

"Is this really true? I didn't believe it when someone mentioned it just now. But look at all these new sell orders pouring in from all directions..."

"I heard that Mr. Morgan is preparing to sell his shares in General Electric..."

……

The crowd was chaotic, with all sorts of people saying all sorts of things.

However, what the traders on the floor saw was that many more stock traders had already entered the market and continued to short sell.

A large crowd surged to the counter, all wanting to short sell stocks, but they were struggling to find buyers.

Finally, one trader, having received a market buy order from a customer, nervously addressed the group, "...I want to buy 5000 shares of General Electric, at market price! Do you have any offers?"

Those around were startled and turned to look at the rare animal, their eyes filled with sharp longing.

"I only need $82, buy mine!" someone shouted, making a selling gesture.

Before the other person could even gesture, they rushed up to him, shouting, "I only need $81 and a quarter! Buy mine, buy mine!"

"I happen to have a sell order for 5000 shares! Come and trade with me."

An unimaginable uproar and frenzy erupted from the crowd...

·

When the stock price falls below $80, the first thing to be affected in the market is actually the stop-loss orders that are already in place.

Many floor traders hold clients' stop-loss orders, and those stop-loss orders are placed just below round numbers.

These stop-loss orders are the first to be triggered after the stock price falls.

Some floor traders, when holding order books, may choose to wait a while longer, waiting for a better price before executing the trade.

However, if they have a stop-loss order, they must sell immediately when that price appears.

The problem is that there are almost no buyers in the market right now.

Once those who had lost money on long positions started to cut their losses and exit the market, the chain reaction further led to a continued collapse in the stock price!

In less than ten minutes, the price on the quoting machine had already fallen below $60.

.

Meanwhile, in a two-story building less than a mile from the New York Stock Exchange, James Keane, hailed as the greatest trader of all time, watched the ticker tape continuously displaying the latest General Electric stock price. His face turned green!

Wait a minute! This stock price drop is too bizarre!

James Keane's brows were furrowed.

His quoting machine was mounted high on the wall. This forced him to stand up and watch the latest paper bags spit out by the machine, which helped him maintain a sense of awe towards the market!

But when James Keane saw General Electric's stock price fall below $85, $80, $75, and even below $70...

His face showed no joy at making money, but rather confusion and anxiety...

"Damn it, something's wrong. Morgan didn't give me any instructions. They didn't tell me to buy GE shares to prop up the stock price... Are they just going to let the stock price keep falling?"

James Keane made up his mind after only a moment's thought. He yelled into the trading room, "Call the exchange floor and tell Quincy to sell everything he owns! Not a single GE share!"

(End of this chapter)