Trading Places
TP
The Year of 1892
Another legendary insider trader was railroad baron Jay Gould. During the Civil War, Gould started a brokerage firm and made a fortune because of his network. In 1869, Gould used his connections to President Ulysses S. Grant in an attempt to corner the market on gold. What Gould really wanted was the price of wheat to rise. He figured if wheat prices increased, farmers would sell more, and this would lead to large shipments of wheat products along one of his railroad lines. Gould speculated that pushing the price of gold up would also increase the price of wheat.
To perpetrate his scheme, Gould tried to convince those close to President Grant that the government should hold off on selling gold. At the same time, Gould’s firm was buying up gold like crazy and refusing to sell it. This scheme caused the Black Friday panic of 1869. The government tried to counter Gould’s deception by flooding the market with $4 million in gold, but Gould and other investors wouldn’t sell. This combination of a flooded gold market and investor hoarding caused the price of gold to plummet, and a panic ensued. A New York Times article published after Gould’s death said in 1892 that his “private sources of information in the field helped him turn almost any success or defeat of the Union army into a profitable account.”