The Strange Secret of William Delbert Gann: An Account of a Stock Market Scam

180 Pages·2018·0.78 MB·English

by  Paolo Anders

The Strange Secret of William
Delbert Gann
An Account of a Stock Market Scam
By Paolo Anders
Copyright ©2018 by Paolo Anders
The right of Paolo Anders to be identified as the author of this work has been
asserted by him in accordance with the Copyright, Designs and Patents Act
1988. All rights reserved.
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All the material contained in this book is provided for educational and
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CONTENTS
The Strange Secret of William Delbert Gann
Copyright ©2018 by Paolo Anders
CONTENTS
Introduction
Acknowledgements
The Author's Note
Internet Sources
Notation
PART ONE: BACKGROUND INFORMATION
1 Preliminary Reading
2 What Is Evidence?
3 Some Money Conversion Factors
4 A Brief Preview
PART TWO: SOME PRINCIPLES AND SOME WARNINGS
5 The Creation of Myths and Confusion
6 Three Useful Principles
7 Some Thought Experiments
8 George Marechal
9 Ralph Elliott
PART 3: ANALYSIS OF WILLIAM GANN'S WORKS
10 The Ticker Article
11 The Annual Forecasts
12 Division Into Eight Parts
13 The Tunnel Thru The Air
14 Gann Angles
15 The Squares of 90, 12, 52 and 20
16 The Square of Nine
17 Putting It Together
18 How To Write An MFC
19 The Tunnel Revisited
20 The Magic Word
21 Planets And Markets
22 Long Range Cycles
PART 4: CONCLUSION
23 A Gann Potpourri
24 Conclusion
Glossary
About the Author
One Last Thing
Introduction
This is the story of an investment swindle from one hundred years ago.
William Delbert Gann was a stockbroker who was born in 1878 in Lufkin,
Texas, and who died in Brooklyn, New York, in 1955. He wrote several books
about stock and commodity market trading and published a list of eighty books,
which he claimed were essential reading for those who wished to trade in such
markets. He also published a number of what he called Master Forecasting
Courses (or MFC’s) which claimed to teach the science of forecasting the price
of stocks and commodities. In the 1930’s the MFC’s were offered at such a high
price that it seems unlikely that many were sold.
I have not been able to find any evidence that William Gann ever traded for his
own profit, that is to say that he ever indulged in what is now called proprietary
trading. In the appendix to one of his books, The Wall Street Stock Selector, he
asserted that he was not a broker, he did not sell stock or bonds and had
concentrated only on the market for more than twenty years. In fact he worked
as a broker more recently than 20 years earlier. In the well-known Ticker article
of 1909 he asserted that:
Being in the brokerage business myself and handling large accounts, I
have opportunities seldom afforded the ordinary man for studying the
cause of success and failure in the speculations of others.
Proof exists that in 1920 he had some business interests other than looking after
the subscribers to his private services. On March 16, 1920 the New York Times
published a notice that to the effect that he had been connected with Moore,
Leonard & Lynch and was now a special partner with C. J. Kelley and Co.
Moore, Leonard & Lynch were brokers affiliated to the New York Stock
Exchange and C. J. Kelley were brokers at 66 and at 80 Broadway, New York; a
short walk from Wall Street. There are some advertisements by Kelley in The
Brooklyn Daily Eagle, for example for Thursday October 9, 1919, and they
appear to have been dealers on the New York Curb Market, which was
mentioned in the advertisement. The Curb Exchange was a place where some
insalubrious scoundrels were operating and where stocks were traded which did
not meet the listing requirements of Wall Street. The telephone number in the
advertisement of Rector 8037-8-9 appears in other advertisements where the
advertisement of Rector 8037-8-9 appears in other advertisements where the
address is given as either 66 or 80 Broadway. All the advertisements of this
company which I have seen mention that the stock which is advertised is
supplied by the ‘curb’ exchange.
On November 10, 1922 The Brooklyn Daily Eagle carried the story:
Cornelius J. Kelley of 25 Broad Street has been expelled from the
Consolidated Stock Exchange. This announcement was made from the
rostrum of the Exchange by President W. S. Silkworth today. Mr.
Kelley was expelled for violating that section of the rules which
provides that any member failing to keep a book record of all
transactions shall be guilty of an act detrimental to the welfare of the
Exchange.
Silkworth himself was not quite clean and later in the 1920’s was convicted of
the unrelated matter of mail fraud and spent a short time in a federal prison.
Prior to 1921 Broad Street was where the curb exchange was located. The
Consolidated Stock Exchange was a different organisation, which competed with
the New York Stock Exchange.
The New York Sun of January 4th, 1920 carried an advertisement on page 8 by
C. J. Kelley for shares in Grape Ola, said in the advertisement to be a company
traded on the New York Curb Exchange. C. J. Kelley were described as
“Specialists” located at 80 Broadway, New York.
The Reminiscences of a Stock Operator, which is about the stock and
commodity trader Jesse Livermore, said in Chapter 21:
You remember the big bull market that began when the Stock
Exchange resumed business in 1915. Scores of men made millions by
capitalizing contracts or even promises of contracts. They became
successful promoters, either with the aid of friendly bankers or by
bringing out their companies on the Curb market. The public bought
anything that was adequately touted.
You will soon see that William Gann had an extraordinarily convoluted style of
writing, the purpose of which was to confuse his readers and limit the amount
that they could learn. He was always pulling one’s leg and tweaking one’s nose.
All readers of his books and MFC’s: Beware!
All readers of his books and MFC’s: Beware!
According to an account, apparently by a grandson (Search for The Remarkable
W. D. Gann), he was the first born of 11 children and left school without
attending high school in order to help his father on his farm. Yet, when his book
The Tunnel Thru The Air was published in 1927, he had, as you will see, some
knowledge about the Phoenicians and the Greeks and he knew something about
the technique of building wooden ships. He was also well established in his own
business in Wall Street. All these things are relevant. To understand the works of
this man one must get behind his eyes and see into his soul.
Although he claimed to be a scientist and mathematician, his intelligence was
mainly for business and literature. This may seem strange given the mediocrity
of his writing but, as we shall see, he had an astonishing ability to invent new
metaphors for commonplace things. Figures of speech such as metaphors,
similes and synonyms are the essence of poetry, and Mr. Gann seemed to have a
liking for poetry, as was shown by many excerpts in The Tunnel Thru The Air
from the works of American poets. It was not an uncommon liking in the days
before radio and television. People had to entertain themselves during long
winter evenings and poetry of the kind that he espoused would have provided an
undemanding form of amusement. However, the poems in the book also served
another purpose: they all contained coded references to precise time cycles in the
stock market. These are cycles for the time at which support or resistance (see
Glossary) occurs and they are not primarily for tops and bottoms in price, though
these will often occur at such points. Because these time cycles are not
exclusively for strictly alternating tops and bottoms they cannot be identified by
conventional cycle discovery methods. My dictionary, which I will paraphrase,
defines similes and metaphors in this way:
A simile is a comparison between two things, in which a comparison
word is present: “Lips like a red, red rose,” or “Shall I compare thee
to a summer’s day?” A metaphor is a simile in which the comparison
word is absent, so that the nature of the comparison is not clear and it
may not even be clear that a comparison is being made.
Part of the task of this book is to unravel these literary devices and show what he
did mean. You will see that his work is repetitive and precise. He had a limited
repertoire of methods but many different ways of expressing them, and his skill
with this was so great that none have noticed it. He also plagiarised the work of
others. He was a shrewd business man, but also something of a scoundrel, a
Bernie Madoff (see The New York Times of 18 December, 2008, “You Mean
Bernie Madoff (see The New York Times of 18 December, 2008, “You Mean
That Bernie Madoff”) kind of person who manipulated his readers and tricked
them into parting with large sums of money for “courses” which were written so
as to be incomprehensible. And yet, within that material and in his books, he did
reveal one method of significance - nothing you must understand that will make
you one thousand per cent profit in one month, as a well-known magazine article
dishonestly claimed for him, but just one method of real utility.
He was well read in history and economics, but there is no evidence of the
scientific ability which he claimed for himself. Neither his books nor his MFC’s
use school level algebra, geometry or calculus, and you will soon see that the
methods which he advocated did not require such skills.
The mediocre quality of his writing may have been due to these things:
1. He published everything himself, and therefore he was not subject to the
discipline which would have been imposed by a publisher.
2. He may have been in a hurry to finish his books.
3. He deliberately wrote badly in order to deceive.
His first books were published by the Financial Guardian Publishing Company,
which was his own publishing house. http://www.bookfinder.com is one of the
best internet sources for used books. If one uses it to search for all the books
published by the Financial Guardian the only items it will find are original
copies of works authored by W. D. Gann. His later books and courses (or
MFC’s) were also self-published.
If the reader is not already familiar with the books and MFC’s then he must read
a few. Many are out of copyright and are available as easily found PDF files.
They are also available as modern reprints. A summary of those which are useful
for understanding this book is given in the chapter Preliminary Reading.
I promise you that you will puzzle over his books and courses and will struggle
to see anything of value. Those who have taken his published ideas literally and
used them to buy and sell stocks or commodities will have lost money. It is
because his works used metaphors which cannot be taken literally. William
Gann did not use a computer, he did not use the motion of the planets - a
technique which he promoted - and neither did he need to plot one-by-one charts
on a daily, weekly, monthly or yearly scale. These last were much touted
methods of his. He claimed that other people had said of him that “This man can
methods of his. He claimed that other people had said of him that “This man can
make a fortune from reading the tape (the ticker tape) alone.” However, I have
not been able to find any proof that he ever indulged in proprietary trading.
If Mr. Gann was in business today then it is likely that he would use a computer,
if only for its immense storage capacity. The principles which he advocated, and
which will be revealed, are in fact well known and therefore of little value. This
will come as a shock to that small coterie of true Gann believers that has crept
into being since his death. If certain methods are well known then how can one
obtain an advantage in a competitive market? There are some ways:
One possibility is that, like his well-known contemporary Jesse Livermore,
he took big risks when young and acquired some wealth. Unlike Livermore
he then diversified into stock broking and may not have done any further
trading. I know of no proof that would stand up in a court of law that he
ever traded in financial markets. Unlike Livermore he kept his money and
died from natural causes instead of through suicide.
He may at times have been a member of a pool – a group of traders who
come together to deliberately manipulate the price of a stock. It was legally
permissible to do so until sometime after World War I; indeed he referred
to the practice of insider trading on page twelve of The Truth Of The Stock
Tape. The New York Times has a record dated March 18, 1909 of a civil
suit initiated by one George Niner against a pool. As pool operations were
lawful, an alleged breach of contract was actionable in a court of law.
As a stock broker he had access to the accounts of wealthy clients - so he
said in the well-known Ticker article of 1909 - and he could have used
targeted mailing to sell his expensive and fraudulent (see later) mail order
trading courses. He would also have profited from success from the
ordinary business of a broker. Access to clients’ accounts would also have
made it possible for him to indulge in insider trading, by placing his own
bets before those of his clients, though I have no proof that he did so.
If there is one outstanding feature about this man’s works it is the extraordinary
way in which he disguised the real nature of his alleged trading methods. No
writer that I know of comes close in that respect except perhaps in some of the
convolutions in the writings of James Joyce. William Gann was a most
imaginative man and the way he obfuscated came from his own power of
invention.
One final question: how did I come by my knowledge? I went out shopping. I
sought an industrial strength bull detector of the kind that can only be bought