The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [151]
In September 1963, De Angelis saw a chance to make a further killing. The Soviet sunflower crop had failed, and rumors spread that the Russians would have to turn to soybeans for oil. De Angelis decided to corner the soybean market, forcing the Communists to buy from him at an inflated price. There was no particular limit to how many soybean futures he could buy. In fact, he could and did control more soybean oil than actually existed on the planet39 by borrowing heavily from Ira Haupt & Co., his broker, and taking on obligations in the futures market to buy 1.2 billion pounds of soybean oil. But this large a bet meant that he could afford to have the price of soybean oil go in only one direction—up.
Then, suddenly, it appeared that the U.S. government might not let the Soviet deal go through. The price of soybean oil collapsed, driving the market down by $120 million. Haupt began calling on De Angelis to meet his obligations, but De Angelis sent excuses instead. When Haupt came up short of money, the New York Stock Exchange shut the firm down and Haupt was forced into bankruptcy.40 De Angelis’s lenders, holding the now-worthless warehouse receipts, hired investigators and turned to American Express, issuer of the receipts, to recoup their $150 to $175 million in losses. And American Express—caught holding tanks full of nothing but worthless seawater—saw its stock plummet. The story began to hit the newspapers.
Two days later, on Friday, November 22, 1963, President John F. Kennedy was assassinated while riding in a Dallas motorcade.
Buffett was downstairs eating lunch in the Kiewit Plaza cafeteria with an acquaintance, Al Sorenson, when somebody came in with the news that Kennedy had been shot. He went back upstairs to his office and found that the New York Stock Exchange floor was in a state of stupefaction; stocks were plunging on heavy trading. With the Dow down twenty-one points in half an hour, the market had lost $11 billion.41 Then the exchange closed, its first emergency closing during trading since the Great Depression.42 Shortly afterward, the Federal Reserve made a statement of confidence that meant—after translation from Fedargot to English—that international central banks would work together to thwart speculation against the dollar.43
As a stunned country erupted in sorrow, anger, and shame, schools were dismissed and businesses shut their doors. Buffett went home to sit, along with the rest of the country, and watch the nonstop television coverage throughout the weekend. He characteristically displayed no powerful surge of emotion, rather a detached gravity. For the first time in history, a U.S. presidential assassination was being covered on television around the globe. For the first time, shock and sorrow united the world through the medium of television. For a brief while America stopped thinking about anything but the assassination.
The newspapers, of course, relegated the American Express scandal to their back inside pages for days as the dramatic headlines took precedence.44 But Buffett went looking for it. The stock never recovered from the blow it took on Friday when the market closed, and afterward it continued to slide downhill. Investors were fleeing in droves from the stock of one of America’s most prestigious financial institutions. Its price had been cut in half.45 Indeed, it wasn’t clear whether American Express would survive.
The company was an emerging financial powerhouse. Now that the average person could suddenly afford air travel, half a billion dollars of the company’s Travelers Cheques floated around the world. Its credit card, launched five years earlier, was a huge success. The company’s value was its brand name. American Express sold trust. Had the taint to its reputation so leaked into customers’ consciousness that they no longer trusted the name? Buffett started dropping in on Omaha