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Piggly Wiggly

The Piggly Wiggly story started in 1919 and has always fascinated me because it started in Memphis TN (just like Holiday Inns) by one of the most charismatic business owners in history. Clarence Saunders invented the first self-service grocery store chain and named it, Piggly Wiggly. It grew so fast, it amazed investors, customers, politicians, and even caught the rapt attention of Wall Street. He took the company public in 1922.

During the heyday of Piggly Wiggly, he built an enormous home (I have seen it) east of downtown Memphis off Central Avenue. It was nicknamed ‘The Pink Palace’ because, well, its pink. At the time (and probably still today) it was one of the largest private homes in America. As you get to the end of the following story, he lost everything including the pink palace when he decided to teach Wall Street a lesson when his unconventional stock buy-back strategy failed. I knew the story well and was going to write it, but I saw Nick Maggiuli’s summary of the story from the book ‘Business Adventures by John Brooks’ and decided he summarized the story much better than I could.

If you have 10-15 minutes and want a good read, this one of the best publicly traded stock stories ever. KT

Piggly Wiggly story written by Nick Maggiuli

It all started in 1919 when a man by the name of Clarence Saunders invented the first modern supermarket — Piggly Wiggly stores.

Before this time, people had to go into a store, give the clerk a shopping list, and then wait for their items to be gathered and brought out. 

Saunders changed all that when he created a retail self-service market where people could pick the items themselves and pay on the way out. 

People loved the idea so much that within three years there were over 1,200 Piggly Wiggly stores in the U.S. 

With this success, Saunders began licensing the Piggly Wiggly name out to other retailers.

Unfortunately, some of these retailers in the northeast began going out of business in the fall of 1922, all while using the Piggly Wiggly name. 

Traders on Wall Street heard of these closings and decided that they had an opportunity on their hands. 

They began shorting Piggly Wiggly while also spreading rumors that the parent corporation was in trouble.

Within a week the price dropped from $50 to $40 a share. 

When Clarence Saunders got word of these rumors, he got angry. Piggly Wiggly was doing fine, yet these traders on Wall Street were trying to ruin him.

As a result, Sanders publicly announced that he would “beat the Wall Street professionals at their own game.” 

Sanders had never bought another stock before in his life, but he was determined to teach Wall Street a lesson.

Immediately Sanders took out a $10 million loan sourced from various banks, stuffed his suitcase and pockets full of cash, and boarded a train to New York City. 

Upon arrival in New York, Sanders assembled a team of brokers, led by the famous Jesse L. Livermore to start a massive buying campaign.

Sanders was determined that he could corner the market. 

As a quick aside, a corner is when an individual (or group of individuals) obtain enough shares of a company that they can essentially dictate the price.

Saunders wanted a corner so he could force the short sellers to pay him whatever price he wanted. 

Remember, when someone goes short a stock, they borrow the shares. So, if the price of the stock increases, the short seller would have to go to the open market and buy whatever shares are available in order to close out their position.

This is how a short squeeze works.

Well, with a corner it’s even worse. The short seller goes to the open market and there is no one there to buy from except the cornerer. At this point, the cornerer can name their price.

This was Saunders’ end goal. 

Flush with cash and with only 200,000 Piggly Wiggly shares available for trading, Saunders began buying. 

On the first day, he (and his secret group of traders) bought 30,000 shares. Within a week, Saunders owned 105,000 shares, or more than half of those available for trading. 

By January 1923, Saunders’ plan was working and the price of Piggly Wiggly had risen above $60 a share.

However, Saunders knew that even if he won his corner, he would need an escape plan.

The problem with cornering the market occurs AFTER you have done it. Even if you squeeze the shorts dry, how do you get your money out?

If you try to sell all your shares at once, the price crashes and you are ruined.

Well, Saunders knew this, so in March 1923, he offered to sell 50,000 of his Piggly Wiggly shares to the public.

Yes, he was selling, but at a price of $55 a share, or about $15 below the current market price.

But there was a catch…

In order to buy the shares, you had to do so via an installment plan that ended December 1923 (nine months later).

More importantly, you couldn’t own the shares (and resell them) until the final payment was made.

Why did Saunders structure it this way? Because he needed to keep these shares off the market in the short term (to burn the shorts), but he also needed some assurance that he could cash out.

In doing the sale, he got both.

Unfortunately, just as the sale was being orchestrated, Saunders’ chief of staff, Jesse L. Livermore, quit after he worried that the corner wouldn’t succeed. 

With Livermore gone, Saunders was truly alone against Wall Street

But what Livermore didn’t know was that Saunders was ready to pounce.

So, on March 20, 1923, Clarence Saunders sprang his trap on the shorts — that morning he called for delivery of his Piggly Wiggly stock.

What happened next was one of the wilder days in Wall Street history. Piggly Wiggly opened at $75 and kept ripping upward. The shorts were forced to buy at $90, then $100, then $105.

By noon, the price was $124.

Though the price was rising, there was very little volume in Piggly Wiggly because there was basically no one to buy from except Saunders. 

The shorts were cornered and only had until the next day (Wednesday) to deliver their shares. But then, the rules changed. 

The Governing Committee of the Exchange announced a suspension in Piggly Wiggly trading and an extension to the short sellers’ delivery deadline.

Saunders countered and offered a deal of $150 a share for delivery by end of day Thursday and $250 a share thereafter.

Unfortunately, very few short sellers came forward to pay Saunders what he wanted.

Then the Governing Committee delivered the death blow to Saunders. They restricted trading of Piggly Wiggly and gave the short sellers until the next Monday to deliver the shares.

The extension granted by the Committee gave the shorts enough time to find other shareholders across the country (i.e., widows and orphans) who they could buy shares from. 

Instead of getting paid in dollars, Saunders got the last thing he wanted — more Piggly Wiggly shares.

By the end of day Friday, most of the shorts had covered their positions and Saunders was left holding the bag while still $10 million in debt.

He had lost. Wall Street had won.

While the exchange was legally allowed to halt trading of Piggly Wiggly, scholars still debate whether the extension of the short seller deadline was within their rights.

Either way, Saunders’ corner didn’t ultimately fail.

In the aftermath, a wave of support grew for Saunders across the country. People were enamored with the man from Tennessee who took on Wall Street.

Unfortunately, this adulation didn’t translate into financial assistance. Saunders eventually declared bankruptcy.

In the end, Saunders will go down as the man who pulled off “The Last Great Corner.”

Competition

Competition starts at a very young age and continues through life. Regardless of who you are or what you do in life, there is always someone or something competing with you. If you allow it in, it can take over your life.

When I think of this subject I always think about the early (1900-1925) car manufactures. Henry Ford, Dodge/Chrysler and General Motors were battling it out in America while, Mercedes, Rolls Royce and Bentley were battling it out over seas. Just like Henry Ford invented the Model T for the average citizen, in 1938 Ferdinand Porsche invented the Volkswagen Beetle.

Competition is everywhere from who can run the fastest when you are a kid to the country next door that wants to take over. History was written and paved with competition in every facet of life from the stone age to last week.

Why am I telling you this? We need to have a resting place where there is no competition. We can’t compete with the world during the day and come home and compete all evening. In order to survive the competitive world, we live in, we need a place of rest, comfort, joy and peace to come home to. Without balance in our life, many people die young from the stress of competition in life.

I have lived (and continue to do so) in a very competitive business. I have won some races and lost some races but the thing that has always settled me was my family. Home was/is that resting place. Sure, it was busy when our girls were small, but there was joy in the little things. As my girls grew up, graduated from college and got married and had children of their own, home and family are still where I go to get away from competition. I believe family is what allowed me for all these years to balance life.

Competition is needed, helpful to push us forward, builds character but it can also be stressful. Be aware of those around you and try to be that safe place for those you love. KT

The world we live in

When I read the news with all the dysfunction and disruption currently going on in the world, the first thing I wonder is if history was always like this, but we just didn’t know? With the age of constant communication, 24-hour news cycles, social media etc. it is impossible (well maybe not) to escape the things going on in the world.

Sometimes I just turn off my phone, iPad and TV and watch Andy Griffith or listen to Creedence Clearwater revival and Three Dog Night. I could name all the issues that concern me about the world today, but invariably, I may say something wrong or hurt someone’s feelings, but I think we all know the issues of the world today of which I speak.

The Bible speaks about wars and rumors of wars being one of the signs of the end times. I am not an end times theorist, but it does make me wonder. The literal interpretation of war is assumed to be between countries etc. I just wonder if it could also mean wars against family values, right and wrong, anger, animosity, immorality, corruption etc. Have no doubt, there is a war going on right now for the soul of America.

I said this the other day to someone and believe it to be true. Except for an extremely small fraction of one percent of the population that ends up leading the news, the rest of us (regardless of background, nationality, ethnicity etc.) all want the same thing. We want to live in security and peace, keep our families safe, be able to walk down the sidewalk, worship however we want, have the means to support ourselves, be able to go to the store without the threat of harm and lastly, enjoy life, liberty, and justice. That’s it.  

Lately, I have gotten used to skipping the news about who hates who, who is wearing what, who said what, who is getting a divorce, presidential poll numbers and who’s on their beach vacation etc. ha. When I think about it, the only things left to read in the news is the occasional historic article, cars, and dogs. Go figure. KT

The pain of the harvest eclipses the pleasure of the planting

There is a passage in the bible about sowing and reaping. Galatians 6:7 says, ‘whatsoever a man soweth, that shall he also reap.’ This means that if for example, you sow (plant) strife and hate, you will reap (harvest) strife and hate in return. If you sow forgiveness, love, honor, and respect, you will receive back those attributes.

It doesn’t matter if you believe it. Its true. If you are honest in your own life, you will see this play out. Its like a farmer that sows corn in his field (there is also scripture about this) he expects to harvest corn. The farmers doesn’t plant corn and then jump up and down and get mad when he doesn’t get beans. So, he planted corn, and he expects to get corn. Same way in our life.

I heard a guy say something the other day that stuck me. He said “the pain of the harvest eclipses the pleasure of the planting. He was of course speaking about the other unsavory bad deeds that people do. If a person decided to rob a bank, the pleasure of the unearned money is quickly eclipsed by the pain of having to pay the price for it.

There are many passages in the bible that have similar meanings such as, “as you give, it will be given unto you.” Again, it doesn’t matter if we believe it or not, this is the way life is. Therefore, sow (plant) well that your harvest will be also be well. KT

Better not bitter

When unexpected things happen in life, how do we choose to be better for it instead of bitter because of it? The answer is, I don’t know for sure, but I do know it is a choice we can make.

I was probably the poster boy for a good reason to go off the rails and let my past define me. I left home in my senior year of high school with no prospects of college life (like all my friends), and I could have gotten bitter and resentful and let that carry me into adulthood. Instead, I chose a life for my wife and daughters that was better than what I had. I did not want to repeat my history into their lives.

I see adults all the time that are still hanging onto their history as an explanation for how their life turned out. At some point, we all have to say, ‘enough,’ and move on beyond the past. Hopefully, the people reading this blog had great childhoods and never had to deal with an unfortunate past. That said, there are many who need some help and advice to forgive the past and forge a new future for themselves and their families.

I heard a pastor say something one time that has stuck with me. He was counseling a person and that had all the reasons why their life was on hold because of what happened in their past. He listened and waited until all the bad past was said out loud. The person thought the pastor was going to confirm that they in fact, had good reason for letting their life pass by while still holding onto the past. Instead, the pastor looked at the person and ask, “ok, lets chose a date that you decide to stop letting your past determine your future. Is it today, next Monday at 3pm or a month from now?” the person looked at the pastor like he had lost his mind and then it began to resonate what he was trying to help them do. The person chose a date and they moved on with their life in a positive manner. All they needed was a little help to come to grips with letting go of the past.

Whatever past you are dealing with, please hear me here, your past is nothing compared to the blessings of a future with a forgiven past. KT