Hudson River Corner (1851)
The Hudson River Railroad was built despite strong opposition from both the Harlem Railroad and the Vanderbilt steam-boat interests. It was constructed on the east bank of the Hudson River and reached to east Albany by 1851. The main passenger depot was located at Tenth Avenue and 30th Street on the West Side of Manhattan.
The Crooked Commodore
By the summer of 1863, Cornelius Vanderbilt owned a substantial block of stock in the Hudson but was still primarily interested in the Harlem. This changed when a group of traders began selling the Hudson short. Vanderbilt then participated in a scheme (which he suggested) to convince the “shorts” that the supporters of the Hudson were lacking in cash. “Supporters” sold large blocks of stock to the “shorts” for cash with an option to buy back the stock within 30 days at a slightly higher price. Instead of holding the stock, the “shorts” immediately sold it.
The “supporters” then quietly bought the stock the “shorts” sold along with all other shares in the market. By July 1863, the stock of the Hudson was cornered and the shorts took a bath. Vanderbilt and his allies took control of the board of directors of the Hudson in 1864 and Vanderbilt became president of the railroad in 1865. The important lesson I want you to take from this is that very rich and powerful men in the stock market work behind the scenes to get everything they want at the harsh expense of those inexperienced in stock investing.
– Doc Brown
BIO: Doc Brown is a national expert on the stock market. His courses “How to Make a Million Dollar Portfolio from Scratch” at the Oxford Club is a national bestseller. Dr. Brown’s research appears in some of the most prestigious academic journals in the field of finance. See Journal of Financial Research and Financial Management. Scott is an associate professor of finance in the Graduate School of Business at the University of Puerto Rico.
FURTHER READING: Sobel, R., 1988, Panic on Wall Street, Truman Talley Books.
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