“Arthur Train believes in facts” began a 1930 profile of the writer in the Wilson Bulletin. The son of a lawyer, he graduated from Harvard Law, became a member of the bar in both Massachusetts and New York, and served in several positions with the district attorney’s office in New York City and Queens between 1901 and 1915. Train would likely have continued as a practicing lawyer had his writing hobby not proved more lucrative. Soon after he moved to New York, he began writing mystery stories for magazines, and when he invented the character of Ephraim Tutt, a wise old Yankee lawyer who solved cases through his knowledge of both business law and human nature, that career took off. Train quit the law in the early 1920s to devote himself full time to writing, and for the next two decades, was among the most popular crime writers in America.
In the case of Paper Profits, however, Train’s readers might have been better served had he stuck to facts and not fiction. Much of the most commercially successful magazine fiction of the early 20th century relied heavily on formulas and tropes. Mystery writers in particular are rewarded with loyal readers for their ability to innovate within narrow limits. Agatha Christie did not become one of the world’s most popular authors because every one of her mysteries was dramatically different from the others but because readers who enjoyed their first Poirot or Miss Marple story had a reasonable expectation that the subsequent ones would be much like it.
Paper Profits is a tale of stock market speculation. Larry Rand, a magazine editor, and his wife Betty, are living a typical middle-class life, a bit ashamed that their house in a New York commuter town could use a fresh coat of paint, worried that their old car has an expensive trip to the mechanic waiting in the near future. On the advice of an ingratiating broker, Betty invests a bit of cash that comes her way into a stock and finds it transformed by a rising market into over $1,000.
Betty quickly takes her profit and exits, but the speculation bug returns with a vengeance after Larry meets Clarice, the beautiful wife of a legendary market player, and she passes along a tip in hopes of luring him into an affair. Coming from Clarice’s mysterious wheeler-dealer husband (our closest sighting of him is hiding behind a pair of curtains), its apparent certainty convinces Larry to stake his car repair fund on the stock, which leaps up in price as predicted. Instead of getting out, however, he takes the plunge — financially and romantically.
Soon, Larry has quit his magazine job and joined the branch brokerage office in their town. Aided by tips from Clarice, with whom he is soon involved, his fortune and reputation rise rapidly. He moves to the New York office, where he’s assigned to use his good looks and Ivy League charms to cultivate the firm’s female clients, and the family moves into a cold but impressive MacMansion on a nearby development full of other stock market stars.
Train offers a convincing portrait of the mass delusion that took over much of the stock market in the late 1920s, when the ability to buy on margin — effectively putting only a down payment on a stock — encouraged millions of small investors to buy stocks. And it’s one that rings true in a historical sense. As Frederick Lewis Allen wrote in his classic account of the 1920s, Only Yesterday, published a year after Paper Profits:
The rich man’s chauffeur drove with his ears laid back to catch the news of an impending move in Bethlehem Steel; he held fifty shares himself on a twenty-point margin. The window-cleaner at the broker’s office paused to watch the ticker, for he was thinking of converting his laboriously accumulated savings into a few shares of Simmons. Edwin Lefévre (an articulate reporter on the market at this time who could claim considerable personal experience) told of a broker’s valet who made nearly a quarter of a million in the market, of a trained nurse who cleaned up thirty thousand following the tips given her by grateful patients; and of a Wyoming cattleman, thirty miles from the nearest railroad, who bought or sold a thousand shares a day.
Much of the speculation of Larry’s firm, as well as of its clients, is fueled by Glutex, a start-up company that’s developed a waterproof coating based on the response of bacteria to certain conditions (chemistry is one subject where Arthur Train’s grasp of facts was less than sure). Glutex appears to have unlimited potential, at least in the eyes of investors, and the price of its stock skyrockets far past the company’s revenue and earnings. Larry’s market gamesmanship lifts the value of his portfolio within sight of $1 million, his real estate to an apartment on Park Avenue, and his imbroglio with Clarice to a level that drives his wife, Betty, to take the children and retreat to her parents’ home.
Train understood enough about economics to recognize that the promise of easy millions through stock trading had created a bubble that had to burst:
Many had doubled their value in eighteen months, a few “‘blue chips” had quadrupled it,—in all cases without reference to their yield. Over and over when they had reached a peak inconceivable but a year before they spurted up again—twenty, fifty —even a hundred points. The Coolidge market had become the Hoover market. Something was happening, but what?
Nobody knew how much of this so-called prosperity was real under the economists’ definition of wealth, how much of it was a mere redistribution of credit, how far the price of stocks was but an automatic readjustment to the decreased purchasing power of the dollar. No one had the vaguest idea to what extent prices reflected the actual value of the equities behind rails, motors, oils and coppers, or merely represented the gambler’s hope of an ever-increasing speculative public.
When Glutex’s bacteria contracts a phage (an infection of bacteria) that renders its coating useless and sends its stock price plummeting toward zero, Larry’s wealth evaporates over a weekend. Like Allen’s chauffeur, window-cleaner, and nurse, Larry has been buying on margin and is unprepared for the consequences when the price suddenly falls instead of rises. John Kenneth Galbraith describes the situation in his book, The Great Crash: 1929:
Thousands of speculators, in whose previous experience the market had always risen, now saw for the first time the seamy side of their new way of life. Each new quotation was far below the last one. Moreover, the ticker, unable to cope with the unprecedented volume, was far behind the market. Not only were things bad, but — they had almost certainly become worse, yet one couldn’t tell from the ticker how much worse. Before the day was out many of these thousands received a peremptory telegram from their brokers — a telegram that was in the starkest of contrast with the encouraging, half-confidential, rich-uncle tone of all previous communications. It asked more margin promptly.
Larry’s apartment, house, big car, and servants are quickly disposed of to cover his margin, and even these are insufficient. Facing bankruptcy, he runs to Betty for support. And here we run into the limits of Arthur Train’s fictional imagination. In the hands of a Balzac, Larry would continue to be driven into the depths of degradation. If not pushed to throw himself out a high window, he would be ground into humiliation, losing the respect of his colleagues and family.
But Train is no Balzac. Such consequences are too much for a writer of formulas. There has to be a happy ending. Faced by a desperate Larry, Betty turns out to be an angel of mercy:
“Can you ever love a swine like me, Betty?”
She kissed him.
“I’ve never stopped loving you,” she said.
Betty not only takes him back but manages to get his old magazine job back. And having taken sole ownership of their old house with the leaky roof, she provides him with the one piece of real estate that won’t be repossessed to cover his losses.
Paper Profits received generally positive reviews when it was published less than a year after Black Tuesday. Harry Hansen, then the most widely syndicated book reviewer in America, called Paper Profits “The Iliad of the Crash” and Train the Homer of the stock market. “A tale that moves with the ticker tape, that clicks off letters and figures and with it recalls the mad, preposterous, frenzied revels when everybody had money, everybody made money, and money was a gilded calf.”
Arthur Train did, indeed, see money, at least in the form of stock speculation, as the gilded calf. Ironically, he wrote the book months before the great crash. Having observed several early scares, he later told his publisher, Horace Liveright, “I saw so many of my friends and acquaintances temporarily ruined by the stock market irrespective of whether they lost or won — in the first case, because they lost their shirts, and in the other, because they lost their souls.”
Train meant “souls” literally. He saw the situation in Biblical terms. “In the sweat of thy face shalt thou eat bread,” he told Liveright, “conferred not a curse by a blessing upon mankind. After all, Horace, what is this novel but the present day story of the apple, the serpent, and the woman, Paradise lost — and in this instance, fortunately, Paradise regained?” Larry and Betty Rand only regain Paradise because Arthur Train’s formula required it. Had he stuck to his other belief — facts — Paper Profits would have had a much grimmer ending…and been a much better novel.