Episode 6: Meet The Man Who Made Millions Trading Mules

economic information and charts, lots of numbers like tronic things. Yeah, and I think, like what people, including myself, think of what a trader does. They imagine a similar environment, wouldn't you say? Yeah, I think they think of that, or you know, the New York Stock Exchange for even though there's no one actually on it anymore. But basically, this idea is that a trader looks at a lot of numbers and spots things that they see it's undervalued and

things it's overvalued. Maybe they use a spreadsheet, maybe they use algorithms, but it's just this very digital type of thing, Yeah, a very abstract set of numbers and an abstract kind of activity. Yeah, but obviously trading hasn't always been like that, and today we're going to be talking about a very different style of trading. Here is an audio hint of what we're gonna be talking about. Hey, dollar to biotic to dollar dollar tims. I have painted dollar ladd to

day time time told Gotti Alla bail. So that kind of sounds like auctioneering to me pretty much. That's almost exactly right. So we're gonna be talking about mule trading, and specifically a guy who made his fortune trading mules in the early nineteen hundreds in Mississippi. Jo, you have to tell me it was mule trading a big thing back then, So I wouldn't have guessed this. I mean, it makes sense, I guess because mules were horton for farms and other activities and no one had cars. Right,

are a few people have cars? So yes, mules were a big thing. A few years ago, I was visiting my wife's grandmother down in northern Mississippi, and I walked into a bookstore in Oxford, Mississippi, and I saw this book on the shelf called Mule Trader, and I didn't even need to open it. I'm a very big believer in judging a book by the title or the cover, and that it was called Mule Trader. So I had

to buy no idea. You were so attracted to mules. Well, I'm attracted to mule trading, and uh, it's a fantastic book by this guy, William Ferris. He's a professor currently at the University of North Carolina, and it's about this guy ray Lum. The full title is Mule Trader ray

Lum's Tales of Horses, Mules and Men. And the idea is, there's this guy who grew up in northern Mississippi and at the age of thirteen he did his first mule trade and then he bought more mules, and he had a really good sense for what mules were valued, and he started trading all over the south of the Southwest, in Texas and Tennessee and everywhere, and he became a huge deal eventually, more than in just mules, but in cattle, horses, livestock in general. Was he like the citadel of mule trading?

I think so. I think one of the things is that there's a lot of interesting parallels and things that we can learn about what he did and trading today. For example, he engaged in interstate arbitrage, buying mules in one stays selling them elsewhere. He also engaged in warehousing, so he had these huge stables that he bought, and then when other farmers needed a place to store their mules, he made a lot of money for them. Well, this

sounds awesome. I'm really excited. Yeah. And one other thing, I mean, you know something we've been watching in the markets all out lately, especially you, is sort of this illiquidity in certain areas of the market. Are mules a liquid very much so, and so to the point where like there was very poor price discovery. Again, they didn't have mule Bloomberg's back then, so they you couldn't just look up a price. You could sometimes buy a mule and sell it for twice as much that very same day.

All right, I'm very intrigued on that point. I want to bring in the author of the book, William R. Ferris, a history professor at the University of North Carolina. Bill, thank you so much for joining us. It's my pleasure. Who was Ray Lum and why was his story worth telling? Was a legendary trader of horses, mules, livestock who was equally famous for his storytelling ability, and he lived into his eighties, long after horses and mules had ceased to be a central part of the South and of America.

But he kept those worlds alive through his stories. And I was lucky enough to be able to record many hours of his nails. How big was the mule trade? How big of a deal were mules? And how big was this whole industry? The mules were the backbone of life, not only in the South, but in our nation. Uh. It's been said that America was built by the mule. The first mule bread was bread about George Washington, and it said that the father of our country was the

father of the mule. And the travel across the country, the farming, the moving of heavy loads, everything that this country did for several centuries was done on the back of a mule. Why why mules? Why not just donkeys or horses? What was the actual benefit of having this crust hybrid? It's read, uh, with a cross between a horse and a donkey, And it's stronger than either of the parents, and it has much better judgment. A horse will work itself to death. A mule if it's too

hot and tired will simply stop. So Bill, let's talk about Ray. How did he get his start? He made his first mule trade at the age of thirteen, right, that's right. He really had trading in his d n A. He was working for a merchant and just as a lark. One day he bought a horse for something like ten dollars and sold it for fifteen and he told his boss what he had done. The boss said, Ray, I think you can make more money trading horses and you can working here in my grocery. And that's exactly what

he did. He made really millions of dollars over his lifetime trading horses and mules. A few days later another come up with the halts. I bought him and give fifteen for him halters with cheap then the little halters of sin. But he'd been young, so I gave him fifteen dollars for him tied him at the point Mrs Fish and Ray. He said, don't you think you could make more money out of trading? And you could? Yea all? I said, I don't know me to George, but I'll

try it. Well, I haven't been without a halt, said do you think the way he interacted with people was the key to his success as a trader. Or I guess what I'm getting at is what made him so good at trading? Well, I think he just loved the exchange. And it's like a card player in a poker game. You never know what hand you'll be dealt. But he

learned to. I can say if a horse was blind and he bought a horse or traded for a blind or a lame horse, he learned how to take that animal and trade it to the next person and and stay afloat as a broker, so to speak. But he made a big deal. In the book, he talks about the importance of honesty, that he didn't want to lie about the quality of his mules. How do you trade a blind mule while also being honest with everyone. Well, he was very clear that he never told a lie.

But when he traded with other traders, you're dealing with people who are in the business as opposed to trading with a child or someone who was not a trader. So you would use special language. You would say he's a little dim and the peeper's which meant to another trader, he's blind. Or he would say he's only hitting on three, which means only three of his legs are are good

and he's lame in the fourth. You have to tell us how did mules actually trade back then, because I imagine it wasn't on an electronic exchange or anything like that. Right now, this is pre internet. You had basically road traders. Like when he began, he would take a string of mules and horses on a rope and ride them up into the Mississippi Delta and he would sell and trade the animals to plantation owners who would then use them to raise cotton. And so that's the first sort of trading.

And then he began to work with livestock auction barns, where you would have thousands of animals that would pass through in a day and be traded. So one thing I find interesting about this is that in addition to looking at an animal and sizing up its value and what you might be able to sell it for, you also have to take into account the costs of transporting a living thing and warehousing it, I guess, and feeding

it and taking care of it. That's right on. One of his biggest trades, he bought eighty thousand horses and La Plant South Dakota, and and mules. And he gathered them and shipped them by train to New Orleans, where he sold them two Italian merchants. And as he said, the horses were wild. They had never seen a human being, and the Italians had never seen a horse. And after he sold them, his ringman said, let's go get dinner. And Mr. Lump said, I want to stay and see

the show. And he said what show? And he said, I want to see how the people had bought these horses. Are going to get them home. And that was quite a drama. They had ropes on their feet of the horses, and they were pulling him through the streets and some of them got loose, and we're running in the streets of New Orleans. It was a Faulknerian kind of scene. You mentioned some of the lingo that he used to describe a mule. What are some of the other terms.

I loved. One of the terms that in the book is if he made one percent on the trade, that was actually meant he made a hundred percent on the trade, or a two percent gain actually meant two on the trade. What were some of the other lingo the traders used to talk back then. Well, he often would use language associated with livestock for people. He would describe a person by saying his bread is not done, which means he's not fully there, or he's not as sharp as he

should be. And if he made if he bought a horse for a hundred dollars and sold it for two hundred, as you said, he would say, I made one one day. I've got to come along with a little halt, and I bought it a little hall given to over the hair point, tied him over that of the post. Well before night came long tame, and I've told him to him for twenty made one percent of the Dutchman says.

One of the ways that he made money he owned some huge storage facilities, right um, And so there was a part in the book that mentioned there was a big flood, a lot of flooding, and some of the local farmers had to store their mules and his facilities and he made money on that. And it made me think about sort of modern trading and how the people who owned the storage facilities for various commodities often can

make money on a warehousing fees. That's right. It's interesting the country really he was built on livestock and trading, and as that passed out, the language horsepower for cars and stock where it's stock originally referred to livestock, but today it refers to commodities and trading stock in a capitalist world in which you buy and sell stock, which

gives you partial ownership of a company. But the same mindset of trading and buying your way into wealth applied to both ray Lum's world and to the world's today. And Ross Pierrot, in writing about his first trades, says that they were horse trades. He would buy a horse in the morning and sell it for a profit in the afternoon, which he said they called in that time a day trader. Well, that phrase continues today on the

New York Stock Exchange. Absolutely, and Ross Perot traded at the famous fort Worth Stockyards, and ray Lum, a generation earlier, was also a major player in the fort Worth Stockyards market. Is that correct? That is absolutely correct. Mr Lum spent many of his most productive years as a trader in Texas, and he introduced what they called night sales because it was cooler at night, and both the livestock and the

buyers were more comfortable and he would go uh. He was based in fort Worth with the Owen brothers, but he would go into the small communities and have livestock auctions right at the doorstep of the farmers there. What was fort Worth like the lifestyle back in the day was it sort of a lot of gambling and drinking? What was what was it like? It was very much a frontier world and Mr Lum understood that the way

to a lot of the buyer's hearts was whiskey. And he would before a big sale the next day with the corps of engineers, he would invite the colonels who were buying his mules to come by. He said, I've got a case of tea in the car well. The tea was bourbon, and they would order up stakes and for out bourbon, and they had quite an evening. And the next day these military buyers would buy everything he

had with a smile. I can see a lot of parallels with trading back then and trading as it's done today. We still use the term day trader. Obviously, brokers still take their client, so I go the expensive dinners right to get that to sell their products. You have like a mutual fun company, take out broker with a steak and alcohol. But there's one thing where I think there is a big difference, and that's in price transparency. The idea that raylm was making a hundred or two markup,

I'd find that hard to believe in today's market. Well, those were the stories he told. He's certainly trades where he lost, you know, he simply, you know, kept going and stayed afloat because he was a good trader. My father was a farmer and he traded with ray Lum, and he told me the only way not to get beaten in a trade with ray Lum is not to trade with him. So why were you know everybody knew who ray Lum was. He became this huge legendary figure. If the only way to beat him was to not

trade with him, why did people continue to trade with him? Well, you didn't necessarily beat him, But if you needed if you had an old mule that was tired and unable to plow, and you needed a good young mule, you would trade with him and he would give you the younger mule, and you would pay the difference that was called the tall you would you would pay you a little money, and then you would be able to continue farming, and you would leave with a smile because he would

tell all the stories, and he had a kind of banter. He would say, this horse is so slick, a fly of a light on him and slip off and break his legs. He just had a way with words. Spill do you think do you think what Ray provided as a trader was a service that was valuable to the rest of society? Absolutely? Uh. It's said that the trader is the poet of capitalism. Uh. You've bought things with a smile, and he in the encounter and the exchange,

it was as though you were hearing poetry. Trader has a band of trades in everything, and a real trader don't never find nothing that he can't use. If he's a trader, he'll trade for anything you've got. He can use it. If he gave use it, he'll find somebody else a ten. That's his business. A good trader have lots of people, and he makes the money for himself. I always considered that I was a very good trader.

The closest thing to that today is probably the used car salesman who when you have an old car that's worn out and you want a new one or a better one. Then you go in and you you make a trade on the parking lot. And many of the old traders, when horses and mules were no longer being traded, they instinctively moved to the automobile. And uh, many of the old livestock barns were used as automobile. Yeah, I wanted to ask you that specifically. So obviously, Ray Loan

was born in the nineties. He lived over eighty years, So tell us quickly how he dealt with the economic transition which was massive that he saw during his lifetime. Well as he as he said, he lived from the time when horses and mules were the most valuable things there until they were finally sold for dog food, which really broke his heart. But he was a survivor and

he kept those those worlds alive through his stories. But he also moved on and he began to u Instead of selling horses and mudles to farmers who had tractors, he would focus on children and find a pony, uh and sell a new saddle to people who enjoyed riding. But he scaled back his operation and essentially had a livestock barn that would handle buying and selling of cattle, but it was on a far smaller scale than what he had seen as a young man. Bill Ferris, thank

you so much for joining us. I love this, I love the parallels to the modern day, and I really appreciate you talking to us about the life of Raylon Well. It's my pleasure and I appreciate your interest in all of this. Thank you for having me go to Matches that I remember when it wasn't too many automobiles around. Talking was about a dollar a pound At that time, money was easy to get. People love tald that they wanted talking about. I went to Memphis and I went

to uh So, Tracy, what what did you learn? Uh? I learned a lot um. I think even more than what I learned, I really just enjoyed listening to that tale of a sort of bygone era that's full of nostalgia and the idea of you know, people taking horses on trains down to New Orleans and selling them to Italian Yeah. I love I love like the salesmanship that was involved. I love the idea that because he was

a good storyteller, that really helped him. Although again It kind of reminds me of today, where some of the most famous investors and fund managers also happened to be great stories and they can, you know, spin you a great yarn about what they're investing in. Yeah, I mean, I guess there are some pockets in investing in trading nowadays where there is still a human element that's really important.

But the thing that all of this reminds me of, as we were talking about earlier, is just how electronified our markets are nowadays. And on the one hand, that can be kind of bad because we lose those sort of human emotional connections to trading. But on the other hand, you could make a strong argument that markets are more efficient.

I doubt I don't think that's not a tough argument to make when someone could sell a mule for twice what they bought it the same day, right, But then on the other hand, you know mules, I guess we're such idiosyncratic things that really required a lot of expertise to price. Again, maybe that was a big service to market. I love that point about service, the idea that you know, even though he was the better trader, and if you're traded with him, his speculation, you're probably going to lose.

But if you're a farmer that needed a new mule or you know, trade in your old bum mule, that essentially he was like sort of providing liquidity. There was nobody else who would give you anything for that mule.

Probably right, And I think the liquidity point is a big one because, as you and I both know, one of the main discussions in financial mark kits right now is about liquidity and whether or not investors need to pay up for the service of liquidity, and you know, whether or not they should expect that liquidity to always

be there. Again, there are no easy answers, but it's certainly interesting to look back at a bygone era and yeah, and cool to think of a very clear example where someone who can provide that liquidity is clearly providing a service to people and it's compensated for it exactly. All right, Well, thank you very much for joining us on another edition of Odd Lots. I'm Joe Wisenthal. You can find me on Twitter at the Stalwart and I'm Tracy Alloway. I'm

on Twitter at Tracy Alloway. Thanks for listening, and we'll be back here next week. Time changes all thing. It changes off the fast. We actually haven't changed. How did it being that had happened? You look at it it out. I've tried to bard and think about things that will happen hdyear keep trying to look into the future and think of what's going to happen. I'm trying to pick

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