The Balboa Brief: Three Miles Out (October 2026)
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Three Miles Out
“There is a huge difference between taking a calculated risk and having a gamble.” — Richard Branson
On moonless nights in the middle of the 1920s, skiffs painted black drifted into Crescent Bay with their
engines cut and no lights showing. Three miles offshore, where American waters ended and the high seas
began, a mother ship waited with as many as 4,000 cases of Canadian whiskey in its hold, close to fifty
thousand bottles. The work was simple: pull the burlap sacks off the ship, load them into the skiff, and run
them through the surf. Once ashore, hand them to a man waiting beside a truck.
The men who did it were paid extraordinarily well, and not for the whiskey. They were paid for the risk of
being caught with it. One beach hand later testified that he earned $100 a night, a small fortune a century ago.
Laguna Beach in those years was a sleepy hamlet of culture and art. Painters had been drifting in since the turn
of the century. It had roughly 2,000 residents and a dirt road through the canyon for a front door. The same
seclusion that drew the painters made its foggy coves a haven for smugglers. The inconvenience was the asset.
The man behind the whiskey trade was an immigrant named Tony Cornero. He was born in 1899 in the
Piedmont region of northern Italy, the son of a hard-luck farming family. By his own telling, his father Louis
took the year's corn crop to market, sat down to a game of poker, and lost every lira of it. By some accounts he
lost the farm as well. With nothing left to stay for, the family immigrated to California when Tony was a small
boy and settled in Santa Clara County. In 1908 his father was killed in an accident with a live wire, and the
family came apart. Tony and his two brothers were sent to an orphanage. They were not reunited with their
mother until she remarried in 1911.
He spent his teens making his own way, driving a taxi and shipping out as a merchant sailor, and he came away
with a working knowledge of the sea. He was twenty when the Eighteenth Amendment outlawed the making,
selling, and moving of alcohol. By most accounts he was a millionaire before he turned twenty-five. He went
by Tony the Hat. His whiskey came down the coast from Canada, a shrimp boat gave him cover, and a fleet of
speedboats did the rest. When the police stopped him in 1924, he was carrying checks bearing the names of
some of the wealthiest people in Los Angeles.
Tony did not make the run. He paid other men to make it for him, and he knew to the dollar what their risk was
worth. He was not the gambler in this arrangement. He was the house.
In 1925 the Los Angeles papers crowned him the King of the Bootleggers. A name like that has a pull of its
own. That same year a twenty-three-year-old LAPD officer named Eddie Edwards went to arrest Tony's
brother Frank over a quarrel about a bull terrier. A year later Edwards was off the force and hauling Tony's
liquor. He married Tony's sister and is buried beside the family.
For a while it looked like a sure thing. Judge Robert Gardner, who grew up in Balboa, remembered sitting on
the railing of the city dock as a boy and watching the speedboats come up the bay, unload their cases, and send
them off to Los Angeles by car. “It was all very open,” he wrote. The police tended to be somewhere else.
It was not a sure thing. Nothing ever is. A hundred years ago this month, in October 1926, federal agents
caught Tony's brother Frank on the Balboa Peninsula with 160 cases of whiskey coming off the speedboats.
Two months later Tony was indicted. He hid for three years, surrendered the week the stock market crashed in
1929, and was sentenced to two years in federal prison. Before he left, he sent a sheriff's captain a machine gun
for Christmas.
Prison did nothing to cool his hand. He was paroled in 1931 and went right back to testing the line and, of
course, winning. In 1938 he dressed an old ship in chrome and red neon, named it the S.S. Rex, and anchored
it off Santa Monica, just past the same three-mile line. It carried a crew of 350, with gourmet chefs, a French
dining room, a full orchestra, and a casino floor of roulette, dice, and blackjack that never closed. Hollywood
columnists called it a pleasure dome. It could hold two thousand gamblers at a time, and they lined up at the
pier in droves for his water taxis. He called them squirrels, not unkindly, and by one account they left him as
much as $200,000 a month. “This ship,” he announced, “is operated by courageous, open-minded American
citizens.”
The state ran out of patience in the summer of 1939. Attorney General Earl Warren sent 250 officers against the
four gambling ships anchored off the coast. Three gave up. Tony did not. He gated off the landing of the S.S.
Rex and turned the fire hoses on the officers who tried to board. The newspapers named it the Battle of Santa
Monica Bay. He held out for eight days. Asked why he finally surrendered, he said, “I need a haircut.”
California won in the end, so he went to Las Vegas and set out to build the largest hotel in the world, a
thousand rooms in the desert. He named it the Stardust.
The odds favor the man who owns the table. Nobody knew that better than Tony. He sat down at it anyway, the
way his father had. On July 31, 1955, with the Stardust nearly finished, he stepped out of a meeting about its
finances and onto the floor of the Desert Inn. By late morning he had lost $37,000 at the craps table. He was
arguing with the dealer over a single $25 chip when his heart gave out. The coroner said he was dead before he
hit the floor. He was fifty-five. The Stardust opened three years later, the largest hotel in the world. The man
who had been a millionaire at twenty-five had $800 in the bank the day he died.
Tony spent a lifetime being paid for risk, and never learned to walk away from the kind that pays nothing. In
investing, it is a good habit to know what you are being paid for. Someone is paying you to carry a risk. The
only questions are which risk, and whether the pay is enough.
It helps to know the going rates. Right now longer-term Treasuries are paying some of their highest yields in
nearly a quarter century. Essential-service AA/AAA municipal bonds are paying tax-free income whose
taxable equivalent, for investors in the upper brackets, hovers near the long-run average return on stocks. None
of that is a forecast, and it is not an argument for owning one thing over another. It is an argument for asking
yourself the question, Am I being properly compensated for this risk? Or am I holding it for free?
If you have any questions or would like to discuss any of this, you are always welcome to call.
Disclaimer:
Holt Investment Partners LLC is a Registered Investment Adviser. Historical material is drawn from published histories and reporting, including
local Orange County and Newport Beach histories, The Mob Museum, the Las Vegas Sun, UNLV Special Collections, and accounts based on
Los Angeles newspaper coverage of the period. These are secondary sources and may differ in detail; certain details rest on local accounts and
on Tony Cornero's own telling rather than primary records. A full source list is available upon request. Commentary on Treasury and municipal
bond yields is based on publicly available data as of October 2026; yields change daily. Taxable-equivalent yield depends on an investor's tax
bracket and state of residence, and municipal bonds carry credit and interest-rate risk. The Balboa Brief is provided for informational and
educational purposes only and does not constitute investment, legal, or tax advice, or a recommendation to buy or sell any security or asset
class. Views expressed are as of October 2026 and are subject to change without notice; any forward-looking statements are opinions, not
guarantees. All investing involves risk, including the possible loss of principal, and past performance is no guarantee of future results.
References to specific securities, asset classes, or third parties are for illustrative purposes only. Advisory services are offered only pursuant to a
written agreement and only where Holt Investment Partners LLC and its representatives are properly licensed or exempt from licensure.
