Arthur Crump

“ I do not say this simply because I am a broker in options, but because it is my honest conviction that options are cheap at almost any price, when a speculator has occasion to use them. If money is lost by buyers of options, it is because many of them are bought by people who have not sufficient reasons for doing so, and after the option has been bought, the owner does not know what to do with it. I have, for example, known people to be bulls on Lake Shore, and then go and spend money for a put in Western Union. Is it any wonder that men who do business on such principles lose money? ”

“ The Stock Exchange speculator has an innumerable number of influences arrayed against him, at least one-half of which he never sees at all until, like the sunken snag, which sinks the steamer without any warning, one or other of them wrecks his fortunes before he is aware of his danger.
A speculative operator has a very dangerous basis upon which to lay the foundations of the argument by which he endeavours to justify himself, and it is this. He says to himself: “there are only two ways for a price to move—up and down.” ”

“ Speculation, as we know it in our time, is a very different affair from what it was fifty, and even thirty, years ago. Value in all markets in our day is unsettled with the lightning flash that laughs at the bed of the Atlantic as no better than a span of space, while the forces that close in on all sides, representing demand and supply, with a responsive thunder-clap, adjust the new level as each market grasps in a moment the cause of the disturbance. ”

“ Speculators never set sufficient value upon the importance of avoiding a loss: they think only of the profits. As it is with our money affairs when we say, Look after the pence, the pounds will take care of themselves; so it is with speculators, look after the losses, the profits will take care of themselves. “Never refuse a profit,” is a golden motto for the speculator, which unhappily few of them in their greediness have the courage to adopt. ”

“ Luther himself could hardly have desired a better proof than this of the pranks which the imagination plays us when dealing with that sense of merit and demerit, so closely bound up with our human egotism. We give ourselves credit, and get credit, I suspect, for a vast deal more both of wisdom and folly in life than we deserve. Are nine-tenths of the prizes and the blanks of life at all more ascribable to any fine selective purpose or deficiency thereof in him who draws them, than my losses, or my friend the Cantab’s sudden retrieval of his loss? ”

“ As compared with the professional tricksters who manage these riggings of the markets, even the best of the outside speculators, who have had long experience and think they can stand on one side and profit by the gullibility of the public, discover themselves frequently the wrong way, when the course of the market for some time at length reveals unmistakably the drift of the experts behind the scenes. The man who must speculate should be early in, and early out, being contented with a cut off the loaf and pass it on; for it is the profits missed that ruin the speculator. ”

“ A man who is going to operate on a large scale will be equally dishonest if he have not a large capital, as a small speculator who has no more than his £300 a year out of which to save up if he loses more than he can pay. It seems hardly necessary to state that a speculator who operates in the Stock markets and loses without having anything of his own wherewith to pay, inflicts just the same loss upon the broker who does the business for him, as he would upon a butcher of whom he purchased a leg of mutton, consumed it, and then declared he had no money. ”

“ In order to bring more forcibly home to the mind of a man who may know nothing of Stock Exchange matters, the wisdom of imprinting upon his understanding the uselessness, in the long run, of playing at what is nothing better than pitch-and-toss, we will just sketch a case in point as an instance:—Supposing a speculator to enter the office of a stock broker. ”

“ If he intends to buy a large amount of stock, which he knows is going to rise, he throws off the cloak of secrecy when he enters the market to sell, and depresses the price as a preliminary feint, so that the contemplated rigging of the price may be as little encumbered by bulls as possible. When it is known in a market that a great speculator is selling, weak bulls are speedily frightened out, and when he has such an object in view it is his “game” to intimidate with all the force of his prestige and the power of his capital. ”

“ The most brilliant good fortune which may result from the operations of a speculator generally fall below his anticipations, when the operations are reduced to figures. It appears that the imagination gets, as it were, diseased by feeding on the contemplation of very rapid gains; and that whatever may be the reality of a hypothetical gain, the mind gets bewildered and fails to estimate as an element of loss, the surrounding husks in which the fruit is enclosed. One forgets that every tangible advantage, in whatever form obtained in this life, has to be got out of a shell. ”

“ They defend the viciousness of their lazy amusement by saying to themselves that the chances must at least be as much for them as against them, inasmuch as there are but two ways for the price to go—up and down. Many a man who has fed and encouraged this itching sensation, which can only be appeased by having passed through the excitement of running a certain risk, finds himself so bound by its spell that in very many cases nothing short of absolute ruin succeeds in quenching his thirst for such excitement. ”

“ Persons who are so loud in their protests at reductions in the Bank rate can never have been buyers of money themselves, or, in other words, sellers of bills. To keep the value of money the smallest fraction above what is actually necessary at the time, by the capricious exercise of a brief authority, is to commit an act of unwarrantable injustice, and to rob the needy. We say if the Bank directors maintain a higher rate of discount than is necessary, they rob the needy, and compel holders of bills to pay an illegitimately high rate of discount. ”

“ Pure speculation as a business, the sole object of which is to gain money, is, from the point of view of risk, removed far out of the ordinary path in which men labour for profit. Only a small percentage of men desire, even if they thought they possessed the required exceptional qualities, to gain their living in such a way. Most men reason that life is short, and that to spend it always in an atmosphere of excitement, under circumstances which keep up a constant destructive mental strain, is a mode of gaining money that involves too heavy sacrifices. ”

“ Now, if the playing of public games of hazard are on the decline from the interference of the State on moral grounds, the question arises: are there any considerations applying to Stock Exchange gambling, which, as a game, raises it above other games of chance, and entitles it to special privileges? Does the outside haphazard speculator stand a better chance as against the Stock Exchange, than a player at Rouge et noir against the bank? ”

“ If you tell persons who are throwing a die that the six will turn up once in six times in the long run, they can form some estimate of their chance of winning. But until a Stock Exchange speculator has been roughly undeceived, his understanding gets entangled so that what he sees clearly only at first, is what is in his favour, because his first interest is to discover that. What is against him, he disregards until he has discovered it has undermined him, and all goes together.
In cases where the public play against a bank, it is so managed that the bank has a better chance than the players. ”

“ The man who makes a study and business of speculating, investigating every detail that it seems necessary to probe until he has adapted it to the rest of his machinery, will be found to be a hard-grained man, sailing very close to the wind, while your persistently haphazard man is mostly a person of flabby character, and no less flabby mind, as easily frightened off a line that he has set himself to follow, in the innocence of a heart that expands with a delusive consciousness of possessing power, as a stray rabbit. ”

“ Money cannot be made for a continuance with any degree of certainty without hard work. When this proposition is demonstrated, which it undoubtedly can be, the whole question of speculation as an occupation, a pastime, or a business, call it what we will, resolves itself into this, that unless a man devotes the same hard work to it that is necessary to earn a fortune in any other calling, plus the possession of an intellect of a special order and considerably above the average, he must be a fool to speculate at all. ”

“ After a severe commercial collapse, like that of 1866 for instance, all securities are low in price, holders of them have been compelled to realize through the debacle which has for the time destroyed credit, turned profits into losses, and frightened everybody into hoarding the precious metals. When things are beginning to mend, and a resurrection of industries takes place, the tide of the national profits begins to turn, and, rippling back into innumerable channels where securities of all sorts have laid high and dry and neglected, again floats them into notice. ”

“ Another reason for the unwillingness of some brokerage houses to encourage speculation against options must be found in the fact that a great many of them have not sufficiently large capital to enter upon large transactions without any other margin than the option. Although I acknowledge that it is hardly fair to ask a broker to do an unlimited amount of business based on options alone, the fact, nevertheless, exists that the strongest houses have always been glad to encourage trading against options, and only the more insignificant houses are opposed to it. ”

“ At every rise and fall in a country’s prosperity there is a flow and ebb in the tide of speculation, not only in stocks and shares, but in all markets. We refer now to that class of speculation which is an excrescence of prosperous times. A merchant’s business is at all times more or less of a speculative nature, it cannot be otherwise; but this is very different from the speculation of outsiders in commodities which they know nothing about. ”

“ Greediness Involves Loss.
Then there is the fatal blunder made by almost every inexperienced speculator, of never being satisfied with a moderate profit. If he buys, and the price rises 1⁄2, he cannot make up his mind to take it, but must wait for 3⁄4; when it has reached that he must have 1 per cent.; and when that rise has been attained to, he wants another 1⁄8 or 1⁄4 to cover the commission. Like the dog, in attempting to grasp the shadow of his bone, he loses all. ”

“ The speculator in the bacon would be playing in a legitimate sense the part of the bull, and the speculator in corn that of the bear. It will be admitted that there is what we know as a reasonable price for all things, and that it is better for all concerned that a reasonable relative value is maintained for all articles than that anything becomes either extravagantly dear or so cheap that it is worth no one’s while to produce it. Every article of those consumed by mankind in their several stations has its fitting place either as a necessity or as a luxury. ”

“ If legitimate trading business, in which the risk of loss is so reduced as to enable a man to earn a living at it, cannot be carried on without adequate capital, how is it possible that pure speculation can be successfully practised in which the conditions are reversed, and at which experience shows that no one can succeed except the professional expert, and only then in some cases under circumstances to which we have before referred? ”

“ For a man to tread a path in which he must systematically not only disregard the interest of other people, but deliberately calculate upon the weaknesses of human nature which characterize the crowd, in order to work upon them for his own ends, it is obvious that he must be constituted in a quite exceptional manner, and not in a way that it is at all desirable that others should attempt to imitate. ”

“ The young corn is beginning to clothe the naked furrow, and the various fruits of the earth are appearing, which only to read and hear of is to fill the eye with a sense of plenty that half converts a Tory Stock Exchange operator into an ultra-radical speculator. ”

“ He is then free to buy at prices which are sure to be unduly depressed, and instead of the dreary waiting to recover from losses incurred, he makes in a very short time probably a handsome profit, again retiring to avoid the reaction that follows a sharp recovery, to await a similar favourable opportunity. To be overtaken, with large amounts of stock open for the rise, by a panic which engulphs a speculator’s money and upsets his judgment at the same time, is among the least excusable faults when committed by the man who starts upon any system. ”

“ It is obvious that, when a man enters a market with a view to doing business, his object is to transact it upon the most favourable terms for himself. He confronts those who are prepared to deal with him either way, that is, to buy or to sell. According as he “opens” to the dealers, or, in other words, indicates what he wants to do, the dealers will make their prices. If he be a buyer, they will try to get him to pay as high price as possible and vice versa. His business therefore, if he be really a buyer, is to try to look as if he were a seller. ”

“ Each stock, and each description of shares, has its history, and is influenced more or less by special causes, as well as by general causes. Each stock, therefore, requires to be constantly watched, after it has been studied, and its peculiar characteristics well ascertained. When it is said that these stocks and shares are numbered not by tens, or by hundreds, but by thousands, it is easy to understand that no one man can master the special knowledge concerning each, which however every jobber who understands his business should do, within the limit of those in which he usually deals. ”

“ THE RIGHT TEMPERAMENT FOR A PROFESSIONAL SPECULATOR.
A man who wins by haphazard speculation, who chances to operate successfully until he has filled his pockets, and retires with his gains from so fascinating an arena, is one in a hundred. Any one who knows anything of Stock Exchange speculation will confirm the statement that, to the ordinary run of men, the game is not worth the candle. There are, however, conditions under which speculation, in a market where ten or fifty thousand pounds can be lost in half-an-hour, may, under given conditions, be systematically practised profitably. ”