Henry Howard Harper

“ The prices of stocks are periodically rising and falling, and one might as well undertake to fight the ocean tide as to contest the course of the stock market when once in full swing in either direction; for the market, unlike the tide, has no prescribed boundaries. There are times—indeed most of the time—when it is much wiser to sit by in the capacity of an interested observer, than to plunge in and become a struggling participant, with the chance of being carried out beyond one’s depth. ”

“ When war was first declared, even before England became involved, the stock market was thrown into such a violent state of panic that it became necessary to close the stock exchange for several months; yet now when the clouds of disaster were at their darkest and hung menacingly over the whole of civilization this country alone was indulging in a riotous exhibition of prosperity such as had never been dreamed of. ”

“ From which it may be observed that in stock speculation, as in other pursuits, wisdom and the ability to master one’s own impulses are sometimes late in arriving at full maturity. Indeed a broker who for upwards of thirty years has held a position of outstanding prominence on the floor of the New York Stock Exchange—a man who often handles a hundred thousand shares or more in a single day—once admitted to me that while he generally made money for clients who entrusted him with optional orders, yet he regularly lost more than half his enormous commissions trading on his own account. ”

“ Nothing could be farther from the truth; nothing could disclose a more profound ignorance of existent facts than for one to adhere to any or all of these fallacious beliefs. The stock exchange itself has no more control over the price of securities than it has over the ocean tides. It is merely an auction room where anyone may send in orders to sell stocks and bonds, either at a certain asking price, or “at market” to the highest bidder. On the other hand anyone may put in either a limited or “at market” bid for whatever securities he wants, provided they are on the list admitted for trading ”

“ Their buoyant spirits increase with every [45] new success, until at length they throw discretion to the winds, extend their risks far beyond the margin of safety, and at the infallible turn of the market they find themselves in difficulty, like foolish fishes that get stranded on the beach at high tide. It is a fact, as inexplicable as it is true, that men with a fair amount of gray matter in their heads, who would flout the idea of paying $50 a share for a particular stock, will later borrow money from a broker at from six to eight per cent. ”

“ The sensation of being short in a rampant bull market has been pictured as similar to that of being chained by the heels to a rising balloon, without any idea of the height to which the gas will carry it—not a cheery picture for the contemplation of one who is bearishly disposed. ”

“ And thousands daily are influenced by the stock ticker to commit the most fatuous blunders.
As a camera fails to record a true picture if placed in too close juxtaposition to the object, so in studying the ticker-tape one is restricted to a close-up view of conditions, resulting in a distorted gauge of values; for the figures recorded often mislead and confuse the attentive observer; in fact it frequently happens that the price fluctuations result from a wave of hysteria among a coterie of traders, and bear but little analogy to the true value of the stocks. ”

“ They set forth an exhaustive array of statistics, instructions and warnings; they furnish elaborately charted plans indicating many of the pitfalls of speculation; they tell how to avoid these, how to buy, what to buy, when to buy and how to make money; but while the theories advanced are oftentimes sound and easily comprehended, very few people profit by them, because when once caught in the maelstrom of stock speculation the average man becomes more or less mesmerized, and at critical moments his conservatism, his resolutions and his theories all take flight. ”

“ It may be set down as an axiomatic truth that no one can learn the art of making money in the stock market by reading statistics, charts, precedents, theoretical disquisitions and instructions. Of course it is not needful, nor would it be any more practicable than it is necessary, to set forth any fixed rules or maxims governing one’s procedure in any other line of business or any other profession, since no one could use them advantageously without the requisite qualifications, such as adaptability, shrewdness and practice. ”

“ The nation had indeed gone prosperity mad, while the rest of the world was going to destruction—certainly an irregular and puzzling phenomenon. Occasionally when some veteran writer piped a note of warning to stock speculators, it was met with a new outburst of bullish demonstration, and the market swept on like a conflagration in a city built of tinderwood. Stocks that had lain dormant for months suddenly came to life and became the favorites of powerful cliques ”

“ Anyone who stops to consider knows that the market prices of the company’s securities are of far less concern to the officials than the matter of conducting their business operations at a profit. If the company’s earnings are good, it is clear that this fact will soon enough manifest itself in the demand for the securities, without any abortive or clandestine efforts; and if the earnings are poor, it would obviously be beneath the dignity of the officials to deceive the public through pool operations or pool affiliations. ”

“ To launch one’s bark into the rapidly shifting currents of fortune in the stock market and attempt to steer an even course is one of the surest preventives of ennui, and after deliberately weighing and analysing conditions from every conceivable angle our erstwhile leather merchant concluded that cutting a few coupons now and then was too tame an occupation for a man of his acumen and ambition. ”

“ A trader who is long of stocks knows to a certainty how much he can lose on any given number of shares; but on the short side there is no limit to what one may lose, even on a few hundred shares. The loss of a definite sum, whatever the amount may be, can be borne with equanimity by a man of nerve; but to maintain a short position in a bull market gives one about as uneasy a feeling as it would to have a number of outstanding promissory notes with the amounts left blank for some unknown person to fill in. It keeps one in a constant state of fear, and fear knows no limitations ”

“ There are many persons who, although knowing a great deal about the stock market, do not realize that the reason why they cannot “beat” it, is that they know too little about themselves. There are others who know their limitations well enough to let this monster problem alone. As it is important that one should learn to swim before plunging into deep water, so it is well to know some of the dangers of the stock market before delving into it. ”

“ Today, after fifteen months of national sunshine and cloudless skies in all directions, we believe it behooves a man of affairs to take counsel with himself relative to his investment and speculative position. Many business men who should have learned better by past experience, still take the business situation as a guide to their stock market [78] operations in spite of the fact that all stock exchange history shows that the market turns up long before a period of business depression has run its course and likewise turns down six months or more before prosperity comes to a pause. ”

“ A man who accumulates large paper profits in speculation and fails to “cash in” until a large part, or all, of his gains have been dissipated in the process of deflation which inevitably follows every boom, is comparable to one who plants a field of grain and refuses to harvest it at maturity, hoping that the ripened kernels will get a little larger. Many a speculator has been brought to grief by an insatiate greed for that coveted topmost point, instead of being content to sell at a good profit and leave the possibility of a [76] small gain to the individual who buys his stock. ”

“ On the contrary, the speculative element represents for the most part men of uncommon shrewdness and foresight; men of studious and analytical minds; men who are, or have been, masters of every situation in their own professions or commercial vocations, even though most of them act like children when they get tangled up in the meshes of stock speculation.
Nor should it be imagined that the stock market is primarily a guessing game, or a game of chance ”

“ When the whole country becomes pervaded with an epidemic of bullishness the action of speculators is always directed by sentiment rather than judgment; and a market that is swept along by excited emotions [83] is always dangerous,—dangerous to go short of and dangerous to be long of. Hysterical “bulls” care nothing whatever about the earnings or dividend returns on a stock; the only note to which they attune their actions is the optimistic slogan, “It’s going up!” and the higher it goes the more they buy, and the more their ranks are swelled by new recruits. ”

“ In a bear market a train wreck, or the death of some financier, or an earthquake in Europe, will put the market off to the aggregate extent of hundreds of millions; whereas one of the greatest bull markets in history found its chief impetus in the most universally devastating war the world has ever known. ”

“ He reasoned that if he gained by selling a stock short, although someone was apt to be the loser, he had no means of knowing who that someone was, therefore he assumed no moral responsibility in prudently acquiring money in a businesslike way, even at the expense of some indefinite person who had been foolish enough to risk it. If the act of selling stocks which one does not own is regarded by some as being unethical in the strictest sense, it is at least sanctioned by general custom. All sorts of goods are sold for future delivery, even before they are manufactured ”

“ No one has ever been able satisfactorily to explain why the prices of all stocks, both good and poor, and even gilt edge bonds, keep an almost even pace in the backward and forward swings, but they do; and thousands of people who have placed their savings in securities that are as sound and safe as a savings bank have viewed with alarm the crumbling market values of their investments, wondering what has happened to their [74] particular stocks or bonds, and if the slumping prices foreshadow a reduction in dividends, or if interest will be defaulted on coupons. ”

“ It is a popular belief with many people that the stock exchanges are highly prejudicial to the public interest and to public safety; as if they actually manufacture stocks, fix their price, and sell them to the public. It is also believed by many persons—even by men with enough brains to buy and sell securities—that whatever they lose on their transactions is gained by the stock exchange or the broker through whom they trade ”

“ It has been wisely observed by one who is more famous for the wisdom of his writings than for the amount of money he has made in speculation, that when a market reaches the top there is no visible sign to indicate it; that on the contrary, at this critical point, everything seems to indicate much higher prices. Also the majority of traders, tipsters, financial editors, and even the brokers themselves, are apt to be most bearishly disposed when the market is at its lowest point. ”

“ When one [71] buys a stock, either for investment or speculation, its value cannot be permanently affected by the action of other traders, and no individual or group of individuals can euchre an investor out of his stock except by his own free will. The man with a hundred dollars has the same relative chance for making money as the man with a million; but the difficulty is that the one with the smaller amount is ambitious to make equally as much as the one with the million; therefore he resorts to gambling on thin margins; and not being content with ordinary risks he plays a long chance shot. ”

“ The most important thing in golf, and the hardest thing to learn, is to keep the eye on the ball while in the act of hitting it; and the hardest thing [95] to learn in stock trading is to keep the eye off the market, hold firmly and patiently to good resolutions, and not try to get rich too quickly. Both look to be easy, but—
Reducing the whole problem to its simplest form, the stock exchange is a well-organized and honestly conducted market-place where anyone may sell or buy investment or speculative securities, at whatever price anybody else is willing to pay or accept for them. ”