Stock speculation

“ Stock Exchange speculation is very deceitful to the eye, and also to the ear. In some respects its associations are like those of a morass, under whose smooth and inviting surface are hidden the remains of unwary travellers. Those who are new to the business see only the glittering surface, and hear only of the fortunes made by stock brokers. People seldom tell of their losses. ”

“ No commercial or industrial depression, no bad news from any quarter, no offerings by holders of stock anxious to unload, had any effect upon Wall Street quotations. But the market was by no means a healthy one. Speculation had almost ceased—perhaps a good thing in itself, but the reason for it had no virtuous significance. Even speculators will not play a game they know they do not understand, and nobody understood the great game which an unknown power was playing quite in its own way in the stock market. There seemed to be no limit to its resources. ”

“ 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. ”

“ When stocks have attained a reasonably high level of value as a result of the recovery [105] of a country’s industry, the chances for the speculator to profit by a continuous rise are of course gone, and he seeks in other directions to turn his capital to account; but the example we have given illustrates perhaps the most legitimate of all forms of speculation in Stocks, provided always the operator knows his business, and allows a sufficient margin for contingencies. ”

“ The market tipsters, the financial editors of newspapers, the brokers’ letters and all stock market literature, with but few exceptions, were crowing loud and boastfully for still higher prices, and after the whole group of stocks had risen in unison for a time, some individual stock was singled out every day or so, pushed into the forefront and skyrocketed to dizzying heights. The brokers and all the customers were delirious with joy and excitement. ”

“ Men of Wall Street, it is impossible to prevent the repetition of those acts by which in five years I have accumulated a billion dollars, impossible so long as a short sale or a repurchase and resale, is allowed. When short sales, and repurchases and resales, are made impossible, stock speculation will be dead. ”

“ Wild speculation by all classes of the community, particularly in land, mining shares, and Stock Exchange securities, but not as a rule in produce, the wealthiest capitalists in the country entering into stock speculation in the late summer, and using most unscrupulously their power over company finance to help along their purposes ”

“ While there is much of what may be deemed pure speculation (some of it reckless and unprincipled enough) carried on through the medium of the Stock Exchange, it should be remembered that there is no business, however legitimate or conservative in its character or pretensions, that has not its speculative side, and does not present ample opportunities for reckless or inexperienced men to ruin themselves if they choose. ”

“ With such tenacity do speculators hold on to a stock, hoping for a recovery when they have made a loss, that they will leave it as a man drops into the sea from a burning ship, only when he is singed by the flames. ”

“ Unless a speculator, whether in the Stock markets or any other market, is prepared to lay down all the elaborate machinery, without which, in these times, it is utterly hopeless to attempt to achieve favourable results in any degree, he must inevitably in the long run lose his money. ”

“ What are the further obvious deductions from the large increase of speculation in public securities thus suggested, to confine ourselves to one kind of market? If the business of the Stock markets were reduced within safe and legitimate limits, that is, was confined to operations of a bona fide investment nature, it is certain that no more than one-tenth, it might be one-twentieth, of the brokers would be required to execute properly all the orders that come into the markets. ”

“ If a speculator has not closely studied the special causes that influence the Stock markets at regularly recurring intervals, he has not learned the alphabet of his business. We shall endeavour to pass in review some of these. First of all, there is the temper of the public. Many persons have puzzled over the causes which will at one time combine to produce activity among buyers of stocks, and at another dead stagnation ”

“ 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. ”

“ What are the possibilities of profit in stock speculation? That question is frequently asked but it is difficult to answer. James R. Keene is quoted as having said: "Many men come to Wall Street to get rich; they always go broke. Others come to Wall Street to operate intelligently for fair returns; they usually get rich."
While it is true that nearly all stock traders who try to make unusually large profits in a very short time in stock trading lose, yet unusual profits can be made if you exercise good judgment and have patience. ”

“ If, for example, it be accepted as proved that one Stock Exchange transaction in twenty is bona fide, it is obvious that when the speculation in those markets shrinks up for the time, which it is sure to do when it has had its run, a number of stock brokers whose business has been established by reason of the increase of speculative operations must fail, unless they have made enough money during the period of unusual activity to be able to live through the period of stagnation that intervenes before the next revival. ”

“ Men are too busy to learn by travel and reading that which, in the interest of the whole country, they should thoroughly understand. Thus it happens that a section of the country given over, let us say, to agricultural pursuits, having first acquired the notion that speculation in securities is only a form of legalized robbery, assumes that to New York City and the New York Stock Exchange is confined a greater part of the stock speculation of the world. ”

“ Many indeed without knowing anything about Wall Street speculation, and who have never speculated anywhere, blame speculation for a host of evils that are in no way due to it. Some of them would even close the Stock Exchange to stop speculation there, forgetting apparently that this would deprive investors and banking institutions as well as speculators of a market for securities, and make all the stocks and 963bonds now listed and dealt in there practically unmarketable. ”

“ 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. ”

“ The fact remains, however, that speculation by machinery, or in other words, the modern system of cramming the public with securities wholesale, may be attended with a good deal of mischief, and although it is too much to say that people who launch new undertakings upon such a system are necessarily unscrupulous, there are strong reasons for looking very closely at securities known to proceed from the offices of firms whose business it professedly is to make money by manufacturing stocks and shares wholesale, and forcing them upon the public. ”

“ 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 ”

“ 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 ”

“ A well planned and matured operation, looking far ahead, backed by ample capital and patience, is the only way to make a fortune at the Stock Exchange, and prudence demands that in case the speculator’s idea should have been wrong, he should have a safe way for a retreat open. Options will fulfill all these demands; and no matter how expensive, if the speculator can afford it, it is the only way of speculating in a safe and reasonable manner. ”

“ The “turn” comes in the second rank of obstacles which stand between the speculator and the goal, or profit, which it is his aim to reach, and is the most formidable of the fixed and, it may be said, inevitable, elements arrayed against him at the start. When a speculator enters the markets, therefore, he has to do his share of keeping both the broker and the jobber, and that not only when he commences his operations, but also when he finishes. ”

“ A number of brokers or jobbers, or both, in the markets will be instructed to run a stock up, after a goodly number of bears have been decoyed in by a gently falling price from day to day, seasoned with unfavourable reports. Those who are able to command a sight of the jobber’s books, know of course exactly the position of affairs, and the price is rigged until the weak speculators for the fall are simply frightened in. This is done upon even a more extensive scale in the opposite direction, for the simple reason that the general public as speculators, are bulls by nature. ”

“ At first sight the chances seem to be as much in his favour as against, and he thinks the failure of others to make a profit must have been the result of mistakes made by them, which he will avoid. But does it occur to such an one that if there were any easy and certain method of making money by speculating in stocks everybody who had a little capital would at once commence to speculate? Speculation in the Stock markets has almost irresistible attractions as a mere amusement, quite apart from its being a kind of occupation which is the most luxurious and exciting mode of making money. ”

“ The great evil of speculation consists in the buying of securities or real estate or anything else with borrowed money, by uninformed people who cannot afford to lose. Its commonest form in speculation in securities is what is known as “margin” trading, this name being derived from the fact that the buyer, instead of paying cash in full for his purchase, deposits only a fractional amount of its cost, which is intended to serve as a margin to protect the broker from loss, while the broker pays the remaining sum necessary to complete the actual purchase. ”

“ Much mischief and trouble would be avoided, and a deal of money saved, if, before entering upon such a dangerous career under the most favorable circumstances as that of a speculator, a study were made of the difficulties such an occupation involves, and also of the chances against the operator, considered as one individual versus the Stock markets. It is melancholy to think of the vast sums of money that are invested in the most serious sense of the word, annually by Stock Exchange speculators in the purchase of a sorrowful experience. ”

“ It may with tolerable certainty be argued that new stock brokers and new jobbers in the early part of their career depend very much upon speculative commission business, and the above figures, therefore, afford ample evidence of the increase of speculation in these markets. ”

“ The illegitimate speculator is the one who starts with a small capital and with some method, with the idea of increasing it upon a system of incurring risks which, in the ordinary course of the market he may operate in, will enable him in case he has wrongly calculated the course of prices, to pay his losses and go on again. ”

“ It is not so easy to be good on nothing after one has had £5,000 a year, and hence a deal of the mischief that results from the foundering of Stock Exchange speculators.
The haphazard man, who is the antithesis of the professional speculator, will generally be found as differently constituted as are the results of his operations. ”

“ 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. ”