Stockbroker

“ But securities for which there is always a ready market are such thoroughly good collateral for loans that bankers are glad to get them.
The stockbroker is, in a way, a dealer in merchandise. Whether he buys for investment or for speculation—and remember that the boundary line between investment and speculation is often shadowy and indistinct—he pays cash for everything he buys. He then seeks advances of credit upon his wares just as the merchant does, supplementing his own capital and the deposits (margins) of his customers with call or time money from the banks. ”

“ Persons who wonder at the magnitude of Stock Exchange transactions, and who jump to hasty conclusions as to the actual capital involved, may well reflect upon the manner in which this method reduces to a minimum the stockbroker’s drafts upon the banks. ”

“ There were probably few among the active members of the Stock Exchange who did not, at this time, know nearly as much about the causes of the panic as 241even the three men who produced it, and among all the brokers, except those in the employment of the syndicate, only indignation was expressed at the operations of Wolf, Claybank, and Gray. The New York stockbroker is neither a Shylock nor a miser. He is usually a genial, generous sort of fellow, who prefers a bull market to a bear raid. He likes to make money himself and have everybody else make it. ”

“ Persons who conjure nightmares over the practice107 of the banks in loaning surplus funds to stockbrokers are deceiving themselves. Instead of losing by this system, every merchant and manufacturer in the land profits by it in greater or less degree. The stockbroker deals in the bonds and shares of great railway and industrial companies, which, in order to succeed, must be able to sell their certificates to the public and so raise the money necessary to provide the extensions and new construction that are constantly demanded by the public. ”

“ The shares I speak of are worth mighty little to those who aren't 'in the know,' and a lot to those who are. If you'll call to-morrow morning at ten o'clock on a stockbroker in the City, whose address I'll give you, and tell him you've a block of Clerios to dispose of, he'll jump at the offer. All you must do is to stand firm, and you can get eight hundred pounds out of him. ”

“ Get stuff that you can put in the green box in the safety deposit vault and not have to worry about.
The stockbroker has a lot of unwritten history about the business man who divides his energies between his office and the ticker. The business man who is trying to make more progress than his competitor in business and at the same time trying to beat out the stock market is dividing his energies, and between the two occupations he is likely to fail. Be a generalist in pleasure and recreation, but not in business. ”

“ He is under immense liabilities in various directions and he has many obligations; whereas the stockbroker feels every minute of the day that his first duty is to the bank; the customer who owns the securities in the loan must either deposit sufficient margin or the broker will sell him out, in which case the loan at the bank is paid off. Finally, it may be added that in the October panic of 1907, when merchants’ failures were announced daily, and when certain banks and trust companies closed their doors, not a single failure was announced on the New York Stock Exchange. ”

“ The mere manipulation of stock is undesirable. The member of the public who thinks that he can compete with the professional stockbrokers is likely to suffer heavy loss. He will do better to make a genuine investment in a stock, with the idea, not of selling, but of getting good interest on his money from the dividends which the stock pays out of the proceeds of the business which it represents. On every transaction in stock the buyer or seller pays one-eighth per cent. of the money which he pays or receives for the stock to a broker. The number of brokers in a stock-exchange is limited. ”

“ What is stock? says one, unhappily, in consequence of his own laziness and ill-luck, or of the laziness and ill-luck of his fathers before him, not a holder of such. Stock, O benighted individual, is a term applied to the various funds which constitute the National Debt, the interest on which is paid half-yearly. Few persons buy or sell stock except through a broker, and this is the original business of the stockbroker, and it was for this the Stock Exchange was erected in 1803. It is only since the peace that the present immense traffic has sprung up in miscellaneous and railway shares. ”

“ The Red Shallows flotation is too small an affair to cause even a flutter in the city, yet it threatens to grind me to pieces."
"There are, you say, twenty stockbrokers selling these shares and you know their names. Where do they offer the shares?"
"On the Stock Exchange, in their offices, in the street, anywhere."
"Is there another twenty stockbrokers whom you could trust?" ”

“ He achieves the Stock Exchange Crowd without difficulty and moves on up into the Banking Set composed of trust company presidents, millionaires who have nothing but money, and the élite of the stockbrokers and bond men who handle their private business. ”

“ Persons who denounce the relationship existing between banks and stockbrokers are in most instances upright citizens of high character, but until a little patient study of conditions has enabled them to speak with authority upon matters that are necessarily complex and delicate, they cannot accomplish any really useful purpose. ”

“ The care and attention required to handle an enormous lot of orders given in this deliberate manner is something with347 which New York stockbrokers are quite unfamiliar; indeed it may be doubted if they could meet such an emergency with their present facilities. ”

“ The only evil that I could ever discover was that the market is denied the support which the actual carrying of the stock is calculated to afford. This hardship weighs heaviest on the promoter. There appears to be no cure. Even if a broker does buy the stock and does not himself sell it out again, there is no law that denies him the right to borrow on it or loan it to somebody else. And it is to the interest of the broker, because he gets the use of the money, to loan the stock always. Stocks are rarely borrowed by anybody except to make deliveries on short sales. ”

“ In margin-trading on the New York Stock Exchange, New York Curb, Boston Stock Exchange, Boston Curb, Chicago Board of Trade, Chicago Stock Exchange, New York Cotton Exchange and kindred institutions, experience among stock-brokers proves that if you stick to the game you have only one chance—YOU CAN LOSE.
In railroad, industrial and mining-stock speculation, where you buy the shares outright and hold them for stock market profits, you have two chances; if you are of the average and your operations are for a period continuous—YOU CAN BREAK EVEN IF YOU ARE VERY LUCKY, OR LOSE IF YOU ARE NOT ”

“ Prominent in the banker-director mind is always this thought: “What will be the probable effect of our action upon the market value of the company’s stock and bonds, or, indeed, generally upon stock exchange values?” The stock market is so much a part of the investment-banker’s life, that he cannot help being affected by this consideration, however disinterested he may be. The stock market is sensitive. Facts are often misinterpreted “by the street” or by investors. ”

“ It is not a sufficient answer to this view to say that the business of a stock-broker is ordinarily distinct from the business of a banker, or that according to the common understanding a stock-broker is not a banker. A stock-broker may do some of the kinds of business that are usually done by bankers, and many banks and bankers do business which, as a general rule, is only done by stock-brokers. ”

“ The business of the stock-broker is just as legitimate and necessary as that of a dealer in clothes, groceries, or hardware; and a man may be as pure-minded and holy a Christian at the Board of Brokers as in a prayer-meeting. The broker is, in the sight of God, as much entitled to his commissions as any hard-working mechanic is entitled to his day's wages. Any man has as much right to make money by the going up of stocks as by the going up of sugar, rice, or tea. The inevitable board-book that the operator carries in his hand may be as pure as the clothing merchant's ledger. ”

“ It is so whether the purchases or sales are by investors or speculators, for speculation on the Stock Exchange is not gambling. Whether stocks, or bonds, are bought, or sold, by investors or speculators is immaterial between the contracting brokers on the floor of the Exchange. They know no difference whatever. Delivery of the stocks or bonds is made by the one, and received by the other, in every case, and payments made accordingly, at the sale and purchase prices, investment and speculative transactions being treated exactly alike. ”

“ These constitute the important intermediary which transforms stock exchange securities into the basis of bank-loans. The commercial banker buys, in general, not the stocks, but the note of the private banker, broker, speculator, or investor, with the stocks as collateral. If investment bankers, speculators and investors decide to support old ways of doing things, the banks lend on the securities of the old kinds of businesses; if investment bankers, speculators and investors turn to new things, the commercial banks follow suit. ”

“ That, of course, is not the only advantage of employing a broker as agent to deal with a jobber who is a merchant. The wares of the Stock Exchange are numerous and varied; more than four thousand separate securities are quoted in the Official Price List of the market, and the number of stocks and shares dealt in which are not quoted in this list is legion. One might wander about the Stock Exchange all day, and frequent hundreds of brokers' offices which surround it, without being able to find a seller of the certain stock one wants to buy, or a buyer of the certain stock one wants to sell. ”

“ My brokers will purchase for cash all the stocks they offer, and, on deposit of sufficient margin, loan them the stocks back again, to be again sold to me. In brief, I will take all their ‘shorts,’ and all the stocks sold by others which their conspiracy will force upon the market. When they have forced prices down to a point where they are ready to cover their shorts and buy for an advance, I will suddenly jump prices to the level they occupied before the conspirators commenced their operations, and thus commend to their own lips the bitter draught they have prepared for others. ”

“ The brokers execute the orders of bankers, merchants, and private individuals; and the jobbers are the persons with whom they deal. When the broker appears in the market, he is at once surrounded by eager jobbers. One of the cries of the Stock Exchange is, 'Borrow money? borrow money?'—a singular cry to general apprehension, but it of course implies that the credit of the borrower must be first-rate, or his security of the most satisfactory nature, and that it is not the principal who goes into the market, but only the principal's broker. ”

“ But the stock-broker, as he exists in the every-day life of our community, typifies signally the gambler’s yearning to gain wealth by short cuts, and the monomania which regards as pitiable those who do not possess and display the gewgaws of feverish, fashionable materialism. There are stock-brokers in all the great capitals of the world, but nowhere has the vocation swallowed up the sons of the best people to the extent that it has done here during the last thirty years. ”

“ The many thousands of brokerage offices throughout the country were jammed to the doors by eager onlookers and participants who devoted themselves exclusively to the market from the opening to the close. Office boys, elevator men, manicures, hotel waiters, hairdressers, cab drivers, and even rural farmers initiated themselves into the game and discussed mergers, split-ups, stock dividends, and all such subjects in high finance with more profuseness and profundity than was ever displayed at a bankers’ convention. ”

“ The speculating public gets action, likes it, and invests money that might have been used in margin-trading on the New York Stock Exchange or for "investment" in the constantly fluctuating low-priced industrials or higher-priced mining stocks that are sponsored by big interests with New York Stock Exchange affiliations. ”

“ Dangers of the new system of business; promotion of unprofitable enterprises.—The appeal of joint stock companies to the public through the medium of the stock exchange proved to be so effective in gathering capital that a great many worthless undertakings were floated. When times were good, that is, when enterprises had proved successful, when people had saved money for investment and looked with confidence to the future, almost anything in the shape of a158 company could get subscribers to its stock. ”

“ One broker after another is really nothing but a family investment agent. That is what it amounts to. There are railroad magnates, bankers, steel kings, copper kings and so on indefinitely. Hundreds of firms in the New York Stock Exchange are nothing but channels for the investment of accumulated wealth and I do not think we realize how much there is of that in this country. ”