Volatility

“ 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. ”

“ For years they braved the wear and tear, the din and tumult of the world's market-place, and like brokers in stocks that change, find in the end no gain, or only gain that counts for loss, as leading more from God. ”

“ Since most of the country’s wealth and commerce is controlled by corporations whose securities are listed on the various stock exchanges, the price fluctuations, which often reach the daily aggregate of hundreds of millions of dollars, either in loss or enhancement of value, are necessarily a matter of general concern. ”

“ It began in a calm—a quiet, happy, pleasant calm—a calm that may be typified by a man seated on the lawn at Barton, and smoking in the shade, with sheep bleating at a distance.
It came out of a calm, we say—a delightful time of rising markets, when the bulls of the Stock Exchange were in clover, and the bears at fault. It began when most kinds of shares were at a premium; when all sorts of companies were paying big dividends, and 5l. shares were selling at 8l. and 10l.; when everything was “looking [Pg 144] up;” when men bought to invest, and even bought one day to sell the next at a profit. ”

“ You know, Monsieur, that, in the stock-market especially, and more or less in every other kind of speculation, the greater part of the transactions are fictitious, to a certain extent. Par exemple: you buy or you sell so many barrels of flour, at such a price, on time, as it is called,—that is, you engage to receive, or to deliver, so many barrels, at the prices and in the times agreed upon, in the hope, that, before the period of your contract comes round, prices will have so varied as to enable you to buy, or sell, the quantity bargained for, upon terms that will give you a profit. ”

“ In a period of depression, the banks accumulate money, and there always is an abundance of money at the beginning of a bull market. During a period of prosperity the banks' reserves decrease and their loans increase. ”

“ 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. ”

“ The stock market might have given me a twist but you know the old saying—you can’t keep a good man in glass houses. Right now I know where there’s a package of money all wrapped up and waiting for me to call around and collect it. ”

“ Within the major movements of stock prices, there always are several minor movements, which are caused by various influences. One of the important causes is the technical condition of the market. Another cause might be called a psychological one. When stocks are moving up steadily in a bull market, people closely connected with the market expect a reaction and watch for it. ”

“ The blood of the land, to speak of money under that title, is thrown into Wall Street as the blood of the body is thrown into the head, and so in Wall Street, we have our men on the watch to tell us whether the currency is in a healthy or unhealthy state. ”

“ Stocks went on rising; speculation went mad; bankers, merchants, lawyers, doctors, mechanics, laborers, even the very washerwomen and servant girls, were putting up their earnings on silver stocks, and every sun that rose in the morning went down on paupers enriched and rich men beggared. What a gambling carnival it was! Gould and Curry soared to six thousand three hundred dollars a foot! ”

“ Stands.—The end of the month will be a good time to examine the pedestals upon which the stocks are placed; for it is not unusual to hear of a stock being destroyed by the pedestal decaying just below the surface of the earth, so that by a strong wind, or anything accidentally going against it, it is broken, and the combs by the fall so misplaced as to reader the stock of little or no value. ”

“ Bear raids and slumps may come and go, unscrupulous speculators may cause depression in the share market through bad reports for their own gain, “but the gold is here,” and energy, pluck, and perseverance, will overcome all the difficulties there may be to obtain it, in this truly golden West. ”

“ If the market was for any reason active, the brokers and their agents were apt to be more numerous than if it were dull and the trading indifferent. A gong sounded the call to trading at ten o’clock, and if there was a noticeable rise or decline in a stock or a group of stocks, you were apt to witness quite a spirited scene. Fifty to a hundred men would shout, gesticulate, shove here and there in an apparently aimless manner; endeavoring to take advantage of the stock offered or called for. ”

“ It must be obvious to every reflecting mind, that so dangerous a game as Stock [89] Exchange speculation, or speculation which partakes of the same nature, in another commodity, entered into, if it be only partly to satisfy a craving for some sort of excitement, is a very unwholesome pastime. ”

“ But the weather, though a most powerful agent in the fluctuation of prices, is by no means the only cause of those great and sudden changes in the marketable value of “securities,” which take money from one pocket, and put it into another. ”

“ Even so, then, just as this lecture is at this instant a fact because our minds agree in making it so, and just as the price of the stock, or the credit of the great firm, is an often irresistible fact, to which the individual dealer must yield in so far as his own financial might isn’t equal to altering it, even so the moon yonder is likewise for us all an outer fact, because we are forced to agree in regarding it as outer. ”

“ If he can recognize the indications which point to the beginning of a pronounced upward swing in securities, and if he can equally recognize the signs which indicate that the movement has culminated, he can liquidate the securities which he bought at the inception of the rise or transfer them to some short-term issues whose near approach to maturity will render them stable in price, allowing the downward swing to proceed without disturbing him. ”

“ It must be remembered that it is the stock of gold and not the annual production which influences the price level; and that the stock will probably continue to increase for many years after the production has begun to decline,—as long, in fact, as production keeps above consumption. ”

“ Then begins the campaign of bad news--famine, pestilence and sudden death--then arrive the bear tips, and when all the longs have been driven out and a new crop of suckers have gone short at the bottom, then comes the accumulation by the Money Gods and up goes the market for them to sell on to the next crop of idiots who will never buy except at the very top, after stocks have advanced from ten to twenty points. ”

“ Distrust increases the velocity of circulation, and decreases the trade performed by the money. We have shown that the general effect of irredeemable paper money issues, which are almost always in large quantities, despite pledges to the contrary, has been to raise prices.
XI.87 Finally, our study of deposit circulation and crises has afforded further illustration. Preceding a typical crisis, there is, in general, a tendency for deposits to increase and also for their velocity of circulation to increase, while prices tend to rise. ”

“ If stocks rise and fall, if property improves and depreciates, the fluctuations of the market are caused by a common movement, a something in the air, a tide in the affairs of men subject like other tides to lunar influences. ”

“ And as time passed the grip of Wall Street on his soul grew stronger until it strangled all other aspirations. He could talk, think, dream of nothing but stocks. He could not read the newspapers without thinking how the market would “take” the news contained therein. ”

“ In the long run, no doubt, it is immaterial whether prices are high or low, whether money returns fall or rise; and yet it might turn out that the habitual association of gain or loss with "making money" would cause a period of simple falling prices to be one of hesitating investment of capital and unenterprising conduct of business. ”

“ The most common case of the "bearer of options" function arises when men hold money, liquid securities of low yield and stable value, short loans, call loans, or bank-deposits, waiting for special opportunities in the market. ”

“ This may be seen and illustrated by the fluctuating price of that species of capital, called stocks, which is to be found in the market of every civilized community. The price of stocks never makes a false report, as to the political aspects of society, but is as infallible a guage in this particular, as is the thermometer of the weather ”

“ Stocks, like food, clothing and all human necessities, are more or less subject to the laws of supply and demand; and when the traders and investors throughout the country become convinced that it is time to buy stocks, a bull market is sure to ensue; then when everybody has acquired all they want—and some of them more—and they make up their minds to sell, it is only natural that values should recede ”

“ There are periods of the year when the temper of investors tends to sulkiness, in sympathy with a fall of the mercury. Dull and disagreeable weather, as a rule, adversely affects the Stock markets more or less, according to the extent of counteracting influences. ”

“ The rise and fall in stocks may sometimes indicate the demand and supply, which again are governed by the disposition of men to purchase more than intrinsic value or change of condition justify. If many persons at the same time seek to buy large quantities of a stock it is sure to advance ”

“ While drinking my coffee—never more than two cups—it was my custom to read and digest stock and bond quotations, for though I had no investments—the only time I had been able to take a flurry there was an unforeseen recession in the market—I thought a man who didnt keep up with trends and conditions unfitted for a place in the businessworld. ”

“ The bottom dropping out of the market! It means millions at a single coup, for, in spite of diplomatic quibbles, the market is like a cork. The Paris bourse is soaring. Wall Street will make a new record to-morrow. ”

“ The Gray Ghost would pick his stock; he would make its fluctuation, its rise or fall, absolutely certain. He would pick a stock of which great things were expected along a certain line and cause opposite things to happen. ”

“ Then the cunning jobber had another set of men employed on purpose to buy, but with privacy and caution, all the stock they could lay their hands on; till, by selling ten thousand pounds at four or five per cent. loss, he would buy a hundred thousand pounds stock at ten or twelve per cent. under price; and, in a few weeks, by just the contrary method, set them all buying, and then sell them their own stock again at ten or twelve per cent. profit. ”

“ After a little I was able to discover a method in the outbreaks of apparent lunacy, and found that the shouts and yells and screams, the shaking of fists, and the waving of arms were merely a more or less energetic method of bidding for stocks; that the ringing of gongs and the bellow of the big man who smiled on the bear-garden from the high desk were merely the audible signs that another stock was being called ”

“ After a time this begins to be perceived, the price ceases to rise, and the holders, thinking it time to realize their gains, are anxious to sell. Then the price begins to decline, the holders rush into the market to avoid a still greater loss, and, [pg 338] few being willing to buy in a falling market, the price falls much more suddenly than it rose. ”

“ Since the amateurs had been panic-stricken, seized with consternation like that of speculators when a ‘slump’ sweeps over a Stock Exchange, prices were giving way day by day, and nothing more was sold. ”

“ In other words, the expectation of a future rise or fall of prices causes an immediate rise or fall of prices.
XI.60 These anticipations respond so promptly to every sign or rumor that superficial observers have regarded the rise and fall of the greenbacks as related directly and solely to expected redemption and as having no relation to quantity. These observers overlook the real mechanism at work; they fail to see that these effects, though quick, are slight and limited. ”

“ Operations on the stock market and similar markets are primarily contracts of buying and selling; they become contracts of chance when they assume the quality of speculation, i.e., gambling on future changes of prices. ”

“ Specu- lations for a rise are known on the Stock Exchange as "Bulls," and their object is by every manner of means to get the prices of the stocks they are dealing in pushed up as much as possible. Speculators for a fall are called "Bears," and they are equally anxious to send prices down. ”

“ The last, accordingly, wound up their business, and, in the language of the day, “went on to the street,” and made their living by selling on time what they did not possess, and buying on time what they never expected to receive, and reckoning profit or loss according to the difference in prices growing [71] out of the fluctuations of the currency between the day of buying or selling, and the day of receiving or delivering. ”

“ If our plans succeed, we sell one hundred and fifty millions of our own holdings at present prices. In order to bear the market fifty per cent below present prices, we must continue to sell down, diminishing the quantity we sell as prices recede, and when we begin to cover, we must buy all we can at the lowest point, diminishing our purchases as prices advance. Those not familiar with such things would be surprised to know that the ebb and flow of values in the stock market is almost as regular, and can be almost as certainly predicted, as the movement of the tides. ”