The Theory of Stock Exchange Speculation

CHAPTER II.. _the Importance of Special Knowledge Regarding the Regularly

The Importance of Special Knowledge regarding the Regularly Recurring Causes that influence the Markets.

1. The Temper of the Public 32

2. Meteorological Influences 32

3. A Favorable Period of the Year 35

4. Causes affecting the Value of English Railway Stocks 36

5. The Course to pursue at the Turn of the Half-year 36

6. Second Half of the Year more favorable for Bear Operations 37

7. Activity among Buyers 39

8. The Bull Speculator’s Great Chance 39

9. The great importance of being now and again altogether Clear of the Markets 40

10. The Movement of Prices near the Settlements 41

CHAPTER III.. _the Right Temperament for a Professional Speculator._

The Right Temperament for a Professional Speculator.

1. Cool-headedness an indispensable Condition of Success 43

2. The Uselessness of Haphazard Speculation 45

3. Accurate Foresight 45

4. The Cool Man, or Professional Speculator 46

5. Observance of the daily published Telegrams from abroad 46

6. The Selfishness and Hard-heartedness of the Professional Speculator 48

7. The Non-professional or Haphazard Speculator 50

8. The Misfortune of Early Gains 55

9. Very few Failures made Public 57

10. Greediness involves Loss 60

11. Keeping one’s own Counsel 60

CHAPTER IV.. _the Increase of Speculation in Stocks and Shares._

The Increase of Speculation in Stocks and Shares.

1. Stock Exchange Gambling increases in Europe, while Public Gaming-Houses are on the decline 62

2. Speculation an Out-growth of prosperous times 63

3. Commercial prosperity unhealthily fostered by Illegitimate Speculation 64

4. The Influence of Trade Profits upon the Stock Markets 64

5. An increase in the amount of Trade Profits realized, causes an Increase in the number of Securities 65

6. Speculation by Established Companies 66

7. The Demoralization caused by Temporary Success 66

8. The New Era in Speculation 67

9. Collapse through Over-speculation in Austria 67

10. Increase in the number of Members of the London Stock Exchange 68

CHAPTER V.. _modern Influences Upon the Markets._

Modern Influences upon the Markets.

1. A Fixed Line of Action 71

2. Closer Uniformity of Values in all Markets through the Development of the Telegraph System 72

3. A speculator cannot hope to succeed in any degree, unless his arrangements are as complete as those of a man engaged in bona fide business 73

4. The Diminution of Gluts in all Markets 73

5. Modern conditions render it more difficult than formerly for Small Mercantile Houses to succeed 73

6. Every Commercial Revulsion destroys Houses of a Speculative character, and throws the good business into the hands of the large sound Establishments 75

7. The Extension of Long-wire Telegraphy 78

8. Money Famines should henceforth be as improbable of occurrence as Corn Famines 78

9. Advantages derived from opening up communications with the Corn-growing Provinces of Russia 80

10. The Growth of Wealthy Monetary Centres 82

11. Private Cipher Telegrams as exterior influences upon Prices 83

12. The Altered Character of interior influences upon Prices 84

13. The Creation of Securities to meet the Demand 84

14. Getting behind the Scenes 85

15. The Difficulty of “Cutting” a Loss 85

CHAPTER VI.. _cacoëthes Operandi._

Cacoëthes Operandi.

1. Waiting for Extremes 87

2. Reaction generally more rapid after a Sharp Rise 88

3. What Not To Do 90

4. Special Information 90

5. Much Money only obtainable as a certainty by Hard Work 90

6. An Average Instance of Haphazard Speculation 91

CHAPTER VII.. _the Pit-Falls._

The Pit-falls.

1. Hidden Forces Opposed to the Speculator 94

2. The Turn 95

3. The Danger of taking Advice 95

4. A Disinterested Opinion 96

5. All the Eggs in One Basket 96

6. Traps for the Public 97

7. The Public as Speculators are Bulls by Nature 97

8. A Case of Roasting the Bulls 98

9. A Cut off the Loaf and Pass it on 98

10. Short Periods in, and Long ones out 99

CHAPTER VIII.. _speculation With Capital._

Speculation With Capital.

1. Restoring the Balance of Advantages 100

2. The Necessity of Some Capital 101

3. Capital to expend in Feints 102

4. La haute Finance 102

5. The Best of all Chances for a Speculator with Capital 103

6. The most Legitimate Form of Speculation, Pawning the Stock 104

7. When to Begin and when to Leave Off 105

8. Test of a Speculator’s Pecuniary Position 105

CHAPTER IX.. _speculation Without Capital._

Speculation Without Capital.

1. A Familiar Case 107

2. Bitter Experience 108

3. The Question of Seeing it Out 108

CHAPTER X.

The “Tip” to Buy or Sell.

1. A Friendly “Tip” 110

2. Unloading at other People’s Expense 111

3. The Qualified “Tip” 111

4. The Unqualified “Tip” 112

5. “Tips” worked by Syndicates 112

CHAPTER XI.. _speculation by Machinery._

Speculation by Machinery.

1. Machinery in existence for directing Human Volition 114

2. The Patrician Investor 115

3. Administering Shares to the Public 116

CHAPTER XII.. _the Shifting of Speculation From the Higher to the Lower

The Shifting of Speculation from the Higher to the Lower Classes of Securities.

1. Speculation in Consols as a Hedge 120

2. Speculation has Changed its Venue 121

3. Increase of the Indebtedness of the States of the World 121

4. The Fluctuations in the Price of Government Stocks 121

5. High Class Stocks more firmly held than formerly 122

CHAPTER XIII.. _the Short “turns,” or Who Makes the Profits?_

The Short “Turns,” or who makes the Profits?

1. The “Turn,” a known quantity always against the Speculator 124

2. The “Turn,” a Loss in going into, and also in coming out of the Market 125

3. The difference in the character of the “Turn,” as compared with former times 125

4. Special Danger of Speculating in a Stock that is quoted very wide 127

5. The “Turn,” the Income of the Jobber 128

CHAPTER XIV.. _in What Respect Is Speculation Useful in Markets Generally?_

In what respect is Speculation useful in Markets generally?

1. Speculation for the Rise, which is both Legitimate and of Benefit to the Community 129

2. Speculation for the Fall, which is both Legitimate and of Benefit to the Community 130

3. A Reasonable Relative Value for all Commodities 131

4. The Three Classes into which Speculators may be divided 132

INTRODUCTION.

Our object in writing this book is to endeavour to show to persons who may contemplate trying their hand at Stock Exchange speculation, the improbability of their hopes being realized. 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 seems to be in the nature of things, that numbers of people must come to grief in their early struggles, through an obstinate determination to trust complacently in their own ingenuity, in preference to profiting by the experience of others. A mountain climber who disclaims the aid of a guide, and is subsequently fished out of a crevasse, can expect no other epitaph, even from his friends, than that he has paid the deserved penalty of extreme temerity and folly. There are probably many guides who can ensure a safe passage over most mountain defiles, but he would be a bold man who guaranteed to pilot a young speculator through the Stock markets, and bring him out to a certainty with a profit.

If a speculator asks the advice of what we will term “an old hand,” and it is in his interests to tell him what he really thinks, he will say: “Leave it alone.”

Why so many people will never be convinced except by their own personal experience is, that they cannot believe what others say of things that are hidden.

“Hereof experience hath informed reason, and time hath made those things apparent which were hidden,” says Sir W. Raleigh.

“But apt the mind or fancy is to rove Uncheck’d, and of her roving is no end, Till warn’d, or by experience taught, she learns That not to know at large of things remote From use, obscure and subtle, but to know That which before us lies in daily life Is the prime of wisdom,”

says Milton; and

“But if you’ll prosper, mark what I advise, Whom age and long experience render wise,”

says Pope.

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.

Individuals who are tempted, not only by curiosity, but by a love of excitement, and more than all in this case by the love of gain, go into the markets and lose their money, and quit the place with much the same feelings as the man who paid a penny to see a horse with his tail where his head ought to be.

“If we hope for things of which we have not thoroughly considered the value, our disappointment will be greater than our pleasure in the fruition of them,” wrote Addison.

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