The individual who trades or invests in stocks will do well to keep
away from the stock ticker; for the victim of “tickeritis” is no more
capable of reasonable and self-composed action than one who is in the
delirium of typhoid fever. The gyroscopic action of the prices recorded
on the ticker-tape produces a sort of mental intoxication, which
foreshortens the vision by involuntary submissiveness to momentary
influences. It also produces on some minds an effect somewhat similar
to that which one feels after standing for a considerable time intently
watching the water as it flows over Niagara Falls. Dozens of people,
without any suicidal intentions, have been drawn into this current and
dashed on the rocks below. And thousands daily are influenced by the
stock ticker to commit the most fatuous blunders.
[Illustration]
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. To illustrate this point more explicitly, the stock of almost
any conservatively capitalized and well managed concern paying six
dollars annually in dividends has an investment value of from $85 to
$100 a share; but in the ups and downs of the market the stock gets
buffeted about on the exchange in obedience to the varying sentiments
of traders, sometimes selling as low as $50, and at other times as
high as $150, without any change whatever in the company’s earnings,
its prospects, or its management. (These matters will be dealt with a
little farther on, and exemplified by showing their effects upon the
mentalities of various types of speculators.) It does not follow that
one who keeps in touch with the stock market by telephone, or through
the daily papers, will find his path free from thorns and snares; but
he will at least have a more open perspective than one who submits to
the influence of the ticker.
Any intelligent trader may reason out exactly what he ought to do under
certain specific conditions; but in the quickly shifting and uncertain
process of determining values he loses his mental poise; and experience
proves that anyone whose reasoning faculties become confounded is apt
to be affected by some form of hysteria, and will frequently do the
opposite of what he would do under normal conditions.
The most copious and the most unreliable financial writers are the
market “tipsters” who write daily letters of advice to an army of
subscribers, and claim to have more or less positive knowledge of
what certain stocks or groups of stocks are going to do marketwise.
They often profess to have definite “inside information,” which any
subscriber may receive at a stated price, ranging anywhere from $10
a month upward. These false financial prophets, who lead a horde of
blind followers, should not be confused with reputable bureaus and
statistical experts who base their opinions and their advice to clients
upon a logical analysis of general conditions.
[Illustration]
Henry Fielding wrote a whole essay to prove that a man can write
more informingly on topics of which he has some knowledge than on
matters that he knows nothing about. He believed also that mankind
is more agreeably entertained by example than by precept; therefore
it is not the purpose of this discourse to teach anybody anything,
unless perchance something may be gained by example or suggestion.
There are four subjects on which advice, however good, is generally
wasted,--politics, stock speculation, religion, and love; for in these
matters grown-ups rarely follow the advice of others, and when they do,
if they profit by it they take all the credit to themselves, whereas if
they lose they always blame the adviser. Such are the inexorable and
universal laws of human nature.
Anyone may relate his own stock market experiences, or those of
others--perhaps to the surprise or enlightenment of his audience. He
may even venture his opinions on the subject; but for anybody to assume
that he can continuously operate an unfailing system of making money
on stock or grain exchanges would be equivalent to asserting that he
could invert the fundamental laws of psychology, or that he could beat
the game at Monte Carlo by scientific methods. Many have tried both, to
their sorrow.
And still, hundreds of thousands of people continue to play at gambling
tables, and hundreds of thousands speculate in stocks. There are many
persons who gamble moderately all their lives, just as some drink
moderately all their lives, with no resultant harm; while with others
both of these inhibited practices become fixed and ruinous vices. Since
trading in stocks has the appearance of being an easy way of making
money, it is one of the most alluring pursuits of modern times; and
from this very fact, although legalized for all, it is susceptible
of becoming one of the most dangerous habits known. It is dangerous
for the confirmed addict not only because he is apt to lose, but for
the reason that it distracts his attention from business in daytime
and frequently destroys his rest at night. But as it would be folly to
advise people not to embark in commercial pursuits because statistics
show that upwards of ninety per cent. of business ventures result in
failure, so it would be useless to caution people not to trade in
stocks because it is a hazardous undertaking in which a peculiar sort
of sagacity and self-control are the only safeguards against certain
disaster.
Most people of sturdy mentality are unwilling to admit that they could
be made easy subjects of hypnotic influences, and would scout the idea
that mere business transactions in securities could effect any undue
subversion of their equipoise. The average human mind is, however,
incapable of maintaining its equilibrium under the strain of great
excitement; and no amount of knowledge, either inherent or acquired,
no amount of experience, however dearly bought, will enable one
always to think intelligently or act wisely under highly nerve-racking
conditions. It is said that persons who become disoriented in a forest
will almost invariably go in the wrong direction (I have done so myself
on two different occasions); and that in an effort to salvage goods
from a burning house they will throw mirrors and other fragile articles
out a third-story window and carry pillows downstairs.