THE RIGHT TEMPERAMENT FOR A PROFESSIONAL SPECULATOR.
A man who wins by haphazard speculation, who chances to operate
successfully until he has filled his pockets, and retires with his gains
from so fascinating an arena, is one in a hundred. Any one who knows
anything of Stock Exchange speculation will confirm the statement that,
to the ordinary run of men, the game is not worth the candle. There
are, however, conditions under which speculation, in a market where ten
or fifty thousand pounds can be lost in half-an-hour, may, under given
conditions, be systematically practised profitably. First, and most
important perhaps of all these conditions, is the temperament of the
speculator, upon which we propose to speak in this chapter.
[Sidenote: COOL-HEADEDNESS AN INDISPENSABLE CONDITION OF SUCCESS.]
A man who is excitable and easily led away from a set purpose will, if he
go deep into speculation, be soon involved in hopeless ruin. A method of
proceeding that has been formed by a careful judgment which has provided
for all contingencies, once adopted, should be adhered to as a rule. To
be able to follow this advice it is necessary that a speculator should
possess a coolness that is not affected by the excitement into which
others are thrown by unexpected events; that he should cultivate the
art of concealing the dissatisfaction felt on sustaining a loss, which
is read at once in the face of a nervous or excitable man; and that he
should have the power of calling forth emotions which are the opposite
of those commonly manifested under given circumstances. In speaking of
the conditions under which speculation may be successfully pursued as
a business, it must be understood that we are referring to the one man
in the hundred—the professional operator—who will frequently in the
elaboration of his arrangements find it necessary to be in the markets
himself, gaining what advantage he can by personally dealing either as a
jobber or a broker. It is obvious that, when a man enters a market with
a view to doing business, his object is to transact it upon the most
favourable terms for himself. He confronts those who are prepared to deal
with him either way, that is, to buy or to sell. According as he “opens”
to the dealers, or, in other words, indicates what he wants to do, the
dealers will make their prices. If he be a buyer, they will try to get
him to pay as high price as possible and _vice versa_. His business
therefore, if he be really a buyer, is to try to look as if he were a
seller. He may enter the market under a variety of influences. He may
know from private sources, for certain, that a stock is about to improve
much, and he may intend to buy as much as he can get at a fixed limit as
regards price. If he is anxious to operate largely, and possess but a
poor control over his countenance, the probabilities are that he will be
read at once, and the market be immediately raised above his limit if he
attempt to buy any considerable sum. In the same way, if being a broker,
he is instructed to get a client out of a large amount of stock for any
particular reason, the suspicion of which he is not able to conceal, the
price will be lowered to him in an instant, unless it be an easy market
to deal in, or by chance an opposite influence springs up at the moment
to improve the price.
Ninety-nine men out of a hundred when they are made stock-brokers are
comparatively young, who make a start for themselves after having been
many years clerks. These men are eager for profit, and commence at
once to go through a course of training which daily saps from their
physical powers the very element upon which a cool temperament rests. The
hurry-scurry, wear and tear strain upon the nerves which is involved in
running from one client to another for orders, deprives a man by degrees
of those qualities, if he ever possessed them, which are indispensable
to the professional speculator. A man whose daily bread for his wife
and family depends upon the execution of a certain amount of business,
must of necessity manifest some degree of eagerness to do the business
intrusted to him, and that eagerness keeps up a strain upon the nerves,
and through them upon his physical powers, which weakens the capacity of
forming very rapidly a correct judgment, and renders the intelligence
liable to become confused under circumstances when to lose the head for
a moment may involve a certain loss of money. Professional speculators
are consequently very seldom men engaged in the business of dealing in
stocks and shares for others, as the kind of labour is incompatible with
the maintenance of the cool temperament which is necessary to success.
[Sidenote: THE USELESSNESS OF HAPHAZARD SPECULATION.]
There is nothing like unsystematic speculation to destroy the cool
temperament of a man. A loss incurred through hasty ill-matured
operations renders him impatient to recover it, which probably leads
to its being doubled. If he chance to recover the loss, instead of
pausing to reflect upon the surprise created in himself by a result
only feverishly hoped for, he goes on blindly tempting fortune, only to
experience ups and downs which unsettle his judgment more and more, until
he begins to “plunge,” when all is soon over.
[Sidenote: ACCURATE FORESIGHT.]
Any one who has moved about at all amongst financial experts, and has
closely observed them, must have noticed that they seem to be men far
above the average as regards penetrative intelligence, appearing to
possess that calm precision of judgment, which, as a rule, is only
secured by the deliberations of many persons. Men who have amassed a
great deal of money, by their own unaided intelligence, have been men
of steady accurate foresight, men who have possessed a large capacity
of judging what the public will do in the Stock markets under certain
circumstances. A great speculator must make it his study to gather into
a focus the various effects that are likely to arise under a given
transformation of circumstances, analyze them, set one against the other,
and calculate out the effect that will be caused when their forces are
spent.
[Sidenote: THE COOL MAN, OR PROFESSIONAL SPECULATOR.]
We will now suppose we are watching the speculator of the cool
calculating temperament, and also the excitable man who is always acting
on new ideas, which, he thinks, will occur to no one else until he
has made money out of them. The cool man sits quietly down and reasons
with himself, and arrives at the conclusion that what is indispensable
to him as ground work is, first, some capital, a sum proportioned to
the contemplated extent of his operations. Without this to commence
with, speculating under any conditions is about as sensible, and about
as likely to be followed by the desired result, as attempting to ferry
people across a deep stream without the aid of a boat. Secondly, early
information is equally necessary from all other markets where the
securities are dealt in in which he contemplates speculating. To render
such information as far as possible trustworthy, a branch house in the
cities where there are important bourses is desirable. These two portions
of the machinery are absolutely indispensable, if success in large
operations is to be the rule and not the exception; and the man with the
cool temperament will probably owe his success as much to the judgment
which showed the necessity of these accessories, as to the well and
timely directed operations which, based upon them, result in profit.
[Sidenote: OBSERVANCE OF THE DAILY PUBLISHED TELEGRAMS FROM ABROAD.]
With the necessary capital and machinery duly prepared for instant
action when a good opportunity occurs, the cool man plants himself in
a prominent position from which he can discern at once the small cloud
on the horizon which warns of the coming storm. The telegrams in the
daily press, as they rise above such hypothetical horizon, are the
harmless or otherwise little clouds which our speculator will scan,
making a note of any which may seem to deserve attention for any special
reason, on account of the effect they may be calculated to have upon
the public mind. Well-conducted journals only admit into their columns
telegrams from trusted correspondents, or from the public companies who
supply them, and whose interest it is to adopt every precaution against
imposition. An important telegram in a high class journal standing on
its merits will always produce more or less effect, and it is of much
consequence, but in the second rank, in the chain of machinery necessary
to insure success for the speculator, that he be posted hourly throughout
the day in the telegraphic news which reaches the seat of his operations.
Side by side with this telegraphic intelligence which appears in the
press, the speculator will receive private telegrams in cipher from his
correspondents abroad, and according to his skill and intelligence in
reading between the lines of the two, and judging of the probable course
of events by their light, will he be able to operate profitably or not.
Pure speculation as a business, the sole object of which is to gain
money, is, from the point of view of risk, removed far out of the
ordinary path in which men labour for profit. Only a small percentage of
men desire, even if they thought they possessed the required exceptional
qualities, to gain their living in such a way. Most men reason that life
is short, and that to spend it always in an atmosphere of excitement,
under circumstances which keep up a constant destructive mental strain,
is a mode of gaining money that involves too heavy sacrifices. The
speculator who deliberately selects that calling must consequently be a
man peculiarly constituted. He is generally a man of rather singular
habits of thought, who thinks it quite legitimate to start a Juggernaut,
and drive it over the crowd, if thereby he can do it profitably.
Perfectly legitimate processes of working a market with him, would be
considered little better than cheating by the ordinary run of men. He
employs systematically all sorts of devices for getting the better of
others who are ignorant and less sharp in foreseeing events than he. He
does not scruple to lay traps, and drive the public into them, by plying
them with fictitious telegrams, if he can get them published, and by
forming syndicates to “rig” the markets. He partakes, indeed, a good deal
of the nature of the bandit, who prepares the way for forcing concession
to his demands by firing a volley into the carriage of the traveller to
whom he is going to give the choice of his money or his life.
[Sidenote: THE SELFISHNESS AND HARD-HEARTEDNESS OF THE PROFESSIONAL
SPECULATOR.]
If he intends to buy a large amount of stock, which he knows is going
to rise, he throws off the cloak of secrecy when he enters the market
to sell, and depresses the price as a preliminary feint, so that the
contemplated rigging of the price may be as little encumbered by bulls
as possible. When it is known in a market that a great speculator is
selling, weak bulls are speedily frightened out, and when he has such
an object in view it is his “game” to intimidate with all the force
of his prestige and the power of his capital. Such a man must have a
concrete hardness of indifference through which nothing can penetrate to
his heart. It is as necessary to the success of his operations that he
possess no more regard for the feelings or pockets of other people than
a hungry tiger would for him if he were airing himself unconcernedly in
a Bengal jungle. He has a purpose in view, just as a surgeon has when the
amputation of a leg has been decided upon. The speculator’s sole aim in
the operation is the profit, towards which he cuts his way, regardless of
the nature of the obstacles to be overcome, just as the knife is plunged
into the flesh, severing the arteries, muscles, and sinews that surround
the bone which it is the object to reach and saw through.
For a man to tread a path in which he must systematically not only
disregard the interest of other people, but deliberately calculate
upon the weaknesses of human nature which characterize the crowd, in
order to work upon them for his own ends, it is obvious that he must be
constituted in a quite exceptional manner, and not in a way that it is
at all desirable that others should attempt to imitate. If uninitiated
people who enter the arena in which some of the professional speculators
flourish, were to spend some months in gathering information and in
close observance of the _modus operandi_, so far as they can get to
see and hear, many of them would soon be persuaded that they were
utterly useless at such work, and would retire, thanking their stars
they had been sensible enough to look on at the game before hazarding
anything themselves. From the very fact that but few are successful
as professional speculators, it can be safely argued that but few are
competent to engage in the business at all, even when educated in all the
tricks and deceptions necessary as collateral aids to the machinery which
we have shown, and shall show more in detail, to be a _sine qua non_.
Those qualities which have, more particularly in the past, characterized
the successful diplomatist are also of the utmost importance to the
speculator. Successful diplomatists in all times, with few exceptions,
have been men who have never scrupled to resort to finessing, chicanery,
and the _ruse de guerre_ in every form under cover of a saintly
innocence that would shame the devil. Deception in all its forms will be
found in the armoury of the professional speculator, and the weapons,
two-edged, are employed with a laboured precision of which a glimpse by
the outsiders is occasionally to be obtained because it is impossible
completely to conceal the fringes of the organisation by which his gains
are netted.
[Sidenote: THE NON-PROFESSIONAL OR HAPHAZARD SPECULATOR.]
We now turn to the non-professional speculator, and what a pitiable
plight is that in which these gentlemen in ninety-nine cases out of one
hundred ultimately find themselves. The members of the Stock Exchange
liken their place of gathering in Capel Court to a barn, and themselves
to fowls inside it, who repair thither every day to pick up the golden
grain thrown in by the public. This description is not exaggerated, and
the more marvellous does it become as one reflects upon the subject. Many
and many is the man that has toiled and earned a fortune to produce him a
competence for the rest of his days, who has been lured into that fatal
vortex, in very many cases because industry had become a habit with him,
and he found retirement irksome. “I amuse myself with a little jobbing
in the stock markets, just to have some object for going up to town
twice a week,” he says to a friend in the train, with whom he chances
to be travelling. Such is the beginning of more sorrow in respectable
households than the world has any idea of. Many a pensive countenance
furrowed by the Stock Exchange, carries in its deep lines the index to
a heavy volume of lugubrious family history, which, partly from shame,
is sealed but to the few who must know its contents. Prosperity brings
wealth in its train, and people put by at first their gains, until
a taste for the excitement of dabbling in the markets grows into a
thirst, and from that into a mania, which is generally the frontier to
be repassed with empty money-bags, and a sad heart, by a wiser, if not
a better man. 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. The man who makes a study and business of speculating,
investigating every detail that it seems necessary to probe until he
has adapted it to the rest of his machinery, will be found to be a
hard-grained man, sailing very close to the wind, while your persistently
haphazard man is mostly a person of flabby character, and no less flabby
mind, as easily frightened off a line that he has set himself to follow,
in the innocence of a heart that expands with a delusive consciousness
of possessing power, as a stray rabbit. Such a class of man is to be
found by hundreds in the haunts of the Stock markets, and they are always
fidgetting in and out, first as little bulls, and then as little bears,
disappearing after a sharp panic like flies from a joint of meat that
is rudely disturbed by the shop-boy, with the important difference that
whereas the flies always get something, the speculators invariably drop
their money.
The following letter which appeared in the _Spectator_ of the 4th
October, 1873, struck us as being _a propos_, as regards a portion of it,
of this part of our subject. It affords another instance of the success
which follows the trial of a haphazard speculator’s “scientific plan.” In
playing against a public bank the gambler should know in these times that
the science of mathematics has been already employed on the side of the
managers, and is arrayed against him as a fixed law, working on the side
of the _croupier_, whether he wills it or not:—
“A friend of mine who was not with us, but who had had many
weeks’ experience at Monaco, had communicated a little plan
for an all but moral certainty of winning, which was founded
on the most scientific principles, but the only defect of
which was that the banks gave one no conceivable means of
carrying it into practice—a defect, indeed, which I believe he
himself had verified by leaving Monaco a loser, in spite of his
scientific plan. His idea was this:—It is obvious that even
where,—say at roulette,—the chance of the next ‘odd’ or ‘even’
is precisely one in two, or one-half, the chance of a run of
any given eight results in a _specified_ order,—such as odd,
odd, even, odd, odd, even, even, even,—will be only one in 2 ×
2 × 2 × 2 × 2 × 2 × 2 × 2, or one in 256. If, then, my friend
bethought himself, you could but steadily stake your money so
as to stake it against the arrival of this highly improbable
compound event, you would be sure to win. I quite agreed
in this extremely sagacious principle, but the difficulty,
unfortunately, was in the application of the theory. The bank
gives you no chance at all of staking your money against any
complex event. It admits only of your staking it in favour of
or against the simple elements of this compound event. And,
unfortunately, though it always remains highly improbable
that any specified run of eight will take place, as you can
only stake your money time by time on each single one of the
eight component elements of the event, and as, in each of them
separately, the chance is one in two, and not one in 256, it
is simply impossible by the rules of the game so to play as
to have the chances in your favour. I did, indeed, think of
requesting the bank to let me stake on the result of two or
three successive twirls of the roulette table, instead of on
one at a time, but since my French was extremely bad, hardly
adequate to protesting against the accidental raking up of my
money when I had actually won, and since, had it been better,
I had no hope that the authorities would comply with a request
so very unsafe for themselves,—the drift of which, indeed, the
croupiers might hardly have caught at the first suggestion,
but would certainly have suspected,—I reluctantly abandoned my
friend’s scientific receipt for winning, and was contented to
lose.
“The gamblers of our party were but three in number, and all
firm of purpose not to exceed the small risk we had prescribed
for ourselves of 125 francs each. I was the eldest and rashest
of the three, my money being soonest gone, though not for
two or three hours, and it was never for a moment doubtful
but that I should be a loser in the end. My companions were
both cooler and cannier in their play. They did not, like me,
precipitately put down their money before the croupiers had
raked up the stakes lost by the previous catastrophe. They did
not stretch over other players so awkwardly as I did,—indeed,
the croupiers had to rebuke me mildly, by begging me to use a
rake; and then, when I did use the rake, I managed to knock the
most desperate gambler in the room about the head with it, and
draw forth a fierce remonstrance, which made me recall with
uncomfortable vividness that there was a pistol-practising
ground (‘Tir-au pistolet’) in the garden of the hotel, which
would readily furnish the instruments for a meeting, wherein I
should hardly have come off with a mere moral lesson. Indeed,
I felt clear, after watching my companions,—one of them a
shrewd counsel, learned in the law, the other a cool, sagacious
Cantab, who came out high in the Tripos the other day,—that
neither of them had the true gambling instinct as strongly as
I, though so far as their experience went, it seemed to confirm
my own. And what was that experience? This chiefly,—that I was
distinctly conscious of partially attributing to some defect or
stupidity in my own mind every venture on an issue that proved
a failure; that I groped about within me for something in me
like an anticipation or warning (which, of course, was not
to be found) of what the next event was to be, and generally
hit upon some vague impulse in my own mind which determined
me; that whenever I succeeded, I raked up my gains with a
half-impression that I had been a clever fellow, and had made a
judicious stake, just as if I had really moved a skilful move
at chess; and that when I failed, I thought to myself, ‘Ah, I
knew all the time I was going wrong in selecting that number,
and yet I was fool enough to stick to it,’ which, of course was
a pure illusion, for all that I did really know was that the
chance was even, or much more than even, against me. But this
illusion followed me throughout. I had a sense of _deserving_
success when I succeeded, and of having failed through my own
wilfulness, or wrong-headed caprice of choice, when I failed.
When, as not unfrequently happened, I put a coin on the corner
between four numbers, receiving eight times my stake if any of
the four numbers turned up, I was conscious of an honest glow
of self-applause. I could see the same flickering impressions
around me. One man, who was a great winner, evidently thought
exceedingly well of his own sagacity of head, and others also,
for they were very apt to follow his lead as to stakes, and
looked upon him with a sort of temporary and provisional,
though purely intellectual respect. But what quite convinced
me of the strength of this curious fallacy of the mind, was
that when I heard that the youngest of my companions had
actually come off a slight winner, having at the last moment
retrieved his previous losses by putting his sole remaining
two-franc-piece out of a hundred and twenty-five francs he was
willing to risk, on the number which represented his age, and
gained in consequence thirty-two times his stake, my respect
for his shrewdness distinctly rose, and I became sensible
of obscure self-reproaches for not having made use of like
arbitrary reasons for the selection of the various numbers on
which I had staked my money during the period of my own play.
It was true that there was no number high enough, sad to say,
for that which would have represented my own age, so that I
could not have staked on that,—but then, why not have selected
numbers whereon to stake that had some real relation to my own
life, the day of the month which gave me birth, or the number
of the abode in which I work in town? Evidently, in spite of
the clearest understanding of the chances of the game, the
moral fallacy which attributes luck or ill-luck to something
of capacity or gift, or incapacity and deficiency, in the
individual player, must be profoundly ingrained in us. I am
convinced that the shadow of merit and demerit is thrown by the
mind over multitudes of actions which have no more possibility
of either wisdom or folly in them than—granted, of course,
the folly of gambling at all—the selection of the particular
chance on which you win or lose. When you win at one time, and
lose at another, the mind is almost unable to realize steadily
that there was no reason accessible to yourself _why_ you won
and _why_ you lost. And so you invent—what you know perfectly
well to be a fiction—the conception of some sort of inward
divining rod which guided you right when you used it properly,
and failed only because you did not attend adequately to its
indications.
“Such is the experience which I carried away with me from
amidst the objectionable smells, the unsavoury company, the
malignant gnats, the haggard revelry, and the general moral
squalor of Saxon-les-Bains; and when my wife reproached me,
with triumphant references to her own warnings, for the missing
five pounds, I replied, what I really feel,—though I know I
shall never convince her of it,—that my experience was not
dearly bought. Is it the only case in which the fiction that
we ourselves have _earned_—whether good or evil fortune—forces
itself with absurd tenacity upon us? Luther himself could
hardly have desired a better proof than this of the pranks
which the imagination plays us when dealing with that sense of
merit and demerit, so closely bound up with our human egotism.
We give ourselves credit, and get credit, I suspect, for a vast
deal more both of wisdom and folly in life than we deserve.
Are nine-tenths of the prizes and the blanks of life at all
more ascribable to any fine selective purpose or deficiency
thereof in him who draws them, than my losses, or my friend the
Cantab’s sudden retrieval of his loss? Yet I still look upon
that able and thoughtful youth with a deep sense of respect for
his cleverness in retrieving his losses, and on myself with
a melancholy consciousness that, like ‘Traddles’ in ‘David
Copperfield,’ my native awkwardness of mind must have been the
cause of my very moderate reverses.—I am, Sir, &c.,
“AN INSTRUCTED GAMBLER.”[26]
[Sidenote: THE MISFORTUNE OF EARLY GAINS.]
The greatest misfortune that can happen to the haphazard speculator is
for him to make money the first two or three “accounts.” He will, in
such a case, in the first place believe himself to possess some uncommon
luck, or a shrewdness for selecting a security that was about to move
in the direction he had reckoned upon. The operations of the most stupid
speculator are frequently attended with such results, just as they might
also be on his first essay at pitch-and-toss. Such incipient luck, by
drawing forth the commendations of others, especially of the brokers—who
do not generally err on the side of warning the individual against the
dangers which beset such a path—builds up in him a false estimate of his
powers. Early success associates his mind with the gains and not with the
losses, and the latter are incurred subsequently with a light heart, as
a sort of accident that will be sponged out by the results of the next
throw.
A case came under our notice of the extreme danger of good luck attending
a first operation, but it was in another market. A Spaniard had settled
in London with his wife and family, and had entered into partnership
with another gentleman. Much money had been made in iron, and prices had
attained to an unprecedented figure (it was in 1872). He bought on pure
speculation 30,000 tons, and cleared £6,000 profit. Elated with such
success, his next operation was a purchase of 40,000 tons. The price fell
£1 a ton. He lost all his own and his partner’s money, and fled from the
country leaving his family destitute.
But when two or three losses have been incurred the confidence becomes
somewhat shaken, especially after a large operation has been attempted,
so as to recover the losses on several smaller ones at one _coup_,
and has failed. Then some sort of a system will be tried, but the bad
judgment which has landed the haphazard speculator so far without his
having perceived the necessity of machinery and a system, will prevent
his adhering to any set purpose. Such a man acts on this information and
on that, led away by the plausibility of a wiser head possessed by a
person who goes about like a big fish in the deep waters, disposing of
the smaller fry for his own purposes.
[Sidenote: VERY FEW FAILURES MADE PUBLIC.]
To dig to the bottom of the question without attempting further to
widen it, what are the chances against the haphazard speculator? If
we ask ourselves whether we have known personally any individuals who
have succeeded as haphazard speculators, we must reply emphatically in
the negative. It occurs to us on making this observation that we have
heard of one individual, who may be described as a haphazard speculator
who did get clear off with £100,000, and we believe it to be correct.
Everything he touched chanced to go the right way until one morning he
raised his hat to his friends and the members who were in the markets at
the time, and bid them farewell. He was a solitary instance of a man with
sufficient strength of character to say to himself, “Thus far shalt thou
go and no farther,” and he adhered to it. Many had made as much before,
but they could never stop until it was all lost again. How is it so
little is heard of those who venture and fail, for the practice would be
greatly discouraged if the failures always came to light. All concerned
are interested in keeping such matters quiet for obvious reasons. The
broker who does the business for the speculator can measure his means
pretty well at the outset, and takes care to keep his client informed so
that he may persuade him to diminish his commitments if the times are not
promising. The business is remunerative enough to make it worth while to
run some risk, and as the client will have always something, at least, to
meet his losses with, the broker is generally prepared for accidents. The
speculator will, for his own sake, keep his misfortunes to himself, and
so the new men come on, never knowing how many have gone irretrievably
into the gulf before them until they have passed the fatal barrier of
actual experience from which, in all but a very few cases, there are
_vestigia nulla retrorsum_.
The chances are overwhelmingly against the class of speculator with
whom we are now dealing, for the following reasons: He has no money,
as a rule, worthy of the name of capital, and consequently if he is
caught deep in by any of the thousand and one accidents that may burst
like a thunder-clap on the top of the markets any hour of any day in
the week, he is unable to “see it out,” as the saying goes. Not being
able to take his stock off the market, the settling day occurs before
a sufficient recovery takes place, and he is done for. Where there is
an exposure to such a catastrophe, that may happen at any moment and
sweep away the entire fund, it is obvious that the game is not worth the
shadow of a candle-end, to say nothing of the substance. Yet this is the
common condition of the haphazard speculator. He stands at the edge of a
precipice knowing that a puff of wind will blow him over, and that it may
come at any moment.
Supposing, for the sake of argument, we put such a possibility of
accident out of the question, and imagine the haphazard speculator not to
be exposed to the contingency of such a collapse, what do we find in the
second rank of chances against him? In the first place his attention, as
a rule, will be drawn to a stock by, we will say, its upward movement.
He thinks to himself, “That stock has been getting up, why shouldn’t I
have some of it?” and he buys, allured as are many others who wait to
buy of those who have rigged the market up to a certain price, and then
send the tip round to buy. The haphazard man thus assists probably the
professional and systematic speculator to unload. He has got in at the
top, and only sees his mistake by getting out at the bottom. Secondly, he
very seldom pauses after having taken the decision to operate, owing to
some special circumstance, to reflect upon the minor surroundings which
are very necessary to keep in view. What are these? To buy on the eve
of a settlement is a mistake, as a rule. In Stock Exchange speculation
the exceptions are of the utmost importance, as for instance—When there
has been a very sharp fall in the middle of an account, and it is known
that the depression has been due to any considerable extent to bear
operations, there will nearly always be a recovery on the eve of the
account, caused by the bears taking their profits. The converse will also
necessitate an operation of an exceptional nature, as when values have
been driven up to a high point in an account by the bulls, to sell would
be the line to take as the account approached, because the bulls might be
reckoned on to take their profits in the same way. As a rule, however,
prices tend to droop as the settlement approaches, owing to sales. The
haphazard speculator is always very much discouraged when he has to pull
up a loss, he should consequently avoid as much as possible incurring it.
If he does not keep these important influences in mind, he will assuredly
have to pay for the negligence.
[Sidenote: GREEDINESS INVOLVES LOSS.]
Then there is the fatal blunder made by almost every inexperienced
speculator, of never being satisfied with a moderate profit. If he buys,
and the price rises ½, he cannot make up his mind to take it, but must
wait for ¾; when it has reached that he must have 1 per cent.; and when
that rise has been attained to, he wants another ⅛ or ¼ to cover the
commission. Like the dog, in attempting to grasp the shadow of his bone,
he loses all. This is of daily occurrence in numerous instances, and is
one of the fatal weaknesses bound up in the frailty of human nature, from
which only the strongest and coolest temperaments are able to emancipate
themselves. Speculators never set sufficient value upon the importance of
avoiding a loss: they think only of the profits. As it is with our money
affairs when we say, Look after the pence, the pounds will take care of
themselves; so it is with speculators, look after the losses, the profits
will take care of themselves. “Never refuse a profit,” is a golden motto
for the speculator, which unhappily few of them in their greediness have
the courage to adopt.
[Sidenote: KEEPING ONE’S OWN COUNSEL.]
In parting company, for the present, with the haphazard speculator, to
whom we have yet more to say worthy of his attention, we would strongly
recommend him if he finds it impossible to leave it alone altogether,
_to keep his own counsel_. Do not listen to what other people have to
recommend. People who are engaged in commerce in all its multifarious
ramifications, care only for themselves, and for no other single soul;
it is at all times consequently idle to put any other construction
upon advice to buy a certain stock, tendered apparently, with the most
benevolent motives, than that it is to serve directly, or indirectly,
the purpose of him who recommends the purchase. In business every one is
for himself, and, as the saying is, “the devil take the hindmost.” A man
who takes to speculating, and has not enough stability of character to
lay down certain principles for his guidance, to be rigidly adhered to
as a rule, or is possessed of an excitable temperament, had better flee
from the thought of engaging in so dangerous a vocation, for his ventures
will assuredly result in the speedy dissipation of his inheritance, be it
large or small.
NOTE.—I made, purposely, no comments on this very interesting
and important chapter, and trust all the terms will be as
readily understood by the New York speculator as by the London
speculator.
H. W. R.