When i first read the meaning of proclamation carved in a stone in Ephasus from Emperor Valentinian, Valens, and Gratian, somehow, it shocked me. That short text was indicating to me that, not so many things have been changed in terms of politics, power, taxing, corruption since it was carved, in 4th century (text can be found here). Some texts, books are timeless.
Reminiscences of a Stock Operator is one of them, I think. I have come cross that book several times in many reading list, but somehow, I skipped it. Until last month. Finally i decided to give a go to that book. And i regret that i have not read it before. I am amazed with its style and frankness and still contemporary, relevant content, after almost a century. It is a book, it deserves to be read more than once and if not, some parts must be noted down to go through time to time. Therefore, i extracted some quote from the book, for future references.
1
There is nothing new in Wall Street. There can't be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again.
There is always a reason for fluctuations, but the tape does not concern itself with the why and wherefore. It doesn't go into explanations. I didn't ask the tape why when I was fourteen, and I don't ask it today, at forty. The reason for what a certain stock does today may not be known for two or three days,or weeks, or months. But what the dickens does that matter? Your business with the tape is now -- not tomorrow. The reason can wait.
2
I always made money when I was sure I was right before I began. What beat me was not having brains enough to stick to my own game -- that is, to play the market only when I was satisfied that precedents favored my play. There is a time for all things, but I didn't know it. And that is precisely what beats so many men in Wall Street who are very far from being in the main sucker class. There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. No man can always have adequate reasons for buying or selling stocks daily or sufficient knowledge to make his. play an intelligent play.
The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street even among the professionals, who feel that they must take home some money every day, as though they were working for regular wages. I was only a kid, remember. I did not know then what I learned later, what made me fifteen years later, wait two long weeks and see a stock on which I was very bullish go up thirty points before I felt that it was safe to buy it.
A stock operator has to fight a lot of expensive enemies within himself.
I don't know whether I make myself plain, but I never lose my temper over the stock market. I never argue with the tape. Getting sore at the market doesn't get you anywhere.
3
It takes a man a long time to learn all the lessons of all his mistakes. They say there are two sides to everything. But there is only one side to the stock market; and it is not the bull side or the bear side, but the right side.
I have been flat broke several times, but my loss has never been a total loss. Otherwise, I wouldn't be here now. I always knew I would have another chance and that I would not make the same mistake a second time. I believed in myself.
Speculation is a hard and trying business, and a speculator must be on the job all the time or he'll soon have no job to be on.
I owe my early success as a trader to them and not to brains or knowledge, because my mind was untrained and my ignorance was colossal. The game taught me the game. And it didn't spare the rod while teaching.
If somebody had told me my method would not work I nevertheless would have tried it out to make sure for myself, for when I am wrong only one thing convinces me of it, and that is, to lose money. And I am only right when I make money. That is speculating.
Ignorance at twenty-two isn't a structural defect.
If the unusual never happened there would be no difference in people and then there wouldn't be any fun in life. The game would become merely a matter of addition and subtraction. It would make of us a race of bookkeepers with plodding minds. It's the guessing that develops a man's brainpower. Just consider what you have to do to guess right.
4
Brokers always had the hope of getting away from me what I had taken from them. They regarded my winnings as temporary loans.
5
The first change I made in my play was in the matter of time. I couldn't wait for the sure thing to come along and then take a point or two out of it as I could in the bucket shops. I had to start much earlier if I wanted to catch the move in Fullerton's office. In other words, I had to study what was going to happen to anticipate stock movements. That sounds asininely commonplace, but you know what I mean. It was the change in my own attitude toward the game that was of supreme importance to me. It taught me, little by little, the essential difference between betting on fluctuations and anticipating inevitable advances and declines, between gambling and speculating.
I discovered that although I often was 100 per cent right on the market that is, in my diagnosis of conditions and general trend -- I was not making as much money as my market "rightness" entitled me to. Why wasn't I? There was as much to learn from partial victory as from defeat.
They say you never grow poor taking profits. No, you don't. But neither do you grow rich taking a four-point profit in a bull market. Where I should have made twenty thousand dollars I made two thousand. That was what my conservatism did for me.
Suckers differ among themselves according to the degree of experience. The tyro knows nothing, and everybody, including himself, knows it. But the next, or second, grade thinks he knows a great deal and makes others feel that way too. He is the experienced sucker, who has studied not the market itself but a few remarks about the market made by a still higher grade of suckers. The second-grade sucker knows how to keep from losing his money in some of the ways that get the raw beginner. It is this semisucker rather than the 100 per cent article who is the real all-the-year-round support of the commission houses. He lasts about three and a half years on an average, as compared with a single season of from three to thirty weeks, which is the usual Wall Street life of a first offender. It is naturally the semisucker who is always quoting the famous trading aphorisms and the various rules of the game. He knows all the don'ts that ever fell from the oracular lips of the old stagers excepting the principal one, which is: Don't be a sucker!
The customer would finish the tale of his perplexity and then ask: "What do you think I ought to do?" Old Turkey would cock his head to one side, contemplate his fellow customer with a fatherly smile, and finally he would say very impressively, "You know, it's a bull market!" Time and again I heard him say, "Well, this is a bull market, you know!" as though he were giving to you a priceless talisman wrapped up in a million-dollar accident-insurance policy. And of course I did not get his meaning.
What old Mr. Partridge said did not mean much to me until I began to think about my own numerous failures to make as much money as I ought to when I was so right on the general market. The more I studied the more I realized how wise that old chap was. He had evidently suffered from the same defect in his young days and knew his own human weaknesses. He would not lay himself open to a temptation that experience had taught him was hard to resist and had always proved expensive to him, as it was to me. I think it was a long step forward in my trading education when I realized at last that when old Mr. Partridge kept on telling the other customers, "Well, you know this is a bull market!" he really meant to tell them that the big money was not in the individual fluctuations but in the main movements that is, not in reading the tape but in sizing up the entire market and its trend.
After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level, which should show the greatest profit. And their experience invariably matched mine -- that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.
A man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do. That is why so many men in Wall Street, who are not at all in the sucker class, not even in the third grade, nevertheless lose money. The market does not beat them. They beat themselves, because though they have brains they cannot sit tight.
Disregarding the big swing and trying to jump in and out was fatal to me. Nobody can catch all the fluctuations. In a bull market your game is to buy and hold until you believe that the bull market is near its end. To do this you must study general conditions and not tips or special factors affecting individual stocks.
One of the most helpful things that anybody can learn is to give up trying to catch the last eighth or the first. These two are the most expensive eighths in the world. They have cost stock traders, in the aggregate, enough millions of dollars to build a concrete highway across the continent.
Without faith in his own judgment no man can go very far in this game. That is about all I have learned to study general conditions, to take a position and stick to it. I can wait without a twinge of impatience. I can see a setback without being shaken, knowing that it is only temporary.
If I learned all this so slowly it was because I learned by my mistakes, and some time always elapses between making a mistake and realizing it, and more time between realizing it and exactly determining it.
6
It isn't a hunch but the subconscious mind, which is the creative mind, at work. That is the mind which makes artists do things without their knowing how they came to do them. Perhaps with me it was the cumulative effect of a lot of little things individually insignificant but collectively powerful.
I began to think of basic conditions instead of individual stocks. I promoted myself to a higher grade in the hard school of speculation. It was a long and difficult step to take.
7
People don't seem to grasp easily the fundamentals of stock trading. I have often said that to buy on a rising market is the most comfortable way of buying stocks. Now, the point is not so much to buy as cheap as possible or go short at top prices, but to buy or sell at the right time. When I am bearish and I sell a stock, each sale must be at a lower level than the previous sale. When I am buying, the reverse is true. I must buy on a rising scale. I don't buy long stock on a scale down, I buy on a scale up.
Remember that stocks are never too high for you to begin buying or too low to begin selling. But after the initial transaction, don't make a second unless the first shows you a profit. Wait and watch.
8
I was utterly free from speculative prejudices. The bear side doesn't appeal to me any more than the bull side, or vice versa. My one steadfast prejudice is against being wrong.
That is why I repeat that I never argue with the tape. To be angry at the market because it unexpectedly or even illogically goes against you is like getting mad at your lungs because you have pneumonia.
9
I have always played a lone hand. I began that way in the bucket shops and have kept it up. It is the way my mind works. I have to do my own seeing and my own thinking. But I can tell you after the market began to go my way I felt for the first time in my life that I had allies -- the strongest and truest in the world: underlying conditions. They were helping me with all their might.
It was an old trading theory of mine that when a stock crosses 100 or 200 or 300 for the first time the price does not stop at the even figure but goes a good deal higher, so that if you buy it as soon as it crosses the line it is almost certain to show you a profit. Timid people don't like to buy a stock at a new high record. But I had the history of such movements to guide me.
The only thing to do when a man is wrong is to be right by ceasing to be wrong.
My greatest discovery was that a man must study general conditions, to size them so as to be able to anticipate probabilities. In short, I had learned that I had to work for my money. I was no longer betting blindly or concerned with mastering the technic of the game, but with earning my successes by hard study and clear thinking.
My biggest winnings were not in dollars but in the intangibles: I had been right, I had looked ahead and followed a clear-cut plan. I had learned what a man must do in order to make big money; I was permanently out of the gambler class; I had at last learned to trade intelligently in a big way. It was a day of days for me.
10
If a man is both wise and lucky, he will not make the same mistake twice. But he will make any one of the ten thousand brothers or cousins of the original. The Mistake family is so large that there is always one of them around when you want to see what you can do in the fool-play line.
Losing money is the least of my trcubles. A loss never bothers me after I take it. I forget it overnight. But being wrong -- not taking the loss that is what does the damage to the pocketbook and to the soul.
Money creates needs or encourages their multiplication. I mean that after a man makes money in the stock market he very quickly loses the habit of not spending. But after he loses his money it takes him a long time to lose the habit of spending.
I would rather play commodities than stocks. There is no question about their greater legitimacy, as it were. It partakes more of the nature of a commercial venture than trading in stocks does. A man can approach it as he might any mercantile problem. It may be possible to use fictitious arguments for or against a certain trend in a commodity market; but success will be only temporary, for in the end the facts are bound to prevail, so that a trader gets dividends on study and observation, as he does in a regular business. He can watch and weigh conditions and he knows as much about it as anyone else. He need not guard against inside cliques. Dividends are not unexpectedly passed or increased overnight in the cotton market or in wheat or corn. In the long run commodity prices are governed but by one law -- the economic law of demand and supply. The business of the trader in commodities is simply to get facts about the demand and the supply, present and prospective. He does not indulge in guesses about a dozen things as he does in stocks. It always appealed to me trading in commodities.
Prices, like everything else, move along the line of least resistance. They will do whatever comes easiest, therefore they will go up if there is less resistance to an advance than to a decline; and vice versa.
The trend has been established before the news is published, and in bull markets bear items are ignored and bull news exaggerated, and vice versa.
A man has to guard against many things, and most of all against himself -- that is, against human nature. That is the reason why I say that the man who is right always has two forces working in his favor basic conditions and the men who are wrong.
In a narrow market, when prices are not getting anywhere to speak of but move within a narrow range, there is no sense in trying to anticipate what the next big movement is going to be up or down. The thing to do is to watch the market, read the tape to determine the limits of the get-nowhere prices, and make up your mind that you will not take an interest until the price breaks through the limit in either direction. A speculator must concern himself with making money out of the market and not with insisting that the tape must agree with him. Never argue with it or ask it for reasons or explanations. Stock-market post-mortems don't pay dividends.
It is surprising how many experienced traders there are who look incredulous when I tell them that when I buy stocks for a rise I like to pay top prices and when I sell I must sell low or not at all. It would not be so difficult to make money if a trader always stuck to his speculative guns -- that is, waited for the line of least resistance to define itself and began buying only when the tape said up or selling only when it said down. He should accumulate his line on the way up. Let him buy one-fifth of his full line. If that does not show him a profit he must not increase his holdings because he has obviously begun wrong; he is wrong temporarily and there is no profit in being wrong at any time. The same tape that said up did not necessarily lie merely because it is now saying NOT YET.
It is simple arithmetic to prove that it is a wise thing to have the big bet down only when you win, and when you lose to lose only a small exploratory bet, as it were. If a man trades in the way I have described, he will always be in the profitable position of being able to cash in on the big bet.
The average speculator has arrayed against him his own nature. The weaknesses that all men are prone to are fatal to success in speculation -- usually those very weaknesses that make him likable to his fellows or that he himself particularly guards against in those other ventures of his where they are not nearly so dangerous as when he is trading in stocks or commodities.
The speculator's chief enemies are always boring from within. It is inseparable from human nature to hope and to fear. In speculation when the market goes against you -- you hope that every day will be the last day and you lose more than you should had you not listened to hope -- to the same ally that is so potent a success-bringer to empire builders and pioneers, big and little. And when the market goes your way you become fearful that the next day will take away your profit, and you get out too soon. Fear keeps you from making as much money as you ought to. The successful trader has to fight these two deep-seated instincts. He has to reverse what you might call his natural impulses. Instead of hoping he must fear; instead of fearing he must hope. He must fear that his loss may develop into a much bigger loss, and hope that his profit may become a big profit. It is absolutely wrong to gamble in stocks the way the average man does.
I have been in the speculative game ever since I was fourteen. It is all I have ever done. I think I know what I am talking about. And the conclusion that I have reached after nearly thirty years of constant trading, both on a shoestring and with millions of dollars back of me, is this: A man may beat a stock or a group at a certain time, but no man living can beat the stock market!
11
A trader gets to play the game as the professional billiard player does -- that is, he looks far ahead instead of considering the particular shot before him. It gets to be an instinct to play for position.
That is one trouble about trading on a large scale. You cannot sneak out as you can when you pike along. You cannot always sell out when you wish or when you think it wise. You have to get out when you can; when you have a market that will absorb your entire line. Failure to grasp the opportunity to get out may cost you millions. You cannot hesitate. I f you do you are lost.
12
A man cannot be convinced against his own convictions, but he can be talked into a state of uncertainty and indecision, which is even worse, for that means that he cannot trade with confidence and comfort.
I have done nothing in my life but trade in stocks and commodities. I naturally think that if it is wrong to be bearish it must be right to be a bull. And if it is right to be a bull it is imperative to buy. As my old Palm Beach friend said Pat Hearne used to say, "You can't tell till you bet!" I must prove whether I am right on the market or not; and the proofs are to be read only in my brokers' statements at the end of the month.
I did precisely the wrong thing. The cotton showed me a loss and I kept it. The wheat showed me a profit and I sold it out. It was an utterly foolish play, but all I can say in extenuation is that it wasn't really my deal, but Thomas'. Of all speculative blunders there are few greater than trying to average a losing game. My cotton deal proved it to the hilt a little later. Always sell what shows you a loss and keep what shows you a profit.
It cost me millions to learn that another dangerous enemy to a trader is his susceptibility to the urgings of a magnetic personality when plausibly expressed by a brilliant mind. It has always seemed to me, however, that I might have learned my lesson quite as well if the cost had been only one million. But Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill, knowing you have to pay it, no matter what the amount may be. Having learned what folly I was capable of I closed that particular incident. Percy Thomas went out of my life.
The hope of making the stock market pay your bill is one of the most prolific sources of loss in Wall Street. You will chip out all you have if you adhere to your determination. There isn't a man in Wall Street who has not lost money trying to make the market pay for an automobile or a bracelet or a motor boat or a painting. I could build a huge hospital with the birthday presents that the tight-fisted stock market has refused to pay for. In fact, of all hoodoos in Wall Street I think the resolve to induce the stock market to act as a fairy godmother is the busiest and most persistent.
13
It was improper and unwise for me as a speculator to allow myself to be influenced by any consideration to act against my own judgment. Noblesse oblige, but not in the stock market, because the tape is not chivalrous and moreover does not reward loyalty.
I was very lucky. I was rampantly bullish in a wild bull market. Things were certainly coming my way so that there wasn't anything to do but to make money. It made me remember a saying of the late H. H. Rogers, of the Standard Oil Company, to the effect that there were times when a man could no more help making money than he could help getting wet if he went out in a rainstorm without an umbrella. It was the most clearly defined bull market we ever had.
Nowhere does history indulge in repetitions so often or so uniformly as in Wall Street. When you read contemporary accounts of booms or panics the one thing that strikes you most forcibly is how little either stock speculation or stock speculators today differ from yesterday. The game does not change and neither does human nature.
A market does not culminate in one grand blaze of glory. Neither does it end with a sudden reversal of form. A market can and does often cease to be a bull market long before prices generally begin to break. My long expected warning came to me when I noticed that, one after another, those stocks which had been the leaders of the market reacted several points from the top and for the first time in many months -- did not come back. Their race evidently was run, and that clearly necessitated a change in my trading tactics.
It is enough for the experienced trader to perceive that something is wrong. He must not expect the tape to become a lecturer. His job is to listen for it to say "Get out!" and not wait for it to submit a legal brief for approval.
Then one day the entire market became quite weak and prices of all stocks began to fall. When I had a profit of at least four points in each and every one of the twelve stocks that I was short of, I knew that I was right. The tape told me it was now safe to be bearish, so I promptly doubled up... After I doubled up, I did not make another trade for a long time.
Never try to sell at the top. It isn't wise. Sell after a reaction if there is no rally.
In a bear market it is always wise to cover if complete demoralisation suddenly develops. That is the only way, if you swing a good-sized line, of turning a big paper profit into real money both quickly and without regrettable reductions. For instance, I was short fifty thousand shares of United States Steel alone. Of course I was short of other stocks, and when I saw I had the market to cover in, I lid. My profits amounted to about one and a half million dollars. It was not a chance to disregard.
14
We ran smack into a long moneyless period; four mighty lean years. There was not a penny to be made. As Billy Henriquez once said, "It was the kind of market in which not even a skunk could make a scent."
I have come to feel that it is as necessary to know how to read myself as to know how to read the tape. I have studied and reckoned on my own reactions to given impulses or to the inevitable temptations of an active market, quite in the same mood and spirit as I have considered crop conditions or analysed reports of earnings.
16
It has always seemed to me the height of dam foolishness to trade on tips. I suppose I am not built the way a tip-taker is. I sometimes think that tip-takers are like drunkards. There are some who can't resist the craving and always look forward to those jags which they consider indispensable to their happiness. It is so easy to open your ears and let the tip in. To be told precisely what to do to be happy in such a manner that you can eagily obey is the next nicest thing to being happy which is a mighty long first step toward the fulfilment of your heart's desire. It is not so much greed made blind by eagerness as it is hope bandaged by the unwillingness to do any thinking.
Old Baron Rothschild's recipe for wealth winning applies with greater force than ever to speculation. Somebody asked him if making money in the Bourse was not a very difficult matter, and he replied that, on the contrary, he thought it was very easy. I will tell you my secret if you wish. It is this: I never buy at the bottom and I always sell too soon."
17
The training of a stock trader is like a medical education. The physician has to spend long years learning anatomy, physiology, materia medica and collateral subjects by the dozen. He learns the theory and then proceeds to devote his life to the practice. He observes and classifies all sorts of pathological phenomena. He learns to diagnose. If his diagnosis is correct, and that depends upon the accuracy of his observation -- he ought to do pretty well in his prognosis, always keeping in mind, of course, that human fallibility and the utterly unforeseen will keep him from scoring 100 per cent of bull's eyes. And then, as he gains in experience, he. learns not only to do the right thing but to do it instantly, so that many people will think he does it instinctively. It really isn't automatism. It is that he has diagnosed the case according to his observations of such cases during a period of many years; and, naturally, after he has diagnosed it, he can only treat it in the way that experience has taught him is the proper treatment. You can transmit knowledge -- that is, your particular collection of card indexed facts, but not your experience. A man may know what to do and lose money -- if he doesn't do it quickly enough.
Observation, experience, memory and mathematics -- these are what the successful trader must depend on. He must bet always on probabilities -- that is, try to anticipate them. Years of practice at the game, of constant study, of always remembering, enable the trader to act on the instant when the unexpected happens as well as when the expected comes to pass.
I have found that experience is apt to be steady dividend payer in this game and that observation gives you the best tips of all. The behaviour of a certain stock is all you need at times. You observe it.
I never buy a stock even in a bull market, if it doesn't act as it ought to act in that kind of market.
An old broker once said to me: "If I am walking along a railroad track and I see a train coming toward me at sixty miles an hour, do I keep on walking on the ties? Friend, I sidestep. And I do not even pat myself on the back for being so wise and prudent."
Experiences had taught me to beware of buying a stock that refuses to follow the group-leader.
18
It was not difficult to be both fearless and patient. A speculator must have faith in himself and in his judgment. The late Dickson G. Watts, ex-President of the New York Cotton Exchange and famous author of "Speculation as a Fine Art," says that courage in a speculator is merely confidence to act on the decision of his mind. With me, I cannot fear to be wrong because I never think I am wrong until I am proven wrong. In fact, I am uncomfortable unless I am capitalising my experience. The course of the market at a given time does not necessarily prove me wrong. It is the character of the advance or of the decline that determines for me the correctness or the fallacy of my market position. I can only rise by knowledge. If I fall it must be by my own blunders.
19
The study of the psychology of speculators is as valuable as it ever was. Weapons change, but strategy remains strategy, on the New York Stock Exchange as on the battlefield. I think the clearest summing up of the whole thing was expressed by Thomas F. Woodlock when he declared: "The principles of successful stock speculation are based on the supposition that people will continue in the future to make the mistakes that they have made in the past."
In booms, which is when the public is in the market in the greatest numbers, there is never any need of subtlety, so there is no sense of. wasting time: discussing either manipulation or speculation during such times; it would be like trying to find the difference in raindrops that are falling synchronously on the same roof across the street. The sucker has always tried to get something for nothing, and the appeal in all booms is always frankly to the gambling instinct aroused by cupidity and spurred by a pervasive prosperity. People who look for easy money invariably pay for the privilege of proving conclusively that it cannot be found on this sordid earth. At first, when I listened to the accounts of old-time deals and devices I used to think that people were more gullible in the i86o's and '7o's than in the igoo's. But I was sure to read in the newspapers that very day or the next something about the latest Ponzi or the bust-up of some bucketing broker and about the millions of sucker money gone to join th,silent majority of vanished savings.
20
He did not argue with the tape is plain. He was utterly fearless but never reckless. He could and did turn in a twinkling, if he found he was wrong.
There is no question that advertising is an art, and manipulation is the art of advertising through the medium of the tape. The tape should tell the story the manipulator wishes its readers to see. The truer the story the more convincing it is bound to be, and the more convincing it is the better the advertising is. A manipulator today, for instance, has not only to make a stock look strong but also to make it be strong. Manipulation therefore must be based on sound trading principles. That is what made Keene such a marvellous manipulator; he was a consummate trader to begin with.
It is well to remember a rule of manipulation, a rule that Keene and his able predecessors well knew. It is this: Stocks are manipulated to the highest point possible and then sold to the public on the way down.
The first step in a bull movement in a stock is to advertise the fact that there is a bull movement on. Sounds silly, doesn't it? Well, think a moment. It isn't as silly as it sounded, is it? The most effective way to advertise what, in effect, are your honourable intentions is to make the stock active and strong. After all is said and done, the greatest publicity agent in the wide world is the ticker, and by far the best advertising medium is the tape.
It is always well to make it plain to the traders and to the public, also that there is a demand for the stock on the way down. That tends to check both reckless short selling by the professionals and liquidation by frightened holders which is the selling you usually see when a stock gets weaker and weaker, which in turn is what a stock does when it is not supported. These covering purchases of mine constitute what I call the stabilising process. As the market broadens I of course sell stock on the way up, but never enough to check the rise. This is in strict accordance with my stabilising plans. It is obvious that the more stock I sell on a reasonable and orderly advance the more I encourage the conservative speculators, who are more numerous than the reckless room traders; and in addition the more support I shall be able to give to the stock on the inevitable weak days. By always being short 'I always am in a position to support the stock without danger to myself. As a rule I begin my selling at a price that will show me a profit. But I often sell without having a profit, simply to create or to increase what I may call my riskless buying power. My business is not alone to put up the price or to sell a big block of stock for a client but to make money for myself. That is why I do not ask any clients to finance my operations. My fee is contingent upon my success.
21
The big money in booms is always made first by the public-on paper. And it remains on paper.
22
[In the boom of 1915] It got so that all a man had to do was to say that he had a friend who was a friend of a member of one of the Allied commissions and he would be offered all the capital needed to carry out the contracts he had not yet secured. I used to hear incredible stories of clerks becoming presidents of companies doing a business of millions of dollars on money borrowed from trusting trust companies, and of contracts that left a trail of profits as they passed from man to man. A flood of gold was pouring into this country from Europe and the banks had to find ways of impounding it.
The way business was done might have been regarded with misgivings by the old, but there didn't seem to be so many of them about. The fashion for gray-haired presidents of banks was all very well in tranquil times, but youth was the chief qualification in these strenuous times. The banks certainly did make enormous profits.
23
Manipulation of some sort enters into practically all advances in individual stocks and that such advances are engineered by insiders with one object in view and one only and that is to sell at the best profit possible.
24
The public ought always to keep in mind the elementals of stock trading. When a stock is going up no elaborate explanation is needed as to why it is going up. It takes continuous to buying to make a stock keep on going up. As long as it does so, with only small and natural reactions from time to time, it is a pretty safe proposition to trail along with it. But if after a long steady rise a stock turns and gradually begins to go down, with only occasional small rallies, it is obvious that the line of least resistance has changed from upward to downward. Such being the case why should any one ask for explanations? There are probably very good reasons why it should go down, but these reasons are known only to a few people who either keep those reasons to themselves, or else actually tell the public that the stock is cheap. The nature of the game as it is played is such that the public should realise that the truth cannot be told by the few who know.
