e l d en

By G . C $
Au th or of Trad e Cy cl es,
-
W h at Ma kes th e Mark et
Etc .

TI C$ ER PUBL IS HIN G COM PAN Y

2 R EC T O R S TREET

NEW YOR$
 PREFACE

HI S b o ok is b ase d u p on th e b e l i e f th at th e
m o v e m e n ts of pr i ces on th e e x c h a n ge s

ar e d e p e n d e n t to a v e ry l a r ge d e gr e e on th e

m e n ta l att it
u de of th e i nv e sti n g an d tr a d ing
pu lb i c I t i s th e r e su l t o f y e a s o f stu d y an d
. r

e x p e i e n c e a s f e l l o w a t C o l u m bi a Un i v e s i ty
r -
r ,

n e w s w i te r r s ta ti sti c i a n
,
o n th e e d i to r i a l staff
,

of TH E M A GA $ I N E OF W AL L S TRE ET , e tc .

Th e b o ok i s i n t n d e d c hi e fl y as a p ac ti c al
e r

h e l p to th at c on si d e ab l e p a t o f th e om
r r c

m n i ty w hi c h i s i n te e ste d d i e c tl y o
u r in ,
r r ~

d i c tl y i n th e m a k ts ; b u t i t i s h op d th t i t
re ,
r e e a

m ay a l so h av e so m e sc i e n ti fi c v al e a s a p e u r

l i m i n y d i s c u s si o n i n a n e w fi e l d w h r e 0 p
ar ,
e

p o r t n i ti es fo r f u r th e r r e se ar c h s e e m a l m o st
u

u n l i m i te d . G C S EL DEN . . .

N ew Y o rk M ay 28 1 9 12 ,
.

259 78 3
 C O N TEN T S .

T h e Sp e c u l at i ve Cy c l e

II . I n v e r te d R e as o n in g an d I ts C o n
se q u e n c e s

I II . T he y
C o n f u s i n g th e P r e s e n t w i t h th e
F u tu r e —D i s c ou n ti n g
C o n fu s i n g th e P e r s o n al w ti h th e

Ge n e r al 71

T h e Pan ic an d th e Boom 87

T h e Psy c h ol o gy of S c a l e O r d e r s 1 01

Th e M e n tal A tti tu d e of th e
I n d iv i d u al
 —
I Th e S p ec u l ati ve Cyc l e

M
O ST exp eri en ced p rofessiona l
tra ders i n th e stock market w ill
readil y a dmit th at th e minor
fl u ctuations a m o u n ti n g t o p erhap s fiv e
,

o r ten doll ars a sh are in th e activ e

sp e cul ativ e is su es ar e ch i efly p sycho

,

l ogical Th e y r esult from vary ing atti

.

tudes of the p ublic mind or more , ,

strictl y
,
fr om the menta l attitudes of
thos e p erson s wh o ar e int er ested i n th e
market a t th e tim e .

S uch fl u c tuatio ns m ay b e an d ofte n

,

“ $
are b as ed o n fun dam ental con di
,

—
ti ons tha t i s o n real changes in th e
,

divid en d p ro sp e cts o f th e stock s a f

fe c te d o r o n varia ti on s in th e earni ng
p ow er of th e corp oration s rep re s ented
— an d ag a i n th e y ma y n ot Th e b road
.

mo v ements of th e mark et covering ,

p eriods o f month s o r eve n y ears are ,

always th e result o f general financia l

10 T H E P SYC H O LO GY OF
conditions ; b ut th e s m all er i ntermedi
ate fl u ctu ation s r e p res ent chan ge s in
th e s tate o f th e p ub l i c min d w hi ch ,

may o r ma y not coin ci d e w ith altera

tions i n b as i c fa ctors .

T o b ri ng o u t cl early th e degre e to
wh i ch p sy chol o gy en ters in to th e stock
m arket p rob l em from day to day it is ,

o nly n ec essary to r ep rodu c e a conv er ~

satio n b etw een p rofes sional trad ers

s u ch a s ma y b e h eard al most any d ay
in N ew str e et o r in th e n eighb orin g
caf $ s
.

“
P
W e l l W hat do you know
,
? says one $

trad er to th e oth er .

“
Just cov er e d my S teel is the reply ,
.

Too m u ch com p an y E v e r v b o dy .

$
s e em s to b e s h ort .

“
E v eryb o d y I ve s e en think s j u st a s
’

y o u do . E a ch o n e h as cov ere d b e

cau s e h e th i nks ev e ryb od y el s e i s sh ort

— sti l l th e m ark et do es n t ral l y mu ch ’
.

I d on t b el i e v e th er e s m u ch short i n
’ ’

’
t e r e s t l eft an d if th at s th e ca s e w e
,

s h al l get an oth er b reak .

$

“
,
’
—
Y e s th at s w hat th e y al l sa y an d
 T HE S T O CK MARKE T . 11

th ey v e al l sol d s hort agai n b ecaus e

’

th ey thin k e v eryb ody els e has covered .

I b el i e ve there s j ust as much shor t

’

interest now as there was be fore .

I t is evi dent that th i s s eri es o f inver

s ion s might b e contin ue d i ndefinitely .

Th ese al ert m enta l acrob ats are doi ng

a su ccess io n o f fl i p fl 0 p s each on e o f
-

w hich l ea ds u p l ogi cally to th e n ext ,

without ever arri v ing at a final st 0 p

p in g p lac e
-

Th e main point o f th eir argu ment is

that th e state o f mi nd of a ma n short
o f th e market i s radically di ff erent from

th e state o f m ind o f on e who is long .

Thei r whole study in such a conversa

,

tion is th e m ental attitu d e o f th os e i n

,

te r e s te d i n th e mark et I f a m aj ority
.

o f th e volatil e class of i n and out trad

- -

ers are long many o f th em w il l hasten

,

to s ell o n any sign of w eak n ess an d

a decl in e w ill r esul t I f th e maj ority
.

are short th ey will b uy o n a n y d evelop

,

ment o f strength an d an advanc e may

b e exp ected .

Th e p sychological a sp ects of sp ecul a

12 TH E P SYCH O LO GY OF

tio n m a y b e cons idere d from two p oints

o f vi ew e qu al ly i mp ortant
, O n e qu es
.

ti on i s W hat e ff ec t do vary in g m ental

,

attitu d es o f th e p ub l i c h av e up on th e
course of p ri c es H o w i s th e character
?

o f th e mark et infl u en c ed b y h l
s
p y c o o g
i cal co nd itions ?
A s e con d co nsi deration i s H ow do es
,

th e m e ntal attitud e of the individual

ff
trade r a ect his chances o f success ?

To w hat extent an d h o w can h e ov er

, ,

com e th e ob sta cl es p la c e d i n h is p ath

way by his o w n hop es and fears his ,

ti miditi es an d h i s ob stin a ci es ?

Th e s e tw o p oi nts of vi ew ar e s o
cl o s ely i nvolv ed an d i ntermingl e d that
it i s al mos t i mp oss ib l e to consi d er
e i th e r o n e al on e .It wil l b e n ec essary
to tak e u p fi rst th e sub j ect o f s p e c u
l ativ e p sych ol o gy a s a w h ol e an d l ater
to attem p t to draw con cl u s i on s b oth
a s to its e ffects up on th e mark et and
its in fl u enc e u p o n th e fortun e s o f th e
i n divi du al trad er .

A s a conv eni ent starti ng p o int it may

b e w el l to tra ce b ri efl y th e h istory o f
 T HE S T O CK M ARKE T . 13

th e ty p i cal sp e cu l ati v e c y c l e w h ich ,

runs its cours e o v er an d o ve r y ear after ,

y ear w ith infin it e slight v ariations b ut

,

w ith s ub stantia l s imilarity o n e v e r y ,

sto ck exchang e an d in ev er y sp ecul a

—
tive m ark et o f th e w orl d and p r e su m
ab ly w ill conti nu e to do so as l ong a s
p rices are fixed b y th e com p etiti on o f
b uyers an d s el l ers an d as long a s h u ,

man beings seek a p rofit and fear a l o ss $

.

B eginning w ith a con dition o f dull

n es s an d i nactivit y with sma ll fl u c tu ,

a ti o n s and v er y sl ight p ub l i c i nterest ,

pri ces b egin to ri se at fi rst almost i m ,

p e r c e p t i b l v N 0 sp ecial
. r eason app ears
fo r th e a dvan c e an d it i s gen eral ly ,

th ought to b e m erely t emporary d u e to ,

smal l professional op erations Th er e .

i s o f course som e sh ort interest i n t h e

, ,

market mostly at th is tim e of th e

, , ,
“ $
chara cter som etim es call ed a sl eep ing
“
T h e w r te r i di sc u ss e d thi s su bje c t r at f ll y i
he r u n

th e $ u a r te r l y $ ou r n a l of E c on om i c s , V l $ VI N
o . 2 o .

il ill f i ly mm i d
, .

Th e art c e w l
a so be ou n d x te n s
e ve su ar $ e

an d q u ote d i n V ol . V II of
“
M od n er B i di d
u s n e ss ,
$
e te
by $ o s e p h F r e n c h $ o h n s on , D e an o f N w Y k U i
e or n

i y S c h ool
ve r s t of C omme r c e .
14 T H E P SYCH O LOGY O F
s hort i nterest A n a ctiv e s p eculative
.

sto ck i s n ev er e ntirel y fre e from shorts .

A s th er e i s so l itt l e p ub l i c s p e cula
tion at this pe riod i n th e cyc l e th e r e ,

a re b ut few who ar e w il l ing to s ell out

o n s o smal l an a dva nc e ,
h en c e p rice s
ar e n ot m e t b y an y large vol u m e o f
p r o fi -

t takin g
. Th e small er p r o fe s

s i o n a l s take th e s ho rt s id e for a turn ,

w ith th e i d ea th at trifl in g fl u ctuation s

a re th e b es t th at can b e h o p ed for at
th e m om e nt an d m u st b e tak en a d v a n
tage of if an y p rofits ar e to b e s ecu red .

T hi s cla s s of s el l in g b rings p ri ce s b a ck
a l most to th ei r form er dea d l ev el .

S oon an oth er u nostentatiou s upward

mov em en t b egin s carryin g p ric es a
,

trifl e h igh e r th a n th e fi rst . A few

s hr ew d trader s tak e th e l ong s ide b ut
‘

th e p ub l i c i s stil l u nmov e d an d th e
’

—
s le ep ing sh ort i nterest most o f it orig
i n a l l y p ut out at m u ch h igh e r fi gu r e s
sti l l r efu s es to w ak en .

G ra du all y p ri ces h ard en fu rth er and

fi nal l y a dvan c e som ewh at sh arp l y A .

few of th e m or e timi d shorts co v er p er ,

 T H E S T O CK MARKE T . 15

hap s to save a p art o f th eir p rofits or

to p rev ent th ei r trades from runni n g
into a l oss Th e fact that a b ul l turn
.

i s coming now p en etrates throu gh a n

oth er l ay er o f intell ectual density an d
anothe r wave o f traders take the long '

s id e Th e p ub l ic notes th e a dvan c e an d
.

b egin s to thi nk som e furth er uptur n

i s p oss ib l e b ut that th ere w ill b e p l enty
,

o f op p ortuniti es to b uy o n sub stantial

reactions .

S trangely enough these r e actions ex

, ,

c ep t o f the most trifling ch ara cter do ,

n ot app ear Waiting b uy ers do not get

.

a satisfactory chanc e to tak e hol d .

P ri ce s b egi n to mov e up fast er Th er e

.

i s a h alt from tim e to tim e b ut wh en

,

a r eal reaction fi nally com es th e market

“ $
looks to o w eak to b uy and wh en it
,

starts u p aga i n i t oft en do es so w ith a

sudden l eap that l e av es w oul d b e p ur -

ch as ers far i n th e rear .

A t l ength th e mor e s tub b orn b ears

b ecom e alarm ed an d b egin to cov er i n
“ $
large vol ume Th e market b oils and
.
,

to th e short wh o i s w at ching th e tap e ,

16 T H E P S YCH OLO G Y O F
s eems l ikel y to sh oot through th e c eil
i n g a t a l mo st any moment H ow ev er
.

fi rm ma y b e h is b eari sh convictions h is ,

ner vous system e ventuall y gi v es out u n

d er th is continual p ou ndin g an d h e
,
$
c overs ev eryth i ng at th e m ark et with
a sigh o f r el i ef that h is l os s es ar e n o
gr eater .

A b out th i s tim e th e o utsi d e p ub l i c

b egins to rea ch th e con cl us io n that th e
“ $
m arket i s too str o ng to rea ct mu ch ,

and that th e o nly th in g to do i s to b u y

“

’
em an y wh er e . F rom th i s sour ce
c om es an oth er w av e o f b uy in g w hi ch ,

s oo n carrie s p ri ces to n e w h igh l ev el s ,

a n d p ur c h as ers co ngratul ate th ems elve s

o n th ei r qu ick a n d ea sy p rofits .

F o r ev er y b uy e r th er e m u st b e a
—
se lle r o r more accurate l y for every
, ,

one hundred shares bought on e hundred

s har es m u st b e s ol d as th e a ctual n um
,

b e r of per s ons buying at this stag e is

l ikel y to b e mu ch greater th an th e n u m
b er o f pers ons sel l ing E ar ly in the
.

a dvan c e th e s up p l y o f stock s is smal l

an d c om es from s catt ere d s ourc es b u t ,
 18 T H E P S YCH OLO GY O F

strai n e d b anki ng r es ou r ces o r d ep res s ed

tra d e w il l s et a d efinite l imit to th e
p ossibl e advanc e I f con d itions ar e
.

b eari sh th e drivin g of th e b iggest

,

shorts to cov er w ill p ra cti cally en d th e

ri s e ; b ut i n a genuin e b ul l mark et th e
a dvan c e w ill c onti nu e u ntil ch eck e d b y
sal es o f stock s h el d fo r i nvestm ent ,

w hi ch com e u p on th e mark et onl y

when p rices are belie v ed to be u n d u ry
h igh .

I n a s ens e th e m ark et i s alway s a

,

c ontest b etw e en i nv estors and sp e cul a

tors Th e r eal inv estor lo okin g ch i efly
.
,

t o i nter est retu rn b ut b y no m eans u m

,

w ill ing to mak e a p rofit by b uy ing l ow

an d s el l in g high i s r eady p erh ap s to
, , ,

b uy h i s favorit e sto ck at a p ri c e wh ich

w il l y i el d h im s ix p er c ent o n h i s i n .

v estm ent o r to s el l at a p ric e y i el din g

,

o nly fou r p er c en t Th e sp eculato r

.

car es noth ing ab out i nt er est r eturn .

H e w ants to b uy b efor e p ric es go u p

and to sell short before they go down .

H e w oul d a s s oon b u y at th e top o f a

 T H E S T O CK MARKET . 9

big rise at any other time p r ov ided p rices

,

ar e going still highe r .

A s th e market a dvances th erefore , ,

o n e investor afte r anothe r s ee s his limit

rea ch ed an d h is stock sol d Th us th e .

vol um e of stocks to b e carri ed o r tossed

from hand to h an d b y b ull ish sp ecu l a
tors i s constantly rolling up l ike a
snowb all O n th e ordinary i nt ermedi
.

at e fl u ctu atio ns coveri ng five to

,

tw enty dollars a sh are th es e sal es by

,

investors ar e small compared with the

speculative busi ness In one hundred
.

sh ares of a sto ck s ell in g at 1 50 th e ,

i nv estor has b ut with th is su m

th e sp e cul ator can easily carry ten
times that n umb er o f shares .

Th e r ea so n why s al es b y i n v e s to r s v
ar e so e ffectiv e i s not b ecaus e o f th e
a ctual amount o f sto ck throw n o n th e
market b ut b ecau se thi s sto ck is a p e r
,

man ent load wh ich w ill not b e got

,

ri d o f agai n u ntil p ric es ha v e su ffered

a s ev er e de cli n e What th e sp eculator
.

s ell s h e o r som e oth er tra der may b uy

b ac k tomorrow .
20 T H E P S YCH OLO GY OF

Th e tim e com e s wh e n ev eryb od y

s e em s to b e b uy in g P ri c es b ecom e
.

con fus e d O n e sto ck le a p s upward i n

.

a wa y to strik e te rror to th e h eart o f

th e l ast su rvivin g sh ort A n oth er a p .

p ear s almo st e qual ly stro ng b ut sl ip s ,

b ack u nob tru sively wh en nob o d y i s

l ookin g lik e th e frog j u mp i ng o u t of
,

th e w ell i n th e arith m eti c o f o u r b oy

hoo d S till anoth er ch urn s vi ol ently i n
.

o n e p l ac e l ik e a si d e w h eel er stu ck o n
,
-

a s an d b ar
-
.

Th en th e m arke t give s a su dden

l u rch dow nward a s th ou gh i n dan ger
,

o f s p ill ing o u t its u nwi el d y conte nts .

Th is i s h ail ed a s a h eal th y reaction

“
,
$

though it is a mystery whom it can b e

h ealth y fo r u nl es s it i s th e s horts
,
.

P ri c es r ecov er again w ith ev eryb ody

,

h ap p y exc e p t a few di sgru ntl ed b ears ,

w h o ar e ri gh tl y r egarde d w ith con

t e m p tu o u s amus em ent .

C uriou s l y h ow ev er th er e s e ems to
, ,

b e sto ck en ough for al l com ers an d ,

th e few cranks w h o h a v e tim e to

b oth er w ith su ch th in gs noti c e th at
 T H E S T O CK MARKE T . 21

th e gen eral av erage o f p ri ces i s n ow

ri sing v ery sl owly i f at all Th e l arg
,
.

est sp e cul ativ e h olders o f stocks fi n d ,

i ng a market b ig enough to ab sorb

th ei r sal es are l ettin g go A n d th er e
,
.

ar e alway s sto cks enou gh t o go arou nd .

O ur b i g cap ita l ists ar e s el dom entirely

o u t o f sto ck s Th e y m erely h av e mor e
.

sto cks wh en p ric es ar e l ow a nd few e r

wh en p rices ar e h i gh M oreov er l on g
.
,

b efore th ere i s an y danger o f th e sup

p ly run ning o u t p l e nty o f n ew i ssu es
,

are created .

Wh en th ere is a gen eral p ubl i c inter

e st i n th e sto ck m arket an imm ens e ,

amount of real iz i ng w il l often b e ab

sorb ed with in th re e o r four day s o r a “

w e ek after w h ich th e d el uge ; b ut i f

,

sp ecul ation i s n arrow p ri ces m ay r e ,

mai n aroun d to p figures fo r w eek s o r

months whil e b ig h ol dings are fed o u t
, ,

a few h un dred sh ar es h ere an d a few

hun dred th ere and ev en th en a b al
,

an ce m ay b e l eft to b e thrown over o n

th e ensuin g d ecl in e at wh ateve r pri c es
can b e obtain ed G reat sp eculativ e
.
22 T H E P S YCH OLO GY OF
l eaders ar e far from i nfa l lib l e Th e y
.

h a v e o fte n sol d out to o soo n an d l ater

h av e s e en th e market run aw a y to u n
ex p e cted h ei ghts o r h a ve h e l d on too
,

l on g an d h av e s u ff ered s evere l oss es

b efore th e y c oul d get out .

I n th is s ell i ng th e b ul l l ead ers get a

good dea l o f u n d esi red h e lp from th e
b ears . H ow ev er wa ry th e b ul ls m ay
b e in concea l ing thei r sa l es their machi
,

nations will be disco v ered by watch

ful p rofessiona l s and shr e wd cha rt stu
d ents an d a consid erab l e sp rinkl in g of
,

sh ort s al es w il l b e p u t out w ith in a

few p oints o f th e to p Th is is o n e o f
.

th e reason s w hy th e l on g s wi ngs i n
a ctiv e s p ecul ativ e sto cks ar e smal l er
i n p rop ortion to p ri c e th an in inactiv e
sp e cial ti es o f a si mil a r chara cter
c on trary to th e gen eral ly rec eiv ed i m
p ress ion I t i s rare th at any con sid er
.

ab l e sh o rt i nterest exi sts i n th e in activ e

sto cks .

—
O n c e th e to p h ea v y loa d i s over
tu rn ed th e decl in e i s u su a lly m or e
,

ra p i d th an th e p re v iou s a d v an c e Th e
.
 T HE S T O CK MARKE T . 3

fl oating s u p p l y n ow greatly increas e d

, ,

i s toss ed ab ou t from on e s p e culator to

anoth er at low er an d l ow er p ric es .

F rom tim e to tim e sto ck s b e com e tem

p o r a r i l y lodged in stubb orn hand ,
s so
that part of th e shorts take fright an d
cov er cau sin g a sh a rp up turn ; b ut s o
,

l on g as th e l oad of stocks is still o n

th e mark et th e gen eral cours e o f p ric es
mu st b e dow nward .

Until inv estors or b i g sp ecul ativ e

cap ital ists again com e i nto th e
th e loa d of stock s to b e carri e d b y o r
d i n a r y s p e cul ativ e b ul l s i n cr eas es a l
most continu al ly Th er e i s no l ess en
.

ing of th e floating s upp ly o f sto ck cer

t i fi c a t e s in th e S tre et an d th ere i s a
,

gradual in cr eas e in th e sh ort i nterest ;

an d of cours e th e b ul l s h av e to carry
th es e short sal es a s w el l a s th e actual
c erti fi cates s i nc e for every s ell er th er e
,

mu st b e a b uy er wh e th er th e sal e b e
,

ma d e b y a short or a long S horts .

cover agai n and again on th e s harp

b reaks b ut in mo st cas es th ey p ut ou t
,

their lin es again eith e r h igh er o r low er

, ,
24 T H E P S YCH OLO GY . OF

a s Op p ortunity o ffers O n th e a v erage

.
,

th e short i ntere s t 1 8 l ar g es t at l o w
p rices though there a r e like ly to b e
,

p eriods durin g th e d ecl in e wh en it w ill

b e larger th a n at th e fi n al b ottom ,

w h er e b uy ing by sh orts ofte n h elp s to

a v ert p an i cky conditio ns .

Th e l en gt h o f th i s d ecl i n e lik e th e
,

ex tent o f the p receding advance de ,

p en d s o n fun dam ental cond ition s ; fo r

both in v estors and s p eculativ e ca p ita l
i s ts w il l com e into th e market soon er
i f al l conditio ns ar e favorab l e tha n th ey
w il l i n a stringent mon ey mark et or
wh en th e futur e p rosp e cts o f b u si n es s
ar e unsati sfa ctor y A s a rul e b uy er s
.
,

d o n o t app ear in force unti l a b argai n

“

day a p p ears
$
. Thi s i s w h en i n i ts
,

dow nward cours e th e h eavy l oa d o f

,

stocks strikes an area honeycombed

w ith stop l os s o rd ers . F loor trad er s
s ei z e th e op p ortun it y to p u t o u t short
l in es an d a gen eral coll aps e r esults .

H e re a re p l enty o f sto ck s to b e ha d
ch eap an d sh rew d op erators l arge
,
—
a n d sm al l ,
b u t mostly l arge o r o n th e
26 P SYCH OLO GY O F S T O CKS .

p oint cy c le thou gh not

, so e asy to id e n
ti fy .

Th e fact w il l at on c e b e recogni z ed
that th e ab o ve d es cri p tion is i n e s ,

s ence a stor y of h uman h op es a n d

,

fears ; o f a m ental attitu d e o n th e p art

,

o f th os e interest ed r esulti ng from th ei r

,

o w n p os ition i n th e m ark et rath er th an

,

from a n y d e l ib erat e j u dgm e n t o f con

d i ti on s : o f an unwarranted p roj ection
b y th e p ubl i c imagination of a p erc e i v ed
p resent into an unknown though not
wholl y unknowab l e futur e .

L a y i ng a si d e for th e p re sent th e i n
fl u e n c e o f fun da m ental con dition s o n
p ri ces i t i s ou r tas k to tra ce o ut b oth
,

th e caus es a n d th e e ffe cts of th es e

p s y ch o l ogi cal el em ents i n sp ecul ation .
 —
II Inverte d Reason i ng and i ts
Cons e q u e n ce s

T is hard for th e a v erage man to op

p os e what app ears to b e the gen
eral drift o f p ub l i c op i nion I n th e
.

stock market thi s i s p erha p s h ard er

th an el s ewh ere ; fo r w e al l reali z e th at
th e p rices o f sto ck s m ust i n th e long
,

run be controlled by public o p ini on

, .

Th e p oin t w e fa i l to rem emb er is that

p ub l i c O p in ion i n a sp e culative market
is m easured i n dollars not i n p o p u l a
,

tion O n e man control ling o n e millio n

.

dollars has double the weight of five

h un dred m en with o n e th ousan d dol$

lars each D oll ars are th e hors e p ow er

.
-

o f th e m arkets — th e m ere numb er o f

m en do es not signify .

Th is i s w hy th e great b o dy o f op i nion
ap p ears to b e b ulli sh at th e to p and
b e aris h at th e b ottom Th e m ultitu d e
.

o f smal l traders m ust b e a s a pl ai n

,
28 TH E P S YCH OLO GY O F

n ec ess ity l ong wh en p ri c es ar e at th e

,

top and short or out of th e market at

,

th e b ottom Th e v er y fact that th e y

.

a r e l on g at th e top sh ow s th at th e y

h av e b e en sup p l i e d w ith sto cks from

s om e s ou r ce .

A gain th e man w ith o n e mi ll io n do l

,

l ars i s a s i l ent in divi dual Th e tim e .

wh e n i t w a s n ec essar y for h im to tal k

—
i s p ast hi s money n ow do es th e talk
in g B ut th e o n e th ousan d m en w ho
.

h a v e o n e thou san d dollars each a r e

c o n v ersatio nal fl u ent v erb os e to th e
, ,

l as t degre e ; an d a mon g th es e smal l er

—
trad ers are th e w riters th e n ewspap er
an d n ews b u re au m en an d th e manu ,

fa c tu r e r s o f go ssip fo r b rokerage
h ou ses .

It will be observed that the above

c ou rs e o f reas oning l eads u s to th e con
e l usio n th at m o st o f th o s e w h o w rite
'

a nd tal k ab out th e m ark et are mor e

l ikely to b e wron g th an ri ght at l east ,

s o fa r a s s p eculativ e fl u ctu ati ons ar e

conc ern e d Thi s i s not c ompl im entary
.

to th e mou l ders o f p u b l ic o p in ion

“
,
 T H E S T O CK M ARKE T . 29

but most s eason ed n ewspap e r read ers

w ill agre e that it i s tru e Th e p res s .

refl e cts i n a gen eral way th e thoughts

, ,

o f th e m ultitu de a n d i n th e sto ck mar

,

k et th e m ultitu de i s n ec es sarily a s a ,

l ogical dedu ctio n from th e facts o f th e

cas e lik ely to b e b ul li sh at high p rices
,

an d b eari sh at l o w .

It ha s often b e en remarke d th at th e
av erage man i s an opti mist re garding
his O wn enterp ri s es and a p es simi st r e
ga rdin g th os e O f oth ers C ertainly th is .

i s tru e o f th e p rofess ional tra der i n

stocks A s a resul t of th e reasoning
.

o utl in ed ab o v e h e comes h ab ituall y to

,

exp e ct that n early ev ery o n e els e w ill

b e wrong b ut i s a s a rul e confi dent
, , ,

that h is o w n ana l y si s o f th e situatio n

w ill p rove corre ct H e v al u es th e Op i n
.

i on s O f a few p ers on s w hom h e b e

l i e v e s to b e general ly s ucc essful ; b ut
asi de from th es e few th e greater th e ,

numb e r O f th e b ul lish O p inions h e

h ears th e more doub tfu l h e b e com es
,

ab out th e w is dom O f follow in g th e b ul l

si d e.
30 T H E P SY CH O LO GY O F
Thi s a p p arent contrari nes s O f th e
m ark et alth ough easil y u nd er stood
,

when its cause s are analyzed b reeds ,

i n p rofe s sional tra ders a p ecul iar sort

—
O f sk eptici sm l ead s th em alway s to
di stru st th e O bvi ou s a nd to app l y a
k in d o f i nv erte d reasoni ng to al mos t
all stock m arket p rob l ems O ften i n
.
,

th e min ds o f tra d ers wh o ar e not n atu

rally l ogi cal thi s inv erte d reasoni n g
,

ass um es th e m o st errati c and g ro

t e s q u e forms an d i t ac count s for many
,

ap p ar ently ab surd fl u ctu ation s in pri c es

w h i ch ar e commonly charged to m a
n i p u l ati o n .

F o r exam p l e a t rad er starts w ith

,

th is assu mption : Th e m arket h as h a d

a good a dvan c e ; al l th e smal l tra ders
are b ul li sh ; s om e b ody mu st h a v e sol d
th em th e sto ck w h i ch th ey are carr y
in g ; h en c e th e b ig cap ital i sts ar e p rob
ab ly sol d o u t o r sh o rt an d r ead y fo r a
r ea ction or p erh aps for a b ear mark et .

Th en i f a stro ng i te m o f b ul lish n e w s
—
com e s o u t o n e l et u s sa y th at r e al ly
, ,

m ake s an imp ortant ch ang e in th e

 THE S T O CK M ARKE T . 31

—
situation h e sa y s A h so th i s is what
, ,

th e y h a ve b een b ull in g th e mark e t o n $

I t has b e en discou n t ed by th e p r eviou s
O r h e ma y sa y Th ey ar e put
“
ris e .
$

ting O ut this b ul l n ew s to s ell sto cks

on . H e p ro ce eds to s el l out a ny l on g
stocks h e may h ave o r p erhap s to s el l
s hort .

H i s reasonin g m ay b e corre ct o r i t
may not ; b ut at an y rat e h i s s ell ing
an d that o f oth ers wh o r eason in a
s imil ar way i s lik ely to p rodu ce at
,

l east a t emp orary d ecli n e o n th e a n

n o u n c e m e n t O f th e goo d n ew s Th i s .

d eclin e l ooks ab s u rd to th e outsider

and h e fall s b ack o n th e o l d expl ana
ti on A ll mani p ulation
,
“
.
$

Th e sam e p ri ncipl e i s often carri ed

furth er Y o u w il l fi n d p rofess ion al
.

trad ers reasoni n g th at favorab l e fi g

u res o n th e ste el i ndu stry fo r examp l e , ,

hav e b een con cocted to en ab l e insiders

to s el l th ei r S te el ; o r th at gloomy r e
p orts are p ut i n ci rculati on t o facil itat e
a ccumulation He n c e th ey m ay a ct i n
.

dir e ct o pp ositio n to th e n e w s a nd carr y

32 T H E P S YCH O LO GY OF
th e m arket w ith th em for th e time at ,

l eas t .

Th e l es s th e trad er knows ab o ut t h e
fu ndam ental s o f th e fi na ncial s ituatio n
-

th e m or e lik ely h e i s t o b e l e d astray

i n con cl usions O f th is characte r I f h e .

h as con fi den c e i n th e gen eral str ength

O f con dition s h e m a y b e ready to a c
c ep t a s genu i n e a n d natural a p i ece o f ,

n ew s wh ich h e woul d oth erwi s e r eceiv e

with cy ni cal sk epticism and u s e a s a
b asis for s h ort sal es I f h e knows th at
.

fu n dam ental con ditions ar e u nsoun d ,

h e w ill not b e s o l ik e l y to i nterp ret b ad

‘

n ew s a s is su ed to as s ist i n accumul a
tio n O f sto cks .

Th e s am e r ea sonin g is ap pl i e d to
large purchases through brokers kn own
to be associated with capitalists In fact .
,

in th is ca s e w e oft en h ear a doub l e i n

v ersi on as i t w er e S u ch b uyin g may
, .

i mp ress th e O b s er v er i n th r e e ways :
“ $
1 . Th e ran k o utsider tak es it at
fac e val u e as b ulli sh
, .

2 A m ore exp eri en ced tra d er m ay

sa y I f th ey really w ish ed to get th e
,
34 TH E P SY C H O L O GY : OF;

th ei r ord ers ea sil y an d w itho ut arou s

i ng s usp icion H en ce th e p lay O f s ub tl e
.

i nt ellects aroun d b ig tra ding o f th i s

ki n d O ften b ecom es v er y e lab orate .

I t i s to b e noti ce d th at th i s i n v erte d
-

r ea son ing i s u s efu l ch i efl y at th e top

o r b ott om O f a mov em ent wh en dis
,

t r i b u t i o n o r ac cu mul ation i s takin g

p l a ce on a l arge s cal e A mark et w h ich
.

r e p eat edly refu s es to r e sp ond to go od

n ew s after a con s i derab l e a dvan c e i s
“
l ik ely to b e fu ll o f stocks . L ikew is e
a market w h i ch w ill n o t go dow n o n
b ad n ew s i s u su ally b ar e o f sto cks .
$

B etw e en th e extr em es w ill b e fou n d

l ong str etch es m w hi ch c ap itali sts h av e
very littl e cause to concea l thei r p osi
tion H avi ng a ccu mul ate d th ei r li ne s
.

a s l o w as p o ssib l e th ey are th e n w illi n g

,

to b e kn ow n as th e l eaders o f th e u p
w ard mo v em ent an d h ave every r easo n
t o b e p erfe ctly O p en i n th e i r b u y i ng .

Thi s con diti on continu e s u ntil th ey a r e

r eady to s el l L ikewi s e h aving sol d a s
.
,

m u ch a s th ey d esir e th ey h av e n o
,

r ea so n to con cea l t h ei r p os iti on furth er ,

 S T O CK MARKE T
’

. .
TH E . 35

e ve n though a subsequent decline may

ru n fo r month s o r a y ear .

I t i s during a lon g u p ward move

“
m ent that th e l amb makes mon ey
$
,

b ecaus e h e a cc e p ts facts as fa cts whil e ,

th e p rofes sion al trade r i s O ften foun d

fi gh tin g th e a dvan ce an d l o sin g h eavily
b ecau s e O f hi s ove r dev elop m ent o f
-

cyni cis m an d s usp i ci on .

Th e s u cces sfu l trad er eventuall y

l earn s wh en t o in $ e rt his natu ral m en
tal p ro cess es an d wh e n to le av e th em
in thei r usual p osition O ften he
develop s a sort of i nstinct w h ich coul d
s carc ely b e redu ce d to col d p rint B ut .

i n th e han ds O f th e tyro thi s form O f

reason i n g is exce edin gly dang erous b e ,

cau s e it p ermits of p uttin g an alt ern at e

con stru ction o n a n y event B ul l n ews .

eith er ( 1 ) is si gni fican t O f a rising

tren d O f p ri ces o r ( 2) i ndi cat es that
,

“
th ey are trying to mak e a market
to s el l o n B a d n ews may in di cat e
.
$

eith er a gen uin e ly b eari sh situation or

a d esir e to accum ulat e stocks at l ow
p ric es
.
36 T H E P SYCH OLO GY OF
Th e i n exp eri en ce d O p erator i s th ere
fore le ft very much at sea H e is play
.

in g w ith th e p rofe ssion al s e dged tool s

’

a n d i s l ik ely to cut h imsel f O f w hat

.

u s e i s i t fo r h im to try to app ly hi s
rea s on to sto ck ma rket co nditions wh en
ev er y event m ay b e doub ly i nterp reted ?

I nd e ed i t i s doub tful i f th e p r o fe s
,

s i o n a l s di stru st o f th e O bviou s i s o f
’

mu ch b en efit to h im i n th e l on g ru n .

M o st o f u s h av e m et th os e d e p l orab l e
m en tal w re ck s O ft en foun d amo ng th e
“
c h a i rw a r m e r s i n b rok ers O ffi ces
’

wh ose thinking machinery seems to

h av e b e com e p erm a nen tly demoral iz ed
a s a r esult o f c ontinu e d a crob ati cs .

“
Th ey are al way s s eeki ng an ult eri or
m oti v e i n everyth in g Th ey credit
$

—
.

o r d eb it M orga n a n d R o ckefel l er w ith

th e small est an d m ean est tri ck ery an d
a scrib e to th em th e m ost artful dupl ici
“
ty i n m att ers w hi ch thos e h igh fi n a n
c i ers w oul dn t S t oop to noti ce Th e
$ ’
.

c ontin u al r ev ersa l o f th e m ental e ngin e

s om eti m es d eranges its m echani sm .

P rob ab l y n o b etter gen eral rul e can

 T H E S T O CK MARKE T . 37

b e laid down than th e b ri ef on e S ti ck ,

to common s ens e . M aintain a b al

anc ed ,
rec e p tiv e min d an d avoi d a b
strus e d edu ctions A few furthe r s ug
.

gestions may h o w ever b e O ffered

, ,

I f you already have a position i n .

'

th e mark et do not attem p t to b ol ster

,
‘

up you r fa il i ng faith by r esortin g to

i nt ell e ctual s ubtl eti es i n th e i n te r p r e
t a t i o n o f O bv iou s facts I f y o u ar e
. .

l ong o r short o f th e market y o u are ,

7

n ot an unp rej udi ced j u dge an d y o u wil l

,

b e greatly t empt ed to p ut such an i n

t e r p r e ta ti o n up on current ev ents as w ill 5

coi nc id e with your p reco nc eiv ed O p in

ion . I t i s hardl y too mu ch to say that
thi s i s th e greatest O b stacl e to su ccess .
’

Th e l east y o u can do i s to avoi d i n 5 -

v erted reasoning i n sup p ort o f your ’

o w n p osition .

A fter a p rolonge d a dvan ce do not ,

cal l invert ed rea soning to your ai d i n

ord er to prov e that p ri ce s are going
stil l high er ; l ik e w is e after a b i g b reak
do not l et your b earish d edu cti ons b e
com e too comp li c a ted B e su sp iciou s
.
38 P SY CH OLO GY O F S T O CKS .

O f b ul l n ew s at h igh p rices an d of b ear

,

n ew s at l ow p ri ces .

B ear i n m in d that an it e m O f n ew s
usually causes but on e considerabl e
'

m ov em e nt of p ric es If th e movement
.

t ak es p lac e b efore th e n ew s com es o u t ,

a s a res ult o f ru mors an d ex p e ctati ons ,

th en it is n o t l ikely to b e r ep eat e d aft er

th e a nnoun c em e nt i s ma de ; b ut if th e
m ovem ent of p ri c es h a s n ot p re ceded ,

th en th e n ews contrib ute s t o th e gen

eral strength o r w eakn es s O f th e situ
ati o n and a m o v em ent o f p ri ces ma y
fol lo w.
 III Th ey

F a man entirely un familiar with the

stock market shou l d sp e nd several
days around the E xchange listen
in g to the con v ersatio n o f all sorts o f
traders and investors in order to p ick
,

up in formation about the causes of p ric e

movements the probabi l ity is that the
,

most pressin g question in his mind at the

end of that time would be Who ar e
“

‘
They ’
?

E v erywhere he went he would

’
hear about Them .In the customers
rooms o f the fractiona l lot houses
h e wou l d find young men trading in
ten shares and arguing learnedly a s
to what They were to do next Tap e .

—
readers experts and tyros al ike
would tell h im that They were ac c u mu
lating S teel o r distributing R eading
, .

F loor traders and m embers of the E x

change would whisper that they were
40 T H E P SY CH OLO G Y OF

told They were going to put the market

up o r down as th e case might be E ven
, , .

sedate investors might in form him that ,

although the situation was bearish u n ,

doubtedly They woul d ha v e to put the

market temporarily higher in order to
unload Their stocks .

This Th ey theor y o f the market is

“ $

quite as p re v alent among successfu l

—
traders as among beginners p robabl y
more so There may be room for argu
.

ment as to why this is so but as to the ,

fact itsel f there is no doubt Whether .

The y are a myth o r a definite reality ,

m any persons are making money by

studying the market from this p o int o f
view .

I f you w e re to go around Wa l l street

and ask v arious classes o f traders who
They are you would get nearly as many
,

di fferent answers as th e number of p eo

ple intervi ewed On e woul d say Th e.
“
,

house of M organ another S tandard

“
,

O il and associated interests — which is $

p r e ttv broad when you stop

,
to think o f
it ; another The big b anking interests ;
“
,
$
42 T H E P SY C H O L OGY O F
the p rinci p a l security markets Th e av .

erage O bser ve r wil l find it di fficu l t to

masticate and swallow this p rop osition .

Th e e ffort to reduc e the science of

speculation an d in v estment to an i mp os
sib l e d e fin ite ne ss o r an id e al si mpl icity
is I believe res p onsibl e fo r many fai l
, ,

ures A S H ardy th e dip l omat who was

. . .
, ,

formerl y a p ro fessor o f mathematics and

wrote books on quaternions diff er e ntia l ,

calcu l us etc once remarked that the

, .
,

study o f mathematics is ve ry p oo r menta l

discipl ine because it does not culti v ate
,

the j udgment G ive n fixed and certain

.

p remises you r math e matician wi ll fo l low

,

them out to a correct conc l usion ; b ut in

p racti ca l a ffa ir s th e w h o l e di ffi culty l i e s
in selecting your p remises .

S o the mark e t stud e nt o f a math emat

ical turn o f min d is always seeking a
—
rule o r a set of ru l es a sure th ing as
“
f
$

traders p ut it He wou l d not seek such

.

rules fo r succeedin g in th e grocery b usi

ness or th e l umb e r business ; he would ,

o n the contrary analyze each situation as

,

it arose and act accordingl y The stock .

 T H E S T O CK M ARKE T .
43

m ark e tp r e sents itsel f to my mind as a

purel y p ractica l p ro p osition S ci e ntific
.

methods may be app l i e d to any l in e o f

business from stocks to chick e ns but
, ,

this is a v ery di fferent thing from tryin g

to reduc e the fluctuations of the stock
market to a basis O f mathematica l c e r
tainty .

In discussing th e identity o f Them ,

there fore we must be content to take

,

obvious facts as we find them without

attempting to spin fine theories .

There are three senses in which this

$
idea o f Them has some foundation in
fact F irst They may be and O ften
.
“
,
$

are roughly conceived o f as the floor

traders on the S tock E xchange who are ‘

directly concerned in making quotations ,

pools formed to control certain stocks or ,

individual manipulators .

Fl oor traders exercise an important in

fl u e n c e o n the immediate mo v ement of
prices S uppose for example they ob
.
, ,

serve that O fferings o f R eading are v ery

light D eclines do not induce l iquidation
.

and only small O ff e rings of stock are met

44 T H E P SYCH OLO GY OF
on ad v ances They begin to fee l that in
.
,

the abs e nce o f unexpected cataclysms ,

R eading wil l not d e cl ine much The nat .

u ral thing fo r them to do is to begin buy

ing R eading on all so ft s p ots Whene v er .

a fe w hundred shares are o ff ered at a

b argain fl oo r traders snap up the stock
, .

A s a result o f this bailing out of the

“ $

market R eading becomes scarcer stil l

, ,

and traders bein g n ow l ong b e come

, ,

more bu l lish They begin to mark u p

.
“

$
prices . Th is is not di fficult since they ,

are for the time being p ractically unani

, ,

mous in a desire for higher p rices S u p .

pose th e market is bid off ered at ,

They find that only 1 00 sh ares

are fo r sale at and 200 are o ffe red
at A s to how much stock may b e
awaiting bids at 2 o r higher they can
1
,

not be sure but can generally make a

,

sh rewd guess O ne or more traders take

.

these O ff erings o f p erhaps 500 shares

, ,

and make the market 2 bid The other

1
.

fl oor traders are not willing to sell at

this trifling p rofit and a wait ensues to,

see whether any outsid e o rders are at

 T H E S T O CK MARKE T .
.
45

tracted by the mo v ement o f the price ,

and i f so whether they are buying or

,

selling orders I f a few buying orders

.

come in they are filled p erhaps at

, ,

and I f selling appears the floor ,

traders retire in good order take th e ,

o fferings at lower prices and try it again

,

the next day or p erhaps the next hou r .

E ventually by seizing every fa v orable

,

opportunity they engineer an u p ward

,

move o f perhaps two o r three points

without taking any more stock than th e v
want .

I f such a movement attracts a follow

ing it may easily run ten points without
,

any real change in the p rospects O f the

—
R eading road though the p rospects of
the road may ha v e had something to do
with making the stock scarce before the
movement started O n the other hand
.
,

i f l arge o fferings O f stock are e n

countered at the advance the boomlet is ,

ignominiously squelched and the floor

traders make trifling profits o r lo sses .

P ools are not so common as most ou t

siders believe There are many d i ffic u l
.
46 THE P SY CH OLO GY O F

ties and complications to be o ve rcom e b e

fore a p ool can be formed h el d tog e th er
, ,

and O perated successfu l ly as we had am

,

ple opportunity to observe not l ong ago

in the case o f H ocking C oal I ron .

But i f a definite p ool exists in any stock ,

its O p erations are p ractically a r ep ro d u c

tion on a l arger scale and unde r a bind
,

ing agreement o f th e meth ods em p loyed

,

by floor traders over a smaller range and

in a mer e l oose and voluntary associa
tion resulting from th e ir common inter
ests A nd the individua l manipulator is
.

only a pool consisting of one p erson .

S econd many conceive Them as an as

,
$

sociation o f powerfu l capitalists w h o ar e

runnin g a campaign in al l th e imp o rtant
speculative stocks simultaneousl y It is .

sa fe to say that no such permanent and

united association exists though it would
,

be hard to p rove such a statement But .

th ere h av e been many times when a sin

gl e great interest was practically in con
trol O f the market fo r a time other in,

te r e sts being content to look on o r to ,

 T H E S T O CK MARKE T . 47

p articipate in a small way or to await a ,

fa v orable chance to take the othe r side .

The S tandard O il crowd the G ates “

,
$

crowd ,
the M organ interests
“
and ,

H arriman and his associates will at ,

once occur to the reader as h av ing been ,

at various times in the past in sole con ,

trol of an imp ortant general cam p aign .

A t present th e great interests are gen

e r al ly classified into three divisions
M organ S tandard O il and $ uhn L oeb
, ,
-
.

A definite agre e men t among such i n

'

te r e sts as these woul d be impossible e x ,

cept fo r limited and tempo rary purposes .

This is p erhaps not so much because

these high financiers couldn t trust each ’

other as it is because each so called in -

te r e st consists o f a loosely bound a ggr e

g a t i o n o f followers o f all sorts and va

r i e ti e s
, having only on e th ing in c om
—
mon control O f capital S uch an i n .
“

te r e st is not an army where the traitor

,

can b e court martialed and shot ; it i s

-

a mob and has to be led not driven

, , .

True the known traito r might be put to

,

death financially speaking but in stock

, ,
48 T H E P S YCH OLO GY O F

marke t o p erations the traitor cannot as ,

a rule b e known Unless his operations

,
.

are o f unusual size he can success fully

,

cover h is tracks .

F rom this second p oint o f v iew ,

The y are not always active in th e mar

$

ket G reat camp aigns can only b e u n

.

d e r tak e n with sa fety in p eriods when the

future is to a certain e xt e nt assu r e d When .

th e futur e is in doubt wh en v arious

,

confusing e l ements e nter into th e fin an

c i al and politica l situation leading fi n an
,

ciers may b e quite content to confine

thei r stock market o p erations to indi
vidua l deals and to p ostp on e th e i n au gu
,

ration o f a broad cam p aign until a more

solid foundation e x ists fo r it .

Third Th ey may b e conceived sim

,
“ $

pl y as speculators and in v estors in

genera l all that miscellaneous and
heterogen e ous troo p o f p ersons scat ,

te re d over the who l e wo rld each of,

whom contributes his mite to the fl u c tu a

tions of p ric e s on th e S toc k E xchange .

In this sense th er e is no doubt abo ut th e

existenc e o f Th e m and Th e y ar e th e
,
50 T H E P SYCH OLO GY O F

but st o cks are in strong hands and Th ey

will have to p ut them higher to mak e
a market to sell on S om e inve stors
.
$

mak e a point of dumping over al l their

stocks as soon as this veteran war horse -

o f the news brigade is groomed and trot

ted out . L ikewise after a p rolonged

,

bear campaign w e hear that som e body

,

is in trouble and that Th ey are going

“ $

to break th e market until certain con

c e n tr ate d holdings are brought ou t .

A l l this is very likely to be nothing

but dust thrown in th e ey e s o f th at most
—
gullibl e o f a l l created beings the hap
hazard speculator Wh en p rices are so
.

high in com p arison with conditions that

no sound reason can be advanced why
they should go higher a certain numbe r ,

of p eop l e are still induced to buy b e

cause o f what They are going to do O r .
,

at least i f th e public can no l onger be

,

induced to bu y in any l arge v olume it is ,

prevented from se ll ing short fo r fear of

what They may do .

Th e close student of th e t e chnica l con

—
dition o f th e market by which is meant
 T HE S T O CK MARKET . 51

the character o f the l ong and short inte r

—
ests f rom day to day is p retty su re to
base his o perations to a considerable ex
tent on what h e thinks They will do
next He has in mind Them as de
.

sc ibed i n the first classification above

r

floor traders pools and manipulators

,
.

H e gets a good deal of help from th is

conception crude as it may appear to
,

—
b e largely no doubt because it serves
, ,

to distract h i s m i n d from current news

and gossip and to p revent him from
,

being too greatly influenced by th e mo

m entary appearance o f the market .

When the market looks weakest when ,

the news is at the worst wh en be arish

,

prognostications are mo st general is the ,

time to buy as every schoolboy knows ;

,

but i f a man has in mind a picture o f a

flood of stocks pouring out from th e four
quarters of the globe with no buy e rs
, ,

because o f some desperately bad news

which is j ust coming ove r the ticker it ,

is almost a mental impossibility for him

to get up the courage to plunge in and
buy I f on the other hand he conceives
.
, ,
52 T H E P SYCH OLO GY O F

that They ar e j ust giving th e market a

final smash to facilitate covering a gi
g a n ti c line o f short stocks he
,
has cour
age to buy H is view may be right o r
.

wrong but at least he avoids buying at

,

the top and selling at the bottom and h e ,

has nerve to buy a weak market and sell

a strong on e .

The reason fo r the haziness o f th e

They conception in the a v erage trad
er s mind is that he is only concerned
’

with Them as They mani fest Th emselves

through th e stock market A s to who
.

The y are h e feels a mild and detached

curiosity ; but as to Their manifestations
in th e market h e is v itally and financially
interested It is on the l atter point
.
,

th ere fore that he concentrates his

,

thoughts .

But inasmuch as definite painstaking ,

analysis of a situation is always better

than a hazy general not i on of it the ,

trader o r investor would do much better

to rid his mind of Them Th e word
.

“
They means nothing until it has an
antecedent ; and to use it continually
 T H E S T O CK MARKE T . 53

without having any antecedent in mind

is slipshod language which stands for
,

slipshod th inking They in the sens e

.
,
'

o f the big banking interests may b e ,

working directl y against Th em i n the

sense o f indi v idua l manipulators ; th e
manipu l ator again may be trying to trap
, ,

Them in the sense o f floor traders .

A genu i ne knowl e dge of the technical

condition of the m arket cannot be
summed up in any o ff hand declaration
about what Th ey are going to do You
$

cannot determine the attitude toward the

market of every individua l who is inter
es te d in it but y o u can roughly cl assify
,

the sourc e s from which buying and sell

ing are l ikely to come the motives which
,

are likely to actuat e th e v arious c l asses ,

and th e charact e r o f th e long interest and

short in terest In brie f after e nough
.
,

stud y and obser v ation you can always

,

h ave in mind som e kind o f an antecedent

for Them and must have it i f y ou base
, ,

your op eration s on te chnical conditi ons .

 —
IV Confus i ng the Pre s e nt with
the —
Futu re Dis c ounti ng

T is axiomatic that inexp e rienced

traders and investors and indeed a ,

maj ority o f the more experienced as

well are continually try ing to speculate
,

o n past e v ents S u pp ose fo r example

.
, ,

railroad earnings as published are show

ing constant large increases in net The .

“
novice reasons Increased earnings me an
,

increased amounts applicable to the pay

ment o f dividends P rices should rise
. .

$
I will buy .

Not at all H e should say P rices

.
,

h av e r i s e n to the extent rep resented by

these increased earnings unless this e f ,

fe c t has been counterbalanced by other

considerations Now what next .
?
$

It is a sort o f automatic assumption o f

the human mind that present conditions
will continue and our whole scheme of
,

li fe is necessarily based to a great degree

56 T H E P SYCH O LO GY O F
on this assumption Wh e n the p rice o f
.

wheat is high farm e rs increase thei r

acrea g e because wheat growing pays -

better ; when it is l ow they pl ant l ess .

I rememb e r talking with a p otato raiser -

who claim e d that h e had made a good

dea l o f money by simply r e versing the
abo ve custom Wh e n p otatoes were l ow
.

h e had pl anted liberally ; when high h e

—
had cut down his acrea ge because h e
reasoned that other farm e rs would do
j ust the o pp osite .

The a v erage man is not blessed o r —

cursed howe v er you may look at i t
,

with an analytica l mind We see a s

.

th rough a glass dark l y .

$
O ur ideas are
always en v e l oped in a haze and o u r
reasoning powers wor k in a rut from
which we find it pain fu l i f not im p ossibl e
to e sca p e M any o f o u r emotions and
.

some of ou r acts are merely auto matic

responses to ext e rna l stimuli Wonder .

ful as is the de v elo p ment o f the human

b rain it originated as an enlarged gan
,

glion and its first res p onse is stil l p ra c

,

tica l ly that o f the gang l ion .

58 T H E P S YCH O LO GY O F

assortment o f ideas from which we con

c l u de that the situation is bullish or
bearish The v ery form o f the ex p res
.

“ “
sion the situation is bullish not the -

situation will soon become bullish

shows the extent to which we a l low the
p resent to obscure th e future in the
formation o f ou r j udgment .

C atch any trade r and p in him down to

it and he will readily admit that the
logica l moment for the highest p rices is
when the news is most bu l lish ; yet you
wil l find him buying stocks on this news
—
a fter it comes out i f not at the moment ,

“ $
at any rate on a reaction .

M ost coming e v ents cast thei r shadows

'

be fore and it is o n this that intelligent

,

speculation must be based The move .

ment o f p rice s in anticipation of such

an event is cal l ed discounting and this
“
,
$

p rocess o f discounting is worthy a l ittle

care fu l exa m inati on .

The first p oint to be borne in mind is

that some events cann ot be discounted ,

even by the su pp osed omniscience o f the

—
great b ank ing interests wh ich i s in
 {T H E S T O CK MARKE T . 59

point o f fact more than hal f imaginary

, .

The S an F rancisco earthquak e is the

standard examp le of an event w h ich
coul d not be fo reseen and therefore
could not be discounted ; but an e v ent
does not hav e to be purely an act o f “

G od to be undiscountable There can

$
.

be no question that our great bankers

have been as much in the dark in regard
to some recent S up reme C ourt decisions
’

“ $
as the smallest pik er in the customer s ’

room o f an odd lot brokerage house

-
.

I f the e ffect o f an event does not make

itsel f felt be fore the event takes place it ,

must come a fte r In a l l discussion o f

.

discounting we must bear this fact in

m i nd in order that our subj ect may not
run away with us .

O n the other ha nd an e v ent may some

times be overdi scounted I f the d iv
.

i d e n d rate on a stock is to be raised from

fou r to five pe r cent earnest bulls with
.
, ,

an eye to their own commitments may ,

spread rumors o f six or se v en per cent .

,

so that the actual declaration o f five pe r

60 TH E P SYC H OLO G Y O F

c e nt ma y b e r e c e i ve d as disa pp ointing
.

and cause a declin e .

G enerally s p eaking eve ry e ve nt which

,

is under the contro l o f ca p italists as

soc i ate d wi th the p ro p erty o r any fi ,

n an c i a l condition which is subj ect to the

m anagement o f combined banking i n

te r e sts is lik e ly to b e p retty tho roughly
,

discounted be fore it occurs There is .

ne v er any lack of ca p ital to take a d

v antage o f a sure thing e v en though it ,

may b e known in advanc e to only a fe w

p ersons .

Th e extent to which futur e business

“ $
conditions are known to insiders is ,

howe v er usually o v erestimated

, So .
‘

much d ep ends espe cially in A merica

, ,

u p on the size o f th e cro p s the temp er o f ,

the p eopl e and th e p olicies ado p ted by

,

leading p oliticians that th e future of

,

business becom e s a v ery complicated

p rob l em No p ower can dri v e the Ameri
.

can p eo pl e A ny control o v er thei r a c

.

tion has to b e e xercised by caj olery or

by de v ious and circuitous methods .

M or e ove r p ub l ic o p inion is becoming

,
 THE S T O CK MARKE T . 61

mor e v olatile and change ab l e year by

year owing to the quicker sp read o f i n
,

for mation and th e ra p id multip l ication o f

th e r e ading p ub l ic O n e can ea sily
.

imagine that some of ou r older financiers

must be saying to themse lv es I f I had
“
,

only had my present ca p ital in 1 8 70 or ,

else had th e conditions o f 1 8 70 to work

o n today $
$

A fair idea o f when the discounting

p rocess wil l be comp leted may usually be
forme d by studying c onditions from
e v ery angl e The great question is
.
,

when will the b uying o r selling become

most g e neral and urgent ? In 1 907 for ,

example the safest and best time to buy

,

the sound di v idend paying stocks was

-

o n th e M onday fol l owing the bank state

m e nt which showed the greatest decrease

in reserves The markets op ened down
.

se v eral p oints unde r p ressure o f liquida

tion and standard issues never sold so
,

l o w a fterward The si mple explanation

.

was that conditions had become so bad

that they coul d not get any worse with
62 T H E P SYCH O LO GY OF
ou t utter ruin which a l l p arties must and
,

did unite to p revent .

L ikewise in the P residential camp aign

o f 1 900 the lowest p rices w e re made on
,
'
B ryan s nomination E veryone said at
.

once H e can t be e l ected

,
“ ’
Therefore
.
$

his nomination was th e worst that could

—
ha p pen the p oint of time where the
political news became most intensely
bearish A s the cam p aign de v eloped his
.

de fe at became mor e and more certain ,

and prices continued to rise in accordance

with the general economic and financial
conditions o f the period .

It is not the discounting o f an event

thus known in advance to capitalists that ,

p resents the greatest di fficulties but ,

cases wher e consid e rable uncertainty

exists so that even the c l earest mind an d
,

the most accu rate information can result

on l y in a balancing o f p rob abilities with ,

the scale p erha p s inclined to a greater o r

less degree in one direction o r the other .

In some cases the uncertainty which

precedes such an event is more depress
ing than the worst that can hap pe n
 T H E S T O CK MARKE T . 63

a fterward A n example is a S u p r e me
.

C ourt decision upon a p re v iously u n

determined p ub l ic p olicy which has ke p t
business men so much in the dark that
they feared to go ahead with any i m
portant plans This was th e case at the
.

time o f the Northern S ecurities decision

“
in 1 9 04.
$
Big business could easily
enough adj ust itsel f to eithe r result It .

w a s the uncertainty that was bearish .

H ence the decision was p ractically dis

counted in advance no matter what it
,

might pro v e to be .

This was not true to the same e xtent

o f the S tandard O il and A merican To
bacco decisions o f 1 9 1 1 because those
,

decisions were an earnest o f more

trouble to come . Th e decisions were
greeted by a temporary s p urt o f activity ,

based on the theory that the remo val of

uncertainty was the important thing ; but
a sensational dec l ine started soon a fter
and was not checked until th e announce
ment that the G overnment would pros
e c u te the United S tates S teel C or p ora

tion This was deemed the worst that

.
64 T H E P SYCH O LO GY O F
could hap p en for some time to come and ,

was followed by a considerable ad v anc e .

M o re commonly when an event is u n

,

certain the market estimates the chances

with considerable nicety E ach trade r .

backs his ow n opinion strongly i f he ,

feels confident moderate l y i f he stil l has

,

a few doubts which he cannot down .

The result o f these o pp osing views may

be stationary p rices o r a market fl u c tu at
,
’

ing nervously within a narrow range o r ,

a movement in either direction greate r ,

or smalle r in p ro p ortion to the more or

less emp hatic p reponderance of the buy
ing or sel l ing .

O f course it must always be remem

bered that it is the dollars that count ,

not the number of buy ers or sellers A .

few great capitalists ha v ing ad v ance i n

formation which they regard as accurate ,

may more than counterba l anc e thousands

of small traders who ho l d an O pposite
o p inion In fact this is a condition v e ry
.
,

frequently seen as ex p lained in a p re

,

vio n s chapte r.

E v en th e o pe rations o f an individua l
66 T H E P SYCH OLO GY OF

to changin g conditions A de v elo p ment

.

which causes on e trader to lighten his

l in e o f stocks may be r e gard e d as harm
l ess o r eve n beneficia l by another so that ,

he maintai ns his p osition or p erha p s buys

more Ou t o f a wor l d wi d e mi x tur e o f
.
-

v arying ideas p ersona l iti e s an d in forma

,

tion emerges the average level o f

—
p ric e s th e tru e in dex n umb er o f i n
v es t m ent con diti on s.

The necessar y r e sult o f the abov e l ine

o f reasoning is that not on ly probabi l i

ti e s b ut e v en rather r e mot e possibilities

are reflected in the market H ardly any .

e v ent can hap p en o f su fficient importanc e

to attract genera l attention which some
p rocess o f reasoning cannot construe as
bul l ish and some other p rocess interp ret
‘

as bearish D oubt l ess e ve n ou r o l d friend

.

o f the n ews co l umns to the e ff ect that

the necessary acti v ities o f a nation o f

“

ninety mi ll ion souls creat e and maintain

a large v o l ume o f business may i n
,
$

fl u e n c e some red b l ood e d o p timist to buy

-

1 00 Union but the grouchy pe ssimist who

has eaten too many doughnuts for br e ak
 T H E S T O CK MARKE T . 67

fast will acce p t the statement as an e v i

dence of the scarcity o f real bul l news
’

a n d will likely e nough sel l 1 00 Unio n

short o n the strength o f it .

It is the overextended sp ecu l ator who

cau ses most of the fluctuations that look
absurd to the sober obser v e r It does not
’
.

take much to m ak e a man buy when he

“
is short of stocks up to his neck A $

bit o f ne w s which he would regard as i n

significant at any othe r time will then
assume an exag gerated importance in his
eye s H i s fears increase in geometrical
.

p roportion to the size o f his line o f

stocks . L ikewise the o v erloaded bull
“
may begin to throw his stocks o n some $

absurd story o f a war between H onduras

and R oumania without e v en stopping to

,

look u p the geographical location o f th e

countries involved .

F luctuations based on absurdities are

always relatively small They are due
.

“
to an exaggerated fear o f what the
other fellow may do P ersonally you
.
,

do not fear a war between H onduras and

R oumania ; but may not the rumor be
68 T H E P SY CH OLOGY O F
seized u p on by the bears as an excuse
fo r a raid ? A nd you ha v e too many
stocks to be com fortable i f such a b reak
shou l d occu r M oreo v er even i f th e
.
,

bears do not raid the market wil l there ,

not be a considerabl e number o f p ersons

who l ik e yoursel f will fear such a raid
, , ,

and wil l there fore l ighten their load o f

stocks thus causing some decline
,
?

The p ro fessional trader fol l owing this

,

l ine o f reasoning to th e l imit e v entually ,

comes to bas e all his operations for sho rt

turns in the market not on the f acts but
on what he be l ie v es the facts wil l cause
—
others to do o r mo re a ccurately p er ,

ha p s o n what he s ees that the news i s

,

causing others to do ; for such a trader

is like l y to keep his finger constantl y on
the p ulse o f buying and se l ling as it
throbs o n the floo r of th e E xchange o r
a s recorded on the tape .

The non pro fessional how e ver wil l

-

, ,

d o wel l not to l et his mind stray too far

i nto th e unknown territory o f what others
may do . L ike the They theory o f
“ $

values it is dangerous ground in that it

,
 T H E S T O CK MARKE T . 9

leads toward the abdication of common

sense ; and after all others may not p rov e
,

to be such fools as we think they are .

While the market is likely to discount

even a possibility the chances are very
,

much against ou r being able to discount

the possibility p rofitably .

In this matter o f discounting as in ,

connection with most other stock market

phenomena the most usefu l hint that can
,

be given is to avoid all e fforts to reduce

the movement of p rices to rules measures , ,

o r similarities and to analyze each case

by itsel f H istorical parallels are likely

.

to be misleading E very situation is new

.
,

though usually composed o f familiar

elem ents E ach e l ement must be weighed
.

by itself and the p robab l e result o f the

combination estimated In most cases
.

the problem is by no means impossible ,

but the student must learn to look into

the future and to consider the p resent
only as a guide to the futu re E xtreme .

prices will come at the time when the

n ews is mo st emphatic and most widely

di s seminated When that point is passed

.
70 P SYCH O LO GY O F S T O CKS .

the question must a l ways b e ,

What
$
next ?
 —
V Con fusing th e Personal with
the Ge n eral

N a p re v iou s cha p ter th e fact has

b e en m ention ed th at on e o f th e
greates t d i fficulti es encountere d b y
th e a ctive trader i s that of ke epin g h is
m ind in a b al an c ed an d u n p rej udiced
condition wh en h e is h eav ily com
m i tte d to e ith er th e l on g o r short si d e
of th e market Un cons ciou sly to h im
.

self h e p erm its his j u dgm ent to b e

,

sway ed b y h is ho pes .

A fo rmer l arge sp e cul ator o n the

C hi cago B oard o f Trad e afte r b ein g
,

s hort o f th e mark et an d ver y b eari sh

on wh eat for a l on g tim e o n e day s ur
,

p ris ed al l his fri en ds b y coverin g

everyth in g going l ong a moderate
,

amount an d a rgu in g v iol ently o n th e

,

b ul l s ide F o r tw o day s h e maintained

.

thi s position b ut th e mark et fail e d to

,

go up . H e th en turne d b a ck to th e
short sid e an d had ev en mor e b ear
,
a rgum ents at h i s tongu e s e n d th an b e
’

for e .

To a c e rtain extent h e di d thi s to

t e st th e mark et b u t stil l more to tes t
,

—
h i m s el f to s e e wh eth er b y ch angin g
,

front an d tak ing th e oth er s ide h e ,

c ould p e rs uad e h ims elf ou t o f h is b ear

i sh o p in ion s . W h en ev en th i s fa il e d
t o mak e a ny r eal ch an g e i n h i s vi ew s ,

h e w as reassure d an d w as r eady fo r
a n ew an d m or e a ggr ess iv e camp ai g n
o n th e short si de .

Th ere i s n oth in g p e cu l iar ab out th i s

con d iti on W h il e it i s e s p e cially d i ffi
.

c u l t to maintain a b al an ce d mind i n
r egard to commitm ents i n th e m ark e ts ,

it i s n o t ea s y to d o so ab out any th ing

th at c l os el y tou ch es o u r p erson al i n
t e r e s ts
. A s a rul e w e can fi n d p l en t y
of reason s for doi ng w hat w e v ery
m u ch wa nt to d o an d w e ar e sti l l more
,

p rol ifi c w ith excu s es fo r not do in g

w h at w e don t w ant to do M ost o f
’
.

u s ch ange th e o l d s o p h i sm Wh atev er
i s i s r ight to th e mor e directly u s e
,

“ $
ful form Wh at ev e r I w an t is right .

T o man y r ea d ers w il l o ccur at onc e th e

 tion co rrectl y in m in d as wh eth er w e ,
“ $
can p ut it over .

W h en it com es to b uy in g an d s el l in g
stocks th ere i s no su ch th in g as
,

“
p u tting it o v er $
Th e m ark et is r e
.

l e n tl e ss I t can not b e b u dged b y o u r

.

soph i stries It wi l l r esp ond exa ctly to

.

th e forc e s an d p erson al iti es w h ich ar e

w orkin g u p on it w ith n o mor e regard
,
’
for o ur op inion s than i f w e coul dn t
vote W e can no t w ork for ou r o w n
.

i nt erests as in oth er l in e s o f b u sin es s

w e can o nl y fi t ou r i nt er e sts to th e
fa cts .

To m ak e th e great est su c ces s it is

n ec essar y fo r th e tra der to forget e n
ti r e l y h is ow n p osit ion i n th e mark et ,

h is p rofits o r loss es th e r elatio n o f ,

p r e s ent p ri c es to th e p oi nt wh ere h e
b ough t o r s ol d an d to fi x h i s th oughts
,

up on th e p o sition of th e mark et I f .

th e mark e t i s goi ng down th e trad e r

mu st s el l n o matt er w h eth er h e ha s a
,

p rofit o r a l os s wh eth er h e b ou ght a

,

y ear ago o r two mi nute s ago .

H ow far th e av erage trad er i s from

attainin g th is p o int of v i ew i s qu ick ly
 T H E S T O CK MARKE T . 75

s e en from hi s con v ersation and it i s ,

al so tru e that a g r eat d ea l of th e l itera

tur e o f sp ecul ation ab sol ute ly fail s to
r e ach thi s con cep tion .

“ —
Yo u h a v e fiv e p oints p r o fi t y o u
$
ha d b etter tak e it a dvi s es th e b roker
,
.

P erha p s s o if y o u know n oth i ng ab ou t

,

th e market ; b ut if y o u un d erstan d th e
mark et th e tim e to tak e y ou r p rofit i s
w h en th e up ward movem ent shows
s i gns o f cul minating r egardl ess of
,

y our o w n d eal .

“
S to p y our l oss es ; l et you r p rofits
ru n i s a say in g w hi ch a p p eal s to th e
n o v i c e as th e ess en ce o f w isdom B ut .

th e who l e qu e stion i s w h er e to stop th e

l oss es and h ow far to l et th e p rofits
run In oth er w ords wh at is th e mar
.
,

k e t going to do ? I f y ou can t el l th i s
y ou r p ersonal loss es and profits w il l
tak e ca re o f th e m s e l v e s a

H ere is a man w h o h as don e a great

deal o f figurin g an d has pro ve d to h is
o w n satisfaction th at s even p oints i s

th e correct p rofit to tak e i n Unio n

P acifi c whil e l oss es sh oul d b e l imited
,

to two and o n e h al f p oints Noth in g

-

.
 T H E P S YCH OLO GY O F

cou l d be
mo re fool ish than th es e ar
b i tr a ry fi gur e s He i s tryin g to make
.

th e mark et fit its e l f aroun d h is ow n

tra des inst ead o f a daptin g h is trad es
,

to th e m ark et .

I n a n y b ro ker s o ffic e yo u w il l noti ce

’

th at a l arge p art o f th e tal k concerns

th e p rofi ts a n d l oss e s o f th e trad ers .

B row n h ad a p rofit o f t en p oints an d

th e n le t it get awa y from h im G reat “

S cott $ s a y s h i s w is e fri en d
$
What .

do y o u want A ren t y o u s atisfied w ith

? ’

t en p oints p rofi t ? T h e r epl y shoul d

$

b e thou gh it rar el y is C ertainl y n ot

,
“
, ,

$
i f I thi n k th e market i s goin g h igh er .

G et th e m o u t w ith a s mal l p rofit ,

I o n ce h ear d o n e b rok er s ay to a n
I f y ou don t th e y w ill h an g
“
oth er .
’

o n an d tak e a l os s Th e y n ev er get
.

p ro fit enou gh to s ati sfy th em A .

$

good p o l i cy p rob ab l y i f neith er th e

, ,

b rok er n or his cu stom er ha d an y r ea l

kn ow le dge o f th e mark et ; b ut m e re
n on sen s e fo r th e tra d er wh o ai m s to
b e i n th e sl ight est d egr e e s ci entifi c .

Th e fa ct i s th at th e m ore a trad e r
‘

a l l o w s h i s m i n d t o d w el l u o n h i s own
 T HE S T OCK MARKE T . 77

p osition in th e mark et th e more l ik el y

i t i s that h is j udgm ent w i ll b e com e
war pe d s o that h is min d i s b l in d to
th os e co ns i derati o n s w h ich do not fal l
i n w ith h is p recon ceiv ed op in ion .

Until y o u try it y o u h ave almo st no

,

i dea o f th e exten t to wh ich y o u ma y ,

b e rendere d unreasonab l e b y th e m ere

fact th at y ou ar e committed to o n e
“
s id e of th e mark et . I n th e market ,
$
to b e consist en t i s to b e stubb orn ,

some on e h a s said ; an d it is tru e that

th e man o f stron g w il l an d l ogical i n
t e l l e c t is often l es s s ucc essfu l th an th e
more shal l ow an d v olatil e ob s erver ,

wh o i s r eady to w h i ffl e ab out lik e th e

w eath ercock at any susp i ci on of a
c h ange in th e w in d This is b e cau s e
th e stron g man h as i n thi s i nstan ce
e mb ark ed u p o n an enter p ris e wh ere
h e can not us e h is n atural forc e an d d e
t er mination h e can emp loy only h is
—
facu l ti es o f ob s ervatio n an d i nt erpr eta
ti on Y et in th e en d th e man o f ch ar
.

a cter wil l b e th e more p erman entl y

s ucc essful b ecau s e h e w il l e v entual l y
,
 78 T H E P SYCH OLOGY O F
m ast er h i s s ubj ect mor e th oroughly
a nd attai n a more j u di ci al attitu de .

Th e m or e s imp l e min d ed after on c e

-

comm itting th ems elv es t o a p o sition ,

ar e th ereafte r ch i efly influ enc e d an d

s up p orted b y th e i ll usio ns of h op e .

Th ey b ou ght p rob ab l y as a re su l t of
, ,

s om e b u l l ish dev el o p m ent I f p ri c e s .

h a v e a dvan c ed th e y fin d th at th e mar
,

k et l ooks stron g a goo d d ea l o f e n

“
,
$

c o u r a gi n g n ew s com es o u t o n th e
ti ck ers and th ey h op e fo r l arge p rofits
,
.

A fte r fiv e p oints in th eir favo r th ey ,

h op e fo r ten an d aft er ten th e y l oo k

,

fo r fift e en o r tw enty
O n th e oth er h an d if p ri ces d e cl in e
,

“ “ $
th ey ch arge it to man ip ulati on b ear ,

ra ids ,
$
etc an d exp ect a n ear l y r e
.
,

c ov e ry .M u ch o f th e b ear n ew s a p
p ears to th em to b e p ut o u t mal i ciou s
l y i n ord er to cau s e p ri ces to d ecl in e
,

fu rth e r .I t i s not u ntil th e de cl in e

b egin s to cau s e a p ai nfu l en croach
m ent up on th eir cap ita l th at th ey
r e a ch th e p o int of s ay ing “
If ,

‘
th ey can d e p re ss p ri c es l ik e th is
’
.

i n t h e f a c e o f a b u ll ish s itu ation

 TH E S T O CK MARKE T . 79

what is th e us e o f fightin g th e m ? B y
a fl ood o f short s al e s th e y can p ut ,

p r ice s dow n a s m u ch a s th ey l ik e
or s om ethin g o f th e s ort .

S u ch trade rs ar e s u fferi ng m ere l y

from y outh or l a ck o f soun d b us ines s
,

s e ns e o r b oth The y h av e a con sid e r

, .

ab l e pe riod o f stu d y b e for e th e m i f ,

th ey p ersist until th ey get p erman entl y

p rofitab l e results M ost o f th em o f
.
,

course d o n o t p ers ist

,
’
.

A mu ch m ore i nte l lig e nt cl ass man y ,

o f whom ar e p ro p erl y to b e co nsid e r e d

a s i n v estors do n o t al l ow th eir p osi

,

tion in th e mark e t to b l ind th e m s o far

a s curren t n e ws o r statisti cal d ev e l o p
m ents ar e con cern e d b ut do pe rmit ,

th ems elves to b ecom e b ias e d in r e gard

to th e most i m p ortan t factor o f a l l
th e e ff ect o f a chan ge in th e p ric e le v e l .

Th ey b ought sto cks i n th e ex p ecta

tion o f a n im p ro v e d s ituatio n Th e .

i m p roved s ituation com es and p ric e s

ris e Noth in g s e riou s in th e w ay o f
.

b ea r n e w s a pp ears O n th e con
.

t r a ry,
b u ll n e ws continu es ple ntiful .
80 T H E P SYCH O L O GY OF

Un d er th es e con dition s th e y s e e no
reaso n for s el l ing .

Ye t th e r e ma y b e a m o st i mp orta nt
—
r e as on fo r s el l in g n am ely that p ri ce s
,

h a ve ris e n s u ffi cien tl y to c o u n te r b al
—
an c e th e imp roved situ ation an d th e y
w ou l d s e e an d a pp reci ate th is fact if
th ey w e r e i n th e p osition o f an un i n
t e r e s te d ob s er ve r
.

O n e o f th e p ri nc ip al rea sons w hy i n
v e s to r s o f th i s c l ass al l ow th em s el v es

to b eco m e con fus ed as to th e infl u enc e

o f th e p ri c e l ev el i s b ecau s e a b ul l

m ark et n ear ly a l wa y s go es u n reason

ab l y h igh b efor e it cul min ates Th e
.

i n ve stor h as p erh a p s in s ev era l p r evi

,

ou s in s tan ce s s o l d o u t at w hat h e
,

th ought wa s a fai r p ric e l e v el o nl y to

,

s e e th e p ub l i c ru n aw ay w ith th e m ar
k et to a p o int wh er e h i s p r o fits w oul d
h ave b e e n doub l ed i f h e h ad h el d o n .

I t i s i n s u ch cas e s that an e xp ert

know l edge o f sp ecul ation i s e ss ential .

I f th e i nv estor has n ot thi s kn owl edge ,

an d cann ot ob ta in th e dep endab le a d

vi c e o f o n e w h o h a s it th e n h e mu st
,

co nte nt h i ms el f w ith m ore mod e rat e

 82 T H E P SYCH OLO GY O F

Th e expe rt ha s l earn e d from e x p e ri

e n c e l et u s say that th e a ppe a ran c e
, ,
“
of h o le s i n th e m ark e t i s a s ign o f
$

w e akn e s s B y a ho le i s m e an t a
“ $
.

c ondition o f th e m ark e t w h e r e i t s u d
d e n l y an d u na ccountab ly re fu s e s to
tak e sto ck A few h un dr e d sh ar e s o f
.

a n a ct i ve sto ck a re o ff e r e d for s a le .

S e ntim e n t is ge n e ra lly b ul l ish b ut ,

th e r e i s n o b u y e r fo r th at stock P ric e s .

s l i p qu i ck ly dow n ha l f a p o int o r a
p oin t b efor e b u ye rs ar e fou nd This .
,

i n a n a cti ve sto ck i s u nu sua l ; an d a l

,

tho u g h th e p ri c e ma y r e co ve r th e p ro
,

fe ss i o n a l do e s n o t forget th i s tr e a ch e r
o u s fai l u r e o f th e mark et to a cc e p t

mo d e rat e o ff e ri ngs He c ons id e rs it a

.

s ign o f a n ov e r b ought mark e t

“
-
$
.

N ow s u pp os e th e tra d e r h as c a l c u
l at e d that a n a d v an c e i s a b o ut to cu l
m in at e a nd h a s tak e n th e shor t
i n anti c i p ation o f that e v
p e c ts that th e m ark e t i s o v er b-
ou g ht ,

b u t is n o t ye t s ur e o f it Un d e r th e s e
.

ci rcum stan c es a n y l ittl e di p i n th e

p ric e w i l l p erh a p s l ook to h im l ik e a
ho l e e v e n th ou h u nd er oth e r c o n
.
$
 THE S T O CK M ARKE T . 83

d iti o n s h e wo u l d not notic e it o r wou l d

th ink noth ing ab out it He is l o okin g .

for th e d eve l o p m e n t of w e akn e s s an d

there is danger that his imagination may
show him what h e is l ooking for ev en
though it isn t ther e ’
'
Th e sam e r e mark s w o u l d a pply to
th e d et e ctio n o f a ccumulation o r dis
tr i b u ti o n
. I f y o u want to s ee d i str i b u
ti on aft e r a shar p a d v anc e y o u are ,

v e ry l ik el y to s e e it I f y o u h a ve so l d
.

o u t an d wan t to get a r e a ction o n wh ich

to re p urch as e y o u w i ll se e ple nt y o f
,

i ndication s o f a r e action I nd ee d i t
.
,

i s a s ort of p ro v erb i n Wa ll S tr ee t that

th e r e i s n o b ear so b earish as a so l d
o u t b u ll w h o wants a chanc e to r e

p urchas e .

I n th e stu d y o f so ca lle d t e ch ni ca l
-

con ditio n s o f th e market a situat ion ,

oft e n a pp ears whi ch p ermits a doub l e

co nstruction . In dication s of v ariou s
k ind s are alm o st e v enl y b a l an ced ; s om e
th ings might b e i nter p rete d in tw o di f
fe r e n t w ays ; and a trader n o t a l r e ad y
‘

int e r e st e d i n th e mark et w ould b e l ikely

to thi n k i t w is e to sta y o u t unti l
h e coul d s ee h i s w a y mor e c le ar ly .

Un d er s u ch ci rcumsta nc es y o u w il l
fin d it an a l most in v ariab l e rul e th at
th e man wh o w a s l ong b efor e th i s con
.

d itio n aros e w ill i nt er p r et t e ch ni ca l

con ditio ns as b u l l ish w h il e th e man
,

w h o w as an d r ema in s sh ort s ees pl ai n

,

i n di cations o f te chn i ca l W eakn ess .

Somewh at a mu sing b u t tru e

, .

I n th is m att er o f al lowin g th e j u dg
m ent to b e infl u e n ce d b y p ersonal com
m i tm e n ts v ery l ittl e o f a co nstru cti v e
,

or p ra cti ca l l y h e l p fu l n ature ca n b e
w ritt en exce p t th e o n e w ord D on t
,
’
.
$

Y et w h en th e inv e stor o r tra der ha s

com e to r eal iz e th at h e i s a p rej u dic ed
ob s erv er h e h as ma de p rogr es s ; for
,

th i s kn ow l edge k e e p s h im from trust

i n g too b l in dly to som ething wh i ch at ,
$

th e m om ent h e cal l s j u dgm e nt b ut

, ,

w h i ch m ay tu rn out to b e s impl y an
u nu su ally stron g imp ul s e o f gree d .

I t h as oft en b e en n ot e d b y stock mar

ket w riters th at sin c e th e great p ub l i c
i s b eari sh at th e b ottom an d b ul l ish at
th e top i t coul d mak e its fortu n e an d
,
 T H E S T O CK MA RKE T . 85

b eat th e multi m ill ionaires at th eir o w n

-

—
gam e by s imp l y r ev ers ing its e l f b uy
ing wh e n it fe el s l ik e s el l ing an d s e ll ing
'

w h en it feel s l ike b uy ing Tom L aw

.

son ,
i n th e h ey da y o f h i s p ub l icit y ,

s e em s to h ave had som e s ort o f dr eam

of th e p ub li c s el l ing b ack to S tandard
O i l cap ital ists th e sto ck s w h i ch it had
b ou ght fro m the m an d th u s b ringing
everyth in g to s mas h in a h eap th e —
p h ilanthr o p ic Th omas doub tl es s b eing
, ,

first p rop erl y s hort o f th e mark et .

Thi s wronghead edness o f th e p ub l i c

no l onger exists to th e s am e extent as
form erl y A great n umb er o f small i n
.

v e s to r s b uy an d s el l intelli gently and

th er e has b een a most n otic eab l e fal l in g

o ff i n th e gamb ling cl ass o f trad e

mu ch t o th e sat isfaction o f e v eryon e ,

except p erhap s th e b rok ers who form

, ,

erly han dl ed s uch b us i n ess .

I t r emain s tru e n everth el ess that

’

, ,
'
th e very mom ent wh en th e mark et
looks stron gest i s l ik ely to b e n ear th e
,

to p, an d j u st wh en p ri ces ap p ear to
hav e started on a straight drop to th e 1

z ero p oin t i s usual ly n ear th e b ottom

86 P S Y CH OLO GY O F S T O CKS .

Th e p ractica l w a y for th e i n ve sto r to

us e th is p ri ncip l e i s to b e rea d y to
s e l l at th e mom ent wh e n b u l l s entim ent
s e ems to b e mo st w ide ly di strib ut e d ,

a nd to b u y w h en th e p ub l i c in gen e ral
s e e m m o st dis coura g e d I t i s e s p e ci a lly
.

im p ortant for h i m to b ea r thi s p rinci p l e

i n m in d in taking p rofits on p r ev iou s
c omm itm e nts a s h i s own i nte rests are
,

th e n i dent ifi ed w ith th e cu rrent tr e nd

o f p ric es .

I n a wo rd th e tra der o r i n ve stor w ho

,

h as s tu di e d th e s ubj e ct e nou g h to b e
r e ad in g th i s b ook p rob ab ly coul d
,

not mak e p rofits b y r ev ers in g h im

s e l f e v e n i f s u ch a th in g w ere
,

p o ss ib l e ; b ut h e ca n en dea v or to h o l d
‘

h ims el f i n a d e tach e d unp r e ju di c ed

,

fram e o f mi n d an d to stu d y th e p sy
,

c h o l o gy of th e crow d es pe cia lly a s it

,

m anifests its el f in th e m o ve m e nt o f
p ri c es.
 —
VI The Pan ic and the Boo m

O T H th e p a ni c an d th e b oom are
em inentl y p s y cho l ogical p h e
mom ena Thi s i s n o t s a y in g
that fu ndam e nta l con dition s do not at
times warrant sh ar p declines in p ric e s
and at oth er ti m es e qual ly shar p ad
v an ces B ut th e p a ni c p ro pe r ly so
.
,

cal le d r e p res ents a dec l i n e g r e at e r

,

than i s w arrant ed b y condition s u su ,

al l y b e caus e o f an e x c ited state of th e

.

p ub l i c min d a ccom p an i ed b y e x h a u s
,

tion o f resourc es ; whil e th e term

-

“
boom i s u se d to m ea n a n exc es s iv e
$

an d l arge ly sp ecu l ative a dvan ce .

Th er e are som e s p eci a l feature s con

n e c t e d w ith th e p an ic and th e b oom

wh ich ar e w orth y o f s e p arate co nsi der

ation .

It i s real ly astonishin g what a ho l d

th e fea r o f a pos sib l e p anic has upon
th e m in ds o f many i nves tors Th e
.
 8 T H E P SY CH O LO GY O F
m emory o f th e e v ents o f 1 907 h as u n
doub t edl y op erate d greatly to l ess e n
th e v olu m e o f s p e culativ e trad e from
that ti m e to th e p r es ent ( Ap ril ,

P an ics o f e qu al s everity h a v e o c curr ed

only a few ti m es i n th e ent ir e h i story
o f th e co untr y an d th e p ossib i l it y o f
,

su ch an outb r eak i n any o n e month i s

s mall e r th an th e ch an c e o f l oss o n th e
ave r a ge i nv e stm e n t th rou gh th e fai l ur e
o f th e comp an y Y et th e sp ecter o f
.

su ch a p an i c ri s es i n th e min ds o f th e

i n ex p eri en c ed w h e n eve r th e y think o f

b u y in g stocks .

“
Y es th e in v e stor m ay s a y R ead
,
$
,

ing s eems to b e in a v ery stron g p osi

t ion b ut l ook wh e r e it so l d i n 1 9 07
,

a t $ 70 a shar e $
$

It is sometimes assum e d that the

l ow p ri c es i n a p an i c ar e du e to a s u d
d en sp asm o f fea r wh i ch c om es qui ckly
,

an d p as s es aw ay qu i ckl y Th is i s n ot
.

th e ca s e I n a w ay th e O p eration o f
.
,

th e e l em ent o f fea r b e gi n s w h en p rices

are n ea r th e top S om e cautiou s i n
.

v e s to r s b e gin to fear th at th e b oom i s

90 T HE P SY C H O L O GY OF

a l itt le tim e ; b u t i n th e stoc k mark e t ,

“
tim e is th e e s s e n c e o f th e co ntra ct $
,

an d is th e ve ry thin g th at th ey cann ot
h a ve .

Th e gr e a t caus e o f l os s i n tim e s of
p ani c i s th e fai lur e o f th e i nv esto r to
k e ep e nough o f h i s ca p i ta l in l iqui d
fo rm H e b e co m e s ti e d u p i n v ariou s
.
“ $

u nd e rtaki ngs s o that h e cannot reali z e

q u i ck ly He ma y h a ve a b undant p ro p
.

e r ty , b ut n o r ea d y m on ey Thi s con d i .

tion in turn r e s u l ts from tr y in g to d o

, ,

to o m u ch — g re e d h ast e ex c es si ve am
, ,

b i ti o n an o ve rs u pp l y o f e as y confid en c e
,

as to th e futur e .

I t i s n otic e a ble in p ani c tim e s that

a p erio d arri ve s w h e n n e ar ly eve r y o n e
thinks th at stock s ar e l ow en ough y et ,

p ric e s conti nu e dow nward to a sti ll

l ow e r l e vel Th e r e sult is that man y
.

i nv estors a ft e r th inkin g that th ey h a ve

,
“
l oade d u p n ea r th e b ottom fin d th at
$
,

i t was a fa l s e b ottom and ar e final l y ,

forc e d to th row o ve r th e ir h o l din g s o n

a furth er d ecl i n e .

Th is i s du e to th e fact m e nt ion e d $
 T H E S T O CK MARKE T . 91

ab o ve that final l ow p ric es ar e th e r e

,

s ul t o f n ec e s siti es n o t o f op inions I n
, .

1 9 07 for e x amp l e e v e ry on e of good

, ,

s en s e kn e w p erfectl y w el l th at stocks
w ere s ell ing b el ow th eir v a l u e th e —
troub l e wa s that i n v estors cou l d n o t
get hol d o f th e m on e y w ith w hich to
b uy .

Th e mora l I S that low p ric e s aft e r ,

a p ro l onged b e ar p eriod ar e not i n ,

th ems elves a s u ffi cien t reason for b u y

ing stocks Th e ke y to th e s ituation
.

lies in the ac cu mu l ati on of l i qu i d capi tal ,

wh ich i s mo st qu ickl y ev i den ced b y a

rap id re covery o f th e exc es s of d e p os its
o v er loan s i n th e N ew Y ork cl earin g
hou s e b anks ( e xc l u din g th e trust com
p a n i e s in
, which loans ar e more v ari e d ) .

This subj ect howev e r tak e s us outsid e

, ,

o u r p resent field .

It i s to a great ext e nt b e caus e th e

l ast p art o f th e d e cl in e in a p an i c ha s
b e en cau s ed not b y p ub l i c op i nion o r ,

ev en b y p ub l i c fear b ut b y n ec essi ty
, ,

arising from ab so l ute exh au stion o f

availabl e fun d s that th e first p art o f
,
92 T H E P S YCH OL O GY OF

th e ens u in g re co ve r y tak e s p la ce w ith

o u t any ap p ar en t r easo n .

“
Tra ders s ay Th e p ani c i s ov er b ut
, ,

sto ck s cann ot go u p mu ch u nd er s u ch
b earish con dition s as n ow exist Y et .
$

sto cks ca n an d do go up b ecau s e th ey ,

are m erely re gai n ing th e n atura l l ev el

from wh i ch th e y w ere d ep r ess ed b y
“
b ankru p t sa l es a s w e wo ul d s a y i n
,
$

dis cu ssi ng dr y good s .

P erh ap s th e word fear h as b e en

ov erw orke d in th e di scus s ion o f sto ck
m arket p sy ch o l o gy I t i s o n ly th e v er y
.

few wh o a ctual ly s el l th e ir sto cks u n

d er th e dir ect i nfl u enc e of th e emoti on
o f fear. B ut a fe eli ng o f caution strong
en ough to i ndu c e s al es o r ev en a fixed
,

b el i ef th at p ri ce s m u st d ecl in e con ,

s ti tu t e s i n its el f a sort o f modi fication

o f fear an d h as th e sam e resul t s o far

,

as p ric es ar e con c ern ed .

Th e e ffe ct o f th is fear o r cau tion in a

p an i c i s n ot l i mite d to th e s e l l i ng o f
sto cks b u t i s ev e n more i mp orta nt in
,

p reventin g p urch as es I t takes far l ess

.

un easin e s s to caus e th e i nt en din g i n

 THE S T O CK M ARKE T . 93

v e s to r to d elay p urchas es than to p re

c i p i ta te a ctu al sal es by h ol d ers F or .

th is reason a smal l quantity of stock

,

p ress ed for sal e in a p an i cky market

may caus e a de cl in e out o f al l p ropor
tio n to its i mp ortanc e Th e o ff erin gs
.

m ay b e s mal l b ut n ob o d y w ants th em
,
.

I t is thi s factor w hi ch accounts for

th e ra p i d r ecov eri es w hi ch fr equ e ntly
fol low p anics Waitin g investors ar e
.

a fra id to step in front of a demora l iz ed

mark et b ut on ce th e turn a p p ears th ey
, ,

fal l ov er ea ch oth er to b uy .

Th e b oom i s in many w a y s th e r e
v ers e o f th e p an i c Ju st a s fear k eep s
.

growin g and sp reading u ntil th e fin al

c rash s o co nfi denc e an d enthu siasm
,

k e ep reproducing each oth er o n a w id er

an d wi d er s cal e until th e resul t i s a
s ort of hilarity o n th e p art o f thousands
o f m en ,
man y o f th em comparativ ely
youn g a nd in exp eri enc ed wh o have ,

mad e b ig mon e y durin g th e l ong a d

$

van c e i n p rices .

Th es e i magin ary millionaires ap pe ar

in a smal l swarm durin g every p ro
94 T H E P S YCH OLO GY O F

l ong e d b u l l m ark et on ly to fal l w ith

,

th eir w in gs singe d a s s oon a s p ri ces

d ecl i n e
. S u ch s pe culators ar e to al l
,

p ractical intents and pur p os e s i r r esp on

,

s ibl e I t i s th e ir v er y i rres p on sib il ity

.

w h i ch h as e nab l ed th em to m ak e mon e y
s o ra p i d l y o n a dvan c in g p ri c es Th e.

p ru d e nt man gets on l y mo d erat e p rofits

—
i n a b u l l market i t i s th e man wh o .

tra d e s o n sho e stri ng margi n s w h o

“
-
$

g e ts th e b igg e st b e n e fit o u t o f th e ris e .

1
W h en s u c h m u s h r o o m fortun es h a ve
a c c u m u l a t e d th e m ark et m a y fal l t e m
,,
~

p o r a r i l y i nto th e h and s o f th es e dar e

d evil s p i rits so th at a l m
,
o st an y r eck
l essn e ss i s p os s ib le fo r th e tim e It i s .

th i s kin d o f b u y i ng wh ich caus es p ri c e s

to go hi gh er after th ey ar e a l read y h i g h
—
enou gh j u st as th e y go l ow er in a
p an i c after th e y ar e pl a in ly s e e n to b e
l o w en o ugh .

W h e n p ri ce s get a b o ve th e n atura l
.

l ev e l a w el l j u dg e d short int e r e st b e
,
-

gins to ap p ea r Th e s e sh orts ar e right

.
,

b ut ri ght too soon I n a g e n u in e b u l l

.

m ark e t th e y ar e n ea r l y al wa y s driv en
 T HE S T O CK MARKE T . 95

to cov e r b y a furth er ris e wh ich i s , ,

from any common s ens e standp oint u n ,

reasonab l e A riot o f p yram id ed mar

.

gins drives th e sane an d cal culating

s hort s e l le r t emp orari ly to sh el ter .

A p s y chological influ enc e o f a much

.

wi der scop e al so Op erates to h elp a b ul l

mark et al on g to unreaso nab l e h e ights .

S u ch a mark et i s u sual l y accompani ed

'

by risin g p ri ces in a l l l in es o f b u sin es s

an d th es e ri s in g p ri ces always create ,

in th e min ds o f b usin ess m en th e i m ,

p res sion that th eir variou s enterpris es

are mor e profitab l e th an i s real ly th e
cas e.

O n e reason fo r th is fa l s e imp res s ion

i s found i n stocks o f goo ds o n han d .

Take th e whol e sal e groc er fo r ex ,

ampl e carryi ng a stoc k o f goods wh i ch

,

i nv entori es i n Januar y 1 909 ; ,

O n th at dat e B ra dstre et s in d ex o f com

’

m o d i ty p ric e s stood at I n Jan

’
u ary 1 9 1 0 B radstre et s ind ex was
, ,

If th e p ric es o f th e various arti cl es i n

cl ud ed in th is sto ck o f gro ceri es i n
creased in th e sam e ratio a s B rad
96 T H E P S YCH OLO GY O F
str e et s l ist an d if th e gro c e r ha d o n
’

han d exactl y th e sam e th i ngs h e woul d ,

i n ve ntor y th em at ab out in
Ja nua r y 1 9 10, .

H e m ad e an ad dition al p rofit o f
du ri ng th e ye ar w ithout an y e f
fort an d p rob ab l y w ith out an y ca l c a
,

l ation on h i s p art B ut this p rofit w a s

, .

onl y ap p ar ent n ot real ; fo r h e coul d

,

not b u y a n y m or e w ith th e in
Ja nuary 1 9 1 0 th an h e c oul d hav e
, ,

b ou gh t w ith th e i n Jan uar y ,

1 909 . H e i s d ec ei ve d i nt o s u p p os in g
h i ms el f ri ch er th an h e r e a l l y i s an d ,

thi s fa l s e id ea l ea ds to a gradua l
growth o f extra v ag an c e an d S p ecu l a
tion in ev ery l in e of b u sin ess an d every
w a l k o f l ife .

Th e s e co ndar y resu l ts of thi s d e l u

s io n o f in cr e as ed w ea l th b e caus e of ris
i ng p ric e s are eve n m or e i mp orta nt
,

than the p rimary results O u r groc e r .

,

fo r e x am p l e decid e s to spend th is
,

fo r an automob il e Thi s h e l p s .

th e a utomob il e b u si n ess H un dreds of .

s im i l a r ord ers in du c e th e automob il e

98 T HE P SYCH OL O GY O F

m ent h e i s en cou raged to sti ll l arger

,

exp en d iture s ; a n d l ik ew is e if th e cap i

ta l i s t notes a t en p er cent advan c e i n .

th e sto ck mark et h e p erhap s empl oy s

,

a dditional s ervants and enlarges h is

h ou s ehol d ex p en ditures so th at h e b uy s
mor e gro ceri es . T h u s th e fe el ing of
c on fiden c e an d e nth u s iasm sp r ead s
wider and wide r l ike ripples from a
ston e d ro pp ed into a p ond A n d all o f .

th es e d e v el op m ents a r e fa ith fu l ly r e
fl e c t e d b y th e stock m ark et b arometer .

Th e res ult i s th at i n a y ear l ik e 1 9 02

,

o r 1 9 06 th e h igh p ri c e s for stocks and

,

th e f ev erish a ctivity o f gen era l tra d e

ar e b as e d to an entirel y u n su s p e cte d
,

e xtent on a sort of p yrami d of mis

,

tak en i mp re ss ion s most of w h i ch m ay

,

b e tra c ed d ire ctl y o r in dire ctl y to th e

, ,

fa ct that w e m easur e ev erythi ng in

mon ey an d alw a y s th ink o f th is money
m eas ur e a s fixed an d u n ch angeab l e ,

wh il e in real it y ou r m on e y fl u ctuates
i n va l u e j us t l ik e i ron p otato es o r
, ,

“
F ru it o f th e L oom $
W e ar e accu s
.

to m e d to fi g urin g th e mon ey va l u e o f -
 T H E S T O CK MARKE T . 99

wheat b ut w e g e t a h ea dach e wh en w e
,

—
tr y to r e cko n th e w h eat v a l u e o f
mon e y .

When a fictitious situation like thi s

be gins to go to p ieces the stock mar ,

ket fu l fi l lin g its function o f b arom eter

, ,

declines first while general busin e ss

,

contin u es a ctiv e Th e n th e mo ne y
.

sharks o f Wal l S treet ge t th ems elv es

$

round l y curs ed b y th e p ub l i c and th e re

i s a w id es p read d es ire to w ip e th em o ff
th e earth in s ummar y fashion Th e .

stock mark et n ever fin ds its elf po p u l ar

u nl ess i t i s goin g up ; y et its goin g
dow n un doubtedly does far mo re to
p ro mote th e country s w e lfare i n th e
’

long run for it s e rves to temper th e

,

crash w h ich must eventual ly com e in

gen era l b usi n e ss circl es an d to for e
w arn u s of tro ub l e ahead so tha t w e
may p rep are fo r it .

I t i s gen eral l y more d i ffi cul t to d is

ti n gu i s h th e en d of a stock mark et
b oom than t o d ecid e w he n a p ani c i s
defin itely over Th e p rincipl e of th e
.

thing i s s imp l e enough how ever It , .

 1 00 P SY CH OLO GY O F S T O CK S .

wa s a n ov e rs up ply o f l i qu id ca p ital th at
started th e market u p ward aft er th e
p an i c wa s ove r S i m il arl y it i s e x h a u s
.

ti on o f l i qu i d ca p ital w h ich b rin gs th e

b ul l m ov em ent to an e n d This ex.

h a u s ti o n i s shown b y h igh er cal l mon e y

rates l o s s o f th e e xces s of de p osi ts ov er
,

l oan s i n N ew Y ork c l eari n ghous e

b a nks a stead y ri s e in comm er cial p a
,

p er rat es an d a s agging market for

,

h igh gra d e b on ds
-

.
1 02 T H E P SYCH OLO GY OF
on th e oth er han d can h ard ly e v er b e
,

p ersuad ed to b u y on a n a dvan ce H e .

reasons P ri c es fre qu ently mo ve s e v

,

eral p o ints again st con di tions o r at ,

l east again st w hat th e co n dition s s e e m

to me to b e Th e s e n sib l e thing for me
.

to do is to take ad v antag e o f th e s e con

tr a r y mo v ements
$
.

H en ce w h e n h e b eli e ve s sto ck s
shou l d be bought he p lac e s an ord e r
to b uy o n a scal e H i s th ou ght is
.

“
It s e em s to m e s to cks sho u l d a d
van c e from th es e p ric es b ut I am not ,

a soo thsayer and p rices have o ften

,

d e c l in ed th re e p oi nts wh en I fe l t j ust
a s b ul l ish a s I do n ow S o I w il l pl ac e
o rd e rs to b uy e ve r y half p oint dow n
for th re e p oints Th es e sp ecul ators
.

ar e a cra z y l o t a nd th ere i s n o k now

ing w h at p ass in g b re ez e m i ght strik e
th em th at w ou l d cau s e a t emp orar y d e
cl in e o f a few p oi nts .
$

A m on g l arg e ca p ita l ists an d esp e ,

c i a l l y i n th e b anki ng co mmu nit y th e ,

“
p hl e gmati c t yp e n atura l l y p r e dom
$

i n a te s
. S u ch m en h av e n e ith er th e
 T H E S T O CK MARKE T . 1 03

t im e n o r th e dis p osition to watch th e

t icker cl o s ely a nd th ey n e arl y alway s
disclaim an y ab il it y to p re dict th e
s mall er mov em ents o f p ri ces Th ey .

a r e enti rel y read y n everth el e ss to take

, ,

advantage o f th es e smal l fl u ctuations

whe n th ey o ccu r and h avin g p l e nty o f
,

ca p ita l th e y can eas ily a ccomp l ish th is

,

b y b uying o r s ell ing on a s cal e .

A s a matter o f fact th e market i s ,

u sua l ly fu l l o f scal e o rders and th e ,

know l edge o f th is a nd o f th e way in

w h ic h s uch orders ar e handl ed i s d e
c i d e d l y h elp ful in j udgin g th e ton e an d

t echni cal p osition of th e mark et from

d a y to da y
’

Th e tw o typ es o f op erators ab ove

d es crib ed ar e al wa y s w orkin g aga inst
each oth er Th e b uyin g o r s el l in g of
.

$
th e i mp ul sive trader tends to force
p rices up o r down whil e th e s cal e o r
,

d ers of th e phl egmati c cl as s t end to

“ $

o p pose any movement .

F o r example let us supp o se that

,

b ankin g interests b el i ev e con diti on s to

b e fun dam entally so un d an d that th e
1 04 T H E P SYCH O LOGY O F
g e n e ra l tr e n d o f th e market wil l b e u p
ward fo r som e ti m e to com e O rd ers .

ar e th e refore p laced by v arious pe r

s on s to b u y stock s ev er y p o int dow n
'

o r e v er y hal f quart er o r e v en eighth

, ,

p oint dow n .

O n th e oth e r hand th e acti v e floo r

,

trad ers fi n d th at ow ing to som e t em

,

p o r a r
y u nfavorab l e d e v el o p m ent a fo l ,

l ow in g c an b e ob tai n ed o n th e b ea r
sid e . Th e y p erc eiv e th e p r es ence of
sca l e ord e rs but th e y think stocks enough
,

wil l com e out on the decline to fil l the

scal e o rd e rs and l ea ve a ba l ance o v er .

T o p u t it an oth er w a y th e floating
,

s u pply o f sto cks has b e co m e at th e ,

m om ent l a rge r than can comfortabl y

,

b e toss e d ab o ut from h a n d to han d b y

th e i n an d out clas s o f tra ders Th e
- -
.

m ark et m us t d ecli n e u ntil a p art of thi s

fl oatin g s u p p ly is ab sorb e d b y th e scal e
orders which und e r l ie current p rices .

Th es e co nditi ons p ro du c e w hat i s

common l y cal l e d a reaction “
Once
.
$

th i s su rp l u s fl oating s up p l y o f sto cks

i s ab sorb ed b y stan din g orders th e ,
1 06 THE PSY CH O L O GY O F

m e t o n a d v an c e s s o that th e m ark e t is
,

k ept fl u ctu atin g w ithi n com p arat i v el y

narro w l i mits fo r a month o r mor e I n .

fact it is l ike ly to b e k e p t o n thi s l e v el

,

s o l on g a s p ub l i c b u y in g co ntin u e s
greater tha n p ub l i c s ell i n g . This i s
som e tim es cal l e d di strib ution A .
$

si mi l ar p e rio d of a ccu mu l ation often $

o c curs after a b ear mark e t h a s run its

c o u rs e an d b e for e an y im p ortant a d
,

v an c e a pp ears .

A c l os e w atch of transaction s o r a ,

stu d y o f conti nuous quotation s as p ub

l i s h e d in c e rtai n n ew s p a p ers often e n
,

ab l es th e exp e ri e n c e d trad e r to discov er

wh en th e most im p ortan t o f th es e s cal e
ord ers ar e w ith draw n o r r evers ed .

A bu l l market which is full of scale

b u y in g orders e ncou nters s u pp ort “
,
$

s o cal l ed o n d ec l in es
-

, . B ears ar e tim i d
ab out dri v i ng down p ri ce s b ecaus e ,

th ey ar e contin ual l y “
lo sing th eir
sto cks .
$
Th e y s a y that ver y l ittl e
“

sto ck com e s out on d e cl in es ; h enc e $

th ere is a c ertai n a p p earan c e o f caution

in th e w a y th e m arket go es down and ,
 T H E S T O CK M ARKE T . 1 07

th e a ctivity o f trad e shows in a b road ,

way a falling o ff at l owe r p rices On

,
.

the advanc e s how ev er a following is

, ,

obtained and acti v ity increas e s .

Toward the end of th e bull market

a change is noticeable P rices go .

dow n easi ly a nd o n l arger tran sa ctions ,

w hil e advan ces ar e sl uggish and O p po

s i ti o n i s m et at h i gh er l e v el s wh er e
p r o fi t taki
-
ng orders h a v e b e e n p l a ce d .

The v ery day when scale buying o r

d ers in a sto ck ar e withd rawn can
oftentim es b e di stin guish ed .

In a b ear market p res sur e ap p ears

“
,

i n p l ac e o f su pp ort
“
.Th e s cal e o r
ders are mostl y to s el l as th e mark et
ris es O nly a s mal l fo l lowing o f p ur
.

chas ers i s obtai na bl e o n advan c es ,

h enc e th e a ctivit y of b usin ess i n a g en ,

eral way falls o ff as prices go up

, .

Th e en d o f th e b ear mark et i s marked

b y th e reapp earanc e o f s up p ort an d
“ $

th e removal o f p ressur e
“
s o that
,

p ri c es reb oun d qu ickly an d sharp ly

from de cl i n es .

Th e commo n as su mption i s th at th is
1 08 P SY C H O L O GY O F S T O CKS .

s u pp ort o r p r e ssur e i s s u p p l ie d b y
man i p u l ators B ut it i s quit e a s
.

l i ke l y to r esu l t fro m th e s cal e o pe ra

ti on s o f h u ndr e ds o f di fferent p ersons ,

w hos e m enta l m ak e u p p r ev e nts th e m

-

fro m b u y in g o r s ell in g i n th e 1 m
p u l s iv e w a y
$
.
 T H E P SYC H OLOGY OF
attitud e I t i s confu sing to th e u n i n i ti
.

at ed an d fi rst e ff orts to w ork o n su ch

,

a p lan are al most c ertain to b e di sas

trou s ; but fo r th e exp eri en ced it b e
co me s a s uc c essful though of cours e,

n ev e r a c ertain m eth od A ch i l d s first

, .
’

e ff orts to u s e a shar p tool ar e l ik ely to

r esul t in b l oodsh ed b ut th e s am e tool
,

may trac e an exqu isit e carvi ng in th e

h a nds of a n exp e rt .

W hat th en sh oul d b e th e m ental a t

, ,

ti tu d e o f th e int e lli gen t b uy e r an d

‘

s ell er of s e cu riti e s ?

Th e l on g p ull investor b u y in g o u t
“ $

ri ght for cas h an d h ol ding fo r a l ib era l

p rofit n e ed only cons ide r th is matter
,

e nou gh to guard again st b e com ing c on

fu s ed by th e vagari es o f p ub l i c s enti
m ent o r b y h is ow n inv erted reasonin g
p roc ess es H e w il l get th e b e st r esu l ts
.

b y k e ep in g h i s ey e s ingl e to tw o th in gs
F acts and P rices The current rate o f
.

int er est th e earni ng p ow er o f th e cor

,

p o r a t i o n s wh os e sto ck s h e b uy s th e ,

d ev elop m ent o f p ol iti ca l con d ition s as

a ff ectin g i nv este d capita l a n d th e r e ,
 T H E S T O CK M ARKE T . 111

lat ion of current p ri ces to th e situation

’

—
a s shown b y the s e thre e factors th es e
cons titute th e mo st imp ortant foo d for
h i s m ind to work up on .

Wh en h e fin ds h ims el f wan derin g o ff

“ $
into a c ons id eration o f what Th ey
w il l do n ext o r w hat e ffect such an d
,

su ch ev ents may hav e o n th e s entim ent

of sp e culators h e cannot d o b ett er
,

than to b ring h i ms el f u p w ith a short

tu rn an d sternl y b i d h im s elf B ack to
common s ens e .

F o r th e mor e active trad er th e s itua

t ion i s di ff er ent H e n e e d n ot b e e n
.

t i r e l y un regardful o f val u es o r funda

m ental condi tion s b ut h is p rim e obj ect
,
“
i s to go w ith th e tide That m eans
.

b asing hi s op eration s to a g reat extent

o n what o th ers w il l th ink and d o His .

o w n m enta l a tti tu t e th en is a most i m

, ,

p ortant p art o f hi s e qu ip m ent for

su cc ess
.

F irst the trader must be a r e as oni ng

,

op ti mi s t
. A more horrible fate can
scarc ely b e imagined than th e shall ow
p ess imi sm o f many market hab itu $ s ,

w h os e m in ds in ca p ab l e o f grasp ing th e
,
 T H E P S Y CH OL O GY O F

l arger for c es b e n e ath th e movem ents

o f p rices tak e refuge in a cy ni cal di s
,

b el ief i n p retty mu ch ev e rythin g th at

m ak e s l ife worth l iving
’

O w in g to th e n atur e o f th e b u sin e ss ,

h ow e v er th is op ti mi sm m u st b e o f a
‘

som ewh at d i fferent chara cter from that

wh i ch b rin gs s u c c ess i n oth e r l in es A s .

a gen era l thin g o p tim is m i ncl ud es th e

pe rsistent n ourishing o f ho p e an ag ,

g r e ss i v e con fid e n c e th e c ertaint
,
y th at
y ou a re right a fi rm determ in ati on to
,

a ccom pl is h yo u r end B ut y o u can not

.

m ak e th e stock market m o v e y our w ay

b y b e l i eving th at it w ill do so H er e .

i s o n e cas e at any rat e w h er e N ew

, ,

Thou ght m eth ods can not b e directl y

ap p l i e d .

I n th e m ark e t y ou a r e n oth ing b ut

a chi p o n th e ti d e o f ev ents O p tim ism .
,

th en mu st cons i st i n b el i e vin g n ot
, ,

th at th e tid e w il l continu a l l y fl ow y ou r
way b ut th at y o u w il l s u cce ed i n float
,

in g w ith th e ti d e Y o ur o p timi sm mu st
.

b e in a s e ns e o f th e in te l l e ct not o f
, , ,

l th e w i ll A n Op tim is m b as e d o n d e ter
.
 1 14 TH E P S YCH OL O G Y O F

s uit o f a d efinit e p l an until co ndition s

change ; and on the oth er stubborn a d
, ,

h e r e n c e to a c ours e o f a ctio n w hi ch
s ub s e qu ent ev ents h ave p ro v e d to b e
erron eou s .

A d ay i n th e country w ith th e m ar
,

k et forgott en o r i f n ec essar y forcib l y

,

ej e cted fro m th e thoughts w ill o ft e n ,

e nable th e trader to return with a clari

fi e d mind so that he can then intelligent
,

l y convict or acquit himsel f o f the vice o f

stubbornness S ometimes it may be
.

c om e n ec essary to cl os e al l commit
m ents an d r emain o u t o f th e mark et
fo r a few day s .

O n e o f th e m ost commo n errors

m igh t b e d es crib ed a s gettin g a n o
“

tion . This is due to the failure or i n

ab il it y o f th e tra d er to tak e a b roa d
vi ew o f th e entir e s ituation S om e .

p articu l a r p oi nt i n th e comp l ex con di

t ion s w h i ch u su ally con trol p ri c es ap ,

p ea l s to h i m stro ngly an d i mp ress es

h i m a s c ertai n to h a v e its e ffect o n th e
m arket H e a cts o n th is s ingl e id ea
. .

Th e i d e a ma y b e al l right b ut oth er ,
 T H E S T O CK MARKET .

co unterb alan cing fa ctors may p rev ent

i t from havin g its natu ral e ff ect .

Y o u en counter th es e notion s ever y

“ $

day in th e S tr eet Y ou m eet a highly

.

cons ervat iv e i ndivi dual an d ask hi m

w hat h e th inks of th e s ituation I am
.

al arm ed at th e rap i d s p r ead o f radica l

s entim ent h e repl i es
,
“
H ow can w e
.

exp ect cap ital to b ran ch o u t into n e w

enterpris es wh en th e p rofits may b e
sw ept away at an y mom ent b y so cial
i s ti c l egisl ati on
$
?

Yo u say mil dly that th e crop s ar e

good th e b anking situ ation sou nd b u s
, ,

i n e s s a ctive etc ,
B ut al l thi s p roduc es
.

n o imp ression upo n h im H e has s ol d .

all his stocks and has his money in th e

b anks .
( H e i s al so short a consid er
’
ab l e lin e b ut h e do esn t t el l you th is )
, .

H e w il l n ot b uy again u ntil th e p ub l ic
“
b ecomes san e .

Th e n ext man y o u ta l k with says

We cannot have much decl in e w ith
th e p res ent good crop p rosp e ct C rop s .

l i e at th e b a sis of ev eryth ing With .

nine billions of n ew wealth coming out

1 16 T H E P SYCH OLOGY OF
of th e groun d a nd flow ing into th e
ch ann el s o f trad e w e are b oun d to ,

h a v e p ro sp erou s co nd itio ns for som e

ti m e to com e .
$

Y o u s p eak o f ra dical ism ad v ers e l eg ,

i s l a ti o n h i gh cost o f l ivi n g etc ; b ut

, , .

h e th ink s th es e ar e r el ati v ely un im

p ortan t com p are d w ith th at
o f n ew w ealth O f cours e h e .
,

is l ong o f stocks .

To mak e th e w ors e a p p ear th e b et

t er r eason s ai d M r S o crates som e
,
$
.
,
’
l ittl e tim e ago I t i s to o b ad w e can t
.

have S ocrates comm e nts on Wa ll

’

S tre et Th e S o crati c m eth o d a pp l i e d

.

t o th e av erage s p ecul ator w ou l d p r o

d u ce a m usi n g r esu l ts .

“
B ewar e of s ay in g Th is i s th e mo st ,

imp ortant fa ctor i n th e s itu atio n u m $

l es s th e a ction o f th e m ark et s how s

that oth ers agr e e w ith y o u E v ery .

h u man min d has its ow n p ecu l iariti es ,

s o p resu mab ly y ours h a s th ou gh y o u ,

can t s e e th em p lain l y ; b ut th e stock

’

m ark et is th e m e etin g of man y min ds ,

h a v i n g ev er y i maginab l e p ecul iarity .

 T H E P S YCH OLO GY O F
cannot c l ear l y m arsha l and r ev i e w
th e m e v e n in h is o w n m in d .

O nl y th e ex pe ri en ce d trad er i s e n
ti t l ed to a hu n ch
“
.
$
Th e no v i c e or th e ,

m a n wh o is not clos ely in touch w ith

t echn ical con diti on s is m ere ly m akin g
,

a n un u su al as s o f hi ms e l f wh en h e
ta l ks ab out a h u n ch
“
.
$

Th e su c cessfu l trader gradua l l y

l earns to stu dy h i s o w n p s y cho l ogical
chara cteristic s an d al l ow to s om e ex
t e nt fo r h is cu stomar y errors o f j u dg
m ent I f h e fi nds th at h e i s g en eral l y
.

too h ast y i n reachi ng a con c l u sion h e ,

l earn s to w ait an d refl e ct furth er .

A fte r mak in g h i s d ec ision h e w ith ,

draw s i t an d l ay s i t u p on a sh elf to
rip en H e mak es only a pa rt of h i s ful l
.

comm itm ent at th e mom ent w h en h e

fe el s m ost co nfi dent h ol din g th e r e
,

m a i n d e r i n r es erv e .

I f h e fi nd s that h e is u sua l ly ov e r
ca uti ou s h e ev entual ly l earn s to b e a
,

l itt l e m or e darin g to b uy a p art o f hi s

,

l i n e w h il e his m in d is still p artial ly e n

v e l o p e d i n th e m ists o f doub t .
 T H E S T O CK MARKE T . 1 19

M ost of th e p ractical s ugg e stion s

wh ich can b e o ffere d are n e cessaril y of
a som ewhat n e gat iv e charact e r . We
c a n p oint o u t th e errors to b e a v oi ded
m uch more s ucc es sfu l ly than w e ca n
l a y out a cou rs e o f p ositiv e action B ut .

th e fol lo w ing su mmar y may b e u s efu l

to th e a ctiv e trader
1
( ) Y our main p urp os e must b e to
k e e p th e min d cl ear an d w e l l b alan ced .

H en c e do not act h astil y o n a p p arently

,

s ensatio n al information ; do n o t tra de t

so h eavily as to b e com e anxious ; and
do n ot p ermit yours e l f to b e influ en ced
b y y ou r p os itio n i n th e mark et .

( )
2 A c t on
i
y our own j udgment o r,

els e act ab so l utely an d entir ely o n th e

j udgm en t o f anoth er regard l e ss of ,
“
y ou r o w n op i nion . Too many cooks
sp oil th e b roth .
$

3
( ) Wh e n i n doub t k
,
e e p o u t o f th e
market D el ays cost l ess than l os ses
. .

4
( ) E nd ea v or to catch th e tren d o f
s entim ent E ven i f this shoul d b e t em
.

p o r a r i l y a g ain st fun dam ental condi

1 20 P SYCH OLO GY ~
OF S T O CKS .

tion s i t i s n e ve rth ele ss u n p rofita b l e to

,

op p os e it .

5
( ) Th e great est fau l t o f nin e ty nin-
e
o u t of o n e hu ndred a ctiv e traders is
being bullish at high prices and bear
i sh at l ow p ric es Th erefor e r efu s e to
.
,

fo ll ow th e m ark et b e y on d wh at y o u
co ns ider a rea sonab l e cli m ax n o m at ,

t er h ow l ar ge th e p ossib l e p rofits th at
y o u may a p p ear to b e losing by inac
ti on .

Th e fi el d cov ere d b y th e s e ch apter s

i s to a great ext ent n ew . A s it b e
com e s m or e th oro u gh l y cultivat ed i t ,

m ay b e p os sib l e to sp e ak w ith m ore

s ci e ntifi c d e fi n i te n e s s . I n th e m ean
tim e th e auth or h op es th at h i s com
,

m ents an d su ggestions m ay b e o f s om e
s ervice in helping readers to avoid u n
w i s e ri sks a nd to a p ply soun d p rin
c i p l e s o f an al ys is to th e inv estm ent o r

sp e cu l ativ e s ituati on .
l 4 METHODS OFOPERATIN G
IN THESTOC$ MAR$ ET
Co n ta i n s S o m e o f th e B e s t I d e a s P ri n te d
i n Th e M a g a $ i n e o f W a ll S t r e e t

Bound i n L eath er, Postpai d

T h e tr i e d an d te s te d me th od s of ma r ke t e x
p e r ts a r e h e re c oll e c te d f or th e fi r st ti me
C ON T I N T S : —
.

P R I N C I PLE S O F PR I C E
M O VE M E NT S ; th e fun d am en ta l b as i s of
ma r k et c h an ge s by Th os F Woodl ock
M e m b er N Y S toc k E xc h an ge A S CAL E
, . . ,

PLA N ; re c omme n d e d by Ch a s H D ow f or
. .

C o —M E TH O D S O F
. . ,

me r ly of D ow $ on es
F O R E CA S TI N G T H E MAR $ E T ; by R oge r W
, .

B ab s on th e emi n en t stati sti c i an—T A$ I N G

.

A N I N V E S T M E N T P O S ITI O N ; by H e n ry
,

H a ll th e p r omi n en t fi n an c ia l wr i te r—TH E
S T UD Y O F V O LUM E S ; p ra c ti ca l me th od s of
,

a ppl y i n g r e c o gn i $ e d st oc k ma r k et p r i n c i pl e s
A S IGN OF B ULL M O VE S ; a~—p r in c i pl e
w h i c h s h ow s w h e n s t oc k s a r e s c a r c e A S T O P
O R D E R M E TH O D ; s u c ce ss f u lly u se d by a n ex
p e r i e n c e d t r a d e r — H O W T O $ UD G E TH E
MAR$ E T F R O M TH E TAP E ; by Roll o
T a p e —A S UCC E S S F UL ACC O UN T ; fr om
$

s ma ll c a p i ta l s ou n d me t h od s—M E T H O D
O F F O R E CAS TI N G A G R E A T R I S E—H O W
and

A S MALL T RA D E R B UI LT UP A F O RT UNE
—WH EN T O B UY BA N $ RUP T S TO C $ S .

I l l u str a te d w i th c h a rts an d d i agr ams

P oc k et s i $ e
.

Th e M a ga $ i n e o f W a ll Str e e t
(f or me r l y Th e T ik
c er an d I nvestment D g e st) i
2 R e c to r S t . N e w Yo r k
A N EW ERIE
Read the h is tory of th is
grea t ra i l road

The Story of Er1 e

By ED WARD H AR O LD M O TT .

$ Go u l d
'
ma n ip u l ati on s —hi i us i
s ama$ n g

an d au dac i ty—
ay s ge n
Comm od or e Van de r bi l t s attem pt ’

to c on tr o l E r i e ; D a n i el D e w an d h i s p r i n ti n g
r

p r e ss ; th e i n side stori es of M an ipu l ati on ; th e

c o n s pi r ac i e s a n d c o n e r s i n E r i c ; th e sto ry o f
r

$ i m F i sk ; th e W all S tr e et b ou ts o f D r e w a n d
Van d e r bil t ; th e Bl ac k F r iday pan ic—a l l ar e
fai th fu ll y d e pic te d h e re i n th e m ost absorbi n g
s ty l e N o o n e wi th a d ol l a s in te r e st i n W al l
’
. r

S t e e t c a n a ff o r d to m i ss thi s o pp o rtu n i ty to
r

se c u re o n e o f th ese b oo k s Si$ e 1 0 x 1 2 ; 524

.
,

pp n e ar l y 2 i n c h es th i c k C ost to ma il 4 5
. .
,

c e n ts . B ou n d in e xtra l h
c ot .

Pr i c e , net ; p o s tp a i d

THE TI C$ ER PUBL IS HIN G CO .

2 R e c to r S tr e e t, N ew Y o rk