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If ten persons act upon his advice, five will gain and five will lose. The losers he has nothing to do with, he would prefer not to see them; but he has the names of the winners in his memorandum book, and he rarely fails to collect from them. This pitfall looks like a shallow artifice, and it is; but a great many people slide down its sides in the course of any given year. Else how should the professional point-giver flourish as he does, and have so much cash wherewith to advertise in the Sunday newspapers? Among the degenerates that infest Wall Street, that class which has been running at intervals which are known as (C discretionary pools " is one of the most atrocious. Their depredations, it would seem, have been most conspicuous among savings banks depositors, to whom they make special appeals in their circulars, showing the profits derivable from their guaranteed two per cent. a month, compared with the small interest paid by the savings banks. These land sharks were making very bold and profitable invasions on the deposits of many savings banks throughout the country when the police raids some time ago put a partial stop to their fraudulent operations; but they are not all dead, and new adventurers of a similar character are springing up every day in all parts of the country.

One of the worst, deepest, most dangerous, and most frequently tumbled into of all pitfalls of Wall Street is dug by operators themselves, and seems to be the result of a weakness of the human mind, which leads it into the practice of taking small profits and large losses.

A speculator puts up 10 per cent. margin and buys X, Y, Z at 75. The shares fall to 74, 73, 72, and so on. Now, if he knows the property to be sound and really valuable, there is no reason why he should relinquish it merely because the market price is lower than it was. On the contrary, if he can afford the cost, it may be policy for him to buy another lot at 70, and even another lot at 65, besides protecting his first purchase.

But suppose he is merely the kind of speculator whose gains proceed from turning a small capital frequently, is it not his most obviously plain course of action to drop his purchase at 73

and take chances of buying in again? Most of us would say, "Yes, by all means." But as a matter of fact he will not drop out until the 10 per cent. margin is exhausted. On the other hand, if X, Y, Z had gone up to 77 or 78 and then shown a tendency to sag off, this same operator would at once have closed the transaction, thus showing a willingness to gain by twos and threes and lose by tens.

An English novelist once wrote: "There are at this moment 10,000 Englishmen wandering homeless and penniless over the continent of Europe because they would not lead trumps at the proper time!" So any well-informed broker can say of his own personal knowledge and experience, "There are thousands of American citizens who are to-day poor because they would not cut short their losses and let their profits run on."

There is also another dangerous pitfall which men dig for themselves; namely, the belief that because a certain description of shares mounts and soars above previous calculations of the general market, therefore it is desirable to buy into it after it has mounted during a long period of days. This belief is almost universal, and yet it directly contradicts our experience and the laws of nature. We know that the higher the wave gets, the weaker it is at the top, while its base is always strong; and we also know that whatever goes up has a tendency to descend again, and that the time always comes when the holders of any commercial property, no matter how desirable, prefer money to property.

Still, the majority of outside operators regard the market as strongest when prices are up and weakest when prices are down, and act accordingly; whereas those who know, base their actions on the firm truth that the market is never so weak as when it is high, and never so strong as when it is low; being, in fact, like that ancient wrestler who, whenever forced down by his antagonist so that his body touched the ground, immediately received from Mother Earth a redoubled allowance of strength.

Some men are born degenerate, some achieve degeneracy, and some have degeneracy thrust upon them; and one is likely

to meet these three kinds of degeneracy in Wall Street. I think, however, that of all the class, those who achieve degeneracy are in the majority, since "evil communications corrupt good manners." Most men are born with a capacity for doing good, and they are capable of acting an honest, straightforward part in business, if they will only exercise that faculty. Money gained by crooked business methods does not make its possessors prosperous for many generations, seldom even for one; and I believe, if the statistics on the subject could be fully ascertained, it would be seen that the number who adopt surreptitious means, no matter how well concealed, to succeed in life would show far more failures in their ranks, perhaps ten times more, than those who fail while seeking fortune by honest methods. The fortunes made by degenerates are usually built upon sandy and shifty foundations, while those that are amassed by their opposites, the regenerates, the good, and the true among mankind, are founded upon rock of the most adamantine quality.

CHAPTER X.

PANICS AND THEIR INDICATIONS.

The causes which usually give origin to panics described. How these great upheavals in business and finance may be partially avoided and their consequences alleviated when they do occur.- Greater elasticity in the methods of banking required to enable the banks to meet emergencies. These institutions have in recent years done well when not handicapped by law. They should be permitted to make more liberal use of their reserve to relieve financial distress. How banks and business men should coöperate in times of impending crisis. The forecast of the panic of 1893.

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Y belief in prophecy generally resolves itself into the fact that there is a great deal of repetition in all history, and by watching the present, storing the mind with a careful knowledge of the past, and collating the facts thus in possession, a pretty good idea of the future may in many instances be premised without any pretensions to supernatural power. When events turn out in accordance with the general tenor of any instance of forecast, that is irrefutable evidence that the reasoning has been practically correct, irrespective of the principle upon which it may be based.

I shall reproduce here the greater portion of an article which I wrote by request and which was published January 13, 1893. In this I stated the conditions which underlie panics, and the deductions were unhappily exemplified in the panic of 1893, which soon began. The article was as follows :

The query now being asked on all sides, "Will there be a panic in 1893?" should impress business men and financiers with the fact that certain peculiarities in the development and trade of the United States render our markets more exposed to peril than those of any other nation, and make the question of panics a peculiarly American one, as we shall see.

The financial crises known as panics are commonly spoken of as freaks of the markets due to antecedent reckless speculation; as being controlled in their progress by the acts of men and banks who have lost their senses, but above all as being easily prevented, and as easily cured when they happen. These are the notions of mere surface observers. They may be in a measure true when applied to the markets of some of the older countries, whose business moves in long-established grooves and embraces but little of the risk attendant on new enterprises. In France and Germany, for example, the hazards of business are almost entirely confined to the accidents of political events, and such nations are exempt from panics due to purely commercial causes. Panics in the United States are due principally to causes from which European countries are exempt.

We are still a nation of pioneers. Nearly fifteen millions of people are added to our population every ten years. This new population has to subdue new territory. New lands have to be cleared, new mines opened, new railroads built, new banks created, new industries established, and new corporations founded. These new ventures are necessarily in a measure experimental. Some of them fail utterly while others succeed magnificently. They require large outlays of capital in advance of obtainable results. In many cases these outlays are met by borrowing, the loan being secured by liens upon the uncertain undertakings, and therefore lacking the stability of value that attaches to well-developed investments. We have thus a ceaseless stream of new issues of stocks, mortgages, and commercial paper, comprising a large amount of outstanding obligations, liable, from the uncertainty of their basis, to wide fluctuations in value. Then we have also a large amount of obligations issued against enterprises, which, though not properly new, are still in an experimental stage, and the value of which is, therefore, subject to wide fluctuations. Issues of this character naturally appeal to the adventurous instincts of our people and cause activity in speculation.

The action of commerce, like the motion of the sea or of the

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