more they pondered over it, the greater grew the doubt in their minds whether they were standing on their heads or their heels.

Although the Black Friday "corner" was a temporary calamity, perhaps it was worth all it cost, in teaching us a useful lesson in financial and speculative affairs. In my chapter on "Panics, and How to Prevent Them," I think I have made several points clear that can be utilized by financiers, speculators and investors to advantage, in case of an impending panic or "corner."

CHAPTER XXI.

CAUSES OF LOSS IN SPECULATION

INADEQUATE INFORMATION-FALSE INFORMATION. - DEFECTS OF NEWS AGENCIES. INSUFFICIENCY OF MARGINS.DANGERS OF PERSONAL IDIOSYNCR\SIES.-OPERATING IN SEASON AND OUT OF SEASON.-NECESSITY OF INTELLI GENCE, JUDGMENT AND NERVE.-AN IDEAL STANDARD.— WHAT MAKES A KING AMONG SPECULATORS ?

S there is always a class of speculators whose operations, in the long run, leave a net result of loss rather than profit, it may not be amiss if I state what experience has taught me as to the causes of this want of

success.

Undoubtedly, many who enter the arena of speculation are in every way unfitted to take the risks against such wily opponents as they must encounter. They are either too ignorant or too wise, too timid or too bold, too pessimistic or too sanguine, two slow or two hasty, too diffident or too conceited, too confiding or too incredulous. These are constitutional defects, any one of which may easily cost an operator a fortune. And yet self-knowledge, with self-con control, may prevent these natural disqualifications from seriously interfering with success. There is no mental discipline more severe and exacting than that of speculation. There is no pursuit in which a man can less afford to indulge in whims, or prejudices, or pet theories, than that of stak ing his money against the prospective changes in financial values. He must be as calm and as impartial as a judge, not less in respect to the risks he incurs than in regard to the integrity of his own judgment. I should lay it down as the first rule necessary to success, that the judgment be not warped by any natural idiosyncrasies; this being secured, a man may succeed in spite of his constitutional defects.

Singular as it may seem, there are no advantages beset with greater dangers than information- the one thing most largely sought after and most highly prized. Very naturally, most men object to taking a risk without possessing some knowledge of the conditions that determine the risk; and yet how few take care that their knowledge is adequate enough or certain enough for the formation of a safe judgment. In some cases, knowledge is unattainable and the operation must be a leap in the dark; and in such instances a man is unwise to step in unless his experience satisfies him that he is uncommonly sagacious in guessing.

Many speculators lose because the information on which they base their operations is insufficient; more because it is false; and others because, while their information is cor. rect, they do not know how to turn it to account.

Between one or other of these difficulties in the use of information must be distributed a very large proportion of the losses incurred in speculation. Incomplete or insufficient information is especially dangerous. One-sided knowledge is nowhere so deceiving as here. A railroad, for instance, may report an increase of gross earnings which is construed as making its stock worth two or three per cent. more than its current price; but the improvement may be due to transient special causes, and the road's current expenses may be growing at a rate which makes the net increase show a decrease. A financially embarrased company may announce an assessment of its stockholders, upon which there is a rush to sell the stock; a little further explanation shows that the proceeds of the assessment will so improve the facilities of the company, or so enable it to reduce its fixed charges, as to make the stock intrinsically far more valuable than it was before; this discovery causes a sharp advance in the shares, and the "short" sellers have to cover their sales at a loss. A stock is bought up freely at New York because London is taking large amounts of it; a day or two later, the deliveries show that large holders connec

LARGE RISKS ON MANUFACTURED

POINTS." 203

ted with the management are unloading on the foreign market upon knowledge of facts damaging to the prospects of the property; the late buyers then rush to realize, and pocket a loss instead of a profit. Every day furnishes new instances of speculations undertaken on this incomplete kind of information, and which end disastrously because the operators did not wait to be informed on all sides of the case, but were satisfied to take a pound of assumption with but an ounce of fact.

One of the strongest anomalies of speculation is in the facility with which men are induced to take large risks on false information and manufactured "points." Considering the readiness with which a numerous class of "outside" operators buy or sell on sensational rumors, it is not surprising that the professional operators should keep the market well supplied with such decoys; and it is not easy to say which most deserves condemnation - tho heedless credulity of the dupes, or the deliberate lies of the canardmakers. There is, however, a third party not less blameable than either of the foregoing. I refer to those who make it a part of their business to circulate false information. Principal among these caterers are the financial news agencies and the morning Wall Street news sheet, both specially devoted to the speculative interests that centre at the Stock Exchange. The object of these agencies is a useful one; but the public have a right to expect that when they subscribe for information upon which immense transactions may be undertaken, the utmost caution, scrutiny and fidelity should be exercised in the procurement and publication of the news. Anything that falls short of this is something worse than bad service and bad faith with subscribers; it is dishonest and mischievous. And yet it cannot be denied that much of the so-called news that reaches the public through these instrumentalities must come under this condemnation. The "points," the "puffs," the alarms and the canards, put out expressly to deceive and mislead, find a wide circulation.

through these mediums, with an ease which admits of no possible justification. How far these lapses are due to the haste inseparable from the compilation of news of such a character, how far to a lack of proper sifting and caution, and how far to less culpable reasons, I do not pretend to decide; but this will be admitted by every observer, that the circulation of pseudo news is the frequent cause of incalculable losses. Nor is it alone in the matter of circulating false information that these news venders are at fault. The habit of retailing "points" in the interest of cliques, the volunteering of advice as to what people should buy and what they should sell, the strong speculative bias that runs through their editorial opinions, these things appear to most people a revolting abuse of the true functions of journalism. But patent as these things are to those educated in the ways of Wall Street, there is a large class who accept such effusions as gospel, and are easily led by them into the clutches of the sharks. It is but just, however, to acknowledge that with these very serious drawbacks, both these classes of news agencies render valuable service to Wall Street in terests, and it is to be hoped that experience will convince them that their enterprises would attain a higher success through emulating a higher standard

Another source of losses in speculation lies in the speculator not holding back a cash reserve sufficient to protect him against an adverse course of prices. Ordinarily, the man who speculates is of a sanguine temperament, and apt to take risks without sufficient provision against contingencies. Hence, it is common with inexperienced operators to use all their available resources in their original margin. The result is that, if prices go against them, they are liable to be closed out and saddled with a loss they can ill afford. Such persons should never pledge more than one-half of their available means at the beginning of a transaction; the remaining half should be kept as a guarantee against their being "sold out," or to enable them to duplicate the transaction at