The Wichita daily eagle. [volume] (Wichita, Kan.) 1890-1906, 1893-08-09

dred and twenty-five dollars. Total
loss two hundred and fifty dollars and
nothing to show for it.
Or suppose that having purchased
at 90, the stock rallies to SO or even 80.
His systems forbids him to sell out at
less than %; and even if he violates it
and sells at 80, he makes only fifty dol
lars. His first loss was one hundred
and twenty-five, and his gain is only a
hundred and seventy-fve; each hun
dred shares being saddled with twenty
five dollars commissions, and in addi-
ton he has departed from his system,
and it may be that he is punished for it
by seeing the stock mount within a
week to 90.
But the short distance which we
travelled on the path of this system
shows how illusory it is. Force may
be at work able to drive the price
steadily down day by day from 80 to
20 or GO; and if it requires thirty days
to do this, our system follower may
lose a hundred dollars thirty times
over and twenty-five dollars commits
sion thirty times over, and thus find
himself at the go point without any
stock, and out of pocket three thousand
and fifty dollars. If he held on to his
original purchase by investing three
thousand dollars, he would only be
three thousand and twenty-five dollars
out of pocket, and would have the pos
session Of the equity in hundred
shares besides.
Such changes as that stocks should
fall to two-thirds of any prevalent
quotation are not unknown; they are
hardly unusual. And they need not
develop such capacities for sinking in
order to demonstrate the fallacy of
any system that is based upon the sup
position that there is regular recur-
renee of short time oscillations of val
ues. There is no regularity in stock
exchange prices. Is there any regu-
larity of waves on the ocean? All the
water is all the time seeking an equi-
hbrium, but what peculiar modes it
has for attaining it! We have calm
seas, chopping seas, strong and still
stronger swells, and now and then
mighty and overwhelming surges, that
rear up into mountains and disclose
frightful abysses, into which no ship
can venture and live. The 'equilib-
rum of values on the stock exchange
is as fatal to the system just consid-
cred as the ''hydrostatic equilibrium"
of the Atlantic would be to a rowboat.
Another neat system is known as the
"Pyramid,'' and is about as follows:
You buy a hundred shares at so, and
deposit five hundred dollars margin.
The stock goes to IS. You have now
five hundred dollars paper profit. Do
you take it in cash? No, but you buy
another hundred at IS, depositing FIVE
hundred dollars moro with orders to
your broker to sell the two hundred
shares at the first drop of one per cent.
1t the stock drops to "a you sell out,
and take a profit of four hundred dol
lars less commissions and interests.
But let us follow up the Pyramid"
The stock rises to one hundred, you
have fifteen hundred dollars paper
profit. You then buy another hundred
shares; still under the same order to
sell if drop of one per cent. occurs.
1t rises to los and you have three thou
sand dollars profit on your three pur-
chases. Your pyramid now becomes
truncated by a drop of one per
cent. and you retire with net cash
profit of twenty-sevenh hundred dollars,
less interest and commission.
It will be seen that this is beauti-
full system if it works. But it doesn't
always work. For instance, stocks
do not always rise when you
buy them. Thus at the outset your
pyramid may be hole in the ground,
and not a pyramid at all. But if it
rises shapely and strong up to and be-
yond the first tier of masonry where
you have a paper profit of $500 and
you buy another hundred, thus laying
the second tier, and a drop comes,
this drop may not be single one per-
cent. Stocks sometimes drop five per
cent. before broker-even of the most
active type-can market them. Then
the pyramid suffers shock like that
given by an earthquake. Having risen
"like an exhalation." it disappears as
quickly as Aladdin's palace when car
ried off by the Genii of the Lamp.
AS a matter Of fact pyramids some
times succeed and sometimes they
don't But it is the nature and essence
of a system, without which so-called
system is not system at all, that it
shall always succeed, or at least almost
always. We buy friction matches on
the certainty that they will ignite
when rubbed; locomotives on the GER
tainty that they will move along when
fired up. But if pyramid can some
times be built and sometimes not. the
chances being more negative than pos
tive, it is certainly a forbidding and
unattractive investment. That pyra-
mid should be worth anything demands
the condition precedent that stock
should steadily rise a certain num-
Der of points, say fifteen.
Another system is that of the aver
ages. Nearly every stock that is dealt
in on the stock exchange has history
running through a series of years,
made up of daily sales, and the average
price of any stock is therefore mat
ter of exact calculation, that is. its
past average price. The follower Of
the average system" takes as the
basis of his operations the supposition
that the average that is to be will cor
respond with that which has been,
which might be fair superstition in
regard to temperature in any given
latitude in a settled country, but
which is evidently unsound when APP
piled to the values of property as to
which the conditions are ali the while
changing. The railway A B connects