The Black Hills union and western stock review. [volume] (Rapid City, S.D.) 1904-19??, 1905-08-11

Inc outsiders haVe not the naDlt OF IL.
And moreover the average American Is
an optimist. 1t has paid him. He has
had faith In his country, in his institu-
lions and it's resources and he has been
rewarded as no men in other countries
have been. Norman B. Ream told a
bear once that he had helped to bury
a dozen men who had bet against the
United States. And so the average
American is a bull. by temperament as
well as by business habit. That Is why
the public SO seldom sells short that it
is almost safe to say that it never sells
short. Once in a while it does, though
never in large numbers, as for mi
In 1903. driven to it by the long decline
in security prices. And. Of course, 50
many months had been wasted in edu-
eating the public to go short Of the
market that when 1t began to sell
stocks short it was too late. The bot
tom had been reached. 1t really was
time to buy. And the outsiders lost
money. That was merely mistaken
judgment.
The professional trader plays for
quick tulns. He thinks a profit is a
profit and ought to be taken because it
is SO elusive and the market is always
there. But he also knows that a loss
is a loss and ought to be taken prompt
~ because Of its fatal propensity for
rapid growth. He may regard the
market as a game of chance, but he
knows its uncertainties. To the large
fnancier the market is q far more i'm
portant affair. He realizes it's uncer-
tainties as he recognizes the manifold
uncertainties of this life, but he weighs
the chances in a large way and acts
accordingly. The commission broker
makes his living by buying and selling
for others. There remain the public.
AT times it ~Speculates blindly, guided
by tips, BY newspaper paragraphs, by
the advice Of friends or foes. With
stocks rs it is with colors, there are
enough v~arities to please all tastes.
There are few that do not appeal to
somebody or other. but there are fads
and fashions and there are speculative
favorites. When a stock is active peO-
pie follow its career with an eye to
potential profits. And so the public
buys where he sees or imagines he sees
others buying. From this it comes to
pass that the public always appears to
act in much the same way. 1t makes
money when the others do and loses 1t
in company with his company. And
the inability to speculate skilfully is
common to the majority.
If transportation, then, is the prim-
AIRY cause Of the public losses in the
stock mark ct, too much emphasis can
not be laid on he ignorance of ele-
mental facts displayed by so vast a
majority OF the stock spectators
which constitute the public. Ignorance
of values is comprehensive enough. 1t
is not everybody that can tell what
standard stock. say. like st. Paul. may
be worth enthusiastically" to say moth
ing Of the highly speculative issues.
whose value. perhaps, only a dozen
men know, and they would not tell for
worlds. Nor Is it anything to wonder
at that a a who would dream Of
buying real estate without ascertaining
the value of the property. the age and
conditions of the house, the character
of the n~eighborhood, the likelihood of
improvements. etc, will. nevertheless.
buy stocks involving an equal sum of
money on mere hearsay. But what does
the most harm is that the average out
side Spectator seldom knows enough
to take a profit when he has one, and
never knows enough to stop his losses
before they become serious. There is
not one who has not heard the old
maxims of the street. such as: Nobody
ever grows poor taking profits; or,
Stop you losses and let your profits
IN; or, Raise your stop as the stock
goes up. etc. But these '~hackneyed say
ings are u~nheeded.
1t is really very difficult to know
when to take a profit. Human nature
makes it difficult. A man buys a stock
because he expects to sell 1t to some
poor fellow creature at a higher price.
The price advances; the profit is there.
But it is only a profit; it is not the
profit which the man hopes to and con-
fdentially believes he will make 1t Is
only a little more that the stock must
rise to make him satisfied. Then the
price comes back. The profit shrinks.
He waits. He wanted $50 a share for
what cost him $50. The price goes to
SS5 and the man doesn't sell. 1t falls
back to $50. If he would not sell at
$50 he certainly would not sell at $50.
They all do it. There is a man, a bust
ness man, who. like others, was a bull
during the great boom. Al one time
. his profits on paper We're $SOO,OOO. 1t
was far more than he had begun with,
more thar all the capital he had in
vested in his legitimate business. He
: wanted a round million. He was sure
he could get it. A week later came
the Northern Pacific panic. He lost
+ all his paper profits, all he had origin
i. ally put up for margin and $4,000
| besides. In the majority of instances
$ this inability to CONVEX paper profits
into cash arises from the spirit of greed
l rather than from the ignorance or in
8 experience of the victims. 1t is a lit
4 tie different with the inability to GU
: losses short.
S Mr.. Norman B.. Ream, who is one
of the clearast headed men in the ii,
nancial world, told me once: If l 1inc
t a trade going against me l close 1t GU
at once. l am in business to max,
money; not to lose it, Inc average
L man finds that a stock he has bought
t instead of advancing, has impolitely de
t clined. He does not sell it out. II
hates to lose money, and he thinks i
2 Will advance again and more tnal
s make up the paper loss. 1t declines
y still more: the loss is still greater, ant
$ the same arguments appeal MOI
strongly to him. A further declin'
8 makes the loss possibly greater thai
l. he feels ne can afford to take. Their
If the price goes still lower, he is force
to sell because all his money is gone
or he buys the stock outright. and |
d thereby hung up for months or years
tying up a great deal of his capita
without satisfactory returns. OF course
very often after the price declines ther
h is Il substantial recovery and the ma
J. who takes a loss of two points finds h
1T could nave made money had he onl
l. had the wisdom or the courage to hol
1t on. But by trading with a stop
20 that is. by not allowing the paper los
y to go more than two or three point:
: for each time it turns out unfortunat
IS it is eminently lucky a dozen time!
ID And, in the long run, 1T Is the only SAT
y way to speculate. Stock speculate
IS is not an exact science. The profes
n SIGNALS lose quite often enough to kee
ID them from becoming purse proud. An
as the big men who win fortunes in sue
It, cessful campaigns lose millions oc