Evening star. [volume] (Washington, D.C.) 1854-1972, 1905-05-28

rewarded 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 tenn
permanent 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 while 1t does. though
never in large numbers, as for example in
1903, driven to 1t by the long decline in Sc
curity prices. And, of course, many
months had been wasted in educating the
public to go short of the market that when
1t began to sell stocks short 1t was too late
The bottom had been reached. 1t really
was time to buy. And the outsiders lost
money. That was merely mistaken judg-
ment.
The professional trader plays for quick
turns. 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 loss and ought
to be taken promptly because of It's fatal
propensity for rapid growth. He may re-
gard the market as a game of chance but
he knows its uncertainties To the large
financier the market is a far more import
ant affair. He realizes its uncertainties as
he recognizes the manifold uncertainties of
this life but he weighs the chances in a
large way and acts accordingly. The COM
mission broker makes his living by buying
and selling for others. There remains the
public At times it speculates blindly,
guided by tips, by newspaper paragraphs,
by the advice of friends or foes. With
stocks it is as with colors. there are enough
varieties 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
stock is active people 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 1t 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 COM
pany with his company. And the inability
to speculate skilfully is common to the
majority.
If overspecula ton, then. is the primary
cause of the public losses in the STOCK
market, too much emphasis cannot be lald
on the ignorance of elemental facts ols-
played by 50 vast majority OF the STOCK
SPECTATORS which constitute the public.
Ignorance of values is COMPREHENSIVE
enough. 1t is not everybody that can tell
what a standard stock, say, like ST. raul
nay be worth enthusiastically, to say noth-
ing of the highly speculative issues, whose
value perhaps, only a dozen men know,
and they would not tell for worlds. NOR Is
/: anything to wonder at that a man VINO
would not dream of buying real estate with
cut ascertainng the value of the property.
the age and conditions of the house, the
character of the neighborhood, the likeli-
hood of improvements, etc, Will, never
theless buy stocks involving an equal sum
OF money on mere hearsay. But what does
the most harm is that the average outside
speculator seldom knows enough to take
profit when he has one, and never knows
enough to stop his losses before they be
iS ro.at nnn
not heard the old maxims of the street,
such as: Nobody ever grows poor taking
profits or Stop your losses and let your
profits run; or, Raise your stop as the stock
goes up, etc. But these hackneyed say
ings are unheeded.
1t is really very difficult to know when
to take a profit. Human nature makes it
difficult. \ man buys a stock because he
expects to sell it to some poor fellow
creature at a higher price. The price adj
vances: the profit is there. But it is only
a profit; it is not the profit which the man
hopes TO and confdentially believes that 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 800 a share
for what cost him $50. The price goes to
S., and the man doesn't sell. 1t falls back
to $50. If he would not sell at $50 he GER
tainly will not sell at $50. They all do it.
There is a man, business man. vino. like
others, was a bull during the great boom.
At one time his profits paper Were $500
900. 1t was far more than he mad begun
with, more than all the capital he rad in
vested in his legitimate business. He want
ed a round million. He sure he would
get it. A week later came the Northern
Pacific panic. He lost all his paper profits
all he had originally put up for margin and
S237 900 besides. In the majority of in
stances this inability to convert paper prof
its into cash arises from the spirit of greed
rather than from the ignorance or inexperi-
ence of the victims. 1t is little different
with the inability to cut losses snort.
Mr.. Norman B. Ream, who Is one OF the
clearest-headed men in the financial world,
told me once: IF 1 find a trade gong
against me 1 close it out at once I an
in business to make money: not to lose it,"
The average man finds that stock he has
bought, instead of advancing has impo-
litely declined. He does not sell it out. He
hates to lose money. and he thinks 1t will
advance again and more than make up the
paper loss. 1t declines still more; the loss
is still greater and the same arguments ap.
peal more strongly to him. A further de-
cline makes the loss possibly greater than
he feels he can afford to take. Then. if The
price goes still lower he is forced 20 sell
because all his money is gone. or ne buys
the stock outright, and is thereby hung
up for months or years, tying up q great
deal of his capital without satisfactory re-
turns. OF course very often after the price
declines there is a substantial recov cry ana
the man who takes a loss of two points
finds he would have made money had he
only had the wisdom or the courage to hold
on. But by trading with 'stop'-that is,
by not allowing the paper loss to go more
than two or three points, for each time it
turns out unfortunate ii is eminently lucky
dozen times And, in the long run. 1t is
the only safe way to speculate. Stock spec
ulation is not an exact science The pro-
fesstonals lose quite often enough to keep
them from becoming purse-proud. Ana the
big men who win fortunes in successful
campaigns lose millions occasionally. Mr..
X Gene is very successful Spectator He
is. perhaps, the greatest stock manipulation
that ever lived. But he has been bang
rupt and his disastrous Southern Pacific