The Birmingham age-herald. [volume] (Birmingham, Ala.) 1902-1950, 1906-09-28
From the Wall Street Journal.

I INVESTMENT, speculation, gambling
these are three words universally used
! without much, If any, clear apprecia-
ton of their difference in meaning. Here
for instance is a promoter who offers, at
a low price, stock in new enterprise,
mining or industrial, which he promises
will pay enormous dividends and will adj
vance enormously in value. He calls this
an investment" when in fact 1t is
pure speculation and may be little less
than a rank gamble. Here also comes
man who wants to buy some shares or
common stock for a turn in the market.
He speaks of this as Investing his mon
ey. What he proposes to do is to specu-
late.
Then comes along a person who seeks
an Investment" paying Z per cent for
widow having $1,000. He does not seem to
realize that such a transaction would be
a speculation, and a very wrong one for
woman with such capital to engage in.
We hear of safe speculations" There
are no such things No speculation can
ever be safe. 1t may be sound, but never
sure.
Critics of Wall street speak of Wall
street gambling" without attempting to
discriminate between the transactions that
may rightly be attributed to gambling
and those other transactions which repre-
sent speculation and investment. If Wall
street were nothing but gambling place
it would not have been for nearly CEN
fury the financial center of the western
hemisphere. The moral sense of the peo-
pie would long ago have closed up the
stock exchange but for the belief that, in
spite of the many abuses of speculation,
it was really performing a great and
beneficient function in providing a we'll
regulated market for securities.
The confusion in the use of the words
investment speculation and gambling does
gross injustice and wrong When the
schemer for other peoples money adver-
tises his speculative stock as an IN
vestment for women, he is defrauding
multitudes of small capitalists. On the
other hand, when intelligent speculation is
denounced as gambling, and when the
stock market is characterized as an Amer
lean Monte Carlo, a gross libel Is com
mitted
II is time that these words were used
NTH more discrimination Speaking broad
~, an Investment is a purchase paid for
in full, for the income, not purchase,
on margin, for sale at a profit 1t is true
that a stock bought outright and locked
up in a safe might be so hazardous, so
far as future income is concerned as to
be more of a speculation than purchase
n. nj rpin fhaSa
exceptions to a comprehensive rule.
In the stock market a speculation is
stock bought on margin for sale at high
er price. The difference between specula-
ton and gambling is largely difference
in the capital invested and the intelligence
displayed in the operation. A clerk who
puts his entire saving of $1,000 as 10 per
cent margin for the purchase of 100 shares
of stock in hopes of selling at a profit, is
gambling He could not purchase the
whole stock. he could furnish no more
margin if the market went against him,
and he could not afford to lose his cap
ital. He knows little or nothing about the
merits or dement's of the operation into
which he has entered. On the other hand,
a capitalist worth, say 100000, who puts
$4,000 or more as margin for the purchase
of a stock the advantages and perils of
which he understands, is specializing for
he can stand the loss if need be. or he
could protect himself by buying the stock
outright
1t is a fair inquiry If the usual mar
gin of 10 per cent in Wall street is not too
low. and if it would not, on the whole.
be better for Wall streets reputation and
eventual profit If a higher percentage
should be demanded The banks require 20
per cent margin on loans to brokers' 1t is
an interesting fact that in the last ten
years there has not been such a movement
of the market for railroad stocks as
would have wiped out a margin of 50 per
cent wisely distributed among various
shares. Leaving out minor fluctuations.
the largest continuous movement of the
average price of twenty railroad stocks
as compiled by the Wall Street Journal
was 44.S7. A margin OF 80 per cent would