The Birmingham age-herald. [volume] (Birmingham, Ala.) 1902-1950, 1909-12-12

that he does not own no peiieVes stooks
are selling too high, there is going to be
reaction. He wires his broker to sell
short 100 shares of stock. He must now
send his broker 1900. SO on each share.
for his broker In New York has had to
borrow the 100 shares from somebody in
order to deliver 1t, lending that party its
full value, and the broker cannot assume
all this risk. The stock might rise. the
lender of the stock might call for more
money or a return of the 100 shares which
have already been delivered to the party
to whom A sold. OF course II A sold at
$50 per share, and the stock drops to $45
he simply buys through his broker 100
shares at s45 to replace the stock bor-
rowed. A pockets 50 per share less COM
missions, no interest being charged In this
case This Is, of course, straight-out
short selling. and as legitimate trans
action is difficult for some people to ap-
| preciate Can We find parallel in or
binary business? Perhaps not in real es-
tate, unless we accept options as parallel
! The manufacturer often sells ahead. even
before he has the raw material. 1t Is
not sufficient to say that A differs from
the manufacturer because the latter Is
| dealing in real things of value and A 10
not A delivered a borrowed certificate of
stock which was returned or replaced
later.
This paper would be too long II we un-
dertook to discuss puts. calls. straddles
| and other devices of the Spectator by
| which he seeks to limit his losses
Must we not ali admit that these deal
| ings, however dangerous. have their par
aliels in other lines of business where
they pass absolutely unchallenged by pub
| lie opinion7 And yet tho stock exchange
| Is even now under fire from politicians
and people.
Before taking UP some of the most fire.
| quently mentioned criticisms OF the ex-
change, I submit the proposition that in
no profession, taken as q whole. can you
find body of men who will stand more
| faithfully to q bargain In the face of
ruin, when, too, that bargain was made
on a nod or the snap of finger In the
| midst Of excitement
It Is sometimes claimed the stock ex-
change causes panics. It might be an
swered that the silent panic Of March,
1907, was scarcely felt at tho time by the
rest of tho country Wall street, like
the sensitive mercury of barometer,
feels the impending storm and stocks
| drop; the storm bursts out of a clear sky
/ upon an unsuspecting land. and the peo-
pie are overwhelmed. Casting about for
an explanation, the people recall that
stocks fell precipitately before the storm.
Happy thought. Wall street must have
been the cause. The sensitive mercury
of barometer falls before the storm.
Must we attribute the storm to the mer-
curry? Again, Wall street sees fair wealth.
or ahead, stocks rise, as does the mer-
curry hours before tho clouds have cleared
away
Do the people credit Wall street or the
mercury with tho fair weather. No, they
are sane and happy now. no need to an
alyze anything until a storm strikes
again.
Another objects because he says stock
speculation Is gambling and ought to be
put down by law. This idea must ind
its support In manipulation, buying on
margins, short selling, and the quiclSness
with which profits ara made or losses
sustained. Manipulation IL the most diff
fcult of these four to handle and will
be given q special paragraph later on.
Whether or not the other three points
will make out case of gambling Is a
matter for the individual consciencs and
Is not a question to be decided by law.
We cannot compel q conscience; the man
who believes stock speculation is gam
bling must refrain therefrom. II he be-
lieves gambling 10 wrong. Another man
equally conscientious does not see 1t as
gambling and must not be judged I'M
charitably. He says, 1T see marginal
trading In all buying of goods and real
estate on credit. How can the mere Ia
cility with which the same thing Is done
on the stock market change the moral
bearing Of the case?- Further he ar
CUES, 1T see short selling In other lines
Of business, particularly in manufactur-
ing for future delivery and In the selling
of crops not yet matured. How can the
commences of the same practice on Wall
street alter the moral bearing Of the
case? And yet again he cannot sec that
the moral bearing Is affected by the
mere rapidity with which trades are
made, each trade being bona-fide con-
tract, entailing a loss or providing
profit Who dares to say that the moral
element is affected by the element OF
time?
Manipulation, as before said, Ii diff
cult to handle. BY manipulation stocks
are put up or down at the pleasure of a
clique or pool, and with no regard to the
intrinsic value of the securities. True
this Is not altruistio, but Wall street has
no corner on selnshness. We find elf
ishness outside of the stock exchange.
Run over In your mind some Of the land
booms that failed. Picture the auction
sale with excited bidders played upon by
the clever auctioneer who may finally
realize more than the actual value Of the
goods Do we not often see advances in
tual value? But to go back to manipula-
ton In stocks In the outset 1t may be
said that the layman cannot appreciate
manipulation. until he gets the specula-
tors viewpoint.
He must frst recognize speculation as
q business. II ne cannot see speculation
as a business. he can never appreciate
the speoulator's way of looking at manip.
ulation. II this viewpoint Is obtained at
once the economic principle of supply and
demand will apply, az surely as II applies
to as stable thing as q gold dollar, only
a matter Of degrees. It matters not In
the business Of speculation whether the
supply and demand for stocks are both
purely artificial and varying from hour
to hour. The speoulator's business Is to
speculate, to him supply means the stock
offered for sale, demand means stock bid
for. In his world OF business these fac
tors are as real. and properly SO, as are
demand and supply in any other business
Before the leaving the subject Of manip-
ulation It II well to observe that 1t Ii
made possible by the very openness and
| freedom Of the stock market, without
| which openness and freedom Of trading
| few enough men would tie their money
| up In stocks and bonds that could not
| be readily converted into cash.
Some will point out the evils that fro
ouently accompany speculation In stocks.
| Suicides, defaulting cashiers. loss of funds
| In trust. ruined careers and q hundred
| other evils are urged against the stock
exchange and it, business. It must be
Al -