Evening star. [volume] (Washington, D.C.) 1854-1972, 1909-01-13

enterprises. the various STUN
kets of the world reflect the intelli.
gence and judgment of thousands OF
persons. many OF whom are experts ana
some of whom may possess Information
that could not be learned by the ordinary
buyer. Manipulation may hasten or re-
tard the natural course Of the price of a
security or commodity. but 1t cannot
permanently affect it's value for that is
determined by absolute facts
Margin Trading a Necessity.
1t is asserted that trading on mar
gins is pernicious," continued Mr.. Arm
strong. but, as matter of fact. the en-
tire business OF the world is conducted
on margins, which is another name for
credit, and you can appreciate what the
effect would be if every commercial and
financial transaction had to be done In
cash. It has been suggested that specu-
lators be compelled to limit their risks
to the amount of their own capital, but
if you would apply that rule to all lines
of business what would become of bust
ness? How are you going to dlHeren-
tiate between the man who buys real
estate on installments and the man VINO
buys raw material for his factory on
credit, or the jobber who buys dry goods
ana groceries on a margin from the man
who buys stock in the same way? The
business of the world is done on credit,
and while no one denies that there Is q
gins, it would be very difficult for any
body to devise a method by which dis
junction can be made between specula-
ton and legitimate transactions.
One of the greatest benefits of the
stock exchange is to enable an investor
an opportunity 10 sell or buy at a mo-
ment's notice upon reliable information
from the latest and most responsible
sources concerning the value of the Sc
curity he owns or is purchasing. And
Io y1la r n
active performs useful function by en-
aiding investors to make deals quickly
and at the actual value and ut market
prices.
Dean johnson Defends Speculation.
Another able defender of the stock ex
change. Dean johnson Of the School of
Commerce and Finance of the University
OF the City of New York. who is regarded
as very high authority on such subjects.
says that, I'm his opinion. 80 per cent of
the results of speculation in this country
are beneficial. broadly considered, and
only 10 per cent detrimental
The greatest harm comes from the de-
velopment of the gambling spirit. particu-
iarly among young men," said Dean John
son. II find among my students that any
mention Of the stock exchange and its af-
fairs attracts instant attention; they know
all about bucket shops and their methods
of working, ana there is hardly any other
subject on which they are SO keen one
relating to trading in the security and
commodity markets.
"On the general proposition however. l
cannot see how the legislature can pre-
vent man from buying horse to be de-
l1vered next week or from selling a horse
for delivery next week. so long as no
fraud attaches to the transaction. Nor
do see how the legislature can prevent a
man from making a purchase % per. cent
for cash and "a per cent on credit. That
is the way in which every merchant and
every manufacturer finances his business.
depending upon the fulfillment Of his
Judgment of the seasons trade to make
good his purchases at the beginning of the
year. The 'middleman' in mercantile b,isi-'
ness comes into closer correspondence
with the stock market trader. He buys
not at all with the intention of distribut-
ing to the consumer, but for the purpose
or selling again, and at an advance over
what he paid What such trader does
in one line on a small scale. the stock
market operator does in many lines on
very large scale; and if you legislate
against the extension of credit that VIC
call dealing on margin in the one in
stance, you ought logically to do the same
In the other.
Faulty Banking Not Trading System
Il doubt. Furthermore. whether it would
be constitutional thus to limit the freedom
of contract, unless under the general well
fare clause, but that is a question for
the lawyers The economic considerations
are sufficient. in any event, to abundantIy
justify an unrestricted opportunity for
trading.
Whatever disturbing effects there may
be at present from speculation in our
security markets are due TO the evils Of
the banking system, rather than to any
particular form or method OF trading
IF we could work out some system bv
means OF a central bank or otherwise
TO obtain a reasonably stable money rate.
and avoid the violent fluctuations that
now attend the manipulations of call
loans in Wall street, 1t would do more to
improve the situation than anything else
am personally an advocate of the central
bank idea. but that discussion is not for
now.
1T is pertinent, however, for lis to
consider the extent to which the money Of
the banks ir now used in speculation. and
whether the evils attending such implOy-
ment Of bank deposits may not be mini
mized through change in the banking
system. AS matters stand, a man. say
with $4,000 to invest goes to his bank
and borrows such further amount as the
money rate may make 1t appear profitable.
With this he makes hir purchase and puts
up as collateral for the loan the securities.
which then become subject. in the matter
of their resale, not only to market condi-
lions and the desires Of the operator, but
to the fluctuations of the money rate it
self. Meantime it is the banks funds that
have been in actual employment. When
rate you will thereby regulate specula-
ton"
MARvnEI, DEATH MYSTERY