The Richmond Virginian. (Richmond, Va.) 1910-1920, 1911-09-04
BUYING STOCKS ON A MARGIN.

n
One Of the best friends Of The Tsrglntan has
written Us letter stating that he thought that
The T'rg'ntnn should state It's position on the
question Of stock gambling. as its silence under
existing conditions is being misunderstood
The rffptnt0n has no hesitation In stating It's
position on this any other moral issue, al
though " does NOT eiaim infallibilty In its juds,
nents It's views on the purchase Of stocks on
q margin are as follows,
The development o. business In modern times
has resulted in the organization Of corporations
for the carving on Of all kinds Of work The
organization OF stock companies has been found
TO be easy method for the carrying on Of
business. In many other than railroad
companies have listed their stock on the va
ricus stock exchanges Of the country. and they
are bought and sold through brokers' just ne
real estate, grain. groceries provisions. etc
are bought The purchase Of the stock OF any
company Is no more gambling transaction
than !s tho purchase OF house or lot horse
vessel, any other property. The purchaser
uses his Judgment TO the value OF the stock
bought tust he Goes concerning the value Of
the other forms OF property mentioned above.
He buys shares a stock when he believes that
he is securing a good bargain
He may buy the stock as a permanent In
vestment TO hold # for some years. because
be believes that he will get good dividend
on the stock and perhaps the. stock may
steadily increase in value He may. however
simply purchase the stock with clearly de-
unite intention to sell Il again when the
opportunity presents itself 70 do at n pro-
1T II the stock ia offered for sale by the
owner at a certain price and man is willing
TO pay that price and does pay it. believing
that he in a short time, when conditions
change. sell the stock at a profit, 1t is an
entirely legitimate transaction II differs In
no wise from the purchase Of piece Of ground
or of horse. by who has no need
for such property, and who does not intend to
keep II. but who believes that by holding It
for short time he will be able to sell il al
\ good profit.
In It's essence, therefore, there is no real
difference between trading in stocks Of COM
panics which represent valuable properties,
and trading in any other form OF property.
The stock Simply a convenient method of
holding property and OF selling It IN part. or
Ia whole
Some persons who have not given tho mat
ter due consideration think that all trading
In stocks is gambling, but The Ttrctnian does
not hold any such position as II IL easiy
shown TO be illogical and ipdefensible posi-
ton.
B.pino stocks on margin differs from the
actual purchase e. stock. not In the respon-
sibility Of the purchaser. but IN the fact that
when stocks are bought on margin they do
not come into this actual possession Of the
purchaser, nor are they transferred the
books Of the corporation to him. The pur-
chaser simply deposits with the broker Ger
tain amount Of collateral which viii allow
u variation Of from TO- 20, or 80 per cent in
the quotations Of The stock the stock mar
ket This is done to secure the broker against
any probable loss in the transaction. Tho
stock does not change hands In the sense that
II is changed the books Of tho company.
Should thr price Of the stock show an In
crease In value, the purchaser sells the stock
at the advance price and IN given the pro-
eeeds Of the transaction along with his col
lateral. The broker simply receiving his
II commission for the purchase ns fhe stock,
Should the stock decline IN price below the
price paid for It. and should the purchaser cell
II at loss. he must pay to the broker in
cash the difference between the purchase price
and the selling price, and should be fail 10
do So then the broker dispose OF the Goa
lateral In his possession. Should the collater
al sell for more than the amount due TO the
broker the balance over that amount Is re-
turned to the purchaser. But should tAa col
lateral sell for less than the amount due 10
the broker then not only does the broker re-
ceive the proceeds Of the sale Of the collateral
but he can call upon the purchaser 70 pay the
balance due. and II payment Is refused. the
claim can be enforced by law against any pro-
perty OF the purchaser
BY this method Of buying on margin
transactions Of large amounts are cerried Oh
upon small. a comparatively small amount
Of actual property values. aud the temptation
IL so great for men to run great risks In or
der to obtain large profits that thousands are
unable TO resist the temptation. and buy
stocks margin far beyond their means,
4 and frequently involve themselves and their
families in poverty and ruin
Nhwsan doea such transaction differ tn IT'S