The citizen-Republican. (Scotland, Bon Homme County, S.D.) 1???-19??, 1917-12-20
H. M. Jacobey, in the

It IL not easy to form a correct
statistical conception of the program OF
speculation Thomas Gibson investigated
1900 brokerage accounts spread over
period of 10 years, and found that so per
cent OF the accounts showed final losses.
Leaving interest charges. commissions.
and taxes aside, 1t would thus appear that
so per cent bought at higher prices than
they sold. while only 20 per cent sold at
higher prices than they bought. Or. In
larger sense. an overwhelming majority
bought in boom and sold in crisis.
while minority bought in u crisis and
sold IN a boom. The reason for this illog-
tcal procedure IS doubtless to be found in
the factor CT crowd psychology, as the
average investor busy when everybody
buys, ard sells when everybody sells,
while the shrewd investor puys when
everybody sells, and sells when everybody
buys.
There Is big panic about every seven
years. as the years 1914. 1907, 1900, 1893,
etc. have amply demonstrated, and with
In these large swings there are medium
swings. II 1t were possible to educate
part of the investing public to adopt
the Hetty Green system of keeping cash
balance in the bank till a violent break
occurs, and then to step in. the above
mentioned unfavorable loss percentage
could be most happily readjusted. Aside
from ma terial advantages great econon-
&c benefit could be attained by stabilizing
Liz SeSdlIlS LbdihEtS, dIlu lUCJAeuldIly LIE
erratic earnings of brokerage houses.
There is no scientific reason why the
business of speculation should be subject
to a higher loss percentage rnan any other
business. OF course. there are those who
will say that the best way to speculate
Is not to speculate at all. In answer 1t is
first of all necessary to consider that 1t Is
difficult to draw a. line between invest
ment and speculstion, as the latter is
nothing but an investment on credit.
The Source Of Capital.
There are those who maintain that both
investment and speculation could be
eliminated as the Industries might just
az well be financed by the companies
themselves. Such experiments have been
made by Lipton's Tea company, and IN
the case OF the German breweries. These
institutions accept savings from their
clientele. pay somewhat higher Inter
est rate than the banks. and thus evatle
an increase in fixed ton. It is
obvious. however. that the cost OF such
| system cannot be much below the COM
mission paid to an underwriting synd.-
cate, aside from the fact that only popu-
| lar and well established concerns could
finance themselves this way. The de-
posts can be withdrawn any moment.
while the fund secured through bond
| issue Is advanced for h definite period
| 1t would be entirely impractical to finance
| a new enterprise along these lines Then
| there are those who would ask the banks
70 ltHaHce 8sne Industries tnrOugh direct
credit operations. 1t is apparent. how
ever. that the deposits OF q bank must
comply with the principle OF liquidation.
and that long term Investment with
considerable risk would be 4 most danger
ous policy. when NE thus, BY elimlna-
ton. are forced to return 10 our present
j system. II appears that those who Advo-
i cate the complete GENERALIZATION 81 the
4 system should at least offer something
4 constructive In exchange for ii. 30 far
1 they have failed to do 20. II II no doubt
most unfortunate that the strugssss for
existence in general. and the struggle tor
commercial success Ia particular, should
nIake It nAeesAsy That isouns nAvs 30 ~
A slime = certain risk. Hut eince this u Z
i fact one can say; thar III here were n0
specuiators they would have to b In
i vented.
a shareholder enjoys not only divi-
II sion Of risk. but also certain DEGREES al
elimination ck risk through ecIentiflc
iAanagesnents On the uther hard, Il =