The Wallace miner. [volume] (Wallace, Idaho) 1907-current, 1919-02-27
CAUSES OF PAN|CS IN
THE STOCK MARKET
STOCK SELLING BY DisAPPolNT.
ED BUYERS GENERALLY
STARTS SOMETHING.

(By Fl. b. Kingsbury, manager of
brokerage department Of o. A. Olin
Coz
A stock market panic is nothing
more nor less, than speculative and
financial hysteria, and is largely con-
fined to the Wall street markets in
New York. 1t affects the whole coun-
try but not so much the individual,
for the reason that every large bank
ing interest, insurance company, near
ly all trust funds, and most of our
have invested or are
stocks and bonds whose
market values are made by the stock
Such financial fevers may develop
In the midst of industrial prosperity,
and are caused by conditions entirely
apart from the circumstances sur
the business Of the securi-
ties involved. These stock market
panics, however, are as rule tenn
porary affairs and their consequences
are entirely different from the So
called commercial panics, and they
IRE usually brought about by the SELL
Ing of stocks by disappointed holders
who have bought at high prices in
vance above the purchase price.
How Panic Starts.
Most spectators in the stock mar
kets are bulls by nature and conse-
luenty they purchase stocks long
with the expectation of an advance in
their market values. Instead of go
ng higher, however, the prices, which
have probably already advanced to
point beyond that justified by basic
begin to recede and ultim-
ately 1t dawns upon these disappoint
ng as they expected. Frightened by
he drop, they begin unloading their
Many of them are compell-
ID to sell because their margins are
and others sell because Of
ear that the prices will go much
over The decline consequently con-
inues until prices reach a level where
INVESTORS are willing to buy. 1t is a.
his time that the downward tenden y
) checked and then we usually have |
market period of dullness. Specu-
OF ina NV,
enthusiastic and there are very few |
peculative purchases in anticipation |
# an advance,
Restoring the Market.
This period of dullness usually lasts
Until the. more far-sighted begin to
lee reasons for an upward movement |
n the future. The shrewd operators |
,egin to buy in order to profit by the |
advance. As soon as
light upward tendency of the market
$ perceived, others make haste to |
while prices are stil rela-
lively low Their demand, however, |
.auses the market to go still higher
md then financial papers begin to
say that the market looks strong"
More buyers realize what has happen
q and begin to be optimistic concern
ng the upward movement and will
therefore, purchase. This movement |
continues gradually, with interruption.
II course, due to profit taking, until !
anl lnyrA t,rhi III toll,
nough to induce the shrewdest in
estors to dispose again of their
Every further raise in the
market is met by orders to sell, until
na1ly large number of stocks pass
rom those who actually own them
s an investment on account of div
lends to those who hold them on
peculation expecting a further adj
ance. Finally there comes a time
hen these shrewd investment buy
rs, seeing their securities higher than
hey think are safe, commence to sell
/ larger amounts and their offerings /;
,on become heavy enough to start
ecline. Then these reckless specu- Il
tors, who. because of their inbound {
faith in still higher prices, have t
ought these securities for the most
,rt with borrowed money, now find {
emselves in trouble. The conse- $
fence is that prices now begin to de- 1
inc more rapidly and the speculat- Il
$ who now hold these securities be-
me dissatisfied and again begin to
load their holdings, thus aggravat-,
6 the downward movement which =
ually continues until shrewd invest
s again find it profitable to enter
e market as purchasers.
OF course there are an endless var
~ of incidental factors which occur
ON time to time which cause a
or upward movement of :,
e stock market, and which would :,
ing untold riches to the man who
uld foresee them.
&c