The Washington times. [volume] (Washington [D.C.]) 1902-1939, 1923-06-22
PLAYING STOCKS
HAZARDOUS
PURSUIT
Few Outsiders Get Rich ON
Wall Street, Cousins
Declares.
By w. S. COUSINS.
Copyright, 1929. by Cosmopolitan
Naws Cervice


News Service.)
NEW YORK, June 22.-To make
money in Wall Street: First, choose
your broker, then buy stocks when
they are cheap and sell 'em when
they are dear.
This is piece of hofnely advice
once given by master Spectator
to a novice; and whatever it lacks
in definiteness, it has the feature
of placing first things first.
1t makes little difference to the
Spectator how successful his opera
tons in the stock market may be,
If his equities are wiped out by
the dishonest methods of band
of crooks masking as legitimate
brokers, and failing to perform the
service for which they accept com.
missions
The system of margin trading,
offering the prospect of enormous
profits on small capital, has given
rise to the development of the
brokerage business in this country.
Naturally, the allurements of rich
pickings" have brought many I'M
desirables into the fold, and traders
as rule show little evidence of dis.
elimination; to them broker is
broker; and in many cases the more
unreasonable the promises. the larg-
err will be the share of business
obtained.
To those who will take the time
to consider the matter, 1t is often
possible to escape the snare of the
bucket shop and the unreliable
brokerage organization.
Past records are sometimes valu-
able, and affiliations and credentials
quite often stamp their character
upon them.
Brokers Shun Safeguards.
In contrast, however, to banking,
insurance, surety companies and
other forms of service, the opera
tions of which are under strict
supervision of State or Federal Off.
GERS, stock brokers have never been
willing to subject themselves to
such safeguards, and to the trader
on margin there is absolutely no
method by which he can be abso.
lutely assured of the safety of
margin account placed with a
stock broker.
1t would be unfair to the New
York Stock Exchange, however, to
say that it makes no effort what
ever to regulate the operations and
to investigate the solvency of its
members. The recent failure, how
ever, of a number of firms over
which this supervision was sup
posed to have been exercised has
awakened public confidence in the
whole mechanism of speculative
trading.
Nature of Speculative Trading.
The nature of brokerage business
is that of service; it is always pos
sible for an individual trader to
test the genuineness of the service
which he is supposed to have re-
ceived. BY offering to make full
payment on shares Of stocks or
bonds supposedly held for him ION
margin he can demand full de-
livery of these shares, and failure
to make such delivery would con-
stitute serious offense against the
exchange itself-so serious, in fact,
that it would lead to expulsion of
the firm from membership.
A prominent Wall Street banker,
thoro> hly conVersant with the
operation of the stock market, told
me that in his opinion there was
but one class of those known as
outsiders who have ever made
money in the street. These are the
traders who visit the street after
q severe decline in stocks, buy up
as many shares as they can handle
of the best class of dividend paying
stock, carry them away and lock
them in a strong box until the
storm blows over. Purchases of
this kind will eventually show good
rry1a aIAa
would be surely wiped out. 1t is
the occasional, rather than the
habitual, trader in speculative stock
that comes out ahead of the game.
Few spectators realize how haz-
ardous the game of Wall Street
specializing really is. A number of
brokerage houses operate on COM
paratively small capital, making use
Of customers margins and bank
borrowings. They have, fortunate
ly departed from the former system
of speculative dealings on margins,
and are now demanding twice as
much margin as they did In the
days before the war.
It Is necessary to consider that
psychology plays n large part in
Wall Street operations. In bull
market prices are always carried
Coo hISn anu 1H q Dear market Cney
are pushed downward too far. To
the trader who has carefully select
ed his dividend-paying stocks and
locked them in his strong box
psychological panic has mo terror.
The general hazard of Investment
should be enough for the strained
nerves of an investor without add
ing any additional worry as to the
financial standing Of a brokerage
house over whose operations he has