Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-11-18
CHAPTER IX.
Psychology of Spectators.

Psychology Ot SpeCuhabOfss
On this chapter the myth about
| Wall Street plungers is exploded ana
we learn just how conservative the
! big spectators really are. Inc m
side story of one mad bull Is re-
lated. which looked quite different
| from the inside than from without)
| NV more than 30 years in the stock
! market has convinced me that big spec
| ulators are more conservative IMAM pls
| business men. This statement violates
| the usual romantic view of Wall Street,
| which is popularity supposed to be flled
! with tremendously rich men, who are
| ready to stake their fortunes at every
! turn Of the market. But very Few rlcn
men in Wall Street actually stake a
very large proportion OF their wealth. IN
| anv stock operation. And the risks &C
tually assumed are not SO great as Is
popularity believed.
To be sure, there are exceptions
! There are big plungers in Wall Street.
lust as there are big plungers In most
lines of business Sometimes these
plungers amass huge fortunes-and
turn conservative. But not very often
Most plungers in the stock market Dig
or little. go broke. The majority OF sue
cessfln wall Street spectators are eau
tious and careful men who avoid doubt
f,ll undertakings and who are in posi-
ton to protect themselves regardless OF
eventualitieS.
It is true that in very active bull
markets important pool operators often
buy stocks with extreme boldneSs. PrlceS
are bid up in seemingly reckless fash
ION. And every one knows that some
times the same stocks swiftly react ana
the pools record losses But-and this
but" lis a big one-the money used to
bid up stocks on these occasions is
usually a small part of the total funds
employed by the pools. And at the time
this bold technique is used the pools are
usually travelling on velvet"-that is.
they are already in possession of large
profits. a small part OF which may be
risked to bring additional profits.
The same principle is followed by
successful business men in many lines.
Merchants, for example, often make
their heaviest advertising expenditures
at the end of the season in order to
dispose of the comparatively small sur
plus stocks left on their hands. But
perhaps I can best explain this pys-
chology as 1t applies to large stock OPP
era tors by giving an actual instance.
Cautious Operator Becomes Mad Bull"
One friend of mine was very active on
the bull side of the market for the two
years, 1927 and 1928. Throughout this
time his attitude was one OF extreme
skepticism. He managed series OF pool
operations with brilliant success and
built up a personal fortune OF several
million dollars, but whenever I talked
with him he was full of pessimism.
Month after month he repeated his as
Sertion that ''the market won't last an
other 90 days" Obviously he was NOV
ing as warily as possible. He stated
that he would not interest himself in
any stock unless 1t was a sound invest
ment at the price obtainable, an issue
he would be satisfied to hold for invest
ment If the market turned sour" To
nv knowledge he refused to handle
pools in at least dozen stocks which
afterward proved big winners for other
operators. In sum, he played safe all
down the line" to November, 1928.
After the market break in December,
1928. expected to hear OF this mans
retirement. Much to my surprise he
came into my office in January with
line of conversation as full of enthuS1-
asm as the widest bull in the street.
And he entered upon a succession OF
deals which he conducted with extreme
boldness and an apparent lack OF any
restraining caution, performance
which might have been expected from
some notorious plunger. but which were
nothing less than amazing Wnen exc
cuted by a man with a reputation Tor
conservatism.
/ was not able to get him to give a
lucid account of his changed attitude
until September of this year, when
after a heavy loss he did retire from
activity. Here is his story:
cat the beginning Of 1925 was worth
almost q million dollars. In the 1926
break I lost $4,000 It scared me. To
get that money together had worked
and worked hard, for Is years. made
up my mind to take no chances on
losing 1t.
In the big bull markets of the next two
years refused to go into any deal un-
less could see my way out in case the
market broke up. handled only stocks
which could be bought on an invest
ment basis. I made money, as you
know. Not as much as some other men
were making-not as much as might
have made But II the storm had come
up was always in sight of land. Then,
in November, 1928, 1 saw trouble ahead
and closed out everything. I had ST.
600, 900 in cash and gilt-edged paper"
"Cuts Loose" With Profits.
IAN the time, of course, I had been
holding myself down. All through 1928
was itching to see what could do
II / cut loose but wasn't rich enough
to take long chances. In December,
while was completely out Of the mar