question the morality of Wall Street and contrast it unfavorably with the morality of other business centers is the fact that in Wall Street probably to a greater extent than elsewhere the primal passions and instincts of acquisitiveness and self-preservation wear less disguise than they do in the other channels of industry and money making. A Stock Exchange anywhere is a theatre in which these primal passions battle as gladiators in the arena without concealment or pretense. Every one who goes down into the arena knows that it is a battle wherein his hand must keep his head, and the penalty of failure will be exacted against him to the utmost. "A la guerre comme a la guerre" is a proverb that very well describes the conditions. under which business is done in Wall Street. Elsewhere it may appear to be different. The only difference is that in Wall Street there is no pretense, no disguise; the essential struggle is the same everywhere. In Wall Street, there has been and unfortunately still is at times fraud in detail peculiar to Wall Street, but it is not of Wall Street nor inherent in the laws of the game.

It is true that speculation in Wall Street is looked upon as being especially immoral by comparison with speculation elsewhere. It is, however, part of almost every manufacturer's business or of every merchant's business to speculate in raw materials or goods, and nobody thinks of finding fault with either for doing so. In Wall Street speculation stands alone, without any business disguise, for all men to see. There is no difference between one kind of speculation and another so far as essence is concerned; the only difference is that one is disguised and the other is

not. It may be noted, moreover, that where the speculation is not disguised it is apt to be more honest than where it hides under a cloak of business enterprise. All men are gamblers and always will be more or less for the "get rich quick" idea, and the chances of "something for nothing" will always prove irresistibly attractive to human nature. The plain fact of the matter is that the general suspicion of and hostility toward Wall Street find their root in the fact that the race for money is carried on simply, openly in the light of day, without pretense or hypocrisy of any kind, and without attempt to cloak the passions that have existed since man first came upon the earth. If gambling be wrong, the principal charge that can be levied against Wall Street is that it is there carried on openly, under simple but rigid rules, and Wall Street does not care who knows it. Elsewhere it goes on in essence just the same, but disguised in a multitude of ways. In these days most forms of business must of their very nature contain a large element of speculation. We do not see that, speculation becomes more immoral by being openly carried

on.

Wall Street has rather less use for an habitual liar than have other places. It has no use at all for a man who does not keep his word. It may be true that honesty is the best policy in Wall Street, simply for reasons of convenience, but that it is the best policy no one can deny. In fact, it is the only policy that in the long run is successful. We do not think that this is necessarily an argument against the morality of Wall Street.

CHAPTER V.

*SCIENTIFIC SPECULATION.

The question whether there is such a thing as scientific speculation is often asked. Various answers of a somewhat affirmative character have been given but they have generally been hedged about with so many qualifications as to be nearly useless for practical purposes. The experiences of operators have, however, crystallized into some general rules worth heeding.

The maxim "buy cheap and sell dear" is as old as speculation itself, but it leaves unsolved the question of when a security of a commodity is cheap and when it is dear, and this is the vital point.

The elder Rothschilds are said to have acted on the principle that it was well to buy a property of known value when others wanted to sell and to sell when others wanted to buy. There is a great deal of sound wisdom in this. The public, as a whole, buys at the wrong time and sells at the wrong time. The reason is that markets are made in part by manipulation and the public buys on manipulated advances and after they are well along. Hence it buys at the time when manipulators wish to sell and sells when manipulators wish to buy.

In some commission offices, there are traders who, as a rule, go against whatever the outside customers of the

*Dow's Theory.

"all our

house are doing. When members of the firm say, customers are getting long of stocks," these traders sell out; but they buy when the firm says, "the customers are all short." There are of course, exceptions to this rule. If there were no exceptions, the keepers of bucket shops would all get rich. When the market has an extraordinary rise, the public makes money, in spite of beginning its purchases at what would ordinarily be the wrong time, and this is when the bucket shops either lose their money or close out in order to keep such money of customers as they have in hand.

All this points to the soundness of the Rothschild principle of buying a property of known value when the public generally is disposed to sell; or of selling it when the general public thinks it a time to buy.

Daniel Drew used to say, "cut your losses short, but let your profits run." This was good preaching, but "Uncle Dan" did not, in his later years, practice his rule, when it would have been better for him if he had. The thought here is unquestionably one of the sound principles in trading. It means that if a stock has been purchased and it goes up, it is well to wait; but if it goes down, it is well to stop the loss quickly on the ground that the theory on which the purchase was made was wrong.

The public, as a whole, exactly reverses this rule. The average operator, when he sees two or three points profit, takes it; but, if a stock goes against him two or three points, he holds on waiting for the price to recover, with, oftentimes, the result of seeing a loss of two or three points run into loss of ten points. He then becomes discour

aged and sells out near the bottom to protect the margin in

which he has left.

How many operators in looking over their books find a considerable number of small profits swept away by one large loss? When a trader finds by his accounts that his profits have been relatively large and his losses relatively small, he can make up his mind that he is learning how to trade.

The trouble with carrying out this plan is that a series of losses of from 12 to 2 points are very discouraging. A trader who sees that he has taken twice or three times a loss of two points when, if he had waited a few days he need not have taken any loss, is very apt to decide that he will not cut his losses short any more, but will wait, and this is the time when the recovery does not come.

Mr. Jay Gould said his policy was to endeavor to foresee future conditions in a property and then, having made his commitments carefully, to exercise great patience in awaiting results. This also is sound doctrine, but proceeds along very different lines. Assuming the ability to foresee the future, it is the wisest of all courses; but many who have tried this method have found that the omission of essential factors made their forecast valueless, and both their courage and their patience of little avail. Nevertheless, this method should not be discarded on account of the difficulties involved. Within limitations, the future can be foreseen. The present is always tending toward the future and there are always in existing conditions signals of danger or encouragement for those who read with care.