CHAPTER IV.

THE MORALITY OF WALL STREET.

A leading newspaper, commented (1902) editorially onthe morality of Wall Street. Part of the burden of its comment was that it was different in some respects from morality elsewhere. Taking the word "morality" to mean in this instance the general law or code of ethics obtaining in Wall Street and elsewhere, it does not appear that there is any essential difference between Wall Street morality and general business morality.

The object of all business is the "making of money" and nothing else. Wall Street is certainly no different from any other place or center of business activity in this respect. Where one business center or group of industries differs from another in the matter of morality is probably only in the details of its code. Now, in the details of its code Wall Street will compare to advantage with most other business centers. As has been pointed out, its machinery is predicated upon rigid observance of bargains made and word passed. While it is true that this kind of honor is absolutely necessary for the smooth conduct of business as it is carried on in Wall Street, it is also true that the high standard required is lived up to by the Street, and breaches thereof are extremely rare.

Perhaps one reason why there is so much disposition to

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 thar 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.

house are doing. When members of the firm say, “all our 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 a loss of ten points. He then becomes discour