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raised by his clients. Especially, in times of financial panics, it is impossible for him to give many issues which have passed through his hands proper attention. It is natural that, occasionally, some one must err, and it is fair that the client should consider that he is only one among hundreds, perhaps thousands, of other clients that the banker has to consider.

In considering the advisability of selling a security, the original cost of it should not be given too serious consideration, especially if the cost were such as to show a loss. If it is a proper time to dispose of it, the cost should be left out of the question. Ask yourself whether or not you would buy at the present quotation, and if, for good reasons, you can decide in the negative, is it not a fair argument to sell? This does not mean that money is not often made by waiting, for all facts in relation to any particular security have to be taken into consideration in thinking of selling it as above indicated, but the mere fact that it costs more than you would give for it is no reason for delaying its sale.

That is the point it is desired to make clear, for probably much unnecessary loss has been incurred by those unwilling, at the time, to take a small one, but who have held on and then taken a greater one in the end. And all just because they allowed themselves to be influenced by the original cost.

When you purchase a stock, bond, mortgage, or whatever it may be, read it; see what conditions it contains. You may find therein some clause detrimental to your interests. It would not be hard to cite cases in which the holder of some stock certificate has suddenly discovered that it carried conditions, plainly stated, had he taken the pains to look, which entailed hardships upon him.

It is not unusual for an investor to spend hours and, perhaps, days in patient thought and study in seeking what he deems a safe purchase, and then, at the last moment, spend scarcely any time in the scrutiny of the paper itself.

When a banking firm buys an issue of bonds, or similar security, from any corporation which is not by law compelled to furnish public statements of its earnings, from time to time, or where the corporation is of such magnitude that it is customary to furnish a statement of its earnings to the public, such, for instance, as the United States Steel Corporation, it is important that a contract be executed between the corporation placing its securities and the banking house purchasing the same, whereby the latter shall receive semiannually or yearly sworn statements of the earnings of the company and its financial condition during the time which the issue of securities may be outstanding; furthermore, that the banking house, for a like period, shall have access to

the books of the corporation for the purpose of auditing its accounts and verifying its statements.

The reason for this is perfectly clear: It affords a means of protection to the bondholder, for, in case the earnings of the property during the life of the security are falling off, it will, by the banking house receiving a statement of such earnings, be made known to the latter and afford an opportunity for self-protection. It is no more than right that the parties lending the money, by which the corporation is able to operate, should be in possession at all times of adequate information to judge whether the property is being properly managed.

In comparing earnings, one month with another, always compare with the corresponding month of the year preceding, as that is the true test. If the corporation is one of long standing, it is advisable to examine into its earnings during a past period of business depression, and to see how it "weathered the storm."

Remember, at all times, that nothing is more sensitive to conditions and impressions than the security market. This is well illustrated in the actual happening of a woman who possessed $5,000 in bonds of a small issue in one of the New England cities. The issue was a perfectly sound one, but was held closely by investors, and the bonds seldom offered for sale. The woman desired to dispose of them, and went to her banker in New York City and asked him to obtain a bid. He, naturally, put himself in touch with one of the local brokers of the city wherein the corporation itself was located. This broker went from bank to bank and from banker to banker to get the best bid obtainable. The woman, in the meantime, had gone with the same request to not less than six other bankers in New York. They, in turn, had each sought some local broker in the New England city, so, upon these pursuing like tactics to the first mentioned, it was not long before there seemed an avalanche of the bonds of that particular corporation. It seemed that there were more bonds for sale than the total of the outstanding issue. The result was that intending purchasers became suspicious and all bids were withdrawn. The woman was unable, for the time being, to obtain any market whatsoever.

In this connection it may be pertinent to say that in the case of an issue of securities unknown in the market where they are offered for sale, the fact of not being able to find a purchaser does not argue that anything is wrong.

In the placing of money for investment purposes, in addition to the foregoing, these are some of the general principles which should be considered:

The standing of the men in charge of the corporation; the

location of the property and the character of the country upon which it is dependent for its business; especially is it increasing in population and wealth, or the reverse? If it is a municipal bond that is being considered, it is not advisable to place too much confidence in a municipality which is so located as to be entirely dependent upon lumber business, oil wells, or some special form of mining; that is, a stability, not likely to be furnished under such conditions, is needed. An agricultural section is far better and more permanent than gold mining. A study of the earnings has already been advised.

Present competition, or the likelihood of the same in the future, is very important. Is the corporation charging excessive rates so as to invite competition? Are its earnings based upon patents which may be approaching expiration?

It goes without saying that the condition of the money market, at the time of purchase, must always be considered. But when all is said, most business must rest upon faith in someone, and, therefore, the character of your banker is allimportant.

This chapter thus far has been written mainly with the idea of assisting those desiring to make careful and conservative investments. The author, nevertheless, understands that there are, and always will continue to be, those who speculate, and, possibly, some of the essential points in relation to speculation may be acceptable, and here follow:

Stock market prices, which, like the ocean, are never at rest, are influenced by many forces. If one is to be even an occasional buyer or seller in the securities of the speculative world, he cannot have too clear an idea as to these factors. Monetary conditions, business conditions, and stock market manipulation, together with the political outlook, both domestic and foreign, are important subjects for study. Always remember that, although values are largely determined by business conditions, prices may, for the time being, move at variance with basic principles. Prices in the long run do, nevertheless, follow the course of existing values. (Many of the subjects mentioned in this connection will be found treated in the main part of the book, so they may be lightly touched upon here.)

It is evident that "business conditions" is a broad subject, but there are certain underlying principles which may be taken as an infallible guide, namely:

First: The crops of main importance the principal of which, grain and cotton, have a tremendous influence upon business prosperity.

Second: The iron and steel industries. It is well under

stood, and almost a tradition, that when these trades are prosperous, other departments of industry are fully occupied. The reverse is equally true.

Third: Watch the railroad earnings. They are a singularly good index of the times. Busy railways and good earnings mean work for the steel companies, car and locomotive builders, etc. Beware of the continued steady decline, from month to month, of these figures. The rise and fall in stock prices have always closely followed the rise and fall in railroad earnings.

Fourth: Study the bank clearings. They reflect business conditions wonderfully well. The clearings of the country at large are better to follow than those of a particular city which may be temporarily affected by a speculative craze.

Fifth: What are known as "swings" from prosperity to depression and the reverse. It is a well known fact that the business of every country passes through alternate periods of rising prices and prosperous times and then falling values and hard times. It behoves one always to estimate, as well as may be, at about what point in one of these cycles he happens to be.

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Monetary conditions" have reference to the supply of, and demand for, money; the effect of an increasing supply upon the rise in prices of commodities; and the fact that low money rates may encourage speculation. Money is the representative in value of all things traded in, and the scarcity of it does not tend to improve business conditions, yet, at the same time, very low money rates may argue poor business, as it shows a lack of demand. The comparative study of the daily quotations of interest paid for "call" and "time loans " is desirable.

As to "political conditions"; we are always dependent upon wise and sane government at Washington; we are sensitive to war clouds, even if not at first involving our own country. The successful speculator has world-wide conditions to dwell upon now-a-days, as the large nations are so closely associated in money and industrial matters that each is more or less dependent upon the continued well-being of the other. The searching, daily reading of domestic and foreign happenings is essential.

Stock market manipulation is fully explained under the subject "Manipulation," and is something to be carefully and seriously considered, and ever borne in mind by whosoever attempts to pick his way among the snares and pitfalls of Wall and State Streets.

There are some shrewd investors who avoid the placing of money in any enterprise of capitalization large enough to attract the attention of Wall Street, and thereby become,

possibly, a puppet in the hands of some "clique." They think it better to invest in smaller companies, whose securities are offered and recommended by reputable bankers, or in local issues; in either case, the amount of the issues being too small to warrant manipulation.

It is a peculiar truth that the general public usually buys while prices are rising, instead of waiting for moderate reactions. It is better wisdom to buy after there has been a decline, and to sell after a sustained advance; but the public appears never to learn this rule.

Activity argues for rest; every excess is sure to be followed by its opposite. Depression follows inflation; and the latter precedes depression.

Nelson says in his "A B C of Stock Speculation":

"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 sell when others wanted to buy.

And also, "that if your 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 the stock goes against him he holds on waiting for the price to recover, with, oftentimes, the result of seeing a (small) loss. . . run into a loss of ten points. He then becomes discouraged and sells out near the bottom."

A financial writer gives expression to the following:

"Value has little to do with temporary fluctuations in stock prices, but is the determining factor in the long run. Values, when applied to stocks, are determined, in the end, by the return to the investor, and nothing is more certain than that the investor establishes the price of stocks. The manipulator is all-powerful for a time. He can mark prices up or down. He can mislead investors, inducing them to buy when he wishes to sell, and to sell, when he wishes to buy; but manipulation in a stock cannot be permanent, so, in the end, the investor learns the approximate truth."

Wall Street always builds on the future, not on what has gone. It always wants a change in security values. Either way is acceptable to the professional trader if only he can get on the track of the right way in advance, and thus act before the public does.

And yet, thousands buy stocks who should not. Some buy because others do; some because the daily quotations show a tremendous apparent buying on the part of others of a stock at the moment attracting attention. They are ignorant of the fact that some of the reported sales are not genuine,

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