The individual who trades or invests in stocks will do well to keep away from the stock ticker; for the victim of “tickeritis” is no more capable of reasonable and self-composed action than one who is in the delirium of typhoid fever. The gyroscopic action of the prices recorded on the ticker-tape produces a sort of mental intoxication, which foreshortens the vision by involuntary submissiveness to momentary influences. It also produces on some minds an effect somewhat similar to that which one feels after standing for a considerable time intently watching the water as it flows over Niagara Falls. Dozens of people, without any suicidal intentions, have been drawn into this current and dashed on the rocks below. And thousands daily are influenced by the stock ticker to commit the most fatuous blunders.
As a camera fails to record a true picture if placed in too close juxtaposition to the object, so in studying the ticker-tape one is restricted to a close-up view of conditions, resulting in a distorted gauge of values; for the figures recorded often mislead and confuse the attentive observer; in fact it frequently happens that the price fluctuations result from a wave of hysteria among a coterie of traders, and bear but little analogy to the true value of the stocks. To illustrate this point more explicitly, the stock of almost any conservatively capitalized and well managed concern paying six dollars annually in dividends has an investment value of from $85 to $100 a share; but in the ups and downs of the market the stock gets buffeted about on the exchange in obedience to the varying sentiments of traders, sometimes selling as low as $50, and at other times as high as $150, without any change whatever in the company’s earnings, its prospects, or its management. (These matters will be dealt with a little farther on, and exemplified by showing their effects upon the mentalities of various types of speculators.) It does not follow that one who keeps in touch with the stock market by telephone, or through the daily papers, will find his path free from thorns and snares; but he will at least have a more open perspective than one who submits to the influence of the ticker.
Any intelligent trader may reason out exactly what he ought to do under certain specific conditions; but in the quickly shifting and uncertain process of determining values he loses his mental poise; and experience proves that anyone whose reasoning faculties become confounded is apt to be affected by some form of hysteria, and will frequently do the opposite of what he would do under normal conditions.
The most copious and the most unreliable financial writers are the market “tipsters” who write daily letters of advice to an army of subscribers, and claim to have more or less positive knowledge of what certain stocks or groups of stocks are going to do marketwise. They often profess to have definite “inside information,” which any subscriber may receive at a stated price, ranging anywhere from $10 a month upward. These false financial prophets, who lead a horde of blind followers, should not be confused with reputable bureaus and statistical experts who base their opinions and their advice to clients upon a logical analysis of general conditions.
Henry Fielding wrote a whole essay to prove that a man can write more informingly on topics of which he has some knowledge than on matters that he knows nothing about. He believed also that mankind is more agreeably entertained by example than by precept; therefore it is not the purpose of this discourse to teach anybody anything, unless perchance something may be gained by example or suggestion. There are four subjects on which advice, however good, is generally wasted,--politics, stock speculation, religion, and love; for in these matters grown-ups rarely follow the advice of others, and when they do, if they profit by it they take all the credit to themselves, whereas if they lose they always blame the adviser. Such are the inexorable and universal laws of human nature.
Anyone may relate his own stock market experiences, or those of others--perhaps to the surprise or enlightenment of his audience. He may even venture his opinions on the subject; but for anybody to assume that he can continuously operate an unfailing system of making money on stock or grain exchanges would be equivalent to asserting that he could invert the fundamental laws of psychology, or that he could beat the game at Monte Carlo by scientific methods. Many have tried both, to their sorrow.
And still, hundreds of thousands of people continue to play at gambling tables, and hundreds of thousands speculate in stocks. There are many persons who gamble moderately all their lives, just as some drink moderately all their lives, with no resultant harm; while with others both of these inhibited practices become fixed and ruinous vices. Since trading in stocks has the appearance of being an easy way of making money, it is one of the most alluring pursuits of modern times; and from this very fact, although legalized for all, it is susceptible of becoming one of the most dangerous habits known. It is dangerous for the confirmed addict not only because he is apt to lose, but for the reason that it distracts his attention from business in daytime and frequently destroys his rest at night. But as it would be folly to advise people not to embark in commercial pursuits because statistics show that upwards of ninety per cent. of business ventures result in failure, so it would be useless to caution people not to trade in stocks because it is a hazardous undertaking in which a peculiar sort of sagacity and self-control are the only safeguards against certain disaster.
Most people of sturdy mentality are unwilling to admit that they could be made easy subjects of hypnotic influences, and would scout the idea that mere business transactions in securities could effect any undue subversion of their equipoise. The average human mind is, however, incapable of maintaining its equilibrium under the strain of great excitement; and no amount of knowledge, either inherent or acquired, no amount of experience, however dearly bought, will enable one always to think intelligently or act wisely under highly nerve-racking conditions. It is said that persons who become disoriented in a forest will almost invariably go in the wrong direction (I have done so myself on two different occasions); and that in an effort to salvage goods from a burning house they will throw mirrors and other fragile articles out a third-story window and carry pillows downstairs.