雙語·股票大作手回憶錄 第二十三章

SPECULATION in stocks will never disappear．It isn't desirable that it should．It cannot be checked by warnings as to its dangers．You cannot prevent people from guessing wrong no matter how able or how experienced they may be．Carefully laid plans will miscarry because the unexpected and even the unexpectable will happen．Disaster may come from a convulsion of nature or from the weather，from your own greed or from some man's vanity；from fear or from uncontrolled hope．But apart from what one might call his natural foes，a speculator in stocks has to contend with certain practices or abuses that are indefensible morally as well as commercially．

As I look back and consider what were the common practices twenty-five years ago when I first came to Wall Street，I have to admit that there have been many changes for the better．The old-fashioned bucket shops are gone，though bucketeering“brokerage”houses still prosper at the expense of men and women who persist in playing the game of getting rich quick．The Stock Exchange is doing excellent work not only in getting after these out-and-out swindlers but in insisting upon strict adherence to its rules by its own members．Many wholesome regulations and restrictions are now strictly enforced but there is still room for improvement．The ingrained conservatism of Wall Street rather than ethical callousness is to blame for the persistence of certain abuses．

Difficult as profitable stock speculation always has been it is becoming even more difficult every day．It was not so long ago when a real trader could have a good working knowledge of practically every stock on the list．In 1901，when J．P．Morgan brought out the United States Steel Corporation，which was merely a consolidation of lesser consolidations most of which were less than two years old，the Stock Exchange had 275 stocks on its list and about 100 in its“unlisted department”；and this included a lot that a chap didn't have to know anything about because they were small issues，or inactive by reason of being minority or guaranteed stocks and therefore lacking in speculative attractions．In fact，an overwhelming majority were stocks in which there had not been a sale in years．Today there are about 900 stocks on the regular list and in our recent active markets about 600 separate issues were traded in．Moreover，the old groups or classes of stocks were easier to keep track of．They not only were fewer but the capitalization was smaller and the news a trader had to be on the lookout for did not cover so wide a field．But today，a man is trading in everything；almost every industry in the world is represented．It requires more time and more work to keep posted and to that extent stock speculation has become much more difficult for those who operate intelligently．

There are many thousands of people who buy and sell stocks speculatively but the number of those who speculate profitably is small．As the public always is“in”the market to some extent，it follows that there are losses by the public all the time．The speculator's deadly enemies are：Ignorance，greed，fear and hope．All the statute books in the world and all the rules of all the Exchanges on earth cannot eliminate these from the human animal．Accidents which knock carefully conceived plans sky-high also are beyond regulation by bodies of cold-blooded economists or warm-hearted philanthropists．There remains another source of loss and that is，deliberate misinformation as distinguished from straight tips．And because it is apt to come to a stock trader variously disguised and camouflaged，it is the more insidious and dangerous．

The average outsider，of course，trades either on tips or on rumours，spoken or printed，direct or implied．Against ordinary tips you cannot guard．For instance，a lifelong friend sincerely desires to make you rich by telling you what he has done，that is，to buy or sell some stock．His intent is good．If the tip goes wrong what can you do？Also against the professional or crooked tipster the public is protected to about the same extent that he is against gold-bricks or wood-alcohol．But against the typical Wall Street rumours，the speculating public has neither protection nor redress．Wholesale dealers in securities，manipulators，pools and individuals resort to various devices to aid them in disposing of their surplus holdings at the best possible prices．The circulation of bullish items by the newspapers and the tickers is the most pernicious of all．

Get the slips of the financial news-agencies any day and it will surprise you to see how many statements of an implied semi-official nature they print．The authority is some“l(fā)eading insider”or“a prominent director”or“a high official”or someone“in authority”who presumably knows what he is talking about．Here are today's slips．I pick an item at random．Listen to this：“A leading banker says it is too early yet to expect a declining market．”

Did a leading banker really say that and if he said it why did he say it？Why does he not allow his name to be printed？Is he afraid that people will believe him if he does？

Here is another one about a company the stock of which has been active this week．This time the man who makes the statement is a“prominent director．”Now which—if any—of the company's dozen directors is doing the talking？It is plain that by remaining anonymous nobody can be blamed for any damage that may be done by the statement．

Quite apart from the intelligent study of speculation everywhere the trader in stocks must consider certain facts in connection with the game in Wall Street．In addition to trying to determine how to make money one must also try to keep from losing money．It is almost as important to know what not to do as to know what should be done．It is therefore well to remember that manipulation of some sort enters into practically all advances in individual stocks and that such advances are engineered by insiders with one object in view and one only and that is to sell at the best profit possible．However，the average broker's customer believes himself to be a business man from Missouri if he insists upon being told why a certain stock goes up．Naturally，the manipulators“explain”the advance in a way calculated to facilitate distribution．I am firmly convinced that the public's losses would be greatly reduced if no anonymous statements of a bullish nature were allowed to be printed．I mean statements calculated to make the public buy or hold stocks．

The overwhelming majority of the bullish articles printed on the authority of unnamed directors or insiders convey unreliable and misleading impressions to the public．The public loses many millions of dollars every year by accepting such statements as semi-official and therefore trustworthy．

Say for example that a company has gone through a period of depression in its particular line of business．The stock is inactive．The quotation represents the general and presumably accurate belief of its actual value．If the stock were too cheap at that level somebody would know it and buy it and it would advance．If too dear somebody would know enough to sell it and the price would decline．As nothing happens one way or another nobody talks about it or does anything．

The turn comes in the line of business the company is engaged in．Who are the first to know it，the insiders or the public？You can bet it isn't the public．What happens next？Why，if the improvement continues the earnings will increase and the company will be in position to resume dividends on the stock；or，if dividends were not discontinued，to pay a higher rate．That is，the value of the stock will increase．

Say that the improvement keeps up．Does the management make public that glad fact？Does the president tell the stockholders？Does a philanthropic director come out with a signed statement for the benefit of that part of the public that reads the financial page in the newspapers and the slips of the news agencies？Does some modest insider pursuing his usual policy of anonymity come out with an unsigned statement to the effect that the company's future is most promising？Not this time．Not a word is said by anyone and no statement whatever is printed by newspapers or tickers．

The value-making information is carefully kept from the public while the now taciturn“prominent insiders”go into the market and buy all the cheap stock they can lay their hands on．As this well-informed but unostentatious buying keeps on，the stock rises．The financial reporters，knowing that the insiders ought to know the reason for the rise，ask questions．The unanimously anonymous insiders unanimously declare that they have no news to give out．They do not know that there is any warrant for the rise．Sometimes they even state that they are not particularly concerned with the vagaries of the stock market or the actions of stock speculators．

The rise continues and there comes a happy day when those who know have all the stock they want or can carry．The Street at once begins to hear all kinds of bullish rumours．The tickers tell the traders“on good authority”that the company has definitely turned the corner．The same modest director who did not wish his name used when he said he knew no warrant for the rise in the stock is now quoted—of course not by name—as saying that the stockholders have every reason to feel greatly encouraged over the outlook．

Urged by the deluge of bullish news items the public begins to buy the stock．These purchases help to put the price still higher．In due course the predictions of the uniformly unnamed directors come true and the company resumes dividend payments；or increases the rate，as the case may be．With that the bullish items multiply．They not only are more numerous than ever but much more enthusiastic．A“l(fā)eading director，”asked point blank for a statement of conditions，informs the world that the improvement is more than keeping up．A“prominent insider，”after much coaxing，is finally induced by a news-agency to confess that the earnings are nothing short of phenomenal．A“well-known banker，”who is affiliated in a business way with the company，is made to say that the expansion in the volume of sales is simply unprecedented in the history of the trade．If not another order came in the company would run night and day for heaven knows how many months．A“member of the finance committee，”in a double-leaded manifesto，expresses his astonishment at the public's astonishment over the stock's rise．The only astonishing thing is the stock's moderation in the climbing line．Anybody who will analyse the forthcoming annual report can easily figure how much more than the market-price the book-value of the stock is．But in no instance is the name of the communicative philanthropist given．

As long as the earnings continue good and the insiders do not discern any sign of a let up in the company's prosperity they sit on the stock they bought at the low prices．There is nothing to put the price down，so why should they sell？But the moment there is a turn for the worse in the company's business，what happens？Do they come out with statements or warnings or the faintest of hints？Not much．The trend is now downward．Just as they bought without any flourish of trumpets when the company's business turned for the better，they now silently sell．On this inside selling the stock naturally declines．Then the public begins to get the familiar“explanations．”A“l(fā)eading insider”asserts that everything is O．K．a(chǎn)nd the decline is merely the result of selling by bears who are trying to affect the general market．If on one fine day，after the stock has been declining for some time，there should be a sharp break，the demand for“reasons”or“explanations”becomes clamorous．Unless somebody says something the public will fear the worst．So the news-tickers now print something like this：“When we asked a prominent director of the company to explain the weakness in the stock，he replied that the only conclusion he could arrive at was that the decline today was caused by a bear drive．Underlying conditions are unchanged．The business of the company was never better than at present and the probabilities are that unless something entirely unforeseen happens in the meanwhile，there will be an increase in the rate at the next dividend meeting．The bear party in the market has become aggressive and the weakness in the stock was clearly a raid intended to dislodge weakly held stock．”The news-tickers，wishing to give good measure，as likely as not will go on to state that they are“reliably informed”that most of the stock bought on the day's decline was taken by inside interests and that the bears will find that they have sold themselves into a trap．There will be a day of reckoning．

In addition to the losses sustained by the public through believing bullish statements and buying stocks，there are the losses that come through being dissuaded from selling out．The next best thing to having people buy the stock the“prominent insider”wishes to sell is to prevent people from selling the same stock when he does not wish to support or accumulate it．What is the public to believe after reading the statement of the“prominent director”？What can the average outsider think？Of course，that the stock should never have gone down；that it was forced down by bear-selling and that as soon as the bears stop the insiders will engineer a punitive advance during which the shorts will be driven to cover at high prices．The public properly believes this because it is exactly what would happen if the decline had in truth been caused by a bear raid．

The stock in question，notwithstanding all the threats or promises of a tremendous squeeze of the over-extended short interest，does not rally．It keeps on going down．It can't help it．There has been too much stock fed to the market from the inside to be digested．

And this inside stock that has been sold by the“prominent directors”and“l(fā)eading insiders”becomes a football among the professional traders．It keeps on going down．There seems to be no bottom for it．The insiders knowing that trade conditions will adversely affect the company's future earnings do not dare to support that stock until the next turn for the better in the company's business．Then there will be inside buying and inside silence．

I have done my share of trading and have kept fairly well posted on the stock market for many years and I can say that I do not recall an instance when a bear raid caused a stock to decline extensively．What was called bear raiding was nothing but selling based on accurate knowledge of real conditions．But it would not do to say that the stock declined on inside selling or on inside non-buying．Everybody would hasten to sell and when everybody sells and nobody buys there is the dickens to pay．

The public ought to grasp firmly this one point：That the real reason for a protracted decline is never bear raiding．When a stock keeps on going down you can bet there is something wrong with it，either with the market for it or with the company．If the decline were unjustified the stock would soon sell below its real value and that would bring in buying that would check the decline．As a matter of fact，the only time a bear can make big money selling a stock is when that stock is too high．And you can gamble your last cent on the certainty that insiders will not proclaim that fact to the world．

Of course，the classic example is the New Haven．Everybody knows today what only a few knew at the time．The stock sold at 255 in 1902 and was the premier railroad investment of New England．A man in that part of the country measured his respectability and standing in the community by his holdings of it．If somebody had said that the company was on the road to insolvency he would not have been sent to jail for saying it．They would have clapped him in an insane asylum with other lunatics．But when a new and aggressive president was placed in charge by Mr．Morgan and the débacle began，it was not clear from the first that the new policies would land the road where it did．But as property after property began to be saddled in the Consolidated Road at inflated prices，a few clear sighted observers began to doubt the wisdom of the Mellen policies．A trolley system was bought for two million and sold to the New Haven for $10,000,000；whereupon a reckless man or two committed lèse majeste by saying that the management was acting recklessly．Hinting that not even the New Haven could stand such extravagance was like impugning the strength of Gibraltar．

Of course，the first to see breakers ahead were the insiders．They became aware of the real condition of the company and they reduced their holdings of the stock．On their selling as well as on their non-support，the price of New England's gilt-edged railroad stock began to yield．Questions were asked，and explanations were demanded as usual；and the usual explanations were promptly forthcoming．“Prominent insiders”declared that there was nothing wrong that they knew of and that the decline was due to reckless bear selling．So the“investors”of New England kept their holdings of New York，New Haven & Hartford Stock．Why shouldn't they？Didn't insiders say there was nothing wrong and cry bear selling？Didn't dividends continue to be declared and paid？

In the meantime the promised squeeze of the bears did not come but new low records did．The insider selling became more urgent and less disguised．Nevertheless public spirited men in Boston were denounced as stock-jobbers and demagogues for demanding a genuine explanation for the stock's deplorable decline that meant appalling losses to everybody in New England who had wanted a safe investment and a steady dividend payer．

That historic break from $255 to $12 a share never was and never could have been a bear drive．It was not started and it was not kept up by bear operations．The insiders sold right along and always at higher prices than they could have done if they had told the truth or allowed the truth to be told．It did not matter whether the price was 250 or 200 or 150 or 100 or 50 or 25，it still was too high for that stock，and the insiders knew it and the public did not．The public might profitably consider the disadvantages under which it labours when it tries to make money buying and selling the stock of a company concerning whose affairs only a few men are in position to know the whole truth．

The stocks which have had the worst breaks in the past 20 years did not decline on bear raiding．But the easy acceptance of that form of explanation has been responsible for losses by the public amounting to millions upon millions of dollars．It has kept people from selling who did not like the way his stock was acting and would have liquidated if they had not expected the price to go right back after the bears stopped their raiding．I used to hear Keene blamed in the old days．Before him they used to accuse Charley Woerishoffer or Addison Cammack．Later on I became the stock excuse．

I recall the case of Intervale Oil．There was a pool in it that put the stock up and found some buyers on the advance．The manipulators ran the price to 50．There the pool sold and there was a quick break．The usual demand for explanations followed．Why was Intervale so weak？Enough people asked this question to make the answer important news．One of the financial news tickers called up tire brokers who knew the most about Intervale Oil's advance and ought to he equally well posted as to the decline．What did these brokers，members of the bull pool，say when the news agency asked them for a reason that could be printed and sent broadcast over the country？Why，that Larry Livingston was raiding the market！And that wasn't enough．They added that they were going to“get”him．But of course，the Intervale pool continued to sell．The stock only stood then about $12 a share and they could sell it down to 10 or lower and their average selling price would still be above cost．

It was wise and proper for insiders to sell on the decline．But for outsiders who had paid 35 or 40，it was a different matter．Reading what the tickers printed there outsiders held on and waited for Larry Livingston to get what was coming to him at the hands of the indignant inside pool．

In a bull market and particularly in booms the public at first makes money which it later loses simply by overstaying the bull market．This talk of“bear raids”helps them to overstay．The public should beware of explanations that explain only what unnamed insiders wish the public to believe．