CHAPTER VIII.
SPECULATION WITH CAPITAL.
Restoring the Balance Of Advantages.
It is in the nature of free trade, that whatever mathematical advantage is to be obtained at all is more accessible to the rich speculator than to the poor one. The rich player consequently can make himself the stronger one, and the operator with capital has advantage over the operator without.[38] So far, however, as it is worth while to exercise at all the natural skill in Stock Exchange speculation, which one individual may possess beyond another, there can be no doubt that a less rich, but very skilful operator, would very materially, if not quite, in the long run, restore the balance of advantages which was against him at the start. As the haphazard speculator always must enter the lists at a disadvantage or on unequal terms, it follows that the exercise of any amount of skill will only bring him somewhat nearer to, or at best slightly beyond, holding his own; and in that he would fail in the long run. If he lay down all the machinery necessary to success in ordinary business, he virtually passes the limit which defines pure speculation by reducing the risks to such a minimum that they are no more than the percentage which is an inevitable element in all mercantile transactions.
The Necessity of Some Capital.
That it is absolutely necessary that a speculator should possess capital may be illustrated from several points of view, and although we may become, perhaps, tedious by repetition, as in Chapter III., for instance, when speaking of the temperament of a speculator, the time spent in double reflections by the uninitiated may prevent shipwreck, at least in the first stages. A man who is going to operate on a large scale will be equally dishonest if he have not a large capital, as a small speculator who has no more than his £300 a year out of which to save up if he loses more than he can pay. It seems hardly necessary to state that a speculator who operates in the Stock markets and loses without having anything of his own wherewith to pay, inflicts just the same loss upon the broker who does the business for him, as he would upon a butcher of whom he purchased a leg of mutton, consumed it, and then declared he had no money. It is really, however, necessary to make this statement, clear as is the truth of it, because speculators, as a rule, do not realize the liability in the same way. There are differences in degrees of tangibility in these matters, no doubt, and hence the morally injurious effects of speculation and all kinds of gambling. A leg of mutton is a solid substance, and the fact of consuming it not only impresses the circumstance upon the mind, but upon the body too, in the shape of the recollection that the body benefited by the food. By the aid of the remembrance of the benefits that grow out of the consumption of the leg of mutton, the liability to pay for it becomes realizeable in a high degree, and no man allows himself to dream of escaping from it. It is not so in the same degree with a liability incurred by “time bargain” speculation, because what represents exactly the same tangible substance, was never fully, or even partially, realized as such.
Capital to Expend in Feints.
La Haute Finance.
All large speculators are well known. If they try to operate through other persons in order to deceive, the truth leaks out some time or other. Large orders are very difficult of execution, unless the broker is either of very good standing himself, or hints at the source from which he receives his instructions. Unless, therefore, it can be shown that the real operator has a very broad pecuniary back, an attempt to buy or sell large amounts of stock through brokers is difficult. It is sometimes necessary to have capital to throw away in feints, before the speculator commences his operations, just as a general may find it expedient to throw away a quantity of ammunition, and even the lives of some of his soldiers, to draw off attention from the real attack. A speculator who contracts to bring out a new loan, unless the security he has to offer is of the highest class, runs considerable risk of losing his money, as he has, as a rule, to pay something down to the borrower as a guarantee of good faith, and to allow him also to taste the ready cash, as some immediate consideration for entering upon business, which, if successful, is of all business the most remunerative. This kind of speculation belongs to la haute finance.
A supply of ready money is essential to the speculator in all markets, and it is marvelous that there can be so many persons who have to grope their way by the aid of bitter experience through the thick darkness of their ignorance to such a shining light of truth as this. And the full realization of this truth is, in most cases, only obtained at an expense which renders it impossible to repeat the experiment.
The Best of all Chances for Speculator with Capital.