One of the reasons why speculation in high-class securities has more or less ceased is obviously because Consols and such like stocks are more firmly held than they used to be when the country was oftener engaged in wars, or disturbed by semi-revolutionary agitations. Then again, the very fact of high-class stocks remaining at a uniformly high level of price, causes a certain class of investors to buy them for simply absolute security’s sake. There are numbers of people who hold Consols because they are perfectly certain their £3 odd per cent. per annum will always be paid. They never trouble themselves about the price of the stock, and continue entirely apathetic whether the price rises to 120 or falls to 50. It stands to reason that, as the country grows in wealth, so do the holders of these high-class stocks increase in number, and as such securities are purchased largely for permanent holding, and purely as a means of providing income, so is steadiness imparted to the price, which tends consequently to be less and less disturbed in the absence of exceptionally adverse influences. There are always large numbers of persons in a country like England who are retiring from active life to live on an income, derived through the medium of public securities of one form or another, which is hereafter to be a purchasing power dependent upon the labour of others. One man does his share of work in the world, and in the process he provides for his future wants through the medium of saved capital. There can be no doubt that if the English national debt were to be paid off there would be a considerable commotion among those holders of Consols who would be satisfied with nothing else half as well. While the times in which we live therefore, continue quiet, the credit of the Government is firmly maintained, and the savings of the people are large, there will be always more buyers than sellers of high-class securities while the return for the money is not less than about 3 per cent. Buyers would in most cases probably prefer to look in other directions than pay anything over par for Consols. The fluctuations under such circumstances are consequently very small, and there is nothing literally but a bare bone for a speculator to pick, which is not worth the commission, and he migrates into other markets.
CHAPTER XIII.
THE SHORT “TURNS,” OR, WHO MAKES THE PROFITS?
The “Turn” a known Quantity always against the Speculator.
Although we have already alluded to this question of “turns,” in referring to the forces, so to speak, in the markets which are arrayed against the speculator, we have thought it advisable, subsequently, to give it a separate chapter. The “turn” is a known quantity about which there is no doubt, and in which there is no element of chance to be reckoned upon according to any doctrine of probabilities, as sometimes favouring one side, and sometimes the other. The “turn” may be described in brief as the income of the jobber, or in other words that fractional part of the whole sum which, if a buyer of some stock, he gets by its sale in excess of what he pays—and if he be on the other hand, a seller, the “turn” is that proportional part of the whole sum which he gets in excess on buying back the stock, in order to square his book. Supposing the two operations of a purchase and a sale proceed first from a bull speculator, and secondly from a bear; the jobber in the one case covers himself as soon as he can by a purchase of the stock sold by the first operation, and by the sale of an amount equal to that bought by the second operation.
The “Turn” a Loss on Going Into and also in Coming Out of the Market.
The “turn” comes in the second rank of obstacles which stand between the speculator and the goal, or profit, which it is his aim to reach, and is the most formidable of the fixed and, it may be said, inevitable, elements arrayed against him at the start. When a speculator enters the markets, therefore, he has to do his share of keeping both the broker and the jobber, and that not only when he commences his operations, but also when he finishes. There is the “turn” to be paid on going in, and also on coming out. The same may be said of the broker, only under certain circumstances. It is customary for a broker to charge no second commission on closing an operation, if it be done in the same account as that in which the operation was commenced. As speculators, however, especially the haphazard kind, are never contented to take small profits, and get out of the markets, they almost invariably pay a second commission. Thus there may be said to be two double fixed quantities, which are piled up against a speculator at the start.[44]
The Difference in the Character of the “Turn” as compared with Former Times.