The Theory of Stock Exchange Speculation

by Arthur Crump

New York, Nov., 1886.

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The last chapter in Mr. Crump’s book, entitled “Outside Criticism on the Causes of Disturbance in the Money Market,” has been omitted in this edition, as it relates simply to questions about the policy of the Bank of England in regard to regulating the discount rate, and a controversy and correspondence on this point between Mr. Crump and Mr. Bonamy Price.

As this whole question is of no practical value or interest to the American reader, I thought it expedient to omit the whole matter.

H. W. R.

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CONTENTS.

		PAGE
[CHAPTER I.] Technical Terms Explained.
1.	Jobbers and Brokers	[19]
2.	The Bull	[19]
3.	The Bear	[19]
4.	Contango	[20]
5.	Backwardation	[24]
6.	Options	[26]
7.	The “Put and Call” Option	[26]
8.	The “Put” Option	[26]
9.	The “Call” Option	[26]
10.	The Fortnightly Settlement	[27]
11.	Speculation by Members of the House	[28]
[CHAPTER II.] The Importance of Special Knowledge regarding the Regularly Recurring Causes that influence the Markets.
1.	The Temper of the Public	[32]
2.	Meteorological Influences	[32]
3.	A Favorable Period of the Year	[35]
4.	Causes affecting the Value of English Railway Stocks	[36]
5.	The Course to pursue at the Turn of the Half-year	[36]
6.	Second Half of the Year more favorable for Bear Operations	[37]
7.	Activity among Buyers	[39]
8.	The Bull Speculator’s Great Chance	[39]
9.	The great importance of being now and again altogether Clear of the Markets	[40]
10.	The Movement of Prices near the Settlements	[41]
[CHAPTER III.] The Right Temperament for a Professional Speculator.
1.	Cool-headedness an indispensable Condition of Success	[43]
2.	The Uselessness of Haphazard Speculation	[45]
3.	Accurate Foresight	[45]
4.	The Cool Man, or Professional Speculator	[46]
5.	Observance of the daily published Telegrams from abroad	[46]
6.	The Selfishness and Hard-heartedness of the Professional Speculator	[48]
7.	The Non-professional or Haphazard Speculator	[50]
8.	The Misfortune of Early Gains	[55]
9.	Very few Failures made Public	[57]
10.	Greediness involves Loss	[60]
11.	Keeping one’s own Counsel	[60]
[CHAPTER IV.] The Increase of Speculation in Stocks and Shares.
1.	Stock Exchange Gambling increases in Europe, while Public Gaming-Houses are on the decline	[62]
2.	Speculation an Out-growth of prosperous times	[63]
3.	Commercial prosperity unhealthily fostered by Illegitimate Speculation	[64]
4.	The Influence of Trade Profits upon the Stock Markets	[64]
5.	An increase in the amount of Trade Profits realized, causes an Increase in the number of Securities	[65]
6.	Speculation by Established Companies	[66]
7.	The Demoralization caused by Temporary Success	[66]
8.	The New Era in Speculation	[67]
9.	Collapse through Over-speculation in Austria	[67]
10.	Increase in the number of Members of the London Stock Exchange	[68]
[CHAPTER V.] Modern Influences upon the Markets.
1.	A Fixed Line of Action	[71]
2.	Closer Uniformity of Values in all Markets through the Development of the Telegraph System	[72]
3.	A speculator cannot hope to succeed in any degree, unless his arrangements are as complete as those of a man engaged in bona fide business	[73]
4.	The Diminution of Gluts in all Markets	[73]
5.	Modern conditions render it more difficult than formerly for Small Mercantile Houses to succeed	[73]
6.	Every Commercial Revulsion destroys Houses of a Speculative character, and throws the good business into the hands of the large sound Establishments	[75]
7.	The Extension of Long-wire Telegraphy	[78]
8.	Money Famines should henceforth be as improbable of occurrence as Corn Famines	[78]
9.	Advantages derived from opening up communications with the Corn-growing Provinces of Russia	[80]
10.	The Growth of Wealthy Monetary Centres	[82]
11.	Private Cipher Telegrams as exterior influences upon Prices	[83]
12.	The Altered Character of interior influences upon Prices	[84]
13.	The Creation of Securities to meet the Demand	[84]
14.	Getting behind the Scenes	[85]
15.	The Difficulty of “Cutting” a Loss	[85]
[CHAPTER VI.] Cacoëthes Operandi.
1.	Waiting for Extremes	[87]
2.	Reaction generally more rapid after a Sharp Rise	[88]
3.	What Not To Do	[90]
4.	Special Information	[90]
5.	Much Money only obtainable as a certainty by Hard Work	[90]
6.	An Average Instance of Haphazard Speculation	[91]
[CHAPTER VII.] The Pit-falls.
1.	Hidden Forces Opposed to the Speculator	[94]
2.	The Turn	[95]
3.	The Danger of taking Advice	[95]
4.	A Disinterested Opinion	[96]
5.	All the Eggs in One Basket	[96]
6.	Traps for the Public	[97]
7.	The Public as Speculators are Bulls by Nature	[97]
8.	A Case of Roasting the Bulls	[98]
9.	A Cut off the Loaf and Pass it on	[98]
10.	Short Periods in, and Long ones out	[99]
[CHAPTER VIII.] Speculation With Capital.
1.	Restoring the Balance of Advantages	[100]
2.	The Necessity of Some Capital	[101]
3.	Capital to expend in Feints	[102]
4.	La haute Finance	[102]
5.	The Best of all Chances for a Speculator with Capital	[103]
6.	The most Legitimate Form of Speculation, Pawning the Stock	[104]
7.	When to Begin and when to Leave Off	[105]
8.	Test of a Speculator’s Pecuniary Position	[105]
[CHAPTER IX.] Speculation Without Capital.
1.	A Familiar Case	[107]
2.	Bitter Experience	[108]
3.	The Question of Seeing it Out	[108]
[CHAPTER X.] The “Tip” to Buy or Sell.
1.	A Friendly “Tip”	[110]
2.	Unloading at other People’s Expense	[111]
3.	The Qualified “Tip”	[111]
4.	The Unqualified “Tip”	[112]
5.	“Tips” worked by Syndicates	[112]
[CHAPTER XI.] Speculation by Machinery.
1.	Machinery in existence for directing Human Volition	[114]
2.	The Patrician Investor	[115]
3.	Administering Shares to the Public	[116]
[CHAPTER XII.] The Shifting of Speculation from the Higher to the Lower Classes of Securities.
1.	Speculation in Consols as a Hedge	[120]
2.	Speculation has Changed its Venue	[121]
3.	Increase of the Indebtedness of the States of the World	[121]
4.	The Fluctuations in the Price of Government Stocks	[121]
5.	High Class Stocks more firmly held than formerly	[122]
[CHAPTER XIII.] The Short “Turns,” or who makes the Profits?
1.	The “Turn,” a known quantity always against the Speculator	[124]
2.	The “Turn,” a Loss in going into, and also in coming out of the Market	[125]
3.	The difference in the character of the “Turn,” as compared with former times	[125]
4.	Special Danger of Speculating in a Stock that is quoted very wide	[127]
5.	The “Turn,” the Income of the Jobber	[128]
[CHAPTER XIV.] In what respect is Speculation useful in Markets generally?
1.	Speculation for the Rise, which is both Legitimate and of Benefit to the Community	[129]
2.	Speculation for the Fall, which is both Legitimate and of Benefit to the Community	[130]
3.	A Reasonable Relative Value for all Commodities	[131]
4.	The Three Classes into which Speculators may be divided	[132]