How to Invest and how to Speculate: Explanatory of the Details of Stock ...

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Introduction

It would be idle to pretend that a handbook for

investors can afford all that is necessary in the way

of information. The investor must keep his eyes

open, consult his broker as before, and make use of

the wits with which Nature has furnished him.

The only objects of this book are to point out to

him certain guiding principles, without attention to

which he is running serious risks, and furnish most

pc of the information as to details of business and mere

- gen^almes „ to stoeke ^d ^ whiei the Man

S in the Street should know, but very often does not.

^ The wealthy investor may know the facts, but

^ there are naany small investors who are strangely

ignorant, as anybody who has had practical expert^ ence of their needs can testify. If this book should help them to understand the main details of financial business, and indicate the principles that guide the movements of prices on the Stock Exchange, its objects will be satisfied.

C. H. T.

VI

I i

IN USE ON THE STOCK EZCHANOB AND IN CONNECTION WITH STOCK EXCHANGE INVESTMENTS AND THE WORK OF THE COMPANIES CONCERNED^

Ad valorem (stamps, etc.). According to the market value of

the security.

Ailaa, Glasgow and South-Western Railway Deferred stock. Ales. S. Allsopp and Co.'s Ordinary stock. A L'escompte. A French method whereby a seller for the

account delivers on demand under ducowrU, Amalgam (mining). A combination of metals with mercury. Amortisation. The drawing and repayment of a bond. Anglos. Anglo-American Telegraph issues, e.g. Anglo "B,"

the Preference, and Anglo " A," Deferred stock. Apes. New York, Pennsylvania, and Ohio First Mortgage

Bonds.

Asked. A quotation is "asked" when a seller will part with

stock at the figure named. See Bid. Assessment^work (mining). In United States the annual work

necessary on a mining claim until full ownership. Atlantic. The New York, Pennsylvania, and Ohio R.R. Co. Ayrshire. (!) Glasgow and South- Western Railway. (2) The

Ordinary stock of that railway.

Backs (mining). Ore from the back of a lode.

Bags. Buenos Ayres Great Southern Railway Ordinary stock.

^ Only Gnich terms are included in the GloBsaiy as are not mentioned in the Index, and to which reference is not made therein to the text.

• •

Vll

Balance Certificate. When we sell only a part of our holding, and send our original certificate in to the company for transfer purposes, we receive a bala/nce cet^iflcate for the holding remaining to us in the company.

Ballymena. Belfast and Northern Counties Railway.

Bcmdon, Cork, Bandon, and South Coast Railway.

Barrel Arrudgamation (mining). Where the silver is amalgamated with quicksilver by revolving the ore in barrels.

Becks, Bechuanaland Exploration shares.

Beefs. Eastman Company's Ordinary shares.

Belly (mining). Where the ore body bulges out.

Berihas. London, Brighton, and South Coast Deferred Ordinary stock. Also called Brighton " A."

Berwicks. North-Eastem Railway, or " Berwick," Consolidated Ordinary stock.

Bid. Applied to a quotation (thus, 116 bid) means that a buyer in the market is willing to give the price for stock.

Blasting powder (mining). An explosive powder used for breaking up hard ground in mines.

Blind lode (mining). A lode that does not show on the surface.

Blow-out (mining). An outcrop of the lode, of a misleading kind as regards value beneath.

Blue-grovrnd (mining). In diamond -mining, the ground in which the stones are usually found.

Bolsa (Spanish). Bourse.

Bonanaa (mining). A rich deposit of ore.

Bones. Wickens, Pease, and Co.'s shares.

Bontu. An extra dividend, usually distributed under this name when directors do not expect to be able to maintain the increase in the total distributed.

Borsa (Italian). Bourse.

Bosh. Wabash Railroad Preference shares.

Branch (mining). A small vein off the lode.

Breads. Aerated Bread Company's shares.

Breadcrumbs. Split shares of the Aerated Bread Company.

Brighton "A." See Berthas.

m

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Vlll

British. (1) North British Railway; (2) its Ordinary stock.

Broken HUl Props. Broken Hill Proprietary shares.

Brums. The Ordinary stock of the " Brum," or L. and N.W.

Eailway.

Buddie (mining). A contriyance for oonoentrating ore. Buffets. Buflfelsdoom G.M. Company's shares. Bulkhead. A dividing partition in a mine. Btdlion. Gold, silver, etc. in lump form. Bullocks. Buluwayo Exploration Company's shares. Btmch (mining). A small mass of rich ore. Butty (mining). A contractor in a coal-mine.

Caley. Caledonian Railway Ordinary stock.

Caliche (mining). In connection with nitrate companies is the

valuable matter on the companies' properties. Calicos. Calico Printers' Association shares. Call. (1) The right to obtain shares, etc. at a certain price

within a given time ; (2) the demand by a company for

an instalment due on shares or stock. Canpacs. Canadian Pacific Railroad shares. Cap (mining). Where the vein or lode becomes worthless. Captain (mining). The mining term for the working manager. CasheL Great Southern and Western (Ireland) Railway. Cave (mining). Where workings fall in. Centrals. New York Central Railroad shares. Champion lode (mining). The chief lode itself. Chartered. The shares of the British South Africa Company. Chatham. The London, Chatham, and Dover Railway. Chats. The Ordinary stock of the Chatham. Childers. The 2| per cent Consolidated Stock of the British

Government, redeemable 1905.

Chinas. Eastern Extension Telegraph shares. Chlorides (mining). The ores containing chloride of silver. Chute (mining). A vein of ore which goes (downwards. Claras. Caledonian Railway Deferred Ordinary No. 1 stock. Clcurettes. Caledonian Railway Deferred Ordinary No. 2 stock. Clean-up (mining). The collection of all the metal for the

different parts of the mill or plates.

a 2 ix

Concentration (mining). A process of separating the rich

portions of ore from the bulk.

Consideration, The amount named on a transfer deed as that

for which the stock or shares is transferred. Coras. Caledonian Railway Deferred Converted Ordinary

stock.

Corpses, Peruvian Corporation issues. Costeaning. Prospecting for ore by making shallow pits. Cottons, English Sewing Cotton shares. Covlisse, The unofficial brokers of the Paris Bourse. Cradle, A trough in which auriferous earth is washed in order

to get at the gold.

Damps, Denver and Rio Grande Preferred shares.

Denver, Denver and Rio Grande Railroad.

Devils or Devels, Transvaal Estates and Development shares.

Dinahs. Edinburgh and Glasgow Railway Ordinary stock.

Districts. Metropolitan District Railway Ordinary stock.

Distringas, An old form of writ whereby transfer of stock or shares could be stopped by any person interested. The same results are now attained by giving the company ^

notice under Order XL VI., Rules 3-11, of the Supreme Court.

Doras, South-Eastem Railway Deferred Ordinary stock ; also ,* ,

called Dover " A,"

Dover "A," See Doras,

Down, Belfast and County Down Railway.

Dressing (mining). The preparation of ore for treatment.

Drift (mining). A horizontal underground working.

Dvmp (mining). Heap of ore or worthless matter from the washings deposited on the surface.

Dundalk, Dundalk Steamship Company.

Dyers, Bradford Dyers Association shares.

Easterns, Great Eastern Railway Ordinary stock. Elbow (mining). Where the lode matter turns sharply. Elswicks, Sir W. G. Armstrong, Whitworth Company's shares. Enfaced paper, India rupee paper when it is written across the certificate that the interest can be received in London

by a bill on Calcutta.

Eries, New York, Lake £rie, and Western Railroad shares. Exchequer bills, Crovemment bills for short term of years,

with option to holder to demand repayment any year.

They bear interest.

Face value. The nominal value of a security.

Fault (mining). When the reef is broken and a piece of barren ground is encountered.

Feeder (mining). A small vein oflf the main reef.

Fiddle. Middle price of a security.

Fissure Vein (mining). A crack in the earth filled with mineral matter.

Fixed charges. The charges for interest, rent, etc., which have to be paid before a company distributes anything to shareholders.

Floaters. Temporary loans usually in form of bearer securities, and so-called because easily realisable.

Floras. Caledonian Railway Preferred Converted Ordinary stock.

Flume (mining). Wooden pipes for carrying water to a mill.

Flux (mining). Anything used to fuse metals.

Foredoswre. The taking possession of mortgaged property by a mortgagee after default.

'' Foreign settlements^ The settling in Consols and a few other securities in the earlier part of the month.

Friable (mining). Elasily broken.

''GMfMs:' Consolidated Goldfields of South Africa Company.

Haddocks. Great North of Scotland.

Hard. Prices are hard, when the tendency is to rise.

Heavy. A market is heavy when the tendency is for prices to

fall.

Hulls. Hull and Bamsley Railway stock. Hungry (mining). When the veins are worthless*

xi

India bills. Drafts on the Presidency towns by the Indian

Government, and issued here by tender. Indigos. Shares of the Yorkshire Indigo, Scarlet, and Colour

Dyers.

Jagers. Shares of the New Jagersfontein Mining Company.

Jwmpmg claims (mining). Taking possession of a mine, perhaps illegally, but perhaps through legal conditions n^t being fulfilled by owners, who have thereby lost ownership.

Jwrtction (mining). Where veins meet in a mine.

Jv/ngle market. The market in West African mining shares.

Kaffir Circus. The market in Kaffirs.

Kaffirs. South African mining shares apart from Rhodesians.

Kanga/roos. Western Australian mining shares.

Kansas. Kansas City Southern Eailroad.

Khakis. National 2f per cent War Loan.

Knackers. Harrison Barber and Co.'s shares.

Knights. Witwatersrand mining shares.

Leader. A small vein of ore connected with a main ore body.

Leeds. Lancashire and Yorkshire Railway,

Letter of regret. Notice by a company to applicants for shares

signifying that no allotment is made. Letter of remmciation. When a company is issuing new capital

and giving the option of subscribing to the old proprietors,

forms are sometimes sent out to be filled up and returned

if the allottees are waiving their rights. Limerick. Waterford and Limerick Railway. Limit. The extreme price which a client names to his broker

as that at which he is or is not to do certain business. Limited market A market in which it is somewhat difficult

to deal.

Little Chats. London, Chatham, and Dover Ordinary stock. Little Turks. Turkish " B," " C," " D " series {q.v.). Lombards. South Austrian and Lombard Venetian Railway

issues.

Londons. London and North- Western Railway Ordinary.

xu

Ma/yroom, Cork and Macroom Railway.

MaUs, Mexican Railway Ordinary stock.

Marbles, Marbella Iron Ore shares.

J/ar^'71 (Stock Exchange). Cover.

Matrix (mining). The bai^en rock enclosing the valuable

ore.

Matte (mining). Ore after it has been partially " reduced." Megs. Mexican Railway Trust Preference stodk. Mets. Metropolitan Railway stock. Middies. Midland Railway stock.

Milks. Chicago, Milwaukee, and St. Paul shares. Modders. New Modderfontein Gold Mining shares. Mother-lode (mining). Main lode.

MuUingar. Midland Great Western of Ireland Railway.

NaUve metal (mining). Pure metal.

Noras. Great Northern Railway Deferred Consolidated Ordinary stock.

Ohs. Abbreviation for Obligations (prior charges of foreign

railways).

Oficina (mining). Where nitrate of soda is manufactured. Ohio. New York, Pennsylvania, and Ohio Railroad. Omnivm. A loan of different parts, united in the Omnium. One of stock. <£1000 nominal ; two of stock is £2000 nominal ;

three £3000 ; half of stock is £500 ; and so on.

Panning (mining). Washing ore in a pan by hand to obtain

the metals.

Pa/rquet. The official portion of the Paris Bourse, where the

Agents de Change do business.

Passage. Cork, Blackrock, and Passage Railway. Pauls. See Milks.

Patmed stock. Stock lodged with bankers, etc., as security. Perms. Pennsylvania Railroad shares. Peter (mining). When the lode narrows^ disappears, or

" pinches " out.

xui

Pocket (mining). Rich ore in a small mass.

Porta. Portuguese bonds.

Potts. North Staffordshire Railway.

Premivm. Is in excess of the amount subscribed. If stock is £50 paid, 2^ premimn will make it worth 52J. If stock is issued at 102, then a market quotation of 2^ premium will make it in reality 4J premium to the purchaser.

Props. Broken Hill Proprietary mining shares.

Reading. Philadelphia and Reading Railroad shares. Real stock. Stock actually held and not sold speculatively. Regvlus (mining). The pure ore at the bottom of a crucible. Rentes. The national debt of a country, e.g. France, or rather

the interest on that debt. Usually that is all the country

contracts to pay. Virtually French Rentes are the French

Consols.

Reserve liobbility. A liability on shares that is only called

upon in case of trouble.

Road Gars. London Road Car Company's shares. Rosies. Buenos Ayres and Rosario Ordinary stock.

Sag. A market sags when prices fall gradually from want of buyers.

Salting (mining). When rich ore is placed in a mine to give delusive returns.

Scrip. Properly speaking, a form of receipt for stock given to subscribers, who can exchange it later for certificates or other evidence of ownership.

Setrha/^k. A temporary decline in a rising market.

Shake Out. When weak holders are frightened out of their securities by a fall in prices sometimes brought about for the purpose.

" Shop." The term applied to those who specially look after the market in a security. It includes the financial controlling group and the jobbers employed by them.

Shores, hake Shore and Michigan Southern.

Shuttings. When the transfer books of a company are closed

xiv for the preparation of diyidend warrants. No transfers of stock are znade by the company during the period.

Slide (mining). When the strata suddenly dip away downwards.

Slubbers. British Cotton and Wool Dyers' shares.

Slump. A sudden and heavy fall in prices.

Soaps. A. and F. Pears' shares.

Soos. Minneapolis, St. Paul, and Sault de Marie Railroad.

South. London and South- Western Consolidated Ordinary stock.

" SpotJ* A <* spot " quotation is one for immediate delivery.

Spwr (mining). A small vein off the ore body.

Squeeze. When '* bears" find it difficult to secure stock on repurchasing.

Stale bidl. A "bull " who has had operations open a long time without success.

Stock Exchange holidays. The ordinary Stock Exchange holidays are January 1, May 1, November 1, or the first weekdays if these days are Sundays, Grood Friday, Christmas Day, and the usual Bank holidays.

Stop orders (American). A '^ limit " for selling out in case of a fall.

Stouts. Arthur Guinness and Co.'s stock.

Strike (mining). When ore is encountered.

Svmyp (mining). A hole at bottom of shaft to collect water. When it is drained of water it is said to be " in fork."

Talon. A certificate attached to a coupon sheet which may be exchanged for more coupons.

Tape prices. The prices sent over the Exchange Telegraph Company's machines from the Stock Exchange to subscribers. So called, because they are printed on a long ribbon or "tape" of paper.

Tars. Tharsis Copper Company's shares.

TelepJiones. National Telephone Company's securities.

Tilbury. London, Tilbury, and Southend Railway.

XV

Tmto8. Rio Tinto Copper Company's shares.

Tribvitor (mining). One who undertakes to work a mine, or

a portion of it, and pay a percentage of results for the

privilege.

Truiiks, Ordinary stock of the Grand Trunk Railway of Canada.

Unions, Union Pacific Railroad shares.

Vestas, Railway Investment Trust Deferred. Vickers. Vickers, Sons, and Maxim shares. Virgins, Virginia 2 per cent Funded Debt Bonds. Vogds. Vogelstruis Estates shares.

Wags, Western Australian Goldfields shares.

Waiter, A Stock Exchange attendant.

Waiver clause, A clause which formerly appeared frequently

in prospectuses whereby applicants were held to waive

rights to know certain particulars as to contracts. War loan. See Khakis, Wasting investment. Any investment which must one day

necessarily be worth, intrinsically, less than it is now. Water. That capital which is over and above fair valuation for

the business.

Weak hull, A *' bull " speculator who has not enough means

to pay heavy differences.

Westralia/ns, Western Australiian mining shares. Whiskies. Dublin Distillers* Company's securities. Wicklow, Dublin, Wicklow, and Wexford Railway. Wild Cat. An unsound venture, dishonestly marketed. Wodcombers, Yorkshire Woolcombers Association shares.

Yankees, American Railway securities as a whole.

York, The market term for the Great Northern Railway.

York "A," Great Northern Railway Deferred Consolidated

« A " stock.

York deferred. Great Northern Railway Deferred Converted

Ordinary stock.

XVI

Chapter I

When Fortune has been good enough to give us something to invest, there is nothing easier than to make an unconscionable muddle in investing it. Outside the area of what are called " gilt-edged " securities, the very soundest that can be picked up, there are snares enough and to spare. The investor may want 5 per cent for his money, and in securing it for a time may find that he has lost no inconsiderable portion of his capital. Some would-be investors are even more greedy, and it is odd that so many do not appreciate the risks that accompany a high interest yield. "I want something Ul" ™>i . count,/ p.r«>n not so long sincl "something that will return 8 to 10 per cent." He proceeded to point out the hardships of his position, with a view doubtless to the recipient of the letter striving more earnestly to discover that excellent investment. Another letter in the day's budget of correspondence was from one of those numerous poor struggling widows who seem in perpetual difficulty with their investments, to judge from the way in which they worry the financial editors of the newspapers. "I don't want to speculate," runs a typical request, "but I want something that is sure to rise, and that will return 5 per cent or more." Sometimes the correspondents are more startling. " What are Great Bounders ? " writes one enthusiastic speculator. "Are they mining shares ; and, if so, what dividends will they pay next year ? " Here is a fourth from an army man : "I am going to buy some Leopoldinas. Will you tell me what they are ? I hear they are very good." A fifth wrote in the same week, stating that he was a poor working-man, and had saved £20. " Will you tell me a sound investment in which I can double my capital before Christmas ?" It was then mid-November, and he probably had his eye on the Christmas festivities. Now these instances of recent questions put to one City editor mean plainly enough that there are elementary facts about the stock markets that want knowing, and that there are not a few people in existence who are running serious risks in not knowing them.

Let us take, then, the main causes of market movements. We note, perhaps, a financial writer, with an eye to the future, predicting a general rise in the best investment securities, or another referring pessimistically to the prospects of coal and iron shares, a third stating dogmatically that the

HOW MAKKETS ARE INFLUENCED

next railway dividends will be bad, and a fourth expressing his conviction that West African mines are going up in value, for " the best people have them in hand." Quite possibly the writers are well-informed. It may be that they are judging from experience of what the movements may be which they fancy are now setting in, and that experience may be worth attention. Markets move for sound financial and economic reasons as well as at the bidding of the gambler. We will, in the first place, take the greatest of all the reasons for market movements — ^the laws of trade.

Let us suppose that trade is very slack indeed, that men are out of work, with little money to spend on food and drink or clothes. Mills and factories are standing idle, those things that are produced, whether cloth, or coal out of the mines, or whatever they may be, are sold at low prices. There may be a vast amount* of capital in the country, but nobody wishes to start a new mill or factory or open up a new mine, because he does not feel that there is a reasonable chance of making a profit. The manufacturer finds that if he wants interest on his spare capital he must invest it in stocks and shares, or somewhere out of his special trade. The banker will allow him little or nothing for his surplus, for there is not much demand for loans, and there are comparatively few trade bills to discount. So the manufacturer calls on his broker, and manufacturers and traders from all over the country call on their brokers, or write to them.

Everybody in trade who has capital is putting it into more or less sound securities. Some gamble with it, like our friend who, in mid-November, endeavours to double his capital before Christmas. Others put it into something safe. The great rush of investors to pick up securities gradually puts up the price of all that are worth having, and many that are not. Consols rise from 100 to 110, and as the interest paid is the same every year, the actual yield to the investor is less, since he is paying more capital to secure that interest. The demand for securities grows. Men and women grumble because they can obtain so little interest in return for their money.

Then some kind people in the City see their opportunity. Hundreds of schemes are propounded, mining ventures are prepared by the score, new inventions that are to make everybody's fortune suddenly become numerous. The advertising columns of the newspapers are crowded with prospectuses of new companies, each better than the others. The wise investor, who is satisfied with his pittance, goes on as before, putting his money into sound securities. But the great multitude of those who wish to get rich, and to get rich faster than their neighbours, begin to subscribe freely for shares, or gamble in them on the stock markets. One day the crash will come, but we need not trouble with that little matter. The main thing is that a great trade principle of supply and demand is iUustrated. The public wanted investments ; the company promoters supply them. Surplus capital must be invested somewhere. ^

Meanwhile, new goldfields, let us say, are being opened up. Most of the mines are not worth having, a few are really hopeful, the minority perhaps oflFer some kind of a chance. The public have paid big prices for all of them, and extravagant eulogies have appeared in some of the newspapers. Mining engineers and company promoters, who will make a big thing out of these fields if the public only subscribe, are interviewed at column length, and make public speeches in which the prospects are discussed with fervour, especially after dinner. A Government official tells in public what he has been told. Even the Sunday magazines have an illustrated article or two on the new goldfields. The money pours in, and miners get to work. The shipping companies do a big trade in carriage of passengers and goods to the new country, the Lker? of minfng machinery find orders in plenty, and their works are employed at full time. Simultaneously, perhaps, a great railway is to be constructed in another country, and orders for rails and. trucks and engines reach our manufacturers. The men at the works are employed on full time. The demand for coal and iron is greater, and the miners therefore become busy. They and the workmen in the factories begin to drink more, and the demand for minor luxuries in food increases. The money begins to circulate. The banks and the manufacturers find that more capital must be released from the securities to be utilised in trade, and it is accordingly released. The wives of the workmen want more finery, even the workmen themselves buy new clothes.

There is a revival in the cotton trade, the woollen trade, the ribbon and hat-making and shoe trades, and many others. We begin to hear of " good times," and there are fewer Socialists addressing half-starving discontented groups of working-men. The trade revival is interesting enough, as we can see, but what it means to the investor is that the demand for securities is not so great as it was, that more money is employed in trade, many far-seeing men are investing in the debentures and preference and ordinary stocks of the iron and steel and coal and shipping and other companies, those engaged in trade and commerce, and are selling out their low -yielding investments to do so. "A very dangerous thing," remarks one man to his neighbour, whei he telb L, that he i» buymg shaJin th^ South Wales Iron Works, let us say. So it may be, for there has been no dividend on the shares for years, and this movement in trade may not last. But our investor probably thinks it will, and is content to back his opinions and the chances of dividends being resumed, and so buys the shares while they are at rubbish values. All these movements out of the best investment stocks mean that there is a tendency for their market-prices to fall. The big insurance companies and the banks, with large sums locked up in the best securities, are well advised, and probably see what is likely to happen. They too sell a portion of their best stocks and put the money into more profitable channels. At last the decline in the best securities sets in, for the demand is not so great and the sellers are more numerous. Operators on the Stock Exchange become " bears," selling what they have not got in Consols and other securities, with the hope of buying back at a lower price. Quite likely they are successful.

Meanwhile, trade becomes still more active. Workmen have been earning good wages, and though prices have been rising they can afibrd to pay more without feeling the pinch, and masters are making big profits. Activity in one trade begets activity in many others. There is an enormous output of cloth and cotton, iron goods and steel goods, and one thing or another. And keeping our eye on the market in securities, we find that the best of them are standing at low prices compared with what they were when trade was slack, and that our investor who bought his South Wales iron shares has actually secured a dividend, and that his shares have risen enormously in value, as well as nearly all the shares and debentures of the companies engaged in iron and coal and shipping and other branches of trade and commerce. Observe, then, that when trade was slack we had the best investment securities at a high figure and " industrial " securities, as the iron and coal and shipping shares mentioned above are called, standing at a low figure. Now, when trade is good, we have the best investment securities at a relatively low figure, and the " industrials " have risen enormously. And depend upon it, there will be many short-sighted people who will believe that the industrials will remain at a high figure, just as there were many who believed that the rise in the best investment stocks was permanent.

Perhaps at this juncture a great firm of manufacturers discovers that, in its speculative zeal, it has over-produced, that there is some difiiculty in disposing of its wares, and that certain heavy liabilities are falling due in the near future. The heads of the firm scent danger, and reduce their prices in their zeal to reduce their stocks. There is another big firm of manufacturers in the same line of business that is notorious for its speculative enterprise, and is known to have manufactured heavily in advance of orders. Its bankers drop it a hint that accommodation may not be provided so freely in the near future, for bankers have a way of taking care of themselves. The firm, in its endeavour to reduce its stocks, undersells the other, and as two big firms are thus " cutting " prices, most of the others are forced to follow suit. The middlemen in the trade, noting the movement, are inclined to wait for still lower prices, and so are by no means free with orders. One of the speculative firms finds that much of its discount paper is falling due, that trade has slackened, the value of its stock of goods has fallen, and when it examines its position, much to the surprise of its partners it is discovered that the firm is insolvent. There is a suspension of that firm, its payments to others in the trade are delayed, prices fall lower, the banks are more cautious, and probably another business or two collapse. Men are thrown out of work. There is less demand for goods, prudent manufacturers restrict output severely, lighten their commitments and withdraw capital. One trade reacts upon another, just as it did when business began to improve. There may even* be a panic. But at any rate there is a slackening off of trade all round, and less incentive to employ capital in industrial concerns, the dividends of which are beginning to decline. Manufacturers and others who are withdrawing capital, and shareholders who are selling their industrial securities, are looking round for something in which to invest. They find that .the best securities are at low prices and they buy them. Here, then, we have another important rule for the movements of securities. Slackening of trade should mean a tendency for the best investment stocks to rise and for the leading industrial securities to fall.

We have been following what is a very normal series of movements in trade, occurring so regularly that the term ^" trade cycle" has been applied to it. The political economists have observed that it usually takes a period of about ten years for the regular succession of changes in trade to take place. It has been the endeavour in these pages to show that those who observe the trade conditions closely may find one of the main causes of market movements, and that those who act in accordance with well-recognised principles may invest with advantage to themselves. The close of a period of highly flourishing trade is not one in which to Duy " industrials " with a view to holding over a term of years ; on the other hand, it is a period in which to buy the best investment stocks. It is the other way round when trade has been slack and is at length showing some signs of mending.