VOObyM

Reminiscences of a Stock Operator
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 newsagency
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 "leading insider"
asserts that everything is
O.K. and 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 newstickers
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
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