The Psychology of Speculation

The stock market literature of the past thirty years would make a vast library in itself -- one that would provide reading for a lifetime. Perhaps there is no other subject, apart from the eternal topic of love, in which more people are vitally concerned, either directly or indirectly. Since most of the country's wealth and commerce is controlled by corporations whose securities are listed on the various stock exchanges, the price fluctuations, which often reach the daily aggregate of hundreds of millions of dollars, either in loss or enhancement of value, are necessarily a matter of general concern. In 1925 the stock transactions on the New York Stock Exchange alone amounted to the stupendous and unprecedented total of well over 452,000,000 shares, while the sales of listed bonds totaled more than $3,398,000,000. These figures, of course, do not include the unknown billions of dollars worth of securities bought and sold on a dozen or more other exchanges and through private channels.

In addition to the large daily grist of "Market Opinions," many books and pamphlets are written which purport to be "Guides to Traders," or up-to-date recipes for "Beating Wall Street. " They set forth an exhaustive array of statistics, instructions and warnings; they furnish elaborately charted plans indicating many of the pitfalls of speculation; they tell how to avoid these, how to buy, what to buy, when to buy and how to make money; but while the theories advanced are oftentimes sound and easily comprehended, very few people profit by them, because when once caught in the maelstrom of stock speculation the average man becomes more or less mesmerized, and at critical moments his conservatism, his resolutions and his theories all take flight.