The Psychology of Speculation

Retired business men suffering from _ennui_, have often had recourse to the stock market as a means of stimulating their emotions and expanding their fortunes; with the result, in the first of these purposes they have usually succeeded beyond their expectations, while in the second they have met with uncharted obstacles. Some years ago when many of the great trusts were in process of formation a well known Pittsburgh magnate sold out his business to the United States Steel Corporation and later bought a home in New York and turned his attention to stock speculation. After plunging into a boiling market and buying thousands of shares at top prices, the trend eventually changed and he found himself on the crest of a tobogganing market with more than a hundred thousand shares of speculative stocks. At length when the pace threatened both his fortune and his peace of mind, in a fit of disgust he dumped his holdings overboard and proceeded to damn the market, the broker and everything else, including himself for being such an unlucky simpleton.

"My dear Mr. Blank," said his broker, "you are possibly quite justified in all your abuse, except that of yourself, to whom you really should apologize, since you do yourself a great injustice. You have had six months' experience in this game at an expense of a little less than two millions of dollars, whereas at the pace you began you were due to lose at least five times that amount but for your rare judgment and cool-headedness."