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Bucket Shops








There has been so much publicity given to bucket shops, nearly everybody
is familiar with the term. A broker runs a bucket shop when he sells
stock to his clients on margin and either never buys the stock for their
accounts, or else sells it immediately after buying it. The bucket shop
simply gets your money on the supposition that you are more likely to be
wrong than to be right. Of course, if you take the bucket shop's advice
you surely are likely to be wrong. Bucket shops get their clients into
the very speculative stocks, where there is likely to be a great deal of
fluctuation in the price of the stocks, which gives them frequent
opportunities to sell out their clients.

When the market is going down or when there are many movements up and
down in the price of stocks, the bucket shops make money rapidly, but
occasionally there is a long period when the market is working against
the bucket shops, and unless they have a great deal of money they must
fail.

In August, 1921, Stock Exchange stocks started to go up. The upward
movement was very slow but it was continual. Up to the time of this
writing, there has not been a three-point reaction, except in a few
stocks, in all of that time. Without a fluctuating market, the bucket
shop has no chance to clean out its customers. As a consequence, the
bucket shops began to fail in the early part of 1922, and up to the
present writing (April, 1922) there have been more than fifty of these
failures. However, it is not likely that all the bucket shops will be
put out of business. The more successful ones are likely to "weather the
storm."

Many laws have been enacted against bucket shops, and we believe some
way will be found to get rid of them at some future time; but we do not
expect that to happen soon, and we warn our readers not to get into
their hands, because if they do not get your money away from you one way
they are likely to get it some other way. The man who runs a bucket shop
usually has no conscience, and it certainly is an unfortunate thing for
anyone to get mixed up with such a man.





Next: Choosing A Broker

Previous: Short Selling



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