Market Information

Where do you get your market information? Perhaps most people get it

from the daily papers. When you look over the financial news of one of

the leading metropolitan papers and see how much there is of it, you can

get some idea of the enormous volume of work necessary to get this

matter ready for the press in a few hours. There is no time to confirm

reports. It is necessary that many of the articles be written from pure

imagination, based on rumors.

Weekly and monthly periodicals can be more accurate in their

information, but even they are not always dependable. Much of the

financial news published comes from agencies that are not reliable. Read

what Henry Clews says about them:

"Principally among these caterers are the financial news agencies

and the morning Wall Street news sheet, both specially devoted to

the speculative interests that centre at the Stock Exchange. The

object of these agencies is a useful one; but the public have a

right to expect that when they subscribe for information upon which

immense transactions may be undertaken, the utmost caution, scrutiny

and fidelity should be exercised in the procurement and publication

of the news. Anything that falls short of this is something worse

than bad service and bad faith with subscribers; it is dishonest and

mischievous. And yet it cannot be denied that much of the so-called

news that reaches the public through these instrumentalities must

come under this condemnation. The 'points,' the 'puffs,' the alarms

and the canards, put out expressly to deceive and mislead, find a

wide circulation through these mediums, with an ease which admits of

no possible justification. How far these lapses are due to the haste

inseparable from the compilation of news of such a character, how

far to a lack of proper sifting and caution, how far to less

culpable reasons I do not pretend to decide; but this will be

admitted by every observer, that the circulation of pseudo news is

the frequent cause of incalculable losses. Nor is it alone in the

matter of circulating false information that these news venders are

at fault. The habit of retailing 'points' in the interest of

cliques, the volunteering of advice as to what people should buy and

what they should sell, the strong speculative bias that runs through

their editorial opinions, these things appear to most people a

revolting abuse of the true functions of journalism."

Of course, every trader gets market letters from one or more brokers.

These are many and varied in character. Some of them are prepared with

great care and give reliable information, but you must remember that a

broker's market letter is published for the purpose of getting business,

and business is created only by the customers' trading. Therefore it is

to the broker's interest to have his customers make many trades instead

of a few trades. In his book "Business Barometers," Roger W. Babson

reproduces a letter written to him by the Manager of the Customers' Room

of a Stock Exchange House. We consider this letter so important to all

traders, we are taking the liberty to reproduce it here:

"Hearing on every hand about the fortunes made in Wall Street, I

decided, upon being graduated from college, to devote myself to

finance. With this end in view, I secured a position with a

first-class New York Stock Exchange House, finally becoming the

'handshaker' for the firm; that is, 'manager' of the customers'

room. So I had an exceptional opportunity to size up the stock

business. The chief duties of the manager are to meet customers when

they visit the office, tell them how the market is acting, the

latest news from the news-tickers and the gossip of the Street. But

the real duties are to get business for the house. Once a most

peculiar man came to the office. He was about forty-five years of

age, dressed in a faded cutaway coat, high-water trousers, and an

East Side low-crown derby hat. In a high squeaky voice he said that

he knew our Milwaukee House and would like to open an account. Of

course, we were all smiles, for here was a new 'customer.'

"One day while in Boston he called us up on the long-distance

telephone to make an inquiry about the grain market. One of my

assistants, desiring to get a commission out of him, said 'We hear

that Southern Pacific is going up; you had better get aboard.' He

said 'All right; buy me a hundred at the market.' The stock was

bought, but he never saw daylight on his purchase, for the market

declined steadily afterward and by the time he got back from Boston

it showed a heavy loss. The man who advised its purchase had no

special knowledge about the stock, but simply took a chance, knowing

that the market had only two ways to go, and it might go up, in

which case, besides making twenty-five dollars in commissions for

the house, he would be patted on the back for his good judgment. If

the market went down, as it did, he would still make twenty-five


"I venture to say that 99% of the speculations on the New York Stock

Exchange are based on such so-called 'tips'. The manager has got to

get the business to keep his position and salary, and this can only

be done by 'touting' people into the market. So he draws on the

'dope' sheets of the professional tipsters and his own feelings, and

gives positive information to the bleating lamb that the Standard

Oil is putting up St. Paul, or that certain influential bankers are

'bulling' Union Pacific. The lamb buys the stock, the broker gets

the commission, and then the lamb worries his heart out as he sees

his one-thousand-dollar margin jumping around in value. Now it has

increased to eleven hundred dollars, then declined to nine hundred

and fifty dollars, then nine hundred dollars, eight hundred dollars,

then back to eight hundred and fifty dollars and then it takes the

'toboggan' to three hundred dollars upon which the broker calls for

margins, and sells the customer out if they are not forthcoming, the

whole speculation being based on the manager's 'feeling' that stocks

ought to go up.

"Men of affairs who will not play poker at home, and are shocked at

the mention of faro and roulette, which any old-timer will tell you

are easier to beat than the stock market, think they are using

business judgment when they try to make money on stock market

'tips'. Anyone with common sense can see that a 10% margin has no

more chance in an active market than a brush dam in a Johnstown

flood. One of the causes for this kind of speculating on a margin

is that a broker's commission is only 12-1/2 cents per share and it

does not pay to do small-lot business. The one-thousand-dollar

margin would only buy ten shares outright and net the broker but

$1.25 for buying and $1.25 for selling, whereas that same amount as

margin on one hundred shares yields the broker $12.50 each way

besides interest on the balance, the net result being that for any

given amount of money a speculator on 10% margin multiplies his

profits by ten and his losses by ten over those that would occur

were he to buy the stock outright and take it home. The broker on

his side multiplies his commission by ten over what he would receive

were he to do an investment business."

From the above letter you get an idea of the attitude of an employee of

the average broker's office. He would not be considered loyal to his

employer if he had a different attitude. When an attitude like this

influences the broker's market letters, they are not reliable.

You may ask whether there is any reliable information about the market.

Yes, there is. There are several large organizations that make a study

of fundamental statistics and statistics of different companies and give

information to their subscribers based upon this knowledge. We believe

that is the only kind of information that is worth very much to a

trader, except the statistical information--the number of shares sold

and the prices at which they are sold--he gets from his daily or weekly

papers. Some of the principal organizations of this kind are as follows:

Standard Statistics Company, Inc.

Babson's Statistical Organization.

The Brookmire Economic Service.

Harvard Economic Service.

Poor's Investment Service.

Moody's Investors Service.

Richard D. Wyckoff Analytical Staff.

The above are the principal organizations of this kind. Subscriptions to

their service cost from $85 to $1000 a year. In addition to these there

are a few other organizations besides our own and individuals giving a

somewhat similar service, but we know of none that gives such a service

at as low a price as ours.

You should not confuse the service given by the above organizations with

that given by many organizations and individuals who attempt to tell you

what the market is going to do from day to day. In other words, they

give 'tips' on the market. There are a number who issue daily market

letters of this kind and charge from $10 to $25 a month for their

service, but it is a line of service that we do not recommend at all,

because we consider that you would be taking a very great risk if you

followed advice of that kind. You might make enormously large profits

occasionally, but you would also have frequent losses, and when the

losses did come they might be greater than all the previous profits. We

want you to understand that that kind of advice is entirely different

from what we are recommending.