The General Semantics of Wall Street

© Barakaldo Books 2020, all rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted by any means, electrical, mechanical or otherwise without the written permission of the copyright holder.

Publisher’s Note

Although in most cases we have retained the Author’s original spelling and grammar to authentically reproduce the work of the Author and the original intent of such material, some additional notes and clarifications have been added for the modern reader’s benefit.

We have also made every effort to include all maps and illustrations of the original edition the limitations of formatting do not allow of including larger maps, we will upload as many of these maps as possible.

THE GENERAL SEMANTICS OF WALL STREET

BY

JOHN MAGEE

WITH ILLUSTRATIONS BY THE AUTHOR

Table of Contents

Contents

Table of Contents 4

PREFACE 5

A WORD OF CREDIT 9

INTRODUCTION 10

THE BIG GAME 12

BLACK MAGIC 17

THE VILLAIN 20

THE BLIND 23

OUT OF THE DARKNESS 26

THE CAMERA 28

THE PRIMARY RECEPTORS 33

A STARTING POINT 36

ONE-TO-ONE 39

OF MAPS 42

DATING THE MAP 47

BRINGING DATA UP-TO-DATE 53

THE TWENTY-SIX LEAD SOLDIERS 55

MAPS OF MAPS 59

THE PIGEONHOLES 63

THE LABELS 66

NOT QUITE THE SAME 71

UP AND DOWN THE LADDER 73

SIMILARITIES—AND DIFFERENCES 75

BEYOND THE WORLD OF THINGS 79

THE MEANINGS WE ATTACH TO MAPS 87

THE MAPS WITHOUT TERRITORIES 91

AN EXCEEDINGLY COMPLEX MACHINE 95

LAYERS OF AWARENESS 100

TIME BINDING 107

STOP! LOOK! LISTEN! 111

CONTRADICTIONS 115

LET’S NOT BE TOO ANTHROPOCENTRIC 125

SANITY MUST BE ACHIEVED 128

THE THINKING PROCESS 131

THE VAGUENESS OF THE HIGH ABSTRACTIONS 136

TO ME 138

EITHER...OR 142

AN EXAMPLE OF THE DANGEROUS NATURE OF DICHOTOMY 146

THREE-VALUED ORIENTATIONS 150

MULTI-VALUED SYSTEMS 153

INFINITE-VALUED SYSTEMS 155

THE GREEKS HAD A PHRASE FOR IT 159

IMPERFECT INFORMATION 165

WHY DOES IT HURT SO MUCH? 170

PROFITS CAN BE PAINFUL, TOO 176

PREDICTING THE FUTURE 179

THE METHOD OF PREDICTION 181

HUNTING 184

POSITIVE FEEDBACK 188

WHAT IS VALUE? 192

ASKING THE RIGHT QUESTIONS 199

TWO VERY PRACTICAL QUESTIONS FOR EVERYDAY USE 203

BALDERDASH, UNLIMITED 208

WE CAN’T GET IT ALL 212

THE TRUTH, THE WHOLE TRUTH, AND NOTHING BUT THE TRUTH 215

INTERLUDE 217

DATED DATA 220

BUY GOOD, SOUND STOCKS 224

I AM INTERESTED ONLY IN INCOME 229

BUT STILL I INSIST ON MY DIVIDENDS 232

PUT THEM AWAY IN THE BOX AND FORGET THEM 235

DAT OL’ DEBBIL MARGIN 238

NOT JUST A MARKET OF STOCKS 241

CORRELATIONS AND CAUSES 244

THE FUNDAMENTALS 250

ACCRUED VERSUS REALIZED 254

UP IS BETTER THAN DOWN 259

THE UP-AND-DOWN OF IT 265

POLITICS AND ECONOMICS 268

A VARIETY OF DEVICES 273

CAN ANY MAN PREDICT THE FUTURE? 278

THE METHOD OF EVALUATION 283

BUILDING THE METHOD 286

THE METHOD IS BUILT FROM THE BARE BONES 290

PUTTING THE METHOD TO WORK 293

HABIT CAN BE A PITFALL 295

CHAIN AND FLASH REACTIONS 299

NUMBERS CAN BE PITFALLS 301

THE WONDERFUL CURVES 305

LOSSES CAN BE PITFALLS 309

PROFITS CAN BE PITFALLS 312

COMMON SENSE CAN BE A PITFALL 315

THE PIG-WATCHERS 318

THE LIMITS OF PREDICTION 321

IS THE MARKET A GAME? 327

THE PURELY MATHEMATICAL ODDS 330

THE STRATEGY OF YOUR OPPONENT 334

THE PAYOFF 338

FRACTIONIZING VERSUS MAXIMIZING 342

ACCENTUATE THE NEGATIVE 347

NET LONG TERM GAINS 350

REQUEST FROM THE PUBLISHER 355

PREFACE

THIS has been a particularly hard book to write. I have found it much harder in some ways than my part of Technical Analysis of Stock Trends. It has been two years in actual preparation, much longer than that in its preliminary shaping-up.

It is hard because the subject is both so simple and so complicated. It is simple in that there are only a few basic points and these would be almost self-evident to a child if he were not already conditioned to a great many pre-conceptions. It is complicated because these pre-conceptions include a great deal of the teaching that every person receives early in life. Some, perhaps most of this teaching is factual and useful. But mingled with it are the legacies of all the pre-scientific theories, the ancient philosophies, the theologies, that have come down through the ages. And the mixture of custom, ethics, hypothesis, precept, morality, discipline, superstition, directives, etc. includes a good deal that may not jibe with the observed facts today, may even conflict with or contradict itself, and may not be in the best interests of mankind’s development as a race nor of a man’s individual welfare.

To make things more complicated, these customs, directives, etc. are often clothed in the vestments of High Authority. They are often presented in highly-colored emotional terms, and as Absolutes, not subject to revision or even to re-examination.

Finally, as if to add further difficulties, the structure of language itself tends to contribute to misunderstanding and misevaluation; unless that structure and its relation to our thinking is well understood.

There have been a good many books written on the subject of General Semantics, some of them far more profound than this one. This particular book was built around the problems of a little cosmos which in many ways provides a good working model of the larger society in which we live. Although the stock market represents only a certain part of the life-activity of a certain part of the population, it presents on its limited stage all of the familiar human emotions, fears, and hopes, and it involves problems which have their counterparts in other domains of business, in social life, in the family, and in the intra-personal world in which each of us lives his own private life.

Some of the thoughts expressed in this book are the outcome of my own experiences in the market and elsewhere. But it hardly seems necessary to add that the background of much of this material rests on the time-binding of others; of Alfred Korzybski of course, and Lillian Lieber, Norbert Wiener, John von Neumann, Karen Homey, and many others. I am most particularly indebted to Doctor Daniel R. Wheeler, since the book leans heavily on the philosophy and psychology he has taught and practiced for many years. Doctor Wheeler, in his work as a psychiatrist, has applied the principles of General Semantics in a practical way to the problems of family and job and of living with one’s self, which involve the common questions that arise in the lives of most of us. Dan Wheeler feels that if, after we have eliminated so far as possible the probable physical sources of un-sanity, that is, if we find no adequate physiogenic cause for maladjustment, we should look at the mind itself, as it has been taught, as it has been shaped and has shaped itself, and discover, if we can, how it is failing to evaluate and deal with the environment successfully. He regards the work of the psychiatrist primarily as that of a teacher engaged in instructing the student not merely in how to solve problems; but a teacher who can show the sincere student how to understand the workings of his own mind, and how to shape his further education and/or his re-education so as to make possible a more realistic appreciation of the surroundings in which he lives. After such training the student will not have to be told what to do in meeting a particular problem, for he will have developed the ability to do his own thinking and to come up with answers appropriate to the question-at-hand.

This is not, of course, a book on psychiatry, nor is it entirely a book on psychology. It is intended primarily as a guide to help the student of the free market to acquire greater confidence and ability in his contacts with that market; though I hope it may hold some interest, too, for workers in other fields.

I am most earnestly hopeful that Doctor Wheeler will write a book in which he will present the applications of General Semantics with special reference to his own work in the field of psychiatry. Such a book would I believe, go a long way to clear the air of a great deal of misunderstanding and plain nonsense that has been bandied about for years in regard to psychiatry, and not all of it from the lips of laymen.

Of necessity The General Semantics of Wall Street touches on a good many different subjects, some of them controversial. I do not make any claim to be an authority on any of these subjects. However, in many fields there is such a high degree of specialization that the inner circle becomes more or less cut off from the rest of the world. Thus, in finance, law, politics, religion, sociology, medicine, education, psychiatry, etc. there has come to be a special language used and understood by the initiate. This is probably necessary in order to set up definitions covering the very specialized concepts involved in particular studies. But the lay public is not welcome behind this veil, and there is not much communication between the dedicated practitioners and the citizenry at large.

It is not possible to have a really meaningful discussion with the workers in some of the specialized fields, partly because of the barrier interposed by the cant or technical vocabulary of the various trades, as it were; and partly because the professional workers neither have the time to explain, nor has the public the time to listen.

Furthermore, if one attempts to talk seriously about serious things with any of the learned members of the learned professions, these specialists will usually repeat (in simple, easy-to-understand words), the cut-and-dried official version of what should be told. This avoids wasting a lot of time in fruitless debate with uninformed outsiders. But it also sometimes perpetuates a certain circularity of thinking which makes basic progress impossible.

As a rule professional men will not engage publicly in any debate that might challenge their own premises and conclusions, except to the extent of defending the status quo of their pre-conceived dogma. This may be because, living in a more or less self-contained world of thought, they are not anxious nor able to explore any very different approach. There is the suspicion that some of these learned men, through no fault or intention of their own, are carrying on their labors within a framework of mediaeval philosophy, obsolete science, and pre-historic superstition; in short that they are doing some very fine work considering the tools they are using, but some of these tools may be as dead as the past from which they received them.

Along with all this there is the group defense system which effectively seals off each esoteric guild, whichever it may be, through the organized discipline of the group. No member of a professional group is likely to challenge publicly even the most obvious un-sanity in the credo of his craft. He will explain willingly, but always within the limitations of the party line. If you touch him on some highly controversial matter he will tell you he is not the spokesman for the group and would prefer not to become involved. For this you can hardly blame him. You cannot imagine a lawyer speaking openly on a radio program about certain tenets of the law. You cannot imagine a banker appearing on television to discuss frankly certain realities of investment. You cannot imagine a priest facing up to certain questions in theology except in terms of the precise dogma of his church.

In all fairness it should be admitted that the great majority of the sincere, honest, hard-working professional men do subscribe sincerely to the official line of their group. As a matter of fact most of them are far too busy carrying out the important duties of their day-by-day work to have much time for purposeless research. They are not encouraged to explore scientifically in the light of modern understanding, the underlying sources of their convictions. And it may be, too, that some of them feel that the end justifies the means. They do not feel a need to probe too deeply into the basic philosophies of their crafts. There is enough hard and useful work to be done at the low level of practical everyday reality. The lawyer must prepare his cases. The banker must deal with practical business problems. The minister must write his sermons, visit the sick, perform the marriages. The teacher must conduct classes as outlined in the curriculum.

But since it is not possible to ask the really tough questions and get the kind of answers we need from the men who should know, in their respective fields, and since there is not too much communication between the experts in various specialized fields, we are faced with the prospect of going on very much in the way we have always gone on; and that is no longer good enough. If we are going to survive as a human race, we must establish a genuine freedom of thought which will make it possible for men in different fields of study to communicate with one another; to re-examine the very foundation stones of their learning, and if necessary, to change them. Also, to maintain an effective two-way communication with the lay public who also have a stake in life, liberty and the pursuit of happiness.

In touching on controversial aspects of some highly specialized professions I do not mean to be presumptuous; and I realize that there are men in these groups, who are well familiar with the problem and who are much concerned about it.

But if the men who should be challenging the past and bringing new education and new light to people who so badly need it, cannot or will not come forward to demand a re-examination of basic methods of evaluation in their own professions, then it may be necessary for members of the lay public to speak out. We are fully aware of the great steps that have been made on the mechanical level, and the administrative level, and the research level. But as long as there remains in our learned professions a hard core of pompous archaic nonsense that can lead to hostility, misunderstanding, frustration and unnecessary human misery, we must say what we have to say and hope that more able men, within the ranks of the initiate, will have the courage to challenge the un-sanities that are hurting them and menacing all of us.

JOHN MAGEE

August 27, 1958

A WORD OF CREDIT

IN THE writing of a book, or in any important creative effort for that matter, there are forces behind the scenes which are vital to the success of the job. I would like to express here my heartfelt thanks to my wife Elinor, and my three children, John, Louise, and Abigail, for their patience and forebearance during the difficult months while The General Semantics of Wall Street was being written, illustrated, and produced.

Also, I would like to give my thanks to our technical staff for keeping the ball rolling during this period in the matter of maintaining daily stock charts, the Delta Studies, and the like: To Frank J. Curto, who has worked shoulder-to-shoulder with me for a number of years, and his wife, Marcella, Colonel Harolde N. Searles, Careen Searles, Harry A. Oltsch, Lottie G. Oltsch, Dr. I. Morgan Levine, Grace Levine, Robert M. Lantry, Henry Larsen, Olen Norris, Sheridan Carey, and John Moriarty.

And to our production and office staff, Flora La Riviere, Alyce Scholz, Charles Curto, and Katherine Quinlan. And to Amy Jones for her help in typing the manuscript.

I want to express my gratitude to Patricia Kelley, my personal secretary, for her encouragement and help in this difficult and sometimes discouraging job.

Most especially I want to thank Muriel Brown, who as General Manager of my business has handled the many difficult problems of a growing organization in an outstanding manner. Her own knowledge of general semantics, plus her unswerving loyalty have given me confidence and inspiration without which the job of producing this book could never have been carried through.

And very importantly, I want to extend my thanks to my brother, Beverly Magee, also a student of general semantics, for his great help in reading proofs and offering constructive suggestions as to necessary changes in the text.

THE GENERAL SEMANTICS OF WALL STREET

INTRODUCTION

WALL STREET is not really a place, you know. Not a narrow little lane squashed between the imposing palisades of the great buildings. Not the Wall Street I am thinking about. On that other Wall Street there are window washers, and typewriter salesmen, and exchange students from Lebanon, and pigeons, and curbstones, and bits of last Monday’s Herald Tribune swirling in a dust-devil; street lights and old chewing gum rooted to cracked sidewalks, a professor from Bowdoin College eating peanuts, a small boy from the Bronx going to visit his uncle’s office. Fire sirens around the corner; boat whistles in the distance; a real substantial piece of the world, and like any piece of the world, filled with complicated and interesting things. But that is not the Wall Street I mean.

Wall Street, as we use the word, is an abstraction, a symbol. It is real enough, but it isn’t the kind of reality that you can go and look at, and take pictures of, and walk around in. It is a metaphor, the first of many we may encounter before we finish our excursions.

The Wall Street we are to consider exists in the minds of people. And the tangible expression of it is not in concrete and steel and plate glass, but in reports, charts, analyses and in the proliferated communications of the tape as its messages are displayed in a thousand board rooms across the country.

And just as we strip the pigeons and the boat whistles and the cracked sidewalk from our picture of the financial world of Wall Street, just as we generalize the activities of the narrow little New York lane to include all the financial interests of everyone who buys the final edition of his home town paper, wherever it is, to check the closing prices for the day, so we again simplify and generalize the financial world of Wall Street. We strip off the superficial and incidental goings-on, and we generalize its basic activities. In short we are trying to see what this thing is, what the essence of it is, and what makes it tick.

More especially, we are trying to see what makes us tick. If we really understood what motives press us to the corner news stand to get the earliest possible glimpse of the closing price on General Motors, it might help us to understand why we so frequently buy stocks that subsequently sell much lower, and sell those issues that skyrocket so handsomely.

And, you know, it isn’t really Wall Street entirely, either, not even the financial kind of Wall Street. It is purchases and sales, predictions and hunches, profits and losses; the chance to pay off the mortgage on the house, the hope of sending Martha to college, the desire to own a Cadillac.

Nor is that the end of the chain, either. We can carry the abstracting process even further. We can strip away all the symbols of finance and even all the symbols of what money can buy; and then perhaps we may stand in the presence of a very generalized abstraction indeed. And this abstraction is not only very general, but at the same time it is very particular and it very specifically concerns you.

I am speaking now of your self. Not your flesh, blood, teeth and toenails, but the part of you that wishes, and hopes, and fears. The part of you that you must do right by or lose your self-regard. And when you have abstracted yourself to the level where you can see clearly that the essential objective in paying the mortgage, sending Martha to college, or buying the Cadillac is all of a piece and is concerned with defending and enhancing your self-regard, then you will realize that the roots of the grubby activities of a dirty little lane in New York have their ultimate flowering in the most personal and intimate recesses of the minds of men.

This may explain somewhat why I have related General Semantics and Wall Street. For to understand the strange and often irrational things that people do to themselves in Wall Street, it is necessary to explore the forces that operate on them, largely from within themselves.

And when you have traced these relations and understand them at the levels of high abstraction, you may find when you come down to earth again that some of the puzzling and threatening problems of the market, and of life in all its other aspects, do not seem so puzzling nor so threatening as they used to seem.

THE BIG GAME

STEP right up ladies and gentlemen...everybody plays; every-body wins. You pick your number, name your prize. It’s the Big Game. Hurry, hurry, hurry!

Wall Street. Bright lights and loud music. A new adventure at each concession. Young couples, sharp fellows out on a spree, sophisticated gals on the make, a sailor on shore leave. Hamburgers, cones, fresh roasted peanuts. The Big Game.

Take a ride on the Atomic Fuel Convertibles! Test your strength in the Steels! Try your luck at the Puts and Calls. Do you dare ride high on the Missiles and Aircrafts? If you have a steady hand, try the Arbitrage.

It’s the Big Game, folks. And when you’ve seen all the sights at Luna Park come out back of the fence to the west (to the midwest, rather). Try the Corn Game! Guess your Spread! Swing ten contracts of Lard and win a fine Seegar!

It’s the Big Game. Everybody wins. Hurry, hurry, hurry!

The Big Game. How do they rig these rackets? How does the shillaber land three balls right in the buckets and walk off with the Kewpie Doll, but one of mine always bounces out. How come that the wheel always slips by just one or two cogs and misses my number for the box of high grade chawclet creams? It’s all pure luck isn’t it? Or do these boys know how to gimmick the play? There must be a gimmick. Somehow it’s always a shill who gets the Indian blanket, and you and I walk off with a tin whistle for a prize.

Well! It’s the Big Game, but maybe it’s not your game; and until you can make it your game; at least until you know the gimmicks and where to look for them, maybe you’d better save your quarters for the ice cream cones and the hamburgers.

You’d never think to look for the gimmicks where they really are hidden, anyway. You’d never find them at all unless you knew where to look. Nobody has anything up his sleeves; there are no wires, foot pedals, nothing a policeman or an inspector could put his fingers on.

Oh, there have been some crude jobs. There still are, here and there, and from time to time. But the local police and inspectors have cleaned out most of that sort of thing.

There was a time when Jay Gould and Jim Fisk could rig up a sucker game with the Erie and play it over and over again until the poor crooked wheel was falling to pieces. But that was a century ago. There was a man who made safety matches and was skillful in engraving fine certificates, very impressive and of no value, who stole millions with his fancy game.

And there are right now, as this is written, some floaters and drifters who are making their pitch just about the way their fathers and grandfathers did before them; only instead of peddling Rock Oil it is Uranium or Nuclear Power or something else with a modern streamlined look to it. But the novelties are still the old standbys, except for the names, and if you scratch the gold wash off you’ll see the same lead-colored base metal underneath. The word is slum.

The low pitch with the slum is relatively a minor nuisance. But we would do well to keep away from these sharpers and small confidence men.

Specifically: What do you do when your phone rings some evening just after dinner time, and it is a toll call from New York. And a very well-spoken voice tells you that it belongs to a Mr. Simpson of the Utopian Investment Company. Mr. Simpson has been given your name as one of the forward-looking men in your town, the sort of citizen who will not only have the imagination to visualize a fine opportunity, but also the courage to act without delay. The Utopian Investment Company has acquired a controlling interest in North Manitoba Resources, Ltd., and while it is expected that as soon as the assay reports are published the stock will be worth from $8 to $10 a share, they are holding a few thousand shares for allotment to men of substance who will provide a solid nucleus of shareholders; the type of men, like you, who will in effect constitute a living endorsement of the firm’s integrity. Two hundred shares of U.I.C. are being held in your name at the nominal price of $5. It is not necessary to send any money. Just give your O.K. now, and the certificates will be made out to you. But you must act now; the offer cannot be held open. Hurry, hurry, hurry! How can you lose? Oh, how can you lose?

This operation, which you may have observed firsthand, is, of course, simply a matter of larceny. It is a criminal activity; the promoters have nothing to offer but a bundle of worthless or nearly worthless stock, and they operate from offices known as boiler rooms, where batteries of phones are manned by expert high-pressure salesmen working from the sucker lists which are the only real assets of the business.

In this sort of operation, which is strictly the back-of-the-fence sneak job, there is no need for any very deep study of general semantics, or of finance. You would think that anyone who had the sense that God gave to a donkey would know enough not to get roped into investing a thousand dollars with a firm he never heard of in a company nobody ever heard of, and on the strength of a call from an utter stranger in another state.

And yet...people still try to pick which shell the pea is under. And people still draw their life savings from the bank to buy gold bricks...or shares of Utopian Resources, Ltd.

Oh, you’ll find all sorts of little games if you have sharp eyes. Slick operators who will set up their tripes back of some tent and take off several scores before the cop or the S.E.C. comes round the corner.

Some of these games are quite legal; but just shoddy. Postcards of bathing beauties. Needle threaders and vegetable graters.

Like the ads you will find in some of the financial papers, promising you the names of several stocks that will surely triple in value in a very reasonable time, if you will just send $5.00. How you can get rich on oil royalties with practically no risk and very little capital. A plan to leverage your investment so that $500 does the work of $5000, and you may make hundreds of thousands of dollars in just a few years and without any effort at all on your part. Advisory services that will tell you what the market is going to do all year in advance. Secret and confidential methods now available to you (and others) for only $3.00. But act now. The Big Turn, the Key Period is at hand. Hurry, hurry, hurry!

However, we are not concerned mainly with the shoddy, crooked, and cruel games of the financial swindler and the financial charlatan.

It is true that Wall Street is, in a sense, The Big Game. It is a place where you can find big adventures, great gambles with huge prizes, and every variety of device to test your skill, your luck, or your courage. But, leaving out the nasty little thieves who operate on the sly with their cheap con games, the majority of the operation is surprisingly clean, honest, and open.

For in another sense, Wall Street is not The Big Game at all. It is not a carnival. It is not Luna Park. The business of Wall Street is the business of evaluating and exchanging the securities that represent the country’s industrial plant, just as the business of LaSalle Street is the business of evaluating the country’s crops. It is an extraordinarily complex business, and in view of this complexity it is extraordinarily well run. The men who work in Wall Street (or it may be LaSalle Street), and this includes all the men whose business is the market, in whatever part of the country they may be, are mostly hard-working, decent people. They operate under elaborate regulatory codes. In addition, they work under the strict rules of their exchanges and associations. And beyond all this, their own ethical standards, on the whole, ate as high as those in any other business or profession.

It is the custom between brokers to carry out a contract made and accepted by word or gesture as faithfully as though it had been executed under bond. The majority of brokers will deal with customers on the same basis; and in case of an error or dispute a broker will normally accept proper responsibility for a mistake and will make right any loss to a customer for which he was responsible.

The work of Wall Street is much like the work in any other commercial business. There are bookkeepers, technicians, executives, salesmen, office personnel; the same kinds of people you might find in a bank, or in a department store.

There are schools for Wall Street men. Courses for margin clerks, for registered representatives, and for those who are specializing in some particular kind of security. Thousands of men have taken, and are taking these courses, many of them on their own time, evenings. And besides this, they are studying, reading, charting, continually learning more about the structure of the financial world.

The men of Wall Street do not, as a rule, look like the prototype of The Capitalist. The vision of the large-stomached gentleman with walrus mustachios, an elk’s tooth on a massive gold chain, and a tall silk hat, lives on. But only in the land of the cartoonist and the dream world of the politician. The men of Wall Street today look pretty much like anybody else. They wear about the same kind of clothes, and they drive about the same kind of car as you and your neighbor do. They have a wife and children; and they play golf and swim when they go on vacation; and they like sirloin steak and go to the movies sometimes, and they worry a little about taxes and the cost of living. None of them wear tall silk hats any more except at the Costume Ball, and none of them has horns or a tail.

And the business of Wall Street, that is, the exchange of money for securities and vice versa, is one of the most democratic operations we have. It is much more democratic than our politics, where you have to have certain connections if you expect to get anywhere.

Wall Street doesn’t care whether you wear a four-in-hand or a bow tie. It doesn’t care whether your bank account runs to six figures or only three. Whether your ancestors came over on the Mayflower in 1620 or in the steerage of the Vulcania in 1925 doesn’t matter a bit. You can live in a twenty room mansion on Long Island, or you can rent a furnished room in Brooklyn. Wall Street doesn’t care what your religion is, or whether you are black, white, yellow or green with magenta spots. When you buy 100 shares of General Motors you pay the same price that anybody else will pay; and it won’t help you a bit if you went to school with the senior senator from the state of New York.

In Wall Street, to an extraordinary degree, a man can still stand on his own feet and be recognized for what he is himself, without regard to social connections, family background, wealth or political pull.

Here, A man’s a man, for a’ that. You can stand on your own feet; and the victory, if you achieve it, is yours. And if you fail, you cannot fairly point the accusing finger at the skyline of New York and say, "They have robbed me!" For there is no great oval room where the top-hatted, wax mustachioed tycoons gather to plot your destruction. It is all right for the Russian press to draw such a picture, and we can perhaps forgive even the local office-holder who sees a chance to stir up laggard votes with a Hate campaign. But you cannot inject life into the fading Currier and Ives portrait of the villains of Wall Street concocting a network of wash sales, false reports and watered stock to rob you of your savings. You will have to place the blame for losses, if losses you have, somewhere else.

QUESTIONS FOR CONSIDERATION

Do you believe that insiders manipulate the prices of such stocks as General Motors, U.S. Steel, Standard Oil of New Jersey? If you do, what are your reasons for believing as you do: on what evidence do you base your opinion?

Do you feel that the profits of a speculator (that is, of a trader in the ordinary sense, not a manipulator) come out of the pockets of other traders or the general public? What leads you to think this? Have you considered what constitutes the function of a free market? Have you wondered how the values of securities and commodities might be determined without a free speculative market? Would you say that the speculator was a parasite and that his profits were unearned income? If you had this attitude how would you feel about your own market gains? Could you buy and sell stocks in the hope of gain if you felt a certain guilt about such gains? Would such an attitude give you security and peace of mind? Is it possible that part of the reasons so many market traders do so badly is because they do have such an attitude?

Would you agree that a man who does not feel the market is a useful and necessary part of our economy should not engage in market trading at all?

Where would you place the responsibility for such market losses as are not due to fraud or manipulation?

BLACK MAGIC

THERE are certain situations where you expect to get fooled and where you might even be disappointed if you weren’t fooled. You don’t really expect to win the bridge lamp and the overgrown teddy bear at Luna Park; in fact, it would be most awkward to lug the damn things home; and what would you do with them when you got home? You expect to lose; and you know that there are certain ways in which the probabilities of your number coming up can be substantially reduced; but that is all right if you’re just out for a good time.

When you go to a magic show you expect to be fooled. You see wonderful things taking place. Cards appear in the air, and the very card you chose sticks to the ceiling. A rabbit, two rabbits, a dozen rabbits are taken out of an empty silk hat, the very same kind of silk hat from which Jay Gould produced common stock in the Erie to cover his shorts; but don’t forget that was nearly a hundred years ago.

You expect to be fooled. The saying goes, The hand is quicker than the eye. But don’t believe that. The hand is not really quicker than the eye. That is just an easy way for somebody to explain something he doesn’t understand.

As a rule the magician is not fooling your eyes. That isn’t the way it works. He doesn’t need to fool your eyes if he can fool your mind; so that you think you see something that wasn’t really there; or perhaps fail to see what was in plain sight all the time.

It is hard to believe that the twelve rabbits were in plain sight (if you knew where to look) and it is even harder to believe that all the mystery and wonder of the show is going on inside your own head. Girls don’t turn into rose bushes, really. A swimming goldfish doesn’t suddenly become a pigeon and fly around the room. And you know that. But unless you have studied magic you don’t quite understand how it seems as if these things happened.

It is a matter of knowing something about how you perceive things. And it will surprise you when you find out how much that you perceive can be completely false to fact. Things that, when they are pointed out to you, will seem so simple. And you will say, "How could I have overlooked that. Why it was in plain sight all the time." It is sometimes as if we overlooked an elephant blocking our own front door, and squeezed past the animal without seeing him at all.

If you are like most people your earliest experiences in the market were discouraging. There are only a small minority of beginning investors who by luck or by the power of the prevailing trend, make large net profits at the very outset. And they are more to be pitied than congratulated, since for them there is likely to be a day of disillusionment more painful even than for those who took their hard knocks at the start. These lucky beginners are somewhat in the position of the young man who was taken to the race track by an older horse-player; made four successive $2.00 bets, all of which paid off, and turned to this friend all starry-eyed to ask, Say, how long has this been going on?

If you are like most of us, the first market adventure is a small one, carefully planned and studied out. One examines the dividend records and the earnings figures for past years as intently as any horseplayer scans the form sheets. He weighs all the factors and buys the stock that his intelligence and common sense tells him is the logical choice. It cannot go down, not very much; and it must go up in value.

And what happens? Wouldn’t you think that just on the basis of sheer luck if you selected any stock at random, the probabilities alone would give you a profit about half the time? "Why do they always have to go down?"

Over and over again the novice goes through his evaluative procedure, selects his stock and buys it, and then a few weeks or a few months later, sells out and takes his loss, and prepares to try again.

How can he be wrong all the time?

Who is doing this to him? Who is fooling him? What is the magic, where is the gimmick, how do they do this?

You know, you can go up after the magic show and examine the cards, and the boxes and the wand, and you won’t find much. The wand is just an ordinary piece of wood, nicely painted with black enamel. The boxes don’t have any false bottoms. The cards are a regular deck, no markings. What happened? How did he do this to me? How did he fool me?

Well; did he really fool me? Or could you say that he just sort of let me fool myself? Yes! The illusion was not in the cards, the boxes, the wand: the illusion was something in my way of looking at these things.

I saw something that was not there. Just as I saw something that was not there when I bought the stock. It seemed to be there. It looked all right. I had good reasons to support my belief. But when the wand was waved, somehow it turned out it wasn’t the way I had thought it was at all.

I was fooled. But who fooled me? And how?

QUESTIONS FOR CONSIDERATION

Have you ever been fooled into thinking you saw something happen that you knew very well did not happen?

Do you know the mechanisms by which magicians fool the public? Do you realize how many of the illusions are created in the minds of the spectators?

Have you ever been fooled in the market? Did you ever go back and trace out just how you were fooled?

Would you say there was a similarity between the deceptions of the vaudeville stage and the deceptions you meet in everyday life? Are they all something that is created in the mind of the observer?

Isn’t it possible that if we understood more about our own minds and how we perceive things we might not be fooled so often?

THE VILLAIN

TAKE down the picture of the Capitalist. He doesn’t exist, not like the picture. And tell that magician to step down from the stage. You get up there on the stage! If anybody turned girls into rose bushes and made rabbits come out of empty hats, it wasn’t the magician. It was you.

And it was you that decided after careful study that Fruehauf Trailer was really worth much more than the $35 you paid for it in 1956. And when you saw it drop mysteriously to $9 in 1957 you cannot quite fairly blame the magician; after all, it was all your own doing. You examined the evidence, and you made the decisions.

Your fault? No, not exactly your fault. Not anybody’s fault in the sense of blaming anybody. But unless there was deliberate fraud here there must have been some fault; and you were the one who made the decisions.

There must have been some fault because you had arrived at the conclusion that this stock would soon sell for $50 or more; and on that basis you paid $35 for it. And instead of reaching your objective, it collapsed to $9. Your conclusion was mistaken and your prediction was wrong.

Perhaps if you had not been so absolute, so sure of what the outcome would be, you might not have been hurt so badly. Perhaps if you had examined more evidence, or looked at the evidence in a different light, it might have helped. Perhaps there were some forces urging you on to buy that stock, forces of which you were not entirely conscious.

At any rate, if we look at the records of the average market newcomer the percentage of success is nothing like what you might expect on the basis of any reasonably good evaluation or even on the basis of pure chance. With rare exceptions he loses money with great regularity until either he runs out of capital, gets discouraged and quits the market (with feelings of great hostility toward Wall Street), or ultimately discovers that it is possible to do something to correct some of his most flagrant errors and stop the succession of failures.

It sounds like a very easy thing to change one’s method of looking at things so as to see the reality, and not the illusion. It seems such a simple thing.

And it is a simple thing, basically. It is as simple as the fact that the earth is round and rotates on its axis. And yet for thousands of years men believed that the earth was flat and the stars moved around the heavens each night (and some still do believe that).

This business of stumbling over an elephant in your own front hall and never even seeing the beast is fairly common. Science is filled with cases where men searched for years for something which eventually turned up, in plain sight, right in their own front yard.

It is much harder to learn something simple, basic, and quite new to you than to learn something that seems quite complicated. It is harder for a high school student to understand what is meant by the square root of minus one