This section is from the "Investment And Speculation" book, by Louis Guenther. Also see Amazon: Investment And Speculation.
Until recent years, the Get-Rich-Quick Game had attracted little attention. Meanwhile, as an evil in the domain of finance, it grew slowly but steadily until it reached proportions where it actually became a serious menace to our national prosperity. It could no longer be ignored. It spread so far that the states and even our National Government had to devise rigid restrictions to check the invasion upon our people made by the multitude of such schemes which were continually cropping up.
The Get-Rich-Quick Game, as conducted in this country, is no longer a small factor. Ex-President Taft regarded all such schemes as constituting a danger to our prosperity, serious enough to make it incumbent on him to devote a paragraph in one of his messages to recommending that drastic action be taken against these swindles.
The loss the public sustains through get-rich-quick schemes is enormous. The greatest harm naturally does not come to intelligent people, as they are not so easily deluded. By far the larger number of victims are drawn from the humbler classes, the thrifty accumulators of capital, who, being totally ignorant of the first sound principles governing investments, and anxious to make their money yield the largest income, grasp eagerly at propositions brought to their attention because they promise enormous returns.
The amount which credulous investors lose in our many different Wallingford schemes to acquire wealth overnight and on a few hundred dollars, cannot be estimated accurately. Still, I believe I am not exaggerating, but underestimating the total loss, when I place the amount at between $150,000,000 and $200,000,000 every year. This certainly is a huge amount of capital to throw away upon ventures which never have had a ghost of a chance to succeed from their very inception, because they were conceived at the start in the womb of dishonesty.
I was asked some years ago by Mr. C. N. Keys, the financial editor of World's Work, to prepare some statistics of the more prominent get-rich-quick fakes foisted on American money savers during the last few years. In the preparation of these statistics I went no further back than seven years and included only such schemes as emanated principally from the eastern financial centers.
The statistics I furnished World's Work included 42 oil companies, with an aggregate capitalization of $83,-448,128; 119 mining companies, with an aggregate capitalization of $527,882,500; and 82 companies of a miscellaneous character, with an aggregate capitalization of $448,269,780. This list was only a partial one and included only schemes still fresh in the public mind. Where one was mentioned there were two score or more unnamed, because space to include them was not available.
Yet in this incomplete list a total capital in excess of one billion dollars is represented. Of this but an infinitesimal part actually went into the development of these enterprises; the larger part drifted to the pockets of dishonest promoters, went for flamboyant advertising in the not over-scrupulous newspapers, or was squandered on large commissions to stock salesmen and their sub-agents. All the millions that investors threw into these schemes proved a total loss. A country cannot long continue to prosper which will tolerate the snuffing-out of so much of its available capital each year.
The Get-Rich-Quick Game is a convenient blind for the high-class confidence man to hide behind. Until the authorities, following the lead of the National Government, became aggressive and made up their minds that it was high time to stop this form of brazen plunder, crooks and crafty promoters found the occupation of despoiling the masses (from such vantage points as fiscal agents, fake bankers, and brokers) extremely congenial, nor were the risks they assumed great Compared to them, hold-up men were individuals of some courage, for they at least always invited danger from a counter-attack when they assaulted wayfarers to get their booty. The get-rich-quick shark was seldom in danger of physical violence, for if one of his victims came to seek him out in his office to force him to return his plunder by physical persuasion, he was never to be found around.
The get-rich-quick schemer works along clever lines. He acquires mining claims or a lease on some oil property somewhere near where a real boom is on and at once starts a company, capitalizing it for a large amount; or he may get hold of some new invention, like the wireless telegraph, or the wireless telephone, and subject them to the same process of inflation. This preliminary step taken, he next proceeds to have stock certificates and attractive literature printed, promising profits ranging from two hundred to as many thousand per cent. Then he is ready for his work of plucking investors of all the money they can spare.
One of their effective schemes is to offer their stock at a low price, much under its par value. They fix on a low price in order to convince their dupes that the investment will rapidly advance in value. In many instances they hold forth promises that their stock will reach a price far in excess of its par value as soon as their enterprise begins to pay large dividends, which are never declared unless fake payments are made and then they are used merely as a bait to be withdrawn later on.
The difference in the price at which a victim may buy stock and what it is sure to reach, according to the promoter, is represented to him as the profits he can easily make. The profit is so vastly in excess of what it is possible for conservative investments to return that the lure catches ignorant and greedy investors, but not intelligent people, who will investigate thoroughly before biting on the mere promises made by people entirely unknown to them.
 
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