"Carrying Over," A Reasonable Course

It may further be noted that the process of continuing or carrying over a bargain, in addition to its manifest practical serviceableness at times, quite independent of any professed speculative element, is a reasonable course. The grant of a fortnight only - the account period - for determining a person's solvency (however valuable it may be as a test) might, under conceivable circumstances, prove most unjustly disastrous to a member of the highest character and of sound financial standing were there not the safeguard of this power of "continuing." It is quite possible that a stable and useful position might, in consequence of some sudden and unexpected lock-up of funds, be placed in serious peril, if not irretrievably ruined, were not the possibility of retrieval, by the aid of extended time, provided through the machinery of temporarily postponing completion.

The operations of the bearl and the bull 2 have been at a certain price and his anticipation of a decline should be realised, he can then, by purchasing the stock at the reduced value secure the profit between the price at which he originally sold and the diminished price at which he can now buy, and thus complete his bargain by a successful delivery. Hence, in order to occupy the position of an advantageous purchaser when the price declines, he effects a present speculative sale. These calculations of a rise or fall in value may be founded upon well-trained judgment, and a comparison of the present condition of affairs with past conditions of an analogous character, with the reasonable inference that - excluding the unexpected and unprovided - the results which followed the former conditions will equally succeed the similar condition now existent. But "there's the rub," - the unexpected! and thus the speculation in future chances may range in graduation, as I have stated, from a skilful estimate to brainless guessing.

1 Bear. - The word was applied in its present sense in the early part of the eighteenth century, and was in common use at the time of the South Sea Bubble. At that date the phrase "bearskin jobber" was described in the preceding statements. They may now be briefly pictured and their relations with the ordinary investor explained.

Bulls And Bears

The popular definition of a Bull and a Bear operator is that the former purchases what he does not require, while the latter sells what he does not possess.

This, however, is far from that exclusive form of definition at which all explanations should aim. For the jobber also, when he "makes" a price, is willing to buy what he does not intend to retain, or to sell what does not then rest in his possession. Bather is the distinction between them this: the buyer (or Bull) estimates on reasons valid to himself that the value of a particular stock is likely to rise, and desires, when that event occurs, to be in a position to avail himself of the chance of selling; but in order to gain this position he must obviously first purchase - the expected profit consisting of the difference between the comparatively low price at which he buys and the higher price attained when he sells what he had bought. The seller (or Bear) pursues the opposite course: he surmises that the price of a specified stock will probably fall: if he can sell now applied to dealers now called bears, and it is thus probable that the original expression was "sell the bearskin," originating in the ancient proverb of disposing of the bear's skin before the bear itself had been captured. Imagination must invent the connection.

2 Bull. - This term was probably derived from a verb-stem, bullen, found in some German dialects, which means "to roar"; or possibly, it has been held by a recognised authority, that the term was suggested by the word " bear," though this attempted solution demands, I think, a somewhat daring exercise of imagination to perceive any conclusive appropriateness or naturalness of contrast.

My personal experience of able men, in all departments of activity, who have disastrously failed, has shown that, far beyond the range of ordinary men, they possessed the faculty of perceiving most of the elements of a subject with marvellous vividness and lucidity of perception, but gained the habit (through happy hits) of mistaking this piercing vision of the parts, however numerous, for a rounded apprehension of the whole. And perhaps my use here of the word "disastrous" rather embodies the poignant contrast between surpassing capacity and its unanticipated fall.

Like the bull, the ordinary investor is in a degree a speculator in future chances; he would never purchase unless he hoped, and possessed some ground for hope (for no one should invest without the guide of knowledge and the exercise of judgment), that his securities would on the whole increase in value, or at all events exhibit no retrogression: but the essential distinction between the two resides in the fact that the speculative purchaser buys simply and deliberately in order to sell, while the investor purchases for the purpose of retention and the possession of a stable source of revenue. The speculative purchaser, in short, buys in order to make as much profit and as speedily as possible out of an increased capital-value, without thinking of the income: the genuine investor purchases in order to gain the permanent and remunerative income which the capital yields.

Ball and bear operations baaed upon [estimated] movements of the market, not vice versa.

It seems an error, therefore, to suppose that prices advance under the compulsion of bulls, and recede under the compelling power of bears; rather is it that a survey of the state and prospects of a particular market, gathered from a multitude of signs, appears to show clearly to observant minds that an advance or decline of price may be reasonably expected, and their operations, consequently, are based upon the probability of the realisation of these views. Hence the mode in which the prices of securities, in which the investor is interested, are affected by such operations is this: there are two forces (personating, for a moment, the desires of men by forces) of an opposite character always ready to be liberated into action upon the market; the one is vigilantly watching for a propitious time to sell, the other, with equal eagerness, is waiting an opportunity to buy. When prices rise (for any reason or cause), the former force comes into operation in the form of sales, and thus tends to depress or retard values; when prices recede (for any reason or cause), the second latent force becomes actual by purchases, and thus aids in maintaining prices or checking a deeper fall. And the resultant effect upon market values will depend upon the comparative extent and intensity of these forces - the volume of the transactions in these two directions.