In this connection, study first "How and Where to Buy," Secs. 35 to 60, inclusive, pages 15 to 30, inclusive, of Text Book. Also "Booms and Panics," Secs. 158 to 163, inclusive, pages 202 to 208 of Text Book. Persons who desire to pursue the subject of City investments further than explained in this course, should procure a copy of "Principles of City Land Values," by Richard M. Hurd.

Sec. 324. The laws of speculation are not well understood; in fact, they may be considered as not well established.

Sec. 325. There is a wide and essential difference between merchandising and speculation, although these two things are apt to be confounded together in theory and practice. A merchant or storekeeper has customers upon whom he must always be ready to attend, and he depends upon small but regular gains. A speculator has no customers and he relies on sudden and eccentric enrichment.

Sec. 326. To the successful speculator, three things are essential - time, capital and courage, and these three are of little value without a fourth, and that is judgment. As shown in Section 36, page 15, of Text Book, judgment is that faculty of the mind which, more than any other, distinguishes one man from another. The successive mental states through which the mind passes in arriving at judgment are set forth in the following section.

Sec. 327. (a) Judging involves materials for judgment ready to hand, and a process of reflecting on these, in order to see to what result they point. The materials are supplied by personal experience or by the words or testimony of others. Judgment rests largely on one's own experience and cannot be accurately exercised until the mind has long been storing up materials for it by unbiased observation and reflection.

(b) To come to a sound decision on a matter of any difficulty, such as the prospective value of a parcel of real estate, implies that the mind rejects what is irrelevant, steadily keeps in view all the relevant facts, and weighs well the bearing of each fact on the case.

(c) Judgment, to be perfect, must be clear and accurate, and be exercised with reasonable promptness. Judgments formed under the influence of strong emotion are in general characterized by vagueness and exaggeration. One must not passively adopt the views of others without seeking to make them his own by personal observation and reflection.

(d) An accurate judgment is one which corresponds precisely to the realities presented and which faithfully expresses the relation of things.

(e) A certain degree of promptness in decision is a condition of a good faculty of judging. A mind drawn hither and thither by conflicting tendencies, and unable to master these, is weak in judgment. (Sully.)

(f) It will be observed that men of good judgment usually decide promptly after coming into possession of all the facts.

(g) A man's judgment concerning real estate may be excellent and yet be suspended or be not exercised, for any one of these reasons:

(1) Because of being completely occupied with other matters;

(2) Because of unpreparedness; i. e., the lack, at the time, of funds with which to take advantage of the opportunity;

(3) Because of prejudice; that is, an unwarranted dislike to a certain locality.

Sec. 328. All speculation has reference to a future and the question of time is always involved. Results are hardly ever immediate; time is required in which to bring about changed conditions. A speculator must have some capital, or at least a small portion of capital and a large portion of credit, or the cooperation of those who have both capital and credit. The speculator must have nerve and confidence; he must not keep the nickel so close to his eye that he cannot see the dollar beyond.

Sec. 329. A merchant must be active; a speculator must be patient. Ordinarily, a speculator can only be watchful and bide his time, as the changes which are about to occur and from which he anticipates good fortune may be entirely beyond his control, and may be happening thousands of miles distant. In real estate speculation, however, these changes are confined to a circumscribed area and their speed may be accelerated by "booming" and advertising on the part of the speculator. There is a proper time to buy and a proper time to sell, and decisive action must be taken before the turn of the tide.

Sec. 330. In speculating in a commodity, such as wheat or cotton, the speculator studies statistics, and takes note of great political and commercial changes. After he has ascertained the average price for a number of years on a particular commodity, exclusive of extreme cases, he buys when the price has fallen below that average.

Sec. 331. Speculation is an exception in business, arising out of derangements of trade, or out of the impossibility, or seeming impossibility, of adjusting the supply to the demand. Speculation has a tendency to readjust trade, as, when prices are low, every purchase that is made has a tendency to raise the price. Trade is steady and uniform and can be carried on at all times; speculation can be conducted only occasionally and when opportunity offers. Trade is certain; speculation unstable.

Sec. 332. Let it be understood that speculation may be directed to any property or article which is, or is likely to be, plentiful or scarce, or may be directed to a variety of properties or articles, so that the speculator may have under way at one time the beginning of one speculation by purchase and the ending of another speculation by sale, and the irregularity which is one of the characteristics of speculation can in this way be turned into regularity. As considerable time is required to mature any one speculation, the wise speculator does not invest all of his disposable means in any one venture, but in several ventures, at various times, so that they are in different stages, some commencing, others terminating. He thus reduces speculation to the nature of a regular trade and makes it more uniform and safe. In real estate speculation, this uniformity is in a measure secured by taking options, but these are only of value when there is great activity and they must be taken before prices rise too high.