CHAPTER XXV. 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 dollars.