The “Standard Oil crowd,” the “Gates crowd,” the “Morgan interests,” and Harriman and his associates, will at once occur to the reader as having been, at various times in the past, in sole control of an important general campaign. At present the great interests are generally classified into three divisions—Morgan, Standard Oil, and Kuhn-Loeb.

A definite agreement among such interests as these would be impossible, except for limited and temporary purposes. This is perhaps not so much because these high financiers couldn’t trust each other, as it is because each so-called interest consists of a loosely bound aggregation of followers of all sorts and varieties, having only one thing in common—control of capital. Such an “interest” is not an army, where the traitor can be court-martialed and shot; it is a mob, and has to be led, not driven. True, the known traitor might be put to death, financially speaking, but in stock market operations the traitor cannot, as a rule, be known. Unless his operations are of unusual size, he can successfully cover his tracks.

From this second point of view, “They” are not always active in the market. Great campaigns can only be undertaken with safety in periods when the future is to a certain extent assured. When the future is in doubt, when various confusing elements enter into the financial and political situation, leading financiers may be quite content to confine their stock market operations to individual deals, and to postpone the inauguration of a broad campaign until a more solid foundation exists for it.

Third, “They” may be conceived simply as speculators and investors in general—all that miscellaneous and heterogeneous troop of persons, scattered over the whole world, each of whom contributes his mite to the fluctuations of prices on the Stock Exchange. In this sense there is no doubt about the existence of Them, and They are the court of last resort in the establishment of prices. To put it another way, these are the “They” who are the ultimate consumers of securities. It is to Them that everybody else is planning, sooner or later, directly or indirectly, to sell his stocks.

You can lead the horse to water, but you can’t make him drink. You or I or any other great millionaire can put up prices, but you can’t make Them buy the stocks from you, unless They have the purchasing power and the purchasing disposition. So there is no doubt that here, at any rate, we have a conception of Them which will stand analysis without exploding.

In cases where a general campaign is being conducted, the “They” theory of values is of considerable help in the accumulation or distribution of stocks. In fact, in the late stages of a bull campaign the argument most frequently heard is likely to be something as follows: “Yes, prices are high and I can’t see that future prospects are especially bullish—but stocks are in strong hands and They will have to put them higher to make a market to sell on.” Some investors make a point of dumping over all their stocks as soon as this veteran war-horse of the news brigade is groomed and trotted out. Likewise, after a prolonged bear campaign, we hear that somebody is “in trouble” and that They are going to break the market until certain concentrated holdings are brought out.

All this is very likely to be nothing but dust thrown in the eyes of that most gullible of all created beings—the haphazard speculator. When prices are so high in comparison with conditions that no sound reason can be advanced why they should go higher, a certain number of people are still induced to buy because of what They are going to do. Or, at least, if the public can no longer be induced to buy in any large volume, it is prevented from selling short for fear of what They may do.

The close student of the technical condition of the market—by which is meant the character of the long and short interests from day to day—is pretty sure to base his operations to a considerable extent on what he thinks They will do next. He has in mind Them as described in the first classification above—floor traders, pools and manipulators. He gets a good deal of help from this conception, crude as it may appear to be—largely, no doubt, because it serves to distract his mind from current news and gossip, and to prevent him from being too greatly influenced by the momentary appearance of the market.

When the market looks weakest, when the news is at the worst, when bearish prognostications are most general, is the time to buy, as every schoolboy knows; but if a man has in mind a picture of a flood of stocks pouring out from the four quarters of the globe, with no buyers, because of some desperately bad news which is just coming over the ticker, it is almost a mental impossibility for him to get up the courage to plunge in and buy. If, on the other hand, he conceives that They are just giving the market a final smash to facilitate covering a gigantic line of short stocks, he has courage to buy. His view may be right or wrong, but at least he avoids buying at the top and selling at the bottom, and he has nerve to buy a weak market and sell a strong one.

The reason for the haziness of the “They” conception in the average trader’s mind is that he is only concerned with Them as They manifest Themselves through the stock market. As to who They are he feels a mild and detached curiosity; but as to Their manifestations in the market he is vitally and financially interested. It is on the latter point, therefore, that he concentrates his thoughts.

But inasmuch as definite, painstaking analysis of a situation is always better than a hazy general notion of it, the trader or investor would do much better to rid his mind of Them. The word “They” means nothing until it has an antecedent; and to use it continually without having any antecedent in mind is slipshod language, which stands for slipshod thinking. They, in the sense of the big banking interests, may be working directly against Them in the sense of individual manipulators; the manipulator, again, may be trying to trap Them in the sense of floor traders.

A genuine knowledge of the technical condition of the market cannot be summed up in any offhand declaration about what They are going to do. You cannot determine the attitude toward the market of every individual who is interested in it, but you can roughly classify the sources from which buying and selling are likely to come, the motives which are likely to actuate the various classes, and the character of the long interest and short interest. In brief, after enough study and observation, you can always have in mind some kind of an antecedent for Them, and must have it, if you base your operations on technical conditions.

IV—Confusing the Present with the Future—Discounting

It is axiomatic that inexperienced traders and investors, and indeed a majority of the more experienced as well, are continually trying to speculate on past events. Suppose, for example, railroad earnings as published are showing constant large increases in net. The novice reasons, “Increased earnings mean increased amounts applicable to the payment of dividends. Prices should rise. I will buy.”

Not at all. He should say, “Prices have risen to the extent represented by these increased earnings, unless this effect has been counterbalanced by other considerations. Now what next?”

It is a sort of automatic assumption of the human mind that present conditions will continue, and our whole scheme of life is necessarily based to a great degree on this assumption. When the price of wheat is high farmers increase their acreage because wheat-growing pays better; when it is low they plant less. I remember talking with a potato-raiser who claimed that he had made a good deal of money by simply reversing the above custom. When potatoes were low he had planted liberally; when high he had cut down his acreage—because he reasoned that other farmers would do just the opposite.

The average man is not blessed—or cursed, however you may look at it—with an analytical mind. We see “as through a glass darkly.” Our ideas are always enveloped in a haze and our reasoning powers work in a rut from which we find it painful if not impossible to escape. Many of our emotions and some of our acts are merely automatic responses to external stimuli. Wonderful as is the development of the human brain, it originated as an enlarged ganglion, and its first response is still practically that of the ganglion.

A simple illustration of this is found in the enmity we all feel toward the alarm clock which arouses us in the morning. We have carefully set and wound that alarm and if it failed to go off it would perhaps put us to serious inconvenience; yet we reward the faithful clock with anathemas.

When a subway train is delayed nine-tenths of the people waiting on the platforms are anxiously craning their necks to see if it is coming, while many persons on it who are in danger of missing an engagement are holding themselves tense, apparently in the effort to help the train along. As a rule we apply more well-meant, but to a great extent ineffective, energy, physical or nervous, to the accomplishment of an object, than analysis or calculation.