Friday, December 19, 2008

A Nineteenth Century View of Speculation that May Apply Today

I recently came across a book published in 1887 called "Twenty Eight Years In Wall Street," written by a gentlemen called Henry Clews. He wrote an interesting section on speculation.

"Speculation is a method now adopted for adjusting differences of opinion as to future values, whether of products or securities."

I never quite thought of it that way but he does distill it down to a mathematical definition.

"This is more common now than in former years because the facilities for procuring information have increased with the greater intelligence and celerity with which all business is now conducted, and also from the greater rapidity with which such information can be transmitted by telegraph and cable."

Obviously, the "facilities for procuring information" was the nineteenth century equivalent of the Internet.

"Speculation brings into play the best intelligence as to the future of values. It has always two sides. The one that is based principally on the facts and conditions of the situation wins in the end, and the result of the conflict is the nearest possible approach to correct values. The consequences of speculation are thus financially beneficial to the country at large."

Is this where Warren Buffett got his famous line about the the voting machine and the weighing machine in regard to the Stock Market? What would Mr. Clews say about our recent spasm of speculative excess today? Is it beneficial to the country? If it is beneficial, then is our government doing the wrong thing in not letting it run its course?

Part II on Monday.

1 comment:

Chartist said...

Technical Market Forecast:The DJIA Will Hit between 10,027 - 11,169 by December 31, 2008!

My daily DJIA chart is as of Friday December 19, 2008. It provides a short-term Bullish forecast, and balances the majority gloomy Bearish view.

The chart with my notes and marks indicate a DJIA Ascending Triangle (short-term forecast to DJIA: 10,027.62 - Fibonacci retracement: .312); and a Reverse Head and Shoulders (Intermediate forecast to DJIA: 11,169.41 - Fibonacci retracement: .618). This work is confirmed by the other major market indices: NASDAQ, SP 500, and QQQQ.

The chart is available Free as an Image (.jpg) file upon request to Chartist

Happy Holidays!