Jim, read this BEFORE scrolling to the very bottom to see when and who wrote it. :-)
When the bloom wore off the boom, some of the promoters found themselves in need of help from experts in stock salesmanship. When the public is hung up with all kinds of securities, some of them purchased at higher prices, it is not an easy task to dispose of untried stocks. After a boom the public is positive that nothing is going up. It isn't that buyers become more discriminating, but that the BLIND buying is over. It is the state of mind that has changed. Prices don't even have to go down to make people pessimistic. It is enough if the market gets dull and stays dull for a time.
In every boom companies are formed PRIMARILY if not EXCLUSIVELY to take advantage of the public's appetite for all kinds of stocks. Also, there are belated promotions. The reaon why promoters make that mistake is that being human they are unwilling to see the end of the boom. Moreover, it is good business to take chances when the possible profit is big enough. The top is never in sight when the vision is vitiated by hope. The average man sees a stock that nobody wanted at twelve dollars or fourteen dollars a share suddenly advance to thirty-which surely is the top-until it rises to fifty. That is absolutely the end of the rise. Then it goes to sixty; to seventy; to seventy-five. Whereupon the average man, who never thinks of values but of prices, and is not governed in his actions by conditions but by fears, takes the easiest way -- he stops thinking that there must be a limit to the advances. That is why those outsiders who are wise enough not to buy at the top make up for it by not taking profits. The big money in booms is ALWAYS made FIRST by the PUBLIC -- ON PAPER. And it REMAINS on PAPER!
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Jessie Livermore in 1915 |
