exchange and the members thereof as public benefactors, indispensable parts of the intricate plan of things as they are, it is well to look at the situation of the man or the woman who makes the stock exchange and the brokers possible—the margin speculator. It is the speculator who pays the commissions. The commissions build the exchanges, pay the rents of the brokers' offices, maintain the costly private wires, and support the modest establishments of the thousands of men who get their living from the business. The bills for these are heavy. The speculator pays these bills. What does he get for his money?

First, let us clearly understand the nature of margin speculation as carried on through a stock exchange house. You, let us say, are a merchant. You have a good bank balance or some sound investments. You believe that Atchison common at par is too low. You think the price will advance. You resolve to take advantage of the rise. You secure an introduction to a broker. How glad he is to see you-especially in times like these. You give him an order to buy 500 shares of Atchison, costing $50,000, for your account and risk.

You do not have $50,000. Your available re

sources are only $5,000. But this is no barrier to the transaction. Your broker is also a banker. He will lend you the difference between $5,000 and $50,000, and will buy the 500 shares for you, providing you will leave the stock on deposit with him to secure the loan. The purchase is made. You give the broker $5,000 in cash or securities. He borrows $45,000 from a bank or trust company and buys 500 shares of Atchison, as he notifies you, "for your account and risk.”

I once heard a broker describe the resulting situation and its developments as follows.

Says the broker to his customer, or "client": "You own 500 shares of Atchison, costing $50,000, and worth $50,000 to-day. Of this $50,000, $5,000 is your money and $45,000 is my money. Suppose, now, that the price of Atchison goes up 10 points. Your 500 shares are worth $55,000. Of this $55,000, $10,000 is your money and $45,000 is my money. You have made $5000. Suppose, now, that you have had enough for the present. You have vindicated your judgment of Atchison's value. You have a good opinion of yourself. You decide to rest on your oars and take your profits. You order your broker to sell. Your account with your broker stands like this.

John Jones in account with Smith & Company, Bankers and Brokers.

The broker now gives you, if you want it, a check for $9,650—your original $5,000, and $4,650 additional. You are a successful speculator. Life is sweet.

Now reverse the situation. Atchison does not go up. It goes down. The grasshopper, or the hot winds, or the Kansas legislature, or the Interstate Commerce Commission, move on the Atchison. Atchison common is "weak.' It goes down two points. Comes now your broker and says to you, in effect, something like this: "You own 500 shares of Atchison. today $49,000. Of this $49,000, $45,000 is my money and $4,000 is your money." Suppose the hot wind blows on, and Atchison goes down three points more. Again your broker confronts you.

These shares are worth

"Your 500 shares are worth only $47,500. Of this sum $45,000 is my money and $2,500 is your money. I have these shares pledged at the bank as collateral for the $45,000 I borrowed for you. The bank demands more security. I'm sorry, but I must have more margin. About $1,000 will be sufficient." So you give the broker $1,000 more, and if Atchison keeps on descending, you give him another $1,000, and another. You must keep his security safe. He must always have $45,000 in the value of your stock.

Now, suppose you cannot meet these calls for margin. Suppose Atchison goes down 10 points in a single day—it went down 18 points on May 18, 1901-and you cannot raise the money for margins. You are sold out. Your broker sells your 500 shares of Atchison, if he is honest, at the best price he can get; if he is dishonest, at the lowest price of the day. He sends you this statement:

John Jones in account with Smith & Company, Bankers and Brokers.

You have lost $4,350, perhaps in a single day. This is margin speculation. This is what keeps the stock exchanges and the brokers' offices going.

There are two questions to ask about speculation. First, is this the best way to speculate? and, second, what is the chance of profit in speculation? A few years ago, in a large Eastern city, there was a stock exchange house that was supposed to be impregnable. The partners were popular and respected. They were closely related to two of the wealthiest families in the city. The firm was

enormous.

One morning

reported to have ample capital. this firm closed its doors. Its liabilities were Most of its assets had disappeared. No explanations were forthcoming. The creditors were called together and informed that, for family reasons, relatives of the firm would make up most of the shortage, provided there was no prosecution. Another house in the same city recently failed. It paid to unsecured creditors ten cents on the dollar.

Cases like these usually involve breaches of trust between broker and client. You give the broker your money to secure him in borrowing a much larger amount of money with which to buy 500 shares of Atchison stock for you. You leave the stock with him as security for your loan. It