Speculation and speculators;

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VOL. XII NEW YORK, JUNE, 1929 No. 6
Speculation and Speculators
THE more one thinks about the present
financial situation, the more confusing
it becomes. Conflicting views are advanced
by various parties, some whose reasons are
patent; others whose interest is academic.
Individual views, considered separately,
may appear to have sufficient strength of
logic to dominate the course of reasoning.
When these views are considered in rela­tion
to the whole situation, they may lose
much of their force. Such is the plight of
"speculation," now so frequently and
widely discussed.
Speculation, as used in connection with
securities, connotes risk. A speculative
investment is one involving risk, but never­theless
one inspired by hope of gain. A
speculative investment lacks the assurance
of profit. There is no promise of income.
In fact, the chances are that there will be
no income, at least for some substantial
period. The reward, if it comes, will be
in the form of increased value. A prin­cipal
transaction ultimately will be the
means by which any profit is extracted.
The aircraft industry is a speculative
industry. Investments in securities of
aircraft companies are speculative invest­ments.
There will be hundreds, perhaps
thousands, of companies organized to build
aircraft and aircraft equipment. Most of
them will fall by the wayside and millions
of dollars will be lost. Out of the milling
process will emerge a few companies in
whose hands will rest the aircraft business
of the country.
The radio field offers another analogy.
Various and sundry amateurs will be
moved to enter the business by hope of
fortune. The savings of friends and rela­tives
will be borrowed for the enterprises.
Business men, with what they believe to be
a genius for organization, will put together
companies and attempt to exploit inven­tions.
Crash after crash will resound
through the land, interspersed with the
wailings of widows and orphans whose in­heritances
have been swept into oblivion.
But finally, radio, television, and what not,
will bring some modern wonder of which
Bellamy, projecting his imagination a hun­dred
years into the future, never dreamed.
The capital for the companies which will
carry on these enterprises will be furnished
by investors. They will be speculative in­vestors,
whether they know it or not.
Advancement in new and unexplored fields
depends upon the risk which investors are
willing to take. If those who take such
risk are speculators, if the development of
these enterprises is speculation, industrial
progress depends upon speculation, and
those who furnish funds for the exploita­tion
of new fields are speculators.