one fool loses on it and another gains, but as a national asset it is hardly worth counting. The serious losses of investors are not made there, but in the wide borderland between investment and speculation, – among the newly-launched mines, which promise fortunes to shareholders; the industrial companies, which are too often the shells of a splendid business with the kernel taken out; and the foreign railways, which, when made, turn out to be far in advance of their time. The shareholder who above all others deserves pity, is he who goes into the market intending to invest, and after he has done it discovers that he has been unintentionally speculating. To such a person the commercial laws of the country and its financial practices are most skilfully planned snares. The one leads him on the ice, and the other does nothing whatever to help him when he has suffered the inevitable fall.
It is the reckless investor and not the reckless gambler who inflicts the severest loss on the country. Reverting to our analysis of securities, if 2000 millions be set aside for those that are perfectly safe, and 500 millions for those that are virtually worthless, there would remain 1600 millions for the intermediate kind. Taking one year with another, these yield a very poor rate of interest overhead. Perhaps 3 per cent would be a sufficiently high estimate, considering that if many are pretty regular in their dividends others are intermittent, and a large proportion have ceased paying any at all. Three per cent on 1600 millions sterling is equal to 48 millions a-year. If that amount came in with the regularity of dividends on Consols, it would be a valuable element in the national income, but it fluctuates wildly. The coal and iron companies offer a good example of how it can rush from one extreme to the other. The same security of that class has yielded 20 per cent in good years, and nothing at all in bad ones. Nor has the fluctuation in dividend been the worst evil with them. The market value of the security has risen or fallen with the dividend, and what should only have been temporary loss of income has meant to many shareholders actual ruin. A very dramatic comparison might be drawn between a good and a bad year in speculative investments, such as commercial undertakings, finance companies, second or third rate American railways, &c. In the good year they may quite easily yield an average return of 5 or even 6 per cent, equal say to 80 millions sterling. In the bad year they may drop to an average of 2 per cent or less, equal in money to only 32 millions sterling. In the 6 per cent year their market value might be considerably over par. Some of them would rise to 100 or 200 per cent premium, and the 1600 millions nominal, worth in an average year say 1000 millions, might in an inflated year be bought and sold on a basis of 1500 millions. In the 2 per cent year all this would be changed. Premiums would run off, and values fall to non-dividend level. The aggregate result might be a shrinkage from 1500 millions to 1000 millions again, or even less.
This is by no means an extreme calculation. In a comparatively short time we have seen Rio Tintos drop from over 30 to 12, Tharsis from £7½ to £5¼, Cunard Steams from par to less than half, Mexican Rails from 140 to 26, Arizonas from pounds to shillings, and so on. These violent declines
