STOCK SPECULATION—DANGERS AND BENEFITS 125%

and is therefore part speculator and part investor. Conversely,
the practical speculator bases his purchases and sales of securities
 upon prices which are fundamentally determined by the
income or the expectation of income to be derived from them.
The margin purchaser, who is in the main a speculator, often
selects dividend-paying stocks in order to offset his interest
charges,” while the short seller gives careful attention to the
dividends paid on his short stock, since he must pay them to
the loaner of the stock. Moreover, many an investor who purchases
 for income will, after a swift rise in price, sell out for a
profit and consequently become a speculator. Thus, in actual
practice, the difference between investors and speculators in
securities is one of degree rather than of kind, and it is especially
 difficult to state in any given case just where the one
ceases and the other begins. It should be noticed that investment
 and speculation are alike in that they both involve a
genuine exchange of ownership of actual property. All orders,
whether for investment or speculation, are executed and cleared
in exactly the same way in the Stock Exchange.

Meaning of the Term “Investment Transaction.”—The
ordinary Wall Street expression of “investment transaction”
refers to an outright purchase and sale of securities, and that
of “speculative transaction” to a margin purchase or short
sale.’ Usually, of course, margin purchasers and short sellers
are actuated principally by a desire for profits rather than for
income, and the presumption usually is when a security is
bought or sold without the use of credit that the primary
motive is income. Yet investors sometimes purchase securities
on margin by the “part payment plan’; sometimes short sales
are caused by the liquidation of investments from out of town
or from abroad; and many people purchase securities outright
in order to sell them later at a higher price. As working definitions,
 then, these expressions, while of considerable practical
See Chapter VII, p. 182.
ale, Stas with, this’ meaning that Chapter V1, dealing with an outright purchase and