56 THE WORK OF THE STOCK EXCHANGE 
fact permits investors to hold securities only as long as they 
involve little risk. Thus, the higher organization of securities 
markets creates an ability to avoid or shift risks somewhat akin 
to insurance. In an unorganized security market, on the other 
hand, almost all the risks entailed by security ownership fall 
squarely on the investor, for when he wishes to shift his risk 
by selling his security, he often finds that the unorganized 
market has practically suspended operations. 
10. Barometer of Business.— Prices on the Stock Ex- 
-hange have frequently been used as a barometer of future 
husiness conditions.’® So eminent an authority as Professor 
S. S. Huebner has stated, “Without an exception every business 
depression in this country has been discounted in our security 
markets from six months to two years before the depression 
became a reality.” 
Frequently, however, the omens provided by Stock Ex- 
change prices have been disregarded by American business men 
until the crash came, and were then cited as evidence that the 
Stock Exchange must have caused it. In this way, the Stock 
Exchange has seemed continually fated to fill the unhappy role 
of the prophetess Cassandra, whose predictions before the 
event brought upon her the charge of being both demented 
and ill-natured, and after the event the inconsistent accusation 
of having herself caused all the trouble. 
This prophetic quality often possessed by Stock Exchange 
prices has resulted not only from speculative intelligence in the 
stock market, but also from the inevitable pressure of economic 
forces. When this collective human intelligence goes astray, 
as it sometimes does, naturally the barometric value of Ex- 
change prices is lessened. But on the economic side, we have 
seen that the market on the Stock Exchange is one for surplus 
capital, and thus expands or contracts before other markets. 
Normally this recurring process has rendered Stock Exchange 
prices barometric of future business conditions, since the latter 
™ Appendix IIf,