ock movements are not an exact duplicate of any previous
ones, and it is impossible to tell how long they will last or just what
course they will take. Certain influences could change a period of
improvement into a period of prosperity very quickly.

A period of prosperity is noted for high prices, high wages, and
increasing production in all lines. Everybody is optimistic. Most people
spend their money freely, and that makes times better. As prices go up
and business increases, more money is required in business and interest
rates go up. As a consequence, when interest rates go up, bond prices go
down. During this period, speculative stocks are selling at their
highest prices; and under the influence of this movement, many stocks
that have no actual value sell up at high prices. Of course, wise
speculators sell all their stocks during this period.

Following a period of prosperity comes a period of decline. The first
sign of it usually is a severe break in the stock market. At that time
general business is running along at top speed and there is no sign of a
let-up, but this break in the stock market should be a warning. Most
people think the break is merely a temporary reaction--they may refer
to it as a HEALTHY reaction--and they start buying stocks again, and put
the market up, but it does not go up as high as it was before the break
occurred. When stock prices do not rally beyond the prices at which they
were before the break occurred, it is a sign that the turning point has
been reached and that the bear market has started, although the majority
of people do not realize this until a long time afterwards.

Next comes a period of depression, when we have low prices, low wages,
hard times, tight money, and many commercial failures. Many people who
lost all their money during the speculation period, become thrifty and
economize during the period of depression, and start in to save again.
Nearly everybody is pessimistic during this period. Trading on the Stock
Exchange is irregular and as a rule very light.

This is the time to get stock bargains, but the general public as a rule
doesn't take advantage of it. People are scared and think prices will go
still lower. The big interests accumulate stocks during this period, and
sell them during the period of prosperity.

CHAPTER XII.

THE MONEY MARKET AND STOCK PRICES

Perhaps no other one thing influences the movement of stock prices so
much, in a large way,