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By Root 2763 0

that send out uniform bulletins (sometimes in the form of telegrams) to their subscribers. The subjects covered may include the state and prospects of business, the behavior and prospect of the securities markets, and information and advice regarding individual issues. There is often an “inquiry department” which will answer questons affecting an individual subscriber. The cost of the service averages much less than the fee that investment counselors charge their individual clients. Some organizations—notably Babson’s and Standard & Poor’s—operate on separate levels as a financial service and as investment counsel. (Incidentally, other organizations—such as Scudder, Stevens & Clark—operate separately as investment counsel and as one or more investment funds.)

The financial services direct themselves, on the whole, to a quite different segment of the public than do the investment-counsel firms. The latters’ clients generally wish to be relieved of bother and the need for making decisions. The financial services offer information and guidance to those who are directing their own financial affairs or are themselves advising others. Many of these services confine themselves exclusively, or nearly so, to forecasting market movements by various “technical” methods. We shall dismiss these with the observation that their work does not concern “investors” as the term is used in this book.

On the other hand, some of the best known—such as Moody’s Investment Service and Standard & Poor’s—are identified with statistical organizations that compile the voluminous statistical data that form the basis for all serious security analysis. These services have a varied clientele, ranging from the most conservative-minded investor to the rankest speculator. As a result they must find it difficult to adhere to any clear-cut or fundamental philosophy in arriving at their opinions and recommendations.

An old-established service of the type of Moody’s and the others must obviously provide something worthwhile to a broad class of investors. What is it? Basically they address themselves to the matters in which the average active investor-speculator is interested, and their views on these either command some measure of authority or at least appear more reliable than those of the unaided client.

For years the financial services have been making stock-market forecasts without anyone taking this activity very seriously. Like everyone else in the field they are sometimes right and sometimes wrong. Wherever possible they hedge their opinions so as to avoid the risk of being proved completely wrong. (There is a well-developed art of Delphic phrasing that adjusts itself successfully to whatever the future brings.) In our view—perhaps a prejudiced one—this segment of their work has no real significance except for the light it throws on human nature in the securities markets. Nearly everyone interested in common stocks wants to be told by someone else what he thinks the market is going to do. The demand being there, it must be supplied.

Their interpretations and forecasts of business conditions, of course, are much more authoritative and informing. These are an important part of the great body of economic intelligence which is spread continuously among buyers and sellers of securities and tends to create fairly rational prices for stocks and bonds under most circumstances. Undoubtedly the material published by the financial services adds to the store of information available and fortifies the investment judgment of their clients.

It is difficult to evaluate their recommendations of individual securities. Each service is entitled to be judged separately, and the verdict could properly be based only on an elaborate and inclusive study covering many years. In our own experience we have noted among them a pervasive attitude which we think tends to impair what could otherwise be more useful advisory work. This is their general view that a stock should be bought if the near-term prospects of the business are favorable and should be sold if these are unfavorable