If you remember the movie the Untouchables or the TV series, you will know the main character was Al Capone. He was untouchable, because he had bribed the police and courts, but he was touchable in terms of paying taxes. In the 1930’s there was someone who was charged with a greater amount of unpaid taxes than Al Capone – Arthur Cutten. He rose from the Chicago Grain pits to become one of the biggest speculators in stocks on Wall Street.  He was the George Soros of the 1920s and 1930s. Mr. Cutten did not like government interference, what entrepreneur does? And moved to Wall Street. At that era there was fewer regulations, more monopolies which ensured those that controlled the stocks made money. Every once in a while the trusts would push up prices which given the low margin requirements of the day, allowed for thousands to invest and have paper profits from their investments. Those that sold actually made money, those that did not had long term investments or had to wait till the next push from the trusts. Mr. Cutten according to the book Gold Diggers of 1929 by George Fetherling published by John Wiley and Sons, Toronto, 2004 – for his stock holdings had a core of favourite stocks and bought and sold others looking for a 10 to 15 price movement. The greater he did this action, he would mark down the cost of his original holdings. In this fashion, for his accounting the original holding cost him nothing. With a large holding, buying and selling on margin was not a concern.  Hopefully his brokerage costs were low, but he had moved from the bulk of his holdings to be bought and sold to a core holding or being an investor.  If you are interested in Mr. Cutten’s remarks about grain trading, one of his papers is published on the internet under www.tradingpitblog.com under Story of a Speculator.

Linking to dividend paying stocks, similar to Mr. Cutten if you own the dividend paying stocks for 10 years, the dividend continues to lower the cost you paid for them or if you reinvest in them the cost per share will go down and if you ever sell the capital gain will be greater. If you hold them, you margin of safety if the markets go down is greater, as long as the company pays its dividend.

There are more questions than answers, till the next time – to raising questions