This action might not be possible to undo. Are you sure you want to continue?
on Wall Street and its methods and on other subjects interesting to the investor. Movements. regularly Only by receiving these figures and systematically. himself. Educational articles on the various phases of bonds. Moody s Magazine contains. can the great principles herein outlined by Mr. practical use. Gold Depreciation. stock record of the month. Domestic Trade. legal decisions affecting investments. Wellesley Hills. unbiased and interesting analysis of current investment and general conditions is made in such a way that the average man is always able to comprehend them.00 a year.Moody' s Magazine Moody's Magazine THE NATIONAL MONTHLY INVESTORS' ublication de- sr^ss investor in securities. questions which vitally affect the securities markets. mortgages and other forms of investment. $3.to be supplied each may arrange with Roger week with Foreign the latest figures on Railroad Earnings. Railroad Rate Regulation. Hall be of direct and immediate . Babson. financial diary of the month. stocks. monthly. London and Montreal and a section devoted to answers to subscribers' questions on specific investments. Regular departments covering life insurance. the Currency. Commerce. every month: An editorial review of current events in which a careful. and Supply. Gold other subjects of vital Money interest to investors. It does not disseminate tips nor does it encourage speculation in the ordinary sense of Its aim is to safeguard the investor and to teach him to think for that word. eighteen Crops. Special articles of well-known financial experts and economists on such topics as the Tariff. monthly letters from Washington. Political Conditions. tabulated in form for profit. public accounting. Mass. MOODY'S MAGAZINE 35 Nassau Street New York City NOTICE TO READERS of the Book READERS W. In its pages are discussed.. Subscription price. the fundamental causes of market movements and the principles of safe investment.
concerning (1) slocks and bonds in which they have invested . to make suggestions concerning other and bonds which can safely stocks be bought both for income and for large profits.Office o( HENRY HALL. and so large that have been the profits of men who have followed the author's advice. it now seems proper to make a moderate charge for the author's services in these matters. So great has become the number of these inquiries. further. either because they are too high or for other reasons. (2) other securities. which would in value. ensure safety of principal and afford the best chances of appreciation and (3) the author's opinion of the stock market at the time being. HENRY HALL. Author of "How Money is Made in Security Investments" 52 BROADWAY. In addition. \\ 7HILE books " HOW MONEY MADE IN SECURITY YY INVESTMENTS" have done much toward and with when like IS public to buy and when educating the seasons regard to the proper times to sell stocks. for is Send me a list of the securities you my criticisms and comments. For $10 the undersigned agrees to make a careful report upon the holdings of stocks or bonds of any individual or institution. . The author is constantly in receipt of inquiries from those who have done him the honor to buy his book. New York. invited. Correspondence are carrying. and. pointing out those which should be held for coming appreciation in value and those which ought to be sold. yet an extensive correspondence shows the awful mistakes which are being constantly made by people in private life in buying securities at the wrong time or buying the wrong things or both. and whether it is best either to buy or sell in order to take advantage of the great swings in prices as outlined in the book. the trend and present position of the financial markets will be explained.
MACKAY & Members. CO. Exchanges. Chicago . Interest and other Investment allowed on deposits : : : : : NASSAU AND PINE STREETS. Boston 421 Chestnut St. NEW YORK 13 Congress St. New York and Boston Stock Dealers in Government Bonds Securities. Philadelphia Rookery Building.
HOW MONEY IS MADE IN SECURITY INVESTMENTS OR A FORTUNE AT FIFTY-FIVE BY HENRY HALL FOURTH EDITION 52 BROADWAY 1909 NEW YORK .
Copyright. 1909. by HENRY HALL THE DEVINNE PRESS .
. RANGE OF LEADING STOCKS SINCE 1890 INTEREST BATES AND SURPLUS DEPOSITS SINCE 1890 210 231 INDEX .CONTENTS PAGE A NATION OF INVESTORS INVESTOR MAKES MONEY 3 11 21 How AN BONDS STOCKS BATE OP INTEREST ON INVESTMENTS 28 44 CYCLES OF PROSPERITY AND DEPRESSION .... 55 105 NORMAL YEARLY MOVEMENTS OF PRICES COURSE OF THE STOCK MARKET SINCE 1860 POINTS TO BE WATCHED . .114 119 TURNING POINTS IN THE MARKET 139 DULL DAYS IN STOCKS 154 160 169 WHEN TO BUY SECURITIES WHEN TO SELL SECURITIES MAXIMS OF WALL STREET FINANCIAL TERMS AND PHRASES 177 182 193 ... .
needs to know how he can and that. which are sold through the banking and brokerage houses of the United States. in the matter of advice. farther. should pay attention to the safety of his An investor capital and the regularity of his income. by investors. that there is imperative need of another work. Other books have been published to define the meaning of the technical terms in vogue in A NUMBER the financial world. however. unless there is a fair assurance that money can be made on stocks will be lost and bonds. bonds. it is almost certain that money on them or so locked up as not to be available for other uses for a period of years. at a date not far distant. part or all of his money. if the times do not promise greater profits going and larger dividends. They treat of stocks.PREFATORY EXPLANATION of text books have been written to explain the character of the securities. then all classes of securities are go- ing lower. every year. If securities are no higher. shall do more than dwell upon the simple truism that an investor. seems to the writer. but also how to make money in This book is devoted to the broad principle. It They all serve a useful purpose. before all other things. vast amount of money is either badly employed or A wasted. notes and mortgages and describe the peculiarities of each. which shall go beyond elementary facts. and great opportunities . and. securities. actually accomplish those obnot only how he can avoid the loss of jects.
in consequence of inattention to cautionary sigeasily recognized by men experienced in
finance but are entirely overlooked
by others. Coming danger and coming prosperity are always
shadowed in various ways.
stocks or bonds,
investor sometimes buys of dominating importance that
everything he has, both with a view to harvest the profit he has on them and to reinvest later
selling in times of bullish enthusiasm being the step the
is usually the most reluctant to take. Conversely, an investor only too often sells, when every To financial consideration demands that he should buy.
guide him in buying and selling, and to urge him to take his profits on investments at certain critical periods, are
the objects of this book.
Wall Street with unfailing
regularity, as in all other fields of human activity. diligent study of Wall Street methods and the financial
history of the past fifty years will reveal to any intelligent man considerations of great importance; and the, fruits of such a study are here laid before the public in the belief
that they will conserve the interests of actual investors. Attention will be called especially to the remarkable
changes in prices of
brought about by
nating periods of prosperity and depression, and to the smaller but also noteworthy fluctuations at certain seasons in each year, all of which will be utilized
the information of
be well to say that this book is not written for men of large fortunes. The man of
millions needs no guidance
from a work of
has private information not at
the service of the
and he can proceed with the purchase and
of securities, with a confidence which is denied to men less well informed. The subject of security investments,
is here discussed to meet thousand Americans, who have many moderate amounts of money, say from $500 to $5,000, which they desire to add to their permanent capital, and from which they wish to derive as large a revenue as is consistent with safety, and from the investment of which they can also gain an actual increment to their principal. This work will not encourage the belief that a man can make himself rapidly rich by trading in Wall Street with a few thousand dollars of capital. The achievement is possible to men who have been trained to the business, but it is foreign to the purpose in view. The object will be to show that security investments can be handled in
the requirements of
such a shrewd and conservative manner, that the principal will be safe and the income sure, and that when this is accomplished, a desirable increment can be added to principal in a perfectly legitimate
a policy which will
ensure a fortune possibly in a series of years and certainly, in a life-time.
IN presenting the fourth edition
of this book to the public, the author calls attention to the remarkable fact that a
large proportion of the business world appears to have been taken entirely by surprise by the panic in stocks and
recession in business of 1907.
It is alleged that thousands of active business men lost, in one year, the profits of the previous ten, and virtually were forced to begin life anew.
The aftermath of a panic is practically the same in all The losses are always grievous. The poor suffer to some extent; the rich suffer the most. That was certainly the case, in 1907,
the securities listed on the
more than $4,000,000,000 While the panic of 1907 resembled 1893 in some respects, 1896 in others, and 1903 in yet others, the general result has been the same so far as wide-spread losses to
prosperous individuals is concerned. But it is remarkable that intelligent and well read men, attentive to the conditions on which prosperity -and sol-
should have been taken by surprise by the
panic of 1907.
As early as December, 1906, the signs of were unmistakable. The enormous excess
of loans over deposits in New York, almost unprecedented in history, a condition paralleled to some extent in
the country banks, was alone sufficient to foreshadow the course of events in 1907. The panic was, in fact, predicted by the author in correspondence with authorities in Washington, as early as January, 1907. This volume was perhaps the first to point out the vital influence of an excess of loans over deposits upon the
course of the stock market. dicated
The events of 1907 have
from the low
position on this subject. in stocks and bonds
of the Fall of 1907 has been vigorous, as is usual in the second year after a panic; and various good stocks have,
in 1909, reached the highest prices at which they have ever been sold. The immediate future now rests upon the
action of Congress in revising the tariff, the decision of the United States Supreme Court on the "commodity
and the currency
legislation of the present
were the forerunners of lines of business. securities and the commonalty knew nies. while men worth several hundred thousand were extremely rare. the grass as green. 3 . sailing vessels. the streams were full of fish and the forests of game. little Several millions of people occupied the thirteen coloThey were courageous. THE CHANGE SINCE 1825 PEOPLE old times good ' l were strong. who could have been rated as a millionaire. the soil was fertile. of the forefathers of the republic. in which forAt the time. industrious and thrifty. But in the simple occupations of the pioneer settlers of a new continent. and it was not difficult to make a living. they merely afforded a subsistence to the energetic men. Lands and plantations. but scarcely any one owned about them. The skies were as blue as now. roads. General Washington was probably the only man on this continent in his day. petty manufactures for local retail and auction stores and inns all existed and tunes have since been made. who devoted Millionaires were almost unknown. COMPARED WITH THE PRESENT.HOW MONEY IS MADE A NATION OF INVESTORS OLD TIMES IN AMERICA. stage coaches. toll sale. their lives to them. no great amount of surplus wealth could be accumulated. healthy and happy in the ' ' but they were not rich. AMERICAN SECURITIES ONCE OWNED MAINLY ABROAD.
Americans had become familiar with the idea of devoting a part of their surplus capital to the purchase of securities. formed in the leading cities. and as foreign trade into the country. Bonds were issued by the public authorities for the payment of debts to the soldiers and others and for the construction of roads. the necessity had arisen for enterprises. The first great stock company came into being in 1791. stocks and bonds had sons of little more than an academic interest to per- who had no money with which to buy them. which could be set on foot only through the aid of the united funds of many different persons or the resources of the State. During the twenty years next after Independence. Securities were not of course but there were only a few joint stock companies and almost no corporations 7 and from the very nature of the case.: MONEY unknown is MADE . who took the stocks and bonds of new companies. as wealth increased and the trade and natural resources of the country were developed. followed later by fire and marine insurance companies. . Owners securities were found only among a limited number of merchants and bankers in the larger cities and the proprietors of landed estates. largely from motives of public spirit and not because they were seeking desirable forms of investment for surplus funds. Stocks and bonds came into vogue. gradually. it the early modest enterprises had brought a great deal of money was possible to secure the capital for mainly through leading men of the different localities. New ventures outside of the province of Government were carried out by organizing joint stock companies and corporations . after the War for Independence. North and South. Before many years had passed. when Congress chartered Local banks were the original United States Bank.
the public it is on record that one man . after the Government had sold its interest in the Bank. an institution of which the country was extremely proud. Bonds and stocks were bought and sold principally at the stores . the fact remains that those who thus be- came partners in the Bank took the stock in most cases as a speculation.000. In modern times. was the quotations of American bank shares and State bonds in London.000. of which the $8. has supplied $8.000. the sum was too large for the whole of the infant republic. mostly in London. The remaining 18.000. In 1791.000. as was expected. the bulk of it speedily found its way abroad.000 for a single enterprise.A NATION OF INVESTORS The projectors of every important enterprise looked 5 For many years. a century ago. Measured by the times. a century ago. to absorb a large issue of even the most gilt edged security is "afforded by the experience of the first United States Bank. In 1809. as reported by President Washington. it was practically impossible to float large issues of securities in the United States. How little the ownership of securities interested our people in the early days is farther shown by the entire absence of special facilities for dealing in them. however. While it is true. and. An illustration of the inability of rich Americans.000 shares (of $400 each) were owned by Americans.000. that the entire capital stock of the Bank was subscribed for in one day. One of the interesting items of news in "Niles's Register " and other public prints. not as an investment. printed here about a month late as a rule. It had a capital of $10. Government took $2.000. the bank was a gigantic concern. an official report stated the rather surprising fact that only 7. to Europe for a considerable part of the funds required.000 shares were held in Europe.
From Edmund C. who had managed to save. In that year. a start was made in New York. In later years. however. Not until 1792. as follows: . This was the germ of the New York Stock Exchange. Stedman's it " History of the New York Stock Exchange" appears that in 1827. invest- and bonds began to play a distinct part in Wealth had continued to accumulate. which sprang up in the '30s and '40s. The process was a gradual one. a year after the organization of the United States Bank. by an agreement between a few jobbers of stocks and bonds as to rates of commission. with the consequence that men of means turned more and more in the direction of corporate securities as a proper and safe employment of surplus capital. trading at York was confined to forty-two descriptions of securNew ity issues. This class of persons became considerable buyers of the securities of the pioneer railroad lines and public utility corporations. before there was any striking increase in the transactions in securities or the roll of stockholders in corporations. Some of these investments were profitable.6 HOW MONEY IS MADE of leading merchants and auctioneers. sums of money not required in stocks financial affairs. through frugality and their talents as business men. Each decade of progress added to the volume of stocks and bonds afloat and the number of buyers of them. ment in the prosecution of private business. were steps taken which tended toward the creation of a specific market-place for securities. dealers in securities in other cities started stock exchanges of their own. and more than one generation of active business men had crossed the stage of affairs and disappeared. dollar by dollar. and many persons were found in the cities. After the dawn of railroad construction in 1826.
Nineteen fire and marine insurance companies. the volume and value of securities afloat and the number of investors. in spite of the enormous advance in wealth and enterprise. In 1907. Americans earn more. How remarkable is having a par value of $28. Even as late as the outbreak of the Civil War.A NATION OF INVESTORS Twelve bank stocks. a day's trading sometimes amounted only to about 4. It is good to be an American and to have played some part in the betterment of conditions.000. while bonds were More sold in 1905 to the value of over $1. Light stock. which one of the marvels of the world's history.000 shares.425. 7 Eight public bonds. at least among the native born. than 250 descriptions of stocks were dealt in. Merchants' Exchange stock. In 1837.000. No figures are at hand. and more than four hundred and fifty varieties of bonds. at all important. that in 1906.000 and has since expanded to $95. Delaware & Hudson Canal stock. the country is rich and comfort is general. in more than fractional lots. as to the actual It is wealth of the population in Washington's day.000. wealth had grown to about $7.000. sales of stocks on that Exchange amounted to 289.000. . sixteen of New York Gas them being railroad shares. a change has been wrought in the wealth of the people. known.000.500.000. however. the change which has since taken place will appear from the fact. that by 1850. In the eighty years or so since the whistle of a locomotive was first heard in the States. in 1861. which has brought about is this transformation.000.942. only twenty-two stocks were dealt in on the New York Stock Exchange.000 shares.000.
are now recruiting the ranks of buyers of securities. in which there is entire freedom of thought and from primitive conditions action.400. In every rank of life. one needs only to refer to the savings bank to gain a clue to the general diffusion of wealth Thousands are now 8. formerly struggled under the most trying conditions for a bare maintenance. and have saved a few thousand dollars and bought a few bonds or shares of stock. laws which tiful harvests give equal opportunities to all.8 live HOW MONEY better IS MADE their and save more than forefathers did. and the opportunities for profitable speculation. who. thou- sands of workmen have passed the stage where they often lacked bread to eat. and more than 7.000 millionaires. as a class. the discoveries of coal. the division of estates. More than 40. with total deposits of only $1.000 depositors now. and which have risen to wealth and prosperity. Farmers. compared with a mere handful in the year of adoption of the Constitution. as the natural product of the thrift of a busy people. as in older countries. So far as the people at capable of large are concerned.635 depositors in 1820. operatives are taking shares in the cotton mills. and there are more than 5. owning a few shares of stock or a few bonds. bounfrom our rich soils. year by year. and the number of them grows. while the average of accounts is thrice as large. the energy shown in every branch of trade and manufacture.139. one now finds investors in securities. an inspiring climate.000. Here. oil and metals. In New England.000 employes of the United States Steel Corporation alone are owners of stock in that concern. A notable . Many a village blacksmith and smart carpenter and grimy toiler in an iron mill is thus a capitalist on a small scale.
although . since it is within the knowledge of every one. five to twenty shares of bank. from stocks and bonds which they have bought. There are no statistics as to the exact or even approximate number of investors in America. if the number could be known. gas. There is little need to multiply instances. or who conduct small retail stores. As long as the assessor and tax collector flourish in the land. or street railroad stock. that investors are now to be found on every side among the ranks of people of moderate means. fishing In the cities. there is now an army of frugal people who seek a larger return on their modest accumulations than a savings bank affords and who are receiving from 5 to 7 per cent. journalists. men and women. officials are under salary as managers. in which the chambermaids and serving men of a Southern city became stockholders in a local shipyard. an appreciable part of whose stock has been subscribed for by farmers. as well as among the men of wealth. Without dwelling further on the point.A NATION OF INVESTORS 9 circumstance is the fact that in the West hundreds of small banks have been organized in the last ten years. are owners of from a vast number of people. started for repair of the swarm of and truck boats owned on Chesapeake Bay. It is doubtful if any useful object would be served. suffice it to say that Americans have fully learned the desirability of investment in securities and the United States has become a nation of investors. Among the millions who teachers. and clerks. curious instance A is known. insurmountable difficulties will stand in the way of an accurate census of security owners.
10 HOW MONEY forethe facts would be most corporations. A few of the IS number of to stockholders in leading railroads but sible was obliged abandon a task made impos- by official indifference. . and a policy of secrecy prevails among the majority of other stock companies. A few years ago. one of the New York mercantile agencies made a strong effort to compile the total MADE interesting enough. have taken pride in publishing the number of their stockholders. but they are exceptions. like the Pennsylvania Eailroad and the United States Steel concern.
the life story of such moral doctrine. MacMorgan.II HOW AN INVESTOR MAKES MONEY MOST FORTUNES IN AMERICA GREAT EICHES POSSIBLE IN STOCKS. It may be true. With rare and conspicuous exceptions. This might have been true in his times and country. kay and thousands of other well-known Americans is a sufficient refutation of Machiavelli 's heartless and im- many and . But the assertion is not true of every rich man. man who men as MarJohn W. it is not even true of shall Field. J. young TOmysterious the man and of phenomena the uninitiated. George Peabody. one of the most in the business world is the accumulation of magnificent fortunes by men who began life without a dollar. the men of to-day who live in splendid houses and own estates in the country. P. HOW THE THING IS DONE ENHANCED BY SECURITY INVESTMENTS. without the use of either force or fraud. that no man could ever rise to great wealth or power. have come up from poverty. such fortunes be made in one life-time ? Machiavelli took the ground. and who have steam yachts. 11 . of more than one has obtained opulence by trampling others under foot or by taking unfair advantage of his countrymen. motor cars. in these times and this country. art collections and practically unHow can limited means.
a strong physique. as we go on. investments in stocks and . and a willing spirit. and John D. and will follow sound and sane methods in his security investments and cultivate his own judgment and powers of intuition. While there is more than one way to make money.12 HOW MONEY But how do rich Is the IS MADE men make their money? What is the way yet open to men of moderate means ? process ? Can a young man. from the days of primitive man . Does this seem a chimerical idea ? Let us see. it is an interesting fact. Rockefeller Carnegie are authority for the statement is. however. however. and thousands of them have been chiefly due to. the tariff and banking. Before passing on. it may also be stated that the majority of men make their big money after they are fifty years of age. and and they ought to know. nothing that any man is can say will ever put an end to speculation. who starts in life with a clear head. but without a cent to his name. which the principle of barter car- ried to the point of taking risks. So far as that is concerned. Such a man ought readily to be worth a million at middle age. ever expect under present circumstances to gain such opulence as other men enjoy? an honest The answer Andrew certainly. His purpose is a different one. and spend a reasonable amount of his leisure time in the study of finance. that most of the conspicuous fortunes in America have been enhanced by. let the writer disavow any intention to encourage active speculation in stocks. if he will depend upon will some regular occupation for his means of support. Bold spirits have always speculated in something. heart. Every young man who has saved a/ thousand dollars can take his place among the capitalists of the future.
mines. the great objection is that many persons incur them without the slightest knowledge of Wall Street history or methods. is deeply implanted in the human breast.HOW AN INVESTOR MAKES MONEY great 13 in lands. In the early part of the last century. which stands a chance of being sold at an advance. earth has ever been able to prevent this. be he a plodder or a man of genius. A deep student. Long ago. as to seek to level a by throwing dandelions against it. especially those which were fostered by Government larly . with close study of underlying factors. mulberry trees. Bonds often sold below par. to tuations of great violence. where others fail. that it would seem to be as useless to try and stop the taking of risks. An investor would then be following the line of by which the captains of finance have been able amass riches in Wall Street. will suc- With legitimate business as a ceed. tulips. beans and whatever else has been in demand No power on The instinct to at different periods in the world's history. bank stocks sometimes sold for 50 per cent premium. cattle. potatoes. and the necessity of making money by some such process is so imperative to the majority of men. brick wall With Their Wall Street ventures are unequivocal gambles. means of livelihood. an investment in stocks should be profitable in nine cases out of ten. iron. grain. infinite patience and conservative methods. and there are so few "sure things" in life. gold. it was observed that the market prices of all securities were subject to serious variations. Some of the first railroad in the West. The stocks of various of the pioneer railroads underwent flucaction. make money by buying something or creat- ing something. reference to taking risks in stocks. and more particulines.
Cool and far sighted added to. discovered one secret of great wealth in the rise in value of their stocks when dividends had become assured. were built while population was scanty and before the routes traversed could supply business enough to ensure dividends or even the expense of operation. in response to trade conditions. and the larger stockholders who clung to those corporations. But it is a maxim of Wall Street.14: HOW MONEY IS MADE land grants. fortunes in materially carefully bought in years of panic and depression them as investments. and should be. The decline in value of the stocks of some of those roads will never be forgotten . the bankers who financed. year to year. and season to season." It is so indeed. portunity for profits much beyond the income to be deIt certainly took rived from men have stocks. during their years of trial and until settlement had wrought its miracles of development. and made. The primary object of every man who buys a share of stock or a bond is. to invest his surplus money safely and derive a suitable income therefrom. by men yet living. no observing man long to grasp the that the varying price of securities supplied an opfact. Each railroad proved a powerful stimulus to local trade and to the value of lands but the companies themselves often languished for years and many of them became insolvent for lack of money. that a good investment ' ' is a good speculation. stocks on which dividends had always been extreme fluctuations in price were witnessed from paid. If properly . On the other hand. the abundance of money and the public de- Even among mand for securities. and sold in later periods of prosperity. the men who managed.
made in stock investments.000 to which arose from the purchase of of depression and their appreciation in stocks in times price after he had built up the properties they reprehis family.000. . which he sailed as a ferry boat from New York to Staten Island. They are taken from the history of the last generation. stocks will in time show an increment on the purfew examples of fortunes. and shrewd buyers of stocks in violent declines. Jay Gould. They are often in the stock market. He borrowed money to go into a steam ferry line and extended his operations to steamboats in general. the bulk of sented. he went into railroads and made the of his family famous by buying good stocks when were cheap and selling some of them afterward at an they name advance. made by backing Delaware. which have been chase price.000. Crocker. often at almost fabulous prices. Their fortunes were due in part to railroad contracts but mainly to the rise in value of the stocks owned by them. Moses Taylor. surprised even some of his business by dying worth $40.000. Stanford and others of that group of remarkable men were merchants in a small way in the neighborhood of the California gold mines. who had grown up in the mercantile business in New associates York. Lackawanna its affairs & Western at a critical period in and after a thorough investigation. Commodore Vanderbilt began life as the owner of a canoe.HOW AN INVESTOR MAKES MONEY A 15 bought. will not be out of place. Late in life. The Astors owe their immense holdings by no means They have always been careful entirely to real estate. Huntington. one of the most daring and intellectual men Wall Street has ever known. left more than $70.
It is this policy only which can be followed by the small investor. on from modest beginnings in trade. have simply taken advantage of the situation as they found it. manufactures. Thousands of other men. and that means all except one out of every thousand. there are. when they could do so. mines. when the good times or the manipulation of prices by insiders had forced stocks to high figures. and he can sell them in boom . risen tional qualities. a few persons of excepevery side. Now. at or near the top of a long rise. They bought stocks. All the others. who have who have themselves called into play the which made stocks in general or those in which they were particularly interested.. bought when they were low and sold advantageously when they were high. of course. to-day. What ation is took place in that respect during the last generbeing also done. etc. one way or the other but he can buy them. all things considered. what results can be produced in a series of years by the ordinary investor? Suppose that a young man. starting in 1870 with a thousand dollars which he had earned and saved. acquired entire financial ease through stocks. when they are extremely low. bought and sold wisely. Among the men who have added to their wealth by stock investments. forces. some of them not known outside of their immediate circles. safely and cheaply. had put it . by a throng of men. He can do little or no- thing whatever to affect the price of stocks. times. high or low. and are now among the captains of finance and industry in these States. until the Probate Court or their gifts to public objects revealed the extent of their possessions. and they sold.16 HOW MONEY IS MADE George Peabody derived his great wealth from stocks.
300 for ten shares of it. That was an approved and with a great future.000. another sedate investment stock. because his shares would have been fully paid for. dealing in Illinois Central alone.000 and this would have taken care of him. Ten shares could have been bought for $900. starting with his ten shares. tral stock was too high to keep.300. had sold the stock within four or five points of the top of every considerable rise. his holdings would have grown to about 900 shares by 1905. with a great record as a dividend payer. as above outlined. and a dividend payer. If he had sold. all the rest of his life. . He would have learned by experience. No panic could have touched him. when New York Cen. as a rule. and at the moments of reinvestment. New York stock. and bought again. If. Ten shares of Delaware. Central has always been an investment stock. He would not have been obliged to go into the market and give an order (to buy or sell) more than once or twice a year. from 1870 to 1905. worth about $170. He would have had to be a diligent student of financial conditions in general and of the in earnings particular. and conversely when it was so low that he ought to buy it. and prospects the of New York received Central He would while have stock a of dividends was in number his name between times. If the investor. Lackawanna & Western. he would have been worth at middle age the sum of at least $150. in 1870. New York in price. very steady and very safe. and had reinvested all the money in New York Central somewhere near the bot- tom of every marked decline. he had put his money into Illinois Central. he would always have had a little surplus cash left over after making his purchases.HOW AN INVESTOR MAKES MONEY into 17 good Central stock. all the outgrowth of the original $1. he would have had to pay about $1.
but which like Union Pacific had a great and certain future.020. Paul through good and evil days until the present time. from 1870 to the present day. Hundreds of men have followed the fortunes of St.000 shares in 1905. In 1888.000 and If our investor 000. Paul (bought in 1870 for $900) had sold anywhere near the top of the next considerable rise. compared with over 250 now. St. There were fewer stocks to choose from in 1870.and this. paying about $60 a share. which afterward ceased to pay a dividend for a time. too. he could have started with fifty shares costing about $1. If an investor in fifteen shares of St.000. or into a stock which did not pay a dividend even then. for $1. ment when the company was reorganized . worth about half a million. would have grown to 1. Suppose that he had gone into St. then. Paul sold as high as $12954. and had pursued this policy consistently. ment into It is therefore quite possible.000. without having had to pay the assessin 1897. Paul was worth as low as $11 a share. he would have made about $2. and had reinvested all the money in the same stock anywhere near the bottom of the next heavy decline. that a neophyte in investin 1870 would have put his first thousand dollars some stock. Paul.18 HOW MONEY IS MADE bought in 1870. had chosen Union Pacific for his studies and investment. They saw the stock* rise to $1983/4 in 1902. In 1877. than now only about seventy actively traded in at the New York Stock Exchange. but now a gilt edged investment. dividends were suspended for a time. a stock with a checkered career.000 by 1905. sold out his interests in 1905 for something like $3. He could have bought fifteen shares in 1870 for $900. The price rebounded from that low figure and in 1881 St.
made for No man can at a time. would have yielded about from an original invest- Does it not begin to be clear how magnificent fortunes have been made in stocks. How shall ? man know when to go in and when this to go out of stocks In order to accomplish anything to above. lower after he has bought. for him. An investor has a thousand dollars to invest. it must be admitted. are coming near their turning points. a like the results referred man must know and know it for himself. as to be able to know when the exact top of a boom has been reached. That is near enough tell. An outsider can never sell at the highest or buy at the lowest. by many actual investors? Now. He will often experience the chagrin of seeing his favorite stock go higher after he has sold and in. at once. He reads . as the top is approached. except by the merest accident and he will . Allowance has been that in the foregoing calculations. or when prices are actually scraping on the bottom of a long decline. that no private investor can ever be in such close accord with the ruling spirits in the stock market. and " buy on a scale down as the market is nearbottom. a little ' ' they begin to ing to its on the way up. It is perfectly understood that they begin to expect to do better than the real insiders.000 in thirty-five years ment of $950. when the major swings of the market. The real point for an investor is to be able approximately.000. probably go or out. sell.HOW AN Central of INVESTOR MAKES MONEY Jersey 19 New $6. But a this is the very gist of the whole matter. extending over a series of months or years. several dollars a share away from those extremes. or have such an intimate acquaintance with underlying conditions.
This latter class of stocks are apt to farther than the railroad securities. no reason at when distribution is in progress. considering what the province of a newspaper is. The reader has the facts and must judge for himself. little later. and what they have to say is most interesting and informing. That is not a bad policy. one or two of them industrials. Investors. as the case may be.20 HOW MONEY IS MADE the daily newspaper for a week and he notes that stocks Tomorrow. " in their own phraseology. and it is the only one which may be pursued at the outset of the future capitalist's career. financial columns discuss the general situation. But this is as far as they have any right to go. They can and do call attention to the fact." Has any one ever known a good newspaper to advise everybody to sell their stocks and retire from the market ? The newspapers cannot do this. An effort will be made in following chapters to supply an investor with the means of forming his own judgment in this matter. go up to-day. buy stocks as quickly as you can. and watch the basket. An investor may follow one of two courses. they mysteriously go down. able swing more violently and In case industrials are added to a man's investments. the time has come. are advantages in having three or four stocks. and the writers are blue or cheerful. those stocks are preferwhich make public reports and which supply the ac- tual data followed. he can diversify his investments and there A . A very few of them are bold enough to say now and then. for The end-of-the-week all that he can see. moderate amounts of each. He may put all his eggs into one basket. from which the fortunes of the company can be No need to specify. .
the natural use of surplus earnings would be an increase of facilities carrying on his regular vocation. or when. buildings. tools. what rate of return on investments in bonds or may an investor look for? dollars. In a solvent private business. in order that the business may be carried on properly in the lean years. THE RETURN NOW TO BE LOOKED FOR ON MONEY AND SECURITIES BEFORE matters. machinery.Ill BATE OF INTEREST ON INVESTMENTS 2 PER CENT A MONTH COMMON A CENTURY AGO. and what can he get for the use of his money ? If he is in a business capable of extension. yearly net profits . Among manufacturing corporations. ships. what shall he do with. stocks passing on to consider the more important to which these pages are devoted. or When a man has saved his first thousand some other when later he has derived and perhaps larger sum from his private busi- ness or from previous investments. First. a few elementary facts should be set forth. the owner is obliged to operate without profit or possibly at some loss for the time being. Goods. or working capital would be added to. to maintain an organization and keep one's list of customers. when profits are small. more or less. for in good years. it is held that yearly profits must be around 25 per cent. LEGAL RATES OP THE PRESENT DAY.
stock of the concern were as heavily watered as capital that of most industrial corporations. the propriety of other investments presents own With itself. the capital being inflated in most cases by a very large and perhaps undue issue of securities. when a sum living. Standard Oil has divided between 31 and 48 per cent annually during the If the last ten years. and analagous forms of investment. as represented by the stock and bonds. which occur regularly and cannot be avoided. but this is an exceptional case. But while such a return on the money invested seems ness tempting. that they make smaller demands upon the time and personal attention of the investor than do standard stocks and bonds. the percentage of In a manufacturing busiprofit would be much smaller. owned by a private firm or an individual. provided that an investor is as cautious in one case as in the other. with its labors and anxieties. this moderate return being due to the fact that the percentage of profit is figured on the total capital. special partnerships. The risk is no greater. on the face of the matter. them. there are many persons who do not care to undertake the responsibilities of private business. shares in shipping. others have sufficient equipment to hold their and against such competition as they are exposed to. rentable real estate.22 HOW MONEY IS MADE range from 4 to 15 per cent. of money has been saved beyond the cost of abundance of investments can be found besides The scope of this work does not admit of consideration of them. especially with reference . the annual profits would need to run from 20 to 25 per cent in order to provide against the strain of bad times. It may be said of stocks and bonds. An promissory notes.
or possibly a panic. Wealth was limited and surplus capital extremely small. a high rate of interest was current. In Germany and Holland. a few centuries ago. The chances of selling out at a profit are larger. by through a brokerage office or a whereas investments of the nature of some of those bank. Higher rates were paid by those who needed money badly to those who loaned it. Farther. Supply and demand always regulate rates of interest with an iron rates high. The law is effective all over the world. hand.RATE OF INTEREST ON INVESTMENTS to the 23 time when he buys and the price he pays. he can do so at any time at a notice. In France. the scarcity of money made interest It was not at all uncommon to obtain 15 or 25 per cent upon loans or ready money. if one wishes to withdraw his capital from an investment in standard securities. the enterprise and the riches of the people caused it to fall to 5 per cent and finally to 2 and 3 per cent. In Eng- land. the growing wealth of the country gradually brought the ruling rate down to between 2 and 4 per cent where it stands to-day. The income to be expected from stocks or bonds corres- ponds rather closely to the average rate of interest on long time loans of money (four months or more) in New York city. ten per cent was the ruling rate of interest. it is only because money stringency. until the Spaniards began to pour the gold and silver of Mexico and Peru into the old world. If the rate for time loans goes much above 4 per cent in England. the financial center of the country. In early times. until the development of industry. low rates . mentioned above are of a more permanent character and moment's sale cannot usually be disposed of quickly or to advantage. In England. and indeed in Europe generally. now. threatens the commercial world.
In those days. great crops of grain brought millions of money into the West. it was fashionable to be economical and the couple did not know what they could do with $2. He could get 2 per cent a month for the use of his money. is told by an Illinoisan. now resident in New York. from 5 to 8 per cent in the West and South. In various of the newer sections of the United States. was once paid in California and other sparsely settled sections of the Western country. Each State has its own laws. But Illinois settled rapidly.000 Our Illinois merchant is yet in busi- The legal rate of interest.400 a year. The time when $2.and himself. Two per cent a month. to-day. is 6 per cent in New England and the Middle States. the willing to .000.000 and it was agreed between his wife . The great profits of the pioneer bankers in the terand on the Pacific coast were obviously due. people grew prosperous. equal to 24 per cent a year. that when they were worth $10. A trifling which affords an insight . and interest rates declined. and even more.400 a year could be realized on $10. when he was married. forty years ago in the West. where conditions have been similar to those in early times in the East. of capital passed. high rates were common down to the middle of the last century. but nowhere is the legal rate over 8 per cent.400 a year. ness. . He was then worth $6. and this would yield an income of $2. in to the high price which merchants and others were pay for the use of loanable funds. ritories part.24 HOW MONEY IS MADE have reigned for centuries on account of the thrift and prosperity of the people. . who was a small merchant in one of the towns of his State. he would retire from business.into the conditions of incident.
the great borrowers of money in this country can usually obtain ample supplies of capital at modest The cities and States are able to borrow all the funds they require at an average of 3^ to 4 per cent. figures. and 186 per cent in 1899 and 1890. is sometimes charged 7 or 8 per cent on time loans for a short period. Montana and Nevada. California. Rates of that character were simply due to spasms in the money market and were of short dur- . But while the rates allowed by law on long time loans are as stated. Money never South. when the parties to the loan agree In the West and the same by private contract. 1896. In Maine. and in 1893. "any rate" is legal when agreed upon by private contract and in New York. In 1873. Rhode Island. Colorado. in ordinary times. that such extravagant rates for temporary accommodation were seen in New York city. manufacturers and merchants can. 127 per cent in October. 24 per cent was charged in New York on commercial paper. 1905. security. and millions have been loaned to the United States government at 2 per cent.RATE OF INTEREST ON INVESTMENTS It is true that 25 a higher rate of interest is allowed in many upon of the States. however. but exceptional cases like these are not to be considered. Massachusetts. Arizona. brings such rates. as 125 per cent in December. cial In years of considerable stringency. borrow at 3^ to 5 per cent. Railroads. "any rate is permitted on call loans of $5. according to their solvency and the amount of security given. 10 and 12 per cent is the limit. the commerto community which generally has pay the highest rate of interest. It is under this provision of the law.000 or more on collateral . 15 per cent was asked. except during periods of great stringency and for a short time.
This is the amount of return an investor can expect from safe. as they . The range of interest rates on time loans for four months or more in New York city. which he puts into railroad stocks or bonds. 5 4 2 %@ " " % y 2 5 4 3 2%@10 2 1895 1896 1897 1898 1899 1900 1901 1902 1903 1904 1905 1906 1907 2 3 @ %@ @4 6 @12 5 6 2 3 2 3 3 4 4 2 2 y2 4 2 4%@ @ y2 @ @ @6 5 @ 5V2 @ 6 y2 6 8 8 7 @6 @6 @ " " " " " " " " " " " " " % 5y2 3y2 5% 314 3% 4% 4% 4% 5 5% 3y2 4 % 1908 @ " " " 5% 5% 3 % investor will therefore look for a return of 4 per cent or a trifle more from money. although this idea is open to discussion. since 1890. have been as follows 1890 1891 1892 1893 1894 : 4 y2 V2 @ @ 9 6 6 1/2 Average. Conservative men are even of the opinion. and for a period of years. sound. If those securities sell at prices An which would make the yield 5 or 6 per cent. with an average of about 4 to perhaps 4^2. that securities which pay a larger yield on the money invested are dangerous. the rate of interest on long time loans seldom goes far ruling from 3^2 to 5 per cent for the bulk of the business. approved security investments. HOW MONEY IS MADE In ordinary times.26 ation.
A discussion is now in progess among financiers and students. if for any reason. . the corporation is solvent and its finances in good shape. to lower the rate of interest and raise the selling price of bonds. to compensate the investor for the larger risk. Johnson of New York being that gold inflation must stimulate and increase the demand for the use of money and thus maintain interest rates. turn anything like 5 per cent. they are a purchase. such as the prevalence of panic or high money. in time. they can be bought to reis beyond question seldom 2 / l of 4 or per cent. who maintain enterprise troversy is now being poured interesting. while stocks and those securities whose incomes increase as the production of wealth increases will appreciate in value. that the rate of interest will rise and that bonds and other fixed income securities will decline. assuming that in the case of any particular company. which ought to yield from 6 to 7 per cent. ordinarily. This position is strongly opposed by others. Joseph F.RATE OF INTEREST ON INVESTMENTS 27 usually do in panic years. Bonds are more stable in price than stocks. and. It is the opinion of many. as to the probable effect of the increasing gold supply upon prices and rates of interest. of whom Prof. While the conis one. they are a purchase. that such enormous additions as are now made to the gold money of the world must tend. John Moody 's theory is. A larger return can be expected on industrial investments. and those whose soundness fall below an investment yield If the companies which have issued them are strong. the influence of the flood of gold into circulation will obviously not be immediate and can only be made clear by the lapse of time.
Every issue by a corporation is secured by a mortgage of some kind. the first mortgage bondholders having the first claim to consideration. and by municipal. being in full payment possession of the property. MARKET PRICES OF VARIOUS ISSUES OF A BOND. deposited with a trust company. necessity for additional capital have compelled most railroad companies to 28 The growth of the country and the . holders of the foreclose the mortgage and then. or all. in denominations of $1. bond is evidence of a loan of money. narily. although They are put forth by railroad companies. and the interest on the whole of the funded debt of a corporation must always be paid ahead of any distribution for dividends on the case of default in stock. which Bonds issued under a first mortgage have priority over all others. public service and industrial corporations. this document is acts as trustee. BONDS in house may be bought through any bank or brokerage any part of the United States. ordibonds for $500 can sometimes be bought. State and They are issued the national governments. In bonds may of the interest.IV BONDS HOW TO JUDGE OF THE SAFETY THIS CLASS'OF SECURITIES DEFINED. on a portion. they may reorganize the concern. of the property of the company and A .000 each.
The value of issue several different classes of bonds. second mortgage and other junior issues depends on the total value of the property. Junior issues are often practically as safe and sound as first mortgage bonds, because the original issues were not large, and because the property against which they are all a charge is of equal value to, or greater than, the total funded debt, and the com-
Debentures are generally considered a junior issue of bonds, because they are printed in the form of a bond, with coupons attached; but they are in fact merely the promissory notes of the company, and they rank as such.
If the corporation which issues them is solvent, they are good investments and often bring a premium. Eailroad equipment notes have taken their place as funded debt and are a popular investment. They are
floated for the purchase of cars, locomotives
There was formerly some laxity in the matter of this form of railroad obligation but their issue is now based on sound principles. It is conceivable that a railroad, whose equipment notes are offered for sale, might be heavily cumbered with debt and its stock sell below par, without the safety of the equipment notes being
The cars and engines are pledged for the payaffected. ment of the notes and the company is required to mainThe equipment really betain them in good condition.
longs to the banking house, which has financed the transaction (or, more accurately, to the holders of the notes)
and they constitute the security, which is ample; they cannot become the property of the company until the
notes are paid.
These notes yield about 5 per cent
them are now
Convertible bonds are a popular feature of railroad The convertible feature is usually intended to give the bonds a speculative value. They can be exchanged
for the stock of the
company under certain conditions. by Union Pacific convertible 4s in
1905 is eloquent testimony to the popularity of that class of obligations. An investor in bonds should concern himself, first and
foremost, with the question of safety of the investment
and assurance of regular payment of
but they are subordinate to the point above referred to. Until the safety of principal is evident, an investor should never
also be taken into consideration,
buy a bond
any kind. Safety
the corner-stone of sucif
cess in all security transactions
his financial career with this
idea firmly fixed in his
will always adhere to it, he will have learned grand lesson in the building of a fortune and will never have cause to regret his action. If he lacks the facilities, or the education, which would enable him to investigate personally, then he should buy only under the guidance of a bond broker, or a banking house, whose
reputation is a guarantee that the securities recommended are of the highest class. In the final analysis, safety of a bond depends upon
of property in good condition,
total capitalization; earnings;
owned by the and priority of follows that a prudent man will make an
informed with regard to the
effort to keep himself fully
financial status of the corporations, with whose fortunes he has allied himself. Indeed, he will do well to post himself before
ought to do
no better opportunity than before he has comOne must look before he leaps in Wall
The average capitalization of the railroads in the United States is $64,265 a mile, of which $30,837 per mile To represents the stock and $33,428 the bonded debt. judge whether a road's capitalization is moderate or excessive, it is necessary to consider the
nature of the route
to build or the re-
traversed, whether the line
whether it is a single track or a four track line, the volume of traffic and the value and cost of terminals in great cities. Capitalizations vary from about $35,000 to more than $200,000 a mile. As the bonded debt is a mortgage on the property, its total volume should not exceed about 50 to 60 per cent of the value of the property. Earnings of the different railroads of the country, for a series of years, and a great mass of other important data, can be found in the Manuals, which are printed by several
authorities, annually, revised to date. Current earnings appear in the annual
ports of all railroads, which are printed in the financial newspapers as rapidly as they appear. If an investor
not a subscriber to a sound and conservative financial
publication, he cannot become one too soon. He will thus obtain all important statements of earnings in detail and
as quickly as every other reader.
In default of any other
to the secre-
method of getting them, an investor can write
taries of the corporations themselves,
If a corporation publishes no reports, if it in the secrecy of its ledgers and vaults the facts up which it would be justified in asking for loans of
money, the public can protect
only by letting
There are enough good things in the unnecessary for an investor to plunge blindly into the dangerous business of buying securities about whose value he can learn nothing.
the bonds alone.
market to make
With reference to the safety of any particular railroad bond, one or two general rules apply. It is seldom that
any two railroads operate under precisely the same conditions or are in exactly the same position as to the total volume of capitalization or the relative amounts of bonds and
however, earnings for a few years past expenses, all cost of maintenance, the taxes, interest on the funded debt and good dividends on the stock, and especially if, in addition to all that, they
yield some surplus besides, the bonds must be deemed a safe investment. It is held by railroad men that, after
cost of maintenance has been deducted from earnings, then from 60 to 65 per cent of the profits should pay all
fixed charges, that is to say, taxes and interest on the funded debt. If 80 per cent is required, an investor
should take advice as to the propriety of selling his bonds and going into some other security. The market value of the stock of a railroad is sometimes an excellent guide to the value of the bonds.
Large earnings and valuable assests ensure a high price for the stock; and the same factors ensure the safety of
Junior issues of bonds are often tempting, because they can usually be bought for less money than those of a higher class. The net return in interest would then be
But, if they are cheaper, they may be so, because the risk is greater. The risk is a matter which
must be considered. So far as safety of principal
concerned, the nearest
approximation to the ideal is afforded by bonds of the United States, a country which pays its debts and has a
phenomenal record in this respect. Bonds of well governed cities and States belong in this class also. They are always in demand, fluctuate little in value, and can always be sold at a moment's notice. Bonds are sold by banking houses engaged in the busiThis basis is ness, on the basis of net yield in income. on the selling price of the issue, the rate calculated of interest paid, and the length of time it has to run. Tables have been prepared, which show at a glance the net return upon any bond at a particular price. When a bond is said to sell on a 4.1 per cent basis (or any other which may be named) the figure indicates the net return to be derived by an investor, at the selling price named. The rate of interest paid by good city or railroad bonds is from 8^2 to 4^ per cent. If a bond is thoroughly sound and pays from 5 to 6 per cent interest, it- is certain to sell at a price which will make the net return on the investment as above. In former times, when capital was scarce and rates of interest high, railroads were obliged to bid strongly for money; and millions of dollars worth of bonds were sold by them, bearing from 6 to 10 per cent interest. There are yet afloat about $520,000,000 of such bonds; but they are being retired as rapidly as circumstances will permit, to be exchanged for securities bearing a lower rate. Industrial and street railroad bonds pay from 4 to 6
per cent, but,
them are not), they are apt
they are safe investments (which all of to sell at a premium, and the
is in the vicinity of 4 per cent. That a railroad bond may be dangerous
000 of funded corporations. fully $275. If a bond sells at a premium. If a bond is on the New York stock exchange.34 HOW MONEY fact. that IS MADE out of about $6. which have weathered the gales of adversity and are selling at a good premium. while to his principal the investor will put himself in line for another addition through the future increase in value of the new investment. The speculative investor is apt to give much attention to bonds which do sarily deter listed not sell at a premium. They avoid wildcat securities of every kind and are never found in the category of a resi- .t sound bonds. or if it has a broad and quick market. it is held that income will remain unimpaired.000 of the total pay no interest at all at present. paying 6 per cent or more. which yield about 4 per cent. especially if they have only a few years to run. constitute the bulk of their permanent holdings.000. that should not neces- from the debt of these an investor from buying it. Such bonds can be quickly disposed of. or if it belongs to the class of savings bank investments. at any time. a number of bond houses are advising the sale of high class. it is apt to bring a premium. especially of the companies with whose Men who management they are identified. well seasoned and thoroughly sound investment issues. Most of them have stocks. If the money were then put into bonds selling below par and having a longer term to run. And it may be well to say that. care most for safety of principal fill their safe deposit boxes with gilt-edged bonds.873.000. at the present time. Br. By so premium before there doing the investor will capitalize his is any reduction in price as the bonds approach maturity. when the investor wishes to realize on them.
who died ostensibly worth a million and whose estate could show securities for that amount. banks to buy the first mortgage bonds of cerunder certain conditions. on the point of safety of capital and certainty of income. and have never defaulted in the interest or on the principal of their debts for more than 90 days at any time. unincumbered. like the wealthy manufacturer many millions of oil cloth to the late A. men exist. In substance. First mortgage bonds of railroads lying mainly within the State or connected with and controlled by such railroads. which were worth absolutely nothing. The estates which are left to women and the surplus funds of savings banks and insurance com- never securities. who never buy anything except bonds and who sell a good one. Bonds and mortgages on real estate. T. A few extremely conservative who sold so Stewart. viz: Boston & .000 inhabitants.BONDS 35 dent of the East. panies are largely invested in this class of gilt-edged These examples embody the best judgment of the most competent men in the field of finance. provided that there has been no default on principal or interest of their bonded debts within five years of the investment. they are as follows: Bonds of cities of not less than 45. to the amount of not more than 60 per cent of the value of the property. New York also allows savings tain other railroads. even if it has advanced $100 or $200 in value. and provided also that at least 4 per cent in dividends has been paid on all the outstanding stock within the same five years. The highest class of investment securities are beyond doubt those which the laws of the State of New York allow savings banks to purchase. which have been incorporated for twenty-five years. They are divided into three classes. said cities to be located in States^ which were admitted to the Union prior to 1896 and have never defaulted on the interest or principal of their State debts since 1860.
1903. 65 per cent of the earnings has paid all expenses and fixed charges and left from 8 to 10 per cent or more for the stock. l good 3 /2 per cent bond sells in the market for from 95 to par that is to say. maturity. New On in 1905 between 73 the other hand. Chicago & Northwestern. Colorado Midland. Lacka wanna & Western.050 normally and 5 per cents. This is. Chicago & Alton. they never sold below $1. owing to the rise in value of the stock. A Union Pacific. Any bond.200. selling much under the prices is of doubtful security. general mortgage 5s. Morris & Essex.000 to $1. Chicago.260 and they have since gone to $1. Burlington & Quincy. New Haven & Hartford. from $1. above quoted. for which they could be exchanged. Michigan Central. but there are a number of minor provisions and an investor who wishes to be fully informed as to all details should obtain a copy of it for examination. from $950 to $1. all An of example of a first class bond is afforded by Central In the crash of Jersey. Paul. 1st gold 4s.000. . in main. For instance. sold and 79. Pennsylvania. Milwaukee & St. Maine Central. having a long time to run.36 HOW MONEY IS MADE Maine. the law. funded . Chicago. New York. Illinois Central. The earnings of the comfully meet the interest on the pany did not even debt. Prices go above or below these figures in extreme bull or bear markets. As they approach bonds tend to decline to par. During the last five years. Delaware.050 to $1. United Bailroads of New Jersey. and in accordance with monetary conditions. A sound 4 per cent bond sells for $1. Delaware & Hudson. sold as high as 160^4 in 1906. 1st lien convertible 4s.360.
Changes in the market prices of the highest class of purely investment bonds afford small opportunity for speculative profits. monetary stringency. A class of well-to-do m'en exists. Abnormally high rates of interest on the value of bonds for the time being and money depress a prolonged bear campaign in stocks has the same effect. hand in hand with the changing chances of something being paid upon them in the $835. He must reason that. The bonds in question rise and fall.BONDS As an cited 37 illustration of another class of bonds. investor needs to be alert at such times. may be Central of Georgia. way of interest. with the times and underlying conditions. Earnings do not pay the interest on the funded debt. 3rd preference income 5s. and all are subject to the inspiring and lifting influence of prosperity and a lively demand for investments. in order to securities are proof against An make his principal perfectly safe. point Men who have only a little money to invest and who are absorbed in the management of a private business can give little attention to the monthly changes in the prices of bonds and ought not to try to speculate in them. the bonds he buys must have a good chance of appreciation in value at some later period. he would not buy when the signs to lower prices. if he has money standing idle. Excellent bargains in bonds can be found in such periods. Certainly. a junior security. panics. howNo ever. and who have considerable experience and a knowledge of finan- . They ranged in 1905 between $525 and Other issues take precedence of them. however. who have the time and a liking for such matters. and long depression. They all do fluctuate in price.
4s. 1934 % % % 109 % 36 124 98 99 12 % 109 95 87 93 111 81 90 24 15 14 11 112 124 102 113 % % % % % Union Pac. 5s. 5s. 1997 Lake Shore. rose from $690 to about $1.. while dealing in the class of securities which best safeguards their principal. & East Ills.. 1911 Cent. 5s. whenever there is a smash in the stock market or when extremely high rates of interest prevail. 1989 97 118 89 126 117 113 86 11 94 24 28 13 % % 61 y 2 113 103 % % % % 14 14 Mex. 1st con. gen. 1911 % % 21 % % 23 % 18 12 . 1994 Texas & Pac. 1st pref inc. In this way. Paul. gen. 2000 1st con.250 or more. Missouri. In the terrible financial reaction of 1903. they can be retained as investments. 1912 Southern Ewy. Among them were: to twenty-eight High. 1939 St. Ch. Louis. 1902 Low. Minn. sold as low as 65 in 1903 and have since risen to par.. 1893 to 1905. 1st lien conv. advanced from $590 to $1. & N. 1995 Bait. 1903 Decline Atchiaon. adj. gen. 4s. mge I. 4s. inc. conv. deb. Kansas & Texas. many bonds From . as it is certain to do in time. 2d gold inc. & Ohio. fell from eleven tween $110 and $285) for profitable and one half points (beand supplied excellent chances investment. 1st gold and Texas & Pacific. the securities can be sold at an advance larger than the percentage of interest which has meanwhile accrued. even if not of the highest grade. 1st 5s. 1945 . 1988 A. Ga. & St. & Pac. 1st consol. 4s. they add something to their capital.. coll.. United States Steel. They reason that if the bonds go lower. 1997 Penna. Ch.38 HOW MONEY IS MADE cial matters. E. 5s. 1937 Ch. 3%s. conv. Mil. and they make a specialty of buying broad trading bonds. 4s. Central.040 1st gold 5s. Central gold 3%s. 4s. gold 3%s. 3s.. whereas when the bond market rallies. 5s. Y. con.
and bide his time. until the bonds have once more fallen below the average of the last years. which range at a low level during periods of depression. he will do well to sell them. Remembering always that the small investor will. and the bonds will receive favorable consideration in the succeeding readjustment of the finances. There is attractions to another class of bonds. As for the bonds of small railroads. Some of the new and this class of speculative yet undistributed bond issues belong in bond investments. which present great men who are able to assume a business risk and possess the patience to wait a series of years.BONDS 39 In 1905. nearly all of these bonds returned to the high values of 1902 and several of them went higher. two or three Four per cent bonds selling somewhat under par. a few of them are their highest and lowest . if prudent. Indeed. He will then reinvest. Union gia bonds above noted Pacific 4s sold as high as 150J^ and the Central of Georwent to 101. As an illustration of the changes in price of bonds during any given year or series of shown in the table below with quotations since 1890 inclusive: years. have nothing to do with bonds whose safety is doubtful. even then it remains true that he will not buy in the height of a booming market. These are the prior lien bonds of small railroad systems. if he then has any securities which are quoted well above the high prices of recent years. there is always the chance that they may be taken into some one of the larger systems. bank the money. are now the most popular form of permanent investment.
40 '6861 HOW MONEY '* 'V '93ra IS MADE i-M CIOQO?OCirJ<^ H|lM t-Ti< C50OO5OOMl>.O OOOiHrHOOi-I IHJOO ' 'S06I s l 'losuoo pwrj ^g V 'TTH "il T- QOClOOOt^-rJ< '8I6T '8S /fcramfr 'qP ^'Jng'-qo O"OOCOOCOiacO-*QO O5O>OOOO5OiOOOJOO OOOOlOi <N U86T 'ss 9Sl[:tI T193 sin ^swa 9 -no * rJ<COTH-^<MeOO5t^b-l^Or-) 0000000Hi-ICI(M(M CI(M(M<M<M(MTHr-( lOt-CO^tO sg pfo3 -uoo ^si rHCMr-l H OTTO HN H HN H Hw H" CO<Mt-COO<MiHTt(QOHTH<MeOOSO<MO5OCO He wl^ 1 wi-* !* V " <MTt<r-IOi-ICOOl^r-! t^rH"<^?DCO<MOO CO^COCOCOCOtMCO <Ot-05<NOrHOCOCiCOl-t-COCOa001lOeOt>. OOOOrHrHT-(OOi-(i-IC1CO<MC^COC<|T-lr-l a ss-J ^lOO-^COrt< ia|co f*' oeN1 UJQ^tlOg 'UBQ "*CqiOC5i005lOQOL-t>10lO^(M OOOOJ0000000000 000050 r sg *ST V * ' 'Sf 61 oo cctaccj ti-HOrHiHOOTHOO co ' S66T "3 'FP .
y -I 'a ' i86T COO THr-IOO OrH OiH OTH OO ' O ^ ^ 01 rH rH ^cqiococOT^Tji 1 CO 01 io '8861 Oi IC4COrt<O O) OS O) O) O) G) QOQOOOOOCOQO C3iO5Oi CDt^OO O O O .5 i-l O rH O5 CO rH OOiHl-^QOtOlOCOiOlO OJ TQ6I 's?8 Plo3 W i!3 OS O5 OOOOOO OOOOOOOOS Tj<rtii-|LOt>-CD in (M OS 0OOJOSO5O5OiOOO ^ O OOO5O5OJ eO Tt^Oi ' '6T6I i-ijoO KJOO O5 CJ LWl 'Si iT6T 'Si 'Aip BJ 4 -ptiH =y 'ia sg -josuoo -U98 '0 '0 eot>>v-(OQCOOQtQOr-<<^l ?S6I 1-fcq iO O iI6l 'S9 H Oi O CO r^N CO CO ouj .BONDS 1S6I <8 9 41 Pl* no ' W rH .
CO O O O t- COt-CO uoo ^sj CC) r-^N OOOOOOO Sf 'UOO | r Cr5QOCOr-IClC5l>. ^ ^r S w n? ^ 3- s 1 I^JOOOOTHCOOOCO OOOOOOO 'Sf OS'S OQOOO OGSCi ISTU^ 'IIOO ! s . -^g !y -uatpj OJQOCO ao o # a.661 COCOOiOOOO O Tfl CDOr-IOO CiOOOi CO <M >O is| OOOO5O OSOO CO gnipijejj CO O5 1- 1^ OS L Cl l^ Hoc H" (M rH 'SI6I 's?8 t.OC5C5rt<COO CDt^OOCiCiOSOiOO OOOOO OCOiOO OOOO ''A "N O5OOO5OO5OO OCOi IO OOOOOOi lajao lO O5 rt<i l -^CO JL66T OOOOOS ff smorj. OOr-trHt-lOO - Tjo OO ^1 OOtOO-r^^r-t<MTt<(MC5 C005000000000i |^^-HI^.42 gg -3 -uoo HOW MONEY IS - MADE i 00<MiHi-l(Mr-l"^t-.tOO-*C^CO QOOOOCOCl ' 7.
BONDS t-cot'6861 iH O rH rJH QO OS O5 - rH OS -g H CO rH CO H* 1 H*> H t>* CO i-H 10 O I-H i-l O CO O5 O O TH ie|( Ha <M O5 * >H C-l '0003 'SS 'out PI<>2 ps ^cocod<Mcocqeotratrscai-it-iiHO5i-iT-i CO<M<yirH>HT-lTHT-l(M^tl>OOaaaCO CO O5 (M O <N O O'O-^fCSOOTH-^hCOOCOOOOOOOOO H-* Ha H * 1 H-"* MM es]oo H|* Ha Ha to O 'OgiOBJ Iff SBX9J. OO CO 'SS 'UOO !^St >n S HI CO 1861 irej^j -uBg '9 -naS iff stnoT^g a sg -uoo ^si Ha Ha lOirai-iTtHco O^ OO jciiokfaoo O^ OO C5 QO a Ha M|OO H* Ha O> O5 Oi OO OO OO Oi OO 05 OO O) O O O O) G) ^5 O) O O O^ O O) O O O) .
the Heading. most of them . Lehigh Valley. among them the Pennsylvania. The stocks of most of the railroad companies and the leading industrial concerns have a par value of $100 a share. exactly as though the buyer were a partner in the enterprise. Lackawanna & Western. yet the list includes several of the great corporations. with $10 shares. In the case of the Grand Trunk of Canada. THE he purchase of a share of stock is an investment in the business. and Delaware. and.STOCKS ADVANTAGE OF PREFERRED STOCKS. 44 .THE NONTHEIR NATURE. but such stocks are seldom listed or traded in on the New York exchange. in New State. Mining shares are usually issued in small nominal par value. and Wyoming has a little one.. Perhaps fifty American railroads. Two or three short lines have $25 shares. in the State of Pennsylvania. the shares have a par value of 100 each or $500 in American money. He is in fact a special partner to the extent of the value of his holdings. the York Harlem and the Long Island. and is not responsible for the debts of the concern beyond the face value of his stock. HOW TO JUDGE OF THEIR VALUE DIVIDEND PAYERS. issue shares of $50 each and while the majority of these lines are small and obscure. the premier railroad of the United States.
the United States Leather tral stock can hope to share in any distriIt was necessary in 1905. The common stocks. are The $50 or half shares. When quoted one buys Reading. common and preferred. Preferred stocks have the priority as to dividends and and preferred dividends are paid. Stocks of every description can be bought through any regular banking house or broker. at $140. he really acquires two shares at $70 each. Some mon stocks are of very high many however upon which no value. while most of the industrials have the cumuThat is to say. to provide for the 41 per cent of arrears of dividends and finance the arrears of dividends on the cumulative preferred stock. usually as to assets. Stocks are divided into two classes. and if the company is unable to pay the full 7 per cent in any year. the arrears of dividends must be paid in full (in cash. . for example. as the Cen- Leather Company. are entitled to all the profits after fixed charges of these comThere are a good dividends are paid at present and the chances of any dividend are so remote. as they are New York on the basis of $100 a share. Those of the railroads are as a rule nonlative dividend feature. The non-cumulative feature is held to be favorable to the common stock. if the stock is a 7 per cent cumulative issue. It is desirable that an investor should acquaint himself fully as to the peculiarities of a preferred stock before he buys it. whether they are traded in on the exchange or not.STOCKS in 45 called. in case of a reorganization of the company. stock or bonds) before the common bution of profits. that their value resides mainly in the voting power. when the two classes are issued. cumulative. to reorganize Company entirely.
The preferred of Interborough-Metropolitan of New York has no voting power. and If earnings are first rate. below this price. around 125. if depression reigns. because at $130 a 4 per cent stock pays only 3^ per cent on the investment.46 HOW MONEY IS MADE . assets. as witness the At those quotations. loans bring high rates of interest and a bear market is annihilating fortunes. Different policies are in vogue as to preferred stocks. in sympathy with earnings. provided always that the finances of the company are not impaired. A good 4 per cent is worth normally around par.) That is more than true investment worth. then both classes share equally in any division of The preferred stock of the Rock profits over 7 per cent. If earnings are falling off. that is to It sells above or say $100 a share. such stocks would prices of 1903. as long as dividends are paid. has a right to elect a majority of the directors. The price at which stocks can be bought is quite another matter railroad stock from their par value. normally. The 5. (Reading sold as high as $164 in the Winter of 1905-6. 4 per cent railroad stocks often sell at from $110 to $130 a share or more. total capitalization. 150 and 175 a share. the rest of the market. good 4 per cent railroad stocks can sometimes be bought for $55 to $85 a share. Paul has a 7 per cent non-cumulative preferred and after 7 per cent has been paid both on that and the common stock. 6 and 7 per cent railroad stocks sell. yield from 5 to 7 per cent on the purchase money. and they are a bargain. and the general market is booming. They soar above those prices and sink below them with the times and in accordance with a wide variety of technical . respectively. if dividends are entirely assured. St. Island Co.
the common paid there A stocks of a majority pay no dividends. in a prolonged bear market.600. which are listed In the multitude of shares. It is assumed that an investor will confine his atten- tion entirely to standard stocks. if the price is too high. much below.000 of capital stock. whereas the steam lines of the United States had issued a total of about $6. on the exchange.000 of the aggregate was not. As upon for the non-dividend payers. The Inter-State Commerce Commission reports in 1904 show that. traded in on the exchanges. Whatever the future of any such stocks may be. and. to buy them is to enter a speculation. they tend to go above inconditions.400. class. which are the ones de- serving of confidence? The dividend payers will naturally have the preferIt is not every stock which is in that fortunate ence. yet on more than $2.000. vestment value.000. except in rare and specific cases. Among industrials. no will attract a conservative investor.STOCKS 47 In a bull market. scant half of the enormous total 4 per cent or more. . any annual distribution of profits. the novice and the man of moderate means should beware of them. and not even then. If he has access to an honest and candid official of the company. the purchase of such a stock while it is cheap may be justifiable. Obviously. a banker connected with the property or any other source of trustworthy information and is assured that earnings are large and a dividend will be voted at an early date. No others can be bought promptly at ruling rates or sold to advantage. and had not been for years. unless it security supplies him with an income.
which reigns among our people at intervals. common. Neither of the two stocks above referred to attained their recent in 1906. one of the Rothschilds. partner in a private firm He has a right to know is entitled to look at the how much money is the con- making. $36% in 1903 to $174 a share Reading rose from $37% in 1903 to $164 in 1906. But a man with a moderate amount of money to invest should resolutely turn his back on stocks which do not afford him a dividend from the start. to eat well.48 HOW MONEY No their its IS MADE one can deny that a few non-dividend payers have holders. in tion of income times. attributed to a man per cent and endanger the safety of capital. and a shrinkage of is bad A cern books. enriched rose with American Smelting. until long after they had been placed on a dividend basis. the investor income be large and enable him to may have spend many restless nights in consequence of a reduchis capital. These are the vital factors. A man should especially avoid being swept away from the moorings of common sense by the bullish furor. come be moderate. or. and next consider the certainty and amount of the income. if the business know that fact also. to in his senses would ever . an investor must aim to guard the safety of his principal. even though the inIf the will sleep well. he or eat well. No man going backward. earnings from extremely high prices. to It is a saying. that must decide whether he would prefer to sleep well If the capital be safe. and gave a promise of even larger payments. It is sometimes better to strive for 7 all classes of buy a sound stock and secure a moderate income than. first of all. In selecting a stock for purchase.
and the such strong concerns as American Sugar Itefining are so excellent with respect to the income they afford. and earns 14 for the common United States Steel. and cost of maintenance. without similar knowledge ? In the case of most railroad companies. and it is difficult to understand why the corporations themselves would be in- jured. St. should he do so in a corporation.. classes of its stock The knowledge of this imparts Beading pays 4 per cent and Paul pays 7 per cent on both stock. or in other words. Union Pacific now pays 10 per cent and earns more than 14 per cent for the assets of common shares. If earnings are ample. earns more than 10. to pay all fixed charges on the funded debt. although. supervision as to ensure annual reports at least. To buy some of these stocks is to If there could be such governmental leap in the dark. even in bad times. the stock must be considered a safe investment. it is perfectly easy to "look at the " books. that regret must be felt at the lack of regular reports of earnings and assets. seldom less than about 7 per cent. a high value to the stock. and leave something over for the surplus fund. A few of the more popular industrial companies also issue statements. preferred. all etc. for examination. is another example of a . the public would be benefited greatly. as here- Why inbefore intimated. in fairness. and all dividends. while possessing enormous value. taxes The preferred common stocks of stocks of industrial companies.STOCKS 49 enter a private firm without full knowledge of its affairs. although some of the larger ones do not. if bought when the price is low. it must be said that some of the companies consider that they would be. to obtain the reports of earnings.
if any. and all charges. glance at the prices of leading stocks for the last fifteen years. even in bad times. safety of capital is concerned. the ideal is most nearly attained by buying in times of great depression. or during a panic. against him. when stocks are below their actual investment worth. or loan it out at interest. however. The public knowledge of these things. and certainly So far as there is a time to buy and a time to sell. It is no time to buy after a prolonged and rise. on another page. It does not follow. There is a time for all things. Men of long experience do not do that. has never proved an injury to the stocks. that they are likely to recover. because the foregoing or any other standard stocks are good. and all paying a proper income. His capital will then be in no danger of impair- ment. This is investor in stocks. where it is safe. the wise inves- extensive A tor waits patiently until he can go in with the certainty that the prices will not go much farther. As between a number of stocks. and wait. and on the other hand. that an investor should go into the market at the particular time when he happens to have money to invest and buy at the prices then ruling. 7 per cent. should teach caution in the matter of buying. all equally solvent.50 HOW MONEY IS MADE earning far in excess of security paying an excellent dividend. derived from the minute and excellent reports of those corporations. an investor will naturally . Governed by the lessons of experience. the one great lesson to be learned by an He is liable to incur some heart- breaking experiences unless he masters it. They keep their money in the bank. The margin of safety on a purchase is then the largest. sound investment securities.
and not even as a speculation. on this account that railroad stocks are generally held to be better investments than industrial shares. the life.STOCKS 51 consider the future worth of the properties. and the liability to disturbance must be considered. He would do this in any of the ordinary transactions of business The margin of safety is affected by future worth. moderately and only after patient . Many of the common stocks of the present day are in the position of those of a number of railroad lines built in the '80s. the trend of the times with reference to such matters as the substitution of electricity for steam for motive power. Any one who buys such stocks would naturally do so. the fertility of the soil in regions traversed by the lines. No one would buy them on an investment basis. and some of them rank among the giltedged securities of to-day. the ownership of patents. The possession of coal and other mines and lands. tend continually to to the value of railroad properties in general. ity of and the improbabil- add serious competition. through Future worth is the only consideration in the matter of non-dividend paying stocks. the ownership of valuable terminals in cities. In new and the case of industrial concerns. unless it were expected that the properties they repretariff or other legislation. had a great if distant future. of the country. the control of the sources of supply of iron ore and oil or other raw materials. rose in value with the settlement stocks. It is growth of population. the development of manufacturing interests along the routes of the roads. The roads sent in question were constructed by men who had confidence in the country and looked entirely to the future for a Their common proper reward upon their investments. long worthless.
may have to weather other storms but seems bound its to enter the investment class of stocks. have been attacked in the courts under the an ti. When the time comes to sell. and he would resign himself to the "long pull." Such stocks are never to be bought unless they are depressed in price. Those not listed can generally be lists sold only at a sacrifice. so much the better for the stock. are those best of the industrials. There are enough good and sound stocks in the general of the exchanges to answer all conservative investment demand. standard stocks find a prompt and satisfactory market at ruling quotations.000. On . no matter how alluring the prospectus of the companies. The regularity of their dividends and strain of changes in the tariff laws. one of this class.52 HOW MONEY IS MADE investigation. owing to extensive control over the beds of iron ore in this country. It is sometimes asserted that it is the actual investor who runs the most risk. This is not a fair statement. If dividends are cumulative. A prudent man will avoid those which are not listed and those which are new and unproved.000.trust laws. the surplus profits which they have earned justifies their rating as good investments. The tions. and subjected to the They have survived American Sugar Refining is every adverse influence. ferred. Some of them have been tried by times of depression. if bought when they are low. This concern has issued bonds but has accumulated a surUnited States Steel preplus of about $100. Industrial stocks have come to stay. The United States Steel stocks are in a class by themselves. with a few striking excepwhich do not issue bonds.
buy extensively into the stocks of any company. Rockefeller. The number now ranges be- tween 10.STOCKS 53 the contrary. on the other hand. of course. and when John D. or. this is a sufficient guarantee that a purchase would be safe for any one. or a large part. jr. unless they expect to or already take part in the management. covered that strong men are accumulating it on a large scale. But. Wall Street and the field of legitimate enterprise both supply a long list of insolvencies every year. if he were speculating and carrying stocks on a margin. entirely beyond the small inbut when a stock is low in price. the direction An active part in is.000 shares of Union Pacific (the price being moderate in both cases) in 1904. all. the owner of a share of stock risks only the surplus profits which he has put into the investment. When Henry C. a boom followed in both of those stocks. no one runs less risk than he. or incur a crushing loss from fire. it may truthfully be said that if an investor buys with judgment. Under the worst possible circumstances. as a rule. for any is left other reason. for any purpose.000 and 12. of his remaining capital. bought 100.. or if he were in legitimate business and affairs were going badly. he would risk not only such surplus profits as he has turned back into the business but also.000 annually. Frick bought so largely of Reading. In the throng one invest- names of conservative actual Men of large means do not. become so utterly bankrupt that nothing for the stockholders an almost unheard of case the investor has lost merely the sum he paid for the stock. and it is disvestor. looks in vain for the ors in stocks. . Should the company waste its assets. This would be bad enough.
in which at the The friend did not time they stood to lose $300. but.000. then in progress in American Sugar. that. an investor can buy stocks. H. with the assurance that his principal will be safe and that the purchase will bring him an increment on his capital. buy. no one should buy it. even as an investment. he would have reasoned that when a man like H. for a tip on the stock market. and the circumstances under which. suggestions will be made as to the time when. Rogers had bought a large quantity of American Sugar stock. unless a stock is going to rise in value.54 HOW MONEY IS MADE and the subsequent rise in values showed how safe it would have been for others to acquire Reading and Union Pacific at the same time. H. . Rogers was once asked by a friend. within a few months or a year or so. As a matter of fact. H. if he had stopped to reflect. In a later chapter. who had more* courage than most men could have summoned for such a purpose. he would never in the world have let go of it until the purchase showed a profit. It can do no harm to insist and the deal was upon the point. the stock rose in value closed to the advantage of all concerned. Rogers replied that he might let his friend in on a deal. Mr.
FACTORS WHICH INVARIABLY FORERUN A CRISIS. sooner or later. and if he should refuse. the price of stocks and bonds and the prevalence of good or bad times. of sound mind. Considerable space will therefore be given to it here. 55 factors. is pression. that the subject is of the first importance. he can skip a good many pages But if of this he is a man as he ought to. He might as well proceed. He will then follow the evolution of the writer set forth. in an orderly way. 's argument. in the manner in which it is here Foremost among the of stocks. therefore. work and read the last chapters first. making sure that the ground is firm under his feet as he advances. fundamental point in making money on security is to know when to buy them and when is If the reader a man of impatient temperament and must to positively know conclusions first. HOW STOCKS FORESHADOW THE TURN IN AFFAIRS THE investments to sell. which exists between . to examine the premises upon which they are based. which influence the price the recurrence of cycles of prosperity and deSo intimate is the relation. he will be compelled. without reference the facts upon which they are based. TEN AND TWENTY YEAR PERIODS.VI CYCLES OF PROSPERITY AND DEPRESSION THE FIVE. to take any one's conclusions without knowing how he arrives at them.
Jevons. But a genuine barometer is an instrument which foretells a change in conditions before the clouds have actually broken away or gathered overhead. The price of iron certainly . with the periodicity of sun spots which reach their eleven years. Human nature itself affords a sufficient explanation of all cles maxima every the phenomena of these great changes in the times. 1763. shows the actual state of trade. The most sensitive of all of them is the market prices of stocks and bonds. 1847. 1711. Since the world has become civilized. if granaries are bursting with the harvests. 1783. 1836/7. S. cites as dates of crises in the British Isles. 1857. 1793. Jevons sought to connect these upheavals in business cir- 1731/2. History has repeated itself also in the general of events from one serious crisis to another and sequence in the causes which bring them to pass. and railroad managers are at their wits' end to find cars for the traffic which pours in from every quarter. of men will have surplus profits to invest. 1742. the years of 1701. Most writers on finance concur in the statement. 1866 and 1878. 1815. 1825. good and bad times have succeeded each other at more or less regular intervals. 1721. without . and Wall street will respond to the dominating optimism of the period and bull the prices of stocks and bonds. When the times change. 1772/3. Prof. that the from one crisis to another is from ten to twelve and that the period is slowly but gradually lengthenyears interval ing. then thousands profits are certain to be large in every vocation. The notion seems fanciful. prices will and they will fall. 1752. Prof.56 HOW MONEY IS MADE If furnace fires are blazing and mills are overwhelmed with orders. W. 1804/5. of England. Iron is said to be a barometer of the times.
ness men. stocks . Its characteristic traits are dwindling trade. The third and A parts of the country. A trade. in all will precipitate the next one. panic follows and the fright in business circles causes a reaction in . be near at hand. All classes feel the depression. Tramps throng the highways and beggars the cities. discharge of surplus employes. which caused the last crisis and newal boom breaks out. better feeling gains ground among busi- A Mills reopen. trade is active. factories are rushed to their full capacity. lower wages. last stage of the cycle is attended by a reof the conditions.PROSPERITY AND DEPRESSION 57 referring them in any way to sun spots or the action of the planets in their courses. strikes. merchants buy larger stocks of labor is again in demand. who are committed to speculative ventures or struggling business enterprises. Good times are seen to goods. smaller earnings. crisis invariably starts with money stringency and unobtrusive liquidation in securities and speculative ventures leading up to and bringing about the collapse of A some great bank or business firm or some startling ex- posure of fraud. retrench- ment in all expenses. Goods bring higher prices. The first stage of a cycle ordinarily lasts three or four years. a fall in the price of securities. There is commonly a temporary rally after the first great shock and a second period of less violent liquidation. Three or four years succeed. shaking public confidence at the very height of good times and spreading consternation and terror among all men. Dry goods and other firms and banks collapse by the hundreds. and all the other melancholy concomitants of hard times. forming the second stage of the cycle. the closing of factories.
variety of causes A operate here to interfere with the orderly succession of events in the middle period of a cycle. Prosperity itself brings on fatal weakness. and every one makes money.58 rise to HOW MONEY unheard of is IS MADE A prices. laws on the trusts. characteristic trait of this stage is prodigality in personal expenses. luxury of the table. . and every weather signal of finance points to a coming collapse. money supply The third period fills out the cycle*. This is really a technical matter. political currency and the * changes. be overtaxed. luxury of equipage. the poor see with envy on every side "luxury of dress. crises have occurred at fairly regular intervals. To use the words of Franklin. rate wars between railroads. attention would not necessarily be paid to that rule here. Both mean the same thing. divides a cycle into four periods of prosperity. a period of depression. interest rates rise. one of decline. Every twenty years. there a great speculation in real estate. and a period of improvement. Mass. If. and the market is burdened with enormous issues of new securities. the reaction seems to be more severe than the intermediate one. soon begin to Bank loans run ahead of deposits. which begins as usual with long continued liquidation. Babson. No objection is seen to Mr. Crop failures. Bank resources. and of the other circumstance that an American stands less in awe of precedent than do the people of Europe. Usually.. and such matters as the discovery : Roger W. for instance. Babson's four One periods. in spite of the fact that the exploiting of the rich resources of a new country has from time to time changed underlying conditions suddenly. it should ordinarily take five years in Europe to pass from the top to the bottom of a cycle. of Wellesley Hills. In the United States. the is depleted." New enterprises are launched in great number. ample at first.
PROSPERITY AND DEPRESSION 59 of gold in California and oil in Pennsylvania. The rapid review of crises in America which will now be presented does not assume to be a history of Wall street. 1857. Hamilton. 1837. have each played a part in affecting the regularity of movement. bought bonds to reConfidence was restored. which has finally precipitated the failures of banks and capitalists and brought on the panic. 1896. 1848. 1826. from one to three years before the actual crisis has arrived and it has often been . Owing to the growing closeness of relations with Europe and to more settled conditions here. The advance has culminated. it is probable that. the long decline in stocks. and order brought out of chaos. as a rule. the rise in stocks has begun a year or more in advance of the actual betterment in trade and manufactures. 1873. 1893. . Secretary of the Treasury. y 1864. and 1903/ ^rief review of each is presented. the United States will pass from one extreme of prosperity to the other in a more orderly fashion. largely through the operations of the first United States Bank. but each turning point in affairs will be sketched with sufficient detail to make the causes and circumstances clear. in the future. chartered in 1791. 1814. with reference to crises. History records the occurrence of crises in business af- America in 1791/2. Almost invariably. The attention of the reader is asked fairs in particularly to a remarkable feature of the action of the stock market. 1884. lieve the situation. CRISIS OF 1791/2 first TRADE conditions and money stringency led to America's Alexander serious reaction and financial panic.
for the cash. The goods were marketed by the merchants of Boston. The country was extremely dependent upon foreign manufactures and these could be had in proper quantity only by smuggling through Canada and the ports of New England.843. foreign trade made From to $19. Boston drew on New York and which were distributing cities. The United States Bank had disappeared in 1811 and the State banks had too limited a capital to . and President Madison took refuge in a Virginia forest in a heavy rain. 1807. Scarcity of cash in the United States caused general alarm and prepared the way for the panic. 24. Exwere less than the pitiful sum of $7.000.60 HOW MONEY IS MADE CEISIS OF 1814 A 1792 DECADE of prosperity was enjoyed by the States after but the War of 1812 and the embargo and non-in. Philadelphia. for shipment to Boston and Canada. Amerports had fallen steadily ican ships. the city of Washington was captured by British troops. the fiscal trouble by almost annihilating a total volume of $246.000.892. long so profitable. a panic was the quick When . by the wagon load. Aug. carry the States through the crisis. to whom immense sums were owing by the rest of the country. They were already staggering under a heavy load of loans and could do no more. tercourse laws finally foreign trade.400 in 1814. in year ending September 30. the smallest in the whole history of the republic. were practically idle. Those cities called in their money from the sections tributary to them. 1814. In 1814. before or since.000. Specie was drawn from the doors of banks in New York and Philadelphia.
A flood of paper money was poured out by the State banks. but trading was limited then to a few varieties of bonds and stocks. Aug. The balance of . 26 and 31 and Sept. and. New lands were being rapidly settled. Imports were excessive. inflation and depreciation of the paper currency leJ to panic and reaction in 1816. after April 10. But the moment had not arrived for a general forward move- ment. enormous quantities of whose productions were dumped on the wharves of our sea-coast cities for sale at auction. 1. In England. who business. The banks in New England and a few in the West weathered the storm. It is true that there was some rebound after the panic. Wall street was affected. owing to the lack of protection under the tariff laws. which gave a stimulus to enterprise and speculation. Merchants did fairly well. of course. especially the weavers of could not withstand the competition of British mills. 1819-END OF THE DEPKESSION HARD times lasted for several years. but in all the rest of the country suspension of specie payments was general. Many went out of woolen goods. banks suspended specie payments. 1816. and the troubles of Wall Street figured to an unimportant extent in the universal distress. Hundreds of business firms were wrecked and depression reigned throughout the country. respectively.PROSPERITY AND DEPRESSION 61 In Baltimore. the result. Philadelphia and New York. Manufacturers felt the hardship of the times the most. by the second United States Bank.
exports A . Government and the banks united in an effort to lessen State banks. or all.000. to more than $165.62 HOW MONEY IS MADE trade ran heavily against the United States. better times dawned. As the crisis of 1814 became acute through a panic. goods Paper money having naturally depreciated. the volume of paper money was According contracted from $110. Stedman calls this the crisis of 1818. economy and curtailment of all new commitments in business. S. so the depression virtually ended in one. Imports were cut down. a sum too large to be paid from the rich earnings It was imperative to pay for the and this evil was soon made worse by another. A. whose the volume of paper money afloat. 1818. courage revived and when . To remedy this trouble. amounting in four years. were called upon to redeem them in specie.000. of American ships.000. business men took hold again with characteristic American spirit and promptitude. protective tariff enacted in 1824 inspired fresh animation in home industry.000 in 1816 to less than $65. New enterprises were laid aside until a more convenient season and many bankruptcies occurred. Many to of them retired a part. starting in the Fall of 1818. circulating notes were deposited in the United States Bank and its branches. 30. Bolles. specie was withdrawn from circulation. The trouble was caused by the lack of ample supplies of tional growth.000 in 1819. Edmund C. of their bills.000. money at a time of great na- CEISIS OF 1826 AFTER drastic liquidation. ending Sept. This drastic proceeding brought on the inevitable collapse in the business world.
late in 1825. liquidation had ended. In 1826.PROSPERITY AND DEPRESSION were larger. When a reaction in trade started in England. a rush of foreign goods turned the tide of gold The times were extremely difficult and enterprise was at a low ebb. But the trend was downward for several Gen. fearful. . excess of imports being only a trifle more than $30. money stringency ruled here and put a stop to all new ventures. and. renewal of the charter of the United States Bank and a reduction of tariff duties was being debated in Congress. first era of active railroad building and by . Money was in ample supply. Jackson was fighting a battle royal against years. 63 during the six years. in fact. was 1831 END OF THE DEPRESSION MODERATE gold imports after 1826 led to a short revival of confidence.000. The new life in every department of affairs led easily and in the usual way to speculaThe country went tion. CEISIS OF 1837 THEN This was the followed a term of six years of halcyon days. ahead too fast. In England. includ- ing the Franklin the depression Bank and Jacob Barker. By 1831. and the turn had come. outward. they nearly balanced. In 1831. always the bane of good times. and once more the banks could not meet all demands for accommodation. a crisis occurred in the United States. with many failures. ending Sept. a slow improvement began. 1825. 30.000. Public works were built on an extensive scale and labor found good employment.
and exuberant enthusiasm prevailed among all historic tulip classes. ships. in some cases. all classes The Clay compromise tariff of 1833. While the times were buoyant beyond previous experience. It is recorded that prices were paid for city lots. payment being made for them in State bank notes. of producers General business also steadily grew better and and traders enjoyed a boom. while not stimulatits effects. underlying conditions were changing. ended the uncertainty which had prevailed. Imports grew to extraordinary figures and the balance of trade against the United States rose from $13. mania broke out for trading in lands. That which was bought to-day at any price was sold to-morrow at a profit. but a speculation.000 in 1832 to . agricultural products and manufactures.64 HOW MONEY IS MADE 1837.601. The demand for material and labor for these works proved an immense advantage to industry. and deposit of the surplus revenues As time in the State banks aided in kindling the flames of a wild Securities attracted little attention. the twenty-three miles of pioneer railroad line of 1830 had grown to 1. A furious carnival of trading broke out especially in Government lands. never afterward known. and although duties were to be lowered gradually until 1842. rivalling the mania in Holland. a vast variety of new enterprises were launched. such as had never before been witnessed in this staid and old-fashioned country.orus multicaulis speculation was an incident of those times. The famous m. at any rate. no serious consequences ing in were felt for several years. rolled on without any serious check to the growing optimism of the period.497.
& S. creased money A great fire in New York. financial frightful panic broke out in the the banks suspended specie payPrices of stocks. Loans expanded steadily at the banks and at one time specie holdings did not exceed 7^4 per cent. October 23.500. 1836. loss Dec. . a world and all ling and fortunes vanished in a day. so far as its Government charter was concerned but it went on for a few years under a Pennsyl. By April 1. lands and goods fell in a twink1837. Gold was kept at home by reason of the large earnings of American ships and the investment of foreign capital in American railroads and other ven- Indeed. its reckless loans did not improve the Early in 1836. Jan. the second United States Bank came to a stormy end. vania charter and general situation. supplies and finally ran past them.PROSPERITY AND DEPRESSION 65 $52. Josephs. 16. 10. the banks were obliged to contract loans. 1835. of the loans. credit was almost at the breaking point. but to meet the payments The country May ments.000 in 1836.240. was on the brink of disaster. a small panic in Wall Street heralded the coming crisis. 1837. Extensive liquidation took place and there were over 300 failures in consequence of the crash.000 of the surplus revenue on deposit among them for distribution to the State treasuries. In New York. But the eager demand for money to finance land and every other kind of ventures kept pace with intures. inflicted serious to- on that community and was one influence tending the final reaction. 1836. L. ward April 10. President Jackson did the rest. J. every year. a few millions of gold were imported. he began to call in from the banks the nearly $37. half of the amount had been paid in. . 1.
The was caused.410. affairs are crisis ' ' trembling in the balance. Similar dullness existed in all other branches of enterprise. In 1843. the dis- United States Bank. A annual contribution to the wealth of the country from the wheat and corn fields is never a greater calamity than when The panic.392. foreign commerce yielded a net balance of $40. in a measure. precisely as here.000 in favor of able nature of the THE the United States. there had been a balance States ten times only when excess of exports in favor of the United 1840 having been the best year. Philadelphia.66 HOW MONEY Rothschilds. went down among others. viously. The prostration in trade crisis in the United States proved disastrous also Insane speculation had been in progress to England. By 1843.000. IS MADE in agents for the tress and. much the best showing in the history of For fifty-three years prethe country up to that time. and was ended in 1837 by panic. Railroad building was a good barometer and had fallen off from 416 miles of new line in 1838 to 159 miles in 1843. and was aggravated. partly through the favornew tariff of 1842 and hand in hand with an enormous decline in imports. is of 1837 generally regarded as a "land lasted for several years. there. depression had been severe. liquidation had been completed. was $25. . In all vocations. high prices for grain and shortage in the necessary imports of breadstuffs. The bank 1843 END OF THE DEPRESSION turn upward came in 1843. reaction and commercial distress. by a partial failure of the crops.
The War with Mexico had little effect. without genuine protection. Railroad building was resumed and went forward with a rush. Pig iron making is always an indication of conditions. credits. a great severe liquidation. Industrial plants were small in that era and machinery was crude. but the seeds of trouble were planted when Congress adopted in 1846 a tariff for revenue only. Trade sprang up and profits were large. . in Europe. textiles and other goods could not withstand the competition of the great and more advanced factories ter . steel. the banks and sent abroad to pay for the The activity of business the banks with loans had once more overburdened and a loss of specie made trouble.000 tons in 1848. men of ability gradually found courage to embark once more in the work of development. Matters were in shape for a reaction.PROSPERITY AND DEPRESSION CRISIS OF 1848 67 WHEN hope finally revived. Good times soon reached every city and settlement and both capital and labor found full employment and reaped a rich reward therefrom. and this trade flourished in particular. Factories and mills began to experience a betdemand for their products. the output rising from 215. The reaction extended to the United States. and the makers of iron. due to inflated fraudulent stock companies and a frenzy of speculation.000 gross tons in 1842 to 800. crisis arose in Europe. large excess of in our foreign trade and gold was imports soon appeared A drawn from goods. invaded every part of the country and caused a halt and In 1847.
Owners of merchantmen added enormously to their fleets in that prosperous period and ship carpenters were among the best paid of American workmen. When it became evident finally that the mines were likely to supply fresh capital for business operations. as a result of a share to $68%. although not at once.000 of gold per annum to the East. railroad building was resumed. however. Whatever there was of doubt in the business situation was finally cleared Aug. for themselves . Mer- chants and ships followed to supply their needs. In a few years. in spite of the injury to manufactures by the low tariff. and the finest clippers in the world had been built for the trade to California and often paid the Pacific coast.68 HOW MONEY 1851 IS MADE END OF THE DEPEESSION discovery of gold in California by Marshall brought about improved sentiment. break in Erie from $90 a The smash was soon succeeded by a genuine revival. 13. California was actually sending $40. and rushed to the Pacific coast overland. Trade had grown with rapid strides to keep pace with settlement of the rich harvest in the traffic of the Shipping had reaped a Atlantic during the Crimean War. .000. away by a small panic in stocks. CEISIS OF 1857 A BOOM in business broke out soon after 1851. 1851. West and in one trip. 1854/5. across the isthmus and around Cape Horn. Thou- THE sands of Americans went wild over the prospect of sudden fortunes.
some time before the actual crisis.000 was only one of the financial stocks. Iron.PEOSPERITY AND DEPRESSION 69 The construction of new railroads was in full swing between all important cities and the miles of new line put into operation annually had grown from less than 1.000 to $38.000 shares. Good times were universal.700 in 1850 to 3.642 miles in 1856. 1856. 1857. Wall Street discounted the good times in its chronic manner. What this meant for the iron and steel industry hardly needs explanation. Dec. European investors looked with favor on American securities. California gold and the earnings of the merchant marine did not offset the demands of .000. Investment of European money here. Rich men were already engaged in the pursuit of greater wealth by watering and an increase of the capital of Erie from $3. the top of the boom was touched in December. An immense issue of new securities was finding its way into the stock exchanges and an active speculation in them was being conducted. were it not for changes in the credit situation. promised an aggravation of the trouble. incidents of the period. then under discussion and finally enacted March 3. and the yet lower tariff. 5th. Every one was making money. ended in such a moderate downward turn as is usual in a bull market. Wealth was advancing.000. which the excited speculation of 1856 had done much to promote. the rise in prices caused the failure of who had been short of Erie more than The reaction which ensued might have 100. With reference to securities. Jacob Little. dry goods and all other commodities brought high prices. Foreign trade had run steadily against the United States on account of the low tariff.
In New York. 24. and while a reaction in stocks was inevitable from all the circumstances of the case. the crash would not have been so disastrous had not a multitude of intelligent men fallen into a senseless panic and by their precipitate action destroyed their own fortunes and those of others. official wrong doing and the stringency in money. and while that was not an unfamiliar phenoin those days of moderate banking resources. however. and the smash was promoted by a coterie of speculators. In January. and there is this to be said in justification of the fright.70 HOW MONEY IS MADE foreign merchants upon our specie supply. Wall Street should not have been. A panic is always unreasoning. Scarcity of cash soon made itself manifest. that the banks had reached the limit of their ability to finance merchants and speculators.000 in the fiscal year of 1857. iron and goods of 1856 were not repeated until long afterward. and when cash holdings had fallen to about SVa per cent of the loans. The tension in the financial world soon reached the snapping point. but the high prices for railroad securities. who had . but was. liquidation set in and falling prices were recorded for months. 1857. either of the mercantile community or of specu- There was a trifling improvement in stocks in January. which swept the business world. the Ohio Life Insurance & Trust Company succumbed . and the crisis had arrived.500 in 1853 to $58. and that busy center has seldom witnessed scenes of greater excitment than prevailed during the panic. it was apparent that no more money could be placed at the command lators. taken by surprise.578.015. Aug. 1857. and net exports of gold ran all the way from $23. loans had been in excess of deposits for menon some time. 1857. under the strain of reckless loans.
Iron fell more than $9 a ton from 1856 to 1861. as above noted. Erie. There was less demand for the output of the textile mills and thousands of men were panic 1857. There were runs on the banks and in October. Some small improvement appeared in 1860 but it was short lived. Stocks appreciated in value. a turn for the worse occurred in May. In consequence of political troubles. good stocks dropped between $40 and $60 a share. Michigan Southern and Illinois Central went into the hands of receivers. and this brought about a serious state of affairs. 1861 END OF THE EE ACTION in DULLNESS reigned after the terrible many important of fields of enterprise new work was and stagnation were experifalling prices enced throughout the country. The depression in business circles lasted practically for four years. there was liquidation until 1858. in the early part of 1857. From the first of the year to October. a number of them suspended. Railroad building had received a staggering blow and fell from 3.642 miles of new line in 1856 to 651 miles in 1861. if a Republican President were elected in the Fall. Scores of business men were ruined by the reaction. Several years of frugality and careful management had led to more healthy conditions. when the difficulty of making collections in the . Threats of secession were being made by fiery orators in the South. Bank clearings in New York in 1857 were only about half of the total of the year before. but after that. All stopped and out of work.PROSPERITY AND DEPRESSION foreseen trouble and gone profits 71 short of stocks and whose were dependent upon exciting a frenzy of alarm. 1860.
set in A certificates.000. 1860. From the low prices. New York certificates. 28. stocks stocks rallied for three years.000. the country added to railroad earnings. 1861. 23. in the form of petroleum. Stocks fell from $7 to $16 a share in a month's time. enacted March 2. 585. President Lincoln was elected in November.375. when there was a sudden semi-panic. Another was the new source of wealth. beginning September 19. The formaarmy in the North and its march to the South created a demand for supplies and breadstuffs and the shipment of troops and munitions to different parts of tion of a large . 1861. discovered in Pennsylvania. CEISIS OF 1864 EVENTS moved swiftly during the Civil War. powerful influence in favor which then of the improvement was the Morrill protective tariff. 1861. and A . then made.was made by the New York Clearing House. amounting to $22. After a rally in December from the low prices of 1860. and the situation then became acute. Clearing House was forced to issue loan Nov. Dec. For the the first time in its history. to carry the banks through the monetary stringency. 1860.72 HOW MONEY IS MADE South impaired the credit of many Northern merchants. caused by the firing on Fort Sumter and the outbreak of hostilities. and this carried the banks A second issue of loan through to better times. in spite of the general suspension of specie payments. to the amount of $7. 1861. strong impulse had been given to manufactures by the Morrill tariff and the requirements of the army. dropped until April.
Pig iron rose $55 and $60 a ton from 1861 to the of 1864.000 of greenbacks by the Govern- Summer modities sold at high prices. a great bull market in stocks began and prices rose excitedly. Wages were high. as never before in In Wall Street. with scarcely a halt the whole year.000 being issued. to extraordinary prices. Every one who had not shouldered a rifle to fight the battles of his country his life.000 in 1860 to $833. although a few securities went higher in June.PROSPERITY AND DEPRESSION hundreds 73 of tons of pig iron. Everything on the list was from $70 to $80 a and the speculative favorites from $100 to $189 a share.000. 1861. to resort through the Clearing House to loan $11. to relieve the strain on credit. dating from November 6. . made money. that the banks in New York were forced. army contracts and trade. 1863.000 in 1864. Delaware & Hudson had felt the enormous demand for anthracite coal and was share higher than in April. ment and the expansion of paper money circulation from $207. as have been expected after a legion of young men might had left the farms and workshops and gone away to the front. stocks were bulled certificates. which had been stacked in the yards of the furnaces.000. in manufactures. Top of the boom was actually reached in April. were bought by the mills at prices which dazzled the mind and enriched hundreds of men. for years. All other comIn 1862. fortunes rolled in upon thousands of men and money was spent with open handed prodigality.719. third time. Speculation required the use of such unheard of sums of cash. An effective cause in this wild whirl upward in prices was the issue of $431. for the .471. In the Spring and Summer of 1864. Trade was extremely active.
Harlem went off the the highest quotation for the metal) . Michigan Central touched $157 list until 1891 ranged below that figure. even while the money market was working into a dangerous position and when every cautionary signal of finance pointed to a cer- Grim and relentless tain. The speculative revel went madly on. Harlem was cornered by Commodore Vanderbilt and went to $285 (a price. In looking over the record of 1864. Paper money inflation had been steadily expelling gold from the United States. which sold at prices not again equalled for a whole business generation. As for the market. Money worked close again. Erie for the same reason Those prices have rose to $126 and Beading to $165. never been seen since in the more than forty years which have now elapsed.600. year of 1864 were $89. which also broke all previous records. In June. the Foreign trade was running strongly in favor of Europe. early and frightful collapse. But swept away by the wild enthusiasm of the times. singularly enough. one finds a number of other stocks. war was raging in all the border States.484. pain and sorrow had entered thousands of homes.800. it and ever thereafter has required forty years to reach once more the high level of 1864. the public debt was running up into the billions. of the stock exchange for several years and did not sell at $285 again until 1896.74 HOW MONEY IS MADE manipulated to $254 a share. taking the average of the broad trading stocks. as . speculators and business men believed the boom would last forever. and an adverse balance of $157. the same to which gold was forced in July. as a whole. and net exports of the precious metal during the heaviest in fiscal recollection.000 was rolled up against us in 1864.
728. then of almost more consequence than high rates of interest on money. they then went lower. Heavy losses were incurred by hundreds of speculators and the reaction extended to the country at large. leading stocks had declined from about $40 to $80 a share. but the excessive loans New York banks. Delaware & Hudson had fallen $121. April 18th. to $17. and a bear market set in during More than one June. The country had been exhausted by the long and AFTER . declining to $47% by May. and while they did not relax their efforts on the bull side for a month or two.000. and by the Spring of 1865. 1867 LOW POINT OF THE DEPRESSION the passionate excitement and reckless speculation of the Civil War period. after the failure of Mr. When the break in Wall Street finally came. 1864. After a moderate rally. Morse. yet manipulation was no longer effectual. caused a semi-panic in the Fall. the immediate cause was a reaction in Fort Wayne stock. dating from March 7. at the cause contributed to the result. in New York. it fell suddenly. That amounting security had been bulled in the interest of Anthony W. The pools were taken aback by this performance.PROSPERITY AND DEPRESSION was natural and a fourth . and the high premium on gold. calm ensued for two or three years. which lasted for several years. were two of the most important. and stocks fell violently until well along in October. 75 issue of loan certificates was re- sorted to. . and. combined with other adverse influences. The scarcity and high price of gold. Morse from $82% in January to $152% in April.
1866.76 cruel conflict . of London. failed. gold went abroad in the amount of $63. the volume being reduced from $983. Imports were heavy and in the fiscal year of 1866. million of to their President Lincoln had been assassinated and a men had gone back from the armies in the field old homes or to new ones in the West. Writers refer to this chapter of finance as the Crisis of 1866.000. May llth. it marked the turning point here.. as usual after an to new abrupt decline. adjustment Stocks rallied to some extent in 1865. again in the Spring of 1866. and one more reaction in the Spring of 1867. from about $40 to caused two thirds of the speculative stock companies there to go out of business. Gurney & Co. Stocks fell off . In 1867. A conditions was imperative. debauch was over for the moment. HOW MONEY and the financial IS MADE . munitions and supplies. next to the most serious outward movement on reccrd. precipitating a sudden panic at that center and a depression. Twenty selected stocks had the high prices of 1864.300. although the banks were not yet in a position to finance a sustained bull market in stocks. arms. Contraction of the paper circulation was in progress. Iron and other manufactures had been depressed by a sudden ending of the demand for war ships. the trouble was ended. which had no little sympathetic effect here. The collapse in England fallen . Practically. an average of $58 a share from and individual stocks had declined $130 a share.000 in 1868.000 in brief period of rest and 1865 to $827.000. After a rally. but underlying conditions were not favorable to an immediate resumption of the bull market. Overend.001. large fortunes were brought to the support of stocks and general business and better times prevailed for several years.
The rebound from the low 1866 and 1867 was vigorous and ran on unchecked until the Summer of 1869. A genuine boom soon manifested itself. partly by . of fortunate crop years In the fiscal year of 1873. The protective tariff was working out good results and while stimulating production. about $30 to about $100 higher than during the depression. went forward rapidly. few stocks went higher in 1871 and some A The real culmination of the bull market was in 1869. when high priced railroad shares were from others in 1872. which had fallen to 738 miles of new line in 1864. it had given the country the advantage of moderate prices for iron and other goods. once begun. New lands were being settled. which was than thrice the amount of the last year of the Civil more War to and the greatest business the country in stocks had ever done up levels of that time. The coal shares were exceptions. The period from 1869 to 1872 was one of distribution. veterans of the war.000.PROSPERITY AND DEPRESSION Every burst of business activity 77 and the requirements of the railroad companies called for every dollar the banks could loan and the burden was borne with difficulty. No workman was denied who sought a market for his services. they hung heavy and some of them were actually lower. exports had passed $522. General prosperity . especially in iron and steel. grew to 7. Mills and shops of every description were rushed with orders.000. CEISIS OF 1873 IMPROVEMENT. A number added to the wealth of the States. Railroad building.379 miles in 1871.
The Chicago fire. business remained in a healthy condition. the stock market was measur- ably strong until 1872. yet remembered as the "day of three corners. October 9. 1872.78 HOW MONEY IS MADE was unchecked until 1873 but stock speculation drooped. . Rivalry in the buying of shares 'for control added to the excitement. and the Boston fire.560. and there were three on one day. sent stocks tumbling. while the price had risen over $20 a ton by the Fall of 1872. Black Friday panic. crops were good. led by a decline in gold from $162^ to $133. one after another. so far the high water mark in that industry in America. 1871.900 tons. all contributing to awaken hopes of higher prices yet to come. 1869. River. Many failures occurred in Wall Street and hundreds of business firms were crippled or obliged to Bank were into the wind up their affairs." While the trend of stocks was downward. the most unheard of watering of stocks was announced from time to time. and pig iron production in 1873 rose to 2. September 24. Business men were doing extremely well. 11. A number of desperate battles were fought in Wall Street between rival factions. like that of New York Central with Hudson . September 17. Not only were powerful cliques energetic in sustaining prices until they could sell their holdings but extra dividends were voted by railroads. Corners were engineered. 1872. A variety of untoward events occurred. and a few important consolidations were effected. each caused a heavy waste of invested capital and a break in stocks. caused by a corner in gold. In spite of all disasters. Clearings at the Gold Exchange so entangled and confused that the bank went hands of a receiver and its doors were closed for several days. Nov.
000. promoted by the overbuilding of railroads. For a short could not at times be to 1 made for less than 7 per cent. week after week. and scarcity of cash caused a money flurry in September. consequences of a panic in Vienna. Bank reserves were low. Time loans went to 12 per cent. Loans were made at per cent a day and 2^ per cent was paid for carrying Erie stock. Later in the year.000 a year since 1867. The echoes and . driving the price from $68^ in October to $230 in November. without more than one brief pause in the Fall. The crisis was at hand.000 to $63. the market was unsettled by a break in Chicago & North Western. % The public. Early in 1873. meanwhile. which was due entirely to the excesses of the previous five years. . by the failure of the Atlantic Bank and then began a financial and commercial panic. made matters worse here. 1873. 79 Various influences had come into play. the banks stopped the issue of weekly statements of their condition. growing out of reckless speculation in doubtful securities. May 9th. was startled on April 26. to Reckless overtrading in Wall Street invariably adds to the weight of other forces in this direction. % per cent a day commission added. ^ stock broke to $81*/2 in December. the United had been buying foreign goods in even greater and gold had been going to Europe at the rate of from $21. already nervous. Frantic selling of stocks began at the New York Stock Exchange and prices crumbled away. In spite of enormous grain exports. The Woodward party had bought and cornered that stock. 1872. A semi-panic ensued. money worked close again.PROSPERITY AND DEPRESSION weaken the credit situation. time. Call loans with many failures.000. with Bankers charged per cent a day for carrying stocks. but the corner failed almost at the moment of success and the States quantity .
failures among business until men grew 1878. change took the perfectly unprecedented action of closing its doors on the 20th.000. In Wall Street. the certificates. as well an the Northern Pacific and the New York. Louis of the It is said that seventy-nine members New York Stock Exchange failed during the panic. thereafter. that the Stock Exreigned. every year clusive.565. the New York Warehouse Company the 17th. But the financial storm had wrecked many fortunes and thrown a number of banks and hun- The smash dreds of business railroads. more numerous. in stock prices ended in November and a great rally followed. The Credit Mobilier investigation uncertainty. intensified the general 1877 END OF THE DEPBESSION THE 1876 and in some lines until the reaction in business lasted until the latter part of Summer of 1877. the New York Midland became Jay Cooke & Co. with *4 P er cent a day added. Time loans were 15 to 24 per cent in October and call money was 7 per cent. men into bankruptcy.80 HOW MONEY 8. IS MADE September succumbed. Pig . Fright and excitement swept the whole country. Chicago & St.000 of greenbacks. With a view to relieve the tension to some United States Treasury reissued about $26. failed on the 18th. New York Clearing House issued loan dating from September 22. pandemonium So terrible was the panic. in the amount of $26. not to reopen them until the 30th. In in- the country at large. This calamity capped the climax. there being slender warrant in the law for this action. the 000.- extent. 1873. last On bankrupt and 1873. For the fifth time.
PROSPERITY AND DEPRESSION iron 81 from 2.379 in 1871 to 1. January 4. The trend of the times was so unmistakably downward Wall Street in this period. which aimed a hard blow at the railroads in the incident. Commodore Vanderbilt died.and there was no important recuperation in price until 1878. lower prices and smaller profits were reported. pledging the Government to resume specie payments. 1879. 1877. In all other vocations. dullness. 900 tons in 1876 miles in 1875. of large means were greatly disturbed during this period by the so-called granger laws of several Western States. and open wars broke out between several important systems. on the 1st of January. and while this was a reassuring good effects were not felt immediately. and its untiring attacks caused prices (after a rebound from the bottom in 1873) to reach a in lower level in the Spring of 1877. and Reading was obliged to apply to creditors for conalso as a sequence of the agreements as to rates cessions. when there had been a fall of about $40 a ton from the high prices of 1872.868. came to an end between railroad and coal companies. Slackening of traffic had already impaired earnings and the damaging competition of 1875 and 1876 cut them down yet more. its Men interest of farmers and sought to regulate freight rates. President Grant signed the bill. New miles of railroad constructed dropped from 7.711 making fell off . 1875. and a trunk line agreement which he had brought about a month or two before was abandoned. January 14. Loss of earnings sent Central of New Jersey into the hands of a receiver in February. all Partly in consequence of these laws and reduce and hard times and loss of freights.560.900 tons in 1873 to 1. than for the previous . that a strong bear party came into existence.
The turn had come. and the tide of prosperity rose steadily until its inspiration trated every city and hamlet in the country. which broke all records. The excess of American exports was only one of the features of this golden period in our affairs. Call money was remarkably low. a marvel to which our people were not accustomed. the average was lower than then. and such evils as prevailed in the business community seemed near their end. the miles of new line rising from 2. A powerful speculative combination was formed in Wall Street and the buying of stocks for a bull campaign began. During four years. the trunk line railroads made a new agreement in June. the high priced ones the most. but heels of 1877. indeed.000 per annum in favor of the United States. endJune 30.665 in 1878 to 11.000. building broke out afresh and once more surpassed all precedent. had peneThe fertile lands of the West and South brought ocean forth bountiful commerce expanded under the harvests. all the gain since 1861 had been wiped out. 1881.569 A . A change in outside conditions was then ushered in. CRISIS OF 1884 BETTER times trod upon the turned slowly. 20 selected stocks had declined $76 a share since 1869 and individual stocks were down from $14 to $116 a share. it Confidence redid return. and number of new railroads were required.82 HOW MONEY The IS MADE month of June ended Taking the whole body of active stocks. foreign trade yielded an average ing balance of more than $230. last drive in the the reaction in the stock market. twenty years. stimulus of good crops.
tractors 83 The transportation of materials for railroad conand a larger volume of goods and grain led to a improvement in the earnings of all lines. Betterment in the stock market was delayed by strikes and riots at Pittsburgh and elsewhere in 1877. Meanwhile. A powerful factor in behalf of higher prices was the undoubted fact. and furnaces could hardly meet with promptitude the orders for metal. men of means awoke suddenly to the fact that railroads were of value as investments after all and a marvelous buying of securities sprang up. The mines were taxed to the utmost and the output of coal was nearly twice that of the dull years which preceded the boom. . that the heart-breaking wreck and reconstruction of corporate finances had been finished for the time being. or nearly three times the record of 1876. merchants reaped large profits. Money was fairly low. there was no hesitation on the striking part of investors and traders. every brokerage office in a flood. barring the customary flurries at the planting and harvest seasons. Stocks began their rise in the Spring of 1878. and time loans could be negotiated at an average of 4 to 5 per cent. The tonnage of pig iron turned out in 1882 was the enormous total of 4.623. In 1879.300. Rate wars had ceased and earnings were on the upward grade. Orders to buy poured into and brokers were in Stocks danger of being utterly swamped with business. As soon as the boom started. Energy pervaded the entire commercial world. which electrified the financial world and led to a boom in prices. mills and factories were busy.PROSPERITY AND DEPRESSION in 1882. In the sale of goods. but the time was ripe for a bull movement in stocks and after a few months the bull party had the situation under control. Farmers were paying their debts.
a few did go higher in 1882. reserves were extremely low in the New But gold began to flow in from Europe and in the fiscal year of 1881. whole of 1880. exchanges were the scenes of furious trading. Fortunes were made by every one connected with Wall Street. particular reasons.000. and the swelling tide of the boom rolled on practically unnumber of striking railroad conchecked until 1881. In 1880. promoted speculation and kept it at the boiling point. however.000. direct cause of the halt was undoubtedly For the as a A enormous issue of new stocks and bonds. throughout the York banks. Shares had then risen. Activity in Wall Street and general business circles was exhibited by the circumstance. The boom in stocks culminated in May and June. July 2. from the low prices of 1877.84 HOW MONEY IS MADE rushed upward with a whirl until November. the stock Scarce a cloud flecked the sky for two or three years. that. stock dividends. After the shooting of President Garfield. such as brokers had never witnessed. May 24. 1881. stocks did not rally back to the high level of the Spring in more than a few exceptional instances. In 1880. averaging about $60. rights on new issues and strong manipulation by operators.000. especially. The buying of stocks for control. A solidations were arranged by Jay Gould and others. in some cases $40 and in others as high as $120. stock dividends were declared to the amount of more than $40. all records were broken by a net importation of $97.000 of that coin. 1881. and a strong speculative shake out in stocks in that month. The good times were not allowed to pass without a few unfortunate incidents. 1880. put forth consequence of the marvelous increase in miles of railroad . among them being a receivership for Reading.
Vanderbilt and Jay Gould managed to lift prices somewhat in Large fortunes were brought to the support of the March 13. No efforts. Confidence was greatly unsettled by this decline. for call loans. In the Fall of 1882. A heavy shrinkage in values took place. and leading men. money ran up to 20 and 25 per cent. By this time. and once to 30 per cent. . a number of stocks reached the lowest prices known for more than a year. and freight was carried by the trunk lines from the West to the seaboard at rates which barely paid the cost of transportation. sufficed to Thousands of men opened their eyes to the fact that they were loaded with stocks and bonds. Another source of disturbance was a partial failure of the wheat and corn crops in 1881. like Mr. Rate wars again blasted the hope of larger earnings in the latter half of 1881. Every effort was made to neutralize the effect of less favorable conditions. which could not be sold at a profit and were not worth keeping as investments. All were pressing for sale and some of them held out no hope of an income to the owners for years ahead. The market was overweighted with those securities. Uold not only ceased to come into the country. and in the Fall of 1882. lar. Mr. Gould made his famous exhibit of securities to a few friends. Liquidation set in. spreading out before them about $50.000 of bonds. stay the downward trend in Wall Street. and . but on the other hand went out. Exports of American produce began to fall off. the public had become seriously alarmed. market. 1882.PKOSPERITY AND DEPRESSION 85 line in operation and the union of old companies.000 of stocks and offering to show them $30.000. however spectacu1882.000. and this selling imposed a burden upon the market too heavy to be sustained.
U. and prices declined from $17 to $54 below the levels at which they had sold a few months before. Grant & Ward. First class stocks were thrown overboard and sacrificed.915. 1883. making matters worse. the idol of the nation. iron leading the way. but because the prestige of Gen. In the midst of the excitement. 1884. which stunned the public mind. influences of the time was the fact that some of disturbing the new railroads were exact parallels and competitors of textile trades of commodities In January of that year. During the latter part of 1884. New and troublesome factors came into play in 1883. the New York Clearing House lent its strong support to the financial community by a sixth issue of $24. . and the Metropolitan Bank. Brokers and traders were frantic and a panic took place. In Henry Villard. deranged the iron A and and general business slackened. was involved in the ruin of Grant & Ward. memorable not only for its violence the older systems. coupled with startling revelations of fraud. S.000 of loan certificates. James R. came the suspensions of the Marine Bank. revised tariff law of March 3. . be noted that the panic was the direct outgrowth of three years of declining prices. the trunk line railroads again went to war with each other and cut rates heavily. Their buying various no longer lent support. Prices Another of the fell. Keene failed. Loss of confidence in It is to great magnates of finance had slowly driven thousands of men out of the stock markets. equally with the weak ones. The crisis arrived in 1884. May. Grant.86 HOW MONEY IS MADE although the earnings of some of the railroads were good yet nothing sufficed to stay the liquidation. May 11. and in April. in quick succession.
A few stocks went lower in the early part of 1885 but the market at large was then on the road to recovery.000. many active stocks had fallen from $30 to $75 a share and Union Pacific was down $103. and then while business men were taking breath and examining the grounds for taking hold again. in the form of easy money. running on into November. of Vanderbilt stocks and West Shore mysterious buying money and low bonds began to be noticed. it So brief and trivial was the revulsion. dullness and sagging prices prevailed for six months or more. lasting until 1890. Liquidation brought its usual panacea for the woes of Wall Street and the financial world. however. a tentative buying of stocks for a rise.PROSPERITY AND DEPRESSION 1886 87 END OF THE KEACTION BOTTOM was touched in the stock market in June.000 in 1884 and 93. that might almost be said there was none. A sharp advance in stocks took place. It ended in 1886. Nevertheless.000 in 1885. there was a good rally in August.000.000 shares in 1881 to 96. 1885. Easy rates of interest finally encouraged some In June. during the whole of 1884 and 1885. which really foreshadowed the absorption of West Shore by the New York Central and the formation of a new pool among trunk line roads for maintenance of rates. The set back in business was of short duration.000. In stocks. and sales on the New York Stock Exchange ebbed from more than 117. Traders were discouraged. 1884. as a rule. and this initiated a . In three years. the foundations were laid for a bull market. 1884. in 1884. Call loans fluctuated between 1 and 3 per cent.
to the delight of every one else in the financial community. The bull market worked gradually upward after 1885. and new life in the iron and coal trades inspired the public finally with courage. 1885. the finish of Henry S. Gold exports in 1886 were not a cheerful feature. There was also a sharp reaction on account of agitation in favor of the proposed Inter-State Commerce Commision bill. CRISIS OF 1893 IMPROVEMENT in the times was aided by harmony among the railroads. country 12. There were the inevitable set backs. fect on stocks H.88 sustained rise. fresh imports of gold. when Congress met in December. Ives.876 miles of new line and this record has ever since remained the high water mark of railroad building in the United States. But underlying conditions had grown better. and the bears in Wall Street became uncertain 1886 by of their position. year of 1893. there was added to the railroad systems of the . peculiar to every . accented by the bomb outrage in Chicago. but the ef- The progress of good times was interrupted briefly in fierce strikes in New York. In 1887. HOW MONEY Wm. Magnificent crops. IS MADE which did not end until the disastrous 8. a number of sensational movements in stocks enlivened Wall Street and Aug. and the concerted work of bankers and financiers. defeat of successive bills in Congress aiming at a lower tariff. May 4th. Vanderbilt died December was limited. Chicago and elsewhere. who failed. In 1887. a revival of railroad construction. llth of that year marked .
In July. St.500. The break failure reached New was soon over and December saw prices mounting again rapidly. a panic Hurst forth in Wall Street. whose talents shone the brightest in a bear campaign. no unfavorable circumstance being allowed to pass without an impetuous drive at stocks by men like James R. Some good stocks did not return to the high prices of 1890 for years afterward. due to a fear that the United States could not maintain the gold standard. November 15th. Before this last disaster.000 of loan certificates to sustain the banks. In 1888. and the Clearing House was compelled to issue $16. money grew scarce in New York. To leave nothing lacking. the Baring banking house in London suspended in November. partial failure of the harvests and various corporate receiverships A swarm A were among them.000 ounces of silver and redemption of silver notes at the Treasury in gold. effected the January famous "gentle. the Democrats swept the country. when the startling news of the Baring York. Paul passed its - dividend. But the drop had cancelled more than half the The life was gone from the bull moverise since 1884. Keene as its leader. Morgan finally in prices resulted. ment. rise in of troubles then cropped up. men 's agreement ' ' between trunk line officials as to rates and there was a good recovery in prices. the break in stocks being urged furiously by a bear party. and a sharp slump 10. Keene. having James R. .645. to financial troubles in Buenos Ayres and to private knowledge in London of the Baring embarrassment. In the Fall. 1889. P. J.PROSPERITY AND DEPRESSION bull 89 movement. The bull market culminated with the Spring 1890. Gold was heavily exported. heavy foreign selling of American securities had mysteriously broken out. Congress passed the act for monthly purchase of 4.
000. As payment . From an and Jay Gould died. the current of excess of exports of $202. 1892. 1892. Sagging prices were the rule.000. The bank- ing situation was strained. and exports had passed the billion dollar mark in . selling their Prudent men in Europe were for this American securities. The all the Enact- ment of the McKinley protective tariff in 1890 had stimulated manufacturing. the balance of trade dwindled. Mr. The times had been good. But the two years of 1891 and 1892 were devoted entirely to distribution. as the Democrats had come into power at Washington. leading stocks had risen from $12 to $30. Cleveland was elected President in November.in 1892. commerce changed. and in 875. The silver purchase law had excited serious fears that the United States could not maintain gold payments.000 1893.90 HOW MONEY IS MADE In spite of every set back. the bull party persisted until 1892 in an effort to put the market higher. or $50 to over $100 a share (according as they were the low or the made high priced favorites) from the level of 1884. and. for the first time in history. and a number of them their highest quotations in 1892. there was an excess of imports of nearly $19. By the Spring of 1892. December 2d. Some stocks had not had their proper rise. perience fully expected a speedy downfall of the protecThe situation was full of dangers. Every vocation nourished. even the dullest mind was aware of the fact that the bull market had ended and that much lower prices were ahead. Crisis of 1893 was indicated by nearly customary factors. every man of political extive tariff. Fortunes had been acquired and money was being spent with Wealth had been reckless and even vulgar ostentation. Then. added to b>y an enormous sale abroad of American produce. and after the moderate January rise of 1893.
The drain upon banking resources forced the calling of loans in December. The strain in financial circles was terrific. 1893. The ruin The stock market was over so far as and distress in the Failures country at large were. The crash came. February 20.506. Panic reigned in Wall Street and there has seldom been a more precipitate decline in stocks than ensued. and the New York Clearing House swiftly yet.House banks took a steadied itself in July and the worst securities were concerned. $87. net. a sum only once before exceeded and never since. so much labor since 1884. eighth issue of loan certificates.000 of gold. White announced his inability to meet his obligations. however. a total of $41. in nearly every State. In other cities. soon after the collapse of the McLeod deal in Reading.PEOSPERITY AND DEPRESSION flood of foreign liquidation could be 91 in gold made only (in view of the disappearance of a favorable balance in the foreign trade) there was shipped abroad in the fiscal year of 1893. In June. May 4th. an old time remedy was called into play. made its 490.000. and next day. In March. indescribable. and the bankruptcy of the company. day after day. which had been reared with . Reading fell $22 a share within a week. S. The banks began to call loans again and interest ran up to 60 per cent. and . A genuine currency famine prevailed. Cleveland was inaugurated and attacked monopolies in his address. National Cordage went into the hands of a receiver. Good stocks fell rapidly and bad ones more The big men were out of stocks and did nothing to support the market. Mr. the Clearing similar course to relieve the tension. were announced. lasting three months. Y. Conditions were ripe for a swift rending asunder of the speculative structure. 1892 and rates for temporary accommodations rose to 25 and 40 per cent.
great illustrated by the record of commercial failures. in each year. in 1896.92 HOW MONEY The blight upon business is IS MADE many banks went down. called Mr. deficit in Government revenues soon occurred and A . 1894. The iron and steel trades suffered a serious reaction.654 miles. by 1896 END OF THE DEPEESSION years of 1894 and 1895 constituted a period of great gloom. Union Pacific. Ills. Erie.000 and in 1893 over $346. Wilson tariff. and home industry were despondent.000. and times were hard everywhere. About one fourth of the railroad mileage of the United States went into the hands of receivers.000. Scarce one man came through unscathed. the total of new construction was only 1. in consequence of previous reckless overbuilding and a smaller mileage was the friends of . until. The trouble was world wide and banks also failed in Italy and Australia. and the crimes and outrages perpetrated by the unions and the march of Coxey's army of tramps to Washington. which numbered 10. Northern Pacific. added to the lines in operation. was enacted in August. Atchison.. The benefits of the repeal of the silver purchase law were nullified only too soon by agitation for demolish- THE The ing the protection of the tariff to manufactures. was the repeal of the purchase law. and New York active business & New England were among One favorable outcome silver of 1893 the bankrupt roads. Railroad construction was at a low ebb. liabilities in the first named year being $114. at a special session of Congress. Cleveland for that purpose. Sentiment was farther depressed in the Summer of 1894 by the strike at Pullman. in fact. Reading.344 in 1892 and 15.242 in 1893.000.
and maintain the reserve intact. December 17. which seemed to contain a threat of war with Great Britain under certain continIn the uncertain state of feeling.000. the to Treasury stock of the coin had fallen to $44. The action . By January. and.000. 1895. Stocks made a start on the highway to recovery. panic broke out in Wall Street. This was so serious an evil that radical measures had to be taken and in February. even if short lived.000.000. a more than fifteen-point slump in stocks. but pubThe market was lic confidence had not fully returned. No sooner would the gold reserve be recruited to a proper point than withdrawals would commence again. a virtual run on the Treasury set in and gold went out at the rate of $3. who agreed to accept the bonds of the Government. A genuine. proved a shock to the public mind. The gold standard was once more in danger. at this juncture.PROSPERITY AND DEPRESSION 93 therefrom sprang a fresh cause for alarm. and there was . In January. 1895.business men. a contract was entered into with the Morgan-Belmont syndicate of bankers in New York.000. Hoarding of the metal by . A distinct revival of the iron trade was experienced in 1895. The Treasury began to be apprehensive lest it should become necessary encroach upon the $100. the coin being taken out in exchange for greenbacks.000 a day and $30. banks and private citizens began.000 gold reserve for ordinary expenses of the Government.000 was taken out not required for export. this message gencies. 1895. stop the export and hoarding of gold. in spite of sales of bonds to replenish the gold reserve. President Cleveland sent to Congress his famous message on Venezuelan affairs. of the syndicate achievement did was as good as its word and its notable much to reassure . ripe for a reaction. although dullness prevailed in most other vocations.
other industries were suffering. Atchison for $8. The BaltiPacific sold for more & Ohio was in the hands of receivers. SentiHeading ment was extremely depressed that Summer. a figure exceeded only twice before and happily never since. the historic Bryan scare threw Wall Street into a fresh panic. gained headway and which ran on for six years. 1897. some imports of the metal. going below that of 1893 and 1894. which.94 HOW MONEY IS MADE In 1896. August was however the turning point. put an end to depression and revived hope throughout the country. Union $4 a share. the iron trade was dull. and finally the triumphant election of McKinley as President in November. after a little. and the free silver mania was raging throughout the country and seemed about to sweep all before it. The iron and dry goods trades . Northern Pacific for $3. manufacturers began to prepare for a larger business and a bull market was quietly set on foot. a cessation in the outflow of gold. The net export of gold in the fiscal year rose to $78. Bumper harvests. The decline from 1892 ranged from $20 to more than $90 in most stocks. when the Dingley protective tariff received the signature of President McKinley. wheat exports. Cash holdings of the banks were low. 1896.25. and so on.50. Every one sold stocks and in August prices touched the lowest level for ten years. CRISIS OF 1903 better times did not gain momentum until after July 24.884.800. Swiftly a boom The broke out in stocks. tKe banking situation was bad. In July. for $6. Everybody scrambled for stocks.
Bank reserves increased enor- mously. developed among the railroads. During this fortunate period of six or seven years. Rate wars were no more. Meanwhile. and the increasing use of iron and steel in these structures spurred the iron trade. The perity in every part of the United States ment gained headway as time wore on. the buildings attained marvellous proportions. American breadstuffs and other products found a ready and ever growing market abroad and by 1901.PROSPERITY AND DEPRESSION . Every business man was doing well. who sent in an avalanche of orders. ployment at good wages. an old principle under a new name.000. excess of exports had reached the astounding .592. total of $664. All the phenomena of profitable times were visible on every side. With the inevitable reactions. Gold exports were moderate and excited no concern. new Good times blessed the whole country. Call money loaned at nominal rates of interest in 1897 and did not harden greatly for several years. and brokers reaped a golden harvest . prices mounted steadily. a great bull market was in progress at the stock exchanges. Personal expenditures were lavish in the extreme and men dressed their families with a magnificence never before witnessed in this republican country. New launched by the score. the rails hummed with the passing of throngs of heavily laden trains and railroad earnings grew steadily larger. no influence seemed to be lacking to promote the welfare of Labor enjoyed ample emventures of all kinds were our people. 95 revived and all classes of mills and shops were soon running on full time in order to satisfy buyers. erection of clouds of gloom fled before the bracing winds of prosand the better- In cities. Community of interest. On the lines of transportation.
Dean Co. No such period has been devoid of them. Roswell P. by sinister incidents.000 shares. War with Spain in 1898 was responsible for a sharp reaction.96 HOW MONEY IS MADE of commissions in the execution of orders to State in the Union. from time to time and on one day in 1901." The trans-Missouri decision. such interest on the part of the general public. the stream of business. Frauds in New York in 1897 and the collapse of the E. 1897. Transacenormous volume. Lawson of Boston. that the tranquil progress of good times and the interrupted. tions were in buy from every Never before had been witnessed . in the latter part of 1897 set back prices for a time and called out from Thomas W. Flower died in the midst of in certain stocks. Good times were never more sharply tested than during the last half of the cycle under review. March 22. chilled a New York enthusiasm for several months. with which his house had been identified. S. who was already striving for publicity. boom . It was enough to Petty traders and big operators divided among them the rich profits which were made every week. in order not to be swamped with Fortunes were made by every buy "any old thing" on any reaction to be sure of large profits on the next rally. headed the Most Gigantic Conspiracy since the Credit Mobilier. It is not to be supposed for a moment. May a 12. a two-page article in daily newspaper. and the collapse of those specialties administered another set back to the market. boom in stocks was not now and then. sales at the New York Stock Exchange Clerks were forced to work reached 3. 1899. trader.000. nights and holidays to make out Clearing House sheets and post the books.
Speculative favorites dropped $25 to $80 a share from the high prices made a few days previously. the shooting of President McKinley. that the current of prosperity never before. and Henry Allen & Co. all aroused public concern and contributed to render the market wild and irregular So great was the momentum of the good times. At the very height of the good times. heightened here by failure of the New York Produce Exchange Trust Co. howran on undismayed until the Fall of 1902. In April. multisupplying an exact parallel to the year of 1864. in stocks Hundreds of men obscure until the boom had made them rich took their place among old time leaders of finance. A . to be closed. 1899. forces came into play in the old. with possessions such as they had not dreamed of twenty years before. Reckless speculation had forced stocks to a dangerous pinnacle of prices. and the collapse of various wild cat securities. During this money was quoted at 186 per cent. several suspensions in Wall Street and Canada. Gates caused the mills of the American Steel & Wire Co. John W. on account of a panic. 97 In December. 1900. 1901. British defeats in South Africa startled the English public and a sudden scare developed. The corner in Northern Pacific in May. and the attendant panic of the 9th are memorable for the swift and remarkable break at the Stock Exchange and the sudden recovery. old way. the loss had practically been recovered. A crop scare in 1901. Wealth accumulated in this era as ever. call falling off in orders for their products and there was another momentary chilling of hopeful feeling.PROSPERITY AND DEPRESSION . which foreshadowed a coming crisis. In a month's time. much beyond their investment worth.
but the task was too great. The banking situation remained bad all through 1903.000. although liquidation was going on steadily.98 HOW MONEY common stocks of IS MADE tude of gigantic corporations had been created.000 of railroad securities alone had been issued in addition to the amount afloat. . Banking capital had been overtaxed by the requirements of legitimate business and the pools in Wall Street strained the resources of every financial institution almost to the breaking point.000. the many being given away as a bonus. Banks. alarm and would not buy. The United States Treasury was appealed to for relief and something was done in the way of anticipating interest and buying bonds. most of them a union of smaller ones. While stocks reacted in the latter part of 1902. pools and syndicates were loaded with a mass of "undigested se" of which so much was said in the curities newspapers of the day. five brokerage money. Desperate efforts were made to carry prices The public took farther. Over $2. than in 1896 and the main body of shares was near to the highest level they had ever attained in the history of the country. no serious trouble developed until after the January rise in 1903.000 of The pools began to find themselves in a dangerous position. "Indigestible securities "they were called by James J. the end had come. 1902 Stocks were from $25 to about $170 higher. and that was their character.000. They could not be sold at a profit and all were seeking a market in vain. The top of the bull market came in August and September. When call loans rose to 25 and 35 per cent in October. houses alone were borrowers of more than $100. Hill. In New York. with inflated capitalizations.
1903. Stocks fell with hardly a halt until September. A conviction that this was true gradually forced itself into an incredulous public mind. The decline ranged from $20 to $75 or more a share. By June. a unanimous decision was rendered by the United States Circuit Court of Appeals This that the Northern Securities merger was illegal. which included some of the most daring and keenest minds in Wall Street. Liquidation was stimulated by a formidable bear party. Hill startled the public at this juncture by declaring in a speech that the "crest of the wave of prosper- ity" had passed. the reaction lasted until the Summer decision. Fortunes shrank heavily during the twelve months and many business men and speculators went to the wall. In business circles. the "rich man's panic" was in full swing. having run its course in one year's time. which had been feared for several months by by threatening that the harmony in the railroad world would be broken. the reaction terminated. Interest rates were high. financiers.PROSPERITY AND DEPRESSION first 99 loans being in excess of deposits every month except the two. Railroads were seen to be economizing in their purchase of Reaction set in. unsettled confidence . Importing merchants bought enormously abroad and imports passed the billion dollar mark for the first time in history. when with a final smash amid great excitement. the balance of trade in favor of the United States being reduced to $394. 1903. Banks. Gold exports were avoided only by the concerted action of leading banks. James J.000. other trades. pools and syndicates began immediately to unload some of the securities they were carrying and loans were freely called. In April.422. in the iron and rails and equipment.
The great abun2 dance of available cash led. Wage advances were granted by the railroads ag- gregating about $100. Stocks then declined. stocks ended the .000 of new securities were authorized.000.000.000 below zero in November. and the enormous excess of loans over deposits alone foreshadowed the turn in the tide. to a bull market. Thousands of workmen were discharged from railroads and industries and nearly as many clerks from offices.000 in August.000. Surplus deposits rose from $40. Bank reserves in New York fell to a low ebb. HOW MONEY IS MADE Enforced closing of many mills and shops was reported. The railroads were crowded with marvel. 1904. Retrenchment was the order of the day.000 and an advance equal in amount was conceded by the industries.000 of charters of the million-dollar class were taken out.000. 1903. Interest rates rose. Business was in a high state of prosperity in all parts of the country. Liquidation of speculative accounts and the inaction in trade had produced a striking result in the banking situation in New York. In spite of rallies. and interest rates were forced down by the plethora of funds to 1 and 2 per cent for call loans and 2y to 3% for time money. to a surplus of $111. A new era of prosperity was ushered in during 1904. traffic and the number and length of freight trains was a Almost all the trunk lines and some others voted larger dividends. PANIC OF 1907 TOP of the boom was touched January 24. and over $1.000. Every one was making money. Crops were abundant. as always. Union Pacific going on a 10 per cent basis. The old. Over $2.100 of 1904. old story of the conditions forerunning a crisis was repeated in all other particulars. 1906.000.
This force acting in all parts of the country gradually brings into action the funds which the banks have accumulated. 1892 and 1896. that "an operator. 1872. In good times. would have changed his position on the market only eight times in forty years the turning points have been 1861. 1881. first of all. after a feeble after Congress had adespecially January rally. and these are set on . ing way. The fall in the prices of bonds was not the least striking feature of the panic of 1907. 1877. crisis is applies to the banks for a loan of money. In a less strikomitted from this . 1885. posits begins to decline. to the ten and twenty year periods. The slaughter of prices was The advance of the previous six years was terrific. '101 In 1907. journed without relieving the financial stringency. In March. wiped out. to have been supremely right. and and stocks and bonds fell at times furiously. The recital on the foregoing pages calls attention. Every preceded by money stringency.PROSPERITY AND*DEPREsi'6&"' year lower than at the start. wherewith to carry on his operations. allusion may be made to the assertion of a financial writer of repute in New York City. summary but the remark agrees in substance with the ten year cycle theory. whose business is capable of extension. it points to the four or five year periods. IN confirmation of the cycle theory. liquidation set in. 1867. and the panic brought to light the usual exposures of rottenness in various financial quarters. to be favorable to The volume of surplus deThe good times have been seen new enterprises. every active man. a few years ago. never stopping until November 21st. a panic 'broke out in New York. growing out of the very prosperity which prevails." It is singular that 1864 should have been .
These features have affairs. and their borrowings add to the men" burdens of the banks. is booming and every one is making and the prices of commodities rise. but if credit is strained. Wages ried away by the optimistic spirit of the times.' 102' HOW MONEY New IS MADE millions. owing to the growing scarcity of available supplies of capital. the bankruptcy of a railroad or failure of an influential bank or operator in stocks. the active at the stock exchanges and a Of course. Carmoney. lively speculation securities are created in order to be sold. Meanwhile. ing situation is bring about the crash. Syndicates and pools must have money. begin to run against the United States. the numberless outbreak of war. . new is begun in them. depleting money supplies at the very time when they are most needed. If the banksound. it is unconsciously held that prosperity will last forever and great extravagance of personal expenditure is seen on every side. Some rude exposure of recklessness or fraud on the part of trusted institutions. it requires only a serious shock to public confidence to give a grave set-back to prosperity or actuForeign trade may ally to overturn the whole fabric. or some one of the other calamities which may overtake the financial world. billions. and the "big securities are made look forward to a time when they can transfer the whole load to the shoulders of the public. corporations are organized whose united capital will aggregate and even Their securities are placed upon the market for Pools and syndicates are formed to carry the securito secure the ties and market them. end in view. the country will withstand a good may many shocks with equanimity. and. a drouth in the West. all preceded every crisis in American business At this point. foot in every direction. sale. business Finally. interest rates rise.
It is to be noted. The top of a boom in stocks occurs at least one or two. not fallen as low as in the last preceding period of depreswhereas they have tended in each new period of pros- perity to go higher than ever before. in spite of all the trials to which they have been subjected by panics and reaction. . A table will illustrate the effect of crises on stocks during the last forty years. with a fall in interest rates to a mini- mum. The ten named serve all and down. sion. than during the whole period from 1865 to 1901. and sometimes brings about the crisis. on the average. the average has .PROSPERITY AND DEPRESSION and especially if the big 103 men have sold their surplus stocks. Just as stocks are extremely apt to be bulled far above investment worth in a great rising market. It is true that they decline in every serious crisis but. a period of severe liquidation in stocks and business enterprises and a large accumulation of idle funds in the banks. has always preceded a turn for the better. recovery in stocks sets in before imis at all marked in trade circles. under one corporate name or another. the crisis is inevitable. A circumstance of momentous interest is the fact. which have been traded in. that the price of good securities has steadily moved higher. years before the actual crisis. that the decline in stocks antedates the actual turn in business. since 1860. permanently higher. since 1877. because they have moved up substantially in harmony with the general list. Stocks seem now to be established on a level. Conversely. On provement the other hand. practical purposes. sometimes three. without a single exception in the last thirty years. Ten denominations have been selected. so they tend to go much below it in a prolonged reaction. as a distinct and logical phenomenon.
104 MJOO HOW MONEY III 01 IS MADE CO rH O O O IO rH OS III Oi O rH rH CO <M CD IO O IO O HW IO CM rH CO tCNl tO* IO TH CD CO* C5 <M rH O H CO rH rH H CO -^ CO O rH* CO H CO !-* CO 00 I-HJC* - "' -^ il OS TfH t~ CD rt< CO rH O ^^ O IO " ~' ** <M O CD "^l rH CO CO rH Ar^< %%l M 3! !* rH H^ TH rH !* t-i O CO 01 rH 10 H CD T* H" H IO CO CO rH % O w|oo CO t rH O Ml-* IO 05 O O O CO IO t- t* rH I .
good times are seen to loom large ahead. and 1904. which the manipulators will not permit The market starts. keeps to cover except at high prices. a dangerous position of bank liquidation months or rallies. IN EVERY NORMAL YEAR. for six months or a year. at the end of a serious depression in business. attention has been directed to the great movements in prices. during which stocks whirl rapidly upward. cause reserves. which extend over a series of years. 1890. the progress of a panic. now When. high interest rates. 1876. AND TWO DOWNWARD. THEIR CAUSES AND EXTENT IN a previous chapter. 1879. 1893. there occur years. growing out of the alternation of good is and bad times. 105 . with only the most trivial This is generally reactions. 1885. and to the existence of a large short interest in stocks. going and never comes backward. and 1903.VII NOEMAL YEAELY MOVEMENTS OF PEICES AT LEAST TWO SWINGS UPWARD. and frantic prices to drop steadily for twelve so. due to the popular enthusiasm and exultation over the return of good times. In other times. Another peculiarity of stock market movements worthy of attention. like 1862. with only the most feeble and uncertain Such years were 1873.
000. many millions go toward the purchase of securities. as the country gains in wealth and prosperity. whether good or bad times prevail. due to manipulation by speculators. the holders of stocks and bonds in this country receive the enormous sum of $150. men of large estates. On the other hand. Thousands of people put from $1. and tends to grow larger. however. part is expended in travel and recreation.000 into stocks or bonds.000. the January and July disbursements than . Fundamentally. but certain ones are notable and are expected and worked for by traders.000 to $5.000. stocks follow a different course. or just after. Some of the A money ness.000 to $1. the sum ranging from But at the beginning and $30. they grow out of the fact. that on or about the first of January and July. year by year. goes into real estate.000 or more in dividends and interest on their security investments.000 to $80. banks and insurance companies put from $100. Some distribution of this character takes place. In normal markets. when conditions are fairly stable. There are always several turns in prices every year.106 HOW MONEY IS MADE In the majority of other years.000. securities is therefore much more active at the time of. The principal part of the great sums in cash referred it to is necessarily devoted to the expenses of living. and two downward. in the middle of the year. by prominent interests is going on. there are at least two strong swings upward in stocks. every month.000. every year. indeed.000 The demand for good into this class of investments. Let us consider the upward movements first. private busi- and diverse forms of other investments. life insurance. the disbursement is and when either accumulation or distribution especially heavy.
or more. a considerable rise has been engineered from some break in the Fall or December. the goods they have bought during a previous reaction. If the general outlook favorable. The lively stocks rise from $10 to $20. January ends the rise in panic years. traditions of The Spring and Fall booms are cherished Wall Street. they buy. at good prices. The second rise is an incident of the Fall months. It is 107 a distinct phenomenon in finance. they begin buying in June or December. of the two. do not always wait until their dividends and interest have actually been paid to them. operators in stocks advance prices during those two periods (if a panic does not prevent such a venture) with a view of selling to the public. This has the effect sometimes of making the price movement a little different from the one which ought to rule normally. . The slow movers advance from $5 to $10 or more a share. Stocks start mount upward Spring or July and Then. as a rule. In every normal year. who know a thing or two. and then. Old hands at the business. By concerted action. after a moderate on into the Spring. since 1860. they often go higher yet into September or October. the Fall rise is generally the most important. and. after a reaction. It reaction. carrying their securities on a margin until the cash comes is in. the Spring rise amounts to little. and. into January. after deliberation. the rise has gone is always equal in extent to the Spring rise. At such times. More conservative people wait until they have the money. when they pay outright for the securities and take them out of the market.NORMAL YEARLY MOVEMENTS OF PRICES at other seasons. The Fall from some low level in the into August.
the boom may be postponed until October or November. for the sake of the normal yearly booms. but from 1. is bad. but. the Fall rally was one of great spirit. taking them back during the next good reaction. sooner or later. has grown immensely within the last ten years.108 rise is HOW MONEY IS MADE If business seldom omitted even in a bad year. In the latter season. very nearly). which they sell in the Spring and Fall months. Men of long experience never part with the stocks which give them a position in their corporations. the market is apt to be maintained on as high a level as possible until the desired end is achieved. in favorable times. in- deed. usually seen the end of the Spring boom in stocks and September the Fall boom. . having been promoted by the declaration of William Rockefeller. (which they did easily) they ought to rise twenty points (which some of them did. If they have not yet liquidated to advantage the stocks they have accumulated. The number of men who carry not only moderate amounts of stock. .000 to 10. or technical conditions unfavorable. Something depends in each year on the market position of the various pools and leading operators. April has. In the reactions of 1873 and 1890. however.000 shares. the "rich man's panic" had cut many a half. that if stocks should go up five points when fortunes down in 1903. they almost always have transient holdings. No exact date can be named as certainly the top of the Spring or the Fall rise. the struggle to put the market up in the Fall was a But there was a good rally in 1893 and even failure. but come it will. merely for the sake of a moderate turn in the market. the top has sometimes been reached in October or November.
that if traders want a reaction. and rust. Fortunate. if at a whole year passes by without weather conditions some time unfavorable to the growing grain. In 1901. The serious nature of a crop shortage has been explained on another page. other $22 to $43 in granger railroad stocks. and unseasonable frosts have not lost their terrors. drouth in the hot season. They no longer fear the old time plague of grasshoppers. Spring and Summer are the seasons for crop scares. general trade is good. wheat and cotton harvests were small ones. hot winds in Kansas and drouth elsewhere of those caused a pathy. there are also at least two swings downward A may variety of causes be attributed mainly it is to money stringency and the crop situation. and this was one of the forces which led to the bad break of that year. crops In 1890. but they have other troubles. contribute to the result. The boll weevil in the South may make a difference in the output of cotton. they seize instantly upon any unfortunate development to bring about the end desired. because a loss of grain tonnage notable case in point may be offset by other traffic. sudden alarm as to the would mean a sharp and serious decline in prices. are the farmers. if the times do not entirely forbid. and to be noted that speculators and pools always play for these reactions. If other influences have conspired to weaken the ardor who are long of stocks. good stocks fall in sym- It must be distinctly kept in mind. if A . the corn. but both 109 Normally. indeed. a mild Winter. fall of During such declines.NORMAL YEARLY MOVEMENTS OF PRICES in prices in every twelve months. Violent breaks on crop shortage are usually transient. cotton and tobacco.
Armour assured his visitors with an almost road. if necessary even at higher prices. Mr. and made money world begins April. It is not un- . It is in the early Spring. in consequence of the demand for ready the farmers. who and are off to Europe. They did later on their granger stocks. and the coming vacations of a money among swarm of men. which sometimes prevail. when doubt has ended. Selling by any large class of men inspires similar action by others. we have no were advised to hold on." compensate oil. Eipley replied: "No. Troubled and anxious. of cautious investors sell their rise. therefore. Ripley is the best railroad president in the United States. and who all get out of stocks before going. business was coming forward. but for the loss of corn. Other influences which operate after the Spring rise are the higher rates of interest. and there is in every normal year a decline from the high prices of the Spring running into May or June. A group of large holders of Atchison and other granger stocks in New York were confronted with serious loss in consequence of the crop scare of that year in July. they sent envoys to the West to study the situation on the spot. Armour was consulted with reference to the value of the opinion of President Ripley of the Atchison Mr. religious solemnity of manner. Mr. and the New Yorkers oil will so. the sea shore or the woods for rest recreation. preferring to Hundreds stocks during the Spring buy them back." When the envoys called at the office of the head of the Atchison sys- tem. "Mr. that the financial to be concerned with regard to the crops. we have New corn. and sometimes into July. May and June are usually months of uncertainty.110 HOW MONEY IS MADE was an incident of 1901.
the Summer reaction will be extremely moderate. These operations are the primary cause Street. and they begin to draw in August. While the banks of the West and South are expected to finance the farmers and planters in the Fall months. and even go short of the market. are withheld from deposit. It has seldom been less than $20. The total amount sent away from New York for harvest purposes.000 and has been in excess of $50. of the Fall swing downward. It must be said. It is A primarily due to a scarcity of loanable funds in New York at that season and is promoted by pools and speculators.000. second swing downward occurs in the Fall. 30 or 35 per cent. each Fall. call loans once rose to 125 rises to 8 or per cent. before the current of remittances had turned toward the East again. 1905. traders desirable to sell their long stock. large in the aggregate. find it Whatever the actual interest charge. and other sums. however. they cannot do it without recalling millions of their surplus money from the East. that if the promise of the crops is definite and splendid. In December.000. is active. Those sections draw down their balances in New York and other central cities. The September reaction is a tradition in Wall . other things being equal. Such an outflow of ready cash forces the rate of interest on loans of for all kinds at commercial centers If trade much higher two or three months. varies with the size of the crops. The West and South require large sums of ready cash to pay off the harvest hands and others and to start the first shipments of produce to market. in New York. when rates are rushed up to 8 per cent or more.000. call money 10 per cent in New York and the rate frequently soars to 25.NORMAL YEARLY MOVEMENTS OF PRICES 111 common for lively trading stocks to go down $15 or $20 a share.
tage of the normal swings of the stock market. coin- cide as a rule with the turning points of the normal yearly swings. always depresses an investor to take advan- the market. Bonds are less affected by these yearly movements than Many stocks. but are not altogether indifferent to them. If fundamental conditions are such that a com- ing change in the trend of business affairs (and therefore of stocks) is indicated. Every considerable decline. in times of panic and depression.112 HOW MONEY IS MADE It quite as often occurs in October or November. whatever the cause. which are sure to come. It is perfectly legitimate for In fact. those who wish to take advantage of the January rise buy good stocks. as a consequence. Selling. often another break in December. when the market is about to turn. if business is good and the outlook free from serious complications. and wait patiently for the better prices. owing to the high rates which prevail when the banks are accumulating money for the January disbursements. ments in The turning points of the great major movestocks. an investor will be safer to sell. men who can get 10 to 20 per cent on call loans are tempted to sell their bonds and put the money out at interest until the flurry is over. has ended during either the Spring or Fall break. or buy. Every boom in stocks since 1860 has culminated at the top of either the normal Spring rise or the one in the Fall. growing out of good or bad times. but There is sooner or later it arrives. When other people have sold. lay them aside. in a normal year. if in any considerable volume. it is sometimes of the greatest importance that he should do so. pay calm and . and the market is down. An investor will.
He investor needs hardly to be advised on one point. and if he has sold on the January or Spring rise. interesting chart. the market is apt to have a strong rise for a year An investor will do better not to sell until have improved materially and at the occurrence of prices a strong Spring or Fall rise. because the market is certain to go lower before the movement is ended. On the other hand. It will not do to buy An downward on the Spring reaction. . If the financial position is strained and stocks have started strongly. few months or the next year or and and week will disregard entirely the numberless twists small turns in prices which occur from day to day to week. and has entered finally upon a period of comparative stability or an actual rise. After a bad smash. if the market has been falling violently for six months or more. yet for clearness the matter may be mentioned. and if the financial situation has eased and money is abundant and interest rates are low. there will be no advantage in buying until July or the Fall months.NORMAL YEARLY MOVEMENTS OF PRICES 113 diligent attention to the broad features of the situation and will be constantly on the alert for those signals of finance which tend to show what the trend of events is likely to be for the next so. then it will seldom pay an investor to try and catch the three months' turns. The general course of the stock market at New York since 1860 is illustrated elsewhere by an important and at least.
This can be shown by a chart of the average price of a number of broad trading stocks. & St.VIII COURSE OF THE STOCK MAEKET SINCE 1860 BULL AND BEAR MARKETS SHOWN GRAPHICALLY. and run . 114 . Reading is omitted (not being traded in at New York) in favor of Chicago & Alton. the stocks selected for this chart . to season. say since 1860. correspond closely with the swings of the whole body of stocks. New Until 1870 inclusive. Erie. and year to year. L. As go the leaders. For are : special reasons. Milwaukee & St. through to the end. so goes the whole market. C. Rock Island and Chicago. In 1871. Delaware & Hudson. C. both inclusive. Central of Jersey. Chicago & Northwestern and Union Pacific are substituted for Erie and Cleveland & Pittsburgh. 1873 to 1879. Paul. shall know it is desirable that an investor what the stock market has done during just a series of years. Pennsylvania is substituted for Rock Island From and runs through to the end. New York Central. Illinois Central. Alton is dropped in 1880. Cleveland & Pittsburgh. A CHART OF THE FLUCTUATIONS OF TEN SELECTED STOCKS order to be fully in touch with the subject under INdiscussion in this book. of a and the movements from season few prominent stocks. C. In 1899. Reading.
coal and general traffic railroads. A fact which contributed to the power of the bull party in that period was the small capitalization of the railroad companies. along about 1896. The country had grown enor- A . and bad in accordance with good times. as a body. Any other group. They include granger. covering any part of the whole period since 1861. and the ten named indicate satisfactorily the general course of the whole market. thereafter. to the high prices of 1864. The high level of 1864 was far in and a long decline was inuntil values had become readjusted to earnings. tinkering of the tariff. and bonds all contriWhile the market swung upward and downward. It was no difficult matter for a strong group of moneyed men to buy up the whole floating supply of any given stock and put the price to unheard of figures. first. yet until nearly the last of the fearful of reorganizations. After the Civil War. stocks. the average crop level of prices ranged between the low point of 1861 and a point half way up to the dizzy top of 1864. contraction of the currency. and their market value had fluctuated strictly in accordance with the times and the seasons of the year. new era then began. would show swings in price. rate wars between railroads. excess of investment values evitable. competitive building of railroads and immense buted issues of new stocks to depress the value of securities.COURSE OF THE STOCK MARKET SINCE 1860 115 These ten stocks answer the purpose very well. corresponding closely to those in the chart. Attention is called. Paper money inflation and the protective tariff underlaid this great rise. a long period ensued during which the governing forces were against the prices of Reckless watering of capitalizations.
RANGE OF TEN STOCKS I 860 to 1884 116 .
RANGE OF TEN STOCKS 1885 to April. 19O9 117 .
or such action should be taken with reference to the protective tariff as to destroy the prosperity of the country. it In spite of all these con- siderations. the stock market entered upon what may be called an entirely new field. as there always have been. probable that prices will never again see the low level of 1860.118 HOW MONEY IS MADE mously in population and riches. If paper money inflation years and rose above the range of the in 1905 passed far beyond played a part in the excited rise of prices in 1864. . which will result in such reorganizations as will squeeze the "water" out of the stocks of many companies which must be contariff and other sidered as overcapitalized. or the modern mania for "regulating" railroads should finally result in a serious diminution of their earnings. Periods of depression will occur. Panics there will be. or socialistic madness take possession of the American people. gold inflation is equally active now. the average level of prices is likely to remain in this new field for a generation or more. which bad times always ensure. but all others previous thirty-five the top of 1864. unless high is finance should decide to enter upon another era of reckless watering of capitalizations. even in this day of large earnThe stock market cannot escape the long declines ings. So far as human judgment can discover. The average price of stocks not only those which appear in the chart. 1877 and 1896. It may be that serious changes will take place in the policies of the United States. Earnings began to be sufficient to pay dividends upon millions of formerly almost worthless stocks. and in 1901.
influential personages want even if the times are good. SOURCES OF INFORMATION SUPPLIES. They assert. Conversely. COMPETITION. that the matter seems hardly Wall Street worthy of argu- ment. What are the underlying conditions which should be 119 carefully watched? . that. conditions. it is stocks to go down. even if some should not. if the men" want stocks reasons exist why they "big to rise. GOLD PRODUCTION. MONEY STATE OF THE CHOPS. an investor Cynics believe that manipulation is the only factor of importance in the stock market. Nevertheless. Even if they are disposed to. they This is true within cer- beyond dispute that leading interests never oppose an unmistakable trend of the times. THE TARIFF. To needs to be alive. A NUMBER stocks of broad influences affect the value of and underlie the booms and periods of depression which succeed each other in the business world. AND TREND OF THE TIMES. if the same fall. but they are defeated by the irresistible force of tain limits. these. So many proofs of this exist in history. they rise. the strong may give battle.IX POINTS TO BE WATCHED EARNINGS.
the larger the earnings. its enormous surplus. is regulated primarily by the earnings and the size and certainty of the dividends. forecast a fall. but high prices cannot be maintained for a stock which does not earn anyskillful stock far above thing. Pacific shall sell at $4 a share. that. and . with the dividends paid thereon in different years. and of each particular one. But it is axiomatic.120 HOW MONEY IS MADE EAENINGS value of the whole body of good securities. depends almost wholly upon earn- THE ings. in 1903. which will be as certain in results as the laws of gravity. to realize this fully. Reduced profits. the effective force in bringing about that very low price was the general fear that 7 per cent would no longer be paid the dividend on the common stock being then in peril. then and yet paying 7 per cent. the higher the price. The recent rise in the Steels is due entirely and directly to the handsome the ability of the corporation to pay 7 per cent earnings. as it did around $185 as in the Fall of 1906. When United States Steel. Vigorous and manipulation may force a good dividend paying its investment worth. Growing earnings mean higher prices for the stocks and bonds. on the preferred in dull times. fell to $50 a share Whether Union or in 1895. if due to other than transient or accidental causes. whether a stock pays a dividend or not. Those which have voting power are always worth something for control of corporations. preferred. One has simply to consult the high and low prices of a number of selected stocks on another page. as later events proved.
given away as a bonus. when the directors voted a dividend reduction and put the stock on a 2 per cent basis. often a weekly and always an annual report. Missouri Pacific rose irresistibly to $100 in 1901. profits are set forth . but when larger profits pointed to an early return of the stock to the rank of a dividend payer. by months. statement. of course through able manipulation. American Smelting. It has since risen to around $119 on beable result ing placed on a 6 per cent basis. Pacific passed its dividend in 1891 and worked down from $77 a share to $10 in 1897. initial dividends must be That earnings are the vital factor seems hardly worth farther argument. sold as low as $37 in 1902 and 1903 but. which have resumed dividends after a long suspension or are approaching the time when declared. Gross and net earnings of the principal lines. a steady rise followed. the inevitwas that in the panic of 1901 the stock dropped to $34 a share. once a worthless stock. and that once despised stock sold as high as $174 in the Winter of 1905/6. The market is full of recent instances of rise in price among non-dividend paying and common stocks. Amalgamated Copper went to $130 a share in 1901. after dividends . are compiled and summarized by several of the financial weeklies and These are worthy of careful dailies of New York city. but the stock was paying 8 per cent. common. even before payments were actually resumed. were begun in 1904.POINTS TO BE the WATCHED the 121 Missouri return to dividends on common. in which net and compared with those of corresponding periods in the year before. Railroads usually issue a monthly report.
From 6. for exportation to . CROPS A LARGE part of the income of all railroad lines from the shipment of grain. but those of the commerce of the United States are always eloforeign quent and should receive the most careful attention. is derived produce and cotton. which issues of profits and state of the business.000 to 15. every year.122 HOW MONEY IS MADE perusal by investors. The Government issues a monthly statement on this subject. and conversely. Statistics are the country in the merchandise transactions. at times. all the daily newspapers. but also the It is printed in sometimes dry reading.000 tons of these articles are shipped by jail to seaboard cities.000.000. but many of the best of them publish annual reports of great clearness concern. They show at a glance the trend of the times as to railroad earnings and the prosperity of each of the principal lines. the best is ing with the public It forms one of the most valuable items of news in the financial papers. which shows not only the balance for or against net export or import of gold and silver. Among industrials. a serious drain upon the financial resources of the banks arises from an adverse balance in foreign commerce. example of candor in dealshown by the United States Steel an elaborate quarterly statement and value. Other industrials are not all so candid. FOREIGN COMMERCE A FRUITFUL source of ample money supplies is the foreign trade of the country.
10. On the first of each published as to the outlook in cotton production. is not uncommon. and. is A boom in stocks has.POINTS TO BE WATCHED 123 foreign lands. the contribution to railroad traffic from this source was more than 30. A far larger tonnage is moved by rail from farm and plantation to the cities and other settlements of the country.000 in 1905 and a fluctuation of $500. which. a similar report is made as to acreage and condition of the staple grain crops. originated in good crops. Bountiful harvests have another and interesting in that the exportable surplus enables the United States to pay off its Borrowings of money abroad and to create a credit. more than at times once. an estimate . Valuable data on this point are supplied from Washington.000 tons of grain.. portation of agricultural produce. bumper crops are of enormous and direct value to every railroad in the land.000. in good times. On the 10th. ensures early importations of gold.000. Depression has effect. In the fiscal year of 1903. Their money perity value in a good year is almost bewildering. begun with a partial crop failure.000.000. soil affect powerfully the prosof the United States in another way. and a vast additional quantity of potatoes.000 tons of cotton. about 3. if large enough. fruit. tobacco and other products of More than once.000 tons of flour. which felt at once in the business world. There is no topic more deserving of interested attention than the state of the crops.000 in this immense total. While none of is month. in dull times.500. has a loss in other earnings been made good by the transthe harvest. 000. The staple crops The productions of the which are reported on by the Government in its monthly statement of acreage and condition approximated a money value of $3. in our history.
These are all also made by the Weather printed in the daily and financial newspapers and form an important guide. and never more so than when a boom or a reaction has run on for a num- ber of months or years. are compiles own affected in the most direct and powerful fashion by the promise of generous or stunted crops. Weekly and other reports are Bureau. seriously upon whom the It is axiomatic that all railroads are affected directly by active or dull times and and industrial stocks peculiarly is The subject of the state of domestic trade so. touch with the crop outlook.124 these estimates of HOW MONEY IS MADE is to be taken too literally. rich men and stock operators. Investors need to keep in so goes the general market. DOMESTIC TEADE SLACKENING of trade after a great 'Boom precedes every financial crisis and an investor must be as alert to detect the signs of a coming change of importance as are . Wall Street always discounts the future and never waits for earnings to be affected actually before adjusting prices to what it sees coming. . one which requires constant attention. and therefore the stocks. One of the best of the its New York financial dailies also estimate on cotton prospects. The profits. they are all eagerly looked for by business men. fortunes of the stock market depend. A the bankers. and while some them have been exposed to serious criticism. and they reflect at least the general facts as to the promise of the harvest. and as they go. of railroad lines which run through the grain and cotton sections.
which afford a wide and accurate view of the whole business field. those reports are republished now by nearly all the leading daily news- papers. ing or slackening of business. 125 Indications of the general course of trade are at the of all. by the two mercantile agencies of New York City. Bank clearings in principal cities are compiled weekly and are worth watching. Various sound and conservative financial weeklies and dailies make a specialty of publishing not only the news but the drift of events in important industries. and they are among the very first to detect and announce a quicken. As a matand importance. It would be almost impossible to point out a form of business in the United States which is not exposed to competiis THERE . COMPETITION no influence to which a particular stock responds more quickly than new and damaging competition. These Argus-eyed concerns are in close touch with correspondents in every city and settlement in the Union and their reports are accurate. every Saturday. dispassionate and valuable.POINTS TO BE command cussion WATCHED . issued by two lead: ter of wide-spread interest ing weekly newspapers devoted to that trade. Among them ere The careful they may almost be said to be official reports on the iron and steel industry. A number of authorities can be consulted. Nearly every one toils in America and is whether business good or bad is a constant theme of dis- among acquaintances. Resumes of the present state of trade are sent to the press.
it is a necessary condition. While competition business is carried on. upon earn- When Andrew Carnegie proposed to build a tube plant in Ohio in opposition to the National was a serious threat and the common . More than a year before the . Every railroad man will agree to that. of the company named promptly fell Tube Company. even the Standard Oil Company and various of the other so-called trusts.126 tion in HOW MONEY IS MADE some form or other. An extreme case of loss inflicted upon stockholders by new and dangerous competition was the historic break in Pacific Mail and Panama Railroad. it sold at $174. under which only such an increase of com- petition as is likely to exert a vital influence ings that proves disconcerting. Community extent but has of interest has minimized rivalries to some by no means abolished is it. which seem to have an entire monopoly of local traffic. Pacific Mail went to $329 in 1865. The genuine nature of the calamity of the outbreak of new and unreasonable competition was well exhibited by the loss of earnings consequent upon the rate wars between trunk line railroads in the '70s and '80s. after the opening Those stocks unheard of prices during the Civil War period. Panama was quoted at $369. move and have their being in an atmosphere of competition and not one of them is free from more or less of it. this and preferred stocks $19 and $13 a share. In September. 1868. live. sold at had in 1866. and even after a stock dividend of 33% per cent of the overland rail route to California. which appear to come the closest to monopolies. as a result of enormous earnings. Even the great railroad lines. although no actual competition could have been felt for a year afterward.
POINTS TO BE Union WATCHED 127 Pacific route was thrown open for business. Metropolitan Street Railway sold at $269 in 1899. and by 1871. But after the opened for traffic Subway in New York had Heen and had diverted millions of fares to its sold as low as $103. West Shore and put an end to a competition which was slowly wrecking the prosperity of the older company. But it is important for an investor to be wide awake to every sign of the coming of serious rivalry against companies whose stocks he owns. the time the overland railroad Central stock was worth $155 in January. but the West Shore road was finished in 1882 and 1881. and they began By was actually in operation. New York Central fell to $81% in June. line to San Francisco. Panama was down to $49. in conse. far seeing holders of Panama and Pacific Mail stocks became convinced that trade and travel would naturally seek the shorter and more expeditious to sell out. come within the personal experience of thousands of busiNo need to dwell upon its consequences. all things which price considered. and has . less attentive stockholders took alarm also and selling was more general. New York quence of stock of loss of earnings. the effects ness men. in desperation. By 1870. 1885. Pacific Mail had fallen to $30%. It was then that the Vanderacquired the entire capital bilt interests. TAEIFF CHANGES THE in dispute propriety of high or low duties on foreign goods is among politicians and economists. at it may or may not have been dear. of excessive competition have own coffers. Metropolitan No doubt.
when the Morrill protective tariff went into operation. IS MADE The ever been since the adoption of the Constitution. and even the prosof pect of reduced duties has always chilled the spirit has always given a set back enterprise. sustaining the factories against foreign competition. The crisis of 1893 rose in a distinct measure from the agitation in the then Democratic Congress for a tariff for revenue only. and promoting the farming the States. however. the business world has become accustomed to the protective principle.128 HOW MONEY us. There can be no question. aided materially in developing the mines. In the United States. which ended in the crisis of 1884. that the twenty or more tariff enactments from 1861. has always proved exciting and has quickened into intense activity the looms. . subject will always be with No one will contest the point. sooner or later. when the system had been fairly adjusted to the requirements of home industry. which eventuated in the Wilson bill. interests of every section of The lower duties of 1883 on many manufactures added to the force of other evil influences. ment of a protective tariff. to 1872. supplying the railroads with an immense and profitable traffic. while the reality On the other hand. enactto business. forges and machinery of the entire country. in lieu of one for revenue only. state of American industry prior to the held to have been due in large measure to Civil War is the relaxation of protection under the tariff laws of 1842 The backward and 1857. that the substitution of one class of duties for the other is a momentous event in the affairs of any country.
tariff changes. low and high rates are charged for call and time loans. equal to 25 per cent of the amount of their deposits. lead to liquidation in . there is always danger of a decline in securities and the condition of the banks may actually foreshadow an approaching crisis. as are likely to have a bearing on the tariff laws.business enterprises. enacted under President McKinley. show a deficit. the loaning power If reserves of the banks is ended for the time being. in stocks is When for any reason. . Selling of this compulsory character invariably means a slump in the It may also stock market and possibly a long decline. When reserves have fallen below the legal limit. money and moderate this and may possible without ample suprates of interest. Stock speculators are then obliged to throw overboard a part of their loads in order to raise funds wherewith to repay their loans. National banks in New York city are compelled by law to maintain a specie and legal tender reserve. cash holdings of the banks are . SUPPLY OF MONEY No BULL campaign plies of set.POINTS TO BE WATCHED 129 The prosperity which the States now enjoy must be attributed in a marked degree to the protective tariff. All writers on crises agree in giving great weight to An investor should therefore at all times be fully informed with regard to such actual or possible revolutions in political control at Washington. the banks are perforce obliged to call in a part of their loans. at the outalso be affirmed of a boom in business.
summarized. They downward movement in general business. called loans. and published in the associated press dispatches. the Treasury at Washington calls upon the banks of the United States to make an elaborate report of their deposits. Every few months. the weekly bank statement is valuable. The situation in the United States at large is disclosed by these reports. because it af- . initiating the which ended in the "rich man's panic" of 1903 and was attended with a reaction keep fully in touch with the condi- tion of the national banks. and other clearing house cities. the Seligmans..000. nor are those of such large private banks as J. Nor does the statement represent the situation at the close of business on Friday. a stateissued by the associated banks every Saturday It is ment In New York. etc. It is not difficult to in stocks. etc. consisting of such part of the capital and surplus profits of the banks as is not invested in circulation. loans. assets. but sets forth the average of the six days since last statement. In New is ment important to watch for them.000. which had boomed stocks to the dizzy pinnacle of in prices at that time. York. there is always a hidden reserve of loanable funds.130 HOW MONEY IS MADE The most recent instance of this kind was the situation Wall street in the Fall of 1902. Loeb & Co. this hidden reserve amounts to more than $300.. Kuhn. at any rate. The banks had reached the limit of their ability to finance the pools and syndicates. In New York. Loans and deposits of the trust comforenoon. nor of some other institutions.. Imperfect though it be. this weekly statenot a finality as to the whole banking position. is panies are not included.. P. Furthermore. Morgan & Co. and the replies are tabulated. for several reasons.
POINTS TO BE
fords an important clue to the actual situation. closely scanned by every active business man.
Public attention is generally fastened upon the item of surplus reserves, because the loaning power of the banks serious decline in reserves independs upon that item.
dicates the approach of high
leads to anticipa-
tory selling of stocks. feature of equal importance, however, is the item of surplus deposits. Investors are advised to watch the dif-
ference between loans and deposits. Normally, the deposits should exceed the loans. In dull times, they always do. In New York, the surplus of deposits over loans rose
in 1899 to $144,000,000; in 1904, to $110,500,000. When an abundance of money is indicated by the magnitude of
surplus deposits, interest rates are sure to be low and one rely upon it that the big men and the restless spirits
been held in leash by a pre-
ceding period of low reserves and high money, are quietly preparing for a bull market and a revival of business,
even if the movement has not already started. The banks always promote such a movement, because they are naturally desirous of higher rates of interest on their money. The first activity may be in the direction of a " shake out" in stocks, in order to eliminate the existing long interest as far as possible. Within a few months, however, a bull movement will be found to be under headway and coincidentally a revival of business enterprise. In the
tables in the latter part of this book, the reader will see the origin of a bull market coincides with a great
surplus of money in the New York banks. On the other hand, when surplus deposits are dangerously low, a situation is revealed which may and com-
monly does foreshadow a serious decline in stocks or an actual crisis. The catastrophe may be postponed for a
year or more, but it is sure to arrive. In New York, the danger line is in the vicinity of about $30,000,000 excess of deposits over loans. When surplus
deposits have fallen to that narrow margin, the cause may be looked for in the activity of general business and of
the speculators in Wall Street and a time is approaching when call loans should rise above 4 and 5 per cent. When
deposits fall below zero, (that is, loans) the evil day has dawned.
liable to go to 10, 15, or
are less than
Interest rates are then
even 25 per cent (and higher) on
If such prohibitive rates are avoided, the result will be due to some extremely happy circumstance or
efforts on the part of leadoperator or pool can carry stocks on a margin profitably, if 10 per cent or more is charged for call loans. At such times, it is inevitable that stocks will
be freely sold. What happens to prices at such junctures need hardly be referred to.
Previous to the resumption of specie payments, Jan. 1, an excess of loans over deposits was the chronic state of affairs at the New York banks. October 25, 1873,
the excess of loans was fully $87,000,000. Specie had been driven out of the country in enormous amounts by paper
and to some extent had been hoarded by and gold formed a relatively small part of individuals; the cash holdings of the banks. Great bull^markets had
been carried on, during that period, through the use of paper money, but after the resumption of gold payments
the country was on a different basis. Gold gradually came back to the banks and deposits tended normally to
POINTS TO BE
in excess of loans.
Now, taking the period
1879, deposits have fallen below loans on several
occasions, as follows:
1879 to the last week in 1883, during which time (with the exception of a few weeks in 1881) loans ran higher than deInterest rates were high, and, posits, every week of each year. after the middle of 1881, stocks declined steadily for three years.
In 1884, a turn in affairs took place and thereafter deposits were normally in excess of loans and the market had a rising trend. In 1887, loans and deposits nearly balanced the entire year; but in the Fall, loans were in excess, and stocks had a strong
August to December, 1890, when leading stocks
of $20 a share.
May and September, 1891, call money going to 25 per cent in the latter month. In both months, a moderate downward turn took place in the stock market; and, as the banking situation did not improve sufficiently, the bull market culminated in February,
June to October, 1893, call money rising twice to 74 per cent and stocks falling $20 to $35 a share, while a crisis and panic
was sweeping the country. August to November, 1896, when, prices being already low, they went lower yet and reached a level, on the average, beneath that
then in existence.
cent in October.
any period for the preceding twenty years, taking the stocks Call money was quoted as high as 127 per
October and December, 1902, when the disastrous reaction of 1903 was coming on. Call money was loaned out in large quantities at from 10 to 35 per cent during this time. All of 1903, except January and February, a crisis prevailing,
and stocks tumbling for
cent during the panic.
six months, although the liquidation so
relaxed the tension that call
money went no higher than 15 per
October, November and December, 1905, and the whole of 1906, save three weeks in January and February, and one in July, call
money rising to 125 per
cent on one occasion,
and high rates recurring
with every outbreak of activity in stocks and business. This has been an exceptional and remarkable period, and seems to foreshadow It is probable that brokers and operators provided themdisaster.
selves with time
at reasonable rates, having resolved never to
place themselves at the mercy of the banks, again, as they were in 1902. The bull market halted more than once and there were several
moderate breaks in stocks. Yet general business continued booming; and the pools and syndicates marvellously weathered the months in
A noteworthy fact in connection with the matter of siuv
than deposits in
that loans were $39,000,000 more in the terrible year of 1893 ;
$40,000,000 more in 1903 $24,000,000 more in the latter part of 1905 and over $62,500,000 in December, 1906.
When the banking situation becomes dangerous, as indicated by the diminution of surplus deposits and especially after they have fallen below zero, a man who believes that
the bull market can be carried yet farther and a reaction in business avoided must know where ample supplies of
money can be obtained. If foreign trade, deposit of Government money in the banks, an inflation of the currency, a flood of new gold from the mines, extensive foreign purchases of American securities, or some other influence can not be brought into play to recruit the exhausted resources of the banks, then there is no other recourse except liquidation in stocks and a slowing down of business enterprise
to relieve the situation.
is possible with of the explanation of this is the high money. part fact, that recovery in stocks, after a crash, begins, while
sometimes said that a bull market
the banking situation
worst but when im-
clearly in sight ahead.
POINTS TO BE
ACCORDING to Dr. Adolph Soetbeer, an authority on this subject, not more than about $3,000,000 of gold was added
annually to the world's supply up to the time of the discovery of America. When the Spaniards began to take
unto themselves and send to Europe the riches of Peru and Mexico, the annual addition to the world's stock of gold was larger but had not risen above an average of
$14,000,000 a year up to 1840. Marshall's find in California and the discoveries in Australia gave an impetus
output of gold. In 1860, the yearly addition to the general stock of gold was about $140,000,000. Many of the first deposits and mines having been worked out, the
annual production fell to $115,000,000 in 1885. South Africa and Alaska have since come into play. According to George H. Roberts, Director of the Mint at Washington, gold was poured into circulation in 1904 to the amount of $347,150,700. The mines are now even more prolific and are sending out more than $1,000,000 of the metal every day. The output in 1905 was nearly
$425,000,000. Students of finance are of the opinion, that the great mass of gold which is being added to the reserves and
coinage of the civilized world will tend to minimize any monetary stringency hereafter and will have the
effect of a
mild and slow inflation of prices of stocks and
the banker, has pointed out the
Frank A. Vanderlip,
startling fact, that, at the present rate of gold mining, the gold coin of the world will be doubled in the next twenty
the approach of a crisis and reaction in trade and. as far as possible. in good times. before an investor will be able to apply his information correctly to the concrete subject of the time to buy and sell securities. at the very time. Suppose that the times have been booming for a few months or years Examine now the less obvious facts of the situation! Are loans in excess of deposits? Are interest rates high ? Are financial men anxious about the supply of money? From what direction can relief. The demands of governments and the inexhaustible energy of business men will always keep pace fully with banking resources. if any. . It HOW MONEY now amounts IS MADE Should there to $6. enormous in the aggregate? Are wages rising? Are the ! . however. after beginning the study of broad conditions. the effects of gold inflation are likely to be more rapid in coming years. be no interruption in the stream of treasure now pouring into the mints. % SOME time is likely to elapse.000.000. and the exercise will prove of the utmost service in the course of time. prices of commodities high ? Have stocks been bulled to a ^eight above actual investment worth? Is foreign trade good or the reverse? The promise of the crops. be expected? Are corporations in the market for more money. More gold may however minimize the evil. It is doubtful if an enlargement of the world's stock of gold will ever prevent periods of monetary stringency.136 years. The main point is to discover. He should study them diligently. the coming turn for the better. in bad times. when money is scarce and are new issues of stock and bonds being launched.000. is it .
without great harm. and a prudent man will get out of stocks on any boom in the market.POINTS TO BE good or the contrary? is WATCHED 137 Does extreme optimism prevail personal extravagance seen on every side? Have there been serious exposures of wrong-doing and fraud. Mills and shops have reduced their output. but when a majority of them combine. or if it has had a steady rise for a year or so. without a serious reaction. Are interest rates low? Are stocks selling on a 4j^ or even 5 per cent basis? Has the stock market reached a state of prostration. without waiting for the final drive at prices. and that there has been thorough and severe liquidation. weeks or months are likely to elapse before there is any . thousands of workmen have been discharged. and general retrenchment has been enforced. Failures have been heart-rending. Now look at the resources of the banks Has idle money accumulated there in great ! stores? 4. The situation is sure to be doubly precarious. if the stock market has had four or five years of improvement since the last depression. the situation is growing dangerous. like the Chicago fire or the San Francisco earthquake caused a tremendous loss of capital and impaired the financial resources of the country? Some one or more of these evil factors may always be present in affairs. stocks of goods on hand have declined. and is there reason to believe that more are forthcoming? and Has a great calamity. and stay out. Per contra. assume that a reaction in trade and stocks has lasted for one or two years at least. where bad news does not suffice to send prices lower ? If these factors are all pres- then an investor can buy back his stocks at any time. several ent. Both at the top and at the bottom of the market.
If he has bought on a reaction. with absolute equanimity. and held on through several months or years. he can buy. he can sell when the situation is dangerous. before the time comes for him to take action anew and either buy or sell his favorite stocks. he must resign himself to wait for several months or a term of years. An investor need not be misled by appearances. . At the other extreme. and has a good increment on the value of his stocks. In both cases.138 HOW MONEY IS MADE important change in prices.
Some of these last for several months. which an additional message. it is of the utmost importance to the private investor. Looked at broadly. finally with a rush the surface of the ocean broken continually by huge swells and the swells. others. price movements in the stock market go in long swings. . A rough idea of the movement can be gained from the familiar comparison with the ocean tide rising upon a coast. barring the occasional reactions. and at the end of the whole long rise. . The tide then turning swiftly and falling for a long time.X TUENING POINTS IN THE MAEKET HOW THE MARKET ACTS AT TOP AND BOTTOM OP LONG SWINGS. suggestions have been made in a previous chapaid an intelligent man to form a Are there judgment as to underlying conditions. at any time. diversified with smaller waves. but not so far as before and . The flood advances slowly at first until it has made some headway recedes part way advances to a higher level again recedes. ART OF MANIPULATION. for sev- eral years. the coast beaten by heavy billows. -CHARTS THE SOME which ought to ter. with reference to the will convey propriety of buying or selling his stocks? If any suggestion can be gleaned from this source. PHENOMENA OF BULL AND BEAR MARKETS. . phenomena in the way the market acts. 139 . then again advances.
comparison. They are the first. which may affect the prosperity of their corporations. variably before there and industry. not a new one. Bankers are necessarily the first to mark increasing courage on the part of merchants and to know whether they foresee good or bad business . Officials of iron and steel companies are alert to every sign of a slackening or a more insistent demand for material. make it their duty to be acquainted with the condition of the growing crops from planting to harVarious interests in the financial world have an vest. which traverse the grain and cotton fields. that they are compelled.140 HOW MONEY is IS MADE the surface broken as before. They are the first to note the first faint streaks of promise. and they note fresh eagerness on the part of buyers. independent service of their own for collecting the same information. the waves moderate or the sea almost calm. must be qualified and mainly by the circumstance that flow. to watch closely every sign of coming changes. which may overspread the sky. or a cancellation of orders. which in several respects. first The railroads and factories. to detect the cloud no larger than a man's hand. but they begin almost inis any important change in affairs impulse in either direction is apt to originate among men who have large fortunes invested in banks. ter day. before the public are aware of the facts. both for the sake of their fellow stockholders and themselves. and at the bottom of the The ebb. which herald the dawn of a bet- Managers of the railroads. the ebb runs more swiftly than the The great swings in prices correspond with the cycles in general trade at large. as a rule. and whose responsibilities are so vast.
whose keen and educated reporters are. 141 From a thousand sources of information. for themselves or others. of these men aim at the actual control of corporaand may in the end retire from active speculation to become sober and conservative managers of properties. by any means the only active Hundreds of keen. Most of the information. in a period of enthusiastic prosperity. If they do not get every important fact as soon as the bankers do. as are the bankers and capitalists to obtain it. able and for the profit to be de- men buy and sell stocks rived from their transactions. from professional pride. Some tions . but certainly part of it. of the market. Quiet buying of good stocks and bonds in times of depression by such men. at critical periods. conversely. and. men of large means learn to forecast the future of business and of earnings (and thus of stocks) and to adapt their own course to the coming changes. mark the true turning points But such men brilliant are not factors in the stock market. as anxious to be the first to unearth and publish important data of this class. Large fortunes have been made through the promptness with which men of wide acquaintance with affairs have addressed themselves to the future. quiet selling of such securities as are not needed for control. and among them are several who conduct campaigns of great magnitude. is placed at the service of the public by the financial dailies and weeklies. no matter whether the spirit of the moment were that of the deepest gloom or the most unbounded optimism.TURNING POINTS IN THE MARKET ahead. they are at any rate certain to discover it soon afterward and to publish it to the world in time for all practical purposes. not all.
Keene. Thomas W. Through long experience. patient. their talents in this direction lead to the . alert intellect. should be added to the list. all of but their places will be from active speculation. Keene. Commodore Vanderbilt and Jay Gould were but. In the course them will retire filled of time. a man of cool. in order that they may have the advantage of the smaller rates of commission on purchases and sales which prevail tunes among fellow members. from time to time. brilliant in execution. Lawson. for the conduct of important campaigns in stocks. hard as steel. and amazing in the extent and variety of his information. It is such men as these who undertake the actual man. common. the independent operators will always have to be reckoned with. At the present day. His other achievements have been remarkable. at from $45 to $55 a share. and as a force in stocks. Long a successful manager of bear campaigns on his own account. of Boston. Jacob Field. Keene took the bull side in 1901 and it was he who marketed United States Steel. and perhaps better fitted by temperament for that side of the market. John W. during the creation of their fortunes. Nearly all are members of the local stock ex- changes. and employment of some of them. those two of genius were daring operators in stocks. All of them possess forwon on the field of financial battle. although they were compelled employ many brokers to carry out the details. by great financiers. planning to men and managing great campaigns. Mr. Civil They have all grown into prominence since the War. by younger men. Easily the prince of them all is James R. and a few others of kindred abilities are the leading operators.142 HOW MONEY IS MADE of this class . James K. they have become expert manipulators of the market. Gates. sound.
Private inquiries must be made. Nothing is left to chance. Each member of a pool must be instructed also. whenever the force of circumstances dictates men do not and orderly They promote the movement. every contin- and provided for. with a view to pro- ducing tangible results as soon as possible. without his plans to a certain extent. fighting his an enemy's country. which will bring to light. the extent of the existing long or short interest in stocks. slow course. way into Oyama. to arrive at an understanding with the large owners of a given stock. it is a other. number of revealing brokers must therefore be employed. and purposes. Whether arising from the impatience of the American temperament. The market reflects serious matter. as far as practicable. concerning the part he is to play in the buying and selling. can go on the floor of an exchange and do operator all the buying and selling himself at any rate. that either a serious reaction or a rising market. It is also necessary. The plotting of a campaign gency is foreseen No A involves a thousand other details. in some cases. never had a greater variety . So far as is possible. wait to let events take their natural. or from a desire natural to all men to have a thing over with and to attain results quickly. For any such campaign. it cept reflect leisurely Buying and selling by actual inveswould seldom move rapidly in one direction or the But the market is not left to itself in this way.TURNING POINTS IN THE MARKET their operations It is to be 143 agement of bull and bear campaigns. which is about to be manipulated. fact. Nothing is done hap-hazard. a number of important and delicate details must be arranged. noted that a campaign in stocks is a real and If the security market did nothing ex- tors.
are reasonably certain to cally Brokers who issue newspapers which comment on market fac- know when liquidation has practi- an end. With reference to the banking situation. 1904.000. that an investor should fasten his attention. slightest doubt. and advisory houses which make it a business to guide clients in the buying and selling of stocks. No bull market will ever be undertaken until underlying conditions are ripe for one. its conclusion is likely made public soon afterward. The pools.000 (they afterward rose to $110.000) when time loans were not l higher than 3 per cent and call money 1 to \ /2 per cent. no one need ever be in the In June. in any year. than James R. When the ground work is laid. or that the stock will not be thrown on the market at an embarrassing moment. as above indicated.144 HOW MONEY IS MADE of preparations to make. Keene. that every speculative long account has been sold out. in charge of a great campaign in stocks. for a rising market. consult frequently and act together. As to be for liquidation.500. Every man could have read that sign for himself. for example. interest rates must be moderate. an investor should consider the propriety of buying back the stocks he has sold on a previous swing come to upward. him out. and that the lies. The first care of the leader of the bulls so far as in is to make sure. There must be ample supplies of money. when surplus deposits in New York were $75. also. It is upon these points. tors. market letters. petty traders and the public have been pretty well shaken Prices are kept weak and made to look as though . and liquidation virtually ended. the flag had already been waved for a start in a bull market.
what the operator Exactly when they ought to buy. from the proceeds of a Pullman dividend. liquidated as thoroughly as for the rise begin. after the market has had a long and continuous decline. During nothing this period. an effort will be made to tire them out. The woman who bought. first act. Quick slumps follow the rallies. tired out. active operations to wait patiently and watch for such periods as these. is very often to put stocks lower than before. disgusted. Many owners of stocks have been in the habit of selling at such a time as this. whose holdings the manipulator wishes to have liquidated. It is After the situation has been wishes. rich was a perfect type of a great and otherwise. in a hurry. prices fluctuate feebly and uncertainly.TURNING POINTS IN THE MARKET 145 destined to go lower yet. they sell. As these people have been proof against fright. and sold it in despair at $9. and investors who are at Wall Street methods. around $20. after improvement has actually set in. one share of United States Steel. why the bull tactics are resorted to. and fearful of even greater sea about losses. it is apt to remain utterly inert and paraGreat operators do lyzed for weeks and even months. common. before aggressive This is one reason. Thousands of small traders. which are turning carefully The small investor needs . they have infinite patience. class of people. as her private speculation. A few stocks are put to new low records. but it will not be an absurd expectation that they will hasten to sell on the first important rise. may have held through the final dip in prices. even while the balance of the list is edging its way unobtrusively upward. just as the bull market of 1904 was about to begin. possible. This policy explains why.
In the early stages of a bull market. having for their object to mystify the public and prevent them from buying stocks. prices are shot upward a few points in two or three days. whether they adpools world or not. on the next reIn only too many cases.146 HOW MONEY IS MADE points in the market. generally the high-priced ones. that buyers are frightened and do not go in at all. The "cats and dogs" have their turn in time. Buyers think they will now go in. a reaction never comes. it is so abrupt and unexpected. and a sold-out stock market are irresistible temptations to organize an upward movement. In due time. and if it should do so. Heads are shaken and pessimistic comments somehow creep into the newsSomething papers. seems to be "hanging over the market" and small buyers are unconsciously led to "wait until the situation clears up a little. Rumors of lower prices are afloat. ample money supplies. Those who are short wait to see what this means." and the "big men" are buying. Low interest rates. periods of accumulation. Then the standard stocks are again bulled. they withhold from view the favorable features of the situation. and advanced. When bad news no longer drives prices down. So far as the pools have the power to do so. Two or three stocks are taken hold of. the formation of a short interest ' ' is sedulously cultivated. Traders may even go short a little more. It is at this . now. another group is advanced. many devices are vertise the fact to the resorted to. and underlying conditions are all right. Meanwhile. the bear market is ended. of which there is a limited supply in the Street and of which the general public have little or none. and are called and actually have " the character of Banks. Later. action.
This is an important moment for an investor. Gold may J5e certain stocks are "going Rumors abound that imported. Often. in despair. pools and operators unload their long stock on belated buyers or the wildly enthusiastic traders. The market is kept active.TURNING POINTS IN THE MARKET 147 stage of the rise that a good manipulator shows to the He keeps the market rising and gives best advantage. " up ten points or more. when a strong break comes. to give credence to the rumors. Eights may be given on others. because the good news . Million-share days and even two-million- at last share days are witnessed at the Stock Exchange. we have a great bull market. ' Under cover of the ' excitement. downward swing. is even utilized to induce the public to buy and the break more stock. "Now. Yet the is tide continues to flow and a new "high record" made every week or two by various good stocks. Too much good news is always a bad sign. Again he must study the banking situation and all the other points which need to be watched. sometimes just as the market is nearing its top for the time being. non-dividend payers and "wild-cat" stocks and even the great high-priced stocks are actually sent up. All these proceedings may have consumed several months. temporary in its nature. Finally. A market. Dividends may be raised on popular stocks. and maneuver At this for a ten to thirty point critical period. thousands of buyers rush in and pick up their favorite stocks. This is precisely the end at which the manipulator has been aiming. is put forward as an excuse. which will not advance farther on good news. Finally. is over with. it an appearance as if the rise were nearly over. a variety of devices are em- ployed to restrain the public from selling. high money or some other plausible influence.
are one of the agencies. rely upon it. One of the conspicuous tests of a successful operator is the ability to sell. while selling more than they buy. while apparently Buying. help swell the chorus. When prices can be put up no farther. It may seem To do incredible that this can be done. which is going up no farther is certainly going down and A . no matter whether it actually brings on a market great crisis. yet performance. no matter whether the market went a little higher afterward or not. if even your clergyman and other persons who are entirely exempt from suspicion of an time has arrived to intentional desire to mislead. tained. all you hear from If the newspapers are all bullish. in order to reap a harvest of profits on the short side of the market. that the operators are getting ready to put them down.148 is HOW MONEY is IS MADE Many news apt to be saved for the culmination of a bull market wise men sell out on general principles when the too good. they are obliged to sustain prices for a time. No matter whether such a proceeding is harmful to business interests. the speculators combine to carry the decline as far as possible. the sell out. if your friends that stocks are going ten or twenty points higher. the writer is only stating the fact. Orders are telephoned simultaneously to several "Washed it is an every day " or "matched orders" through which the object is at- sales . especially if the market has And this has always rise. traders go short of this to advantage. been true. Too much good news. and univerenthusiasm mark the culmination of a bull movement. When stocks. tremenhad a long and continuous sal bullish dous volume of transactions at the Exchange. a bear campaign begins.
000 shares to get rid of 30. the professionals were all getting short of their favorite stocks. to attract attention tors. prices commence slowly to fade away. more to At margin is called for by the brokers with the inevitable is result that a quantity of stock is thrown overboard. General Electric. Not long ago. Each broker rushes to the post and executes his order. it required washed sales of 300. heavier sellquick slump breaks out and the bear market is under full heading way. the operator ends each day in an improved position. the twenty point margins are exhausted. and conceal the real designs of the big specula- In 1903. having sold more than he bought. stocks are thrown over regardless of price. all operations for the rise come an end. it is usual for a few selected stocks to be bulled to much higher figures.TURNING POINTS IN THE MARKET brokers. But this is the United States. If his work is skillfully done. Slow and feeble rallies are succeeded by rapid dips. Lacking their former support. heavy advances took place in Delaware & Hudson. and the public no wiser or actually mystified. "When the decline has imperiled the ten point margins of stubborn and skeptical traders. more Finally. While the insiders are getting out of stocks and going short at the top of the market. A the consequence.000 Southern Railway stock near the top of the market. Meanwhile. In due time. Missouri Pacific and People's Gas. others to buy. in which prices go a little lower than before. 149 Some of them are directed to sell. just before the great break began. and there . the proper moment. They may not do these things in Utopia. none of them aware of the orders of the others or ttfat they all emanate from the same source. Southern Pacific.
66 65 62 J50 -59 _58_ 57 151 .SOUTHERN PACIFIC Fluctuations in I9O5 continued ^2 71 -70 J59 68 JZ.
the bear market but short-lived stock. At the psychological moment. Wall Street always dis- counts the future. He must look at the future and judge whether the times ahead are favorable to stocks or the contrary. From more On these rallies. each . Every outburst of liquidation the market farther down. by famous Joe Millerism. and they show at a glance whether a given stock is cheap or high. meaning of the market can be read in charts. time to time. until. An investor will lose nothing In the to a habit of cynicism. as so many small traders do in Wall It would be absurd to suppose that the whole Street. He will be aided lying conditions training his by close attention to underand by the comments of conservative newspapers and bankers. One culminates and prices are again at the end of their swing. An investor is advised not to make A a fetich of charts. which an investor must watch for. take hold and support the market by their purchases and the whole story is repeated. It is the periods of accumulation and distribution. they are a graphic representation of what stocks are doing. the courtier was warned not to believe all he heard at the French court. the pools sell terrifying break succeeds another. traders who are short cover their commitments and there is a smart rally. clue to turning points in the market is sometimes afforded by charts. An investor must not believe all mind he hears in Wall Street. the strong come forward again. An investor can obtain the material with which to make a chart. each one covering several months. after months of confusion and loss. This he must learn to do also. On the other hand. by taking a newspaper which prints a detailed list of all the sales.152 is HOW MONEY IS MADE carries another smash.
with a rally of several points and a return to about the lowest figures. is a sign. At the bottom. as a rule. that accumulation is going on and that in due time a strong rise will follow. then buying is indicated. The chart must be looked at broadly and must be considered with reference to underlying conditions and the general situation. But periods of accumulation and distribution are generally indicated. If it is high. The main point is. . number of swings and turns at the top of a long rise. chart shows where a stock stands at any stage of the A in progress. then that is proof that too much stock is for sale there and distribution is evident. followed by a decline. The chart should be kept in the form of the sample one hereto appended. At the bottom. on the New York stock exchange. are held to signify distribution. it may go lower yet. Ruled paper can be bought in stores where mathemati- cal supplies are kept. which is commonly better defined than the top. back to the top and refuses to go through. and especially a strong dip downward and a rally back to about the same high figures again. but it will not do to rely absolutely upon the pools and operators showing their hand too plainly through the charts.TURNING POINTS IN THE MARKET 153 day. that is not necessarily a sign that it will not go higher. especially for the keeping of charts. that when a high top rallies and the market is made. Those who pin their faith entirely to charts believe that "double tops" and "double bottoms " are the thing to look for. If it is low. a movement then A number of movements back and forth. There is something in this. when a return to low figures has taken place and the stock refuses to go much if any lower.
it may be said that 154 . but with what we are considering here is something different from holidays. to veterans. owing to the distractions of the The phenomenally dull periods may coincide one or the other of these halts. now and then. the normal mid. is the recurrence of exceptionally dull periods in the trading. and which is full of significance. J\. slow way along as a flat.XI DULL DAYS IN STOCKS '. and the lost all interest in securities of From a week or a month. there happens which the market wends its during sluggishly as a muddy brook crosses are tired beyond expression. low ebb. Citing the unusual periods. time to time. first. of the Street are without Few of the real phenomena meaning. when traders public seem to have every description.Summer Trading first halts in the market. twice a year.PHEIR MEANING AND WHAT THEY PORTEND EXAMPLES A FEW NOTEWORTHY 4 PHENOMENON which is witnessed in Wall Street. at intervals. these dull periods are highly to be They are not and mid-Winter at a confounded with the mid.Summer and mid-Winter dull days. on the usually occasion because is of the vacation absences of a throng of traders and operators. and significant. and in December.
that year is only 65. usual January rise and reaction had been followed by a good Spring rally. often referred to as almost a record day of Prices had come up nicely from the low figures of 1895 hesitation in the but 1896 was a terrible year and any upward movement was an unfavorable . an almost unbroken decline took place.DULL DAYS IN STOCKS intense dullness in the stock [break in prices. in stocks Many traders had an idea that what the farmers believed might be true. Another such instance was the extraordinary dullness in the Spring and Summer of 1896.400 shares a day. . In July. Farther. After the Spring May 27th of rally. July was duller than common. and with the exception of an extremely mild rally in August. the market fell into the doldrums. lasting the remainder of the year and ending in a violent smash. The hesitation in the market foreran a fall. sales at the New York stock exchange fell to an average of only 83. silver Conservative men feared the consequences of the law and stopped buying. owing to dry weather. Europe was disturbed by our silver legislation and had troubles of its own besides. There was a pause to consider the situation. they fell. In 1890. a prosperous and fortunate year in the early months. the crops were not in good shape. Intense dullness in 1890. therefore. The Silver Purchase act was under discussion and became a law in that month. When prices began to move. that inflation of the currency would boom prices of stocks and commodities both. running into May. twice 155 market has preceded a serious during the last fifteen years. few clouds were visible on the financial horizon. The except in the always troubled region of politics. signified an alteration in underlying conditions for the worse and foreshadowed a bear market.700 shares.
Seats on the stock exchange suffered in value and pessimism was so rampant that many brokers thought their seats would be useful thereest full were 60. In the week ending June 30. in each of those years. and good in 1894. July was practically. These two cases are the only ones of importance within fifteen years. In each of the years named. As a rule. after only as heirlooms. sales did not go above 576. To all appearances the market . which started when activity returned and gained momentum later. Crops were excellent in 1891. poor in 1893. sales What that meant to brokerage offices may easily be imagined. On July 3d. in which an entire paralysis of the trading was the forerunner of a serious decline in prices. Condition of the crops played no certain part in the dullness of those months. and was the precursor of booms in prices. 1893 and 1894. making it probably the dull- week of the present generation. the lowest point so far as prices were concerned. intense dullness precedes a strong movement upward. at a season when is normally active. unless in consequence of some catastrophe in national affairs not now dreamed of. HOW MONEY IS MADE Apathy for a month or more.156 feature. 1894. no matter at what level the market is standing.200 shares. In 1895. known to the present generation of active men. was succeeded by a heavy drop in prices and the great break of August carried the level of the market down to the lowest point. the smallest volume of transactions was in . cated definitely an end of liquidation. the notable periods of stagnation coincided with the Summer vacation period. In 1891. that low level will never be seen again. the It indit stagnation was far greater than was normal.000 shares.
000 shares.DULL DAYS IN STOCKS 157 January and February. Utter and hopeless inertia settled down upon the No broker earned his salt. sales did not go above 1.000 shares a day. and. liquidation had completed its course. This was a typical case of the usual sequence of great dullness in the stock market. Important interests were maturing plans for a bull market. Stocks were in strong hands. there followed a steadily rising market until the May panic of 1901. 1904. was the smallest day in eight years. . 22d sales amounted only to 86. Sales averaged about 120. and. liquidation was over. the situation had cleared up.000 The public were being subjected to the tiring shares. the end of a seven months' decline. In one week. The average for the month was about 150. The intense dullAugust meant that. out process.000 shares. with trifling reactions. market. This was. March 10. when the average of railroad stocks was higher than at any time for ten years (except for a few weeks in 1892 and 1899).325. after a run of twelve months. the month of August was excessively dull. On the worst six days. prices rose then until September. just before the great upheaval in prices of good railroad stocks to prices three and four times greater than the figures at which they sold in 1896. the dull month was June. however. In 1900. after a short and sharp shakeout. In the exciting bull market of 1902. Aug. The bull party had a tight rein on prices.000 shares a day. and men who were shrewd enough to put the proper interpretation on the phenomenal dullness of June were lifted June was the month to wealth before the frosts came. Drouth had affected the wheat crop and the allied armies were besieging Peking. trading ness of reached a total of only 672.
On the 17th. the era of higher prices market has risen to the highest point ever average of 1864.. Saturday. and all things animate in Wall Street. since then. June 28th. A good reaction had occurred in May and prices had started upward again. As a matter of fact.800. On the 17th. Liquidation had ended. preferred. The Northern Securities case had been decided (against the Union Pacific interests) and the bad news did not A realizing sense of the depress the market farther. A fine rally into January had taken place and then prices drooped nearly to the low level of 1903. Since then we have had over a million shares on a Saturday. Union Pacific. the stock ticker.000 shares were dealt in. business in times of active manipulation.900 shares only were reported. known.070.158 HOW MONEY IS MADE The smash of 1903 was ended. St. On the 15th. sales of 87. ^ths mous volume on an active day is a feature of the furious . total sales on the New York exchange amounted only to 1. Prices held their own but there was no buying. by a dullness and apathy which seemed to presage another fall.000 shares or so. market. their long stock during the previous break were tired out. which hastened to cover its short sales. J^th. 83. situation finally dawned on the bear party. and United States all magnificent stocks whose enorSteel. little more than one full day's as far as possible. exceeding the high Phenomenal dullness reigned in Wall Street in June. During the last week of April. Such persons as had not sold 1905. During the week ending June 17th. March was the turning point in the market.000 shares were done. Drowsiness fell upon the 129. only 1.000 shares were dealt in. A and new dawned on Wall Street. Paul changed in price just %th of a point.
said to show the importance of watch- ing for periods of remarkable dullness in the stock mar- They form turning points.DULL DAYS IN STOCKS trading. a great rise is ahead. It is imperative at such times to search closely into underlying conditions. the famous day of the blizzard. meant. Enough has been ket. and wild With it reference to intervals of dullness in the trading. 159 That was the record for dullness. 1888. By those who wish same phenomenon is watched to profit by small turns If. there may be a flicker upward just after the resumption of active trading. incidentally. It is bound bull be remarked. a strong movement upward as soon as activity returned. 1905. those who are short cover at once and play for an upward turn. if in prices.250 shares. when practically no business was done on the exchange. There could be nothing worse than that. also be said that the may for. trading falls dull. that is generally held to signify a coming turn downward of a few points. and prices refuse to go any lower. active trading stops or falls dull for an hour or more. an enormous volume of sales. . what it usually does. after a break. that the top of a market is commonly attended with great excitement may in the trading. There never was anything worse except perhaps on March 12. and erratic movements in prices. The stagnation of June. If they are dangerous. on a rally. Per contra. but the market toward a lower level. If those conditions are sound. sales being only 15. each day.
even at the risk of a little repetition. their rates of dividend. he will sometimes buy a favorite stock many dollars a share cheaper than the prices ruling at the moment. RULES FOR BUYING ARRANGED AND CODIFIED ITor taken for granted.XII WHEN TO BUY SECURITIES REACTIONS HALF-WAY BACK. and wishes to recover them lower down. the financial standing of the companies in other reAll this is fundamental. respectable and long established securities. DOCTRINE OP FIVE-YEAR AVERAGES. which will afford him a regular income. which he wishes to is all. presumed that he will confine his attention to standard. the lessons to be learned from which will now be set forth. earnings and surplus profits. or that he has come into the possession of surplus funds. An investor should seldom be in a hurry. self the To determine for one's proper time to invest in securities requires a study of the matters outlined on the previous pages of this book. and profitably. and that he knows what they have sold for in recent years. 160 Safety of capital can . and in a general invest safely It is also way spects. and by proceeding in a perfectly cool and matter of fact way. By waiting a few months or even a year. that an investor has sold some. of his stocks at high prices during a boom.
an investor might amuse himself by making a chart of the fluctuations of the stock he has particularly in view. a stock to be bought when it has fallen or below.. & St. L Delaware & Hudson Illinois Central $284 108 131 127 102 67 *Mo. at the start. he must certainly buy when the market is down and not during the whirl of a furious bull market. In any event. If that plan had been followed in 1905. Paul C.. and a man who cannot wait for a decline has no business to put his money into stocks. 107 167 141 157 "Pennsylvania 97 Union Pacific 83 79 U. This cannot be insisted upon too strongly. that to. pfd. one will often save the equivalent of more than a year's dividends by patient delay. & St. allusion may its be made is to the doctrine. Steel.. $ 78 88 & St. one might have tried to buy some one or more of the excellent stocks. but it would give an investor few opportunities. To clear away one misconception. Pacific Nat '1 Biscuit. American Sugar Atchison Baltimore & Ohio Canadian Pacific Central. pfd 100 90 142 114 *N. Y. C. If. in addition to safety. of N. Y..WHEN TO BUY SECURITIES 161 only Be assured by buying stocks when they are cheap and when there is a prospect of higher prices for them. Central N. C. pfd. pfd 154 Western Union 88 139 Lake Shore Louis. L. covering a period of a year or more back. & Nash Manhattan . entertained by some. for example. Amer. Mil. one wishes to add an actual increment to his principal. Ch. Such a rule is well enough. 1st pfd. While awaiting his opportunity. S. Car & Foundry. average price for the last five years. Locomotive. J Chic. named below. at the prices set opposite: Am.
which rose from around $32 in May. one contingency in which the doctrine of average price may be acted upon. but other considerations would have dictated buying then and they would have been convincing and sufficient. nil. it is apt to react nearly or quite half-way before resuming the upis There ward swing. case in point was afforded by Tennessee Coal & Iron. On the it is so seldom that the five-year average can be depended on as a guide that its practical value is almost whole. because there had been great depression. Obviously. the plan would have been good enough. this method of judging when to buy would have had little practical value in 1905.162 HOW MONEY IS MADE Only three of the stocks named. during certain periods after the Civil War and in the '80s and '90s. phenomenon is seen more distinctly in the speculative and highly manipulated stocks. but even in that case. Some other guide must be sought for in a region like the United States. When a stock has risen rapidly from a previously low level. this govern. With apply. In 1903 and 1904. fell as low in 1905 as the prices given. It would have answered. with heavy drives at prices. the five-year-average plan may answer in any given year. In other lands. those marked with an asterisk. 1904. where conditions reference to bonds. to $106 in The A . where underlying forces are lifting the whole body of good stocks to higher and yet higher levels as time rolls on and the country is working out its manifest destiny. the five-year average may is not the rule to may be stationary. and indeed few others fell in that period to their five-year average.
Reactions half-way back are often seen in the foot-balls of speculaWall Street. Is money accumulating in the banks? Are Have there been rates of interest less than 4 per cent? smash after smash and do standard stocks sell at prices which would return more than 4 per cent on the money Can an ininvested. the time to buy is a strong drive in prices in the months from July during to October. In a year of this character. The upward movement may have just begun. stocks all may have seemed amazingly cheap. The best guides for buying are based on common sense. bottom has been reached some time between July and Octo- ended? ber. but experience . the price had reacted on profit-taking to $73. Assume. that good times are returning after a long term of depression. In every year of depression since 1860. things considered. a later. can frequently buy his favorite to advantage on these half-way-back reactions. if he has missed his opportunity at the bottom. In those years. perhaps 5. and that a stock is worth the price it is selling at. and instances of the tendency are shown in the chart of Southern Pacific on another page. perhaps 6 per cent? vestor gather from such sources of information as are open to him an idea that liquidation in stocks has virtually failures. tion in A An investor who has become convinced that a long period of prosperity lies ahead. in the stock market. in the Spring.WHEN TO BUY SECURITIES 163 month April. an advance of about $74 a share. that the bull market will run on for some time. and a clear understanding of the present situation of the market with reference to the last crisis or period of depression. a great decline in stocks. a knowledge of underlying conditions. 1905. drop of $33 a share or about half the rise. first.
then the best time to buy is at the bottom of the normal yearly swings in prices. of the times is toward betterment. is the time to buy. An investor then merely taking back good stocks. times continue to brighten. investor did not recover his stocks But suppose that an at or near the bottom of prices in a year of great depression! Suppose that the Hull movement has made some progress upward. that purchases as early as July in a year of desperate depression. and prosperity looms large for months or years ahead. are gen- enough for all practical purposes. previously sold at much higher prices and if they go somewhat lower in the Fall. a good rule in years of reaction is buy when things look who hang all day over a to absolutely the worst. if money is easy. It may be said.164 HOW MONEY IS MADE shows that they have always been cheaper yet in the Fall. No iron-clad rule can be laid down. after one or two years of the downward swing. provided that the trend erally safe is . But if he keeps his eyes on the banking situation. In a general way. and that prices are higher than they were! What then? If conditions remain good. as to whether it is preferable to buy in July or the Fall in these years of prostration. no harm can come to him. or later in September or October. after a considerable drop in prices. he cannot go far astray in deciding whether to buy in July or at some later date. when he comes into the money which he wants to invest. No investor can dispense with the exercise of judgment in every action on the subject of stocks. and that The inexperienced part of prices are going lower yet. however. . June or July. the banks have ample resources. when men stock ticker feel sure that some catastrophe is impending they know not what.
" The air will be pools found full of reasons why he should not delay but invest at once. It frequently happens that an investor has idle funds at such a time. these stocks are sold. a second decline nearly if not quite to the low level enterprise A reached before has always heretofore taken place. he can commonly do so to advantage a few days later. every month. while there is invariably an excited rally immediately after a panic. sooner or later. because. On a great Hreak. stocks are always bought in quantity by prominent financial interests to support the market and prevent it from going to pieces entirely and when order has been measurably restored. in the parlance of the Street. This is the most dangerous and difficult time for an investor. He must ask himself: Are stocks selling above investment worth? Has the boom been in progress several years? Have money supplies been diminished by the activity of business and by stock market operations. During a great boom in business and stocks.. for .WHEN TO BUY SECURITIES 165 the public always sells at such a time as that. the and operators are " gunning. If one is not quick enough to buy on the day of the great smash. the man. man must have some confidence in the future of his country and its inexhaustible spirit of A and its resources. of money are dispersed for dividends and interest. Those who have stocks to sell want his money and they will put forth every effort to induce him to buy at high prices. millions . until loans are more than deposits. What shall he do? He is exactly whom. and during the selling there is another recession. panic in an improving year always brings a bargain day. and an investor can get any stock he wants without bidding up the price to do so.
One may rely upon it. In a few instances. elements of the financial situation.166 HOW MONEY IS MADE rates high? or until surplus deposits are nearly at zero ? Are interest What is the state of foreign trade? Does Have there been exdisturbing legislation threaten? posures of fraud or wrong-doing? On a calm and dispassionate review of these. such as this. in order to sell out later. however. and rumors may abound of yet tion in trade? higher prices for stocks. . as nearly as can be judged. that and their friends have had advance informa- tion of the good thing coming and have been buying the stock when it was low. The temptation to go in at once is almost irresistible. no clouds or distant mutterings may indicate an approaching storm. prefers never to alarm the investing public). to wait with a perfectly calm mind for the rising tide to halt and then to ebb furiously in the manner characteristic when of periods of crisis and reaction. every favorable factor may be treated lightly by the press (which. for the moment. That is the time to buy. Good news. An investor may feel. He will buy only the reaction has run its course. unbounded enthusiasm may prevail among acquaintances. is certain to be followed by at least a moderate reaction. especially if the the insiders stock at once starts upward. and all other. that he has lost an opportunity in some of them. stocks may rise high'er. This is precisely the time not to buy. the sky may be clear. from principle. not at all from mercenary considerations. It is seldom worth while to buy an active stock imme- diately after a dividend has been increased. He will do well. are there present a majority of the circumstances which always forerun a crisis and a reac- To all appearances.
on which all the assessments have been paid. it is not uncommon to levy an assessment of $1 to $5 a share. years of waiting followed. There will be little harm in waiting until he can buy stock. or more. An investor will wait until the plan of reorganization is published. He will then know exactly what he has to face. a portion of which they are willing to risk in the purchase of non-dividend-paying stocks. and when a stock has fallen to. great deal of money A has been made in such stocks. and especially if the market has been extremely dull for several days or weeks. or below. buy on strong reactions in the Summer or Fall months. actual investment worth. on some strong drive at prices. Union Pacific and other stocks of that class. if the market has not risen for more than one year. and to codify the rules for buying as far as practicable : In years of trade depression and reactions in stocks. that a buyer can secure the stock at as low a price as before and sometimes lower. 2. on the stock. but sterling companies were sure to shake themselves free from their difficulties in time. buy 1. to realize the profits which have been made by courageous buyers. . Many holders will sell rather than pay the assessment. Reading. only in the late Summer or Fall. One needs only to com- pare the present value of Northern Pacific. which are about to be organized. To summarize the whole matter. and it seldom fails to come to pass.WHEN TO BUY SECURITIES 167 Those who have ample funds. who accumulated some of those securities when they could No doubt. be had for a song. In the rearrangement of the finances of a bankrupt company. Erie. In years of good business. often devote some attention to bankrupt companies.
If a stock is not above investment value. especially if the 6. After a dividend has been raised.168 3. whose earnings have been barely able to meet fixed charges and dividends. if an intention is made manifest to expand the capital or bonded debt considerably. buy during a panic or the second drop of has begun. not buy a stock. the stock has reacted half-way back. rise. after recovery 4. . buy after the next strong prices. buy. buy when transactions become large and the price begins to 5. when 8. price has risen above investment value. Buy the stock of a company about to be reorganized only den rise. reaction. After a stock has long been inactive and when the price is low. Do after the plan of reorganization has been made known. Do not buy after a long or sudden rise. after a sud7. HOW MONEY IS MADE In a good year. 9.
mind so as to reference to selling. is to let go of stocks. 169 . In practhose logical owing. in order to catch the twists and turns in prices. to speak plainly.XIII WHEN THEIR ENDING. but who tend to overstay and frequently let the There are profits of to-day run into losses to-morrow. A FEW NOTEWORTHY INSTANCES Wall from week INstocks. BOOMS AND TOP OF THE MARKET NOT SO DEFINITE AS THE BOTTOM. a genius for buying at the exact psychological moment. to week. TO SELL SECURITIES. which has stood the test of time. but who lack the faculty of buying at the others. when they are With above investment worth. to the credulity and cupidity of human nature. especially if the rise has been in progress for several years. The rule seems simplicity itself. a general rule. it is difficult to follow. when the volume of transactions is unusually large. when there is excited buying by the general' public or by traders who are short of stocks. It is possible to train the act with reasonable discretion in both cases. among the men who trade actively in who have whose insight as to the proper time to sell is marvelous. and when periods coincide approximately with the culmination of a normal yearly movement in prices. right juncture. It is presumed that an investor has bought good stocks tice. STOP ORDERS. it is not uncommon to find individuals. Street.
how much higher. It is important to watch for the phenomena of the top of a bull movement. a bull market is as much the product of natural forces. and the growth of prices resembles the slow progress of the crops. and that he has meanwhile received one or more dividends on the stocks. but need not be . in the most matterof-fact way. or more. in that the movement is exposed to accidents and must be carefully aided by the art of man. But there is a vast difference which attend the harvest. At this juncture. They never are as clear at the top as at the bottom of the market.170 HOW MONEY IS MADE during a period of depression or reaction. The signs that the harvest time has come are not so obvious at the end of a bull movement in stocks. $25. elsewhere referred to. Trading at the stock exchange may be fast and furious. On the farms and plantations. million shares a day. an investor will free his mind entirety from the tips and rumors of Wall Street and consider. which cover the face of nature in the Spring. and that. In its origin. the market is likely to go. the leaves and flowers. he has seen $15. as are the plants. with full knowledge that the time in the circumstances has come and that delay will ensure the blighting of all his hopes by the inevitable and bitter frosts of Winter. and harvest the sugar cane and cotton. An investor must always be attentive. Enthusiasm prevails on every Sales have run up to an aggregate of one or two side. the husbandman can sedately pluck the fruits. added to the value of each share he holds. by patient waiting through good and evil days. reap the ripened grain. if any. The time may be at hand for the top of a normal yearly swing in stocks.
1865. the death of prominent magnates in the financial world. that. that the humanly moderate rate of 4 per cent would in time give place to a larger annual distribution on the stock. and unexpected exposures of ras- cality or failures of institutions. near the highest price on An advance of $42 a share must have proved. Suppose that Union Pacific had been A bought in 1904 around $75. at the top of a bull movement. record. As elsewhere narrated. war scares. and 1896. of fixed charges. The which they do this has already been told. first of all. whether to last for years. much is left of the usual four. cool-headed investor will reason over the matter with entire sang froid. crop shortages. No signs of trouble were visible in the finan- . In November of the same year. He must also determine whether he will wait for the end of the long swing or take advantage of the normal yearly turn. He must is the swing upward consider. be. the stock had risen to $117. The point is. as it did after likely He must decide how 1861. But the company had paid 4 per cent for years and its earnings had grown finally to around 10 per cent in excess . a strong temptation to sell. It is probably safer to pursue the latter course. The times were improving. forces may be mustering which are certain to in manner bring about a reaction or a long decline. when the market is being made to look the strongest. and he will be safer against accidents.WHEN in TO SELL SECURITIES 171 undue haste. 1877. and to many did prove.or five-year swing upward. the great operators and pools must create a public following to which to sell their stocks at good prices. as appeared from It was as certain as anything could its financial reports. 1884. because an investor will then remain a closer student of conditions .
Take another instance! Suppose that an investor had bought United States Steel. A few months have repurchased $20 a share lower. Had an investor sold during the excited market of February. should be worth from $100 to $120 and upward. During that swirl upward. then. Until the security in question should have approached the higher figure.000. preferred. The usual January or Spring rise was just ahead. early in 1904. He might . with total sales of almost 2. no important reason would have appeared for selling. Union Pacific was rushed to $138 a share. to maintain the 7 per cent dividend. 1905. The facts would have justified the belief that Steel. and it could have safely been taken for granted that nothing would be lost by waiting until that In February. At that price an investor would get less than 3 per cent on his That was the time to sell. preferred. tried by the storms of depression and reaction and paying 7 per cent regularly.172 cial outlook. and from this. HOW MONEY IS MADE Surplus deposits were large and money in ample supply. having become convinced that the Corporation was able. around $55. trading at the New York Stock Exchange. later one could has since risen above $180. there was a week of excited time. By October the stock had risen nearly to $85 A quarterly report is issued by the Steel officials. 1905. would ultimately rise to par or higher. it could have been learned that profits were steadily expanding and that the trade had entered upon a period of genuine prosperity.000 shares a day. and resolved. he could have realized around $96 for his stock and would have added the hand- some sum of over $40 a share to his principal. A sound industrial. On the increase of the dividend to 10 per cent Union Pacific investment.
in order to support the stock and enable the pool to market its later purchases without a loss. but around $200. Steel. and the investor might have safely waited for the quotation which the stock seemed destined to reach at a not distant date. preferred. Every underlying condition pointed to a coming crisis and reaction. . As a 6 per cent investment stock. Paul had been bulled to $198^. but the prospect of this was small. Paul would have yielded about 3*/2 per cent on the purchase price. A typical instance of the proper time to sell was supPurchases could have been plied by St. but at $220 St. Paul was going to $220. By September. and that was the time to sell. . even then. Paul in 1902. for all practical purposes. made around $150 several times in the first three months of 1901 and on one occasion it sold as high as $186. the same year. At $105. reacted nearly to $90 during the dull Summer months of 1905 and has since been sold at $113. Interest rates were high. $30 a share lower. Money was worth more than that then. Surplus deposits of the New York banks were almost exhausted. A few rash speculators may have bought at the prices then ruling. Scores of investors sold their holdings then and repurchased. St. 1902.WHEN TO SELL SECURITIES 173 have bought again. St. It had been "tipped" for $200 and came near enough to that figure The market then hesitated. a few dollars a share cheaper. next month. the stock would have paid only 3*/2 per cent on the purchase price. At the critical moment. the Street was filled with rumors that St. The stock was about to be placed on a 7 per cent basis. Paul would have paid less than 3^4 per cent. at $186. the top of the Spring rise in 1905 it went nearly to This figure coincided with the culmination of a normal yearly swing.
Credit was badly strained. Buyers at Spring prices had more than $30 a share profit and this would have paid
vestors sold without
the 7 per cent dividend for four years. Conservative inmore ado. St. Paul never went even
and it entered upon a downward was never seriously interrupted until September, 1903, when it sold around $134 a share. Those who did not act promptly and get out in September, 1902, had an opportunity to do so around $180 to $183 in the
rise of 1903.
always harder to decide when to sell than when to the height of a bull movement current gossip tends to blunt the perceptions as to the foundations on which the market rests. The hysterics which prevail at the bottom of a bear market, or in a hotel fire, or when the steamer is in trouble at sea, are as hard to contend with as the contagious enthusiasm which rules when a Hotel lobbies and the bull market is fast and furious.
newspapers are full of tales, most of them grossly exaggerated, in which all sorts of people, including actresses, head waiters, valets and clerks, are reported to have made fortunes in the stock market and to have gone in again on various stocks named. Cynicism is the best ally at such
will disentangle himself bluntly
from all outside influences; and if any of the stocks which he holds are in truth going higher, he will "let the other fellow" make the money and will sell him the
it with. He should then leave the market, out entirely, and wait for the normal downward stay swing which is sure to follow. He can afford to devote
stocks to do
himself to private affairs for a few months before committing himself again.
TO SELL SECURITIES
practice which will be found useful to many who cannot, or do not intend to, pay close attention to market
vagaries, or who expect to be absent, is the employment of so-called "stop-loss orders" stop orders, for short. These are a protection against sudden panics and unex-
The theory of stop orders is based on a number of considerations, among them being the tendency, already referred
rise or fall.
of stocks to react half-way back after a strong No greater decline than half-way is likely
ever to take place, unless a bull movement has definitely and conversely, no greater rally than that may be
expected, unless the market has finally turned for good.
who makes use of a stop order would wait had been a good rise, say $15 a share. To take a concrete instance, say from $80 to $95. He would
then order his broker to "sell the stock at $88 stop." That is half-way back. As the rise goes on, he will raise
the stop order, placing the point for a sale half-way back
from highest quotations. All this from selling at any time, and any
will not prevent
price, he chooses; but it will ensure at least a part of his profits in case of a sudden panic like that of May, 1901, or any other severe reaction while he is away or inattentive. A useful fact to bear in mind is this, that, in bull mar-
kets, the highest prices of
any given year are made either or April, on the one hand, or in the Fall. In January a bear market, and during a trade reaction, they are made
January or February. To summarize, a few rules
will serve as
guide as to the time to
In any event, eell, when every underlying condition of finance points to an approaching crisis and depression. 2. Sell, when the price is above investment value, on any sudden rise, or at the top approximately of a normal yearly
January or February, when surplus deposits have below zero, when interest rates are high, and when the slackening of trade can no longer be disguised. 4. Sell, as a normal yearly movement in prices reaches its usual
fallen near to or
period of culmination, if you expect to repurchase after a fair
5. Never sell a stock which has been carried through a long and sustained decline, when it is at absurdly low figures. 6. Never sell on news of a strike among the workmen of the corporation, unless the stock is above investment worth, and then
you should sell anyhow. 7. Never sell during a panic, in a bull market, except on a stop order, but hold on until the rally, and then judge dispassionately.
a good stock on mere market rumors.
are too often set afloat to mislead.
9. Finally, do not be discontented if your stock does not bring the very highest price which has been paid for it. The highest prices seldom last for more than a few minutes and cannot be
by a person away from Wall
MAXIMS OP WALL STREET
Prices do not respond to conditions, they respond only to manipulation. The motto of cynics.
up must come down. have planned for large profits, never take small you
J. J. Hill.
Rothschild was asked the secret of his wealth, he it was by never selling stocks at the top and
never buying at the bottom. In other words, he never waited for the extremes of the market.
FINANCIAL TEEMS AND PHEASES
A FEW OP THE TECHNICAL TERMS
IN USE IN
DEFINED FOR THE BENEFIT OF THE GENERAL READER
in use in
stocks are seldom paid for at once, but are settled for fortnightly. Two days are set apart, twice a month, for the
settlement of contracts in stocks.
To "buy for account "
means that they are
to be paid for at the
Adjustment Bonds. Bonds issued for the adjustment of the finances of a company. They are a lien on any new property, not covered by previous bond issues, and, with
reference to other property, they take their place after
The buying of stocks in one market, where they are low, and the sale of them in another, where they are higher. Or the reverse. The profit is usually small and results from quick turns in the stocks. class of
arbitrageurs on the New York stock exchange devote themselves to arbitrage transactions between that city
To buy every half point
or so down, in a
then the bucket stock as the customer buys. or written order. A bear on stocks is a man who believes that the down. Broker. Conversely. or to sell short on a similar scale up. The object is to make total transactions average a satisfactory and safe figure. The name given in Europe to a stock exchange. but it means no more than draft. the draft to be paid at the point to which the shipment is made. but which as a rule has no connection with or membership in any ex- change. in a rising market. or buys much as he sells. or. if he is a market will go manipulator. A draft. thus never carrying stocks. if the . charging a small commission for his services. but often records the order without exe- cuting it. which is ostensibly a regular brokerage concern. for the payment of money. is used in international transactions. who therefore sells short in order to buy back at a profit. Bourse. in behalf of a customer. The name given to an office. and whose operations. tend to aid the fall in prices. bill of exchange.FINANCIAL TERMS AND PHRASES 183 falling market. The term. the bucket shop loses. if the order shop as sells as much is executed. Bill of Exchange. If the customer wins. issued usually against a shipment of goods. Bear. The concern accepts orders for the sale or purchase of stocks. A Bucket Shop. It is drawn by one person upon another and is to be paid to a third party or bank. man who executes an order for the purchase or sale of securities.
say price named. the bucket shop bets against its customers as to the course of the market. of Clearing House. and who labors to bring about higher prices. Practically. A bet between the parties as to the future course of the stock. Call Loans. the bull party its re- supposed to be for the sources for continuing the moment at the end upward movement. for the "call.184 HOW MONEY IS MADE customer loses. Call. Cats and Dogs. connected with the Clearing House Association. with a view to wiping out their customers' accounts and pocketing the money." Practically. send all the checks against other banks. the bucket shop wins. Money loaned out on collateral security. When the "cats and dogs" are suddenly boomed in is price. the transaction is a $100. at a certain time. A Wall Street term. received . non-dividend paying or worthless stocks. on call. that is to say. It is asserted that when the bucket shops of the country are loaded with orders for long stock for their customers. contract which pledges the man who sells the "call" to deliver a certain stock. they engineer a raid upon the market. applied to obscure. market is going up. A man who believes that the who buys and carries stocks for a rise. at a The seller receives a sum of money. Bull. with the understanding that the loan is to be repaid at any time on demand. A building to which all the banks of a large city.
and all the money received from one set of banks is at once paid out to the others. connected with the stock exchange. They are received by all the banks in the association. or $12. who can then dictate the price at which sales shall be made. by the Clearing House. issued in times of monetary stringency. for money. upon deposits of securities as collateral.50 for each 100 shares of stock. it must send the amount in cash promptly to the Clearing House. Contango. Commission. when all the floating supply of a stock has been purchased by a pool or by operators. in which stocks are "cleared" in the same way as the checks in the clearing house of the bank& These are certificates Clearing House Loan Certificates. . in the settlement of balances against each other. meaning the charge paid by the buyer of stocks for continuing his contracts until the next fortnightly settlement. The credit and debit balances are exactly equal. in lieu of cash. a credit balance. it receives from the Clearing House the amount in cash. There is also a clearing house. mutual exchanges.FINANCIAL TERMS AND PHRASES 185 in the course of the previous day's business. A term used in London. of securities. A situation. Comer. If it has a debit balance. Each bank presents to the representatives of other banks the checks If a bank has. crisis and they enable the banks to go through a financial without suspending payment. on the total of these it has against them. A It broker's charge for the sale or purchase amounts to J^th of one per cent for each transaction.
at the banks on domestic exchange shows which way the If a tide of money is tending between the two cities. or securities sold abroad. Without interest. tempted but Covering. HOW MONEY A IS MADE weapon against those who have sold a stock great many successful corners have been engineered in Wall Street and many others have been atfailed. or premium. When stocks are loaned flat. the sellers here go to an international bank and deposit their own drafts against . it buys drafts on New York only at a discount. it signifies that the short interest in stocks is large. sold short. Drafts for money. Finance Bills. bank in Chicago has too much money on deposit in New York and can use its funds more profitably at home. issued by bankers in the United States against bankers abroad. Plat. In that case. not against a credit for goods. The discount. which have been Domestic Exchange. The buying back of stocks. Foreign Exchange. When goods.186 It is a fearful short. Foreign exchange is sometimes sold by the international bankers. but against money borrowed abroad. produce. Drafts for money issued in one city and payable in another. and sells drafts on New York either without charging a premium or at a discount. produce or securities are bought in the United States by foreign purchasers. the drafts are called finance bills.
Giving Up. gold exports are indicated. the tendency is toward is to say we have been buying abroad more than we have sold and the excess must be paid for exports of gold. and usually costs. Stocks are sold. whose earnings are in a large measure due to. and receive the [banker's own drafts against his correspondent abroad. seller of ' ' Granger Roads. The northwestern lines. but normally.FINANCIAL TERMS AND PHRASES 187 the purchasers. and when around 4.89 or higher. Frequently a situation arises in which a broker does not wish to appear personally as a buyer or a certain stock. Alton. with bills of lading. St. Rock Island.842 or lower. Paul. say % of a point. fractional lot is less than 100 shares.8665. or a customer wishes to operate through another than his regular broker. because the figures vary from day to day. A different " broker is employed to execute the order. the tendency toward imports of gold. and that ends the transaction. . when exchange is low. Cotton is the quickest maker of foreign exchange. in blocks of 100 shares or their multiple. No exact figure can be named for the gold export and import points of exchange. normally.the transportation of grain. etc. that in gold. is Conversely. it Fractional Lot. Par of exchange is 4. who then gives up the name of the broker for whom the order has been executed. when exchange sells around sells 4. gold imports are probable. to buy. Northwestern and Union Pacific roads. Whether exchange is high or low is of great importance to Wall Street.. When it is high. The leading grangers are the Atchison. a trifle more A per share than in the case of 100 shares.
Kaffirs. who give this support to a stock or the general market in tftnes of reaction. The Government has the right to pay out national . act of coin. When reserves below those figures. States notes (greenbacks). Minor coins. 1890. and national bank notes are receivable for all public dues except duties on imports. to the amount of 25 cents. upon whom the unscrupulous prey. Lamb. for all debts. in one payment. banks must keep 15 per cent reserve. silver cer- and national bank notes . gold coin or Other national certificates. public and private. certificates. A name used in London for South African mining shares. in amounts not more than $10. for all purposes. the credulous and inex- perienced. Subsidiary silver coin. banks cannot add to their loans. bidding for the stock offered without It signifies either quiet an unwilling taking of stock by a pool or the bankers.188 HOW MONEY Taking all it. except duties on imports and interest on the public debt. and Treasury notes. The law requires national banks in New York and 15 other central reserve cities to keep 25 per cent of their deposits in their vaults in greenbacks. or silver coin or certificates. July 14. fall Ten kinds of money are in circulation in The following are legal tender: Gold standard silver dollars. The novice in stocks. Legal Reserve. but the certificates are receivable for all public dues. United Legal Tender. the United States. The fol- lowing are not legal tender: Gold tificates. IS MADE accumulation or Holding the Bag.
except interest on the national debt and except in redemption of national currency. sends the price of the stock up. When a man buys " margin" he does not pay the full value for them. they order one a certain number of thousand shares of a and another broker is ordered to an equal quantity. To be "long" of stocks is to have bought them for Manipulation. The operations whereby stocks are forcibly raised or lowered in price. and as a commission is paid upon them. among to aid the result desired by the operator. carried out better price can be obtained.FINANCIAL TERMS AND PHRASES 189 bank notes for all its debts. be depressed in price. that is to say. with energy. Long. it must be kept active. similar tactics are redownward side. Another lot is bought at a higher price and a similar lot sold at that price or better. without reference to The art of manipulation has been outside conditions. they form a regular feature of every campaign in stocks and cannot The art of manipulation has other feabe prevented. them the setting afloat of rumors calculated tures. When a stock at a given price stock is to sorted to on the fictitious sales . carefully studied and proceeds with a thorough knowledge of human nature. but deposits with Ten his broker a certain percentage of the par value. if The process. per cent is the usual margin. The stocks must be paid . The exchanges forbid but as these matched sales and purchases are cleared regularly through the stock exchange clearing house. If the public are to be attracted into buying a resort to stock. a rise. Operators usually matched broker to buy sell orders. stocks on a Margin.
In order to conceal the purposes of the pool and its exact position. A " point" . say 10 per cent. the margin is wiped out. few individuals for operations pool aims either to bull or bear stocks. in stocks so on. the case of wild and dangerous stocks. A few active speculators quires to have their stocks carried on a 5 per cent margin. which makes short sales a favorite with many charged. Put. range Whatever the margin. Equality in value. 2 y point.190 for in full. If stocks sell in Boston at Parity. the manager alone knowing what being done until the final accounting to the members. traders. the same price as in New York. An A until the deal is finished. some of its members sometimes sell stocks openly. and vice versa. half a dollar a share and Pool. and the part he shall play in the daily buying and selling required for manipulation of the stock. the broker 20 per cent margin. while the pool is really accumulating. is $1 a share. There is always a manager of the pool. A "put" entitles the buyer thereof to "put" or . "blind pool" is one in which the members A contribute the money for its operations but take no part is in its operations. HOW MONEY IS MADE In rear- and the broker does that out of money he has borrowed from the banks on time or call loans. The buyer of stocks is obliged to pay interest on the amount of money advanced by the broker upon the Upon short sales of stocks no interest is purchase. they sell on a parity. Point. who assigns to each member the amount of stock he must carry association of a in the stock market. if the stocks decline in value an equal number of points.
or call from the signer the prices stated. When the short. It is a dangerous expedient and can be resorted to with safety only in the early part of a long swing in the market either way. When. the short interest in the market is large. them at ruling prices. within a time and at a price The buyer pays a certain sum for the privilege. or will not. He orders the sale of a certain . decline in value. the a "straddle. A "spread" is a double privilege. Pyramiding. Short." Stop Orders. The same as "stop loss orders. and he borrows them from some other house and pays for them in full.FINANCIAL TEEMS AND PHRASES deliver stock to 191 its signer. To be short of stocks is to have sold them for a The trader is out of all long stock and then "goes ' ' the broker sells number of shares The broker must deliver the shares thus sold. he does not pay interest. When a speculator for the rise has a profit on the stock already bought. making his profits the basis for additional sales. which entitles the holder either to deliver to. fall. privilege is stocks named in the contract at the is If the price in each case the same. short sales are covered." If a . he sometimes uses this greater value of the stock as a margin for farther purchases. or at any rate only a nominal rate. Spreads and Straddles. however. he usually pays interest to the borrowing broker. As the broker who loans stock and receives pay for it in cash can then loan out the money so received at interest. named. the stock then bought is delivered to the house from which the original lot was borrowed. A "put" is only one form of betting that a stock will. The speculator for a fall follows the same plan.
or if the going against him and he wishes If to limit his loss. If surplus reserve so. who sell short. Technical Conditions. the loaning power of the banks is equally If surplus reserve disappears." the "pups. he might order the broker to "sell at 98 stop. it is sold at once Then if the stock and the owner has at any falls rate made If he has bought at 100 and the stock does not go up.The amount of reserve in lawful money of the associated banks. rally in the market is sometimes enginered on "technical conditions. Washed ders. he might say "sell at 105.192 trader HOW MONEY market is IS MADE is carrying long stock.. is large. i." Sales." His loss would be limited to two points. and wishes to make sure of some of his profits.. or of a single bank. ferent set of technical conditions. he gives the broker a "stop order. the short interest A was unduly decline may take place on a diflarge. the banks are obliged to and reduce their loans. all the brokerage houses loaded A with long stock and no short interest in the market. the loaning power of the banks is exhausted. in excess of the 25 per cent required by law. and dogs. that is to say. call in In the latter case. Stop orders are used conversely by those five points on his purchase. e." ." he has bought stock at 100 and it has risen to 110. the market being overbought. Virtually the same as the "cats etc." to 105. Surplus Reserve." which would mean that the market was oversold. in the event of an unexpected de- cline. Practically the same as "matched or- Wild Cat Stocks. stop. and especially if it is replaced by a deficit.
RANGE OF LEADING STOCKS 193 mlllllll H" iO eocst-iocoooeo OOOO^t^OOQO |oo He* HN H" H" rHt>t~t-t~b-t-b- II II t lll eoHn I oocqoscoeo^ ^L^QOOiOJOS eejoo r+n 11 flr^ O S3 S Oi OS t^ OO H OCOOOfOOC<JrHO coioco^t-os^-* K5JOO -4 C$0 Hl r4 OOOiC55O5 OiO5O5OiOi .
194 HOW MONEY O t- IS MADE :'r. III Illl Illl II ooooooooooooo w H O * r^ O 0} l!!! 1 ! 11 !!!. 1 !!!!!! Cs|-^C5O5OOQOOSrH S^^COrHCIrH1-1:-* O HH O H H io|oo ecjoo <M CI CO Illslllllllllll COQOCO ^ddr-tdd^^^o^o^^rdr COT^lOCOt^ O O O O O O>OCiC5Cl . QO b- QO M H|OO rH H O * 5OO CO w.
lll4llll4llllllllll I Q I COOOCOOOCOOOCOCOOO r^lOCDt^OO O O O O O OiCiO5OiO5 .EANGE OF LEADING STOCKS 1 195 14 H l 1 1 ll & 3 iHiHW^Hrt^rtTHiHWCSIW^iWfrlTfilOCqN g|OOOOOOOOOi-lr-frHrHiHrHrH^lrHTH _ g H * ** i- cl cq cq c^ o O h i I i I i-H r-t I i I i I i I C<l Ml* H-* WN g :.
rt 1 4 & Ift 1 ift 3 t- * I < PS rt< 10 10 CO l> | H-* H-* He* CH OOOrHb-OOOCOOlOOOO rH '<tllOOCOCqC^rHCOCO<M H*> He* H* l O5 GO ^ m co C5C5C5C5O5 t-^ .196 HOW MONEY IS MADE iiilliiliiiliiliii <3 s >H JZJ ^coeocooooooocoeo "^ *<* ^ T*< H w eg e-i CQ <M <M fc tf CO Or-I -* OQ g I III! Ill II II 111 |-* I 1 II *o 1 1 He* n|oo M| H l Hw !* H H-* [* H-* >ico HN .
1: 1 4 1 4 13 b(M SoOOrHOOOOOOOCOCOOOOO .S i-s<<CQfta2ftoQfi ** p 197 <> 5> g) CO <M CO ^ o o 53 bO 5 g $ CO (MfMOrHrHrHOSOSO . o C5 ko CO <M CO I I II II -3 11 I ^ 3 3 I O ii 111 H|IM (M l^ iH -^ t^ <M O d rH CO H|S $o 00 lO O IO K is 10(00 CO CO ^rfi d 1-5 r-:j d d fcD^rd.RANGE OF LEADING STOCKS d Qj^ Qj 3 5< .6 a 8.
198 HOW MONEY IS MADE a a 6 i I II 14 ill ill tCO 00 t- II III l g OOCOOOOOOOOOrHOOCO ^kOrtrt^ Hill O O W|OD <4* *H* i rH Ol H* TjH O O Tt< Tt< CO ll r-i'M -71 f-4 1-f* i-l t- CO <M CM 0000000000000 H Ci5 0000 H O S8 CN| eeW lOtolO^^tO^CJ^^OOt4<<DI>>t>-b-<OC0tr3O>OiQG a H CO H 2 CO ^T Oi 113 I || bCO Tf II O O CM TH O CM O O CM CM O5 CO l> T-\ H 05 H 05 00 CM 05 GO C5 O O5 O .
RANGE OF LEADING STOCKS s 199 i ff g 3 11141111111 lOOOCO<Ni iTfl^HtOirjOT^h-lO'OlMT^tOfM OOCiOiOOCOQOOOO5O5Oi-(<MCO<M(MlOC>i-l(M r^!N WTH HIOO ^00 H * * I I i-s II HJ 511141 HS HS 1-3 1 41 43 I -a -3 HJ i 4 tl> O ^ O .> o H U3lOiOlOOiO?C>L l> t> b- b- T^OOOOOOMCDOiCXJOOcCOOOOOOOO III I COCOOOQOQOOO o o o o o o O5OJOJO5O5Oi .
200 HOW MONEY o <M O < IS MADE 1 n mil 111 ill Tti 1 OS lll'lllllllll T CO O >O >O to 1C b- b- b- b- b- b- b- b- l III II I Illl III o" (M HI OS i-l O O HOD O I Illl II II 1 I I OlOCOlOCOO5i-IO5 OlODCOOOOOi-(lO III I il i 111 co co OOlOO OlOfOO CO eO -<?i O OS CO CO O O bOS CO CO OS CO OS OS GO to OS co o OS o .
O 35 ^ ^* Illlllllllll .EANGE OF LEADING STOCKS g 201 COOSCOCOrhC^l OOOOSO5O5O5 Oi-li-H b*bt>frfc~t>'fc'fc* III CJojO 1 lilt Illl Ill 1 II H 1 o IliilH-aiilllflal.] ^i^. " " Ill III III III -l005-^00> lOCOCOOt!* HN -4M H* t^CXDCJOrHfMCO-^lOCOt^ O C^ Cw O O O C^ O C^ CO O O G) O) O^ O O O O^ GO GO CTj .l! 888-5S3-3SS18 COCOO^QOQOOiOO^<M d bO>^X3 n rj d^ &QjS >* ^ CO CM CO <M <M "* CO r*H ^ rt< ^ CO Ci CO QO QO CD QO OO 'O SrHCIfHlHi-JrHC^<M^^ieO CO T*H T+H l>* ^H Si ^ ? S 5 . J-* | CO t- O5 i .
202 HOW MONEY IS MADE II I II I ll 1 I ii ii iiii t(M i-H <M -H i-H <M <M (M rH (M <M rH s 1 1 1 li ii 1 1 ii 1 1 1 1 1 - Illllllllllllllllll llllllllllllllllll .
1141 H-* l rH 3OlOOOCOC<JOr-ICi<MiO rH "* <N rH r-l T*< t~ d M 111! 4 1 _jj II colw 4 1 1 Hw Hoo io|oo HQO II II Hw --loo 1 1 1 n|oo wj-* III 14 He* j|* OJ I4IIJ4II44444I1IIII OOOOOOOOOOOOOrK^iOiOiOO icjw N M|W M|* H-* COXOrHOCO <MTj<COCOt 111331111 44 3411 till S s.EANGE OF LEADING STOCKS 203' lllll H He* H* Hw HW l .^ 6 ^ s g fi^S^^^I^O *g ?0 -s -> L- u>\ao -*:> OOG3 1 CO HW H< OS I- HM 00 I II44II4I4I4 Lt- b- l> L t- QOQOCO OOOOC^C^ .
204 HOW MONEY IS MADE 3 II Illl I IO ill 4 L II tl> 1 1 t- II II tLL t^ b- 144^41 Ill 14 ^H t-5 3 . tc.Q Ix.-!< nix m|oo Hi III 4III4II44 OOOOOTHClC<ieOOOOOOOOO O5 OO O^ OO O} GO O} GO O} GO O} CO O^ GO O5 CO O5 GO O5 O OS O - O OS .
KANGE OF LEADING STOCKS 205 4J44Hif J4J4i4J4l4 r-ICOlOiHCOO5Oi O5 OS r-l Cq rH O O O O O O O HJ OJ III III 4 III 111 41 lHt-l>t-t-OrHlOC 4 ill II III till 4 >- ci C 1 4 OOQOOOQOQCOOOOOO OO 4541 11 jddd^'^ jJd 1 1 ODlOlOOO T-ib-.O5THoso COOOOOOOOOOOQOOOOOQO CO t^ OO .
206 HOW MONEY S IS MADE 3 OOHOOOOOOOOOOOOOOOO 00 0000000000000000 O O O O <M 8 CO kQ IO O * rHrHrHi-HiHCOCOCOeOr^ 3 t" T*< ^ CO O -^ -<^ T*< fc 1 1 14 00000 g O2 III lilll-ll Ill-ill III COCQOCO-^>OOD w cb II 1 1 III 11 1 1 1 III ill! CO <N OOOOOOOOOOOOOOOOOOO l>- O .
EANGE OF LEADING STOCKS p sf 207" ddrc)>>.ooot)^W)d>-OQ 1 1 a & & s I a 14 s I J I Illlll ll lllll'll ooooooooooooooooo o d <M ira <M o IfjlO'^CO'll^COCQ ^ooooooooooooooooooo 111 4111 IIIIIIIIIII ^ O) * O) O) TJ< ^O d rH CO 00 CO O) CM OOOOOOOOOOtOOOOOCOr^-^ .
fl>dd.208 HOW MONEY a IS MADE fed.**' Ul tf <1 g W P od eJT > t t>- t^ t^ i> t~ m|* H CO05COCOOOOO Hoc H<* --Hi * HI OQ P5 1 g g OQ Illlllllllllllll OOOOOOOO^OOOOOOOiHOO^QOOOOOOO W cb 4 (fS || 1 1 Illl | 1 | S i 3 o S 1 gs^sssssss^gssS .
RANGE OF LEADING STOCKS 209 CO 09 el <P9 co t-joo H ^T IrHrHT-lT-IC^IOli HN H H -** (r-l ooooooooooooooooooo g g | ||| isg-afrlg jl-sl-sHsP^ggfi^^^OQ^^ H^ -a tl-'. r-i'll r.i) K >jl cc a fc -(>H<MT-liHrHrHiHrHt-lTHC<lCOC^COCOeOr-i-l ooooooooooooooooooo 1 I OOOOCOQO^DCOOOCOiHOOrtlL-^COOOOO O^ OS O O O aoaoaooooo coaoosCiCi T .'fl g ^ P^ r--M *-< CC'T.
in consequence. in New York city. ending the year about the highest. 1891 THE banking situation was improved by the liquidation. loans passed deposits in the latter part of the year. They were weak and sagging during the last six months. and then money came back to the banks.INTEREST BATES AND SUEPLUS DEPOSITS THE rates of interest on call loans. In 1900. the fact is indicated by a minus sign. money flurry in the Fall led to a break in stocks. posits are given in 1890 SURPLUS deposits had been ample for two years and call loans moderate. and on time loans for four months or more. stocks rose. They are the excess of deposits over loans. except in the crop season of 1889. Money was high. loans went to prohibitive rates. are presented in following tables. and troubles in Buenoa Ayres and the Baring failure caused a panie. after a strong reaction. although. and. The market turned in 1892 for a strong downward movement. and rose above 1891. Stocks were strong the first half of the year. after the January rise. as eloquently set forth by the loss in surplus de210 . 1893 JANUARY was top of the year. A as at 1892 SURPLUS deposits were large until the Fall. Surplus de- round numbers. and when deposits are less than loans. there was a good Spring rise. Then they fell almost to zero. The banking situation then became strained. stocks trended downward. and the surplus deposits of the Clearing House banks. since 1890 inclusive.
1896 THERE was steady depletion of banking resources in 1896 and surplus deposits fell below zero. gold exports. amounting to about half the loss since January. and remarkably high rates of interest. and in fact the market started upward. were it not that the Democratic party had gained control of the Government and eliminated a large amount of protection from the tariff laws. hung low until the Fall. . etc. while a number of unfortunate influences prevailed. Stocks were bought for a bull market and the country settled down to of a new era of prosperity. 1895 SURPLUS deposits were ample and interest rates moderate until the last three months. After regained nearly a good shake out in April. stocks moved upward with a rush and all the ground lost since 1893. This proceeding disinclined the public to making any new financial ventures. the Bryan scare in politics. improvement was checked in December by the famous Venezuelan message to Congress. 1897 THE firm foundation for a long bull market was laid in 1897 by a great gain in surplus deposits and low interest rates. The election McKinley in November changed the aspect of affairs. dull times. Heavy buying of stocks for a bull movement took place. cancelling all the gains of the year. A great bull market might have originated in 1894. A bull movement could not have been supported.INTEKEST BATES AND SURPLUS DEPOSITS posits 211 and rise in interest rates. By The Fall. A great fall in stocks took place into July and the market surplus deposits began to in prices. prices had risen above the level of the year before. which brought on a panic-stricken decline into December. when heap up and there was a good recovery 1894 SURPLUS deposits were enormous in 1894 and interest rates ex- tremely low.
Interest on call loans was prohibitive the latter part of 1902. There were a number of sudden breaks in stocks and the May panic is memorable. The War with Spain held the market back for a time. Surplus deposits were large. not enough. at the end of the year. Stocks boomed. but the times were good and this was only a halt in a bull market. and time loans . but loans at the New York banks gradually attained excessive proportions. and finally. the swing was toward higher prices. 1901 A REMARKABLE year. December was high point of the year. In the Fall. something which happens every thirty years. 1900 SURPLUS deposits were well above the danger line and loans were made at moderate rates of interest. attributed by the astrological fraternity to a conjunction of Jupiter with Saturn. THERE was a great rise in stocks in 1902. but interest rates moved higher. but these were due to special causes and not to any danger in the banking 1902 situation.212 HOW MONEY 1898 IS MADE SURPLUS deposits were again enormous and interest rates were low. but after July. surplus deposits were falling and interest rates were extremely high. Those long of stocks were tired out this year instead of being shaken out. a state of affairs which had not existed since 1896. 1899 STOCKS rose steadily. with normal reactions until August. they were heavier than deposits. to stop the bull market. British defeats in South Africa and high money led to a strong break in December. however. the rise was resumed with energy. but then. once in December rising to 186 per cent.
good rally succeeded A into the Fall. fell steadily. 1906. 1906 THE stock market reached the highest level on record in January. It became imperative to reduce loans and prices fell heavily after the great boom in August. in consequence. 1905 SURPLUS deposits were ample. a condition never before known. when 40 leading stocks were $52 a share. and stocks rose until the end of the year. Money piled up in New York. stocks fell until August. on the average. 1903 THE banks were heavily loaded with loans. until November 21st. they were $115. Interest rates were high.INTEREST RATES AND SURPLUS DEPOSITS went above the legal rate. Prices LOANS were with a rally now and then. and the stock market rose to the highest level ever known. Call loans were made at nominal rates.000 below zero. On November 24th. and surplus deposits were below zero most of the year. The boom brought on genuine 1907 financial stringency. the entire year. A bull market was the logical outcome. in excess of deposits. . Money was in good supply until the latter part of the year. j 1908 LIQUIDATION and the halt in business corrected the strain on the banks. below the top of 1906 special stocks were down from $60 to $140 a share. 1904 THE banks acquired cash heavily during 1904 and surplus deposits mounted enormously. exceeding 1864.000. There were several spasms in money. the first half of the year. and a rise began. and after a handsome January rise. There were two severe breaks later.
<* H t.214 HOW MONEY IS MADE OJ 00 CO CO CO O ^Cq^^ HCO U3 jiO <M CD t> tO 00 CO<M O to OO iHW : O i-H OO rH(M(M O C<l OJ IO C<J O5 r-t rH (M O CO O t.TH iH OO O <M OS CO iHiH<MCO rH(M<M iHr-l<M : :: <! ::: to ^5 :::::: O O O O O O O O O ^^ .
INTEREST RATES AND SURPLUS DEPOSITS 215 oCOCOCOCOCOCOCOO CO O OlOO -COCDOCDO .
IO <MOi (MOSCO CO O t^ rH CO-* rHOO rHr-KM rH<NCO rHlMIM rHrH : : : :: :.216 HOW MONEY IS MADE cTof ^arr-rco^oTirrof ccTc^acf tffTjT r-TcTocraf oTtcTicraf cT rH - r CO CO CO C3 W rH r-1 rH iH IMasOeOOt*"* rH rH <M rH rH (M C^C<l<^OlC<lC^C<lC<JCqWC<IC<lC<JC<IC<J<NC^rHrHrH CQOCO (NCO CO rH(N<M O t.: : : : .
INTEREST RATES AND SURPLUS DEPOSITS 217 to CO O ?O OO CO O CO CO O O CD ^O c^ <M .H .
iHdC^ i I C<l (M T IT I Cl . > .<. . i O yj * HHIHH H iH rH rH iH H^HN t-^rHCOr^i-(QO>Oi-IOOlOC<ICi?DCOOt^COOl Tt<i-IQOlOCqO5 r-lC^lC^ rH T \ &\ .H rH rH iH CO^Tc<l(M<M rH rH iHrHtHO 4 ^3 .f>. . CO CO CO CO CO CO ^^ ^^ *^ CO CO "^ CO CO CO CO CO CO CO CO CO CO CO CO CO 3 H ::::::::::: H*> :*3 Cq ::::::::::: d <M <M <M HH'HH9>H8 M' CO <M <M Oq <M <M | H" C^(MC<l<NC^C<lCOCOCOCOCOCOCvI C< . . J5 O . O . % . . 2 '< mo' "Si .218 HOW MONEY ^ tin IS MADE 000000000 oooo oooooooooooo OOOOOOOOOOOOOOOOOOOOOOOO lOiOiOiOOOiOOOOOOOOkOO>OOiOOOOOOOO IHIHrH 59. OOOOOOOOOOOOOOOOOOOOOOOC IQIOOOOIOIOIOOOOOOOOIQOQIOOIOOO>OOO rftO<MCqCOOO^O5O5O5C5OiOOOOTHt-HrHrHOOOOOO CO CO CO "* CO oo oooooooooooooooo o o^o^o ooo o_o^ o^o^ o^o^ o^o o ^ft T*< ^ CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO O cocic<ic<ieoc<i O c^ O O c^(M<Nci(Mc^c^c^<M<n<M<Mc<jcq HIH[H T-H w H rH r-l j-H iH rH ?H ^j O iH rH ' . i I C<1 P* K] fe ^ 3 . O ' '& 'P m w 'o-O fT p.
.^^ H iH rH T-l CO <NCO rH<MCd ' r-l r-i <M r-l <M CO rH ' 'O p OOOOO oo 3 Oo OOooO HH<MII rH[ffi^ie rH <M <M iHr-i -I : : =1 .INTEREST RATES AND SURPLUS DEPOSITS 219 CO CO CO CO CO CO CO CO CO co w co cco occccq <M cco co o 3 :::::::::::: l^M HlM :1 iH r-l : ^.^ m ^_.
000000 IOIQ .IOOOOIOO T"H t^.^ US -^ rH CO CO rh rH 3 CO : : r}< rJH IQ -^ > CO o l>- t.tO O T^ CO CO CO CO CO CO <N CO CO C?CD 00 OU3 ' rH i-i <M Oi f I! CO CO CD CO CO CO CO _O "* _O ^* CO CO CO CO CO CO CO CO CO CO '% a : :| : : :| .O) CO CO CO O5 <M <M cq co co co co HH CO CO T* <<* 000 Ci OOCOdbf OJ O rH ~"X MTJ M .220 HOW MONEY IS MADE ooo <M iH <M C3 iH oooooo CO O5 | 00 .
INTEREST BATES AND SURPLUS DEPOSITS 221 co co co co 00 co* co" co" T* * *&1#m'^ *#*#'& co'co'co'crf T^ 3 :::::::::::: :^3 : :*3 HP : : : iHiHrH<N.6 ::::: CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO 3 : : : n3 :::::::::::::::::::: rH<MCO ocooDco r-I oi^'*iHooio<no> iHrHCQ H<MC<I .HiH<nrHr-<i-l : : :?: : :! : : : : : : :.
o ::: r- 13 ooooooo II ccp i i i-l <M <M rH rH rH rH i o co"_o co co co co r< -^ _o i tO COK3 ^O H>' co ^cocococqcococo :::|: . . . .222 HOW MONEY -I! IS MADE *M'Hen CO CO CO CO CO CO CO * *^( ^^ CO CO CO CO CO CO co co co co co co co co'co' -^ TH co" co co co co co co co co co co ?H <M co 4 P . . .. | .
INTEREST BATES AND SURPLUS DEPOSITS 223 rH CO T* H rH CO tH rH i-i iH rH iH CO CN NCOcic^c^<>ic<j c<i :::&:: fc :i co cococococoocbcoo --^o CO ^o -^ Tj< COCO * * -^ CO CO CO CO CO CO CO CO CO cocococococococo^' <NCq<MMCqCl(M(MrH<MClCOCOCOC<ICOCOCO<M(M<MTH<M(MTHd CM OS iHMCO O CO O .
224 HOW MONEY IS MADE o o oo oo ooooooooo : : : : : : : : : : : : : : : : . : : .
10 10 10 m IQ io 10 >O : . . . t-ooT-)T^cDa5t^ooooco<MocorHOimcocoooocooio-^oo5 St-aoSSojo>o>o>o>cooooi>ooooci5oot*o5o5ooobcobCOCO^-*TiHCOCOrt<CO Tt< -rtHVOiO CO CO CO CO CO CO CO CO CO CO rHiHO? rHC<l rHCqC^l iHiHC<l iHT-l<MCO . IQ 10 "^ 10 ira IQ T^IOO : ^0 : : . O .INTEREST RATES AND SURPLUS DEPOSITS 225 QIO O .
226 HOW MONEY s > ' IS MADE cTcTo' cro~o~o~o" I I I I I I iOCO tt- to co CO CO CO H< ** *** 3 10 '. b-CO-*COCOCOCOlOif500OOOOCOOOCOl>COt-COCOt><NOCO rH i-f <M C<1 (M CO tH iH fH . o cott^o -t-cocoo -cococo '.
INTEREST RATES AND SURPLUS DEPOSITS 93 'r*' ' 227 oooo oooo OOiU^^Tt<eQ o ::: .
228 HOW MONEY IS MADE .
c<i9!-4i < !* CO CO CO CO CO CO CO CO CO CO CO CO **'* ^ ^ CO CO ^ CO CO CO Mi-*!-*M'- CO CO nl^H^^^ d CO <N CO H^H-*^-*-!!-* CO CO CO CO CO HHN^!CTHe^M^!ejrtiN^'HirH:^^^^!-* H|- CO CO CO CO CO CO CO CO CO CO CO CO CO CO : :: < : :S S : . ff fstf*afrfrfi THQO^r-fGOOrHOOlO CJ Cl i I r-i 7-1 fH H|cqH'4i>-ile)H<*(^'<'l 'Hl^ l HinNn| 4iH.INTEREST RATES AND SURPLUS DEPOSITS 229 . :? *-9 .
JH o p. --S --S -^ - | *S . MADE 0000000000000 oooooooooooooooooooooooooo OOOt COIOOOOIOOCOOOOOCOOL'-O'OOIOCO'O IS CO HOW MONEY 02 Q TjTrNT-r-T I .~~i HaM*>H 3 ^ ^ -* T* H-0 Tj< IO I HoMw H-* CO O <M O HM ' (M 3 :::::::::::::::::: r-IC^<M : iHrHC^CO : : iH(M(M : : rHTHCI : : i-lC<JfO r-lC^wS : : : |: __= =_==== :|: :| :| : : : :| :| ===== OOOOOOOOOOOOOOOOOOOOOOOOOO ^Q S3* J g ^ ^ OOOOOOt OOCOlOOOO^fOlOOOOCOOOOOO > Cl| T^orTirco^Tirr4'eri>^i^L^co"co~rH ori^o^o^o^i^^co~io^c<rc<rcxrt-^ IrHi-^iHr-ftHr 1| |rHrHrHF-tC<IC<IC 'liHi Vf > I I 1 | I I I I I I I I I I I I I I I I i ib \ntnin lo'io'co'co co co io"io 10 3 10 ::::::::: :^S ::::::::::::: | iH|^H-*wi <*'.l5'H'H'i- o T*H TH ^ ( N Ti< 10 10 o m H 10 1 * H^ 1 10 10 o o IH|HW o HMNM'H'H*' o o o ^ ^ -^ T^ TJH T*H o 1 .230 'p. HnHnH'M HnnlainHi H m^-'w H He* T^coMWM<N<Nweocococoeooc<icvioocQcqc<i<NiHcqc^c>i(>i 10 cq o> co <M 05 co J Q . SpY r i T 'f ~f ~\ \ ~\ i ~i ~f f i i i i i OlOlOlO>OlOCOI.
r-frl IO <M (M <M C<J W <M T-f* SCf* i-l <M H" *4* C^l CM W r-f CO <M <M lO 00 OO 1C CO CO CO <M D CO ! IP !! sa ooo 2 It .INTEREST RATES AND SURPLUS DEPOSITS if OO 231 oooooooo lOOOOOOOO I I I I I a 3 i-fcqr^N 1-fM 1-fN f# 8^)1 CO H" t^ lO I 3 -t s p.
232 HOW MONEY IS MADE .
40 Canadian Pacific. Southern Pacific. 79. 98. 130 Baring failure. 182 Astor family. 79. 183 94. 183 Bell.INDEX Account. 79 Averaging. statements. 40. 35 Bourse. 92. 148 Bear on stocks. 184 Central Leather. Louis V. five-year average. 85. market prices since 1890. 195 Charts: Show course of the market. 193 American Steel & Wire. 31. 94 Bucket shops. 63 Bank Bank reserves. 161. 54. 179. 193 American Smelting. sales in 1905. 179 Campaigns in stocks. 39 Central of New Jersey. 121. 36. 195 Chicago & Alton. 95. 194 Atlantic Bank. 40. 143 Canada Southern. 184 Buffalo. 83. 89 Barker. 28. 38. which pay no 34 Chicago & Eastern Illinois. 12. 97 Boston & Maine. 73. 161. 95.. junior issues. 40 Chicago & Northwestern. 97 Broker. Addison. 182 Adjustment bonds. Andrew. 150. 184 Call loans. 193 American Locomotive. 194 Brooklyn Union Gas. 40. 183 British defeats in South Africa. 146. 19. of. 161. 195 Capitalization of railroads. 81. 40 Bull markets. 183 Brooklyn Eapid Transit. 38. 94. 41. ten stocks since 1860. 97 Amalgamated Copper. 62. 76. 78 Blizzard of 1888. 75. 110. 161. 126 Cats and dogs. 161. 81. 182 Allen. 184 Cammack. 183 Black Friday. 180 Bills of exchange. Baltimore 194 & Ohio. 47 Carnegie. 188 Bear markets. 45 Central of Georgia. 30. 77. 196 233 . 92. 100. 196 33. 68. 52. 36. 79. 48. 116 Chesapeake & Ohio. 71. 97. 112. 80. 161. 69. 195 American Sugar Refining. varieties interest. 32. 7. 87. 36. 129. 182 & PittsRochester burgh. 88. 162. 36. Bryan scare in politics. safety of. 194 Arbitrage. 114. 161. 121. 32. 49. 152. 40. 38. 15 Atchison. 146 Bulls on stocks. Henry & Co. 40. 193 American Car & Foundry. Call. Jacob.. 38. 159 Bonds: Affected by stock movements.
186 Crocker. 179 Dull days in stocks. 123. 8 Dean. 104. 66. 31. 11 Finance bills. 38. 187 for. shortage of. 186 Flower. 125 Consolidated Gas. 114.. 96 Foreign exchange. 41. Burlington 36. 91. Benjamin. 80 Crimean War. 173. 29 Erie. 97. 140. 158. 30 Cooke. 90. 60. 111. 161. Marshall. 142. 20. Fortunes made in stocks. Double bottoms. 29 Garfield. 55 Farmers buying securities. 73. & St. President. 72. 36 Commission. 79. Eoswell P. 198 Community of interest. 46. 74. 84 Domestic: Exchange. 77. L. 36. 120 Equipment notes.. 31. 196 18. on leading stocks. 49. 106. 67. monthly. terms and phrases. 141. their effect on prices. 104. Co. 40. 79. 75. 184 Clearing House certificates. 55. 142 General Electric. 107. 97. 186. 121. 58 109 Frick. Lackawanna & West- ern. 95. 89. 38. 100 Fall rise in stocks. Cleveland. 185 Convertible bonds. 92 Credit Mobilier. 180 Field. 197 John W. 68 Crises and depressions. Milwaukee INDEX & & Quincy. 120. 175 Federal Mining & Smelting. 69. 92. 89 Gates. 30 Corn Products. 193. magnitude of. 197 Colorado Midland. 185 Earnings: Eeports of. 41. 41 124 Clearing House. 185 Course of the market since 1860. C. Fort Wayne. 114 Covering.. 41. 198 Field. 36. Paul. 125. 161. 126 Competition and its effects. 199 Gentlemen's agreement. 196 Chicago. 89. 80. C. Circumstances of the Crops: 69. 53 Future worth. 153 Double tops. 74. 95. money required Fractional lots. 114. 104. 62. 11 122.234 Chicago. tonnage of. 91. 154 161. 186 Financial: Newspapers. 114. 124. 186 Coxey's army. 122 harvest. reports of condi. 41. Delaware & Hudson. 84 7. 198 Dingley tariff.Franklin Bank. E. 90. 182 Five-year average price. trade. 71. 197 Contango. 114. 75 82. 15 Foreign trade. 153 73. 40 Chicago. S. 74. 121. Drew. 86. Charles. 64. 63. Bock Island & Pacific. 79. Jacob. 89. 104. 75. 93 Colorado Fuel. 92. . 96 Debentures. Delaware. St. 149. President. 36. 104. 51 Cycles. 114 167. stock.. 63 tion. 185 C. to be watched. 88.. 170. 197 Corners in stocks. 94 Dividends: Amount. 82. 78. Franklin. 161 Flat.. Henry C.. Jay & Co. 149. 104.. 77. 44. 75. Daniel.
84. 73. 148 Inter-State Commerce Commis. 24. they make money. 200 run the most risk! 13. L. 141. 44 Granger roads.. 188 Lawson. President. 99 Hocking Valley. Huntineton. Henry S. 44 Long of stocks. 17. 93. S.. 78. 210.. 149. McLeod. 71. 71 times. 199 Industrial stocks. 86 Investors: Number of. 104. 36 Manhattan. A. 11 94. 188 235 R. 175 201 Jevons. Kansas & Texas. 96. 104. 188. Kuhn. 65 Hamilton. New York. A. Lamb. 44 Lincoln. C. 187 Gold: Premium on. 23. Joseph F. 67. J.. 161. 77. 65 Minneapolis & Minneapolis. 72. 15 Long Island. do they 127. 47. effect of gold production. Prof. Johnson. 119. 86. 81. 60 Maine Central. 24. 8 St.. how Metropolitan Street Bailway. Illinois P. Thomas W. 178 Co. 89.. 69 James J. 85. 149. 88 Millionaires. production. 74 Kaffirs. W. 63. 36. 15. 23. 68. 135 Gould. Louis. 42 St. 97. 74. 86 International Paper. 188 Lehigh Valley. Alexander. 56 Missouri Pacific. James 86. Central. Marie. 137. 26 Marine Bank. 27. 86 Great fires: Boston. Paul Sault . * 4 69. 161. President. 41. 78. 174. 125 Michigan Southern. 187 Grant & Ward. 36. Ste. early u ' Ives. in McKinley. Missouri.. on bonds. 52 Mexican Central. 199 Holding the bag. 114. 78. 172. Jackson. President.. Prof. 76 Little. 33. 9. 189 loans. 188 Hill. 142. 38. 130 Lake 200 Shore. Jay. 83. legal rates. 177 Grand Trunk.Maxims of Wall Street. Jacob. 38. 11. 104. 91 Machiavelli. 88 Metropolitan Bank. 114.INDEX Giving up. 177 sion. foreign. 98. 189 Margins on stocks. investments. 44. 38.. & S. 11 Madison. 129. 161. President. 81. President. 41. 129 Mackay. 52 Interest rates: And surplus deposits. on time on 21. 200 Manipulation. 59 Harlem Eailroad. John W. tenders.. 142. 27 201 Josephs. Keene. 201 January rise in stocks^ 107. 74. 121. 75. 65 & 3. 71. Michigan Central. 38 Iron production and prices. 76. 161. Loeb & 144. 189 ? 11 a V\T b ? ks 48 p ^ 200 ' Louisville & Nashville. Chicago. 199 Matched Orders. 90. 86 Grant. 142. 161. 178 Legal: Reserves. 42.
164. 80. 132 99. 179 . 103. Pennsylvania Eailroad.. Chicago & St. 97. 42. 127. 190 Preferred stocks. 145. 71. 7 New York Midland. 75. 7. 80. 44. 81. 205 Bogers. 149. inflation.. 64 Normal yearly movements of Beceiverships.. 92. 42 National National National National Biscuit. 203 New New York Cordage. 161. 64. 88. 65. 81. 42.. 91. Co. 161. 161. 162.. 89. 71. 126 Boberts. etc. Henry H. 36. 85. 92 New Central. George.Pyramiding. 165 Morgan-Belmont syndicate. 65. 201 Tube. 74. 86.. 180 Morris & Essex. 45. 79. 97 New York Stock Exchange. 98. 121 Keactions half-way back. 79. 203 Bepublic Iron & Steel. 94. 161. 99. 84. 190 Points to be watched.. 204 Pullman. 80 New York. George H. 62. 205 Non-interest-paying bonds. 12 Bockefeller. 190 Patience as a factor. 130. New York Gas Light. 75 Morus multicaulis. 203 Pacific. 45. New Haven & New ford.. 167. 104. re- 47. 119 36. 92. Louis. 70 Overend. 111 91. 126. 59. 143 158 Bichmond & Danville. 135 Bockefeller. 97. Eailroads: Dawn of construc- 202 New York Trust Co. 70.. 78. 126 York & New England. 54. 169 North American. 87. 49. 69. 202 Pool. 64 Paper money: Contraction. 75. 205 Puts. 204 Petroleum. 72. 62. 91. 92. 48. 94. 72 Point in stocks. 82. 38. miles of new line. 73. 203 Beal estate speculations. 44. 81. 76. 76. 53 Bockefeller. 6. Northern Securities. 78. Pacific Mail. 80. 104. 110 Bich man 's panic.. 42 Ohio Life Insurance & Trust Bipley. P. 70. 204 103. 10. 76 Panama. 92. 100. 86. 89. 177 Peabody. 11. 99.85 53. 89. Anthony W. 155 tion. 191 York. 81. 60. 115 prices. Ontario & Western. 114. Edward P. 41. 202 42. 115 Parity. 60. 16 Pennsylvania Co. 91 Lead. 202 York.236 INDEX Panics. New York Warehouse Co. 74. 68. 84. 46. 91.. Gurney Oyama. 115. 18. 34 Norfolk & Western. 66. 59. John D. 145. Jr. 126. 108 Bock Island. 105. ports of earnings. 17. 42. 80 175 Non-dividend-paying stocks. 204 People 's Gas. 62. 190 Hart. John D. 130 & Co. 63.. Money stringency. 38.. 81. J. rate wars. 93 Morgan.. 11. William. 36 Morse. Beading. 49 Pressed Steel Car. 94. 205 Northern 167. 45. 105. 93. Besumption of specie payments. Produce Exchange 6. 77.
18. 85. 94. 206 Specie payments. 207 4. 56 Washington. 166. J. 36 United States Bank. 79 Workmen buying stocks. Adolph.. Cornelius. 131. 160 to sell. 92. 149. 87. 149.. V. 43. 74. 167. 152. 209 War: With Mexico. 70. Henry. 30 St. White. 144. 86. 208 United States Steel. 144. 63. 7 West Shore. 100. 158. 191 Silver Purchase act. 173. 137 Savings banks: 1820 and 1905. 39. 36. 164 Short of stocks. 72. 43. 8. 154. 6 Stewart. 81 Speculation inevitable. 208 Vanderbilt. 120. Louis & Western. 87. 12 Spreads and straddles. 161. When When 43. 175. 105 Tariff changes. 146. 88 Vanderlip. 66. 173. 122. 192 Tennessee Coal & Iron. 85. T. 53. 163. 120. city captured. 159 Undigested Union securities. 191 Spring rise in stocks. 139. 35 Stocks. 15 Technical conditions. 43. 209 to buy. 10. 66. 66 United States Leather. 135 Venezuelan message. Dr. 145. 161. 96 Turning points in prices. 61. Leland. Edmund C. 61. reserve.. 48. St. 142. 81. 206 Stanford. 49. 38. 124 Stedman. A.. Frank A. 62. 178 127 Taylor. 127 Western Union. 67 j with Spain. 162. 64. 129 Surplus: Deposits. 207 Trans-Missouri decision. 89. 88. 161.. 192 of. & W. 169 S. 65. 5. 155 Soetbeer. 49. Washington. 207 Toledo. 130 September break. 96 Washed 60 sales. 72. 38. 158. 43. 90. 43 San Francisco earthquake. 38. Sun spots. 172. normal. Louis & San Francisco. 38. 92. 208 United States Rubber. burgh. 52. 111. George.INDEX OgdensBorne. 150. 192 Swings of the market. 22. 192 Wisconsin Central. 94. 162. 15. 59. Texas & 137. 35 Seligman. 115. 112. Wild cat 8 . 90. 86 Wabash. Safety in investments. 67. 112. 206 Southern Railway. 191 237 Watertown & Pacific. 126. 45. Supply of money. Moses. 93 Villard. 148. 43 180 Rothschilds. 50. 92. 60. 107. William H. 69. 171. investments. 65. 98 Pacific. 43. United Railroads. 15 State of trade. 180 Vanderbilt. 91. 43. 209 Woodward corner. 44 Stop-loss orders. 77. 100. 3 Wealth of the United States. 207 stocks. 210. 175 Standard Oil. 8. 135 Southern Pacific. 142.. 126.
Member New York Stock Exchange BOODY. Waterbury. 36 Pearl St. Post'Office Arcade.. Transact a general banking and stock exchange business. City. Y. Stamford.David A. 5 Thomas St. Grand St. subject to check. Main St. Brooklyn. Interest allowed on deposits. a market mailed to customers. New York Stock Exchange BANKERS AND BROKERS 111 Broadway. reviewing the financial situation and general outlook. New York BRANCH 213 OFFICES: Centre St.. 3 1 1115 1 1 1 Montague St. main office with the and prompt execution and careful attention the all are given to orders. Hartford.. Private wires connect branches .. Boody Edgar Boody Theo Ames Jr.. N. MCLELLAN r Members of the CO.. letter is If desired. . New Haven. every Saturday. Bridgeport.
gotiating all sell Foreign Exchange on facilities for Exceptional classes ne- of Commercial and Documentary Exchange. Blyth Charles W. for cash or on margin. Stocks. . Also buy and commission. T.Charles A. Huntting BLYTH & BONNER Bankers 43 & Brokers EXCHANGE PLACE NEW YORK Members New York Stock Exchange Execute orders for the purchase and sale of Bonds. W. Bonnet H. and all classes of Invest- ment Securities.
DRAKE.HARVEY FISK & SONS BANKERS AND DEALERS IN United States Government. CONN. WILKINSON. . and Municipal Bonds And Other Investment Securities NEW YORK 62-64 CEDAR STREET PHILADELPHIA. Conn. < Building Represented by K. Mutual CHICAGO. HENRY DANIEL L. 421 -. BOSTON 35 CONGRESS STREET Represented by JAMES H. ILLS. CHAPMAN. 414 Continental N-t'l Bank Bldg. Railroad. CHESTNUT STREET Represented by Life HARTFORD.
RETURN TO +> CIRCULATION DEPARTMENT 202 Main Library .
University of California FACILITY Richmond Field Station Richmond. CA 94804-4698 ALL BOOKS MAY BE RECALLED AFTER 7 DAYS 2-month loans may be renewed by calling (510)642-6753 1-year loans to may be recharged by bringing books NRLF Renewals and recharges may be made 4 days prior to due date DUE AS STAMPED BELOW 2 2 1993 .vr RETURN TO the circulation desk of any University of California Library or to the NORTHERN REGIONAL LIBRARY Bldg. 400.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.