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a single security before the certificates came out. They made large amounts out of Northern Pacific, but some of them came out with a small loss on Atchison bonds and stocks, because they had made a mistake in not allowing enough margin for interest. Interest is a very important item. The method of operators consists in buying the old shares and selling the prospective new ones against the former. In determining the price at which to sell the new the interval of time before the new are issued is taken into consideration, since interest must be paid on the shares which have been bought, and they must be carried until they can be exchanged. The trouble in the case of the Atchison was that the new securities did not come out until a later time than had been expected.

The important part which contracts for securities "when issued" may play, was perhaps best illustrated by the first transactions in those of the United States Steel Corporation on the Broad Street curb. These prices really deter mined the movements of Federal Steel, Steel and Wire, and other subsidiary shares on the Stock Exchange. For several days it was not known just what the old shares ought to be worth in the exchange for new, and they fluctuated wildly until the relationship was determined by watching the prices of United States Steel shares when issued. The common started on the curb at 38, and the preferred at 8234 in the second week of March, last year. That an investor benefited by buying before issued seemed clear from the fact that when the new shares came out and they were introduced on the Stock Exchange, on March 28, the common started off at 4234 and the pre

ferred at 9234. From the standpoint of the person who wanted to buy the old shares and sell the new against them it was a difficult task, because of the restrictions placed upon the exchange of securities. Some of the traders tried a little of what was termed "arbitraging" between the Stock Exchange and the curb, figuring out, as they thought, a profit of 4 or 5 points, but they gave it up when they realized how completely the syndicate controlled the situation.

The dangers sometimes incident to trading in unissued securities are illustrated by the San Francisco bond case (1902) and that of the United States Steel bonds, which it was proposed to issue, partly for the retirement of preferred stock and partly for betterments. Syndicate agreements provide, as a rule, that the participants shall take their proportion of the new securities issued, and find a way to dispose of them. It has been a common habit for syndicate members to make contracts for the sale of the securities 'when, as, and if issued," so as to get them off their hands as soon as possible. In the case of most of the companies promoted or reorganized by Mr. Morgan, the syndicate members were expected to take their proportion of the securities, unless it was specifically agreed that the managers were to dispose of them. No negotiable certificates were issued permitting of the transfer of subscriptions, as in the case of the San Francisco Street Railway Company, financed by Brown Brothers & Co. The subscriptions of the latter are dealt in on the curb; exactly like stocks.

The trouble in the case of the 'Frisco bonds doubt

less arose from the fact that the agreement provided that the members should take the stock to which they were entitled. They might also be compelled to take the new bonds unless the bankers were able to sell them to better advantage or such part as the bankers did not sell. It was possibly inadvertence on the part of the subscribers that caused them to sell the new 'Frisco bonds, not knowing whether they would have the certificates to deliver; or, they may have thought there would be "enough to go around" when $20,000,000 were issued. The small amount of San Francisco bonds that came out at the start, as well as the possibility that only $50,000,000, instead of $250,000,000 of United States Steel bonds might have been issued, illustrate two of the dangers that may arise from selling securities in advance. In the one case a temporary scarcity rendered it possible to run the price up to a fictitious figure, assuming that the contract was literally enforced which compelled the seller to deliver them the moment they were issued. In the second instance, a smaller issue of United States Steel bonds would render it necessary for the seller to deliver a really more valuable security than he thought he had sold, and he might have to take a loss.

Of course, there is always the risk that plans may be changed and the securities will not be issued at all. A notable instance which caused quite an uproar was the announcement of a new issue of India stocks by the British Government some years ago. These were extensively traded in "when issued," but the Government changed its mind, and all of the transactions had to be declared off.

CHAPTER XXXIV.

THE TIPSTER'S POINT OF VIEW.

The stock market from the tipster's point of view is not uninteresting. As a guide, however, he is invariably less valuable than an honest broker, and is usually very clever in "calling" market movements after they have run their

course.

The following "study" of stock speculation is the work of an advertising tipster, and the reader will be his own judge of its value.

WALL STREET'S GREAT GAME.

Over 90 per cent. of the transactions on the Exchange are purely speculative-mere betting on quotations. So, likewise, 90 per cent. of the fluctuations are based on manipulation, and not on the values of the properties or outside conditions. Good or bad crops have a very close relationship with the country's actual prosperity, and should be the paramount factor in stock market values; but the insiders are supreme in Wall Street, and manipulate prices up and down without much regard for crops, earnings or any outside factors. Nobody can shut his eyes to the fact that in a bull market (that is, when insiders are long), stocks go up in the face of bad news, and in a bear market (insiders short), prices go down, no matter how rosy the outlook. Every extended movement is planned in advance and controlled throughout by the shrewdest financial generals in the world. They know the actual-not the published-conditions of the properties whose stocks are to be handled. They know when natural conditions warrant a bull or a bear campaign. They leave nothing to chance, but their trump card is the weakness of human nature.

When the plans have been arranged for a bull campaign, or extended upward movement, every sort of bear argument imaginable is used to induce the public to sell; elections, war scares, stringent money, damaged crops, gold exports, etc., etc., are resurrected and used effectively year after year. Meanwhile, the insiders are quietly accumulating stocks and checking every advance at certain figures. Finally, when all is ready, and the vast majority of speculators bearish, and declines seem inevitable, the bull market commences often upon the actual happening of some anticipated bad news. The

advance is at first very gradual; some stocks rise, others remain stationary, while a break is made in one or two, to encourage the bears in putting out more "short lines." Presently the "leaders" advance more rapidly, and the others begin to move up. Each stock has its individual range and pecul1arity in moving, though toward the end of a campaign those stocks which have been lagging behind come forward with a rush. The importance, therefore, of confining your attention to the leaders during the first half of a campaign, can readily be seen. The money made on them can be transferred to the "specialties" before the latter have had their advance.

During all this time there have been thousands of fluctuations, like surface waves, but the tide is on the flood and prices steadily rise. Every one becomes enthusiastic over improving business. The "sneaking" bull market has developed into a "creeping" bull market and the "lambs" are at last making money. Finally there comes a grand rush to buy, accompanied with great excitement and the wildest optimistic rumors. Enormous quantities of stocks are handled, and this is the finish, for a time, at least, of the bull campaign. Insiders are "unloading"; and although newspapers, financial writers, news bureaus, and every bull artifice that can be devised, are used to "jolly" the public into buying, though everything looks rosy and there is not a cloud in the financial horizon, the market comes to a stand. Spite of good news prices sag. Gradually but surely and with many false upward starts, the market falls.

Once the insiders have distributed their stocks, absolutely nothing can keep prices up. Before long, excuses are found to force down the market; and then the same old game is played over again. It all resolves itself into two grand divisions: Accumulation-or buncoing marginal and investment owners out of their stocks at less than actual value; and Distribution-or selling the same stocks, by means of false pretenses, at vastly more than actual value.

The details are changed, but the same general tactics are employed year after year. The lambs never learn to buy stocks when everything looks darkest. They never learn that a bull campaign begins in gloom and ends in glory.

POOL METHODS.

Human nature is such that it is almost impossible to buy stocks at the bottom, with nothing but bad news pouring in. It is still harder to sell at the top when the market looks strong and only goods news is heard, and personal friends tell you of some Insider who has assured them of a 15 or 20 points advance in such and such a stock. People generally buy at these times. The manipulators' game is to play on this phase of human nature, and they pull the wires so as to get every body full of financial optimism just at the time when they are ready to sell. Surely anyone can see that the big fellows are not here for their health, or for glory, but to make money, and the largest amount possible, with absolute disregard of whose pocket it comes out of. SOMEBODY must lose the money which they make. not one of those somebodies.

See to it that YOU are

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