CHAPTER XXXII.

END OF SEVERAL "BOOMS."

The 1902 autumn collapse of numerous stocks, inflated in the progress of the crazy "boom" of that season to the highest prices on record, suggested reminiscences. There are many of such reminiscences in point.

The first half of 1881 was a period much resembling the first four months of 1901. Burlington and Quincy had risen 222 points, St. Paul 28, Northwestern 23, Lake Shore, 1734, Louisville 5912, New York Central 272, Panama Railway 60, Western Union 57. This is the account of the period by a conservative reviewer of the time:

"In the present era, consolidation is the word, and nothing in the financial world has now such charms for investors and capitalists as this magic term. Let the stocks of two non-competing companies each be selling at 20, with few buyers; let a consolidation be proposed, share for share, and immediately the stocks are run up to 30-4050-as the case may be. Add one more element to the transaction-water-in the shape of a stock distribution of 100 per cent. or more, and the original amount of stock, selling for only 20, is found to be worth par. This il lustration may present an extreme view of the case in the details mentioned, but the general fact is indisputable that a large number of stocks on roads that have never paid a

dividend, nor have any prospect of paying one for some years to come, are now selling at 60 to 100, which last year were considered dear at 20 to 40."

There was a somewhat familiar ring to the description when applied to markets of 1901-2.

President Garfield was shot on July 2. A railroad ratewar broke out almost the next week; following which, the hot winds ruined the corn crop. All these occurrences were described, as usual, as "thunderclaps from a clear sky." The markets collapsed, with intervals of support from "inside interests." By autumn, stocks were down as a rule 10 to 20 points, the intervening decline having been much more severe.

In most respects, 1882 resembled 1902 exactly as 1881 resembled 1901. The "boom" of 1882 OCcurred later in the year. Up to midsummer, advances of more than 10 points or thereabouts were not numerous. September's high level, however, showed upward movements such as 33 in New Jersey Central, 24 in St. Paul, 34 in Lackawanna, 23 in Illinois Central, and 58 in Manitoba. From then until November, prices hung fire; they even scored "marked advances," with the help of rumors from Mr. Vanderbilt. On November 18 money was described as "easy and in a normal condition." On Monday, November 20, it rose to 20 per cent.; it touched 30 later on. The surplus bank reserve had vanished, and a deficit of $3,000,000 took its place. It was said in a contemporary journal on November 25:

Stock market fluctuations have been so violent that feeling has almost verged on panic. The two points are the

railroad war and the condition of the steel trade. Production of steel rails was enormously stimulated by rapid railroad building and the high tariff, and profits of manufacturers for a time were fabulous. It was a foregone conclusion (this was written long after the event) that mills could not keep up these profits.

They certainly did not keep them up, and depression was very severe, with a number of leading mills closed down during the autumn. The close of the year showed some such declines from the earlier autumn prices as 19 in Burlington and Quincy, 23 in Lackawanna, 11 in New York Central, 18 in Union Pacific, 22 in Manitoba, 23 in Pullman, 25 in Oregon Navigation. This was the last of the "big booms" of the period.

Passing over a long series of minor "booms," such as those of 1885, 1886, 1890, and 1895-nearly all of which were upset by the money market's rebellion against the excesses of the speculators-we come to 1899. The famous "Flower boom" was one of the most hollow in the entire series. It now appears laughable that the hopes of a great market should have been pivoted on such a stock as Brooklyn Rapid Transit, but so it was. The genial atmosphere of the commission office where stock-jobbing "tips" were distributed to the unwary had its effect on the whole community and on the whole stock list. "Brooklyn" itself rose not quite 60 points; but there were other advances like the 25-point rise in Burlington, New Jersey Central's advance of 25, Lackawanna's 22, Manhattan Elevated's 36, Metropolitan's 81, and New York Central's 20. The chief manipulator died suddenly on May 13. None, or practic

ally none, of the wind-bag stocks were found in his vaults by his executors. He at least had sold out what he had; but the public was left to sell the rest. The bell-wether stock of the entire list fell 37 points within a day, and has never touched its high price since. Manhattan Elevated dropped off 28 points of its recent inflated price, Metropolitan 54, and the standard railway shares some 15 to 20 points. The new-fledged industrials, which had shared in the happy movement, tumbled in similar proportion. The interesting fact of the "boom" of 1899 was that the money market played little part in tripping up the Stock Exchange.

CHAPTER XXXIII.

DEALING IN UNISSUED STOCKS.

Trading in unissued securities, in advance of their actual distribution, started in this country in connection with the issue of the new Government 4 per cent. bonds, which were bought by the Morgan-Belmont syndicate on February 19, 1895. A somewhat similar practice had previously been in vogue in Europe, having originated in the desire of investors to arrange for the purchase of bonds or stocks in advance, when new issues were expected to come out. They naturally appealed to their banker to put through the transaction, and it came to be a common thing to fix upon the price which investors were to pay. This naturally led to trading in contracts for the new securities, based upon the estimated value which different persons thought they were worth.

Messrs. Morgan and Belmont had so arranged the terms for the flotation of the $62,315,000 of new Government 4s -so they thought-that those placed abroad would not be resold to this country right away, which would tend to defeat the purpose for which they were issued. But the foreign bankers were experts at disposing of securities before they were issued. Before the Secretary of the Treasury had put out the first lot a large number had changed 'hands at a sharp advance in price, and in many instances the original buyers never saw the securities which they