had turned over. What they were really dealing in were contracts to deliver United States Government 4s, "when, as, and if issued." The syndicate got the bonds at 1042 and offered them to the public at 11214 on the next day. On February 25, only 5 days after the offer to the public, trading in the new bonds, "when issued," began in the unlisted department of the Stock Exchange, the initial sale being at 118%, or 5% above the price at which they were offered to the public. The price ran up to 1193% before the end of the week. On March 14, when the first

bonds appeared, the price did not go above 120.

While there was much of a speculative character about the trading in the new bonds, most of the buying above 118, before the securities were issued, represented the execution of orders for investors who had failed to get any when they were offered at 1121⁄44, and who thought they might have to pay still higher prices after the certificates came out. In this case they did not gain much by buying the "when issued" contracts.

The trading in Government bonds before issued opened up to American traders visions of great possibilities in getting an early start in new securities, and when the reorganizations of Northern Pacific, Reading, Atchison, and other railroad properties came along a little later dealing in contracts became a common thing on the Broad Street curb. For a long time the foreign bankers, who are experts in figuring out the niceties of "arbitrage" and of exchange transactions, did most of the business in the "when issued" contracts. One of their number says that profits of from $25,000 to $50,000 were sometimes made in

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