CHAPTER XX.

FINANCIAL CRITICISM.

The stock market and its relation to newspapers is a much misunderstood subject. With the great increase in speculation and public interest, the newspapers have responded to a demand which, all things considered, is filled most creditably. It is only a few years ago that opening, high, and low quotations were considered sufficient to satisfy those interested in the stock market and for forty years there had been no improvement. This primitive method was superseded by a careful compilation of the day's trading, printed in tabulated form and including every sale made or transacted from the ticker, reproduced in an afternoon paper and sold on the street for a penny twenty minutes after the closing of the Stock Exchange. This remarkable development in the way of newspaper enterprise was made possible by the present owner of The Sun and The Evening Sun of New York, who was quick to realize the value to the public of such a service at the astonishing cost of the country's smallest coin. And so accurate has that service been that it has been accepted in courts of law as official in lieu of any better or as good service from the Stock Exchange itself.

Each newspaper supports a staff in Wall Street and the Street itself is represented by two reputable news bureaus

a number of daily financial newspapers and several weeklies.

Stock market criticism is dependent largely upon the individual point of view of the writer and the policy of the newspaper itself. An afternoon newspaper market review may be an academic study of the money market, with the Stock Exchange subordinated to its relative position in the perspective, or it may be a simple review of the influential news factors that caused market fluctuations, and explanations reduced to common sense. Or it may pursue a middle course, indulging in economic speculations and at the same time not losing sight of the important fact that the reader wishes to know why particular stocks advanced or declined. A writer may be ultra-conservative and pessimistic as distinguished from the majority who are given to prophecy and inclined to optimism. And again he may be honest or corrupt, moral conditions that are governed by the individual and his environment.

The reliable critic usually endeavors to avoid the field of prophecy. It is almost invariably the fact that in reviewing the factors governing the situation he will endeavor to make bullist deductions; that is to say, he is prejudiced in favor of advancing security prices and the prosperity of those who own them. This is a natural position and one which meets with the approval of the reader. He is from necessity committed to the constructive side.

There are times, though, when his judgment enables him to detect the approaching financial storm and sound a note of warning. There are writers who see so many dangers in

stock speculation and in the tendency to human excesses that scarcely a day passes that they do not justifiably condemn the market in one phase or another. And there are others, corrupted by their own speculations or the gra tuities of stock manipulators, who pen grossly inaccurate and deceptive articles for pecuniary gain.

A market review is entitled to consideration to the extent that it is reasonable and accurate. If it is unreasonable, inaccurate and perhaps too radical in departing from established rules and customs it should be ignored. Per contra the opposite qualities should make it worthy of consideration.

Corrupt and inspired articles are readily detected. Should the alleged facts not be verified; should the prophet prove to be a false prophet; should the hand of the press-agent be in plain view, know then that you are following an unreliable and dishonest guide.

The usual method employed in corrupting the financial critic is for a stock manipulator to offer the disseminator of news, views and tips, a "Call" on a specified number of shares. Should a pool have a deal in view intending to advance a particular stock it will endeavor to obtain the support of those newspaper writers who will lend their columns and their newspapers to the legitimate or illegitimate movement, as the case may be, for a speculative opportunity to participate in a small way in the profits.

The representative of the pool proceeds in one of two ways. He will send (1) for the individual writer and offer him a "Call" on the stock under manipulation at a price. This price is usually above the market. In return

the writer agrees to "boom" or "apply the hot air method" as it is required; or in simpler terms print misleading statements to facilitate the sale of stocks to its readers. A "Call" in such a proposition would mean that the writer received the privilege of calling upon the manipulator for a specified number of shares of stock at a certain price. If the stock declined the privilege would have no monetary value. If the stock advanced the writer could sell the stock against the "Call" and receive the difference between the price written on the "Call" and the price at which the stock was sold, or the transaction would be closed in the manner most acceptable to the man who had paid the bribe.

Or (2) the manipulator may send for one newspaper writer who in turn represents a combination of writers and give the newspaper man complete charge of the transaction, and the power to distribute the "Calls" as in his judgment he considers that the best results can be obtained. Some of these "Calls" are very profitable and others quite worthless. They may be repudiated at any time and their holders have no redress or claim. Their owners are powerless to antagonize the interest which deceived them, for publicity means exposure, and exposure ruin.

It must be conceded, however, that where this form of corruption exists it is readily detected and that all things considered the newspaper protects the public better than the public are at times willing to acknowledge. The majority of the Wall Street financial writers are honest men and will freely sacrifice the "main chance" in order to state the facts.

Stock market critics endeavor to find a reason or expla

nation for the day's fluctuations. The price movement may be uniform-up or down—or it may be irregular, one stock or group of stocks advancing, others declining and others remaining dull and passive. He must search the field for the primary cause. At times this cause may be plain to everyone, again it may be concealed from the outsider's view and yet again the superficial factors may be written down as the cause when the true facts are completely hidden. The speculator can form his own conclusions regarding the merits of each critic by a study of the latter's work.

The criticism has been frequently made by speculators that nine out of ten newspapers are bullish at all times and through all markets. This is true, and the following story will partially explain why: The editor of a financial journal was a bear on the market. He believed in lower prices. He was committed to short contracts in the market and from day to day he gave his readers the benefit of his convictions, honestly and with enthusiasm. The market declined. Day by day, however, he lost subscribers, until finally the losses became too serious to be ignored. An important commission house among others notified him to discontinue its subscription of three copies. He first sent his business manager to the house in question for an explanation. A member of the firm said: "Your paper is bearish on the market. All our customers are bulls. Your paper is on file in our offices and our customers find a great deal of fault with it. It makes somes of them very angry."

"But we have been right on the market?"