Economic History and Its Relation to Stock Trading in the Automobile Industry.
That it may be possible to comprehend the tendencies and probable trend of activity in the motor stock market, it will be necessary to look back at economic conditions which prevailed at the time of the automobile’s infancy, and at the conditions during various periods since then.
No industry in our times has shown such phenomenal growth and in no country has its development been so marked or reached such proportions as in our own.
In the earliest stage of the industry, the automobile was accepted as a fad, and it has been stated that the American people took hold of the fad as an intoxicant, paying as high as from $6,000 to $12,000 for a car, and reveled in all the natural resultant vices of extravagance, snobbishness, excess and carelessness. Houses were mortgaged and ruin was accomplished for many who paid high prices and then could not stand maintenance and repair cost.
The relative effect on business then became apparent. Bankers protested and entered complaint against the automobile as a degenerating factor in life. Automobile manufacturers expanded lavishly, over-capitalized, undertook to effect great stock-jobbing consolidations, until conservative financiers took steps to stop the harmful waste and inflation and many bubbles burst.
During this period, therefore, stocks of the automobile group were looked upon skeptically, and were scarcely known in the legitimate market before 1912, with the exception of a few scattered stocks, some of which are now altogether out of existence or merged in new companies.
While stock trading did not come into general prominence until within the last five years, it is agreed that economic conditions have had a big influence in bringing about this recognition.
In further considering the outlook in this industry, it is necessary to analyze the buying power of the population. This will have a decided effect upon stock activity, which the remarkable history of this industry has placed in a class almost by itself.
The people of the country never before enjoyed the money earning possibilities now in order, but to offset this is the high cost of all articles going to make up the necessities and luxuries of our increasingly complex modern existence.
In 1906 there were registered (mostly by buyers of an earning capacity of $3,000 or more) 48,000 automobiles. Since then registration has increased 5,000 per cent, due to the changes in the average price of automobiles. Investigation shows that the average price of an automobile in 1907 was $2,123, while in 1916 it dropped to $820.
The following chart shows the changes in the average price of automobiles since 1904:
In very few years this infant industry has grown to rank as one of the most important in this country, and it is plain to see how conclusively the industry’s influence has produced an economic effect upon our national life. The farmer’s life has been made more attractive. Cities have expanded into suburbs, thus affecting and influencing values on both urban and suburban real estate. Good highways are demanded. Thus it can be recognized the strong hold this industry has upon the nation at large, nor do present signs indicate that it will cease to grow.