Anyhow, the stranger, for whom this book is chiefly written, would, if he took a hand in any one of these games, soon find out that though he might see the price of the shares he had purchased mounting gaily up on the blackboard like mercury in the tropics he could never realize to any appreciable extent. Did he start to sell, then all the weak little bulls of whom his co-speculators would be composed, people to whom ten dollars a day one way or the other makes all the difference in their domestic budget, would rush to sell also out of sheer fright, and down would go the market on him like a guillotine. At the finish he would be left with a very large proportion of his probably not over-valuable holding; of which he would have little further news than notices regarding proposed reconstruction schemes, etc.
It must not, however, be imagined that the Buenos Aires Stock Exchange is by any means exclusively devoted to such work as that just indicated. On the contrary, many Bank and Industrial shares are also quoted and the other, the Securities, ring is just as genuinely serious as the gambling part of the share ring is meretricious. The chief securities dealt in in the former are the Bonds of the National Cedulas, as “gilt edged” a security as could well be wished for.
These Cedulas are Bonds issued by the National Hypothecary Bank, an Institution of the National Government, as against mortgages of freehold property in the Republic; the method of their issue being, shortly, as follows.
An intending Mortgagor lodges a proposal with the Bank; on which his title is examined and the property offered valued by Government experts appointed for each purpose.
The result of the examination of title being satisfactory, the Bank states the amount for which on its valuation, fixed after leaving ample margin for possible depreciation, it will accept the mortgage.
But the Bank has no cash funds, and therefore issues Bonds, carrying interest at 6%, and subject to annual amortization, for the amount agreed to be granted to the Mortgagor. The latter, if he require cash, as is usually the case (most of such borrowings being actually effected with the objects for which the Bank was founded, viz. improvements of the property mortgaged, extension of holding, or purchase of stock and implements), must take his bonds to the Stock Exchange for sale. For them there is always a free and open market, the price obtainable usually varying only according to ordinary accidents of supply and demand.
Many brokers hold standing orders for these Bonds, at a price, for Europe (before the War Antwerp was always a buyer at a certain level). The only really appreciable downward fluctuations of this security are of very short duration, an hour or two at most, and are due to what can only be condemned as the inconsiderate action of the Directors of the Hypothecary Bank. That is to say, the Bank’s acceptances of Mortgages are sometimes allowed to accumulate and then, all of a sudden, the Directors seem to get to work and sign and issue huge batches of Bonds. Not only do most of these find their way to the Stock Exchange, in consequence of anticipatory orders lodged with brokers by absent or upcountry mortgagors, but many such people leave selling orders with the Bank itself.
The result of all this frequently is that one fine morning or afternoon cartloads of these Bonds arrive on the Stock Exchange and flood the market, in spite of all the market can do with the best intention of sustaining prices.
Soon, however, the mass is absorbed by the home and foreign demand, and the little crisis which could never have occurred except through the bad management above described, is over and normal prices rule again.
All this relates to the current issues of these Bonds, the “Cedula Argentina” as they are now called.