Wall Street changed with almost magical suddenness from depression and apprehension to confidence and buoyancy with the defeat of Bryan and his silver heresy, and the reëlection of McKinley in November, 1900. Large capitalists all over the country began to buy stocks and bonds on so heavy a scale that prices shot up rapidly, like the celebrated Gilderoy’s kite, and very soon orders poured into the Stock Exchange from people of smaller means everywhere, and a tremendous bull market for stocks resulted, with too many men staking, or ready to stake, their bottom dollar on the rise.
The speculative capitalists and large operators of Wall Street, not of course excepting many of the active Standard Oil magnates and James R. Keene, naturally availed themselves of this state of affairs to manipulate stocks on a grand scale. Having loaded up with them early at low prices, they boomed them with vigor; and we witnessed the beginning of a carnival of speculation, and an unexampled rush to form combinations of industrial and railroad interests, or trusts, and generally to capitalize the concerns taken in for many times the amount of their previous capital or real value. The stock thus created, after being admitted to dealings in Wall Street, was made active and bid up by the promoters to high figures to catch buyers, while the public, which had become crazy to buy, took it in enormous amounts. It bought in haste to repent at leisure, for, I regret to say, most of the buyers have it still; and the aggregate loss its shrinkage in price represents is to be counted by very many hundreds of millions of dollars.
But it was fortunate for both Wall Street and the nation that the inflation which ran riot till September, 1902, was then checked by the conservative action and warnings of the banks and men like myself, for if it had been allowed to continue for another half year it would have ended in a disastrous convulsion, a bursting of the bubble, which would have been felt all over the United States, and in every department of business, as in and after the panics of 1857 and 1873. I was one of the first to sound the alarm and call a halt in this dangerously wild speculation in my weekly letter dated September 13, 1902, in the following words:
“A man becomes an inebriate by getting himself into a condition where he ceases to recognize effect as following cause. Under the influence, at times, of the intoxicating beverage he will defy both law and order. This is due to the callous condition he has allowed himself to get into. The stock market of late has been productive of a similar condition of mind with a majority of people. They have been engaged now for such a prolonged period in buying, buying, buying, making profits on all their ventures, as to make them like the inebriate, callous to all adverse factors whenever they come up. High prices don’t frighten them; scarcity and high rates for money don’t frighten them; cautionary signals don’t frighten them; strikes don’t frighten them. Buying and holding on have simply become chronic with them. This may not unlikely continue to be the condition of the stock market until compulsory liquidation sets in, which the strain in the money situation will sooner or later produce. I recommend great caution on the buying side, and, better still, not buying at all at the prevailing high prices. I see no possibility of relief to the money market excepting through the importation of gold. The activity of business all over the country, together with the moving of the crops, is going to keep money thoroughly employed at high rates from now onward and all the way through the new year; therefore, those who buy stocks to carry hereafter, excepting on big concessions from present prices, may meanwhile be overtaken with discomfort from depreciation in values as well as from the difficulty of obtaining money at reasonable rates.
“Henry Clews.”
The intoxication of the time having gradually given place to sobriety, and a slow but heavy downward reaction in prices, we escaped the violent and widespread panic that threatened us, and that would have been inevitable had we not “slowed down” in time. As it was, the decline was long-continued and severe, and impoverished or ruined hundreds of thousands of people, including a vast number of formerly very rich men. Both big and little speculators became the victims of the downward plunge of prices: but the country as a whole was saved from serious disturbance and depression—that is, from the effects of such a tremendous collapse and crash as menaced Wall Street during nearly the entire year 1903. This was very fortunate for all our material interests; and the conservative element in Wall Street is to be congratulated on having so successfully put on the brakes in time to prevent a collapse that would have involved and disturbed the nation from the Atlantic to the Pacific.
The year 1901 was the most remarkable in the financial history of the United States, and Wall Street was a theater of action whose performances astonished not only the entire country, but the world. Their like had never been seen before, not even during the great war between North and South. It would take volumes to fully describe and give retrospective clearness to the leading events of that extraordinary period which made the Stock Exchange continually the scene of wild excitement, daring manipulation, and unexampled inflation.
To say that Wall Street astonished the natives and made conservative business men stand aghast is no exaggeration. There were six influential factors actively at work in that year, namely, the consolidation of railroad and industrial companies at enormously inflated prices, including the disastrous Northern Pacific skyrocket “corner,” the restless sea of reckless stock speculation that swept the American people into its vortex, with all its razzle-dazzle extravagance, the transformation of this country from a heavy lender in Europe to a heavy and urgent borrower, the partial failure of the corn crop, the decline in prices for nearly all the staples except grain and iron, and the collapse in earnings and dividends of many new industrial combinations. These included The Amalgamated Copper Company, and the panicky decline in its stock, which impoverished or ruined many thousands of investors, it being first run up to 130 and then rapidly down to 60 by the manipulators, who sold out and then sold “short,” and who are said to have made more than fifty millions by the up and down movement. Subsequently even this low price was cut nearly in two, as the decline did not stop until 32½ was reached.
A mere recital of events as they occurred would be an eloquent serial story to those familiar with the alphabet of Wall Street; and there is no more interesting or exciting serial story than the stock ticker tells, from day to day, to those interested in the stock market, or one that often excites more joy or sorrow, or carries with it more weal or woe, prosperity or ruin. But the ticker, like Tennyson’s brook, will go on forever during business hours, for we shall never be without a stock market and speculation.
The transactions of the New York Stock Exchange in 1901 were so tremendous in volume as to excite wonder. But they only represented the speculative spirit, the intoxication of the time. The sales in the first half of the year aggregated 175,800,600 shares of stocks and $637,100,800 of bonds at par value, an increase of 109,906,300 shares and $346,900,700 in bonds over the same six months in 1900.