Fifty years in Wall Street

by Henry Clews

In the cotton market, however, as wild and extraordinary a bull speculation raged in 1903 and the early part of 1904, under the lead of Daniel J. Sully in New York, and William P. Brown and a Southern clique in New Orleans, as ever excited the Stock Exchange. Through their manipulation, helped by the statistical position of cotton and the prospect of reduced production, cotton rose, under an enormous and unprecedented volume of transactions, from about eight cents a pound here to seventeen cents, with frequent violent fluctuations, and Mr. Sully was avowedly planning to carry it up to twenty cents, when he found his resources insufficient to carry, on a falling market, the amount of cotton sold to him. So after going up like a rocket, he came down like the rocket stick, although his previous profits by the rapid rise had run into several millions. It was well that a halt was thus practically called to this excited speculation and excessive advance in cotton, for it had inflicted heavy losses upon spinners and caused the closing of many mills. Sully’s failure was the logical result of a too daring speculative campaign, and reminds us of that vaulting ambition which overleaps itself and falls on the other side.

Glancing at other countries, I find that Canada made more material progress in 1903 than in any previous year in her history, business increasing substantially in nearly every branch of trade and finance, stimulated by bountiful crops and 150,000 immigrants. But in England the continued decline of British Consols to the lowest prices in a generation reflected a low financial barometer, the legacy of the costly South African war. France, however, made the best showing of the year in Europe in finance and general prosperity, while in Germany a vigorous industrial revival lifted that country out of its previous depression consequent on over-speculation and bank failures.

One question of great interest in relation to our new industrial combinations is whether a proper readjustment of their hugely inflated capital and excessive charges will place them permanently in a condition of efficiency, productiveness, solvency, and prosperity, or whether they will ultimately drift, one by one, into the hands of receivers through their inability to make both ends meet, or become hopeless wrecks, like the Shipbuilding Trust. The same fate is liable to overtake many other large flotations into which there was a too copious flow of water, supplemented by chicanery and misrepresentation. Many of these have been organized in disregard and defiance of legitimate finance, and have exposed the stock market and all the monetary interests depending upon them to risks and disastrous disturbances inseparable from organizations whose foundations rest largely on wind and water and on prospectuses and book-keeping that often failed to tell the truth, the whole truth, and nothing but the truth.

It was well that a stop was practically put to the creation of such inflated industrial combinations, as well as to needless combinations and highly inflated stock issues among the railroads for power and profit and stock-jobbing purposes, by the course of the Wall Street banking interest, to which I have referred, in coming to the conclusion that the over-watering of new companies, the marketing of new stocks, and the rise of prices on the Stock Exchange had been carried beyond the point of safety, and that the outside public had bought more speculative industrial and railway stocks than they would be able to carry on a falling market.

They argued, therefore, that their buying power and their inclination to buy were nearly exhausted, and that the stock market had become largely a field of action for certain heavy and reckless speculators, each of whom had suddenly made many millions by the formation of new trusts and railway combinations. Some of these had become multi-millionaires through the early sale of the heavy amounts of United States Steel stock they received in exchange for their plants when that huge corporation was launched in its sea of water. In this they were like some others who enriched themselves by their industrial combinations in the West before they branched out in Wall Street.

Very large bank loans to the brokers of these big operators were gradually called in and fresh accommodations refused them. Without loans it was impossible for them to buy and run up stocks to inordinately high prices, as they had been doing. Therefore they found that, to a large extent, their occupation was, like Othello’s, gone. They were eagles with clipped wings.

The heavy liquidation by large and small operators in 1903 caused a heavy and almost continuous decline in prices on the Stock Exchange. Many rich men were compelled by this shrinkage and the calling in of their loans by the banks to sell out heavy lines of both railway and industrial stocks. Not a few of these lost practically all their capital, while nearly all the rest sold a large part of their best holdings to protect the remainder, which became unmarketable.

This period of liquidation and depression left Wall Street and the country at large in 1904 thickly sprinkled with poor rich men, capitalists with a good deal of property, real and personal, including stocks, but all unsalable in the market except at an almost ruinous loss. Their policy is naturally to hold on to what they have left till the tide turns, and if they are strong enough to be able to do this they will doubtless meet with their reward. History repeats itself in Wall Street as well as elsewhere, and with this prospect in view they can cheerfully say, as the old song says, “There’s a good time coming, boys; only wait a little longer.”

Meanwhile, those who were active in Wall Street during this eventful period of inflation and speculation must note, more than others, the vast change that has come over sentiment and opinion in Wall Street and everywhere else.

Both Wall Street and the outside public have lost the faith that they had in many of the stock-market leaders, the men who were once followed blindly in their schemes of inflation and regarded as omnipotent in their execution. The power and prestige of these leaders, for the present at least, have passed entirely away, and none are so poor as to do them reverence. The devotees of the Street no longer worship the old idols.