Fifty years in Wall Street

by Henry Clews

With regard to business conditions and prospects, the general sentiment of both Wall Street and the rest of the country is optimistic, and to this may be attributed the extensive recovery of the stock market that has already taken place since the crisis that began in October. Although the dealings in stocks have been very largely professional, the improvement reflects the confidence in the situation of the rich Wall Street men who have led the movement, and confidence, like distrust, is contagious.

The absence of any considerable buying by the outside public has been conspicuous, but so also, since the end of 1907, has been forced or voluntary liquidation. Hence, there being no pressure to sell actual stock, it was easy for the powerful bull party at work to advance prices against the short interest, which was very large; and the bears were driven to cover their contracts at a heavy sacrifice of their previous paper profits. But, like the poor, the bears are always with us, and their expressed views as to trade conditions and prospects are, of course, as pessimistic as those of the majority are the reverse. But the majority rule, and Wall Street never fails to discount the future. It is the great financial barometer of the United States.

Leaving sentiment aside, there is ample scope for differences of opinion as to the exact situation and the future, so conflicting are the reports that come to us. In some sections, and some industries, very different conditions are reported than those that prevail elsewhere, and bankers, merchants and manufacturers in the same towns disagree as to things as they are.

This shows that we are in that uncertain transition period which always follows panic; and how long it will last, is the problem that business men all over the country are now trying to solve. Meanwhile the rise in stocks, which has been encouraged by the banking interest largely for the sake of its influence in promoting confidence among the people of all classes, may fairly be looked upon as the precursor of substantial improvement in general business.

Yet, however much we may hope for quick recovery from the effects of the crisis, we should always look unfavorable facts squarely in the face, for self-deception is the worst kind of folly. We must consider the worst, as well as the best, features of the situation, in order to gauge it correctly; and the reduction of ten per cent. in the wages of cotton mill operatives in New England, and the working of many cotton, woolen and other mills on part time only, and the shutting down of others, shows how much manufacturing industry there, as well as elsewhere, has been affected by the severe ordeal we have passed through.

But, so far as the banking institutions were concerned, Boston enjoyed a larger degree of immunity from trouble during the crisis than any other city, a fact that bears testimony to their soundness and conservatism. Boston may, therefore, well pride herself on this memorable circumstance, the result of good banking and good business methods. She had, fortunately, no speculative capitalists with chains of important banks under their control, as New York had.

The crisis accomplished one good thing, and that was the sweeping away of this unsound banking, which had become a menace not only to New York, but to the whole country.

The best banking authorities believe that actual business improvement is already making headway, although there is no uniformity in it, the recovery in some places, and some lines of business, being decided, while in others it is barely visible. Thus the Southwest, and its great distributing center, St. Louis, report a larger degree of betterment than any other section, while Chicago, like the Eastern and Middle States, reports comparatively little.

In the present stage of recuperation, the wage problem is forcing itself more and more upon public attention, and especially upon that of mill owners and the railway companies. The urgent necessity the railways are under of reducing them, to offset reduced earnings, is met by the unwillingness, or refusal, of the men to have them reduced. They have been encouraged in this attitude by President Roosevelt’s action, and now the labor leaders are urging Congress to legislate in support of their position. But Capital has its rights as well as Labor.

The railway companies, as an alternative to reducing wages, have proposed an increase in freight rates, but shippers are up in arms against this, particularly manufacturers; and the authorities of the States, as well as the Interstate Commerce Commission, signified their opposition to it. The railways, meanwhile, have kept pace, as far as practicable, with the contraction of traffic, by discharging large numbers of their men. In this way they have materially reduced their expenses, while they report increased efficiency by the labor still employed, every man in these times being anxious to hold his place by doing good work.