Members of the Stock Exchange are not allowed to advertise themselves or their firms, but most of the daily newspapers in London have an agent in the house, either a jobber or broker, who furnishes to his principal for publi- cation a daily report of the state of the markets and the current prices of the day, which in that way reach the eye of the public. It may be assumed that in the better class of journals the information thus afforded is perfectly trust- worthy, although some years since one of the leading newspapers was imposed upon by its agent, who took advantage of his position to manipulate certain matters for his own ends. Less scrupulous publications, however, are freely made use of to influence the public, to cry up or prejudice the markets and particular concerns. The provincial broker, as a rule, limits his ad- vertisement to the name and address of his firm, with a quotation of the prices of a few of the stocks mostly dealt in, and monthly, or quar- terly, sends an extended list to his customers. The outside broker who advertises himself freely in the newspapers, as well as by pamphlets and circulars, is to be avoided. He will invite you to participate in his system — always an in- fallible one — of operating. He will suggest "options," "put and call," the "cover" system, and other devices by which the inexperienced may be mystified and beguiled into losing their money. However astute a man may consider himself, experience proves that, with amateurs, this kind of gambling is sure to result in loss.
An ingenious mode of practising on the cre- dulity of the public may be noticed in some financial publications. An editorial notice or subsidised paragraph will be inserted in the paper, extolling the merits and predicting the certain success of some concern which it is desired to bolster up or to foist upon the public. This is done in such a way that the reader is expected to believe that it is the genuine ex- pression of a truthful opinion by the editor, who has obtained his information from unimpeach- able sources. Of course, this peculiar kind of advertisement has to be paid for, but it has its advantages to the advertiser, for it can (for a consideration) be quoted by the country papers as unbiassed news, and attention called to it in a money article or leaderette. The pamphlets issued by the advertising outside broker are sometimes amusingly artless in the endeavour to sell shares and attract custom. On the first page will be found some paragraphs setting forth the merits and prospects of certain named companies, and advising the reader to buy shares in them without a day's delay, as a con- siderable and speedy rise in value is assured. One may be permitted to wonder why the broker and all his friends do not rush in and secure every share that is to be had. At the end of the paper the reason will be discovered; in every one of the concerns referred to shares are offered for sale, which cannot be got rid of in the regular market. It must be inferred that some credulous persons are taken in by this transparent artifice, or it would not be so con- stantly practised. The object of these publica- tions is chiefly to puff up doubtful securities, in the hope that some fatuous speculator may be tempted to buy. It is delightful when two of these gentry fall out and expose each other's knavery. The reader is assured that "Codlin's his friend, not Short"; the latter is denounced as a fraud and retaliates, but no action for libel is brought, because both know that on either side the imputation is justifiable.
It may excite surprise in some who are favoured with circulars and prospectuses which are, through the Post Office, sown broadcast over the whole country, how the name and address of a comparatively obscure individual should be known. Prospectus and circular distributing is a business conducted on a regular system. When it is desired to invite subscrip- tions to float some new company or to bolster up some concern, the share lists of the same sort of companies already in existence are drawn upon for names and addresses; and court directories also furnish a wide field for operations.
At the present time the rage appears to have set in for forming limited liability companies out of private industrial concerns or trading firms. Most of these companies, we are told by an authority, "are brought out under the same auspices" — that is they are started and floated by a skilled personage known as a "promoter." The stereotyped prospectus must now be familiar to most people, and the public respond freely to the invitation to subscribe for shares, without consideration or inquiry. The prospectus is usually replete with statistics, showing the suc- cess which has attended the business whilst in private hands, and the enormous profits made; and one is apt to wonder why they did not keep it to themselves, instead of inviting the public to share in the gains. But there are good com- panies and bad companies, and it is to be feared that the latter largely preponderate. A good company may have a genuine reason for its existence, such as the desire of a last surviving partner to retire from active life, or the growth of the business to such an extent that more capital is required than could be obtained from a private person, or upon some other equally valid ground. A bad company is often the make-shift to save a decaying firm from insol- vency, or to dispose of a business at a price quite out of proportion to its real value. The prospectus affords no opportunity of discrimi- nating what is genuine and likely to succeed from what is false and sure to fail. If, as it has been said, eighty per cent. of companies floated sooner or later go to the wall, then, indeed, inquiry and much circumspection are needed before entering upon a speculation of the kind. It must be said, however, that many companies formed from trading concerns have become well established and profitable, and if permanency could be relied upon, they furnish a field for lucrative investments. Those adventures which are unduly pressed upon the notice of the public should be regarded with suspicion. If a thing is really good in itself, it will not require much persuasion to commend itself; and if bad, no purchased laudation will make it better. A subtle mode of advertising is just now coming into vogue, which, though expensive, will for a time be successful. There need be no reflection on the companies which adopt it, though calcu- lated to beguile the innocent and confiding in- vestor. A leaf or two introduced in some of our illustrated papers, in no wise differing in the printing from the remainder of the publica- tion, and appearing as though it formed part of the regular pabulum offered to the public. This leaf or leaves contain well-executed pic- tures of the works and machinery and other interesting objects connected with the industry of a company to which it is desired to call attention, and a descriptive account is given of its magnitude and success. To the casual reader all this would appear to be a matter of public interest, offered to the public as part of the regular business of the paper, but it is only an ingenious form of advertisement and has to be paid for as such, but that is of no consequence if the effect is produced, of a rise in the price of the shares. There are some companies whose shares are quoted at such enormous premiums, and which pay such high dividends, that the investor is sorely tempted to embark in similar undertakings, apparently, that are brought be- fore the public. But these prosperous concerns are in most cases first taken up by a syndicate — that is, a certain limited number of persons behind the scenes — who finance and float the company, and when success has been attained, the public are granted the privilege of purchas- ing shares — but at such a price as the syndicate choses to put upon them, and, not seldom, that is the highest they ever attain. This is particu- larly the case with mining companies, the successful ones having certainly only benefited the few. This syndicate system has given rise to a bogus imitation, which, however, appears to have met with but limited success. Circulars in lithographed writing, marked "private and con- fidential," and implying a friendly interest in those addressed, are sent to persons whose names are obtained in the manner already indi- cated. An invitation is given them to join a syndicate about to be formed to float a certain company, the profits arising from the operation being certain and enormous. Again, if it be such an excellent and certain venture, why offer a share to an entire stranger? These circulars are very speciously worded, and there is an air of candour about them likely to allure. Anyone foolish enough to subscribe would probably, after an interval, be informed that owing to un- foreseen circumstances the adventure had turned out a failure, and that all the money had gone in expenses. Successful gold mines have yielded large fortunes to their proprietors, but it must be remembered that mines have but a limited existence, and once they are worked out the money invested in them is lost; for when they cease to yield ore there is nothing more to be obtained from them. Promiscuous dealing in mine shares is nothing more or less than gambling, or taking part in a lottery in which the blanks are overwhelming and the prizes next to nothing. If an enterprise has in it any degree of soundness or promise, there are plenty of the knowing ones ready to step in and take all the advantages to be gained; it is the des- perate ventures and unscrupulous swindles that the public are mostly pressed to support — only to lose their money. It is to be hoped that the dupes are at length awake to the pit-falls dug for them by the mining company promoter and speculator, whose seductive paragraphs are everywhere in evidence in the advertising sheets of the day.
A typical example — and not a fictitious one — of hundreds of knavish concerns foisted on the public may be quoted. A certain company, of which no prospectus has been issued, nor of which anything is publicly known, appears in the mining lists. One day, a paragraph in a financial paper reports that the agent for the mines, on the spot, has cabled that the promise of success exceeds all expectations, that samples of ore, yielding three ounces to the ton, have been found, and that the necessary machinery must be sent out at once. This is followed up by an editorial leaderette (of course, paid for), in which the writer expresses surprise that the shares of so promising an enterprise should be at so low a price, and predicting a rapid advance when the work is further developed. These notices effect their purpose to the extent of rais- ing the quotations of the shares a few shillings, but this is not enough for the promoter; a cir- cular is next issued, in the usual way, to the effect that the directors have been fortunate enough to secure additional property near their own, which furnishes wood and water, so essential to the proper development of the mine, and including, moreover, alluvial pits abounding in gold. An elaborate lithographed sketch of the property, with mines at work and a steam-engine, accom- panies the circular, and the whole presents an appearance of real business. The next move is the statutory meeting of the shareholders, which, however, is very sparsely attended, as the vic- tims are chiefly people residing in the country, who do not care to incur the expense of a journey to London. The man who presides at the meet- ing, an outside broker, begins a speech by apologising for the absence of the chairman of the company (of whom the shareholders hear for the first time), and then goes on to describe with tedious detail the technical working of the mine, the stopes and veins, and bunches of gold that there are, and the stamps, machinery, &c., that there are to be. He describes what has been done in the alluvial pits, and the prospect of wealth to be drawn therefrom as beyond the dreams of avarice, and winds up with warm con- gratulation of the proprietors on the valuable property they possess. Whether he has over- done his part or something prejudicial to the company leaks out, the shares which had changed hands at 10s. gradually drop to 5s. Then a circular goes the round in which some member of the ring of knaves invites the public to join a syndicate to buy up five thousand of these shares which he has, through peculiar circum- stances, been able to secure the refusal of at 4s. a share. A special meeting of the shareholders is next called, when it is announced that more capital is required, and that it will be necessary to pay up the one shilling per share which still remains outstanding. A last desperate effort to get rid of the shares at any price is then resorted to before the call of one shilling per share becomes payable, and some thousands are offered at one shilling and sixpence each. After the time has expired for paying the call, a last circular is issued, intimating briefly that the eminent engineer, who has originally given such a glowing account of the mine, now reports that there is no present indication of gold on the property, but that possibly some might be found if they dug deep enough!
The name of the company has disappeared from the mining share list, and it will be heard of no more. It is doubtful if there ever was any property, or engineer, or board of directors, or, in fact, anything more than the outside broker and his confederates.
Of the bona fide speculative undertakings in South Africa and Australia, the exploration and finance companies, or some few of them, have made the largest profits. Their system, broadly speaking, is to acquire certain tracts of land in a gold-bearing district, and then let small portions on lease to different subsidiary companies, which have been floated to develop gold or whatever else these portions may con- tain. The price paid to the parent company is made up of; perhaps, one half in cash and the other in the shares of the new concern. An im- mediate profit accrues from the payment in cash, and there is a wide field for further gains if the operations of the subsidiary companies are suc- cessful. But in this, as in all speculative enter- prises, the prizes have been few and the blanks many.
CHAPTER IX. LIFE INSURANCE.
LADIES do not take advantage of the system of life insurance to the extent one would expect, seeing the benefits it is capable of conferring upon themselves and their belongings; and as their indifference is no doubt, in many cases, owing to a want of knowledge of the subject, a chapter thereon may be useful.
Life insurance is an admirable system, devised, in all its ramifications, to provide against loss or damage through the various contingencies to which human nature is subject.