Some terrible failures occurred in the Stock Exchange during the Spanish panic of 1835. A few facts connected with this disastrous time will serve excellently to illustrate the effects of such reactions among the speculators in stocks. A decline of 20 or 30 per cent. in the Peninsular securities within a week or ten days ruined many of the members. They, like card houses in a puff of wind, brought down others; so that in one short month the greater part of the Stock Exchange had fallen into difficulties. The failure of principals out of doors, who had large differences to pay, caused much of this trouble to the brokers. Men with limited means had plunged into what they considered a certain speculation, and when pay-day arrived and the account was against them, they were obliged to confess their inability to scrape together the required funds. For instance, at the time Zumalacarregui was expected to die, a principal, a person who could not command more than £1,000, "stood," as the Stock Exchange phrase runs, to make a "pot of money" by the event. He speculated heavily, and had the Spanish partisan general good-naturedly died during the account, the commercial gambler would have certainly netted nearly £40,000. The general, however, obstinately delayed his death till the next week, and by that time the speculator was ruined, and all he had sold. Many of the dishonest speculators whose names figured on the black board in 1835 had been "bulls" of Spanish stock. When the market gave way and prices fell, the principals attempted to put off the evil day, says a writer of the period, by "carrying over instead of closing their accounts." The weather, however, grew only the more stormy, and at last, when payment could no longer be evaded, they coolly turned round, and with brazen faces refused, although some of them were able to adjust the balances which their luckless brokers exhibited against them. Now a broker is obliged either to make good his principal's losses from his own pocket, or be declared a defaulter and expelled the Stock Exchange. This rule often presses heavily, says an authority on the subject, on honest but not over-opulent brokers, who transact business for other persons, and become liable if they turn out either insolvent or rogues. Brokers are in most cases careful in the choice of principals if they speculate largely, and often adopt the prudent and very justifiable plan of having a certain amount of stock deposited in their "strong box" as security before any important business is undertaken. Every principal who dabbles in rickety stock without a certain reserve as a security is set down by most men as little better than a swindler.
During the rumours of war which prevailed in October, 1840, shortly before the fall of the Thiers administration in France, the fluctuations in Consols were as much as 4 per cent. The result was great ruin to speculators. The speculators for the rise—the "bulls," in fact—of £400,000 Consols sustained a loss of from £10,000 to £15,000, for which more than one broker found it necessary, for sustaining his credit, to pay.
The railway mania produced many changes in the Stock Exchange. The share market, which previously had been occupied by only four or five brokers and a number of small jobbers, now became a focus of vast business. Certain brokers, it is said, made £3,000 or £4,000 a day by their business. One fortunate man outside the house, who held largely of Churnett Valley scrip before the sanction of the Board of Trade was procured, sold at the best price directly the announcement was made, and netted by that coup £27,000. The "Alley men" wrote letters for shares, and when the allotments were obtained made some 10s. on each share. Some of these "dabblers" are known to have made only fifty farthings of fifty shares of a railway now the first in the kingdom. The sellers of letters used to meet in the Royal Exchange before business hours, till the beadle had at last to drive them away to make room for the merchants. There is a story told of an "Alley man" during the mania contriving to sell some rotten shares by bowing to Sir Isaac Goldsmid in the presence of his victim. Sir Isaac returned the bow, and the victim at once believed in the respectability of the gay deceiver.
With the single exception of Mr. David Ricardo, the celebrated political economist, says Mr. Grant, there are few names of any literary distinction connected with the Stock Exchange. Mr. Ricardo is said to have amassed his immense fortune by a scrupulous attention to his own golden rules:—
"Never refuse an option when you can get it;
Cut short your losses;
Let your profits run on."
By the second rule, which, like the rest, is strictly technical, Mr. Ricardo meant that purchasers of stock ought to re-sell immediately prices fell. By the third he meant that when a person held stock and prices were rising, he ought not to sell until prices had reached their highest, and were beginning to fall.
ON CHANGE. (From an Old Print, about 1800. The Figures by Rowlandson; Architecture by Nash.)
Gentlemen of the Stock Exchange are rough with intruders. A few years since, says a writer in the City Press, an excellent clergyman of my acquaintance, who had not quite mastered the Christian philosophy of turning the right cheek to those who smote the left, had business in the City, and being anxious to see his broker, strayed into the Stock Exchange, in utter ignorance of the great liberty he was committing. Instantly known as an interloper, he was surrounded and hustled by some dozen of the members. "What did he want?" "How dared he to intrude there?"