Fifty years in Wall Street
ought to do.
“Buy,” said the broker.
“But I don’t want to buy; I have got more now than I want.”
“That is all right; buy anyway; that will make a market for the stock,
and you can unload when the time comes.”
“How much must I buy?”
“Oh, about $250,000 worth.”
“But I have not got $250,000 in cash to go and buy rubber stock.”
“Well, you can borrow it; a man in your position, Mr. Bannigan, will
have no difficulty in borrowing $250,000.”
Much against his will the old man was finally persuaded to do as he was
told. About two weeks later the broker wrote to him that he must buy
some more—this time $200,000 worth. Mr. Bannigan used rather strong
language, but finally yielded as before. He borrowed $200,000 and turned
it over. With this additional capital to work on, the broker continued
to manipulate the market. The insiders soon discovered that some strong
party was buying, but they did not know who, Bannigan having carefully
kept himself in the background. His broker operated skillfully in the
stock, one day buying, the next selling, to keep the stock active. The
broker after a while began to borrow large amounts of the stock. This
convinced the insiders that there was a big short interest somewhere,
and they got together in order to squeeze the shorts. The inside holders
who controlled most of the stock combined to squeeze “the shorts” out.
In furtherance of this plan they put the price up to 61, and at about
that figure Bannigan’s stock was all unloaded. Bannigan now found
himself full of money, while the other fellows were filled up with his
stock. They never awakened to the fact that the president had sold out
on them until his shares were delivered against their purchases, as they
thought, of “short” stock. Rubber broke and did not stop tumbling until
it had gone from 61 to 16.
This deal had all the elements of a comedy-drama, and the playwright who
can do it justice will find material there which will make him an
everlasting fortune and reputation.
It is not often, however, that newcomers in the Street fare as well as
this in the end. For a time they will go on merrily enough, and send
things booming, but in the end most of them get the worst of it. At the
risk of repeating myself, I will say here:
Mr. A. B. Stockwell is a good illustration of the truth of this. At one
time he was worth many millions of dollars. His start in life was as a
purser on a Lake Erie steamboat; his father, it is said, kept a livery
stable in Cleveland. On one of his trips Stockwell was in a position to
show considerable attention to Elias Howe, the inventor of the eye at
the top end of the sewing-machine needle. Mr. Howe was accompanied by
his daughter. Stockwell made himself agreeable to Miss Howe also, and
with such good effect that he managed to win her affections, and soon
thereafter married her.
When Mr. Howe died, Mrs. Stockwell came into possession of her father’s
millions. With this nest egg Stockwell started in Wall Street, and
before anyone realized what had happened he was the most talked-of man
in the district. He put all his wife’s millions in Pacific Mail stock,
secured entire control of the company and elected himself its president.
He came into the Street as plain Stockwell. Then, as the news of his
liberality and good-fellowship spread, he became Mr. Stockwell. After he
got hold of the Pacific Mail he was Commodore Stockwell by common
consent. Everybody bowed and scraped to him, and no man was so high and
mighty that he was not proud to shake his hand.
Stockwell took hold of Pacific Mail at about 40 and sent it up to 107.
It was at this period that he was worth on paper over $15,000,000. But
he found, unfortunately, when it was too late to retreat, that though
Pacific Mail was up to 107 it was not worth that figure when the
unloading commenced.
He was landed high and dry with it all, and the Street told him he was
welcome to it. He tried to sell, and found that there was no market.
Then came violent demands on him to pay up his numerous call loans, and
in order to respond he had to sell regardless of price, and thus a
whirlpool was created which finally sent the stock down to the price at
which he had begun his original purchases. In this one upset he lost all
his paper profits and his wife’s millions besides. That was the most
famous boom in the history of Pacific Mail, notwithstanding Leonard
Jerome’s previous brilliant ups and downs in that property.
Leonard Jerome and his brother Addison had a good time with Pacific Mail
for a while. They ran it up to high figures several times, but finally
met with the same experience that Stockwell did. The two Jeromes, from
being among the wealthiest and most dazzling operators in the Street,
were in the end practically wiped out. Leonard Jerome, who was the
father of Lady Randolph Churchill, had nothing left to bequeath his
daughter except an equity in the house now occupied by the Manhattan
Club on Madison Avenue, which yields an income of about $15,000 a year,
of which Lady Churchill gets $10,000.
These are a few of the booms that have stirred up things in Wall Street
at one time or another, as did the Keene, the Gould, and the Vanderbilt
booms, and the rest I have mentioned.
------------------------------------------------------------------------
CHAPTER LXVIII.
WALL STREET’S WILD SPECULATION, 1900-1904.
MCKINLEY’S REËLECTION AND THE DEFEAT OF BRYANISM SET THE BIG BALL OF
SPECULATION ROLLING ON THE STOCK EXCHANGE.—THE TREMENDOUS VOLUME OF
SPECULATION BY BOTH LARGE AND SMALL CAPITALISTS.—THE RUSH TO
INCORPORATE NEW COMPANIES AND CREATE INDUSTRIAL TRUSTS AND RAILWAY
COMBINATIONS.—THE ENORMOUS CAPITALIZATION OF THE UNITED STATES STEEL
CORPORATION AND OTHER COMPANIES IN EXCESS OF REAL VALUES.—THE RAPID
GROWTH AND POPULARITY OF NEW AND OLD TRUST COMPANIES AND THE EFFECT
OF THEIR COMPETITION IN FORCING BANK CONSOLIDATIONS.—THE BOLD AND
RECKLESS SPECULATIONS IN RAILWAY STOCKS OF THE NEWLY ENRICHED
WESTERN CAPITALISTS.—THE GREAT NORTHERN PACIFIC PANIC OF MAY 9,
1901.—THE CAPTURE OF CONTROL OF THE LOUISVILLE & NASHVILLE RAILWAY
BY JOHN W. GATES, AND ITS REDEMPTION BY J. P. MORGAN & CO., ACTING
IN THE INTEREST OF THE LOUISVILLE & NASHVILLE AND SOUTHERN
RAILWAY.—THE SLOWING DOWN OF WILD AND RECKLESS SPECULATION IN STOCKS
AFTER SEPTEMBER, 1902, THROUGH THE INFLUENCE OF THE BANKS AND
CONSERVATIVE BANKERS, THUS AVERTING FURTHER INFLATION AND A GREAT
CONVULSION.—THE LIQUIDATION AND DEPRESSION OF 1903 A NATURAL
REACTION FROM THE INTOXICATION OF THE PRECEDING PROLONGED BOOM.—THE
GREAT RISE IN COTTON AND THE COLLAPSE OF THE TREMENDOUS BULL
SPECULATION LED BY DANIEL J. SULLY WHEN HE FAILED.—THE SUDDEN FALL
IN THE IRON BAROMETER IN 1903, AND THE GENERAL SITUATION IN 1904.
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