Fifty years in Wall Street
sold his wagons and harness and made up a pack train over the mountains,
and, arriving in San Francisco, sold his teams at good prices. His trip
had been a complete success. He now went into the hotel business, and,
after selling out twice to good advantage, he formed a partnership to
engage in the brick trade, which, proving very successful mainly through
his skill in drumming up business, he decided to go into it alone. He
himself knew nothing about brick making, but he studied up the subject
and eventually became an expert. He obtained remunerative contracts with
the Government; he boarded his men and made for a time about fifteen
hundred dollars a month. He finally sold out and went into the livery
business. He made money and invested considerable in real estate. He
sold out and went to Virginia City, Nevada, at the breaking out of the
mining excitement there. At that point he started a lumber yard. He
speculated in mines and met at times with great success, but once he was
so badly worsted in this great game that he was compelled to mortgage
all of his property; but the tide turned soon and became a flood of
gold. He speculated in such mines as the Crown Point, Belcher,
Consolidated Virginia, California and Ophir. He acquired at one time the
controlling interest in the Ophir. He has speculated heavily in San
Francisco real estate, and with marked success. He erected a building
there that cost, with all its appurtenances, over three million dollars.
Part of it is used as a theatre. He bought sixty thousand acres of land
in Los Angeles county, and had practically a town of his own. He spent
about half a million dollars improving this tract, more particularly his
Santa Anita ranch of over fifteen thousand acres. His sagacity and
industry, rather than mere “luck,” have won him his fortune of ten or
fifteen million dollars.
WILLIAM H. STEWART.
William H. Stewart, another successful man of the Far West, who has
twice represented Nevada in the United States Senate, was a New York
boy, born in Wayne county in 1827. A good many New York boys have
succeeded in the West. He went to California early in 1850. In the fall
of that year, while prospecting, he discovered the Eureka placer
diggings; he built saw mills, worked claims because disgusted with
mining, went to Nevada City in the spring of 1852, and in December of
that year was appointed District Attorney, was elected to that office in
the following year, and in 1854 was appointed Attorney General,
thereupon taking up his residence in San Francisco, where, by the way,
he married a daughter of ex-Governor Foote, of Mississippi. Later he
returned to Nevada City and established a very lucrative law practice,
and remained in that county till the spring of 1860, when the furore
over the Comstock mines induced him to go to Virginia City, Nevada. He
thoroughly understood mining law, and soon had a large practice. The
large sums which his legal talents brought him were invested in mines,
and he became one of the leading operators on the Comstock lode. He
invested half a million dollars in San Francisco real estate. He
rendered important services to mining interests while in the United
States Senate, in preventing the passage of a bill providing for the
sale of all the mineral lands of the country at public auction, a
measure which it was supposed would concentrate much of the mining
property of the United States into the hands of the wealthy.
JAMES LICK.
James Lick, born in Pennsylvania in 1796, was one of the strange
characters of California. He went there in 1847, after having been a
manufacturer of pianos in this country and different parts of South
America. He took $30,000 to San Francisco, which he invested in real
estate, foreseeing that it was to become the great city of the Pacific
Slope. He bought lots by the mile. His profits were enormous. He became
one of the great millionaires of California. He set aside $2,000,000 in
1874, to be held by seven trustees, and to be devoted to certain public
and charitable purposes. In 1875 he desired to make some changes in his
schedule of gifts, and when the trustees expressed some doubts as to
their legal right to give assent, at his request they resigned. The next
year he died, and then followed a litigation by his son and other heirs,
which was finally so adjusted as to leave a large sum to be devoted to
various public and charitable projects. He left $60,000 to be devoted to
a statue of Francis Scott Key, the author of the “Star Spangled Banner.”
He was very eccentric, due, it is said, to an early disappointment in
love. He sought the hand of a miller’s daughter, but was dismissed by
the father, because young Lick did not own a mill. When he became
enormously wealthy, James Lick built a large mill, and adorned it with
mahogany and costly woods as a memorial of his youthful attachment. He
seemed to derive almost childish pleasure in contemplating this splendid
building, which would have so far outshone any that could ever have been
owned by the man who had once spurned him for his poverty. The poor
young men of one generation are often the millionaires of the next. One
of the great monuments to his memory is the great Lick Observatory.
JOHN W. SHAW.
John W. Shaw, who made considerable money in mines and mining stocks, is
one of the Western millionaires who reside in New York. He was a
superintendent of mines, and speculated on his information. He was at
one time prominently identified with the Eureka Consolidated mine. He is
supposed to be worth $4,000,000 to $5,000,000, and is now President of
the Hocking Valley Road. Messrs. Keene, Lent, Dewey, Harpending,
Verdenal and other more or less successful men well known in California,
live here. One of the distinguished lawyers of the West who have come
here to establish a practice is ex-Governor Hoadly, of Ohio. Austin
Corbin, though at one time a lawyer in Iowa, found his true field in New
York, and Alfred Sully, after amassing some means in the same State,
likewise found himself drawn to New York, and won unexpected success in
finance here.
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CHAPTER XLIII.
RAILROAD INVESTMENTS.
VASTNESS OF OUR RAILROAD SYSTEM.—ITS COST.—FALL IN THE RATE OF
INTEREST.—TENDENCY TO A FOUR PER CENT. RATE ON RAILROAD
BONDS.—EFFECT OF THE CHANGE ON STOCKS.—PROSPECTIVE SPECULATION.—SOME
SOCIAL INEQUITIES TO BE ADJUSTED THROUGH CHEAPER TRANSPORTATION.
There are, perhaps, few who distinctly realize the magnitude of the
amount of capital invested in the railroads of the United States. The
immense area over which our population is distributed necessitates a
much greater length of railroad, as compared with inhabitants, than
exists in any other nation. In 1884 we had, according to “Poor’s Manual
of Railroads,” no less than 125,380 miles of road within the United
States, which exceeds the entire mileage of Europe. This was required to
provide for the travel and transportation of about 54,000,000 of
population, while Great Britain, France, and Germany, with their
combined population of 120,000,000, had in the same year about 60,000
miles, and Russia, with some 85,000,000 of people, had only about 19,000
miles.
It can hardly be a matter for boasting that we have found it necessary
to provide such a disproportionate length of road to accommodate the
wants of trade and travel; for the more capital we have to invest in the
facilities for carriage the less we have for investment in the means for
production, and the more we have to pay for transportation service the
worse is our position for competing with other nations. This,
undoubtedly, is a much more important factor than is generally allowed
in the question of our ability to command a share in the world’s
international commerce proportioned to the extent of our population.
The cost of our railroads, as indicated by the capitalization statements
of the Companies in 1884, is represented by $3,669,116,000 in bonds and
$3,762,016,000 of stock. As shown in another chapter on “Railroad
Methods,” the actual cash outlay in construction and equipments is very
much less than these figures; but the roads aim to earn an investment
return on these enormously inflated amounts, and do so as far as they
may be able.
Elsewhere in this volume I have shown how the effort to earn dividends
upon hundreds of millions of fictitious railroad capital is imposing an
unjust tax on the people, retarding the growth of national commerce and
creating a distinct millionaire class not without danger to our
political future; and I wish here to refer to one fact from which we may
hope for some mitigation of this pernicious tendency.
Within recent years it has become very clear that a large permanent
reduction has been effected in the rate of interest on fixed capital.
Perhaps, the principal causes of this change has been (1) the high
credit of the Government, represented by a 3 per cent. rate of interest
on its loans; (2) diminution of the element of risk in our corporate
enterprises; (3) the more developed and consolidated condition of our
industry; and (4) the growth of the national earnings in a ratio
disproportionate to the new undertakings inviting capital. To such an
extent has the loanable resources of the country increased that, whereas
ten to fifteen years ago we found it necessary to borrow in other
countries a large portion of the money needed to build our railroads, we
are now almost entirely independent of European lenders, and are
beginning to invest in the construction of roads in Canada and Mexico.
Thus comes about the fact that, while the bulk of the new outstanding
railroad bonds bear interest at 6 to 7 per cent., with exceptions at 5
and 8 per cent., there is no difficulty in now negotiating the mortgages
of sound railroads at 4 per cent., and that may be safely regarded as
the future rate for all meritorious loans. It is not difficult to see to
what course of things this fact points. If new roads can be built on a 4
per cent. ratio of interest charges, then the new constructions on that
basis and the gradual replacing of maturing loans at the same rate will
very quickly establish a competition between roads thus situated and the
large mass of companies burdened with the old high rate of interest that
will bear very seriously on the latter. To a company with, say,
$40,000,000 of bonded debt, it is a matter of a difference of $800,000
per year in fixed charges whether it pays 6 per cent. interest or 4 per
cent. This difference will be so vital in cases of competition between
high rate roads and low-rate ones, that it will leave no choice, with a
very important proportion of our railroads, between facing financial
embarrassment and taking immediate steps for readjusting their debts to
the new and lower rate of interest. As an important proportion of the
original bonds issued 25 to 30 years ago at 6, 7, and 8 per cent. rate
by the older roads are now beginning to mature very rapidly, a large
extent of high-rate debt will from this time forward be transmuted into
4 per cent. bonds, which will add force to the tendency here indicated.
Some important results must follow from this new drift in railroad
investments. One of the effects would naturally be a diminution of the
current high rate of premium on the old bonds, which has become, so
adjusted as to yield, in most cases, a return of 4 to 4½ per cent. on
the market value. Holders of this class of bonds will perceive that the
companies cannot long sustain the burden of their present high rate of
fixed charges, and will soon come to discount in advance the inevitable