Savannah morning news. [volume] (Savannah) 1868-1887, 1882-10-20
THE STOCK MARKET.
Business View of the Intrinsic Value of
Railroad Securities.
Boston Herald.

DCoSOft deTUtQs
The present condition Of the stock market
is one well calculated to perplex would-b be
investors. Last-vear at this time II was well
understood that the crops throughout the
country were far below the average Weld,
and, consequently, the demand made upon
the railroads for their movement would
be much less than it had been during
the season then closing. Besides this, ss
the farmers would have less money to
spend, the movement of manufactured
wares to the South and West would show q
relative falling off. In anticipation of q de-
cline in business, there was decided depre-
citation in the selling price Of almost all of
the railway shares OF this country, when
compared with their market value IN the
spring and early summer of 1881. As these
prices are largely controlled by speculation,
1t was only natural that the decline should
be, In appearance, at least, greater than the
ostensible reasons for the change warranted.
Looked at from a purely mercantile
point of view, It is absurd
that a temporary loss of business
which threatened to impair, for twelve
months or so, the dividend-pRying power Of
a railroad company, should produce de-
cline of 25 per cent. or more In the selling
value of its stock. 1t may be that in the
first instance the value was undulV in
flated, but It is also probable that
from one extreme to another. The true
value of railway shares depends upon the
ability of the company to pay through
series of years regular dividend, and also
upon the possible augmentation of fits divl-
dend. paying powers by an increase In
traffic, arising from the steady growth OF
the country. In the stock market an at
tempt Is always made-sometimes unwisely
to discount future conditions; but, as we
have indicated, the tendency is to exsgger-
ate both the favorable and unfavorable
features IN these conditions.
When the assurance was given OF gen
.erous harvest throughout the country, the
prices In the stock market instantly felt the
effect of this encouragement, and, in the
latter part Of the summer, there was rise
all along the line. There was, to be sure,
justification in this, for, apart from the
earnings OF the various roads, the facts
pointed toward a more prosperous era IN
general business, which would supply
many with the means they have
not recently possessed of making in
vestments in stocks. In other words,
good times might occasion a more vigorous
competition among the buyers of stock.
But it hardly seems reasonable that this
should occasion appreciations In value TO
the extent of the probable return in divi-
dends for two years or more. Within the
last few weeks the tide has turned in the
other direction. There is tightness in the
money market as there always is at this
season of the year, when the crops have to
be moved, and in consequence, chiefly, of
this, stocks have declined so as to part
with nearly all the grain made two or three
months ago. OF course this last fall as
we'll as the previous rise, has been brought
about by the immediate action Of stock op
orators; but these have in both instances
had plausible basis upon which to work.
q In fho
market may be an interference more or less
serious; but that it should in the last week
occasion an apparent depreciation In the
value OF railroad shares to the aggregate OF
tens of millions Of dollars is giving wholly
disproportionate importance to this inter
ference so far as the legitimate investor is
concerned.
The latter individual cannot be too often
reminded that in railroad shares there is a
speculative and an actual value, which may
be widely apart from each other. An in
stance OF how wide this difference may be
was given last week in a kindred object of
speculation. The price of wheat for Sep
tember delivery was held at about ten cents
per bushel higher at Chicago than the
price of wheat for October delivery. There
was, of course, no reason beyond specula-
tion, why wheat delivered last Saturday
should be worth any more than
wheat delivered to-day. In this instance
the profit to quite an extent, went to those
farmers who were in a position to hurry
their grain into market, and the sufferers
are those who had sold wheat for Septem-
Der delivery at low prices, though, If these
were farmers, they at least got what was q
fair market value for their product. While
speculation, both in wheat and railroad
shares, is contest fn which Spectators are
the chief sufferers, it is unfortunately true
that In the latter the large operators often
depend for the success Of their movements
on the effect which their specula-
tions will have on legitimate holders of
stock. In the case OF the Manhattan Ele-
waited Railroad, some time since, the raid
was made on the stock for the purpose of
inducing bona fide holders of it to sacrifice
1t in the hope Of preventing a yet greater
loss. To large extent these are the tactics
which are now being pursued in regard to
several railroad corporations. IL one were
to believe the rumors that are sent out over
the country from Wall street, New York,
number OF the companies In which
thousands OF persons of moderate means
have small holdings, are on the verge
OF bankruptcy, and when they pay dividends
are borrowing the money to pay them with.
It need hardly be said that these repor,s are
as untrustworthy as anything well can be.
The intent of those who issue them is not to
warn honest and innocent holders,
but to so far frighten these that, by
forcing sales of their small holdings,
they will aid In bear movement in stocks,
Whether the price at which stocks are sell
ing is low or high, when their actual worth
is considered, we do not pretend to say;
but, to arrive at fair cQnclusion on this
subject, some other authority must be
taken beside that OF interested stock opera
tors. On general principles, it may be said
that there is nothing in The present outlook
which would warrant the supposition that
the actual value of railroad shares will be
less six months hence than they are now,
whatever changes may in the meantime
occur in their speculative value.