The morning news. [volume] (Savannah, Ga.) 1887-1900, 1891-11-13
BENEFITS OF SPECULATION.
What a Wall Street Man Has to Say
About Wall street Business.

About Wall street Business.
NEW ORLEANS, Nov. 12.-The following
is an extra from the address Of George
Rutledge Gibson Of New York city. on Wall
street, delivered to-day before the American
Bankers Association, now in session here, on
The Principles and Benefits of Specula
tom:
Now, / am at oncs met with the possible
criticism that Wall street is merely the seat Of
an uuproductive, useless and injurious specula-
ton. / want for an instant to debate this point,
| 70 see whether the common judgment OF un-
| thinking people may not do an injustice TO this
/ portion OF the financial mechanism. Large IN
| dertakings require large capital, and to accom-
plish great industrial results 1t is necessary TO
mass capital. The fortune of no individual
| would be ample to set in motion the forces
| which have produced the prodigious results of
| modern material civilization Tne subdivision
| Of the title of ownership Of such great engines
| Of progress as manufacturing, Shipping, min
| ing, banking, trading, telephone, telegraph.
| cable water and gas companies is indispensable
to their organization and operation.
About forty years ago the application of the
| principle of limited liability was applied to
/ corporations, and men found that they could
/ employ portion of their capital in undertak
| ings which were not Immediately under their
| control, and for the success OF which they were
| not wi ling to leopard their entire personal
| fortunes. This method resulted in the forma-
| ton OF an immense number OF companies, or
| gdnlLeQ 1OT all manner OF financial, INDUSTRIAL
| and commercial purposes. 1t was necessary
| that there should be some common market
| place for the shares and debentures of these
| corporations and the stock exchange naturally
became the common grouud upo1 which buyers
ana sellers of such obligations met. In view of
the fact that the success of thess corpora
tons depended upon great variety of Infiu-
| ences, it is natural that there should be much
| tiuctuation of feeling concerning the profits
which they may hope to return to the holders
OF their securities. individuals naturally make
| different estimates of the Importance of given
events; they make different forecasts as to the
future; they have different ideas as to the
state of sentiment regarding these enterprises,
all OF which factors unite TO make a sensitive
fuctuating market for the shares and bonds of
such of these corporations may attract the
attention aud operations of numerous dealers
The principle of speculation is inherent in al
business; 1t is, indeed, but another name for
foresight and progress. 1t expresses itself per-
haps more quickly and papably in a stock ex-
change than in purely commercial circles, just
as wave of heat registers Itself more quickly
| on bulb of mercury than upon bar OF iron;
but the heat is there exactly the same in both
| instances. The merchant endeavors to read the
/ future and prepares himself for it; the manu-
facturer sells his goods in advance Of their pro-
| duction; the contractor agrees TO build house
| before he owns plank or board or nail-or
| TO build railway before he buys a
| croSstie. a rail, or a shovel; the cotton
manufacturer sells the sheetng and the iron
manufacturer his steel rails before the cotton is
grown or the ore extracted from the mine; the
importer in the city. and the retail dealer in the
country town, equally according TO his means
and his Information, buys more goods before
an increased tariff goes into effect than he
would buy to meet his ordinary demand. I'm
fortunately for them, however, they are not
| always successful in their endsavor to forestall
commercial events and conditions.
The farmer who markets only enough of his
| wheat or the planter of his cotton to meet i'm,
mediate cash necessities, and wlthhods the re-
mainder because he expects higher prices for
| his product, and not because he wishes to CON
| sumo such surplus, is morally as much OF a
Spectator as the person who, also with view
| of reseling, tries to buy the farmers wheat or
| the planter cotton at current prices
| The Bank of England, that Gibraltar of con-
| servatsm, which occasionally goes into the
| London money market to borrow on its consols
| for the purpose of stiffening the rate for money
| by absorbing the supply of loanable funds per
| forms speculative act as dstinctively as Van
l derbilt. a large owner of Lake Shore would
i perform II he went into the stock exchange and
/ purchased all of that stock floating on the
market in order to create higher quotations and
q better market
The man who buys railroad stock or bond
because he believes the traffic along the line OF
| that particular railway will be large and remu
| nerative exercises precisely the same kind and
| quality Of business judgment that the real
| estate dealer exercises when he buys farm land
| or city lots in anticipation of a better demand
| for breadstuffs or increased building accommo
| dations But it is said that Wall street goes
| further than this and sells stocks short-as if
| there we're involved in this a principle not
| present in greater or less degree throughout the
| entire commercial world. OF course one cannot
| sell an individual piece of farm land or an indi
| vidual city lot short by reason of physical lui
tations, whereas he can go short of the stock
| OF corporation If he can borrow the certh-
| Gates, for the reason that any one share of
stock is of the identical character and value of
| any other share. One can sell merchandise
| short, as IN the instance which have lust cited
| where the contractors or manufacturers sell
| for delivery at future date finished produces
the raw material of which they do not own at
the time that the contract to sell is made.
John Stuart Mill, writing of the influence of
| industrial progress on prices, gives a high
economic view of speculation. He says: when
speculation in commodity proves profitable
TO the spectators as body, it is because in the
| interval between their buying and reselling the
price rises from some cause independent OF
them, their only connection with it consisting in
| having foreseen it. In this case their purchases
make the price begin to rise sooner than it
otherwise would do, thus spreading the priva
ton of the consumer over longer period but
mitigating It at the time OF its greatest hight;
evidently to the general advantage. =
The interest, in short, OF the spectators as a
body comedies with the interest of the public
and as they can only fail to serve the public in
terest in proportion as they miss their own, the
best way to promote the one is to leave them to
pursue the other in perfect freedom
One OF the best examples of the adverse
effects OF attempted legislative repression of
speculation Is the result Of the act of congress,
approved June II, 1864. entitled "An act to pro-
hibit certain sales of gold and foreign ex.
Cnahso. LUIS act ue'cHiTeu unlawful all trans
actions in gold for delivery any DAY subsequent
to the day of sale, and in order that any trans.
actions might be lawful they should be con-
Quoted at private place of business and hence
not in an exchange. Transactions outside OF
this law were to be void and q misdemeauor.
Well, the result was that on June 1s, the day
following the approval of the act the premium
on gold was 9514, and by June y
that premium rose TO $50 per cent. Be-
tween the date of its passage there were
no sessions or transactions in the gold room
AS there was no open market where sellers and
buyers could meet in open competition, and as
Offices could exact pretty much apy price they
pleased, the depreciation Of the paper money
OF the government was aggravated instead of
mitigated by this worse than futile piece of
legislation. Only one thing was to be done. re-
peal the act in restraint of trade, and on July 2
sixteen days after its passage, this obnoxious
law was repealed.
|
| A nIea -raapoap+ in Tho yTroo.4-,.a r -