The sun. [volume] (New York [N.Y.]) 1833-1916, 1897-09-20
ynr ORIGIN OF rANrcs.

makes the luulClpus hppEClenSlN0 OF future |
trouble. Not for years have prices risen 90 fast
,rs so far, nor the volume OF transaction, |
b.en so LARGE as they have during the last
four weeks. On Thursday the trading In stocks
amounted to 662.l97 shares. and In bonds 10 |
a. -4a. 900. the totals for tho week being $780,
600 shares and Sl7. SOC, 900 In bonds. The
.tocks foremost in the movement have been
those Of the local gas companies, Consolidated
having reached on Thursday tho unprecedented
suotation OF 242. Mutual 400. Standard 40,
and Brooklyn Union l36. Standard Oil certin.
Gates also took n fresh start and went up TO over
$50. The railroad share market was not 30 ram
p.nt, but the high prices OF week before last
Nere more than sustained. and the buying was
extensive, An upward tendency il also visible
IN the anthracite coal stocks, proceeding from
ru,nors OF a coming rise in the price of coal.
slight effort OF memory only is needed to re-
sal a similar state OF things prevailing during
the few months which preceded the crash Of
Is 90. People bought stocks then as eagerly and
at as inflated prices as they are buying them
now. For New Jersey Central they paid as high
as $50; FOR Long Island Railroad, lis; for Man.
haitian Elevated, 172; for New York and New
Haven Railroad, 800; for General Electric, ia;
for National Cordage. T5; and even for Union
Pacific. A.. The same s~pecious arguments wero
used on behalf OF these prices that are used now
10 advance the favorites of the moment. New
Jersey Central was to get large and assured div
idends from the lease OF its property to the
Reading Railroad Company; New York and
New Haven was to profit immensely from
its acquisition OF the Old Colony sys-
ten: the earnings OF General Electric were
rcrorted TO be far beyond the amount needed
to pay : per cent. on its stock: the Long
Island Railroad was to pass into the hands OF
the Pennsylvania Railroad Company; Manhat.
tan was TO increase its dividends to 10 per cent.
per annum. and its stock was to sell at 200; Ma.
tional CordaGe doubled It's nominal capital on
the strength of great expected earnings from
the manufacture Of binding Irvine, while Union
Pacific had seen its worst days and would
shortly again become q dividend payer. How
grievously all these representations failed the
record shows. On Feb. 90, 1898, the Reading
Railroad company went into the hands OF a re-
ceiver, and with 1t went the inflated value of
New Jersey Central stock; the Long Island
Railroad was not sold to the Pennsylvania
Railroad COMPATIBILITY for that concern, as
recent investigation has shown that the Long
Island was not earning the dividends It paid.
Manhattan Elevated. instead of increasing Its
dividends to 10 per cent. per annum, had to re-
duce them to 1 per cent. and its stock, instead
OF rising to zoo. fell below so. New York and
New Haven has had hard work to make 8 per
cent. ClVlQeDCS instead OF inc ~ IL was paying
In 1893. General Electric has paid no dividends
ut all since 1898; National Cordage has been
eItinguished completely. and before 1898 ended
Union Pacific was insolvent.
OF course. these catastrophes are not to DO
accepted as infallible presaGes Of similar ca
tastrophes for tho companies which are now In
as high favor as were the wrecks OF 1898. In
deed, the history Of American Sugar. OF Standard
Oil, and Of the gas companies of New York and
Brooklyn proves that Q high price does not
necessarily 60 before destruction nor popularity
before . fall Still. when ono hears people talk
ing of Q consolidation which Il going to triple
the volume Of . eompany's capital. a. II such .
consolidation were sure to triple the value Of the
property, and Of doubling railroad dividends on
the strength Of slighs actual increases Of earn
inEs, It Ii impossible not to b apprehensive that
the result win DO disappointment
For example, the Consolidated Gas Company Of
this city has been earning. recently, about 9 per
cent. per annum on its capital OF S35, ooo. 900, and
dividing g The rumor prevails that tho COM
pany II TO DO taken into Q combination with
certain other city gas companies on the basis of
$50 per cont In o per cent. bonds, 100 per cent.
In preferred stock and 100 per cent In common
stock. making $50 per cent. altogether. On the
basis Of this rumoP buyers arc found for the
present stock at about TAO. although the annual
kC0uCb3on VI ~ pEACo ~ ga VI SSnIo pcE luou-
sand cubic feet will. On the companys annual
outputof 10. 600. 900 thousand feet, take $500. Ooo
from this years profits and In the year 1901
will take from than 81. 100000. II the company
10 now earning even 10 per cent on its capital.
Or %. SOC. 900. and Its earnings do not increase,
II can divide In 1901 and thereafter but 81 .o0o..
600. or 8 per cent. on its present capital To
make its stock worth near $40. It ought TO con-
tnue to earn and divide not less than the 10
per cent It II now earning. Similar reasoning
appliss to the other gas stocks which have been
forced up to 60 fabulous pricea- The Mutual
las latterlY been paying. on an output oil
1000 600 thousand feet annually, dividends Of
eper cent per annum on its capital Of $500.
600. At $500 per share. this capital comes to
Q1A,o0o.o goo. and to pay even 4 per cent. on this
amount would require net annual earnings Of
$3.50 900. or nearly twice as much as the earn
ings are now Tho Equitable Is about tc
combine with the New York and East River
and to receive $500 per 500 share In new
Securities. Hitherto 1t has earned on an annua
output Of 100000 thousand feet IL per cent
On Its present capital Of 81. o0o. 900. It's stool
IL to be exchanged for S1o.o 900 of 5 per cent
bonds and $1,000. 900 in preferred 8 per cent
stock. but where tho money 10 to como from
TO pay interest and dividends on these amounts
with gas at 81 per thousand is q mystery.
For . panic like that of 1898, tho conditions
are, indeed. not yet favorable. The imitation o
values necessary to produce it has not gone be
yond the Stock Exchange, and. even there, it ha
teached only q few specialties, while genera
business has scarcely felt 1t at all. The four
Teen years from 1879 to 1893 were needed Il
difrse throughout the country that universal
iy OF exaggerated prices which led to the re
action OF 1899, AMI q similar result cannot b
accomplished in a few months. Moreover. W.
had. between 1879 and 1892. a surplus Govern
ment revenue OF 81. 200. 600. 600, or nearl.
800. o0o. 900 a year. the whole OF which. BY tn
purchase of bonds, was poured as oil upon tn
nres OF speculation. In addition, we issued sill
yer currency. from 1873 TO 1890. to tho amour
OF s-5.OOo,ooo a year, and from 1890 to 1898, o
more than $780, 900, 900 a year. Now. we have
deficit instead of a surplus. and q currenc.
which Is rather contracting than expanding.
Nevertheless it is not too soon to begin TO tax
precautions against repeating the sad expert
shce OF 1898. Prevention is not only better thai
cure but 1t is cheaper and much easier to apply
This m F, - Ngno -. n