The Salt Lake herald. [volume] (Salt Lake City [Utah]) 1870-1909, 1899-12-24
CAUSES THAT ARE CITED
WHOLE MAY BE SUMMED UP IN
oVER-SPECULATIoN.
How Dealers Indulge In Pyramid
ing'' and the Consequences
Brought About-Duration of
Transvaal War and Stringency In
London Had Their Effect.

count, The rush to cover short contracts
carried prices up without regard to frac-
tons in the speciaities, which had been
the mark of attack. Sugar, Metropontan,
Tobacco, Brooklyn Transit and Peopie
Gas jumped from Sle to 5 points on OPEN
ing sales. The same buoyant tenoernsss
was shown in the internal list OF STOCKS
London had lifted these Sharply pSloIe
the opening here. but they bounded ABOVE
the London parity TO a level from 10 :
points above last nights close here.
The urgency of the demand from the
bears constituted a miniature panic. Their
short selling yesterday was based on an
assumption that the periodical settlement
in the mines department OF the Lonov1
stock exchange which began today would
disclose so weak a position there tnat
panic would likely result. ON the con-
tTary the earliest news from Ionoon
showed that the settlement IN IonuOn was
proceeding easily and in an orderly man.
ner, sentiment there being much encour-
aged by the shipments of gold from New
York.
forced liquidation pursued prominent
figure in the financial world all day yes
terday. Today, on the contrary, II was
affirmed that 81, 100000 in government
bonds had been placed as additional Sc
curity for this man of wealth and taat
his difficulties were ended. the profess
sionai traders accepted the one runor
with the same credence as they had the
other, and put in a lively two hours try
ing to buy stocks to save themselves from
loss.
interpretations of the bank statement
were decidedly confused, and the market
ran off on realizing. 1t did not get PACK
TO the top but hardened again materially
and closed strong. The cash increase
shown by the statement of 81. 7S2, 500 came
as a surprise in view of the gold snip
ments and the drain to Boston. 1t is an
evidences of the hidden resources Drougnt
out in such a crisis as that of the past
week The item of loans can hardly be
an accurate reflection of the net result
of the drastic contractions of the week
The SmailnesS of the decrease, $5.Us4,VVO
must be the average system OF computa-
What happened in Wall street this week
had been a long time brewing. Any one
of half a dozen or more causes might be
cited, but any of them or all OF them
combined were more properly but the cul-
minatior OF a long series OF causes wnlcn
precipitated the event The whole may
be summed up in the term. over-specuia-
ton.
Among professional spectators there is
a process eXpressively termed, pyramid
ing" Money is borrowed with which to
buy on a margin. When the price of the
purchase rises the advance is reckoned
as profit and is invested in more pur-
chases. The profits thus re-invested help
to advance the price and the paper profits
thus amount UP TO enormous proportions,
But the demand which has thus advanced
the prices was purely fictitious one:
Tho pyramid thus crested is an inverted
one, and il topples over when an attempt
is made to sell TO realize. The capitalists
do not call their operations 'pyram1ding,
but the persistent Initiation in values of
securities which went on for months had
the same effect.
Ii has been long evident that any large
selling to realize would depress the mar
ket. and some wealthy combinations have
persistently held their stocks and ignored
the symptoms Of coming stringency in the
money market. with an obstinate opti-
mism regarding the repleniShment of the
money supply. which results have not jus
titled capitalists and bankers who had
underwrltten the securities of many of the
new industrial flotations found the mar
ket taken from them and prices of the Sc
curities in the open market dropping be-
low the underwriting price With this
burnedSome load to protect, the growing
stringency of money threw an avalanche
of all classes of securities on the market
to obtain needed funds.
1t was such a realizing movement on a.
large scale that it had long been sought
to avoid, as the market was in no condi-
ton TO stand II. But once started. and
the bears fully understanding the weak
ness of the condition and offering prices
down with reckless holiness, the fabric
began to crumble and seemed tottering to-
ward ruin on Monday. when the associat-
ed banks of, New York, by concerted ac-
tion offered $40 600 in loans and broke
the money rate, which had jumped to Y
per cent a day. equivalent to lS6 per an
num- in the frantic bidding of hard-press-
ed holders. With the easing of the money
rate the panic was checked and the pro-
ceedfng reduced to some sort of order.
The market however. continued feverish
all through the week under constant liqui-
dation. which brought prices in many i'm
portant stocks lower than the low prices
of money.
Coming to the more immediate causes
of the speculative collapse, il is evident
the duration of the Transvaal war and
the consequent cessation Of the South
African gold supply was counted upon
with confidence to be much shorter than
II is now evident 1t VIII be. London spec
ulators have persisted in rosy-hued opin-
ions and have Dulled the market even on
limitations that a military movement
was in prospect. making large inroads on
the money supply TO carry stocks. The
British military reverSeS have had a cor
respondingly acute effect. The conse-
Quent difficulties have had worldwide
effect in forcing up sterling exchange
and the money rates IN Paris. Berlin and
centers 10 meet the necessities of the
coming annual settlements.
The New York money mag let. burdened
with extraordinary commitments on ac-
count of the great industrial combina-
tons. has been thus cut off from the ex-
pected replenishment by gold imports on
account of the continued favoring trade
balance Also, the usual autumn refluX
of money from the interior to New York
after the crop-moving period has been
entirely suspended this year. owing to
the business activity all over the country.
Still another adverse factor was the
continued absorption of funds by the
v.
expectediy large revenues. which have
established q running surplus. The drain
has been particularly oppressive on New
York owing to the large proportion both
of the customs and internal revenue taxes
which are paid through New York clear
ing house banks The large capitalization
and flotation OF hopes and prospects
which capital was carrying was thus
made more burdensome OF the elements
of Cistrust of such hopes and prospects,
which multiply az periods OF difficulty
and grow apace with what they feed on.
the public is by this time informed by
reason of the weeks events.
The difficulty last week in Boston in
sustaining the market for copper mining
stocks was the initiaSory step. Very large
sums of money had to be taken out of
New York to that center, and the whis-
pers thus caused begot a spirit of dis
trust. The suspension of one of the nu-
merous new trust companies which have
been organized in New York in the past
year caused another mass of fears and
possibilities of harm which spread in a
true panic manner.
TheS weeks events have sufficiently
proved the reality OF some of the diff
culties which were unprecedented. But IL
is not to be disguised that bitter animos-
tiles and competitions of powerful money
forces and even social enmities have
played q large part in the innumerable
currents coursing beneath the surface.
interests in the country are in conflict
over the public utilities in Greater New
York. the gas war being an incident.
Their manelvers and counter-moves have
stirred up the market like the grapple of
leviathans in a pool of wafer
Again. the encroachmenfs of the trust
companies on the banking field in the
last few months have aroused criticism
and Reproduction from conflicting inter-
ests. There is reason TO believe there
was a willingness 10 utilize the week 5
trust companies TO keep more strictly
within their own field. It is recognized