The Wichita daily eagle. [volume] (Wichita, Kan.) 1890-1906, 1899-02-01
BOOMERS ARE WARNED
Not to Penetrate too Far the
WiIdS of Boomland.
PSYCHOLOGY OF THE. BOOM
As EIucidated by a Staid
Financial Organ.

/
ogicauy. Pro;racted and extensive move
/ ments of the kind cannot happen except
under very striking financial conditions,
/ of which the price movements is in GER
tain sense the exponent. But neither can
| they occur except as the result of pecul-
lar mental condition of the community.
/ Such buying for speculation is VIGOROUSLY
/ contagious. 1t is pretty certain to run, in
the case of a really extended movement
into what is known as a popular craze Or
mania, the characteristics of which. IN its
extreme form. are the abandonment of or
binary business judgment and the Ter
forgetfulness of normal relations between
quoted prices and intrinsic values.
The most familiar shape assumed Dy this
infatuation is a seemingly unanimous co.,
viction, prevalent at such times, that the
higher prices rise the more likely they are
| 10 go higher still, and that, therefore, the
elimination of a boom is the time for
the outside specUlat tor or investor 10 buy.
Nothing, of course, could be more absurd
than this statement, put in the terms of
an abstract proposition, and it is not prob
able that the Spectator ever reasons out
his own position thus coolly. But he is
carried away, so TO speak, by the spec
tacle of continued upward rush of values.
His imagination. his emulation. and mis-
cupidity are all aroused by the sight of
other men turning hundreds of dollars
into thousands in the space of a day or
two. and with no effort of their own. If
his Temperament is cautious, he has prob
ably been balancing the adverse chances
against the temptation to risk his money;
he may very likely have decided that prices
are too high for legitimate investment.
But prices go higher still, and his hope
Of placing his own money on better terms
grows steadily fainter. Eventually, judg-
ment is swept aside by the fear that he
will not get a chance to participate at all
in the continued rise of prices unless he
buys at once. In other words, he simply
yields himself TO the prevailing mania.
The further such a craze permeates the
usually intelligent and conservative part
of the community, the more completely
all restraints of sense or reason, and some
times of common honesty, disappear. Most
people will remember what sort OF shape
business methods and business morality,
even outside of Wall Street, are found
to have assumed under such influences
when the inevitable day of reckoning ar
rives.
These are very old and familiar princi-
pies. They deserve to be repeated now.
however. when It has become manifest
that this spirit of speculation is spreading
with great repidity throughout the Amer
lean community. In many respects the
situation is. without doubt, extremely. en-
couraging. and such encouragement al
ways finds voice in rising prices for Sc
curities. Supply and demand must until
mately govern the stock market as well
as any other market, and it has happened,
rather singularly, that the recent immense
increase in American capital seeking re-
munerative investment has been accom-
panied by practically no increase what
ever in the high-grade securities available
for such purposes. In 1882, for instance
a period somewhat similar as regards the
state OF investment ca pital-11.J00 new
miles of railway were laid in the United
States; in 1851 1880. Securities issued
against this new construction served 20
absorb the surplus capital. Last year
only a trife over 5000 miles were laid. and
so far has demand for investment out
stripped supply that this country has been
able, according 90 conservative estimates.
to lend in Europe something like slO0O0O.-
600 without in the least disturbing it's do
nestle markets.
On the simple basis then, OF demand
and supply there has been good reason
for an advance Of investment prices: all
the more so since not only individual but
institutions have taken part in the en-
larged demand. Economy among the
poorer classes. followed by better wages
and profits. swells the depository funds
OF savings banks and insurance companies.
Such funds must be reinvested in profit
earning enterprises: thus. indirectly, the
mass of citizens. with savings OF ten or
twenty dollars each become as truly in
vestorS in securities "a the merchant or
banker with his five or ten thousand Of
increased profits. The force of this COM
bined demand. which is apt, because OF
the corporation interest and dividend
TO make itself notably felt
in the few weeks after the first Of jan
uary, is sometimes irresistible.
But when all this is granted, the peculiar
dangers OF such a situation remain. ar
or for that matter. in me DAYS OF the
South Sea Bubble. There is really no ek-
oeptlon 10 the ultimate bad results os IN
unchecked movement OF the kind The
rise III prices NAV be greater or less. &C /
cordtng 10 its legitimate basis IS more or
less substantial. But II hardly needs argu-
ment 10 prove that however favorable a
there must be some norma lin., !
TO It's reflection IN advancing values Ths |
further prices nave risen beyond this limit.
In the momentum OF speculation. the more !
viole1. the subsequent collapse and fnan- /
c5al arrangement.
As matter OF simple fact. the average /
active stock or the New York market mas /
already risen - 20 - Ter cenr IN price /
within EiHe months Many have nearly 4
OF quite doubled il market value. More /
over, The last few weeks u almost urre- /
strained outside demand have not been /
wasted 5y tue expert promoter u wall
street Such periods are his harvest sea
sons. A recen: careful c3npiistio By ne /
Financial Chronicle shows that new cor
Dorations OF the so-casied ..inrfust-fal.'
type. organized during ISIS. reported az
zregate share capital u no less than seis-
- CO. 4 good part % these shares Is now
7ei1g rapidly fos;ed or The sea 81 Wal
street speculation with the expectation
hat Il vii land, eventually. IN TIE hands
y the outside pubic" No douh, much
y this mass q capital stock l. inrinstc-
illy Worhiess-a mere handle OF paper cer-
lnc2tes given away 10 the incorporato-s
Is a bonus" or thesr moderate Invest
Kent % real capita But waen. a. has
'appenet. The quoted price OF even thess
hares on the sock exehange S. doubled