The sun. [volume] (New York [N.Y.]) 1833-1916, 1903-06-12
THE SToCk MARKET.
Tho Present Movement Toward an Eaui'
o 'Iibriun o. Prices and vslues.

o 'librium u Prices and vsiues.
To. THE EpfToR OF The SuN-Sir: Tho
causes producing the present condition OF
the stock market are reported by the news
papers to be a mystery to Leading bank
ers." Who are these bankersf They must
be men Of very little disoernment, for the
coming OF the existing condition was ex-
peoted long ago by all sagacious observers
Of the situation with whom l came In con-
tact. So convinced were such observers
that prices had been carried up by the swell
ing tide Of, two years ago to a top-iofty level
that they were quick to take advantage OF
the boon to sell out even gilt edged
securities, and more particularly those OF
more purely speculative kind. ...
Ia there not, then, a vast amount OF money
obtained from this earlier liquidation lying
idle In banks or getting small interest in
trust companies and only waiting for an
opportunity to lift the market by purchases
for Investment? Tread daily that investors
are crowdlng into the market after bar
gains" but it must be remembered that
Investors generally invest their money
and do not keep II lying loose. For year
past, certainly for six months past, they
have had many opportunities to buy back
at lower prices the stocks and other securi-
ties they sold, and to get s per cent. on their
money. The amount Of money In the hands
of rioh men awaiting investment at this time
Ii much exaggerated. Outside OF a few
great estates and insurance companies, &C
cumulations Of money are invested already,
for the most part.
cannot. therefore, see any. immediate
prospect Of 4 great and permanent uplifting
Of the market by rush Of investors to take
advantage Of the bargain counter The
uplifting can only come with force, 1t seems
to me, with revival OF purely speculative
confidence in rising prices The investment
demand. Is continuous. but relatively 1t is
small in market like that OF Wednesday,
for instance. with total volume OF trans
actions OF more than 200 900 shares. II 1t
was as large as it has been represented to
be, prices would not have dropped so heav-
lily. Why did they drop? Simply because
there are not enough investors around the
bargain counter" to keep them up with
their bids The one great force sustaining
the market and preventing @the bottom
from dropping out" is the covering OF short"
sales.
This leads me to say that the denunciation
of the bears" by traders compelled to drop
their insufficiently margined "long" stock
Is altogether short-sighted. Except for the
bears" they would be in far worse case. II
there was not a demand to cover Shorts"
the sacrifices they are compelled to endure
would be sharper. Without a speculative
short" demand to help them to liquidate,
and with only an investment demand on
which to rely they might find 1t hard to get
r., = t1xu
prices even to get a market for them at all
unless they we're intrinsically very good
This whole downward movement In the
stock market is attributed to bear raids.
but as 1t has been going on continuously
and ominously for six months. is not that
explanation simply an exhibition OF childish
petulance? A distinctively bear raid is a
rapid movement, soon over; but this de-
cline, taking 1t month in and month out, has
been uninterrupted, and 1t could not have
been produced. though 1t might temporarily
have been accelerated, by "bear raids"
merely. hit was not movement toward q
natural equilibrium Of prices and values IL
would have stopped long ago, however
strenuous the bears" might have been.
You might as we'll attribute to the bears
responsibility for the drought, or the floods,
or the adverse operation Of the forces Of
nature generally.
I have questioned all along II there was
actually the great short" interest, carried
from day to day, which have seen repre-
sented. Undoubtedly, there has been heavy
short selling, but obviously very much OF
II has been covered from day to day, for
the opportunities for profit have been con-
tinuous, and bears are not the sort Of men
to be ain business for mere fun OF the game
They are the most wary OF stock spectators
and the most expert. Any fool can make
money in such a market as We had in the
boom after the election Of 1900 but 1t takes
sharp fellow to get profit out OF declining
market, for the risks Of the bear, v OF course,
are greater. There is no limit to his possible
loss. Therefore he must keep his eyes open
and lump in and jump out in quick order.
That is, l question il the -short" covering
has not been largely from day to day-if the
mass of bears" have not usually followed
the policy of closing their contracts very
speedily
or course, some far-seeng men actually
acquainted with the situation produced by
the over-manufacture Of securities have
taken the risk of holding on for the decline
which their sound judgment expected.
This Judgment have found to be nearly
unanimous among judicious financiers dur
ing the last six months. at least among those
of my own acquaintance. So far from being
appalled, by the present condition Of the
stock market" 40 far from being confused
as to it's causes" the course 1t has been fol-
lowing is exactly what they had expected
and prepared for. They inferred that the
inevitable consequence Of the stuffing Of
banks and trust companies with @undi-
gested" and indigestible securities, issued
by the ream, would be 80 great an over-sup.
ply that the market would tremble UNDER
meath 1t. Rich men, we are told, have been
the special sufferers by the great and con-
tinuous downward movement. but they are
the men who were made rich by this paper
discounting OF the prosperity Of the long
future.
Ayear ago, two years ago, there was great
danger in the stock market. 1t came in the
@boom," but safety has come with the fall.
The danger was that under the pretext Of
mergers. Consultations" "reorganiza-
tions," "up-to-date fnancierine," and a
new and modern development OF the old
fashioned laws Of finance brought about bv