The times dispatch. [volume] (Richmond, Va.) 1903-1914, 1903-07-26
A DISASTROUS INDUSTRY.

The trouble In Wall Street, in spr'e Oh
,he prosperous condition of trade gen.
orally. is due in large measure to the
work OF number of manufacturing
Adjustments which began operations d
wear or so ago We refer 20 those con
Germs which manufactured stocks oy .iio
waron-load and dumped them on inc
market. to be purchased by the genera
public. These organizations were Wen
enough In some respects. 1t seemed o..
right for concerns In the same me %
Industry to come together In community
~ interest. and most Of them have pros
nered They would have gone along
we'll and saved their stockholders much
trouble If they had been conservative
IN rheir methods Of capitalization. BIT
instead of capitalizing on the basis OF
their intrinsic worth, they cap'tailzeo
on the basis OF their earning capacHy'
at best a varying quantity. issuing ponos
and preferred stock to the fun vaiue,
An many Instances, Of their assets. ana
issuing in addition an amount or COM
mon stock equal to and sometimes eH-
mon stock was given, usually as
bonus to the insiders, and was as so much
nrofit to them, provided 1t should be SOLO
Therefore the market became consesteu
with millions and hundreds of millions
of this sort of stuff. which was. some
times not worth intrinsically the paper
II was printed upon. So long, as the
public demand for "watered STOCK. II
could be disposed of and even used at
bank for collateral But when the coun-
try became gorged with It, ana "heh
there was no longer an active specu-
lative demand for 1t, prices began 70
slump. and those who were loaded with
II had trouble with their brokers, from
whom they had borrowed money. Mr.
Morgan called it "undigested" stock,
whereas Mr.. Hill called 1T "indlgestible'
stock. and Mr. Hills definition seems
to be more nearly correct.
With more stocks on the market than
could be readily absorbed naturally
prices began to slump and in falling
market good stocks suffered with the
bad. Spectators frequently throw over
board their best stocks in order to pro-
tect the worst, And so the thing has
gone on until prices have fallen below
those of the panic of May 9th
II is hut fair to say that there were
come honorable exceptions to the rule,
among which may be mentioned the
Virginia Carolina Chemical Company.
which was capitalized on buslress-like
basis. with assets to-day largely in ex-
cess of the entire capitalization. But. as
already said. in times like these the
good must suffer with the bad.
This is about repetition of the land
boom In the early '9Os Men went out
Into the old fields and bought lots at
fabulous prices on their prospective
value, on the promise that a great city
was to spring up as If by magic. and
that the lots would by and by be worth
q small fortune. Some sensible men
bought these lots because they felt sure
they could sell them to somebody els'
Ut profit, and as long as this specula-
live demand continued prices held up
But the moment It was realized that the
values were purely fictitious, prices be-
gan to fall, and by and by the lots were
hardly worth the price of ordinary farm
Ing lands, for the old fields had been 81
cut up by streets" that they were
spoiled for farming purposes,
We live to learn. and the people of tn
United States have had another whole
some lesson They have seen that value
cannot be created by an artificial pro
cess. and that sooner or later values
like water will seek their level.