The sun., 1905-08-28
THE FINANCIAL; SITUATION.

~
Russia and Japan we're being conducted
in Europe rather than In this country our
stock market would pay comparatively
little atteution to them. The idea was that
the sass with which our newspapers have
been enabled to give great deal Of space
to the proceedings OF the conference had
caiissd the afair to loom larger In the
Well Street mind than II should, and that II
Berlin or Vienna, or perhaps even, as was
at one time suggested, the plains OF Man
'churia, had been the scene OF the parley
Wall Street would have paid as little at
tention to the matter as II did to the progress
Of the various skirlnishes and battles be-
tween the Russian and Japanese forces
during the last eighteen months.
Despite the varying news from Ports
mouth during the week, the stock market
up to the latter part Of the period gained
in strength; the true reason therefor being,
Of course, the force Of underlying condi-
tions which, careless OF day to day buying
or selling based on the ebb and flow OF
peace rumors. pushed prices to q higher
level. There was no great increase OF oom-
mission house business, and the notable
advances in prices then made were clearly
the result OF the activity OF pools and
cliques. But manipulation Of this kind
is familiar feature Of all rising markets
and Is not deserving Of criticism from
common sense point Of view, unless 1t Is
pushed to an extreme In one case. ad-
mttedly, this extreme was reached last
week, and the incident produced bad
effect in financial circles. This was reck-
less bidding up Ct Reading common stock,
SO that fears Of q corner In the stock were
justly excited and the whole market was
thrown into feverish and unsettled state.
The best information ia that there Is no
corner in Reading and that the rise Of the
stock in the last month has merely repre-
sented speculation for the advance in 1t
by daring operators, who have found that
the lookup Of the shares that has taken
place owing to the large quantity OF the
issue put away for invest nnant Uade 1t
easy to jam the price Of Reading up
ward upon comparatively small purchases.
There is no doubt that In this process q
good deal OF money has been lost in Reading
by spectators for the decline. and as the
end Of the operation is not yet 1t remains
to be seen how much money will be finally
made out Of 1t by the spectators for the
rise. The wisdom Of the purchases Of
Reading stock in the past. by which the
continuance OF the present management
was unalterably secured. is now apparent.
Had it not been for these purchases there
might very we'll now be q strife for the
control OF Reading in the open market,
which would really result in another
Northern Pacific corner. All this, how
ever, serves to set forth clearly the nature
Of the powers that have recently been ex-
-, Qrn
There has been an appreciation by investors,
and also, OF course, by spectators, Of the
value Of the equities, present and pro-
spective, arising in this country from the
ownership OF it's iron and steel mills. its
coal and iron mines, it's railroad properties,
its farm lands and all its other great eetab-
lished industries. These equities were
formerly merely potential, as in the case
of the Reading, the demand for various
products and business facility being less
than the supply thereof, owing mainly
to the scarce population Of the country.
but now that our country, and for that
matter the entire world. II visibiy filling
with people and that business has suf-
fered vast expansion, these dead assets
have been transformed into live ones.
and the Transformation has taken place
in many instances almost In the twinkling
OF an eye. The hacknayed phrase that
consumption still surpasses production
expresses 1t all.
It Is time, however, for q word Of caution.
1t is to be remembered that q security
market has two great sides. those Of specl-
lation and investment, and that the fact
that fundamental conditions are sound
and seem on the whole to be making for .
higher range of prices does not preclude
the possibility Of sharp fluctuations in
quoted values owing to the operation Of .
variety Of temporary causes. Speculative
buying Of stocks is conducted upon mar
gin, and by far the greater portion Of
those who indulge in 1t have not the means
of making payments in full for their pur-
ohases. There II, hence, volume Of pure
credit created which huctuates nervously,
oven though the main current Of values
still moves on in one direction. At q
very high range Of prices there Is
naturally greater imitation Of credit and q
greater general market sensltiveness
than on other occasions; and at such
periods prudent opera tors for the rise,
particularly II . season OF year approaches
when conditions arc normally more adverse
to an advancing stock market than at other
times. usually reduce their commitments.
We have just been witnessing q striking
exemphhcation Of the rule, we'll known
to speculaton, that in August stock market
prices tend to rise, owing to the fact that
in this month the prospect Of the harvests
gets to be definitely ascertained. and that
this prospect is usually such As to inspire
confidence. But another -rile. Is, also,
that in September some recession in prices
usually OCCURS; and this is due to the cir
cumstanoe that speoulators for the rise
arc then often compelled to pay higher
rates for the use Of money because Of the
drain OF funds from the speculative centers
brought about by the demands for money
for Drop moving. There was q striking
exception to this in September last year,
when, owing to the extraor dinarily large
surplus reserve Of the Clearing House
banks here, the crop moving drain,
though 1t oocurr ed as usually, was little
felt. But this year the bank surplus here
is very low and security prices are very
high; while analysis Of the last returns Of
the national banks throughout the country