Evening star., 1905-08-27
THE INSIDE OF
WALL STREET
BY EDWIN LEFEyRE.

Ia WALL STREET 4
d BY EDWIN LEFEvRE. L
4fSS ~ ~ n N S s sS m rs 77s 7S GE rs 7S rs ~
Bull markets are of two classes. The first
consists OF the legitimate, logical, inevitable
appreciation in values resulting from genu-
| inc improvement in underlying conditions;
| the other, to put 1t tersely, Is but a care
| fully planned campaign of distribution. In
! both cases what is called bull manipulation
| by powerful interests is necessary to start
| the tide of prices rising. 1t Is legitimate
| function of manipulation to start such
| movements. Left to itself, the public, not
being specialists in security values. would
! not know when to buy, just it seldom
knows when to sell The manipulators tell
| them when to buy but forget to announce
| the time for selling. But that is neither
| here ror there. The average Wall street
| professional assumes that there must al
ways be manipulation by the big men,
| and whenever there is substantial advance
| in the price of a particular stock In the alb
| sence of satisfying explanations he says
| manipulation, and acts accordingly lie
| sometimes succeeds in influencing the opn-
| ions of outsiders by this skeptical attitude
and the deep-rooted contempt which his
voice conveys when he says ''manipula-
| ton. For this reason more than any ot her
| whenever a prominent operator calls at
| tenton TO value king conditions affect
| ing particular stock, his words are
! ceived with wise increduity. To be sure
| in the past the big insiders have not al
| ways told the truth. Some of them. in fact
| have never told the truth and those who
have never lied have never told all the
| truth.
With underlying conditions good and the
temper of the speculative community in the
right mood for reckless gambling, it has not
been necessary to tell the truth or for that
| matter, to conceal. In certain frame of
| mind all that the public wishes is to have
an excuse for gambling 1t would gamble
probably even without the excuse but by
having some reason it will be able to feel
real business-ike. There have been there
fore all manner of such explanations for
advances in prices of stocks. The nature
OF these rumOrs-they seldom more than
ruinors-has changed from time TO time, ac-
cording as their novelty has worn off and
their potency as stimulating influences
has decreased to rothngress. To the ex-
tent that these rumors have reflected the
attitude of the public toward the stock mar
ket they are instructive. The great manipu-
lators study stock market fashions. They
may try to mold sentiment and at times
they succeed, but the most they can hope
is to gauge sentiment accurately seven
times out of ten. With that percentage and
some patience their fortunes will grow
quickly enough.
x
In the greatest stock boom we ever had
that which eliminated in the Northern Pa
ctfc corner May ., 1901. the public was
absolutely stock mad. At that time the
magic word was deal" One deal" after
another was first hinted at, then semi-con-
firmed, at length officially announced and
at each stage of the deal there was a fresh
jump IN the price of the stocks affected
All you had to say was that there was a
deal on between the NJ. n. and G. and the
r. S. and T roads to start the mob buying
The reason was plain. The railroads were
prosperous and the public hungry for secu-
rites The great railroad strategists found
themselves possessed of the means where
with to change their dreams into realities
Thus Mr.. E. II. Hartman decided that the
controlling interest of the Southern Pacific
would be good for the Union Pacific to
have. He bought a huge block of stock in
the open market and the rest from the
Huntington estate and Others Naturally,
the price rose tremendously.
:: 4
Mr.. Cassatt thought that the Pennsylva-
MIA would profit greatly by becoming a large
stockholder in the Baltimore and Ohio the
Norfolk and Western and other roads He
knew he could pay for these purchases by
issuing and selling Pennsylvania railroad
stock to the clamoring mob. His heavy
buying of the stocks in question made them
rise. and that made the public think it also
would do well to buy the same stocks For
reasons which he has vouchSa fed dozens of
times Mr.. James J. Hill thought the Great
Northern and the Northern Pacific ought 10
buy the control of the ST. Paul. He and
MI Morgan made plans to do so. The mere
knowledge of it started St. Paul bounding
toward the sky. But the largest owners of
St Paul refused to sell their stock and the
plan was abandoned. The next best thing
was to buy the Chicago, Burlington and
Quincy. Mr.. Hill, instead of going about
circuitously, began by loudly proclaiming
his intention to do SO. 1t made it easier for
him to do so. because so few believed him.
Burlington was under 40 when Mr.. Hill be-
gan. 1t ran up day after day. There was a
deal, the public told. AS the stock
rose the public assumed that the deal" was
the uplifting force which indeed it was in
that instance. Mr.. Hill got the Burlington,
and in the publtc's mind the magic of the
word deal was established more firmly
than ever, so that operators whose only OBJ
ject was to get rid of securities and inse-
curities of all kinds labeled their goods
deal and sold them by the carload Even
after the Northern Pacific panic manipu-
iators used the deal argument until they
found that the public no longer rose to the
bait The fashion had changed, both be-
cause the public loves novelty and because
the public, no longer being stock crazy did
not relish the stories of deals which in time
developed habit of falling through.
4 *
Because the attractveness of a mystery
never diminishes Wall street hears more
mystery talk in connection with stock
movements than any other kind, particu-
larly when such movements are entirely
speculative. The professionals sneer at it
and have a habit Of referring to a stock
thus treated selling mystery on as
they might say interest on or after it is
all over as being ''ex' mystery, parodying
the familiar "ex' dividend; but fo rail- that
they bite quite as often as tn cpu5lc. Mr..
keene uses this mystery attraction quite
often. and Mr.. Thomas f. Ryan knows to
eighth of point how far he may use
it in the stock market.
* x
In the past few months the point has been
made clear that the great financers either
think that the public is wiser than it was
or believe that the public has rights which
must be longer braZenly ignored Refer
ence to this changed attitude has been made
in these articles, and it is reflected by the
form of bull arguments heard. For in