The sun. [volume] (New York [N.Y.]) 1833-1916, 1906-12-24
THE FINANCIAL SITUATION.

y AlANlDal BLU " III NlAO " 80 WNN.s
the fall was not surprising when all the
factors combining TO produce II are duly
considered; and the reflection at once
arises that II the bulk of stocks carried on
margin in Wall Street had not been held
Ia strong hands much greater demorali-
aation in the market would n been
witnessed thar actually occurred. The
ostcnsible occasion for the drop was, Of
course. tho extraordinary details of the
Chicago, Milwaukee and st. Paul Railway
Company's plan for an issue OF 500 900. 900
new stock; and II is admitted on all sides
that even crediting the originators of the
scheme with innocent designs the best that
can be said Of their act was that IL was one
calculated to throw the stock market into
confusion. The payment Of the first in
stalment Of $40, COO, 600 Oh the new stock
was set for the last day of the year. when
the money stringency attending the annual
financial settlement Is sure to be greatest.
The transfer books of the company were to
close for the new issue within forty-eight
hours, and the original intention was, 1t
seems. TO only issue a single certificate
in the case of each subscription and not to
allow these certificates to be split or
TO bc made negotiable. Questions at
once arose that no one could answer re-
garding the availability as collateral OF
these certificates under such circum-
stances. and it was evident that such share
holders as were not living at or near the
financial centres might find themselves
cheated out of prospective subscription
rights through physical inability TO comply
with the terms upon which the rights were
offered. There was talk Of lawsuits, in
functions and SO forth. and the natural
impulse OF every one who was specializing
in the stock was TO close his ventures as
soon as possible. All this brought about
q drop on the day after the announcement
regarding the issue was made Of 10 points
In the price Of the St. Paul common shares,
and although the quotation for the stock
rallied somewhat afterward, there was a
manifest disposition on the part Of traders
In the market 20 let the stoclvseverely alone;
nor were responsible commission houses
o~veranIious TO nave dealings in the Sc
curity on their books. Back Of the dis
turbance caused by the manner Of bringing
out the ST. Paul issue was, of course. the
fact that including the quantity of stock
thus issued there had been in the seven
days preceding formal demands for new
capital on the part Of the three North
western railway companies OF over $780,
600 900: while II account was taken Of the
authority granted by the Atchison stock
holders 10 the directors OF their ompanv
70 increase the Atchison capitalization the
sum thus stated would have been increased
by 500 900 ,OC0 more. Over $500 ,OO0. 900 Of
new capital issues have indeed been brought
out or authorized within the last few weeks.
There Is no denial of the fact that the bust
ness Of the Western railway lines Ia such
as 10 warrant all the expenditures con-
templated in these new creations Of stock.
Nothing has been more emphatically
demonstrated in the course OF the last six
months than the needs OF the railroads
not only in the West, but the country over
for new mileage, new terminals and enlarged
facilities OF every description. Coming.
however, upon a torpid investment market
such huge increases OF capital were by no
means a bull argument" In the views Of
Wall Street spectators. The terms which
provided for the spreading over a long
period Of payment upon the new stock
and for the allowance OF interest upon
these payments meanwhile. we're such as
TO amount in substance to the negotiation
OF short time notes by the railroad COM
DuIlCS al IdNEH NdINIlR lIOIH " W per
cent; and thus the action was itself a rather
pointed indication of the probable market
valuation under existing circumstances
OF the outstanding Z per cent. dividend
paving stocks in question. The prevailing
idea as 10 the price at which a stock Of this
sort should sell upon its dividend basis
alone has been shown for some time back
In the instance OF the Pennsylvania Rail-
III
stocks Of the Northern Pacific, Great North
ern and st. Paul common stock were selling
above this level being that II was certain
that large rights upon them were i'm
pending. When, however, these rights
we're deducted from the prices Of the stocks
and the probability assumed shape that
no more privileges Of the kind would he
forthcoming. NJ least for n considerable
time, the market valuation Of the stocks
was once more determinable largely by thu
matter Of dividend payments alone.
In the case Of the Northern Pacific and
Great Northern stocks there vet remains,
II is true, az an asset that sooner or later
must be subject TO division, the oft die
cussed equity in their ownership of the
Burlington property. But as the division
of this equity would entail, before con-
Guided, such an enormous financial oper-
alton as the calling in OF the s2l5 ,OOO, 900
Burlington 4 per cent. bonds jointly guaran-
teed by the Northern Pacific and Great
Northern Company it is seemingly plain
that no such arrangement can take place
until the money market ia once more in a
condition OF ease--a state Of affairs that for
the moment certainly, does not seem very
near at hand. All this naturally led to sell
ing Of the three stocks named; and one i'm
portant development became very plain,
namely. that there had at last been a con-
siderable detection from that ptalanx Of
shareholders in the so-called Hill group
Of stocks who had for years previously
maintained an unbroken front ard kept
such an unrela xed grasp upon their inter-
ests in the properties as 10 cause a practi-
cal, IL informal, pool" in these holdings IN
formed. Looming up in the further
background still of all these matters was
the rather grim presence Of the money
situation. Secretary Shaw's relief measures
il was realized. come TO naught, OF
we're at least working their relief 30 slowly
az to exhaust the patience Of speculate
- $1,000 ah,A@ Ea-s-.. II IL g.