Evening star. [volume] (Washington, D.C.) 1854-1972, 1906-12-16
Financial News Letter
BIZ W. @. NICHOLAS.

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BIZ W. @. NICHOLAS.
NEW YORK. December 10. 1905.
The Secretary of the Treasurys homeo-
pathic relief to the money market which
was forecasted in this correspondence last
week gave an immediate stimulus to specu-
lation for the rise. but there has been very
evident purpose on the part of large bank
ing interests to check any excited specula-
ton on the rather slender relief given to
the market by Mr.. Shaw. Even on our
credit system Of doing business. by which
we--make one dollar do the work OF five,
$20.OOO.OO0 is no great sum Of money in
Wall street, when there are SO many mil
ionaire spectators accustomed to carrying
on margin 25OO0 and $1,000 share lines of
stock Then. too the stocks in which the
speculation has been most active for long
time are those which are selling at hlGn
prices One day this week there was pur-
chase In one block of 10000 shares OF Read
ing. This meant that the buyer paid the
seller $4,000. This was only one transac-
ton out of the many hundred IN the course
of one day. 1t is no uncommon thing now
for spectators whose names are unknown
to the general public to carry lines OF stock
running into the millions Of dollars. The
been Union Pacific. The cost of 10000
shares of this stock today Is in the neigh
borhood of $1,S5O,OOO. Two years ago the
cost of the same amount of Union Pacific
was 100000 less than this. And only a
few years ago. at the beginning of the pres
ent great rise in security values, 10000
shares of Union Pacific could be purchased
for $4,000. The speculation in the low
priced stocks does not now attract the men
who play the market for big stakes. 1t is
for this reason that Wall street eats up sur
plus capital very rapidly during period OF
bull speculation. Only a small part of the
dod 10 firnn hill
is advanced by the spectators themselves
and the great bulk Of it must come from
the banks.
The higher rates for interest. as has been
pointed out In this correspondence. are one
of the natural results of the increased pro-
duction of gold. Several years ago large
institutions like the insurance companies
were worrying over the decline in interest
rates and the difficulty in getting adequate
return on invested funds. For long pc
Rod after the bear market of 1903 call
money in Wall street was almost given
away. The prevailing rate over long pc
RODS was per cent and at times large
sums of money were loaned on call IN wan
street at less than 1 per cent. 1t Is to be
recalled that several years ago leading rail-
road companies, in refunding their bonded
debts were able to borrow money at 3H per
cent and there was talk of the standard
rate of interest for gilt-edged securities de-
Ginning to 3 per cent But now the tide Is
all the other way. The greatly increased
production Of gold in the great gold camps
Of South Africa, America and Alaska at
first lowered interest rates. but now the
later result. as 1t always has been IN the
past, Is to raise interest rates. An IN
creased supply of gold means increased
prosperity. and increased prosperity means
the expansion of commercial ventures. This
in turn calls for more capital and this
hiOh0 n a
notable sign of the times is the announce
ment by the Bowery Savings Bank, one OF
the largest savings banks in the world. that
next month the interest paid to its de-
positors will be raised to per cent. This
institution has nearly $1,O00,O00 on deposit
and its depoSitors number 10000. This &C
ton of the Bowery Savings Bank will prob
ably set the pace for similar institutions all
over the country. 1t is interesting to recall
in this connection that many of the old-iine
bankers were finding fault year or two
ago with the progressive banking institu-
tions in interior towns that bid per cent
for deposits through the mails.
X X
James J. Hill of the Great Northern
Railway continues to cut up melons for
his stockholders, following out the plan
recently outlined in this correspondence. A
year ago Mr.. Hill increased the capital of
his road by $25. Oo0. 900, offering the stock to
his stockholders at par. The rights that
thereby accrued were worth about $50
share A few days ago Mr.1gHill dis
eributed the certificates representing the
ownership of the Great Northern iron ore
lands as a free gift to his stockholders.
These certificates are worth in the market
at the present time about $50 share to
Great Northern stockholders. Mr.. Hi!
quickly followed the cutting of the ore Land
stock this week by s6O0oO,O00 making the
total capitalization of the road $210, 600, 600.
Every owner of five shares of Great North
ern stock has the right to subscribe to two
shares of the new stock at par. The rights
that accrue through this increase in capital
amount to nearly $35 share. It Is seen,
therefore, that in the course of thirteen
months Mr.. Hill has given his stockholders
bonuses in addition to the regular per cent
dividend amounting to about $155 share
Mr. Hills railroad has been earning very
much more than its dividend, and rather
than increase the rate beyond I per cent
he has distributed the profits in the form
of rights and script dividends. Since the
Spanish-American war the Great Northern
has distributed to its stockholders about
S4OO a share or nearly $f5 a year This Is
not only evidence of Mr. Hills remarkable
ability as a railroad man, but it is also
evidence Of the marvellous commercial
growth of the country since 1898. The
growth of the Union Pacific property in the
same period has been almost as remark
able That some OF the other larger rail-
road systems do not Snow such SatlSfaC-
tory results to the stockholders in this
period is due to various causes. Some rail-
roads, during this period of amazing Pros
perfty have only succeeded in recover ing
from the effects of DISQUALIFICATION. mis-
management. and stock jobbing in the years
previous to 1898. Others are located in
territory that has not developed SO rapidly
as that in which the Great Northern and
Union Pacific are operated.
A railroad property that has not received
its due proportion Of attention from specu-
1ators in the past two or three years is
the Lehigh Valley. One reason for this Is
that the stock Of the company is traded
In only in Philadelphia. and does not have
ket Lehigh Valley stock now pays only
4 per cent, although the $50 shares are
selling at about $50, or 100 per cent. This