The Minneapolis journal. [volume] (Minneapolis, Minn.) 1888-1939, 1906-12-30
THE DECLINE In STOCKS

s1tudCIou uloSI unprOHlS1ng CnaC &C
counts for recent sharp declines in the
stock market. The downward move be-
gan in the high-priced and so-called
Erich men 50 stocks Melons were
cut, in the anticipation of which prices
had been advanced materially. The old
story of good thing discounted was
told over again. There were new is
sues Of stock announced by number of
the big railroad systems These is
sues, IN accordance with custom, car
ried provision for the sale of the new
stock in, certain proportions to all old
stockholders at par. As the market
value of the old stocks were we'll above
par in every case big profit appeared,
either in the form Of ability to pur-
chase certain amount of new seeuri-
ties at par, salable at the time in the
open market at much higher price, or
the privilege Of selling the subscription
right to some one else. 80 -.
During the year 1906 twenty-five Of
the larger railroad or industrial compa-
MES whose securities are bought and
sold on the New York stock exchange,
issued new stock which carried rights,
The profits to stockholders who sold
their rights ran from IS cents to $55 a.
share. There were rights that were
worth $l2, others that were worth
$3.50, $40, $37 and $42. Most of the
big privileges came with the issue of
new stock late in the year, principally
in December. ..1a
Thru the earlier part Of the year no
more than the average number of stock
holders availed themselves of the priv
ilege Of selling their subscription rights
in the, open market, but later in the
year the disposition increased to take
the Immediate profit and pass up the
larger profit more remote, and rights
were sold more freely. This was not a.
favorable sign. 1t indicated that hold:
ers, In greater degree, believed that
they could profit more by taking in diff.
ference in ready cash and waiting for
a chance to buy the stock cheaper later
on, than by subscribing Immediately for
more stock, even at parity against a
market price much higher.
The money situation, the railroad in
quiry in the west, evidence of unsatis-
factory service and fear of possible leg
islative enactment resulting, the con
test Of the state of Minnesota in the
matter of the latest and one of the
largest new stock issues-$6O ,GOO,O OO-
all had their effect. There was, besides
all this, the fact that the January inter
est and dividend disbursements will run
close to $200,000,0 which will operate
to hold money tight while the pay
ment process is on -:
MT
necessarily seek later reinvestment, and
lit is the usual thing TO- find, it coming
back early in January and rising mar
ket following the new purchases. But
this year the money flow into New
York, despite the greater volume in
circulation and the general soundness
OF things, has been lighter than ex-
pected. 1t is easy to see why this
should be. The west has much grain
and produce tied up that if railroad
service were normal would long since
have come into terminals, thus releas-
ing money at farthest point and reliev-
ing the situation generally. .@. ~.
| The consequence has been that what
started as a bear market in the erich
men s stocks is now affecting the
general market. Some of the best div
1dend paying northwest securities, with
every favorable prospect before them,
have lost in market value. -" :
After the new year comes in it is
probable that conditions will change
and that recent losses will be regained
in part, but until the money situation
eases not much need be expected.
Speculative activity is necessary for 4
rising market and few care to speculate
with the average call money rate so
high that the dividend on the best pay
ing stock on the list does not pay the
interest on the money borrowed to carry
stock bought for speculation.