The Washington herald. [volume] (Washington, D.C.) 1906-1939, 1914-08-22
UNDER THE TEST OF FIRE

| For the first time in over forty years,
the people Of the United States have ex-
perienced period OF suspended animation
| in the investment world. No matter how
good or how bad investments might be,
it has been equally impossible to sell
them. The market function has been
paralyzed and practically all trading In
Standard securities has ceased.
Such q period is necessarily a time OF
test and trial for the securities them
selves as well as for the people who hold
them, and who deal In them. Its effect
upon the various classes OF investors and
the various classes Of securities in which
they invest may be worth noting, for
from It one may draw conclusions that
may be Of material value as guide In
making future investments.
To the Spectator. who buys to sell
again. and who borrOws money TO make
his purchases, and who almost invaria-
bly, buys more than he can afford to look
out for in times Of trouble, such q period
means distress, anxiety and monetary
loss Not only has he been called upon
by his bankers to strengthen his margins
at a time when II was impossible TO do
so in the ordinary way of selling some
Of his securities, but he has ben com
PEELED TO resort TO all kinds Of eXpedients
in order to get rid OF some Of his labil-
tiles In the first few days after the
stock exchange closed, a class OF brokers
came into being to deal in standard
stocks. The theory upon which they
founded their businesses was the theory
that a lot Of men would have TO have
money regardless Of value, and that since
all regular exchanges were closed, men
would have to accept whatever bids they
cared to make. In that market, which
was rather a wicked episode in American
finance, prices ten and fifteen points be-
low the closing figures on the stock ex-
change were not unusual, particularly for
small amounts Of stock held by customers
Of brokerage houses who had been called
upon to put up more margin and who
had no money with which to meet the
call
, To the speculative holder Of securities,
therefore this period brought the most
acute suffering and the strongest posi-
BILE warning against future excuses of
this sort.
The middIe-cIass investor, who buys
speculative stocks, but who generally
pays for them in cash, or at any rate
does not leave himself In a position to
be called upon suddenly for more money.
was in a more comfortable position. As
he looked at the prices that had been
reached by his securities during the big
decline, he did not feel particularly com
nine cases out of ten is a man who keeps
careful track of prices all the time and
who feels uncomfortable IL he cannot
ind a quotation for his stock at least
every week or day. He Is never quite |
sure that the property in which he has
bought is going to stand the strain. He
uses the price Of the stock as an indica- |
ton Of the value of his investment. To |
him also this period of suspended anima- |
ton has brought q good deal Of discom- |
fort, IL not fear. Hundreds Of investors |
of this type, If they can be called IN
vestors, have visited their brokers or |
sought advice by mail with respect to |
their funds and have made resolutions
that II ever the time comes again when
they are able to get out OF their specu-
lative commitments they Will look rather |
at the value of what they buy than at
its chance to show profits by advancing
prices. To the man who Is in the habit
OF buying securities because they look
cheap this period has brought some seri-
GUS reflections and a lot OF sober second
thought.
The business man who prides himself
upon his ability to Judge 4 value is gen.
orally a buyer OF seasoned dfvidend-pay-
ing stocks, Of good middle-class bonds,
and of standard listed bonds. To him
there has been some discomfort. He has
looked with dismay upon a decline Of
twenty to thirty points in the price OF
his stocks and of five to six points In
the price Of his bonds, and he has OBJ
served with even more distress that these
securities, which are usually perfectly
good to take into his bank and bolster
up his credit, are not wanted by his bank
at the present time, and are, in fact,
more or less under the ban, so far as the
banks are concerned. While no very
acute distress has come to this class Of
buyer, and while nothing serious was
anticipated in his case, the phenomenon
of a disappearing market and sudden
of the convertibility Of his in
has been q great shock to him.
He never thought that II could happen,
FOR II had not happened previously within
MS business lifetime.
To the classes of investors beyond this
nan. the disappearance OF a market has
made relatively little difference. The av-
rage woman living on invested funds,
md the average man who has his money
nut away in good bonds and stocks with
nut any idea of being able to use them
Is collateral or trading in them from
tme to time, hardly realizes that the
markets are closed or have been closed.
such an investor may from time to time
AXE an interest In the quotations and 1
prices, but II is only an Incidental sort
Il interest and does not go very deep. II
Therefore, when quotations cease and I
me cannot ind out from day to day what