The Washington herald., 1914-07-18

very fine office. beautifully equipped. He
repeated what he had already told the
! fnvestor-namely, that the stock could not
be sold. because IL had no value On his
| letter-head this promoter had printed thG
| statement NO investor In our securities
has ever lost a dollar" Picking up one
OF these Ietter-heads from the desk. the
writer asked the promoter II he did not
| think IL ought TO be revised, under the
| circumstances.
Why, no. said the promoter, he
hasn't lost anything. He cannot lose until
he sells his stock, and he can't sell his
stock"
Last week, in New York, there ACQUIRED
a great catastrophe-the failure Of large
group OF commercial houses which en-
Joyed a splendid reputation and probably
deserved II in a mercantile way. Some
years ago, however. a company had been
noated. AFFILIATED with these enterprises,
and its preferred stock particularly had
been sold to private investors. In the
flotation OF this stock the list Of Gus
TONERS in the storm who had a charge
account was freely circulated and visit
ed by statesmen. The result OF that, OF
couse was that a great percentage Of the
stockholders were women.
Before the collapse, this stock had had
market value near 100 in Wall Street
a market, such as is technically called
narrow" Sometimes for weeks at a time
there would not be a single sale. Of
course. nobody ever sells such a stock
short, and, consequently, there is never
anybody who Is in a position to buy when
trouble comes. unless he actually wants
TO get the stock and pay for II. Such a
stock is known as a speciality.
When the trouble broke loose, Of course,
faur -. gW
was some scattered selling of this stock.
Before the receivership was announced IL
had dropped from Sc to g. On the day
Of the receivershlp II opened at 20 and
sold as low as s.. The next day it sold at
s. There 1t stopped in its downward
course.
In all. there were only about a dozen
trades in II. There seemed TO be an un-
limited amount Of 1t offered for sale. but
there seemed to be no buyer, and most of
the stock that was offered for sale was
withdrawn quickly when it was found
that there was no market for il at all
Hour after hour brokers kept quoting it
over the telephone wires as being of
fered at so-an-so; no bid
In a larger and more respectable way
that security. from a market point of
view, Is much like the mining stock
There are a good many million dollars
of IL owned by various people. the ma
jority of whom will probably be mighty
glad to sell it at anything approximat-
ing present prices but unfortunately they
cannot sell II at any price whatever.
bankers and brokers and other
people who know something about these
matters advise the stockholders to hold
on and not offer this stock. because by
doing 50 they would only slaughter
prices and would not possibly obtain as
much for their stock as they would OBJ
tain by holding of and keeping Il. hop
ing for a happy outcome of the trouble
That Is probably sound advice, though.
Of course, no one can do more than
guess at the ultimate result OF such a
smash as this enc.
This illustrates a rather curious phase !
Of the investment business. When one
tells an investor that such-and-such a |
stock or bond has no market, he is fire. |
luently met by the reply that the in |
vestor cares nothing for the market. but
that all he wants Is safety and income. |
This Is particularly true when the In
vestor is seeking a very high return on |
his money. He thinks that so long as 1
he gets his dividends or his interest and /
feels comfortable In his mind about the 1
safety OF his principal, that is all he
wants. That Is perfectly true so long
Is everything Is all right.
When. however, something goes wrong.
L Is an entirely different story. II any
one a year or two ago had been seeking 1
! per cent. the very preferred stock re-
,erred to In this article might well have
been selected by any critic. AS a mat
er OF fact. II was selected and recon-
nended by a great many conservative sd-
risers as being as good as any other
per cent security in the market. 1t
was possible to buy and sell II IN a limit
d amount but the result has proved
he utter failacy OF buying securities
hat have any speculative element in 7