The Seattle star. [volume] (Seattle, Wash.) 1899-1947, 1917-12-18
ny DIR. ARTHUR J. sELwyN
BROWN

BROWN
Famous Financial Authority
>EW YORK, Dee. ls.-Ih"
United States government must
sooner or later take action to III
rect tho course 81 financial in.
yestment In tho nited States, W
the security market !. TO be
saved from possibly dis'ss'
trou> crash.
Two weeks ago the bottom
dropped ont Of tho New York
stock market. To-day the bond
market has reached tho lowest
polut since tho Sensational de
elm. immediately following tho
outbreak Of war. In iyit.
Tho panicky conditions which have
rrc.ntly depressed the Stock Ex
change were brought about by dis
turbing war events, by tho world
wide imitation III tho curronoioa ana
hy the Increasing demand for capital
for carrying on tho enormously IN
creased Industrial operations necos
STATED by our entry INTO the war.
Decline Halted
The decline In security priooa has
been temporarily halted by favorable
war news. the possibility Of freight
rate incroaaoa for tho railroads. and
by the action Of the Stock Exchange
euv.rnora In draAtcaily controlling
abort selling.
But the trend Il unfnistahnhly
downward. and must continue 10 10
80 until effective governmental Ac'
tion In taken.
The roaaon for this In obvious.
Tn. govrrnment has suddenly b
com. the largest competitor for
ready capital In tho money market
And ar war operations continue. tho
government Is going 20 require All
the available capital In tho coun'
try. This win put tho cost Of caph
,al up. and therefore force the hqut
dalton OF low interest bearing sccuri'
tics.
Short Selling Legitimate
There have been suggestions that
short selling IN the market has been
responsible fog panicky conditions.
and demands that short selling In
mad, illegal. There are sxo.llens
reasons why this cannot b. done.
Public iBenrfit~d
-short selling. IL perfectly leFit
innate and necessary financial prac-
tic.. To soil securities short In
,urt as necessary NJ TO quote pric~a
on tho cost Of huihinE br'dgc or a
slcyscrapcr. in advance Of oonntruc-
ton.
The man who sells stocks short
believes that In tho future he can so
into the market and buy the stocks
cheaper than they wcr- at tn. time
the short 9sie was raado- This ~
ideniically what a contractor docs
every time he gives an estimate To
estimates that at given date mate
rails can b. bought In ot-sn markets
at specific ratna. and he bases his
estimates on such rates.
In the cnne Of tho short seller Of
stocks. or of the contractor. The 80
Inmates may have hrcn wrong. Th"n.
OF course, tho contractor In each
case win los. money. They must
iiy. up to THAR contracts
In such ssiort mfiing operations
the public n h~n~fitcd heeaugn The
market IN xtataffzci by the tranrao-
tons II there WIN no, numerous
trunnctLoas OF this Kind besng car.
rted out every day markets would
nucfuat. violently and trrcguiariy.
short sales tend TO restore cauilie
rum.
Th~r~ Il Abuse
But short s.liing can he abused
Groups OF powerful operators can
josn funds and force an abnormal
state OF prices. IL Ia this abuse that
mus, 30 guarded against. And That
Is what tbs new Stock Exchange
rule aims 10 prevent
Short selling. however. r. not uhe
cause OF present panicky conditions
in tho market. Since November. 1915.
securities have been steadily drop
ping. The decline has boon parucu-
larry rapid since IN. middle Of Aus
ust. High grade bonds have declined
more extensively than any other
class OF security. and railruad shares
have closely followed the declines In
bonds.
Industrials Down
Industrial securities. tho more
erratio. have also sid down almost
vertically.
This decline IL undoubtedly due 20
the knowledge that American paruc-
ipation in the wnr must 10 In
creased 40 M to restore any losses
or weakness caused TO the allies thru
Russian and Italian conditions.
Our Task Greater
Armies. ships and munitions on n
far srrander scale than we believed