“I want to sell out bag and baggage,” he said. “I want to get rid of every one of my forty thousand shares. Here they are, put them on the market and sell them.” The stock broker told him that that would never do. If he wanted to realize full value for his holdings he would have to go about it in a different way, for if he threw his forty thousand shares into the market it would knock the bottom out and he would get little or nothing for his stock. Mr. Bannigan saw the point, and asked what he was to do.
“Buy,” said the broker.
“But I don’t want to buy; I have got more now than I want.”
“That is all right; buy anyway, that will make a market for the stock, and then you can unload when the time comes.”
“How much must I buy?”
“Oh, about $250,000 worth.”
“But I have not got $250,000 in cash to go and buy Rubber stock.”
“Well, you can borrow it; a man in your position, Mr. Bannigan, would have no difficulty in borrowing $250,000.”
Much against his will the old man was finally persuaded to do as he was told. About two weeks later the broker wrote to him that he must buy some more, this time, $200,000 worth. Mr. Bannigan used rather strong language, but finally yielded as he had before. He borrowed $200,000, and turned it over. With this additional capital to work on, the brokers continued to manipulate the market. The insiders soon discovered that some strong party was buying; but they did not know who, Bannigan having carefully kept himself in the background. His brokers operated skilfully in the stock, one day buying, the next, selling to keep the stock active. The brokers after awhile commenced to borrow large amounts of the stock. This convinced the insiders that there was a big short interest somewhere, and they got together in order to squeeze the shorts. The inside holders who held most of the stock, who had combined to squeeze the shorts out, as they thought, put the price up to 61, and at about that figure Bannigan’s was all unloaded. Bannigan now found himself full of money and the other fellows had his stock. They never awakened to the fact that the President had sold out on them until his shares were delivered against their purchases, as they thought, of short stock. Rubber soon thereafter did not stop tumbling until it had gone from 61 to 16. This deal had all the elements of a comedy-drama and the playwright who can do it justice will find material there which will make him an everlasting fortune and reputation. I have touched but lightly on a few of the important incidents. It is not often, however, that newcomers in the Street fare as well as this in the end. For a time they will go on merrily enough, and send things booming; but in the end many get the worst of it. A. B. Stockwell is a good illustration of the truth of this. He is still around the Street somewhere, but is one of the “has beens,” like numerous other former conspicuously large and supposed to be brilliant operators. At one time he was worth many millions of dollars. To-day, he is upside down. His start in life was as purser on a Lake Erie steamboat; his father, it is said, kept a livery stable in Cleveland. On one of his trips, Stockwell was in a position to show considerable attention to Elias Howe, the inventor of the eye at the upper end of the sewing machine needle. Mr. Howe was accompanied by his daughter. Stockwell made himself agreeable to Miss Howe also, and with such good effect that he managed to win her affections and soon thereafter married the young lady. When Mr. Howe died, Mrs. Stockwell came into possession of her father’s millions. With this nest egg Stockwell started in Wall Street, and before anyone realized what had happened he was the most talked of man in the district. He put all his wife’s millions into Pacific Mail stock, and secured entire control of the Company. He came into the Street as plain Stockwell, then as the news of his liberality and good fellowship spread, he became Mr. Stockwell; after he got hold of Pacific Mail he was Commodore Stockwell, by common consent. Everybody bowed and scraped to him and no man was so high and mighty that he was not proud to shake his hand. Stockwell took hold of Pacific Mail at about 40 and sent it up to 107. It was at this period that he was worth over fifteen million dollars; but he found, unfortunately, when it was too late to retreat, that while Pacific Mail was up to 107, it was not worth that figure when the unloading commenced. He was landed high and dry with it all and the Street told him he was welcome to it. He tried to sell, and found that there was no market. Then came violent demands on him to pay up his numerous call loans, and in order to respond thereto, he had to sell regardless of price and thus created a whirlpool, which finally sent the stock down to the price at which he commenced his original purchase at 40. In this one upset, he lost all his paper profits and his wife’s millions besides. This catastrophe not only stripped him of all his worldly possessions, but reduced him to the position of being plain Stockwell again, and there are many also who even go so far as to call him “that little red-headed cuss.” That was the most famous boom in the history of Pacific Mail, notwithstanding Leonard Jerome’s previous brilliant ups and downs in that former erratic property.
Leonard and Addison Jerome had a good time with Pacific Mail for a while. They ran it up to high figures several times; but finally meeting with the same experience that Stockwell did. The two Jeromes from being among the wealthiest and most dazzling operators in the Street, were in the end practically wiped out. Leonard Jerome, who was the father of Lady Randolph Churchill, had nothing left to bequeath his daughter except an equity in the house now occupied by The Manhattan Club on Madison Avenue, which yields an income of about $15,000 a year, of which Lady Churchill gets $10,000.
[Illustration:
WILLIAM ROCKEFELLER. ]
These are a few of the booms that have stirred up things in Wall Street at one time or another, as did the Keene booms, of which there were several, the Gould booms, and the Vanderbilt booms, all of which have been referred to in previous chapters in this book.
The question of trusts or trade combinations has, in recent years, excited a good deal of interest. One of the most interesting figures in this connection is John D. Rockefeller, who will undoubtedly be regarded by the future historian as a striking character in the business history of the nineteenth century. And be it remembered that history now concerns itself, not so much with the doings of governments; not so much with the personalities of emperors, kings, presidents or even with political parties, as with the life of the people themselves. This is clearly shown by such historians as Lord Macaulay and John Bach McMaster. And looking at history in this way, surely John D. Rockefeller must be regarded as one of the most interesting types of the great commercial powers of the day. He was a pioneer, a commercial Daniel Boone, striking out into a new and untrodden field of enterprise, taking great risks, undergoing grave financial perils of a novel kind and at length winning a complete and lasting success—a success which has filled business history with his achievements and the world with his fame. It was a great stride from the little farmhouse in Tioga County, New York, to the place which he fills to-day. Born in 1838 he is now in the prime of life. Reared by strict, church-going people, his word is as good as his bond; he is the soul of business integrity, and a striking example of what thrift, enterprise and persistency will do for a young man who starts out in life with apparently little or no chance of success. His old schoolmaster, it seems, was the first to get the young man to look into the refining of petroleum. Not so many years ago, they used sperm oil, and it cost $1.50 a gallon. How to refine the thick, ill-smelling oil found in the water courses of Pennsylvania was a problem. It was black slime, and John D. Rockefeller, by hitting upon a method of refining it and introducing it in the home throughout the world has made a fortune that recalls the fable of Midas. Before he was twenty-one he formed a partnership with a man named Hewitt and at first engaged in the warehouse and produce business. Then came the great oil craze in Pennsylvania. Poor farmers suddenly became rich; thousands flocked to the oil fields. Young Rockefeller kept his head. Asked to make investments in oil wells for Cleveland friends he dissuaded them from the project on the ground that the thing was being overdone, and with Samuel Andrews, who was familiar with the general processes of distilling, engaged in the refining branch of the petroleum trade. The firm subsequently became Rockefeller, Flagler & Andrews, which rapidly expanded its field of operations, and in 1870 organized the Standard Oil Company with a capital of $1,000,000. It started pipe lines to ship the oil to the seaports. It made millions in by-products once considered worthless. It established markets all over the known world, cheapened its methods of production and outstripped all competitors. Little wonder then, that its “extra” dividend in the year 1899 amounted to $23,000,000 over and above the regular dividends on the whole capital stock. Mr. Rockefeller attributes his success to early training and perseverance. That is, like other men who have stamped their individuality upon the affairs of mankind, he is what is termed a causationist; in other words, he believes that nothing is got for nothing; that effects proceed from causes, and the cause of success he believes to be largely perseverance. He believes that perseverance overcomes almost everything, even nature itself, and in that opinion this practical business man is at one with the philosophers of antiquity.
He and his associates in the Standard Oil Company are naturally a power in the stock market. They are, of course, very large holders of railroad stocks and bonds and at times their influence is as irresistible as the laws of gravitation. John D. Rockefeller’s influence alone could be so, as he is supposed to be the richest man in America and indeed the richest man ever known in human history. His is believed to be the greatest fortune ever accumulated by any man within his own lifetime. That he feels the responsibilities of his great wealth is obvious from his munificent gifts to educational and charitable institutions, to churches and to a hundred other praiseworthy objects. His princely donations to schools, colleges and universities rival those of that other public-spirited citizen, Andrew Carnegie. They are equally strong in their belief that the greatest charity lies in helping others to help themselves.
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CHAPTER LXIII.
A GLIMPSE INTO THE FUTURE.
I believe that it would be difficult to set bounds to the possibilities of American development. The inventive genius of the people, their adaptability to all circumstances, their tenacity of purpose, their wonderful energy, and the fabulous resources of the country all make it certain that the United States will reach a degree of power and prosperity hitherto unexampled in human history. Carlyle’s “French Revolution,” has been strikingly described as “history read by flashes of lightning,” and I am tempted to use the same language in describing the commercial revolution which has taken place in this country during the last few years. Great as it is, however, I think it merely a prelude to what is to come. We are destined for one thing to have a great Pacific trade. Fifty years ago, Humboldt said that the day would come when the trade of the Pacific Ocean would be as great as that of the Atlantic. And the increase within a year or two in this commerce augurs well for the ultimate fulfillment of the great scientist’s prophecy. We readily adapt ourselves to the requirements of foreign markets and that is a very important point. Lord Charles Beresford bears testimony to this fact. He says with truth that Americans find out what the foreign markets want, then they supply it. The English say in effect, “We know what you want better than you know yourselves.” The American sends the Chinese thirty-inch-wide calico, which is what they want; the Englishman sticks to twenty-seven inches, with the remark expressed or implied, “Take it or leave it.” And the Chinese will leave it rather than take it and the American manufacturer will be the gainer thereby. Minister Wu’s recent remarks on the necessity of finding out just what the Chinese want and then conforming to their wants, cannot be too carefully borne in mind. Furthermore, we are ready to adopt the newest and most highly perfected machinery regardless of cost. Mr. Carnegie, for instance, on a single occasion discarded machinery which had cost him $2,000,000, and replaced it with the latest which inventive genius could supply. The London engineering journals, on the other hand, admit that the British manufacturers will not change their machinery no matter how apparent it may be that they are being distanced by their more progressive rivals in this country. They reason that they have put just so much money into the “plant” and must get just so much out of it before they will replace it. This seems a good deal like the ostrich which thrusts its head into the sand and refuses to look danger in the face. In the meantime the British are left behind in the race and Glasgow merchants have to try the puerile and utterly futile device of getting up a boycott against American steel and iron products. Such a device, under the circumstances, seems a good deal like the attempt of the celebrated Dame Partington, as the famous English wit Sidney Smith describes it, to sweep back the Atlantic Ocean. She trundled her mop vigorously and made a gallant onslaught, but the Atlantic was aroused and it is needless to say who was the victor. And the American iron trade’s invasion of English markets must result in a victory, unless there is a radical change in conditions, which no one can now foresee. We study the markets; we take pains to ascertain their wants, and it is an axiom of trade that a man or nation that supplies the demand, whatever it may happen to be, gets the trade. This is a law as inexorable, as unchangeable as the laws of the Medes and Persians.
We are now one of the five great world powers, financial and political, with a population second to none except Russia. That is to say, we have a population of 76,300,000, Germany has 55,000,000, Austro-Hungary 45,000,000, the United Kingdom 41,000,000, France 39,000,000, Italy 32,000,000, Spain 20,000,000, Russia 136,000,000, Japan, 45,000,000, India 340,000,000, China 400,000,000. The Mongolian race is numerically powerful, but in the long run can the yellow race stand up against the white? I doubt it. Meantime the population in this western home of the Caucasian race is steadily increasing. In 1800 the United States had a population of only 5,308,483. It is now 76,304,799. Then we had sixteen states. Now we have forty-five. Then our territory consisted of 909,050 square miles. It is now 3,846,595 square miles. We have practically a new race made up of an amalgamation of all branches of the Caucasian race, speaking the English tongue, which in my judgment is destined to be the one tongue spoken in the world. It is a people determined to uphold just and equitable principles of trade and to have sound money. The amount now in circulation is $2,074,687,871, or an increase within three years of $400,000,000. Russia has only 26,000 miles of railroad; we have 190,000. In the last fifteen years we have made more progress in the things which tend to increase practically the term of human life by annihilating time and space and supplying necessities and comforts of one kind or another than ever before in our history. We are told that what does not happen in a year may happen in a minute. Similarly what might not have happened in a thousand years under adverse conditions, has happened in fifteen.
What of the future? In the language of Daniel Webster, “the past at least is secure.” We see that the bank exchanges which in 1888 were $48,750,886,813, have risen in 1900 to approximately $92,000,000,000. During four years of a sound money Republican Administration, exchanges in our clearing houses steadily increased from $48,750,886,813 in 1888, to the magnificent total of $60,883,572,438 in 1892. But from 1892, during four years of Democratic rule, our clearings fell from $60,883,572,438 to $51,935,651,733 in 1896, running as low as $45,000,000,000 in 1894. From 1896, during Mr. McKinley’s Administration, we gained on an average more than ten billions each year, the exchanges having gone up from $51,935,651,733 in 1896, to the surprising sum of $92,037,588,818 in 1900. From 1888 to 1892 during a Republican Administration, we increased our exports $317,787,505, reaching the then gratifying figure of $1,015,732,011. From 1892 to 1896, during a Democratic Administration, our exports decreased by $152,531,524, falling from $1,015,732,011 to $863,200,487. From 1896 down to June 30, 1900, with two months estimated, during McKinley’s Administration, our exports have gone up from $863,200,487 in 1896, to $1,400,000,000, gaining $537,000,000, or nearly doubling; and of this vast export of $1,400,000,000 more than $400,000,000 are manufactured goods, and would require in their production more than a million of American mechanics.
From the fall of 1888 to the fall of 1892, during a Republican Administration, national banks gained in resources $694,400,000, going from $2,815,700,000 to $3,510,100,000. From the fall of 1892 to the fall of 1896, during a Democratic Administration, the national banks lost in resources $346,500,000, going down from $3,510,100,000 to $3,263,600,000. From the fall of 1896 to April 26, 1900, during McKinley’s Administration, the national banks have gained in resources $1,548,356,000, going up from $3,263,600,000 to $4,811,956,000. The increase in both Republican periods was constant and gradual throughout, demonstrating, as has been well said, the influence and power of far-reaching politics which alone can bring about uniform and universal prosperity worthy the genius of the American people. The Republican party turned over the Government to the Democrats in March, 1893, with a bonded debt of only $585,029,330, and this was increased to $847,365,130, in times of peace. For the purpose of prosecuting the war the debt was increased in 1898 by $200,000,000, and now stands at $1,046,048,750, less such an amount of the twenty-five millions of 2 per cent. bonds as the Secretary of the Treasury may have already redeemed. During the last four years of Democratic administration, $201,003,808 of gold was exported; while during the first three years of the recent Administration, or down to June 30, 1899, we imported $201,071,000, making a difference in favor of Republican politics of $402,074,808. Look, too, at the per capita circulation in the United States. In 1802, it was $5.00; in 1845, $9.00; in 1873, $15.85; in 1892, $24.40; in 1900, $26.77.
As President McKinley pointed out in his message, our foreign trade for the fiscal year of 1900 showed a remarkable record. The total of imports and exports for the first time in the history of the country exceeded two billions of dollars. The exports are greater than they have ever been before, the total for the fiscal year 1900 being $1,394,483,082, an increase over 1899 of $167,459,780, an increase over 1898 of $163,000,752, over 1897 of $343,489,526, and greater than 1896 by $511,876,144. The growth of manufactures in the United States is evidenced by the fact that exports of manufactured products largely exceed those of any previous year, their value for 1900 being $433,851,756, against $339,592,146 in 1899, an increase of 28%. Agricultural products were also exported during 1900 in greater volume than in 1899, the total for the year being $835,858,123, against $784,776,142 in 1899.
The imports for the year amounted to $849,941,184, an increase over 1899 of $152,792,695. The increase is largely in materials for manufacture, and is in response to the rapid development of manufacturing in the United States. While there was imported for use in manufactures in 1900 material to the value of $79,768,972 in excess of 1899, it is reassuring to observe that there is a tendency toward decrease in the importation of articles manufactured ready for consumption, which in 1900 formed 15.17 per cent. of the total imports against 15.54 per cent. in 1899 and 21.09 per cent. in 1896.
The election of November, 1900, stamped out of the minds of the people all fear that any sort of governmental policy in any way inimical to the finances or business or prosperity of the country may be adopted. A very great factor in our future development, which our people are soon to discover, will appear in the building up of the ports of trade on the Pacific Coast, which will be so extensive and rapid in progress that the Atlantic ports will before long begin to feel the competition of the Western coast of our country. Our grasp of the Philippine Islands, and the foothold in trade and greater share of confidence in our disinterestedness as regards territorial encroachment which is fast gaining in the Chinese Empire, will finally consummate the preparations for as great business and prosperity for the Pacific coast States as have heretofore been enjoyed by those of the Atlantic coast. Soon a part of the trade and commerce of the Eastern States will be brought into competition with that of the great Pacific coast, insomuch that it will appear that indeed “Westward the star of empire takes its way.” It is the foresight of such change in the Pacific States that has helped produce such a pronounced electoral result.
Our country is now passing through a rapid growth of progress and power and prestige which will soon place her in the leadership of the nations, with every means necessary for extending civilization, enlightenment, commerce and better government over the world. We have come to the time when we must take up the mighty work of further cultivating and improving the condition of mankind, and we will continue this great work until our labors shall have brought to pass better conditions of government, co-ordination of interests, education, and peace and good will among the nations of the earth. In the progress of civilization since the dawn of the Christian era, the momentous task of leadership has devolved first upon Rome, then upon Spain, then upon England. It seems to have been reserved for the “Young Giant of the West” to complete the tasks undertaken, and assemble into one great community of interest vast national forces which have been the growth of centuries. In due time we shall no doubt finish the work and bring peace and good will to men in every part of the world and prepare men everywhere to turn the spear into a pruning hook, the sword into a ploughshare and to give freedom and protection and prosperity to all sorts and conditions of men, and put an end to strife between the nations. We believe that such is the great office to which we have been called, and that our functions as the leading nation of the world have already begun.
[Illustration]
ALL THE PRECEDING PAGES WERE WRITTEN YEARS AGO, AND WHAT FOLLOWS BRINGS THE WORK UP TO THE DATE OF THIS ISSUE, MARCH 31ST, 1908.
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CHAPTER LXIV.
MY CHRISTMAS ADDRESS TO CUSTOMERS DEC. 24, 1906.
You can now realize why we have for so long a period had a congested stock market. It started by the accumulation of Union Pacific by comparatively few people, the purchases being commenced in 1903, the panic year, when the price dipped to 65. By the time the stock touched 100 the accumulation was complete. Then the manipulation was begun for its advance to 190, at which time the ten per cent. dividend was declared, since which the process of distribution has been going on. St. Paul, Northern Pacific, and Great Northern have gone through a similar process. Prior to the declaration of the increased stock issues by these companies, the larger part of the old stock had been bought up by the inside knowing ones, after which the new issues were announced to the public. The profit to the holders of these stocks can be measured by the market value of the rights. Now we all know what the large holdings of these stocks meant. The inside magnates having nearly all of them, the outsiders were left out in the cold, and were consequently in the dark; but now the light of day flashes over the situation. You are asked to buy the rights which represent insiders’ profits, all of which is water pure and simple. The accumulation of stocks has now ceased and distribution is under way, and that is why the market has this present fit of liquidation, which must go on until completed. Then the situation will have righted itself legitimately, and not until then. Remember what I tell you: that the accumulation of stock as I have described has produced the present congested money market, and the unlocking of the former will, after a short time, unlock the other; then all will be well again. The present turbulent waves will pass over without many shipwrecks, and then will come calm weather and a smooth sea. Patience is a great virtue; exercise it, and wait for bottom; then get in and get rich.
Gentlemen, this is my Christmas greeting to you. You all have my best wishes for a happy and prosperous New Year.
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CHAPTER LXV.
EDWARD H. HARRIMAN.
Edward H. Harriman was born on Long Island in 1848. His father was a clergyman, and the family in poor circumstances. At the age of fourteen he left school, and began his business career in a Wall Street house. Of an aggressive and masterful character, with a great capacity for hard work and the ability to master every detail, he rapidly forged ahead. At eighteen he became partner in a brokerage house; at twenty-two bought a seat on the New York Stock Exchange. In 1883 he was chosen a director of the Illinois Central Railroad Company, and four years later, when he became its vice president, he retired from the brokerage business, having amassed what was then considered a comfortable fortune. For a time, while President Fish was abroad, Mr. Harriman was acting president of the Illinois Central, and promptly put into execution his idea that the way to make a road pay was to put it in the best of physical condition, and thus attract traffic by the ability to handle it, rather than by cutting rates. This policy afterwards brought the Union Pacific up from a financial and physical wreck in 1893 to the most aggressive and progressive railroad corporation of the day, operating, together with the Southern Pacific, over 15,000 miles of road, besides controlling the Illinois Central, Chicago & Alton, and St. Joseph & Grand Island Railroad companies and the Pacific Mail Steamship Company, and owning large interests in the Baltimore & Ohio, New York Central, Atchison, Chicago & Northwestern, and Chicago, Milwaukee & St. Paul roads. Mr. Harriman and his associates were defeated in an attempt to obtain control of the Northern Pacific in 1901, but the Union Pacific system benefited by this defeat, it is estimated, by about $60,000,000. The purchase of Northern Pacific in the open market forced the price of its stock up to $1,000 per share on May 9, 1901, causing the memorable panic of that date.
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CHAPTER LXVI.
THE UPS AND DOWNS OF WALL STREET.
ILLUSTRATED BY PERSONAL REMINISCENCES OF ITS LEADERS.
The mutations and vicissitudes, the ups and downs, of Wall Street can be best illustrated by sketches, from life, of the career and experience of its leading operators, who have often, though not generally, gone up like a rocket and come down like a stick.
I will not begin with those now foremost in the Wall Street arena, but go back to Jacob Little, whose name is still a household word on the Stock Exchange.
He died in the sixties, while the war between North and South was raging, and he had gradually ceased to be a power in the Street after the panic of 1857. He remained a bear on the rising tide of currency inflation following the outbreak of the war, and was submerged and wiped out.
He was an odd fish—singular in appearance, manner, and business methods, but for more than twenty years he had a great name in Wall Street. To speak colloquially, he was the cock of the walk by self-assertion and common consent.
He was the successor of Jacob Barker, who came from Philadelphia, and was the first great leader Wall Street had known. He was trained in his office, and began as a stock operator on his own account in 1835.
[Illustration:
HENRY H. ROGERS. ]
The panic of 1837 made his reputation and his fortune, for, being naturally a bear, he was largely “short” of stocks. That panic swept the whole United States with the besom of destruction, and sent prices down to zero. It left him a greater bear than ever, a preacher of distrust and a prophet of failure. He thrived on calamity, and grew richer and richer during the years of depression that followed that memorable revulsion.