Stockjobbing

“ Dealers and consumers ceased buying until their surplus stocks had become exhausted, and then bought in small lots only as they were compelled to. Meanwhile, stocks in the hands of the syndicate were accumulating rapidly with no visible outlet for reducing them.
A feature in the trade which alone should have been sufficient to prevent men of brains from going into such an operation was that the production could not be contracted for in advance. The high price stimulated production and day after day the syndicate had to buy in the producing markets large quantities at current prices. ”

“ The range of the jobbers speedily extended itself beyond the comparatively narrow field presented by the funds. Exchequer bills with a variable premium were invented and brought into the market, a large and lucrative business was done in lottery tickets, and even seats in parliament were negotiated on the Stock Exchange. Joint-stock companies next came into play, and these have ever since proved an inexhaustible mine of wealth to the jobbers. ”

“ Capital which the owner does not employ in purchasing labor, but keeps idle in his hands, is the same thing to the laborers, for the time being, as if it did not exist. All capital is, from the variations of trade, occasionally in this state. A manufacturer, finding a slack demand for his commodity, forbears to employ laborers in increasing a stock which he finds it difficult to dispose of; or if he goes on until all his capital is locked up in unsold goods, then at least he must of necessity pause until he can get paid for some of them. ”

“ It is the income drawn from land and labour, and not any benefit rendered to commerce by stock, which causes its wealth. And this fact is the true reason, why stock transplants men from the natural interests of society, into the artificial interest of paper and patronage.
To buy cheap, and to sell dear, is admitted to be the object of commerce. The English mode of effecting these objects, is to compel labour to sell, and foreign nations to buy, at the prices which paper monopoly shall settle. ”

“ The great stock employed in every branch of trade, and the number of rich competitors, generally reduce the rate of profit in the former below what it is in the latter. But the wages of labour are generally higher in a great town than in a country village. In a thriving town, the people who have great stocks to employ, frequently cannot get the number of workmen they want, and therefore bid against one another, in order to get as many as they can, which raises the wages of labour, and lowers the profits of stock. ”

“ The capitalists, in alarm, threw open the whole of their accumulated stock at greatly depreciated prices. There was no further demand for manufacturing labour, because the world was glutted with the supply, and hence arose strikes, panic, bankruptcy, and a period of almost unexampled hardship to the workman, and of serious and permanent loss to the master manufacturer. Speculation, therefore, in an old branch of industry, is perilous not only to the invester but to the prosperity of the branch itself. ”

“ The investor lends his money on perfectly safe security to the aid of commerce and industry, expecting a comparatively small return, but that a safe one. By so doing he is encouraged in thrift, whilst commerce and industry enjoys the benefit of the capital, and the Stock Exchange is the medium of it all. The speculator, less conservative, risks money, the loss of which he is perfectly well able to afford, in the furtherance of experiments in commerce and industry, be it the trial of a patent or the opening up of a mine. ”

“ It may be noticed, too, that sales of "rights," of puts and calls and straddles, and other contract rights, are regular factors in the organized exchanges. Wherever profits are to be made by leveling values as between different places or different times, speculation arises, and, with dynamic change, this means everywhere, in every business, and all the time! The shifting of labor and capital from industry to industry, leveling returns to capital and labor, involves an enormous amount of trading that would not occur in a "normal equilibrium." Much of this the Stock Exchange does. ”

“ They fancy very naturally that a stock which is subject to violent fluctuations, and which is seen to fall and rise two or three per cent. in a day, is a fine field to operate in; but the compensation which is in all things, soon reveals itself here in the manner described, so that the speculator stands perhaps even less chance of making a profit off a widely fluctuating security than he would by one that moved to a smaller extent over or under a central point of value from which there was not so much movement. ”

“ Such a quotation provides an ample margin for what is called the jobber's turn, that is, the profit he expects to make by buying and selling the same stock, as a merchant. Wide quotations, which prevail in stocks that are not often dealt in, and even in stocks that are in times of panic, merely mean that the price the client has to pay is high, whilst the price he will receive for the same stock is low. The more enterprising the jobber, the narrower the prices he will make. Of course, in making a price the jobber does not undertake to deal in any abnormal amount of stock. ”

“ Just in the same manner, if you wanted to buy some stock, you would go to a stockbroker for it, and not to a stockjobber—the stockbroker occupying the same position as Marshall and Snelgrove, while the stockjobber stands in the place of the wholesale house in the City.
The stockjobber, or wholesale merchant, is always ready both to buy and sell with the broker. If you give an order to the latter, he darts into the Stock Exchange, and without disclosing the nature of his order to the jobber, inquires of him the price of the particular stock which you wish to deal in. ”

“ He must do this in his own interest, for he must ever be ready to buy and sell at the demand of the broker whom the public sends to him. This is compulsory under the law of competition, for, of course although the jobber confines his attention to comparatively few stocks, he has no monopoly; there are other jobbers in the same market anxious to secure the orders which the brokers bring in. The jobber obtains his supply generally by purchase in the market, always endeavouring to charge a slightly higher price for it than that at which he has bought it or thinks he can buy it. ”

“ Germain be preferable to an aristocracy of stock-brokers?
At all events, the law of supply and demand is beginning to redeem the situation, and, if not to restore our moral credit, at least to save the rising generation from falling into the same slough. The stock-broker industry has been overstocked, and the late young capitalists in fur overcoats, with benedictory manners, wear anxious countenances under the stress of that Old World demon, excessive competition. ”

“ In years of rising prices, the 'base stock' method causes an understatement of income; for it disregards the gains actually realized through liquidation of low price stock on a high price market. In times of falling prices, it causes an overstatement of income; for it ignores the losses which result from the consumption of high price stock. This method may, like many reserves which business men set up on their books for their own purposes, serve to equalize the results of operations during a series of years. ”

“ That machinery will go on replacing hand labor; that the joint-stock company will absorb the private firm, to be, in its turn, swallowed up in the Ring and the Trust. That thus the smaller producers and distributors will gradually, but at a constantly increasing pace, be squeezed out and reduced to the condition of employees of great industrial and trade corporations, managed by highly skilled captains of industry, in the interests of idle shareholders. ”

“ Another remarkable instance of combination prior to the introduction of mechanical power and the factory system is that of the “stockingers,” the hosiery workers, or framework knitters, described by Dr. Brentano. From the very beginning of the use of the stocking-frame, in the early part of the seventeenth century, servants appear to have been set to work upon frames owned by capitalists, though the bulk of the trade was in the hands of men who worked upon their own frames as independent producers. ”

“ Simultaneously with the publication of the statement, a process known as "making a market" goes on in the Stock Exchange. The promoter, who holds all the shares, arranges with a jobber to sell them. He probably gives the jobber a call on the shares at a certain price, and anything which the jobber can obtain for them over that is his profit. Then the promoter instructs some brokers to buy the shares and others to sell them, and in this way he produces a semblance of activity. It can easily be arranged that the price shall rise rapidly enough to attract attention. ”

“ Wild speculation by all classes of the community, particularly in land, mining shares, and Stock Exchange securities, but not as a rule in produce, the wealthiest capitalists in the country entering into stock speculation in the late summer, and using most unscrupulously their power over company finance to help along their purposes ”

“ A fund may be seeking for productive employment, and find none, adapted to the inclinations of its possessor: it then is capital still, but unemployed capital. Or the stock may consist of unsold goods, not susceptible of direct application to productive uses, and not, at the moment, marketable: these, until sold, are in the condition of unemployed capital. Again, artificial or accidental circumstances may render it necessary to possess a larger stock in advance, that is, a larger capital before entering on production, than is required by the nature of things. ”

“ This restless desire on the part of all the employers of stock, to quit a less profitable for a more advantageous business, has a strong tendency to equalize the rate of profits of all, or to fix them in such proportions, as may in the estimation of the parties,84 compensate for any advantage which one may have, or may appear to have over the other. It is perhaps very difficult to trace the steps by which this change is effected: it is probably effected, by a manufacturer not absolutely changing his employment, but only lessening the quantity of capital he has in that employment. ”

“ With respect to speculation, I will remark that stock-jobbing has prevailed more or less in all countries, and ever will, in some degree, notwithstanding any exertions to prevent it. If you judge from what has happened under the existing system, any change would render a melioration probable. ”

“ Private firms might initiate a practice of reserving a certain amount of their capital to constitute a kind of stock for their workmen to invest their savings in, under—if that were legalized—limited liability. One advantage of this plan over the ordinary industrial partnership would be, that while, like it, it would enhance the workmen's zeal in their work, it could not possibly have the effect of reducing wages, because [Pg 340] the stock would be a free investment, and would probably not be taken up by all or by more than a majority of the workmen. ”

“ The capital remains unemployed for a time, during which the labour market is overstocked, and wages fall. Afterwards the demand revives, and perhaps becomes unusually brisk, enabling the manufacturer to sell his commodity even faster than he can produce it: his whole capital is then brought into complete efficiency, and if he is able, he borrows capital in addition, which would otherwise have gone into some other employment. At such times wages, in his particular occupation, rise. ”

“ In a decaying manufacture, on the contrary, many workmen, rather than quit their own trade, are contented with smaller wages than would be suitable to the nature of their employment.
The profits of stock vary with the price of the commodities in which it is employed. ”

“ Nor is Capel Court an exception. When the fate of a jobber depends on the turn which the market may take,—when sorrow or success hangs upon a word,—when family, friends, and fortune are in the balance, and a rumored falsehood may sink or save,—it is not in humanity to resist the temptation; and it has, unhappily, become too general a practice to stop at no invention, and to hesitate at no assertion, which may assist the inventor. From this cause the Stock Exchange is rarely mentioned with that respect which it merits, as the theatre of the most extensive money transactions in the world. ”

“ You see we few men have got to run things here. It's going to be on our shoulders to see that labor is employed. A lot of small stock-holders are a nuisance. As man to man I'm going to ask each of you not to sell his stock, but if any one comes to you and asks about its value, I expect you to be loyal to our enterprise. I'll begin looking about for something to replace the plant-setting machine, and when the shop closes we'll start right up again. It isn't every day men get a chance to sell themselves a fine plant full of new machinery as we can do in a year or so now. ”

“ No longer did a single man with a single ship sail around until he found a market, but company trading overseas had their ships, wharves, and depots furnished by men's savings put into a common stock. The first major capitalist industries were coal mining, iron mining, and foreign trade because they all needed large investments, and thus joint-stock company organization. ”