Volatilization

“ In course of time these shrewd schemers, who are known as monopolists, gathered this liquid air into large tanks and warehouses, and put an exorbitant price upon it. The business flourished greatly because everybody was daily in need of liquid air. ”

“ A moderate disturbance caused by one of the above changes, or a combination of them, will produce an immediate effect on the price of the commodity, which again will tend to react on both the supply and the demand by altering the opinions of sellers and buyers. If no further change tending to disturb the market takes place, the market will gradually settle down again to a state of equilibrium. But if the disturbance has been considerable, a relatively long time may elapse before the market becomes quiet ”

“ My brokers will purchase for cash all the stocks they offer, and, on deposit of sufficient margin, loan them the stocks back again, to be again sold to me. In brief, I will take all their ‘shorts,’ and all the stocks sold by others which their conspiracy will force upon the market. When they have forced prices down to a point where they are ready to cover their shorts and buy for an advance, I will suddenly jump prices to the level they occupied before the conspirators commenced their operations, and thus commend to their own lips the bitter draught they have prepared for others. ”

“ Oscillations are set up which, though tending to be self-corrective, are continually perpetuated by fresh disturbances. Any cause which disturbs equilibrium will suffice to set up oscillations. One of the most common of such causes is an increase in the quantity of money.*51 Another is a shock to business confidence (affecting enterprise, loans, and deposits) . A third is short crops, affecting the Q's. A fourth is invention.
IV.30 The factors in the equation of exchange are therefore continually seeking normal adjustment. ”

“ The effect of melting coin, on the one hand, is to decrease the amount of gold money and increase the amount of gold bullion, thereby lowering the value of gold as bullion and raising the value of gold as money; thereby lowering the price level and restoring the equality between bullion and money. The effect of minting bullion into coin is, by the opposite process, to bring the value of gold as coin and the value of gold as bullion again into equilibrium. ”

“ Those who ignore the economic tides that ebb and flow through the medium of the Stock Exchange as they did in 1907, do so because they do not understand that these great market movements are really but expressions of natural laws. If there is a rising tide—a boom—it is attributed by thoughtless people to speculation and gambling. If there is a bad break, it is caused by panic-stricken repentant sinners, or by the activities of the bears. ”

“ Within the major movements of stock prices, there always are several minor movements, which are caused by various influences. One of the important causes is the technical condition of the market. Another cause might be called a psychological one. When stocks are moving up steadily in a bull market, people closely connected with the market expect a reaction and watch for it. ”

“ The sensation of being short in a rampant bull market has been pictured as similar to that of being chained by the heels to a rising balloon, without any idea of the height to which the gas will carry it—not a cheery picture for the contemplation of one who is bearishly disposed. ”

“ With such tenacity do speculators hold on to a stock, hoping for a recovery when they have made a loss, that they will leave it as a man drops into the sea from a burning ship, only when he is singed by the flames. ”

“ The market tipsters, the financial editors of newspapers, the brokers’ letters and all stock market literature, with but few exceptions, were crowing loud and boastfully for still higher prices, and after the whole group of stocks had risen in unison for a time, some individual stock was singled out every day or so, pushed into the forefront and skyrocketed to dizzying heights. The brokers and all the customers were delirious with joy and excitement. ”

“ You know, Monsieur, that, in the stock-market especially, and more or less in every other kind of speculation, the greater part of the transactions are fictitious, to a certain extent. Par exemple: you buy or you sell so many barrels of flour, at such a price, on time, as it is called,—that is, you engage to receive, or to deliver, so many barrels, at the prices and in the times agreed upon, in the hope, that, before the period of your contract comes round, prices will have so varied as to enable you to buy, or sell, the quantity bargained for, upon terms that will give you a profit. ”

“ Distrust increases the velocity of circulation, and decreases the trade performed by the money. We have shown that the general effect of irredeemable paper money issues, which are almost always in large quantities, despite pledges to the contrary, has been to raise prices.
XI.87 Finally, our study of deposit circulation and crises has afforded further illustration. Preceding a typical crisis, there is, in general, a tendency for deposits to increase and also for their velocity of circulation to increase, while prices tend to rise. ”

“ From ten to three they stood before the quotation board and watched a quick-witted boy chalk the price-changes, which one or another of the customers read aloud from the tape as it came from the ticker. The higher stocks went the more numerous the customers became, being allured in great flocks to the Street by the tales of their friends, who had profited greatly by the rise. All were winning, for all were buying stocks in a bull market. ”

“ Were a railroad to double in money value, the result would be, since the money value of the bonds could not increase appreciably, that the money value of the stock would more than double. Stocks are shares in physical wealth the value of which, in money, can fluctuate. Since the money price of bonds is relatively inflexible, that of stocks will fluctuate more than the price of the physical wealth as a whole. ”

“ It must be remembered that it is the stock of gold and not the annual production which influences the price level; and that the stock will probably continue to increase for many years after the production has begun to decline,—as long, in fact, as production keeps above consumption. ”

“ The many sources of air-supply were guarded and men were employed to carry the liquid from the raw springs to the private tanks of the monopolists. Not long after this, when the monopolists saw that they controlled all the liquid air of the country, they had rigid laws passed forbidding the importation of air from any other country. Then when all preliminaries were arranged, the magnates raised the price of their commodity. ”

“ No one has ever been able satisfactorily to explain why the prices of all stocks, both good and poor, and even gilt edge bonds, keep an almost even pace in the backward and forward swings, but they do; and thousands of people who have placed their savings in securities that are as sound and safe as a savings bank have viewed with alarm the crumbling market values of their investments, wondering what has happened to their [74] particular stocks or bonds, and if the slumping prices foreshadow a reduction in dividends, or if interest will be defaulted on coupons. ”

“ A gang of speculators may get up a corner on wheat or cotton or stocks of some sort and artificially raise the price while they unload at the advanced rate thereby securing wealth they never earned. Combinations and trusts in oil or sugar, screws, nails, coal, whisky, gas-pipes or binding twine, arbitrarily advance the price of the articles whenever they want more money, and thus take as many thousands or millions from that patient ass, the public, as they see fit without a pretense of returning an equivalent. ”

“ When carried on in connection with either commodities or securities it tends to steady their prices. Where speculation is free, fluctuations in prices, otherwise violent and disastrous, ordinarily become gradual and comparatively harmless. Moreover, so far as commodities are concerned, in the absence of speculation, merchants and manufacturers would themselves be forced to carry the risks involved in changes of prices and to bear them in the intensified condition resulting from sudden and violent fluctuations in value. ”

“ After the stock market had been sold to a standstill and its weak timbers eliminated, by May, 1907, it was only natural, 786in view of its previous drastic liquidation and heavy decline, that with good crop weather following the backward spring, stocks should advance. The keel of a future bull market of large dimensions had been laid by the disastrous liquidation that had occurred, and we subsequently witnessed its development on a rapidly ascending scale. It is a law of nature that action follows reaction. ”

“ Values outside of the stock market are showing signs of disturbance. A plethora of money, whether in gold or any other form, must invariably bring enhancement of prices. We have seen it in the stock market; we are beginning to see it in other lines. When it begins to affect standard commodities—the necessaries of life—we shall have a serious state of affairs. The people are hard pushed already. Times are very bad in the ordinary sense. ”

“ On account, lastly, of this Circumstance, that a stronger Demand for Money is met in either one of two ways, by increasing the stock of coin, or by an increased rapidity of circulation of that on hand. It is exceedingly fortunate that a brisker demand for money, especially if it be but temporary, does not necessarily enlarge the Supply or alter the value, but only hurries round the existing money. Oscillations in the Demand are responded to by a slower or a more rapid circulation. ”

“ Exchange raises, and the mint price brings down bullion. IV. The mint price has as great an effect in bringing down the price of bullion, as exchange has in raising it. In countries where the metals in the coin are justly proportioned, where all the currencies are of legal weight, and where coinage is imposed, the operations of trade make the price of bullion constantly to fluctuate between the value of the coin and the mint price of the metals. ”

“ A sharper Demand carries up the market-rate, and a higher market-rate commonly [56] acts upon Supply to enlarge it, and an increased Supply too checks the rise of market-rate. Per contra, a slacker Demand lowers market-rates, and lowered rates often lessen the Supply by the action of holders and speculators,—holders withdrawing their stock for a better market, and speculators buying now when the article is cheap to store away until it shall be dearer. ”

“ If the market was for any reason active, the brokers and their agents were apt to be more numerous than if it were dull and the trading indifferent. A gong sounded the call to trading at ten o’clock, and if there was a noticeable rise or decline in a stock or a group of stocks, you were apt to witness quite a spirited scene. Fifty to a hundred men would shout, gesticulate, shove here and there in an apparently aimless manner; endeavoring to take advantage of the stock offered or called for. ”

“ In a period of depression, the banks accumulate money, and there always is an abundance of money at the beginning of a bull market. During a period of prosperity the banks' reserves decrease and their loans increase. ”

“ There are always two parties in every stock exchange, well known as bulls and bears. Those who believe in an advance, or what is to the same end, manipulate a stock to increase its price, are said to be "bulling it" ”

“ THE MONEY MARKET AND STOCK PRICES
Perhaps no other one thing influences the movement of stock prices so much, in a large way, as money conditions. It is impossible to have a big bull market without plenty of money. During a bull market nearly all stocks are bought on margin, which is explained in Chapter XVI. This makes it necessary for brokers to borrow large sums of money. When money is tight, it is impossible to get enough to carry on a large movement in stocks. ”

“ It began in a calm—a quiet, happy, pleasant calm—a calm that may be typified by a man seated on the lawn at Barton, and smoking in the shade, with sheep bleating at a distance.
It came out of a calm, we say—a delightful time of rising markets, when the bulls of the Stock Exchange were in clover, and the bears at fault. It began when most kinds of shares were at a premium; when all sorts of companies were paying big dividends, and 5l. shares were selling at 8l. and 10l.; when everything was “looking [Pg 144] up;” when men bought to invest, and even bought one day to sell the next at a profit. ”

“ As you put out new greenbacks, with the prospect of a large emission, the greenbacks will rapidly depreciate as to gold; and as the bonds are payable principal and interest in gold, they will maintain their gold value, and their price in paper money will thereby become so high that the method of putting out greenbacks by purchasing bonds will soon become very unpopular and be dropped. ”

“ Normally, the price level is an effect and not a cause in the equation of exchange; but during such transition periods its fluctuations temporarily react on the other five factors, and especially on deposits. A rise will thus temporarily generate a further rise, while a fall temporarily operates in the opposite direction. ”

“ After a little I was able to discover a method in the outbreaks of apparent lunacy, and found that the shouts and yells and screams, the shaking of fists, and the waving of arms were merely a more or less energetic method of bidding for stocks; that the ringing of gongs and the bellow of the big man who smiled on the bear-garden from the high desk were merely the audible signs that another stock was being called ”

“ There are periods of the year when the temper of investors tends to sulkiness, in sympathy with a fall of the mercury. Dull and disagreeable weather, as a rule, adversely affects the Stock markets more or less, according to the extent of counteracting influences. ”