Of course the speculator who buys stock in a new copper mine is simply
taking a gambler’s chance that ore will be found in paying quantities.
Most of those who have submitted to this enticement in the past thirty
years do not need to be reminded of the hazards attending such risks.
I recall that about twenty-five years ago, when the “copper fever”
was raging throughout the country--and in Boston especially it was
highly infectious--a half-page advertisement appeared in one of the
leading Boston newspapers, relating in graphic terms the discovery
of the most remarkable copper mining prospect that had ever come to
light. The chief mining engineer of one of the largest and best known
copper mines in the United States--a man of wide experience and vast
knowledge in the mining business--while prospecting somewhere in the
West came upon what seemed to him the richest deposits of copper ore
he had ever seen. These ore bodies were said to be located in a large
mountain, conveniently near a railroad, and by tunneling into the
side of the mountain the ore could be trammed out, dumped onto the
cars and hauled to a smelter a few miles away. The mining engineer
(whose full name was given) had immediately resigned his position,
organized a stock company, known as the Occidental Copper Mining
Company--into which he admitted a number of personal friends--bought
the property, and began tunneling operations on his own capital and
what he had raised among his friends through the sale of stock in the
new corporation. Having exhausted their funds and desiring to continue
exploration work--which became more and more promising--the directors
had sold a block of treasury stock, the par value of which was one
dollar a share. The latest reports showed that the work was progressing
satisfactorily under the personal direction of the engineer who had
discovered the mine, and that stockholders might expect dividend
returns inside of a year or so. The advertisement was inserted, not
by a stock-jobbing firm or underwriting syndicate, but by a well
known wholesale and retail grocery and provision company, who claimed
that after fully investigating matters they had bought a large block
of the stock, twenty thousand shares of which they would distribute
among their customers at the par value of one dollar per share. I
called on the president of the grocery company, who said his firm
thought so well of the prospect that they had bought twenty thousand
shares as a speculative investment, and a like amount to distribute
among their customers. He represented that although the shares were
easily worth $5 each he considered it good advertising for his company
to sell them at par, $1; and with a view to extending the benefits
as widely as possible he preferred to dispose of the stock in small
lots. He cheerfully gave me the names and addresses of the directors
of the new mining company and suggested that, if interested, I might
write to them. One was a physician of good repute, another was general
auditor of the Chicago, Milwaukee & St. Paul Railway Co., another
was a western lawyer of prominence, and so on. I wrote to each of
these three, telling them of my interest in the matter, also asking
for a candid expression of their opinions about the property. Each of
them sent me a personally written reply, substantially corroborating
what information I already had, and saying that they had given their
names and their financial support to the company solely upon the
recommendation of the mining engineer, whom they knew personally and
trusted implicitly. Further than that they knew nothing, but were
willing to take a gamble on his judgment. After receiving the second
of these three letters I hurried to the office of the grocery and
provision company, and to my great disappointment, found that they had
only a few hundred shares left. When I told the president that I would
take the entire lot at his price, one dollar per share, he shook his
head. He said the stock was going rapidly in five, ten, and twenty
share lots, and that in justice to their other customers and friends he
did not think it fair to let me have more than one hundred shares at
most. But finally he yielded to my persuasive argument, that inasmuch
as he had only a few hundred shares left he might as well let me have
them all and thus finish the whole transaction at once, saving himself
the bother of peddling them out piecemeal.
Nothing further transpired until, some months later, I received
a circular from the mining company reporting good progress with
development work; also stating that owing to further need of funds to
continue this work the directors had concluded to make another offering
of treasury stock at the same reduced price at which they had sold the
previous block, namely, _at five cents a share_! In the aggregate the
advertising feature was probably more advantageous to the customers
than it was to the grocery company (which soon afterwards went
bankrupt); for although the purchasers, including myself, lost every
dollar of their investment, it doubtless served as a warning (which in
my case it certainly did) that prevented much greater losses in other
swindling schemes.
The task of preparing the prospectuses of the thousands of fake copper
mining propositions and oil schemes that have been foisted on the
public in the past twenty-five years, and made to appear especially
attractive by a price of from five cents to one dollar a share, has
developed some of the most remarkable inventive geniuses of modern
times. Their advertisements and arguments have been so convincing that
the contrary persuasions of bankers and brokers have been absolutely
unavailing with friends and customers who have given orders to buy the
stocks; and against their enticements there is positively no remedy
short of experience. The tempting baits of every imaginable variety
offered by the promoters and dispensers of these bogus stocks have been
the means of filching hundreds of millions of hard-earned money from
credulous people, who are misled to suppose they are getting in on the
“ground floor” of a modern Aladdin’s Cave before it is opened to the
public. But it always has been so, and probably it always will be. It
would be as useless to warn the general public, or even particular
individuals, against these alluring ground-floor propositions as it
would be to warn a flock of goslins to keep out of a mud puddle. It’s
like admonishing a boy against a hundred kinds of mischief; he will
surely find some act of deviltry not included in the list, and his
defence will be that you didn’t tell him not to do _that_. And this
argument is the more unanswerable because you well remember having used
the same stratagem yourself.
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