This country, said the late Mr. Rothschild, is, in general, the bank of
the whole world. That distinguished capitalist never said a truer thing.
If Russia wants a railway, or Turkey an army, if Ohio would borrow cash,
or Timbuctoo build a railway, they all come to London. The English
stockholder is the richest and softest animal under the sun--as
repudiated foreign stocks and exploded joint-stock projects at home have
too frequently illustrated. When the unfortunate stockholder has in this
way invested his all, the result is at times very painful. The cause of
this is not always to be traced to "greenness," but to the desire to
derive large dividends or interest, without due regard to the security of
the investment. Not even is the _bona fide_ investor always safe. He is
the goose that lays the golden egg. In one respect this weakness is
somewhat tragic. For instance, to give an extreme case:--Suppose A. B.,
twelve years back, had, as the result of a life of industry, saved 5,000
pounds, and invested it in the London and North Western Railway, when
that famous stock was in demand, and quoted as high as 250 pounds, what
must be the unhappy condition of that too-confiding A. B., supposing he
has not already died of a broken heart, when he finds London and North
Western stock quoted, as at this present time, under 100 pounds? Again,
supposing C. D. had died, leaving his disconsolate widow and twelve
children, innocent but helpless, a nice little property consisting of
shares in the Western Bank of Scotland. What must be the state of that
disconsolate widow and those twelve children, innocent but helpless, upon
finding that not only have all the original shares completely vanished
into ducks and drakes, but that upon each share a responsibility of
somewhere about one hundred and fifty pounds has been incurred besides?
Can we calculate the sum total of bitter misery thus created and
scattered far and wide? As well might we attempt to realise the dark and
dismal regions of the damned. The caution cannot be too often repeated,
to avoid investments which entail unknown liabilities, or which are
subject to great fluctuations of price or the amount of dividend.
Abundant opportunity for safe investment is offered in the Debentures,
Preference and Guaranteed Stocks of British Railways, which pay from 4 to
5 per cent. per annum. The aggregate value of the stocks and shares
which are dealt in on the London Stock Exchange is somewhat bewildering
in its enormous amount. First and foremost are the several stocks
constituting the National Debt of Great Britain, which may be taken at
between eight and nine hundred millions. The capitals of the various
British railways amount to upwards of three hundred millions. The
capitals of the Bank of England and of sundry joint-stock banks amount to
more than thirty millions. Then there is a large amount invested in
canals, gas and water, steam, telegraph, and dock companies. The total
amount of American railways is about one hundred and sixty-eight millions
sterling; European railways, two hundred millions; and those of India and
our colonies, fifty millions. Moreover, there is a vast aggregate amount
of foreign stocks and loans, which our readers will not care that we
particularise.
The grand mart for the traffic in such things is a large building situate
in Capel-court, just opposite the Bank of England. It has three other
entrances--one in Shorter's-court, Throgmorton-street, one in New-court,
ditto, and one in Hercules-passage, Broad-street. You cannot get in, for
a porter guards each door, and if you elude him you are easily detected
by the _habitues_, and obliged to beat a precipitate retreat. But from
the entrance in Hercules-passage, by peeping through the glass folding
doors, you may manage to get an imperfect view of the interior. You will
see that in the middle of the day there are a great number of
well-dressed, sharp-looking gentlemen talking very energetically, and
apparently doing a great deal of business. As they pass in and out you
hear them discourse as familiarly of thousands as
"Maids of fourteen do of puppy dogs."
Let me add that there are a variety of distinct markets--the English for
stocks and exchequer bills, the foreign for stocks, and the railway and
mining, and miscellaneous share department. I may also add that a
news-room is attached, where the daily papers, especially the city
articles, are very eagerly perused. I am told that the _Daily News_ is
the favourite, and that the demand for that paper is very great. The
Stock Exchange does not recognise in its dealings any other parties than
its own members. Every bargain, therefore, whether for account of the
member effecting it, or for account of a principal, must be fulfilled
according to the regulations and usages of the house. Its affairs are
conducted by a committee of thirty, annually elected. "Every member of
the Stock Exchange and every clerk to a member shall attend the committee
for general purposes when required, and shall give the committee such
information as may be in his possession relative to any matter then under
investigation." The committee have the right to expel any member guilty
of dishonourable or disgraceful conduct, or who may violate any of the
regulations, or fail to comply with any of the committee's decisions.
As regards small people outside like ourselves, the functions of the
Stock Exchange are soon fulfilled. I have worked hard--I have saved a
few hundreds--I want to invest them--I call upon a stock-broker--they are
(I mean nothing offensive by the comparison) as thick as thieves in this
neighbourhood. I commission him to buy me a certain number of shares in
such and such a company. My broker rushes into the Exchange, goes to the
particular spot where the dealer in such shares is to be met with, and
buys them for me, to be delivered on such a day. I pay him a commission
for brokerage, and my business is done. Suppose I want to buy government
stock. What is stock? says one, unhappily, in consequence of his own
laziness and ill-luck, or of the laziness and ill-luck of his fathers
before him, not a holder of such. Stock, O benighted individual, is a
term applied to the various funds which constitute the National Debt, the
interest on which is paid half-yearly. Few persons buy or sell stock
except through a broker, and this is the original business of the
stockbroker, and it was for this the Stock Exchange was erected in 1803.
It is only since the peace that the present immense traffic has sprung up
in miscellaneous and railway shares. Let me suppose I have a thousand
pounds to invest in the Three per Cents., which are now quoted at about
96. I wait on a stockbroker; he goes over to the Exchange and purchases
them for me, and then sees to their transfer in the Bank of England,
receiving as his commission one eighth per cent., or 2s. 6d. in the 100
pounds upon the amount of stock transferred. But I am of a speculative
turn, and wish to make a fortune rapidly by means of the Stock Exchange.
I again have recourse to a broker. As I assume that I am a mere
gambler--a man of straw--I stand to lose or gain a large sum of money on
a certain contingency. I draw a blank, and leave my broker in the lurch,
who has to settle his accounts as best he can. If he cannot pay by
half-past two on the day of settlement, which in shares is once a
fortnight, and in consols monthly, he despatches a short communication to
the committee of the Stock Exchange; an official then suddenly gives
three loud knocks with a mallet, and announces the unpleasant fact that
my broker is unable to meet his engagements. He is termed a lame duck,
and cannot again figure on the Exchange till he pays a composition of 6s.
8d. in the pound. The readmission of defaulters is in three classes.
The first class to be for cases of failure arising from the defection of
principals, or from other unfortunate vicissitudes, where no bad faith or
breach of the regulations of the house has been practised; where the
operations have been in reasonable proportion to the defaulter's means or
resources; and where his general character has been irreproachable. The
second class, for cases marked by indiscretion, and by the absence of
reasonable caution only, or by conduct reprehensible in other respects.
The third class for cases where the defaulter is ineligible under either
of the former classes, but whom, nevertheless, the committee may not feel
warranted in excluding from the Stock Exchange. The final decision of
the committee on each defaulter's application will be notified to the
members in the usual way, and remain posted in the Stock Exchange for
forty days. Stockbrokers rarely go into the Bankruptcy Court, as the
house appoints assignees, and settles the affair in a much easier way.
Lame ducks are not always ruined in purse. I knew one who waddled off
the Stock Exchange, he having been a speculator on his own account, and
thus evaded the payment of rather a heavy sum. I met him at Brighton
this summer, living in one of the best houses in Kemp-town.
Stock-brokers are very facetious fellows, and amuse their leisure hours
in many ways, such as tossing for halfcrowns in a hat, and practical
jokes; occasionally a good deal of small wit passes current. I have
heard of an almanac, circulated in MS., in which the various
peculiarities of individual members of the Exchange were very cleverly
hit off. A late Exchange wit has given birth to the following _jeu
d'esprit_, which has attained a wide-spread popularity in the City:--
"When the market takes a rise,
Then the public comes and buys;
But when they want to realise,
Oh! it's 'Oop de doodum doo!'"
When the government broker appears to operate on behalf of the
Commissioners, for the Reduction of the National Debt he mounts into a
"box," and is surrounded by a clamorous host, all eager to buy or sell.
The present number of members of the Stock Exchange approaches nearly
800, each paying a subscription of 10 pounds per annum, besides finding
securities for between 800 and 900 pounds for three years. Our
stockbroker generally spends his money freely. If he is a married man he
has a nice villa at Norwood or Clapham, and affects a stylish appearance.
Then there are the "jobbers," who remain inside the stock market, waiting
for the broker, and who are prepared, immediately he appears, to make a
price at which they are either buyers or sellers--the jobber calculating
upon making it right with the broker, who has undertaken an operation the
reverse of his own. Occasionally the jobber runs considerable risk,
since, after concluding a bargain, and while endeavouring to obtain a
profit on it, the market may turn. Still he is a useful middle-man, and
saves the broker a world of trouble.
But there is much business transacted which is less legitimate, and is
known as time bargains, which are bargains to deliver stock on certain
days at a certain price, the seller, of course, hoping that the price
will fall, and the buyer, that it will rise when the period for
completing the bargain has arrived. The speculative settlement is
effected without making full payment for stock; the losing party simply
pays the difference. One who speculates for a rise is a Bull (it is said
the great Rothschild made a vast deal of money in this way), the
speculator for a fall is a Bear. Continuation is the interest on money
lent on the security of stock. A great deal of business is done in this
way. A merchant, or a railway company, or a bank, have large sums of
money to dispose of. Instead of locking it up they employ a broker, who
lends it on certain securities, for a few days or a few weeks.
Operations on the Stock Exchange answer in this way, but the small
tradesman, or clerk, or professional man who ventures within the charmed
circle of Capel-court for the purpose of speculation, generally learns
bitterly to rue the day.