Bushels Bales
Year Corn Cotton
1880 1,717,434,543 5,789,329
1885 1,936,176,000 6,550,215
1890 1,568,874,000 8,655,000
1895 2,151,139,000 7,157,340
1900 2,105,102,516 10,383,422
1905 2,707,993,542 11,345,988
1906 2,927,416,091 13,000,000
The time is very near at hand, when anything less than 3,000,000,000
bushels of corn will be a crop failure; and high prices cannot be
considered a great compensation in lean years. Short crops mean
decreased demand for labor and loss of purchasing power by the common
people, who are after all the best spenders.--From Thomas Gibson’s
Market Letter, July 13th, 1907.
_The Selection of Securities._
When so many seductive baits are offered, so many nets and traps
contrived and constructed by clever brains and cunning fingers are
spread for the capture of those having money, is it surprising that
the careless and credulous are victimized, and even that the sagacious
and prudent should sometimes be taken in? Nevertheless, for the losses
they have sustained, investors, as a rule, have themselves chiefly
to blame. The mistakes made, in nine cases out of ten, have been the
purchase of “cheap” securities. The hope of realizing a little more
than ordinary interest, by buying paper at a discount, has proved to
be the rock on which unnumbered capitalists have split. In addition to
their money’s worth, they have endeavored to get something for nothing,
with the result of most generally getting nothing for something. It
is remarkable how blind are people, ordinarily sagacious enough to
make money, to the fact that property cannot pay a revenue beyond its
producing capacity. For instance, how can a trolley company, whose line
is wholly or mainly built from the proceeds of mortgage bonds, sell
them at a heavy discount, besides allowing large commissions for the
selling, and then pay both this interest and dividends on a large issue
of watered stocks? Or how can a poor agriculturist, occupying a half
improved farm out on the frontier, with a family to support and grain
selling barely above the cost of production, pay ten or twelve per
cent. upon the capital with which he does business?--From “The Art of
Wall Street Investing,” by John Moody.
_The Bank Statement._
“A statement or exhibit of the condition of banks.
“In New York the Bank Statement is issued from the clearing house
on Saturday. The consolidated statement (or as it is officially
designated, the “summary of the weekly statement of the associated
banks”) is the collective showing by the banks belonging to the
clearing house--the showing when the returns of the individual banks
have been consolidated (put together).
“The consolidated bank statement shows the average deposits, loans,
specie, legal tenders, circulation, reserve and surplus reserve of the
banks for the week ending with and including Friday.
“The term deposits includes the net deposits (credit balances) of
persons and concerns (designated as individual deposits), balances
to the credit of other banks and all money and credits subject to
withdrawal. Loans include money loaned and likewise paper (promissory
notes, drafts, etc.) bought. Specie includes not only gold and silver
coins, but also gold certificates, which are redeemable in gold or
silver, as the case may be. Legal tenders as the term is used in the
bank statement, means, United States notes (greenbacks) and Treasury
notes (notes issued for silver bullion purchased under the so-called
Sherman act).
“Note.--As defined by the statutes, legal tenders include United States
notes, Treasury notes, gold and silver coins and minor coins, but not
gold certificates, nor silver certificates.
“Circulation means the notes issued by national banks, to secure the
redemption of which Government bonds have to be purchased by the banks
and deposited with the Treasurer of the United States. A bank cannot
count circulation in its reserve; whether it is its own circulation or
the circulation of some other bank, makes no difference. Reserve means
the total amount of specie and legal tenders held. Surplus reserve
means the total amount held in excess of legal requirement. A national
bank (in New York City) must, by law, maintain a reserve equal to
25 per cent. of its deposits; a state bank must, by law, maintain a
reserve of 15 per cent. In compiling the bank statement a reserve of
25 per cent. is allowed or figured for state banks as well as for
national banks.
“The consolidated statement formerly was issued from the clearing house
in the following form, the changes (increases and decreases) resulting
from comparison with the preceding statement (the statement issued the
week before):
Loans $874,647,900 $2,344,000 Increase
Specie 152,338,200 1,068,300 Increase
Legal Tenders 67,274,300 1,319,000 Decrease
Deposits 872,340,600 164,600 Increase
Circulation 36,072,500 411,600 Increase
Decrease of reserve, $291,850
“The (final) item reserve in the statement as issued from the clearing
house, meant surplus reserve, although not specifically so stated.
“In the newspapers the statement appeared as follows; being elucidated
so as to show the reserve held (that is, specie and legal tenders which
are generally referred to as cash holdings), the reserve required and
the surplus reserve with the changes in these items:
Current Preceding
Week Week Changes
Loans $874,647,900 $872,303,700 In. $2,344,200
Deposits 872,340,600 872,176,000 In. 164,600
Circulation 36,072,500 35,660,900 In. 411,400
Legal Tends. 67,274,300 68,593,300 De. 1,319,000
Specie 152,338,200 151,269,900 In. 1,068,300
--------------------------------------------
Reserve held $219,612,500 $219,863,200 De. $250,700
Res. req’r’d 218,085,150 218,044,000 In. 41,150
--------------------------------------------
Surplus $1,527,350 $1,819,200 De. $291,850
“In 1902 the Secretary of the Treasury (Leslie M. Shaw) suspended the
requirement to keep a reserve against government funds on deposit in
national banks upon the ground that these funds were special deposits
which were fully secured by pledge of bonds with the Treasurer of the
United States. This action by the Secretary of the Treasury caused a
change in the make-up of the bank statement by the addition to it of
figures showing the average amount of government funds on deposit. The
consolidated statement was thereafter issued from the clearing house in
the following form:
Loans $874,647,900 $2,344,200 Increase
Specie 152,338,200 1,068,300 Increase
Legal Tenders 67,274,300 1,319,000 Decrease
[3]Deposits 872,340,600 164,600 Increase
Circulation 36,072,500 411,600 Increase
Reserve on all deposits 291,850 Decrease
Reserve on all deposits
other than United States 325,825 Decrease
[3] United States deposits included, $40,633,400.
“In the newspapers the statement was made up in both the old and the
new forms as follows:
Current Preceding
Week Week Changes
Loans $874,674,900 $872,303,700 In. $2,344,200
Deposits 872,340,600 872,176,000 In. 164,600
Circulation 36,072,500 35,660,900 In. 411,400
Legal Tends. 67,274,300 68,593,300 De. 1,319,000
Specie 152,338,200 151,269,900 In. 1,068,300
-------------------------------------------
Reserve held $219,612,500 $219,863,200 De. $250,700
Res. req’r’d 218,085,150 218,044,000 In. 41,150
-------------------------------------------
Surplus $1,527,350 $1,819,200 De. $291,850
Deducting the United States deposits held by the banks from the
aggregate deposits the bank statement compares as follows:
Current Preceding
Week Week Changes
Tot. deposits $872,340,600 $872,176,000 In. $164,600
U.S. deposits 40,633,400 40,769,300 De. 135,900
----------------------------------------
Dep’s 25% $831,707,200 $831,406,700 In. $300,500
Reserve held 219,612,500 219,863,200 De. 250,700
Res. req’r’d 207,926,800 207,851,675 In. 75,125
----------------------------------------
Surplus $11,685,700 $12,011,525 De. $325,825
“The detailed bank statement, which is issued simultaneously with the
consolidated statement, contains first the number of each bank (each
bank has a number by which it is known at the clearing house) and then
the name of the bank, after which follow the amounts of its capital,
net profits (surplus and undivided profits), specie, legal tenders,
deposits and circulation.
“The bank statement is said to have been made up on rising averages
when the items in it have been increasing in amount during the week, or
the statement is said to have been made up on falling averages when the
items in it have been decreasing in amount during the week.
“Generally speaking, the bank statement is favorable or good when it
shows that the position of the banks has been strengthened, as by an
increase in the surplus reserve through, or by means of an increase in
their cash holdings rather than by a decrease in their deposits, which
often is effected by the calling of loans--by demanding and obtaining
the payment of money loaned on call. As money loaned is credited to
borrowers on their deposit accounts and increases the total deposits
of the bank, so the payment of loans by borrowers takes from and
decreases deposits. As will be seen, the calling and consequent payment
of loans does not increase cash holdings but merely changes balances
in individual accounts. A reduction in deposits reduces the amount
of cash required to be held as a legal reserve and correspondingly
expands (increases) the surplus reserve. Generally speaking, also, the
bank statement is unfavorable or, if particularly unfavorable, is bad
when the position of the banks has been weakened, as by a decrease in
the surplus reserve through a decrease in their cash holdings rather
than by an increase in their deposits, which often is effected by an
expansion in (increase in amount of) their loans, which correspondingly
expands (increases) their deposits and correspondingly increases the
amount of cash required to be held as a legal reserve. This additional
amount is deducted from and correspondingly reduces the surplus reserve.
“The bank statement may be said to be favorable or good, however, if
an increase in loans is reported when the banks are surfeited with
money: also the bank statement may be said to be unfavorable or rather
not good (but hardly bad) when it shows that money is accumulating in
idleness in the banks--when deposits are increasing, not as a result of
increasing loans, but in the absence of a borrowing demand for money.
“There are other circumstances which make the bank statement favorable
or unfavorable as disclosed in the circumstances themselves.
“There is also a non-member bank statement, which is a statement of the
conditions of banks which are not members of the clearing house but
clear through members. This statement is issued from the clearing house
on Monday and shows the average condition of the banks for the week
ending with and including the preceding Friday.
“The non-member bank statement contains the name of each bank, followed
by its capital, net profits, average amount of loans and discounts and
investments, average amount of specie, average amount of legal tender
notes and (national) bank notes, average amount on deposit with its
clearing house agent (the bank through which it clears at the clearing
house), average amount on deposit with other New York City banks and
trust companies, average amount of net deposits and average amount of
circulation.”--From Smith’s Financial Dictionary.
_The Cycles of Stock Speculation._[4]
All speculators, and most investors, possess a general idea of the
range and trend of prices for a considerable period. This knowledge is
more frequently based upon impressions gained during their own years
of activity in the speculative world than upon research. The knowledge
gained by active participation is certainly the most forcible and
lasting, but is frequently productive of erroneous ideas, as will be
set forth hereafter.
[4] Reprinted from MOODY’S MAGAZINE of August 1906.
For the purpose of giving a clear idea of the movements in stocks
during recent years, the accompanying chart has been arranged. The
use of circles in lieu of the customary straight lines was hit upon
as presenting more clearly to the eye the comparative extent of each
year’s movement, and more plainly distinguishing one year from another.
These advantages are gained without obscuring from view the general
trend of prices for the period considered.
For the purpose of establishing a single hypothetical stock whose
movements should be representative of the course of all other active
securities, the fluctuations of twenty stocks were welded together.
That is to say, the high points of these stocks for the year 1896
were added and divided by 20. The same course was followed with the
low points, and each year considered was treated in like manner. By
drawing a circle upon a numbered chart with the upper rim resting
upon the figures representing the high point, and the lower rim upon
those representing the low point, an average price for the year is
necessarily established at the axis.
The size of the circles shows the actual and comparative extent of the
movements, and the position of consecutive years on the diagram shows
the general trend of prices.
In selecting the twenty stocks to be used in forming a composite
security, care was taken to eliminate the shares of such corporations
as have undergone radical changes during the period considered, 1896
to 1905, inclusive. The Rock Island Company, for example, is in itself
an important system, but owing to the conversion of $75,000,000 Common
stock into $200,000,000 of mixed securities in 1902, the tracing
of its subsequent movements would involve unnecessary computations
and explanations. It may be added that experimental tests show that
the hypothetical stock, call it “Composite Common” for the sake of
convenient reference, was faithfully representative of almost all
movements from 1896 to 1906, and that the selection of other stocks
would have made only insignificant variations in the general result.
The original intention was to extend the investigation for a longer
period than ten years, but so many readjustments, assessments, and
other changes occurred in listed securities prior to 1896 as to make a
clear showing difficult.
Common stocks of railroads only were considered. Few Industrials have
reached their tenth birthday, and aside from this, their introduction
would make a false showing by increasing the dividend rate with no
corresponding increase in the selling price of the stock.
The twenty stocks chosen for amalgamation were as follows:
Atchison, Topeka & Santa Fe, Baltimore and Ohio, Canadian Pacific,
Canada Southern, Chesapeake & Ohio, Chicago & Great Western, Chicago,
Milwaukee & St. Paul, Chicago & Northwestern, Chicago, St. Paul,
Minneapolis & Omaha, Erie, Illinois Central, Louisville & Nashville,
Missouri Pacific, New York Central & Hudson River RR., Pennsylvania,
Reading, Southern Pacific, Southern Railway, Union Pacific, and Wabash
RR.