Continued from...Dow Theory and its Implications
We shall prove, by strict analysis, the fidelity
of the stock market barometer, tested over a long period of years. With
the aid of Dow's theory of the price movement we shall examine the major
swings upwards or downwards, extending from less than a year to three years
or more; their secondary interruption in reactions or rallies, as the case
may be; and the relatively unimportant but always present daily fluctuation.
We shall see that all these movements are based upon the sum of Wall Street's
knowledge of the business of the country; that they have no more to do
with morality than the precession of the equinoxes, and, that manipulation
cannot materially deflect the barometer.
Movies and MelodramaBut, to judge from some of my correspondence, the case must not even be argued, because it is alleged that Wall Street does not come into court with clean hands. It has seemed, in the past, at least discouraging to point out how the dispassionate, the almost inhuman, movement of the market has nothing whatever to do with the occasional scandals which disfigure the record of every market for anything anywhere. But the proportion of people who only feel is, to those who think, overehelming. The former are in such a majority that concession must be made to them, although I still decline to apologize for the stock market. I should as soon think of apologizing for the meridian of Greenwich. To quote one of the best known of Grover Cleveland's useful platitudes, it is a condition and not a theory which confronts us.
In the popular imagination there is a fearful and
wonderful picture of Wall Street - something we may call the Wall Street
of the movies. What the English call the cinema is our modern substitute
for the conventional melodrama of our grandfathers. Its characters are
curiously the same. Its villains and vampires are not like anything in
real life; but they behave as consistent villains or vampires ought to
behave if they are to satisfy critics who never saw a specimen of either.
Many years ago Jerome K. Jerome wrote a chapter on stage law. He showed
that on the English stage the loss of a three-and~six-penny marriage certificate
invalidated the marriage. In the event of death the property of the testator
went to the person who could secure possession of the will. If the rich
man died without a will the property went to the nearest villain. In those
days lawyers looked like lawyers - on the stage. The detective looked like
a gimlet-eyed sleuth, and a financier looked so like a financier that it
positively seemed to hurt his face.
Financiers of FictionOur modern financier on the screen looks like that, especially in the "close-ups." But he is no new creation. I remember reading a magazine story, a score of years ago, of a stock market coup by a great "manipulator," of the type of James R. Keene. The illustrations were well drawn and even thrilling. In one of them Keene, or his prototype was depicted bending dramatically over a Consolidated Stock Exchange ticker! It is to be presumed that he was smashing the market with ten-share lots. Only a Keene could do it, and only a Keene of the movies at that. Doubtless the author of the story, Mr. Edwin Lefevre, who was dissipating his talents in hazy financial paragraphs for the New York Globe at that time, felt.that he had been artistically frustrated. But perhaps he had, himself to thank. Here is his own description of such a manipulator. It is in a short story published in 1901, called The Break in Turpentine:
"Now, manipulators of stocks are born, not made. The art is most is most difficult, for stocks should be manipulated in such wise that they will not look manipulated. Anybody can buy stocks or can sell them. But not every one can sell stocks and at the same time convey the impression that he is buying them, and that prices therefore must inevitably go much higher. It requires boldness and consummate judgement, knowledge of technical stock market conditions, infinite ingenuity and mental agility, absolute familiarity with human nature, a careful study of the curious psychological phenomena of gambling and long experience with the wall street public and with the wonderful imagination of the American people; to say nothing of knowing thoroughly the various brokers to be employed, their capabilities, limitations and personal temperments; also their price."
That is professedly fiction, and, incidentally,
more true and respectable as art than the product of the melodrama or the
screen. It lays no stress on the deeper knowledge of values and business
conditions necessary to assure the existence of the kind of market which
alone makes manipulation possible. Truth is stranger than fiction, and.
perhaps harder to write, although the remark is open to an obvious retort.
Silk Hats and Strained FacesNot long ago there appeared a letter to a popular newspaper, notorious for what may be called the anti-Wall Street complex. It professed to give, in a series of gasps, the impressions of a Western stranger on visiting Wall Street. One of these "flashlights" was, "silk hats and strained faces." Let me be exact. I have seen a silk hat in Wall Street. It was when Mayor Seth Low opened the new Stock Exchange in 1901. My stenographer, bless her honest heart, said it was real stylish. But financiers of the movies tend to wear silk hats, just as the heroes in melodrama, even when reduced to penury and rags, wore patent-leather shoes. A screen financier without a silk hat would be like an egg without salt. We cannot otherwise infer, as we are required, that he is a bad egg.
"A Long Way Back for Soup"Only a few years ago there was a severely localized scandal over a "corner" in a stock called Stutz Motor, for which no true market had been established. Nobody was hurt except a few speculators who chose to sell the thing short. They paid up without whining. But it formed an irresistible text for a popular attack upon Wall Street. One of the New York newspapers said that the incident was only in a piece with "the Metropolitan Traction corruptionists, the New Haven wreckers, the Rock Island wreckers, and" what it called, with a free rendering of history, "the life insurance corruptionists." This was in a newspaper professing to sell news. It did not tell its readers that the last of the Metropolitan Street Railway financing happened twenty years before. Even the foolish and indefensible capitalization of the surface lines of New York, unloaded on what was then called the Inter-borough Metropolitan Company, was fifteen years old. The life insurance investigation, which, incidentally, neither charged nor proved "corruption," went back sixteen years. Even the last essay in misjudged New Haven financing, a comparatively minor matter, occurred fully eleven years earlier; that of Rock Island, nineteen years before; while that favorite charge against Wall Street, the recapitalization of the Chicago & Alton, was carried through in 1899 and not a soul saw anything wrong with it until 1907. I suppose I write myself down a hopeless reactionist when I say that, with the fullest knowledge of the facts, I cannot see anything reprehensible in it now.
Widows and OrphansEven an incident so spectacular as the Northern Pacific corner, with the purely stock market panic which it produced, cannot be pleaded as an example of a kind of manipulation which would disable our barometer. That particular panic occurred in the course of a primary bull market. It produced merely a severe secondary reaction, for the upward movement was resumed and did not culminate until sixteen months afterwards. That incident of 1901, however, is still alive and kicking, so far as the politicians who denounce Wall Street are concerned. It is remarkable that all the stock affected in these bygone incidents is alleged to have been held by widows and orphans. I wish somebody would marry that widow and adopt, or even spank, the orphan. After depriving their trustees of the commonest business sense they have no right to come around in this indelicate way and remind us of our crimes. There is a lucrative engagement waiting for them elsewhere - in the movies.
From The Stock Market Barometer by William P. Hamilton, published in 1922
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