356 



FINANCIAL REVIEW OF 1885. 



silver certificates having aided in augmenting 

 the gold balance of the department. There 

 were rumors of a change of management of the 

 "West Shore through the retirement of one of 

 the receivers ; but the negotiations to this end 

 were abandoned in consequence of the failure to 

 procure the financial relief required. There was 

 evidence of purchases in this market by Euro- 

 peans of stocks and bonds for investment, indi- 

 cating greater confidence in American railroad 

 properties. The movement was comparatively- 

 steady until the 8th, when the news of the de- 

 feat of the Gladstone ministry in Great Britain 

 had a partially unsettling effect, the bears at- 

 tacking the market on the theory that a change 

 of ministry would result in reviving the Anglo- 

 Russian dispute. The bulls, however, prompt- 

 ly checked the decline, and turned prices so 

 decidedly upward that the bears hastily cov- 

 ered their short contracts. One important 

 event was the election on the 17th of Hon. 

 Chauncey M. Depew to the presidency of the 

 New York Central, made vacant by the death 

 of Mr. Thomas Rutter. This was immediately 

 followed by a rise in this stock and in the other 

 Vanderbilt properties, and then combinations 

 were formed in the remaining specialties with 

 a view to a vigorous bull movement. The com- 

 mission-houses reported a better inquiry from 

 non-professionals for stocks than they had en- 

 joyed for many months, and there was reported 

 to be good investment-buying from all sections 

 of the country. It subsequently appeared that, 

 upon the accession of Mr. Depew to the presi- 

 dency of the New York Central, he opened 

 negotiations for the settlement of the differ- 

 ences between Mr. Vanderbilt and the Penn- 

 sylvania, which troubles grew out of the build- 

 ing by the former of the South Pennsylvania 

 road, and Mr. Depew also set on foot the nego- 

 tiations for the reorganization and lease of the 

 West Shore. The early knowledge of these 

 movements possessed by Mr. Vanderbilt's friends 

 and following, induced them to buy largely of 

 the trunk-line properties, and this will in great . 

 part account for the movement in these spe- 

 cialties. Toward the close of the month realiz- 

 ing sales, a fall in Pacific Mail caused by news of 

 the loss of the steamship City of Tokio, a drop 

 in New York Central due to the announcement 

 of a dividend of one half of one per cent, for the 

 quarter, the smallest ever declared, and reports 

 of a large deficit in six months' operation of 

 Lake Shore, contributed to make the market 

 heavy. Early in July reports of a conference 

 between the Vanderbilt and Pennsylvania in- 

 terests in relation to the South Pennsylvania 

 stimulated further purchases of the Vanderbilt 

 properties, and the grangers -were favorably 

 influenced by the reports concerning the crop 

 of spring-sown wheat. Later in the month it 

 was announced that a majority of West Shore 

 bondholders had assented to the proposition 

 for a reorganization and lease of the road to 

 the New York Central, and, as it was seen that 

 this would pave the way for an adjustment of 



all the trunk-line troubles, there was very con- 

 fident buying of all the principal stock**, and 

 the advance was almost uninterrupted for the 

 remainder of the month and until about the 

 third week in August, when the bull movement 

 culminated. The market was irregular after 

 this to the close of the month. Early in Sep- 

 tember the grangers were unfavorably in- 

 fluenced by the reduction of the dividend on 

 Chicago and Northwestern ; the trunk lines 

 renewed cutting of freight rates, prices being 

 forced so low that some roads refused to carry 

 goods when the rates offered were below the 

 cost of hauling, and the coal-trade became un- 

 settled in consequence of temporary overpro- 

 duction. This condition of affairs encouraged 

 bearish demonstrations on the market, and it 

 soon became largely oversold. The decided 

 improvement in the business situation resulting 

 mainly from the generally favorable news re- 

 garding the cereal crops, and the prospects of 

 an abundant yield of cotton, aided in a recovery, 

 but during the last week in the month there 

 was an irregular speculation with St. Paul about 

 the weakest, this stock being affected by the 

 decision of the directors to issue $5,000,000 of 

 preferred stock to retire the floating debt. One 

 incident was the failure, on the 29th, of Soutter 

 & Company, a prominent house on the bear side 

 of the market. This was followed on the 2d 

 of October by the suspension of William Heath 

 & Company, and of Henry N. Smith, both large- 

 ly short of the leading stocks. These failures 

 were for important amounts, and the announce- 

 ment had an unsettling effect while the out- 

 standing contracts were being adjusted under 

 the rules of the Exchange. After the shock 

 was over, it was found that the bears were 

 thoroughly demoralized, and the bulls deter- 

 mined to take advantage of the fact and move 

 the market upward. This manipulation was 

 successful, and the advance was stimulated by 

 news of the most favorable character. The 

 earnings of the granger roads showed a marked 

 improvement; the managers of the trunk lines 

 commenced their conferences for the purpose 

 of arranging new pools, and cliques were formed 

 in Western Union, in the low-priced South- 

 westerns, and in the cheap fancy stocks, and 

 commission-houses reported an active demand 

 for stocks from speculators, who until then bad 

 not made their appearance in the market. One 

 feature was a sharp rise in Reading, which, it 

 was subsequently reported, was manipulated 

 for the purpose of enabling Mr. Vanderbilt to 

 unload. Another feature was a sustained up- 

 ward movement in St. Paul, due to purchase 

 by a Chicago combination of speculators. The 

 tone was very strong for the remainder of the 

 month, and in November until about the 20th, 

 London investors and the arbitrage houses 

 liberally buying, and the earnings of the granger 

 and trunk-line roads steadily increasing, 

 important event was the announcement on the 

 6th that the presidents of the trunk lines h* 

 agreed upon a pooling contract embracing both 



