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Real estate record and builders' guide: v. 69, no. 1786: June 7, 1902

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'tine 7, 1902, RECORD AND GUIDE. 1035 DE/oTfl) TO R^M E:st«e . Bui Loif/c ApctfnzcniRE ^OJSEHom DnKHpltiH, BU31t/ESS AJbTHEilES Of Gei^I^. iKtERpST. IPRICE PER YEAR IN ADVANCE SIX DOLLARS Toblished eVery Saturday Oommualoattona should be addressed to C. W. SWEET, 14-16 Veaey Street, New YorK ?. V. UNDSEY, BuBlness Manager Teleplioijo, Cortlandt 91117 "Entered at the Post Office at N'ew York, JV, Y.. as second-class matter." Vol. LXIX. JUNE 7, 1902. No. 1786 THERE is no doubt that professional Wall Street -was dis¬ appointed by the action of the security marlcets both here and abroad this weelt. It was expected, erroneously as we pointed out last week, that the signing of the peace agreement in South Africa would be followed by a pervading advance in security prices. As this did not take place disappointment fol¬ lowed, which was expressed by an open attack on prices in the latter part of the week. The bulk of the news was fairly good, but the untoward possibilities of the strike in the coal trade are too apparent and too serious not to override everything else. The least and best that can be said of this striite is, that even if the possible consequences are not accomplished to anything like a maximum degree, the signs point to a long and bitter fight, which cannot fail to bave its effect upon the general busi¬ ness of the country. Current crop news, while on the whole some¬ what more cheerful, does not remove the fears aroused by earlier reports; that is it does not show that the land is recovering now what it lost in previous months. Some weakness in stock prices is, therefore, not surprising, though the agencies that have sup¬ ported the market hitherto in spite of abnormally high quota¬ tions, are still present and ready to act as soon as short con¬ tracts appear in volume. These agencies are the confidence and tenacity of holders of securities, continued prosperous business and cheap mouey. They will not, however, prevent, in the long run, the return of prices to a nearer parity to real values than they have approached for a long time. Nor does their continued presence remove our opinion that we saw the culmination of the stock market boom last year, and that this year we have seen the reaction from the depression that followed it. We have now to add that the market has resumed the process of natural decline which the circumstances call for. Heavy selling unac¬ companied by liquidation would produce a quick rally, but all the same, those who are awaiting the return of the boom move¬ ment are simply lingering around the ashes, though perhaps still glowing, of a. fire that is spent. ONE of the things upon whicb the expectations of a rise in this marketwas based was theassertionthatas soon aspeace was arranged, London would buy Americans. The futility of this hope is shown by current comments upon our securities by the local flnancial press, a characteristic example of which is the following: "The stringency (in money) appears to be largely due to American operations on this side, securities being o.°fered for loans here in order to carry over liabilities imtil the opening of the export season shall adjust the balances between here aud New York, It is scarcely necessary to add that bankers here can hardly be too cautious as to the extent tbey are willing to make advances on American securities, their value being a very uncertain quantity from day to day, and almost from hour to hour." In due time the new conditions in South Africa will work benefit on all sides, but they have not had time to play yet, and, meantine, there must come the curtailment of govern¬ mental disbursements for war purposes and the release and re¬ placement of the capital employed to meet the government's wants. The flrst beneflts will be felt by the best issues such as government bonds. The advance in Consols has been checked by realizings, but the resumption of purchases for the Sinking Fund will practically insure current quotations, so that when outstanding speculative contracts have been adjusted the upward movement will be resumed. Another government bond to which attention may be drawn is the German Imperial 3s. It is con¬ fldently reported tbat a new issue will be made in a short time, and this will afford an opportunity to buy the bonds cheaply, as the depression of British Consols just prior to the last issue did to buy them. Last year a lot of Imperial 3s were issued at 871/0; this year an issue was made at S9.S0, and the bonds have since advanced to 93, and would have Dten higher but for th*" superior attraction of Russian 4s to the German investor. No part of either of these issues was placed officially in this market, but some were sold by bankers having foreign connections, and the results have been satisfactory. Not only aoes this bond sell lower and pay more—3 per cent, as compared with 2'^ per cent— than the Consols, but interest is subject to no deduction for income tax as income on the latter is. As to safety, for prac¬ tical purposes, one is as good as the other. Recent Tendencies of Railroad Control. T X 7HEN, as they have been doing lately, any of the great VY railroad men have appealed for the release of the rail¬ roads from control by Federal or State Commissions, tbey have apparently not been aware of bow pureiy personal their appeal v.-as in a sense. The whole tendency of the railroad develop¬ ment in the past three years has been to throw the control of the railroads of the country into so few hands that none of them can make such an appeal as that previously referred to without the personal motive being, in appearance at least, revealed to the hearers. Within tbe consolidation movement there has been another and corresponding action which reduced the number in control as the number of the independent companies was re¬ duced. The attitude of the ordinary shareholder in this coun¬ try toward railroad government has been similar to that of the ordinary citizen towards civil government, i, e., to consistently leave it to the professional; his proxy has gone to elect a ticket composed for him in the office of the railroad manager, as the citizen's vote has been given to elect a ticket in whose compo¬ sition he has had no share. The result has been the same in both cases; it has produced the institution best known by the undignified term "boss." Railroading has perhaps been more amenable to this influence than any other of our affairs, for not¬ withstanding the vastness of its extent and the enormous amount of capital involved, it is at present dominated, if not entirely controlSed, by just five men oply. It is during the present boom—whicb,bowever,if the coal strike is prolonged and extended, will have soon to be referred to in the past tense—that this concentration of railroad control into few bands has made the greatest strides, and this has been effected not by purchase of stock for individual account, but by the em¬ ployment of the credit of companies ah-eady controlled to acquire by their issues of bonds other companies, thus enlarging the mileage included within one system without in any degree en¬ larging the control. In this way, to quote the most prominent instances, tbe Union Pacific obtained its control of the Southern Pacifle and Northern Pacifle, and the Great Northern their con¬ trol of the Burlington. The process employed is, however, best illustrated by the case of the New York Central. Up to with¬ in a recent period, the New York Central, the Lake Shore and the Michigan Central were independent systems; though, as is ■(lell known, Vanderbilt interests dictated their policy and man¬ agement. Each had stock out in the hands of the public by which control could be changed if that were expedient. The mileage of all was in the neighborhood of 6,000 miles, and the capital secured and unsecured amounted to about $440,000,000, the stock alone being about ?183,000,000, or 40 per cent, of the total. The stock of the New York Central then amounted to $115,000,000—we are speaking of a time prior to the latest issue— which was, say 26 per cent, of tbe total capitalization. By con¬ solidating the "Lake Shore and the Michigan Central with New York Central through the agency of bonds, the entire control, whicb had previously lodged with the 40 per cent, of capitaliza¬ tion, became concentrated in the 26 per cent. Nor does this represent the whole of the case, because actual control is -with any majority of this 26 per cent, which would reduce it by any¬ thing less than half. It would be even possible to show, that in an extreme of the case, a comparatively few millions of dollars could, if the credit of the individual employing them was sufficient to bring the facilities to borrowers offered by our banking system into play, control the whole of this system of 6,000 miles of railroad which bad cost $440,000,000 to create. Moreover, the proportion of capital controlling could be reduced by continuing the process of acquiring new properties by the issue of bonds, and the percentage of the total capital, on which the whole fortunes of tbe system depended, reduced to very small flgures indeed. In this latest tendency of raih-oad control—this moving towards a railroad dictatorship, for tbere Is no more reason why the five should not eventually become one as the 50 of not so long ago became five, raises two questions, one more Immediately ad¬ dressed to the investor, and the other to the public and the government. In the process of consolidation there has been a return under tbe spur of expediency to the flxed income security 1