LIBRARY - THE UNIVERSITY OF CALIFORNIA SANTA BARBARA PRESENTED BY Dame Judith Anderson THE STOCK MARKET BAROMETER 1915 1916 1917 1913 1919 1920 1921 1922 1923 1924 1925 1926 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914 1897 1898 1899 1900 1901 1902 1903 1904 190S 1906 1907 1908 1909 1910 1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1923 1926 (Copyriyht by Dow, Jones & Co., 1926) THE DOW-JONES AVERAGES 1897-1925 THE STOCK MARKET BAROMETER A Study oflts Forecast Value Based on Charles H. Dow's Theory of the Price Movement. With an Analysis of the Market and Its History Since 1897 By WILLIAM PETER HAMILTON Editor of The Wall Street Journal HARPER fcf BROTHERS PUBLISHERS NEW YORK AND LONDON THS STOCK MARKET BABOMETKB Copyright, 1922 By Harper & Brothers Printed in the U. S. A. B-A Ninth Printing To My Old Friend and Colleague HUGH BANCROFT without whose suggestion and encouragement this book would not have been written LIST OF CONTENTS CHAPTER PAGE I. CYCLES AND STOCK MARKET RECORDS 1 II. WALL STREET OF THE MOVIES.... 9 III. CHARLES H. Dow, AND His THEORY 21 IV. Dow's THEORY, APPLIED TO SPECULATION 30 V. MAJOR MARKET SWINGS 40 VI. A UNIQUE QUALITY OF FORECAST 49 VII. MANIPULATION AND PROFESSIONAL TRADING 60 VIII. MECHANICS OF THE MARKET 73 IX. "WATER" IN THE BAROMETER 87 X. "A LITTLE CLOUD OUT OF THE SEA, LIKE A MAN'S HAND" 1906 101 XI. THE UNPUNCTURED CYCLE 115 XII. FORECASTING A BULL MARKET 1908-1909 128 XIII. NATURE AND USES OF SECONDARY SWINGS 142* XIV. 1909, AND SOME DEFECTS OF HISTORY 154 XV. A "LINE" AND AN EXAMPLE 1914 172 XVI. AN EXCEPTION TO PROVE THE RULE 185 XVII. ITS GREATEST VINDICATION 1917 196 XVIII. WHAT REGULATION DID TO OUR RAILROADS 208 XIX. A STUDY IN MANIPULATION 1900-1 221 XX. SOME CONCLUSIONS 1910-14 237 XXI. RUNNING TRUE TO FORM 1922-1925 250 XXII. SOME THOUGHTS FOR SPECULATORS 262 APPENDIX : RECORD OF THE DOW-JONES AVERAGES 281 PREFACE A preface is too often an apology, or at best an explanation of what should be sufficiently clear. This book requires no apology, and if it fails to explain itself the fault is that of the author. But acknowl- edgment must be made most gratefully to Clarence W. Barron, president of Dow, Jones & Co., and to Joseph Cashman, manager of that great financial news service, for permission to use the indispensable Dow-Jones stock-price averages, and to my old com- rade in Wall Street newspaper work, Charles F. Renken, compiler of those averages, for the charts here used in illustration. W. P. H. THE STOCK MARKET BAROMETER THE STOCK MARKET BAROMETER Chapter I CYCLES AND STOCK MARKET RECORDS AJ English economist whose unaffected humanity always made him remarkably readable, the late William Stanley Jevons, propounded the theory of a connection between commercial panics and spots on the sun. He gave a series of dates from the beginning of the seventeenth century, showing an apparent coinci- dence between the two phenomena. It is entirely human and likable that he belittled a rather ugly com- mercial squeeze of two centuries ago because there were not then a justifying number of spots on the sun. Writing in the New York Times early in 1905, in com- ment on the Jevons theory, I said that while Wall Street in its heart believed in a cycle of panic and pros- perity, it did not care if there were enough spots on the sun to make a straight flush. Youth is temerarious and irreverent. Perhaps it would have been more polite to say that the accidental periodic association proved nothing, like the exact coincidence of presi- dential elections with leap years. Cycles and the Poets Many teachers of economics, and many business men without pretension even to the more modest title x 2 THE STOCK MARKET BAROMETER of student, have a profound and reasonable faith in a cycle in the affairs of men. It does not need an under- standing of the Einstein theory of relativity to see that the world cannot possibly progress in a straight line in its moral development. The movement would be at least more likely to resemble the journey of our satellite around the sun, which, with all its planetary attendants, is moving toward the constellation of Vega. Certainly the poets believe in the cycle theory. There is a wonderful passage in Byron's "Childe Harold" which, to do it justice, should be read from the preceding apostrophe to Metella's Tower. This was Byron's cycle : "Here is the moral of all human tales, 'Tis but the same rehearsal of the past ; First freedom and then glory ; when that fails Wealth, vice, corruption, barbarism at last, And history, with all her volumes vast, Hath but one page." There seems to be a cycle of panics and of times of prosperity. Anyone with a working knowledge of modern history could recite our panic dates 1837, 1857, *866 (Overend-Gurney panic in London), 1873, 1884, 1893, 1907, if he might well hesitate to add the deflation year of 1920. Panics, at least, show a vari- able interval between them, from ten to fourteen years, with the intervals apparently tending to grow longer. In a subsequent chapter we shall analyze this cycle theory, to test its possible usefulness. CYCLES AND STOCK MARKET RECORDS 3 Periodicity But the pragmatic basis for the theory, a working hypothesis if nothing more, lies in human nature itself. Prosperity will drive men to excess, and repentance for the consequence of those excesses will produce a corre- sponding depression. Following the dark hour of absolute panic, labor will be thankful for what it can get and will save slowly out of smaller wages, while capital will be content with small profits and quick returns. There will be a period of readjustment like that which saw the reorganization of most of the American railroads after the panic of 1893. Pres- ently we wake up to find that our income is in excess of our expenditure, that money is cheap, that the spirit of adventure is in the air. We proceed from dull or quiet business times to real activity. This gradually develops into extended speculation, with high money rates, inflated wages and other familiar symptoms. After a period of years of good times the strain of the chain is on its weakest link. There is a collapse like that of 1907, a depression foreshadowed in the stock market and in the price of commodities, followed by extensive unemployment, often an actual increase in savings-bank deposits, but a complete absence of money available for adventure. Need for a Barometer Read over Byron's lines again and see if the parallel is not suggestive. What would discussion of business 4 THE STOCK MARKET BAROMETER be worth if we could not bring at least a little of the poet's imagination into it? But unfortunately crises are brought about by too much imagination. What we need are soulless barometers, price indexes and averages to tell us where we are going and what we may expect. The best, because the most impartial, the most remorseless of these barometers, is the recorded average of prices in the stock exchange. With varying constituents and, in earlier years, with a smaller number of securities, but continuously these have been kept by the Dow-Jones news service for thirty years or more. There is a method of reading them which has been fruitful of results, although the reading has on occa- sion displeased both the optimist and the pessimist. A barometer predicts bad weather, without a present cloud in the sky. It is useless to take an axe to it merely because a flood of rain will destroy the crop of cabbages in poor Mrs. Brown's backyard. It has been my lot to discuss these averages in print for many years past, on the tested theory of the late Charles H. Dow, the founder of The Wall Street Journal. It might not be becoming to say how constantly helpful the analysis of the price movement proved. But one who ventures on that discussion, who reads that bar- ometer, learns to keep in mind the natural indignation against himself for the destruction of Mrs. Brown's cabbages. Dow's Theory Dow's theory is fundamentally simple. He showed that there are, simultaneously, three movements in CYCLES AND STOCK MARKET RECORDS 5 progress in the stock market. The major is the pri- mary movement, like the bull market which set in with the re-election of McKinley in 1900 and culminated in September, 1902, checked but not stopped by the famous stock market panic consequent on the Northern Pacific corner in 1901; or the primary bear market which developed about October, 1919, culminating June- August, 1921. It will be shown that this primary movement tends to run over a period of at least a year and is generally much longer. Coincident with it, or in the course of it, is Dow's secondary movement, represented by sharp rallies in a primary bear market and sharp reactions in a primary bull market. A striking example of the latter would be the break in stocks on May 9, 1901. In like secondary movements the industrial group (taken separately from the railroads) may recover much more sharply than the railroads, or the railroads may lead, and it need hardly be said that the twenty active railroad stocks and the twenty industrials, mov- ing together, will not advance point for point with each other even in the primary movement. In the long advance which preceded the bear market beginning October, 1919, the railroads worked lower and were comparatively inactive and neglected, obviously be- cause at that time they were, through government ownership and guaranty, practically out of the specu- lative field and not exercising a normal influence on the speculative barometer. Under the resumption of private ownership they will tend to regain much of their old significance. t 6 THE STOCK MARKET BAROMETER The Theory's Implications Concurrently with the primary and secondary move- ment of the market, and constant throughout, there obviously was, as Dow pointed out, the underlying fluctuation from day to day. It must here be said that the average is deceptive for speculation in individual stocks. What would have happened to a speculator who believed that a secondary reaction was due in May, 1901, as foreshadowed by the averages, if of all the stocks to sell short on that belief he had chosen Northern Pacific? Some traders did, and they were lucky if they covered at sixty-five points loss. Dow's theory in practice develops many implica- tions. One of the best tested of them is that the two averages corroborate each other, and that there is never a primary movement, rarely a secondary move- ment, where they do not agree. Scrutiny of the aver- age figures will show that there are periods where the fluctuations for a number of weeks are within a narrow range; as, for instance, where the industrials do not sell below seventy or above seventy-four, and the rail- roads above seventy-seven or below seventy-three. This is technically called "making a line," and experi- ence shows that it indicates a period either of distribu- tion or of accumulation. When the two averages rise above the high point of the line, the indication is strongly bullish. It may mean a secondary rally in a bear market; it meant, in 1921, the inauguration of a primary bull movement, extending into 1922. If, however, the two averages break through the 77 CYCLES AND STOCK MARKET RECORDS 7 lower level, it is obvious that the market for stocks has reached what meteorologists would call "satura- tion point." Precipitation follows a secondary bear movement in a bull market, or the inception of a pri- mary downward movement like that which developed in October, 1919. After the closing of the Stock Ex- change, in 1914, the number of industrials chosen for comparison was raised from twelve to twenty and it seemed as if the averages would be upset, especially as spectacular movements in stocks such as General Electric made the fluctuations in the industrials far more impressive than those in the railroads. But students of the averages have carried the twenty chosen stocks back and have found that the fluctuations of the twenty in the previous years, almost from day to day, coincided with the recorded fluctuations of the twelve stocks originally chosen. Dow-Jones Averages the Standard The Dow- Jones average is still standard, although it has been extensively imitated. There have been various ways of reading it ; but nothing has stood the test which has been applied to Dow's theory. The weakness of every other method is that extraneous matters are taken in, from their tempting relevance. There have been unnecessary attempts to combine the volume of sales and to read the average with refer- ence to commodity index numbers. But it must be obvious that the averages have already taken those things into account, just as the barometer considers 8 THE STOCK MARKET BAROMETER everything which affects the weather. The price move- ment represents the aggregate knowledge of Wall Street and, above all, its aggregate knowledge of com- ing events. Nobody in Wall Street knows everything. I have known what used to be called the "Standard Oil crowd," in the days of Henry H. Rogers, consistently wrong on the stock market for years together. It is one thing to have "inside information" and another thing to know how stocks will act upon it. The market represents everything everybody knows, hopes, be- lieves, anticipates, with all that knowledge sifted down to what Senator Dolliver once called, in quoting a Wall Street Journal editorial in the United States Senate, the bloodless verdict of the market place. WALL STREET OF THE MOVIES 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 equi- noxes, and that manipulation cannot materially deflect the barometer. Movies and Melodrama But, 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 discour- aging to point out how the dispassionate, the almost inhuman, movement of the market has nothing what- ever 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, overwhelming. The former are in such a 9 io THE STOCK MARKET BAROMETER majority that concession must be made to them, al- though 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 con- ventional melodrama of our grandfathers. Its char- acters 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 certi- ficate 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 Fiction Our modern financier on the screen looks like that, especially in the "close-ups." But he is no new creation. WALL STREET OF THE MOVIES 1 1 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 artis- tically frustrated. But perhaps he had himself to thank. Here is his own description of such a manip- ulator. 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 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 re- quires boldness and consummate judgment, knowledge of tech- nical 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 temperaments; also, their price." That is professedly fiction, and, incidentally, more true and respectable as art than the product of the, 12 THE STOCK MARKET BAROMETER i 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 Faces Not 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 J-ow 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 other- wise 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. No- body was hurt except a few speculators who chose to sell the thing short. They paid up without whin- WALL STREET OF THE MOVIES 13 ing. But it formed an irresistible text for a popular attack upon Wall Street. One of the New York news- papers 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, oc- curred 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 Orphans Even 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 14 THE STOCK MARKET BAROMETER of manipulation which would disable our barometer. That particular panic occurred in the course of a pri- mary bull market. It produced merely a severe secon- dary reaction, for the upward movement was resumed and did not culminate until sixteen months afterwards. That incident of 1901, however, is still alive and kick- ing, 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. Dow's Theory True of any Stock Market Let us be serious, and get back to our text. The law that governs the movement of the stock market, formulated here, would be equally true of the London Stock Exchange, the Paris Bourse or even the Berlin Boerse. But we may go further. The principles un- derlying that law would be true if those Stock Ex- changes and ours were wiped out of existence. They would come into operation again, automatically and inevitably, with the re-establishment of a free market in securities in any great Capital. So far as I know, there has not been a record corresponding to the Dow- Jones averages kept by any of the London financial WALL STREET OF THE MOVIES 15 publications. But the stock market there would have the same quality of forecast which the New York market has if similar data were available. It would be possible to compile from the London Stock Exchange list two or more representative groups of stocks and show their primary, their secon- dary and their daily movements over the period of years covered by Wetenhall's list and the London Stock Exchange official list. An average made up of the prices of the British railroads might well confirm our own. There is in London a longer and more diversified list of industrial stocks to draw upon. The averages of the South African mining stocks in the Kaffir market, properly compiled from the first Trans- vaal gold rush in 1889, would have an interest all their own. They would show how gold mining tends to flourish when other industries are stagnant or even prostrated. The comparison of that average with the movement of securities held for fixed income would be highly instructive to the economist. It would demon- strate in the most vivid way the relation of the pur- chasing power of gold to bonds held for investment. It would prove conclusively the axiom that the price of securities held for fixed income is in inverse ratio to the cost of living, as we shall see for ourselves in a later chapter. The Fact Without the Truth is False It is difficult, and with many observers it has proved impossible, to regard Wall Street comprehendingly 1 6 THE STOCK MARKET BAROMETER from the inside. Just as it will be shown that the market is bigger than the manipulator, bigger than all the financiers put together, so it is true that the stock market barometer is in a way bigger than the stock market itself. A modern writer, G. K. Chester- ton, has said that the fact without the truth is sterile, that the fact without the truth is even false. It was not until Charles H. Dow propounded his theory of the price movement that any real attempt had been made to elicit and set forth the truth contained in the fact of the stock market. Can we make it possible for the man whose business brings him into the midst of that whirling machinery to understand the power which moves it, and even something of the way that power is generated? Apparently the only picture which has hitherto reached the popular retina is the distorted image which we have called the Wall Street of the movies. Homage Vice Pays to Virtue Why does the swindling oil-stock promoter circular- ize his victims from some reputable address in the financial district, and use all sorts of inducements to get his stock quoted in the financial columns of repu- table metropolitan newspapers? Would he do that if the public he addresses, the investor and the specu- lator, the investor in embryo, really believed that Wall Street was the sink of iniquity which the country politician depicts? If that were truly the case the shady promoter would seek other quarters. But he WALL STREET OF THE MOVIES 17 uses the financial district because he knows that its credit and integrity are the best in the world. Hypoc- risy is the tribute which vice pays to virtue. He would have no use for a Wall Street as rotten as himself. Indeed, if the financial district were one tithe as cor- rupt as the demagogues who abuse it there would be no problem for them to propound. The money center of the United States would fall to pieces of its own rottenness. All this is true, and yet if the exact con- trary were the case the theory of the stock-market movement would still be valid. Rhodes and Morgan It will not be charged that the writer is like the dyer's hand, subdued to what he works in, if his illus- trations have been chosen mainly from the financial district. There is a Wall Street engaged upon tasks so serious, so exacting, that it has neither time nor inclina- tion to be crooked. If it is true, as we have seen, that nobody can know all the facts which at any one time influence the stock-market movement, it is true, as any of us can record from personal experience, that some have far more knowledge than others. The men who really know lift you out of this scuffle of petty criticism and recrimination. When they are rich men their wealth is incidental, the most obvious means to larger ends, but not an end in itself. When I was following my profession in South Africa, a quarter of a century ago, I was thrown in contact with Cecil John Rhodes. He had definite ideas i8 THE STOCK MARKET BAROMETER and large conceptions, far above the mere making of money. Money was necessary to the carrying out of his ideas, to the extension of white civilization from the Cape to Cairo, with a railroad as the outward and visible sign of something of even spiritual significance. In the respect of intuitive intelligence I have met only one man like him the late J. Pierpont Morgan. It was impossible to follow the rapidity of their mental processes. There was something phenomenal about it, like the performances of mathematically gifted chil- dren who can give you the square root of a number in thousands with a few moments of mental calculation. Other well-known men speaking perhaps from the point of view of a reporter seemed to have mental processes much like our own. Most of the great cap- tains of industry I have met, like James J. Hill and Edward H. Harriman, had a quality essential to a first-rate thinker. They could eliminate the irrelevant. They could grasp the fundamental fact in a page of verbiage. But Rhodes and Morgan could do more. They could reason to an often startling but sound con- clusion before you could state the premises. Not Indescribable And these men were rich, almost fortuitously. They had great tasks to accomplish, and it was necessary that they should have the financial means which made achievement possible. In the past few years we have heard a great deal about "ideals," and found that most of them were half-digested opinions. But there is a WALL STREET OF THE MOVIES 19 Wall Street with an ideal. There has usually been, and I hope there always will be, the right man to take the right objective view at the right moment. Not long ago I heard a lecturer setting forth what he called the "indescribable" beauties of the Grand Canyon of the Colorado. In the space of an hour and a quarter he proved conclusively that those beauties were inde- scribable, at least so far as he was concerned. But Milton could have described them, or the Psalmist. Perhaps any reasonably intelligent man could give you an idea of that natural wonder if he set forth simply the spiritual truth in the physical fact before him. The Unchangeable I feel I have said before, perhaps in editorials you read to-day, and forget to-morrow, what I am saying now. The problems of humanity do not change, be- cause human nature is what it has been as far back as human record tells. "Cycles" are as old as organ- ized humanity. The changes we see are superficial, especially where sincere and intelligent men so legislate that they may the better live together in peace and good will. The human heart is essential to all prog- ress. Reform starts there, and not in the halls of legislation. The Bells of Trinity Facing the western end of Wall Street, casting its shadow from the setting sun upon the most criticized and least understood section of a great nation, stands the spire of Trinity. We have often heard its bells 20 THE STOCK MARKET BAROMETER ringing the old familiar Christmas hymns. The shep- herds will be watching their flocks again, all seated on the ground. It may well be that, hearing those bells, the glory of the Lord shall in some manner shine round about us. There is little that laws can do to make men happier or richer or more contented. There is no form of government to-day, without its parallel, and warning, in the past. There is none in the past of which it could not be said that only righteousness exalteth a nation. Wall Street knows as well as the most disinterested of its critics that goodness and jus- tice and sacrifice and love are the foundation of all good government, because in that spirit alone a people truly governs itself. We have said that the laws we are studying arc fundamental, axiomatic, self-evident. And in this higher truth surely there is something permanent which would remain if the letter of the Constitution of the United States had become an interesting study for the archeologist, and the surviving writings of our day were classical in a sense their authors never dreamed. Such a foundation is permanent because truth has in it the element of the divine. Chapter III CHARLES H. DOW, AND HIS THEORY TO judge from a large number of letters received from readers of past discussions on Dow's theory of the averages, and on panic and prosperity cycles generally, that theory is assumed to be some- thing in the nature of a sure way to make money in Wall Street. It may be said at once that it bears no resemblance to any "martingale" or system of beat- ing the bank. Some of the questions show more intel- ligence and understanding than this, and one of them at least deserves an extended reply. A Newspaper Man, and More "Who was Dow, and where can I read his theory?" Charles H. Dow was the founder of the Dow-Jones financial news service in New York, and founder and first editor of The Wall Street Journal. He died in December, 1902, in his fifty-second year. He was an experienced newspaper reporter, with an early train- ing under Samuel Bowles, the great editor of the Springfield Republican. Dow was a New Englander, intelligent, self-repressed, ultra-conservative; and he knew his business. He was almost judicially cold in the consideration of any subject, whatever the fervor of discussion. It would be less than just to say that * never saw him angry ; I never saw him even excited. ai 22 THE STOCK MARKET BAROMETER His perfect integrity and good sense commanded the confidence of every man in Wall Street, at a time when there were few efficient newspaper men covering the financial section, and of these still fewer with any deep knowledge of finance. Dow also had the advantage of some years experi- ence on the floor of the Stock Exchange. It came about in a rather curious way. The late Robert Goodbody, an Irishman, a Quaker and an honor to Wall Street, came over from Dublin to America. As the New York Stock Exchange requires that every member shall be an American citizen, Charles H. Dow became his partner. During the time necessary for Robert Good- body to naturalize, Dow held a seat in the Stock Ex- change and executed orders on the floor. When Good- body became an American citizen Dow withdrew from the Exchange and returned to his more congenial news- paper work. Dow's Caution, and His Theory Knowing and liking Dow, with whom I worked in the last years of his life, I was often, with many of his friends, exasperated by his overconservatism. It showed itself particularly in his editorials in The Wall Street Journal, to which it is now necessary to allude because they are the only written record of Dow's theory of the price movement. He would write a strong, readable and convincing editorial, on a public question affecting finance and business, and in the last paragraph would add safeguards and saving clauses which not merely took the sting out of it but took the CHARLES H. DOW, AND HIS THEORY 23 "wallop" out of it. In the language of the prize ring, he pulled his punches. He was almost too cautious to come out with a flat, dogmatic statement of his theory, however sound it was and however close and clear his reasoning might be. He wrote, mostly in 1901 and the first half of 1902, a number of editorials dealing with methods of stock speculation. His theory must be disinterred from those editorials, where it is illustrative and inci- dental and never the main subject of discussion. It is curious also that in one of his earliest statements of the price movement he makes an indefensible claim. Under the caption "Swings Within Swings," in the Review and Outlook of The Wall Street Journal of January 4, 1902, he says: "Nothing is more certain than that the market has three well defined movements which fit into each other. The first is the daily variation due to local causes and the balance of buying or selling at that particular time. The secondary movement covers a period ranging from ten days to sixty days, averaging prob- ably between thirty and forty days. The third swing is the great move covering from four to six years." Where Dow Went Wrong Remember that Dow wrote this twenty years ago, and that he had not the records for analysis of the stock market movement which are now available. The extent of the primary movement, as given in this quota- tion, is proved to be far too long by subsequent experi- ence; and a careful examination has shown me that the major swing before Dow wrote was never "from 24 THE STOCK MARKET BAROMETER four to six years," rarely three years and oftener less than two. But Dow always had a reason for what he said, and his intellectual honesty assures those who knew him that it was at least an arguable reason. It was based upon his profound belief in the recurrence of financial crises, at periodic intervals (as shown by recorded financial history), of a little more than ten years. Dow assumed for that period one primary bull market and one primary bear market, and therefore split the ten-year period in half. It was rather like the little boy who, being asked to name ten arctic animals, sub- mitted "five seals and five polar bears I" Panic Dates of Jevons In the opening chapter we spoke of historic panics, of Professor Stanley Jevons, and of his theory con- necting such crises with the recurrence of spots on the sun and their assumed influence upon the weather and crops. I said that the reasoning was about as good as associating presidential elections with leap years. But here are the dates of commercial crises in Eng- land as recorded by Jevons, and it is fair to say that they are sufficiently impressive. These years are 1701, 1711, 1712, 1731-32, 1742, 1752, 1763, 1772-3, ^S. 1793. 1804-5, 1815, 1825, 1836, 1847, 1857, 1866, and 1873. As Dow says in an editorial quoting these dates, published in The Wall Street Journal on July 9, 1902 : CHARLES H. DOW, AND HIS THEORY; 25 "This makes a very good showing for the ten-year theory and is supported, to a considerable extent, by what has occurred in this country during the past century." Dow's account of the successive crises in this country (he had personal experience of three of them 1873, 1884 and 1893) was so good and interesting that it is well worth quoting here. So far as Jevons's dates are concerned, it is curious to note that he omitted one serious crisis near the beginning of his list. That occurred in 1715, and was precipitated by the Scottish invasion of England in that year to restore the Stuarts to the English throne. It is rather human of Jevons to omit it, if, as I suspect, there were not enough spots on the sun in that year to fit the parallel. Dow on Our Own Crises Here is Dow's account of our own crises : "The first crisis in the United States during the nineteenth century came in 1814, and was precipitated by the capture of Washington by the British on the 24th of August in that year. The Philadelphia and New York banks suspended payments, and for a time the crisis was acute. The difficulties leading up to this period were the great falling off in foreign trade caused by the embargo and non-intercourse acts of 1808, the excess of public expenditures over public receipts, and the crea- tion of a large number of state banks taking the place of the old United States Bank. Many of these state banks lacked capital and issued currency without sufficient security. 1819, 1825, and 1837 "There was a near approach to a crisis in 1819 as the result of a tremendous contraction of bank circulation. The previous 26 THE STOCK MARKET BAROMETER increase of bank issues had prompted speculation, the contrac- tion caused a serious fall in the prices of commodities and real estate. This, however, was purely a money panic as far as its causes were concerned. "The European crisis in 1825 caused a diminished demand for American products and led to lower prices and some money stringency in 1826. The situation, however, did not become very serious and was more in the nature of an interruption to progress than a reversal of conditions. "The year 1837 brought a great commercial panic, for which there was abundant cause. There had been rapid industrial and commercial growth, with a multitude of enterprises estab- lished ahead of the time. Crops were deficient, and breadstuffs were imported. The refusal of the government to extend the charter of the United States Bank had caused a radical change in the banking business of the country, while the withdrawal of public deposits and their lodgment with state banks had given the foundation for abnormal speculation. 1847, 1857, and 1866 "The panic in Europe in 1847 exerted but little influence in this country, although there was a serious loss in specie, and the Mexican war had some effect in checking enterprises. These effects, however, were neutralized somewhat by large exports of breadstuffs and later by the discovery of gold in 1848-9. "There was a panic of the first magnitude in 1857, following the failure of the Ohio Life Insurance and Trust Company in August. This panic came unexpectedly, although prices had been falling for some months. There had been very large railroad building, and the proportion of specie held by banks was very small in proportion to their loans and deposits. One of the features of this period was the great number of failures. The banks generally suspended payments in October. "The London panic in 1866, precipitated by the failure of Overend, Gurney & Co., was followed by heavy fall in prices in the Stock Exchange here. In April there had been a corner CHARLES H. DOW, AND HIS THEORY 27 in Michigan Southern and rampant speculation generally, from which the relapse was rather more than normal. 1873, 1884, and 1893 "The panic of September, 1873, was a commercial as well as a Stock Exchange panic. It was the outcome of an enormous conversion of floating into fixed capital. Business had been expanded on an enormous scale, and the supply of money became insufficient for the demands made upon it. Credit collapsed, and the depression was extremely serious. "The year 1884 brought a Stock Exchange smash but not a commercial crisis. The failure of the Marine Bank, Metro- politan Bank and Grant & Ward in May was accompanied by a large fall in prices and a general check which was felt throughout the year. The Trunk Line war, which had lasted for several years, was one of the factors in this period. "The panic of 1893 was the outcome of a number of causes uncertainty in regard to the currency situation, the withdrawal of foreign investments and the fear of radical tariff legisla- tion. The anxiety in regard to the maintenance of the gold standard was undoubtedly the chief factor, as it bore upon many others." A Weak Prediction With a caution in prediction which is not merely New England but almost Scottish, Dow, in a typical final paragraph, goes on to say : "Judging by the past and by the developments of the last six years, it is not unreasonable to suppose that we may get at least a Stock Exchange flurry in the next few years." So far from being unreasonable, it was not even a daring guess. It was more than a "flurry" in 1907, five years after, when the New York banks resorted to clearing-house certificates and the stock market 28 THE STOCK MARKET BAROMETER grazed a panic by a bare five minutes. But the pre- diction was made during a primary upward swing which culminated in September of the year 1902, three months before Dow died. Events soon disproved Dow's five-year primary swings, arrived at by splitting the assumed ten-year cycle in half. There was a primary bear market from September, 1902, lasting nearly a year. A primary bull market originated in September, 1903, becoming definitely marked by June, 1904, and culminating in January, 1907 a period of three years and four months; while the primary bear market which fol- lowed it and covered the period of the crisis of 1907 lasted until the following December a period of eleven months. Nelson's Book on Speculation All that Dow ever printed is in The Wall Street Journal, and only by search through the precious files of Wall Street's Bible can his theory of the stock market price movement be reconstructed. But at the end of 1902 the late S. A. Nelson wrote and published an unpretentious book called The A B C of Stock Speculation. It is long out of print, but may occa- sionally be picked up from the second-hand booksellers. He tried to persuade Dow to write the book, and, failing that, he incorporated in it all that he could find of what Dow had said on stock speculation in The Wall Street Journal. Of the thirty-five chapters in the book, fifteen (Chapters V to XIX inclusive) are edi- torials, some slightly abridged, from The Wall Street CHARLES H. DOW, AND HIS THEORY 29 Journal, covering such subjects as 'Scientific Specula- tion," "Methods of Reading the Market," "Methods of Trading" and market swings generally all of them interesting but not suitable for entire reproduction here, although they will be sufficiently quoted in sub- sequent chapters. Nelson's is a conscientious and sensible little book. He was a conscientious and sensible little man one we loved and laughed at, for young reporters could not take him as seriously as he took himself. His autographed copy lies before me as I write, and I can see his pathetic figure and earnest, strained face he was dying of tuberculosis as I read his rather con- ventional discussions on the morality of speculation. He died not long after, far away from his beloved Wall Street, but it was he who evolved the name of "Dow's Theory." It was an honorable ascription, to which Dow is fully entitled; for if many people had recognized meaning in traceable movements in the stock market the great and useful barometer of trade it was Dow who first formulated those ideas in a practical way. Chapter IV DOW'S THEORY, APPLIED TO SPECULATION WE have seen in past discussions of Dow's theory of the stock-market price movement that the essence of it could be summed up in three sentences. In an editorial published December 19, 1900, he says, in The Wall Street Journal: "The market is always to be considered as having three move- ments, all going on at the same time. The first is the narrow movement from day to day. The second is the short swing, running from two weeks to a month or more ; the third is the main movement, covering at least four years in its duration." It has already been shown that his third and main movement may complete itself in much less than Dow's assumed four years, and also how an attempt to divide the ten-year period of the panic cycle theory into a bear and bull market of approximately five years each led to an unconscious exaggeration. That, however, is immaterial. Dow had successfully formulated a theory of the market movements of the highest value, and had synchronized those movements so that those who came after him could construct a business barometer. The Truth Beneath Speculation This is the essence of Dow's theory, and it need hardly be said that he did not see, or live to see, all 30 DOW'S THEORY APPLIED 31 that it implied. He never wrote a single editorial on the theory alone, but returns to it to illustrate his dis- cussions on stock-market speculation, and the under- lying facts and truths responsible not only for specu- lation (using the word in its best and most useful sense) but for the market itself. It is not surprising that The Wall Street Journal received many inquiries as to the assumptions it made on the basis of Dow's major premise. On January 4, 1902, Dow replies to a pertinent question, and any thoughtful reader of these pages should be able to answer it himself. The correspondent asks him, "For some time you have been writing rather bullish on the immediate market, yet a little bearish in a larger sense. How do you make this consistent?" Dow's reply was, of course, that he was bullish after the secondary swing but that he did not think, in view of stock values from earnings of record, that a bull mar- ket which had then been operative sixteen months could run much further. It was a curious contraction, incidentally, of his own minimum four-year estimate, but that major upward swing as a matter of fact ran until the following September. It may be said that such a swing always outruns values. In its final stage it is discounting possibilities only. A Useful Definition In the same editorial Dow goes on to give a useful definition from which legitimate inferences may drawn. He says: _, ... 32 THE STOCK MARKET BAROMETER "It is a bull period as long as the average of one high point exceeds that of previous high points. It is a bear period when the low point becomes lower than the previous low points. It is often difficult to judge whether the end of an advance has come because the movement of prices is that which would occur if the main tendency had changed. Yet, it may only be an unusually pronounced secondary movement." This passage contains, by implication, both the idea of "double tops" and "double bottoms" (which I frankly confess I have not found essential or greatly useful) and the idea of a "line," as shown in the nar- row fluctuation of the averages over a recognized period, necessarily one either of accumulation or dis- tribution. This has been found to be of the greatest service in showing the further persistence of the main movement, or the possible termination of the secon- dary movement, so apt to be mistaken for the initiation of a new major trend. I shall, in a later chapter, analyze such a "line," made in the stock market in 1914. Successful Forecast In subsequent discussions there will be no difficulty in showing, from the various studies in the price move- ment since 1902, standing for record in the columns of The Wall Street Journal, that the method for a forecast of the main market movement and for a cor- rect discrimination between that and the secondary movement had been provided in Dow's theory, and that it has been used with surprising accuracy. A prophet, especially in Wall Street, takes his life in his hands. If his predictions are always of the ros DOW'S THEORY APPLIED 33 whatever the facts of the situation may be, he will at worst be merely called a fool for his pains. The charge against him will be far more serious if he sees that a boom nas overrun itself, and says so. If he is bearish and right he will be accused of unworthy motives. He will even be held contributory to the decline which he foresaw, although his motives may have been of the highest and he may have not a penny of interest in the market either way. "Recalling" a Prophet Is the American public so ungrateful to its Micaiahs and Cassandras as this? Yes, indeed, and more so. It does not like unpleasant truths. In 1912, when Colonel C. McD. Townsend of the United States Engineers, an army man with a brilliant record then and since, was president of the Mississippi River Com- mission, he predicted, from the height of the water in the upper rivers, one of the greatest Mississippi floods. He warned the city of New Orleans that the flood might be expected in a month's time, recommend- ing the most vigorous and immediate steps to lessen the calamity. Was New Orleans grateful? Its citi- zens held an indignation meeting to demand from President Taft the recall of this "calamity howler" and "dangerous alarmist." Mr. Taft characteris- tically kept his head, and Colonel Townsend was not removed. A good deal of property in the Mississippi Valley was "removed," and it is needless to record that New Orleans did not escape. The railroads and great 34 THE STOCK MARKET BAROMETER industrial concerns, where they were likely to be affected, took the warning seriously, with advantage to them- selves. The mayor of New Orleans subsequently rescinded the resolution, with an apology. Anyone who knows one of the ablest and least advertised en- gineers in the United States Army will readily under- stand that Townsend regarded the mayor and the previous mass meeting with equal indifference. Synchronizing the Price Movement It has been said before that Dow's theory is in no sense to be regarded as a gambler's system for beating the game. Any trader would disregard it at his peril, but Dow himself never considered it in that light, as I can testify from many discussions with him. I was writing the stock market paragraphs of the Dow-Jones news service and The Wall Street Journal in those days, and it was, of course, essential that I should thoroughly understand so scientific a method of syn- chronizing the market movement. Many men in Wall Street knew Dow and set their experience at his service. His mind was cautious to a fault, but logical and intellectually honest. I did not always agree with him and he was oftener right than I. When he was wrong it was clearly from lack of accurate data such as is now available. Necessary Knowledge It would perhaps be well to point out here that a knowledge of the major movement of the market, DOW'S THEORY APPLIED 3* whether up or down, is necessary for the successful flotation of any largely capitalized enterprise. In a future discussion it will be convenient and highly inter- esting to illustrate, from James R. Keene's own admis- sions, how he distributed Amalgamated Copper to an oversanguine public at a time when the Boston News Bureau, to its everlasting honor, was warning New England investors to have nothing to do with that property at anything like the prices asked, or allow themselves to be deceived by the quarterly dividend of \Y-2. per cent and a half per cent extra. That rate was retained at a time when The Wall Street Journal was openly calling the company a "blind pool," and showing, as the Boston News Bureau had shown, that neither the conditions of the copper trade nor the capitalization itself justified the flotation price. But Keene could never have distributed the stock except during the known major swing of a great bull market. He had exactly the same condition to help him in the much more formidable, and creditable, task of dis- tributing the enormous capitalization of the United States Steel Corporation. That stock could never have been sold, and its sale would never have been at- tempted, in the subsequent bear market of 1903. An Instructive Editorial It would be unfair to Dow if the reader were not given the opportunity of extracting for himself some light on Dow's own application of his theory, or at any rate some idea of his method in the series of 36 THE STOCK MARKET BAROMETER editorials which, as I have said before, dealt primarily with stock speculation as such and only incidentally with rules for reading the market. Here is an edito- rial, almost in full, published on July 20, 1901, only ten weeks after the panic which resulted from the Northern Pacific corner. At the time he wrote he did not see clearly that it was not a culmination of a major swing but a peculiarly violent secondary reaction in a primary bull market. He speaks first of individual stocks : "There is what is called the book method. Prices are set down, giving each change of one point as it occurs, forming thereby lines having a general horizontal direction but running into diagonals as the market moves up and down. There come times when a stock with a good degree of activity will stay within a narrow range of prices, say two points, until there has formed quite a long horizontal line of these figures. The formation of such a line sometimes suggests that stock has been accumulated or distributed, and this leads other people to buy or sell at the same time. Records of this kind kept for the last fifteen years seem to support the theory that the manipula- tion necessary to acquire stock is oftentimes detected in this way. "Another method is what is called the theory of double tops. Records of trading show that in many cases when a stock reaches top it will have a moderate decline and then go back again to near the highest figures. If after such a move, the price again recedes, it is liable to decline some distance. "Those, however, who attempt to trade on this theory alone find a good many exceptions and a good many times when signals are not given. Trading on Averages "There are those who trade on the theory of averages. It is true that in a considerable period of time the market has about DOW'S THEORY APPLIED 37 as many days of advance as it has of decline. If there come a series of days of advance, there will almost surely come the balancing days of decline. "The trouble with this system is that the small swings are always part of the larger swings, and while the tendency of events equally liable to happen is always toward equality, it is also true that every combination possible is liable to occur, and there frequently come long swings, or, in the case of stock trading, an extraordinary number of days of advance or decline which fit properly into the theory when regarded on a long scale, but which are calculated to upset any operations based on the expectation of a series of short swings. "A much more practicable theory is that founded on the law of action and reaction. It seems to be a fact that a primary movement in the market will generally have a secondary move- ment in the opposite direction of at least three-eighths of the primary movement. If a stock advances ten points, it is very likely to have a relapse of four points or more. The law seems to hold good no matter how far the advance goes. A rise of twenty points will not infrequently bring a decline of eight points or more. "It is impossible to tell in advance the length of any primary movement, but the further it goes, the greater the reaction when it comes, hence the more certainty of being able to trade successfully on that reaction. "A method employed by some operators of large experience is that of responses. The theory involved is this: The market is always under more or less manipulation. A large operator who is seeking to advance the market does not buy everything on the list, but puts up two or three leading stocks either by legitimate buying or by manipulation. He then watches the effect on the other stocks. If sentiment is bullish, and people are dis- posed to take hold, those who see this rise in two or three stocks immediately begin to buy other stocks and the market rises to a higher level. This is the public response, and is an indication that the leading stocks will be given another lift and that the general market will follow. 38 THE STOCK MARKET BAROMETER "If, however, leading stocks are advanced and others do not follow, it is evidence that the public is not disposed to buy. As soon as this is clear the attempt to advance prices is generally discontinued. This method is employed more particularly by those who watch the tape. But it can be read at the close of the day in our record of transactions by seeing what stocks were put up within specified hours and whether the general market followed or not. The best way of reading the market is to read from the standpoint of values. The market is not like a balloon plunging hither and thither in the wind. As a whole, it represents a serious, well-considered effort on the part of far- sighted and well-informed men to adjust prices to such values as exist or which are expected to exist in the not too remote future. The thought with great operators is not whether a price can be advanced, but whether the value of property which they propose to buy will lead investors and speculators six months hence to take stock at figures from ten to twenty points above present prices. "In reading the market, therefore, the main point is to dis- cover what a stock can be expected to be worth three months hence and then to see whether manipulators or investors are advancing the price of that stock toward those figures. It is often possible to read movements in the market very clearly in this way. To know values is to comprehend the meaning of movements in the market." There are assumptions here to which modifications might be offered, but there is no need. It would be impossible to show, except by the research of records covering at least half a century, that there are as many days of advance as of decline. The information would be valueless if obtained. It amounts to saying that heads and tails will equalize themselves if a coin is spun a sufficient number of times. But what may be commended is Dow's clarity and DOW'S THEORY APPLIED 39 sterling good sense. What he had to say was worth saying and he stopped when he had said it a rare virtue in editorial writing. His feeling for the essen- tial fact and for the underlying truth, without which the fact is bare and impertinent, will be readily re- marked. He dealt with speculation as a fact, and could still show forth its truth without profitless moralizing, or confusing it with gambling. It will be well to imi- tate his point of view in further discussion, both on his theory and on the immense and useful significance of the stock market generally. MAJOR MARKET SWINGS IT may be said, in continuing the discussion of what Charles H. Dow actually published in the columns of The Wall Street Journal, on his now well-known theory of the stock price movement as shown by the averages, and it must be emphasized, that he was con- sciously devising a scientific barometer for practical use. Remember the difference between the thermom- eter and a barometer. The thermometer records actual temperature at the moment, just as the stock ticker records actual prices. But it is essentially the busi- ness of a barometer to predict. In that lies its great value, and in that lies the value of Dow's Theory. The stock market is the barometer of the country's, and even of the world's, business, and the theory shows how to read it. The Averages Sufficient In Themselves It stands alone in this respect, for a sufficient reason. Wall Street has been called "the muddy source of the nation's prosperity," and we need not concern our- selves with question-begging adjectives. The sum and tendency of the transactions in the Stock Exchange represent the sum of all Wall Street's knowledge of the past, immediate and remote, applied to the discount- ing of the future. There is no need to add to the averages, as some statisticians do, elaborate compila- 4* MAJOR MARKET SWINGS 41 tions of commodity price index numbers, bank clear- ings, fluctuations in exchange, volume of domestic and foreign trade or anything else. Wall Street considers all these things. It properly regards them as experi- ence of the past, if only of the immediate past, to be used for estimating the future. They are merely creating causes of the weather predicted. It is a common superstition, exemplified in the Pujo Committee's inquiry into some supposed supercontrol of banking and finance, that "powerful interests" in Wall Street exist which have a sort of monopoly of knowledge and use it to their own nefarious ends. The stock market is bigger than all of them, and the financial interests of Wall Street are seldom combined except momentarily to stop a panic, as in the crisis of 1907. Taken separately, or even in temporary alli- ance, these interests are often wrong in their estimate of the stock market. In the days of H. H. Rogers and the supposedly all-powerful activities of what was called the Standard Oil group, I have known that group wrong on stocks for months and even years together. There was no shrewder judge of business conditions as affecting great enterprises than Henry H. Rogers, but I have heard him argue seriously that it was not he that was wrong but the stock market and the headstrong public. Bigger Than any Manipulation In the price movements, as Dow correctly saw, the sum of every scrap of knowledge available to Wall 42 THE STOCK MARKET BAROMETER Street is reflected as far ahead as the clearest vision in Wall Street can see. The market is not saying what the condition of business is to-day. It is saying what that condition will be months ahead. Even with ma- nipulation, embracing not one but several leading stocks, the market is saying the same thing, and is bigger than the manipulation. The manipulator only foresees values which he expects and hopes, sometimes wrongly, the investing public will appreciate later. Manipulation for the advance is impossible in a pri- mary bear market. Any great instances of designed manipulation and they are few in number occurred in a primary bull market, necessarily so because the market sees more than the manipulator. A personal experience of not only Wall Street but other great markets has taught that manipulation in a falling mar- ket is practically non-existent. The bear trader carries his own letter of marque, and fights for his own hand. A major bear swing has always been amply justified by future events, or for exception, as in 1917, by terri- fying future possibilities. Writing in a Bull Market Starting feebly near the end of June, 1900, with a pitifully small volume of transactions, four months before the re-election of McKinley, a bull market developed which covered a period of more than twenty- six months. This was interrupted by the May panic of 1901, arising out of the Northern Pacific corner, proving to be only a secondary downward swing of a MAJOR MARKET SWINGS 43 typical, if violent, kind. It was during the course of this bull market that Dow wrote the editorials in The Wall Street Journal to which reference has here been freely made because they contain the substance of his theory. He had designed a barometer for practical use, and it is characteristic of the man that he pro- ceeded to apply it, to find out if it had the vital quality of dependable forecast. It is a pity that he could not have lived to test it in the twelve months' bear market which followed. All subsequent market swings, up or down, have proved the value of his method. Throughout that bull market his forecasts were remarkably accurate, if necessarily general and not applied to particular stocks or small groups. He was correct in the essential matter of the adjustment of prices to values. His concluding editorials were pub- lished in July, 1902, not long before his death. In those he foresaw that prices were outrunning values, and that within a few months the market would begin to predict a contraction in railroad earnings, at least a slower development in the great industrial groups, and contraction of trade elsewhere. Primary Movements It will be well to give here the major swings from the time Dow wrote to the end of the bear market which culminated in 1921. They are as follows: 1. Up. June, 1900, to Sept., 1902. 2. Down. Sept., 1902, to Sept., 1903. 3. Up. Sept., 1903, to Jan., 1907. 4. Down. Jan., 1907, to Dec., 1907. 44 THE STOCK MARKET BAROMETER 5. Up. Dec., 1907, to Aug., 1909. 6. Down. Aug., 1909, to July, 1910. 7. Up. July, 1910, to Oct., 1912. 8. Down. Oct., 1912, to Dec., 1914. 9. Up. Dec., 1914, to Oct., 1916. 10. Down. Oct., 1916, to Dec., 1917. 11. Up. Dec., 1917, to Oct.-Nov., 1919. 12. Down. Nov., 1919, to June-Aug., 1921. 13. Up. Aug., 1921, to Mar., 1923. 14. Down. Mar., 1923, to Oct., 1923. 15. Up. Oct., I923 8 to If the late J. Pierpont Morgan said that he was "a bull on the United States," this exhibit confirms his judgment. In that period of twenty-three years the bull markets lasted rather less than twice as long as the bear markets. The average duration of seven major bull swings is twenty-five months; while the average dura- tion of seven major bear swings is fifteen months. It will be noted from the table that the longest major swing upward was that from September 22, 1903, to January 5, 1907. The actual top of the averages was January 22, 1906, with a subsequent irregular decline of some months and a like irregular recovery, all within the year 1906, to a figure close to the old high point. This is therefore taken as the end of that primary movement, although t'he secondary swing of 1906 was by far the most extended of which we have any record. This exceptional year, of which the San Francisco earthquake was the feature, will be fully discussed in a subsequent chapter. The other five bull markets show periods of from something over nineteen months to a few days less than twenty-seven months. MAJOR MARKET SWINGS 45 Startling Predictions The longest of the six bear markets here illustrated extended to nearly twenty-seven months, including the outbreak of the Great War and the hundred days' clos- ing of the Stock Exchange, culminating immediately before Christmas, 1914. That was a black Christmas, as some of us may happen to remember; but it was followed, in 1915, by the tremendous boom in the production of material for the combatants in a war which America had not then entered a boom which the stock market predicted with the greatest accuracy at a time when the business of the country was hardly beginning to grasp its significance. Two of these six bear markets did not last quite a year, one of them less than a month more, and one of them less than fifteen months. There seems suffi- cient material here to say that a bear market is nor- mally appreciably shorter than a bull market; perhaps as secondary downward swings in a primary rising average are short and sharp, with a halting recovery consuming a longer time than the decline. The Market Is Always Right It will be shown at a later stage that throughout these great market movements it was possible from the stock market barometer to predict, some valuable distance ahead, the development of the business of the country. These discussions would fail in their purpose if they did not make the subject clear to the unfinan- cial layman interesting to the man who never bought 46 THE STOCK MARKET BAROMETER a share of speculative stock in his life. A barometer is a necessity for all vessels at sea, from the smallest coasting schooner to the Aquitania. It means as much, and even more, to the "Bolivar" of Kipling's ballad, "swamping in the sea," watching, in dispair, "Some damned liner's lights go by, like a grand hotel" as it does to the navigating officers on the liner's bridge. There is no business so small that it can afford to disregard the stock market barometer. Certainly there is no business so large that it dare disregard it. Indeed the most serious mistakes in the management of great business have come from a failure of these navigators of the great liners of the sea of commerce to take heed when the passionless, disinterested stock market called their attention to bad weather ahead. and Never Thanked When, in the United States Senate, the late Senator Dolliver, reading an editorial of The Wall Street Jour- nal, said, "Listen to the bloodless, verdict of the market place," he saw the merciless accuracy of that verdict; because it is, and necessarily must be, based upon all the evidence, even when given by unconscious and unwilling witnesses. No wonder the rural politician can so easily make Wall Street the scapegoat for depressing conditions, affecting his farmer constituents no more than the rest of us. Wall Street is guilty in their eyes, for they are willing enough to hold Wall Street responsible for a MAJOR MARKET SWINGS 47 condition which it merely foresaw and predicted. It was said in a preceding chapter that the prophet of calamity will make himself hated in any case, and hated all the more if his predictions come true. But Wall Street's predictions do come true. Its predictions of prosperity, duly fulfilled as we have seen, are for- gotten. Its predictions of adversity are remembered, and by none more than the man who ignored those pre- dictions and is therefore the more bound to find some- body other than himself to blame. Wall Street the Farmer's Friend Wall Street is often called "provincial" by politi- cians and others actuated by an unreasoning sectional jealousy of the necessary financial center of the coun- try. The country can have only one such center, although the framers of the Federal Reserve Act, overloading it with sectional politics, tried hard to make twelve. The farmers say, or their political spokesman says, "What does Wall Street know about farming?" Wall Street knows more than all the farmers put together ever knew, with all the farmers have forgotten. It can, moreover, refresh its memory instantly at any moment. It employs the ablest of the farmers, and its experts are better even than those of our admirable, and little appreciated, Department of Agriculture, whose publications Wall Street reads even if the farmer neglects them. The stock market which began to break at the end of October and the beginning of November, 1919, 48 THE STOCK MARKET BAROMETER when the farmer was insanely pooling his wheat for $3 a bushel and his cotton for forty cents a pound, knew more than the farmer about cotton and wheat. And that barometer was telling him then to get out, to sell what he had at the market price and to save himself while there was yet time. He blames Wall Street and the Federal Reserve banking system and everyone but his own deluded and prejudiced self. He thinks he can change it all by getting his Congress- man to take an axe to break the barometer. He is trying to break the barometers of the grain trade in Chicago and Minneapolis, the barometers of the cotton trade in New Orleans and New York. Twenty years ago, at the demand of her farmers, Germany broke her grain barometer, with destructive legislation. What was the consequence? She had to construct a new barometer on the old plan, and it was the farmers who paid for it in advance out of their own pockets. The Germans have learned to let free markets alone, a thing the British always knew, and built up the great- est empire, with the widest commerce the world ever saw, on exactly that knowledge. Chapter VI A UNIQUE QUALITY OF FORECAST THERE are two Wall Streets. One of them is the Wall Street of fact, slowly arriving at defi- nition out of a chaos of misconception. The other is the Wall Street of fiction; the Wall Street of sen- sational newspapers, of popularity-hunting politicians ; the Wall Street of false dramatic interpretation, whose characters are no more real than the types of the old-fashioned melodrama of fifty years ago those caricatures which have had an astonishing and unintel- ligent revival on the moving-picture screen. It was felt that our second chapter might well be devoted to that popular misconception, Wall Street of the movies. Major Movements Are Unmanipulated One of the greatest of misconceptions, that which has militated most against the usefulness of the stock market barometer, is the belief that manipulation can falsify stock market movements otherwise authorita- tive and instructive. The writer claims no more authority than may come from twenty-six years of stark intimacy with Wall Street, preceded by prac- tical acquaintance with the London Stock Exchange, the Paris Bourse and even that wildly speculative mar- ket in gold shares, "Between the Chains," in Johannes- burg in 1895. But in all that experience, for what it 50 THE STOCK MARKET BAROMETER may be worth, it is impossible to recall a single instance of a major market movement which depended for its impetus, or even for its genesis, upon manipulation. These discussions have been made in vain if they have failed to show that all the primary bull markets and every primary bear market have been vindicated, in the course of their development and before their close, by the facts of general business, however much over- speculation or over-liquidation may have tended to excess, as they always do, in the last stage of the primary swing. A Financial Impossibility This is a sweeping statement, but I am convinced of its fundamental truth. When James R. Keene took up the task of marketing two hundred and twenty thousand shares of Amalgamated Copper, for the people who had brought about that amalgamation but had not been able to float the stock, it is estimated that in the course of distribution he must have traded in at least seven hundred thousand shares of that stock. He carried the price to above par to realize a net of ninety to ninety-six for his employers. This was a relatively small stock capitalization; but let us assume that some syndicate, larger than any that the stock market has ever seen, necessarily involving the co- operation of all the great banking institutions, under- took to manufacture the general bull market without which Keene's efforts would have been worse than wasted. Let us concede that this super-syndicate could afford to ignore the large number of active securities A UNIQUE QUALITY OF FORECAST 5 1 outside of the forty active stocks taken in our railroad and industrial averages and defy all trained public opinion. Let us assume that they had accumulated for the rise, against all their previous practice and con- viction, without, by some miracle, arousing suspicion, not two hundred and twenty thousand shares of stock, but a hundred times that number. Anybody who learned in the little red school house that two and two make four must see that we are here leading ourselves into an arithmetical impossibility. This syndicate would presumably not be content with less than a forty-point net profit, and its actual trades, before it had established a broad general market even equivalent to that Keene established for Amalgamated Copper, alone would therefore amount to something like one hundred and twenty million shares, which, taking them at par, would involve financing to the amount of many billions of dollars so much financing, in fact, that the great banks concerned would presum- ably relinquish all their other business and confine themselves to the syndicate operations alone. Such a syndicate could not have done this, or a tithe of this, at any time during the existence of our national bank- ing system. Does anybody think it would be possible to undertake such a panic-breeding operation with the assistance of the Federal Reserve system? Where Manipulation Was Possible To state the terms of a corresponding bear opera- tion, where every wealthy member of the syndicate is 52 THE STOCK MARKET BAROMETER necessarily already a large holder in stocks, bonds, real estate and industrial production, would reduce the whole thing to the wildest absurdity. My mind refuses even to grasp it. Keene, in a broad bull market, to distribute a number of shares amounting to one-twenty-fifth of the common stock alone of the United States Steel Corporation, had behind him all the wealth and influence of the powerful Standard Oil group. When he distributed United States Steel common and preferred he had behind him not only the great Morgan banking influences but those of every group that came into that steel combination, with the general approval of a public which correctly recognized a wonderful and even unprecedented expansion in production and trade. But even with that backing could he have multiplied his efforts a hundredfold? The merchant, the banker, the manu- facturer who studies the stock market barometer with reference to the major swings, can dismiss from his mind altogether the idea that they are falsified by manipulation. Roger W. Babson's Theory But the idea is widely held. There is no intention here to arouse or encourage controversy, and if I take an example from Roger W. Babson and his book on Business Barometers, he will, I am sure, readily understand that it is not intended in criticism or depreciation of his highly sincere work. It is only fair to Mr. Babson to say, also, that the extract I give A UNIQUE QUALITY OF FORECAST 53 here was published in 1909 (the italics are Mr. Babson's) : "A slowly sagging market usually means that the ablest spec- ulators expect in the near future a period of depression in general business ; and a slowly rising market usually means that prosperous business conditions may be expected, unless the decline or rise is artificial and caused by manipulation. In fact, if it were not for manipulation, merchants could almost rely on the stock market alone as a barometer, and let these large market operators stand the expense of collecting the data necessary for determining fundamental conditions. Unfortunately, however, it is impossible by studying the stock market alone to distinguish between artificial movements and natural movements ; therefore, although bankers and merchants may watch the stock market as one of the barometers, yet they should give to it only a fair and proportional amount of weight." Business Barometers Used in the Accumulation of Money j by Roger W. Babson; second edition, 1910. Mr. Babson's Chart What sort of barometer should we have if we had to make allowances for a tube of mercury that was too short, or for a general lack of accuracy in the delicate and sensitive mechanism of the aneroid? The stock market barometer is not perfect, or, to put it more correctly, the adolescent science of reading it is far from having attained perfection. But it is not imperfect in the sense Mr. Babson here assumes. It does discharge its function of prediction, when viewed over any reasonable length of time, with almost uncanny accuracy. Let us take a few examples from Mr. Babson's own picture chart, those composite "plots" above and below a consistently rising line rep- 54 THE STOCK MARKET BAROMETER resenting the steady increase in a growing country's wealth, and we shall see how the stock market pre- dicted each of them before Mr. Babson had the mate- rial to draw them in the squares of his instructive and striking chart. To those who are unfamiliar with a publication so interesting it may be said that he divides his chart with columns for each month of the year ver- tically, and completes his squares horizontally with numbered lines showing the area covered by all the factors of business, above or below a gradually rising middle line across the chart representing the growing wealth of the country. How the Stock Market Predicted It will be observed that where these areas are shal- low they tend to become broader in time consumed, and where the time to complete the area is less the depression or expansion is deeper or higher, as the case may be, the black areas above or below being assumed to balance each other, at least approximately. One of these black areas of depression shown in the Babson chart began in 1903, only developing recognizable space in the latter part of that year, and continued throughout 1904, finally emerging above the line of growing wealth in the earlier part of 1905. The stock market anticipated this area of business depression, for a primary bear swing began in September, 1902, and ran until the corresponding month of 1903. Mr. Babson's area of depression was still ruling when the market became mildly bullish, in September, 1903, and A UNIQUE QUALITY OF FORECAST 55 strongly bullish before the following June; while the Babson area of depression was not completed till the end of that year 1904. The Babson chart does not show any great degree of expansion until 1906, although it foreshadows it in September, 1905. But the stock market barometer foresaw all Mr. Babson's expansion, and the long bull market continued up to January, 1907, overrunning itself a tendency of bull markets and bear markets alike. A True Barometer Mr. Babson's area of expansion reached its high maximum in 1907, when a bear stock market swing had already set in, continuing for eleven months until early December of that year, predicting that length of time ahead of Mr. Babson's truly calculated area of depression, which was deep, but not long in duration, and lasted till the end of 1908. His subsequent expan- sion area above the line did not begin to show itself in market strength until the end of July of 1908; but the stock market barometer once again foretold the coming prosperity' in a bull market which had its genesis in December, 1907, and its culmination in August, 1909, beginning from that time to predict with equal accuracy, and well in advance, Mr. Babson's next period of depression. Surely this shows that the stock market is a barom eter, and that the Babson chart is more strictly a record, from which, of course, people as intelligent as its industrious compilers can draw valuable guidance 56 THE STOCK MARKET BAROMETER for the future. To use a much-abused word, the stock market barometer is unique. You will remember that "unique" is a word which takes no qualifying adjec- tive. Our barometer is not rather unique, or almost unique, or virtually unique. There is just one of it, and it cannot be duplicated. It does predict, as this simple illustration has shown, the condition of business many months ahead, and no other index, or combina- tion of indices, can assume to do that. Our highly scientific and competent Weather Bureau often ex- plodes the fallacy of any assumed radical change in general weather conditions. It does not pretend to go back to the glacial age. It tells us that there have been droughts and hard winters before, coming at uncertain and incalculable intervals. When it attempts specific prophecy a single particular from its immense collection of generals it is merely guessing. Does anybody who happened to be in Washington at the time remember the "fair and warmer" weather prophesied over the Taft inauguration? I went over the Pennsylvania Railroad on the following day, when the storm had leveled every telegraph pole between New York and Philadelphia. It was even said that some of the special trains had so far missed the parade that they were not in Washington then. Even the aneroid barometer can only forecast a limited number of hours ahead, according to the atmospheric pressure. Cycles Overestimated There are other compilations, and that of Harvard University will be noticed in a more appropriate place. A UNIQUE QUALITY OF FORECAST 57 I am inclined to think that all attach too much force to the cycle theory, very much as we have seen that Charles H. Dow did in splitting the favored ten-year cycle into an assumed but non-existent five-year bear market and a similar five-year bull market. But Mr. Babson would tell you that his areas of expansion and even of inflation, extending not five years but two years or less than three in point of time, do not neces- sarily blow their tops off in a final explosion and that the bottom does not drop out of his period of depres- sion. A stock market crisis may occur in the middle of a bull market, like the Northern Pacific panic of 1901; or a near-panic, with a development more seri- ous and radical, may occur in the course of a major bear swing in the stock market, as in 1907. Mr. Bab- son correctly shows that the latter was followed by a business depression that had already been fore- shadowed in the downward stock market movement. If all panics and industrial crises arose from the same causes and could be predicted with the suggested rythmical certainty, they would never happen because they would always be foreseen. This sounds some- thing like an Irish "bull," but it may well stand as a statement of the fact. Was it not an Irishman who said that an Irish bull differed from other bulls in the respect that it was always pregnant? I do not here go deeply into this question of cycles, because it is abundantly clear that the stock market is little moved by any such consideration. 58 THE STOCK MARKET BAROMETER Order Is Heaven's First Law If Wall Street is the general reservoir for the col- lection of the country's tiny streams of liquid capital, it is the clearing house for all the tiny contributions to the sum of truth about the facts of business. It cannot be too often repeated that the stock market movement represents the deductions from the accumulation of that truth, including the facts on building and real estate, bank clearings, business failures, money condi- tions, foreign trade, gold movements, commodity prices, investment markets, crop conditions, railroad earnings, political factors and social conditions, but all of these with an almost limitless number of other things, each having its tiny trickle of stock market effect. It will be seen from this how true the postulate made in an earlier discussion was when it was said that nobody in Wall Street knows all the facts, to say nothing of the meaning of all the facts. But the impartial, passionless market barometer records them as certainly as the column of mercury records the atmospheric pressure. There is nothing fortuitous about the stock market movement, and I think I have shown that it cannot to any profitable extent be per- verted to the ends of deception. There must be laws governing these things, and it is our present purpose to see if we cannot formulate them usefully. Many years ago George W. Cable said: "What we call chance may be the operation of a law so vast that we only touch its orbit once or twice in a lifetime." There A UNIQUE QUALITY OF FORECAST 59 is no need to lose ourselves in the mazes of predestina- tion and foreordination, or reduce the Westminster Confession to absurdity by saying that life is just one damned thing after another. But we shall all recog- nize that order is Heaven's first law, and that organ- ized society, in the Stock Exchange or elsewhere, will tend to obey that law even if the unaided individual intelligence is not great enough to grasp it. Chapter VII MANIPULATION AND PROFESSIONAL TRADING READERS of preceding chapters may well pause here to take count of how much we have been able to infer, and how much of our inference we have been able to prove, starting on the sound basis of Dow's theory of the stock market. We have satisfied ourselves that he was right when he said that there are in progress three definite movements in the market the major swing, upwards or downwards; its occa- sional suspension by a secondary rally or reaction, as the case may be ; and the incalculable, and for our pur- poses largely negligible, daily fluctuation. We can satisfy ourselves from examples that a period of trad- ing within a narrow range what we have called a "line" gaining significance as the number of trading days increases, can only mean accumulation or distribu- tion, and that the subsequent price movement shows whether the market has become bare of stocks or satu- rated with an oversupply. True to Form But we have been able to go further than this. From the preceding article alone we see that every major swing is justified by the subsequent condition of the country's general business. It has neither needed nor received manipulation. The market consequently has 60 PROFESSIONALS AND MANIPULATION 61 often seemed to run counter to business conditions, but only for the reason which represents its greatest use- fulness. It is then fulfilling its true function of pre- diction. It is telling us not what business is to-day but what the future course of business will be. News known is news discounted. What everybody knows has ceased to be a market factor, except in the rare instance of a panic, when the stock market is con- fessedly taken by surprise. When these articles appeared in serial form in Bar- ron's, the national financial weekly, I included the fol- lowing inference, based upon the reading of our barometer, on September 18, 1921, the date when the quoted paragraph was written. It appeared on No- vember 5, 1921. It was no guess, but a scientific deduc- tion from sound premises, and correctly announced the change in the main direction of the market. "There is a pertinent instance and test in the action of the current market. I have been challenged to offer proof of the prediction value of the stock market barometer. With the demoralized condition of European finance, the disaster to the cotton crop, the uncertainties produced by deflation, the unprin- cipled opportunism of our lawmakers and tax-imposers, all the aftermath of war inflation unemployment, uneconomic wages in coal mining and railroading with all these things over- hanging the business of the country at the present moment, the stock market has acted as if there were better things in sight. It has been saying that the bear market which set in at the end of October and the beginning of November, 1919, saw its low point on June 20, 1921, at 64.90 for the twenty industrials and 65.52 for the twenty railroad stocks." 62 THE STOCK MARKET BAROMETER A Contemporary Example At the beginning of the last week of August, 1921, it looked as if the bear market might be resumed by the establishment of new low points in both averages. But remembering that the averages must confirm each other, The Wall Street Journal said, on August 25th: "So far as the averages are concerned, they are far from encouraging to the bull, but they do not yet jointly indicate a definite resumption of the main bear movement." The railroad stocks were forming a "line" at that time, and after a technical break of a fraction of a point through on the lower side it was resumed, and no new low point, indicating a definite resumption of the main bear movement, was given. On September 2 ist, after a remarkable continuance of the line of probable accumulation in the railroad stocks and a con- firmatory rally in the industrials, The Wall Street Journal's "Study in the Price Movement" said: "It is beside the point to say that we are facing a hard winter. The stock market is meaningless if it does not look beyond such contingencies. It seems to be forecasting a solid foundation for better general business in the spring. It may well be that the stage for a primary bull market is being set." By that time both the industrials and the railroads had well-developed lines of presumed accumulation, and the former had significantly made a higher point than that of the previous rally. The Wall Street Journal's analysis of October 4th said: "By the well-tried methods of reading the stock market averages, only a decline of eight points in the industrial average, PROFESSIONALS AND MANIPULATION 63 and nine points in the railroads, or below the low figures of the main bear movement recorded June 2Oth, would indicate a resumption of that movement. On the other hand, the railroad stocks alone at present figures would need to advance less than a point to record the repeated new high for both averages which would indicate a primary bull market. The industrials have already recorded that point, and both averages have shown a remarkably clear and distinct line of accumulation which is likely at any time to disclose a market bereft of its floating supply of stocks." In the last paragraph of this closely reasoned analysis it was said: "Prices are low because all these bearish factors our critics adduce have been discounted in the prices. When the market is taken by surprise there is a panic, and history records how seldom it is taken by surprise. To-day all the bear factors are known, serious as they admittedly are. But the stock market is not trading on what is common knowledge to-day but upon the sum of expert knowledge applied to conditions as they can be foreseen many months ahead." Henry H. Rogers and His Critics Here is the application of our theory, and the reader can judge from the subsequent course of the market the value of the stock market barometer. He can even make the same analysis for himself, given the same major premise and carefully tested reasoning from it. The professional speculator might well encourage the general belief that he is invulnerable and invincible, even if an ignorant public assumes that the cards are stacked against itself and that the professional knows 64 THE STOCK MARKET BAROMETER their backs as well as their faces. Many years ago the late Henry H. Rogers, who was not talking for publication, said to me : "The sensational newspapers, which are always attacking John D. Rockefeller and his associates for their wealth, have put millions into the treasury of the Standard Oil Company. You and I know that we are not omniscient or all-powerful. But, by editorial innuendo and suggestion in cartoons, the people who hold us up to popular envy and hate have created exactly that impression. When everybody who may have to do business with us assumes in advance that we can dictate our own terms, we have an invaluable business asset." The same agitation brought about the dissolution of the Standard Oil into its thirty-three constituent companies. That operation trebled the value of Standard Oil shares, and, inci- dentally, the price of gasoline. Perhaps these news- paper proprietors were holders of the stock. That was before the era of the Ford car, however, and they may have assumed that it was a public service to make the rich owner of a motor car pay more for his gasoline. A Speculator's Reasoning Assumption of an unfair advantage for the profes- sional is absolutely baseless. The reasoning of a pro- fessional like Jesse Livermore is merely the reasoning presented in this and preceding articles, backed by a study of general conditions. He said on October 3, 1921, that he had been buying, and, giving him the credence of ordinary courtesy for such a voluntary PROFESSIONALS AND MANIPULATION 65 statement, it is clear that he was trying to shape in his own mind what the investing and speculating public would think at a date as far ahead as he could see. This is not manipulation. These speculators are not creating any false market or deceptive appearance of activity to lure the public into the game, like the "barker" outside a Midway show. On October 3d Jesse Livermore was quoted in the columns of Bar- ron's as saying that "all market movements are based on sound reasoning. Unless a man can anticipate future events his ability to speculate successfully is lim- ited." And he went on to add: "Speculation is a business. It is neither guesswork nor a gamble. It is hard work and plenty of it." Dow's Clear Definition Let us compare this with the words of Charles H. Dow in The Wall Street Journal twenty years before. In the editorial of July 20, 1901, he said: "The market is not like a balloon plunging hither and thither in the wind. As a whole, it represents a serious, well-consid- ered effort on the part of farsighted and well-informed men to adjust prices to such values as exist or which are expected to exist in the not too remote future. The thought with great operators is not whether a price can be advanced, but whethei the value of property which they propose to buy will lead invest- ors and speculators six months hence to take stock at figures from ten to twenty points above present prices." Observe how the none too deftly expressed thought of Livermore parallels the more perfectly shaped defi- nition of the detached and dispassionate Dow. Ber- 66 THE STOCK MARKET BAROMETER nard M. Baruch, after the war, gave evidence before a Congressional committee as to a market operation by which he had largely profited. He showed in the simplest manner that he had merely analyzed a known cause and foreseen clearly its probable market effect. He showed, what nobody who knows him would ques- tion, that he had no "inside information," so called, and that no employee in a Washington department had sold the secrets of his office. Wall Street holds such secrets as of little value. They may give an unfair advantage so far as individual stocks are concerned, but they could be entirely neglected with imperceptible loss, even if the secret were not generally as worthless as the seller of it. A Good Loser What is there that was done by James R. Keene or Jay Gould, by Addison Cammack or other great mar- ket figure of the past, which could not have been done, in the fairest way, by men of equal brains and intelli- gence, willing to pay the price of arduous study for the knowledge necessary to success? What is there that Jesse Livermore or Bernard M. Baruch do which is open to criticism? They pay the seller his price, but they do not accept stock sold "with a string to it." The vendor thinks his reasons for selling as good as theirs for buying what he sells. If he were a jobber in the woolen trade, selling his investment in American Woolen stock, or a banker selling United States Steel common on the devastating foreign competition which he thinks he foresees, he would consider his own PROFESSIONALS AND MANIPULATION 67 sources of information better than those of the specu- lators. They take the same risks that he does. They are often wrong, but they do not whimper about it. I have known many operators of this kind, and I never heard them whine when they lost, or boast greatly when they won. and a Bad One But the little gambler who takes the gutter view of Wall Street pits his wits against trained minds, not merely those of the speculators and the professional traders on the floor of the Stock Exchange, but the minds of men whose business requires them to study business conditions. This kind of gambler is a bad loser, and is often highly articulate. He, or those dependent upon him, is lucky if he receives such a lesson at his first venture that he confines his future relation with Wall Street to denouncing it as a gam- bling hell. It would be all that if the stock market were made by him or people like him. To the everlasting credit of the country, we may confidently assume that it is not. Refusing a Partnership With Jay Gould Charles H. Dow, who knew Jay Gould well and enjoyed his confidence as much as any newspaper man of the time, largely because of his incorruptible inde- pendence, says in one of his editorials that Gould based his position in the stock market primarily on values. He tested that market with purchases of sufficient stock to show whether there was a public 68 THE STOCK MARKET BAROMETER response whether he had correctly foreseen the public appreciation of values which he thought he had recog- nized. If the response was not what he expected he would not hesitate to take loss after loss of a point or so, in order to reconsider his position from a detached point of view. Some years ago there was a pathetic derelict in New Street, one of the unlovely fringe of any speculative market, who could truthfully say that he had once been offered a partnership by Jay Gould. I have missed his face in recent years, but not a great many years ago he was a promising young member of the Stock Exchange. His execution of orders on the floor was remarkably good. It is a difficult and exact- ing task. It requires about that combination of in- stantaneous judgment and action which would mark a star player in big-league baseball. To this broker a number of Jay Gould's orders were entrusted. No broker, it is needless to say, saw all of them. Gould was so pleased with the way his business was done that he sent for the young man and offered him a limited partnership. To Mr. Gould's surprise, it was refused. The broker actually said: "Mr. Gould, I have executed a great many of your orders and you seem to me to make more losses than profits. That is not a business I want to share." He could not see that his vision was restricted to only one side of Gould's many-sided activities. Opportunity knocked at his door tried to kick it in but the young man showed that he could do only one thing well. His administrative judgment would have been worthless, as indeed it afterwards proved, for he drifted out of PROFESSIONALS AND MANIPULATION 69 the Stock Exchange into New Street and from there, I suppose, into oblivion. Truly, many are called but few are chosen. An Intelligent Trader Rare talent of any kind commands great rewards for the reason that it is rare. The amateur who re- gards the market as a gamble starts wrong. He holds on when he is losing and takes small profits, to his continuing regret, when the market is going his way. The speculators he envies, those he charges with cogging the dice and marking the cards, exactly reverse his process. However strong their conviction may be they run quickly when the market does not agree with them or justify the inferences they have drawn. They may be, as Gould often was, too far ahead of the mar- ket. One of the most intelligent men I ever met in Wall Street, not long dead, was a former teacher and a fine classical scholar, whose hobby was collecting rare coins but whose business was speculation. He saved no market turns or broker's commissions by part- nership in a Stock Exchange house. He was just a speculator, sitting before a customers' board or near a stock ticker. And yet that man, by judgment, study, nerve tempered by caution and, above all, a readiness to see his error quickly, never made less than $30,000 a year ; dying at a good age, leaving a comfortable for- tune and a collection of rare coins which brought excel- lent prices. He would select his stocks on analyzed value and study the market movement. He would buy with con- 70 THE STOCK MARKET BAROMETER fidencc but always well within his means. He would take a two-point loss on a thousand shares of stock without hesitation if the market did not move his way. When that discouragement happened he said that he could not form a correct judgment unless he got out and took an objective view. He had originally about the capital which would have been necessary to pay for the education of a doctor or a lawyer, or to start them in business. He gave his undivided but by no means selfish attention to what he had made his business. He was always long of stocks early in a bull market, and in its last stages he generally made a trip to Europe to add to his collection of coins. He was no solitary instance. I could name others like him. But I am not advising any man to speculate, even if he has the moral stamina to comply with the same exact- ing requirements. If you have a business that you like, one which keeps you comfortably with a margin for the unforeseen, why speculate in stocks? I don't. The Dial of the Boiler Some intelligent and many irrelevant questions have been put since these discussions began, and one of them, which has something of both qualities, disputes the economic necessity for the professional speculator. I am not to be drawn into a discussion of academic eco- nomics and still less into one of abstract ethical ques- tions. I am describing the stock market barometer as it is and the great and useful service it performs. It is necessary, therefore, to explain its by no means com- PROFESSIONALS AND MANIPULATION 71 plicated machinery. It is neither as simple as the crude three-foot tube with its column of mercury nor so complex as the highly perfected aneroid instrument. The question whether I would be willing myself to dis- charge the functions of a professional speculator is beside the/point. We do not need to go back to the formal logic of the Greeks twenty-four centuries ago to know that there can be no argument on matters of taste. Every bit as important as production is distribution, and distribution of capital is the greatest function of Wall Street. The professional speculator is no more superfluous than the pressure gauge of the steam-heat- ing plant in your cellar. Wall Street is the great financial power house of the country, and it is indis- pensably necessary to know when the steam pressure is becoming more than the boilers can stand. It is im- portant here to avoid getting our metaphors mixed, but the safety valve will occur to anybody. The stock market is all that and more; and the professional speculator, however ignoble or material his motives may be, is a useful and highly dependable part of that machinery. That he may grow rich in the process is neither here nor there, unless we are to adopt the bol- shevist doctrine that personal wealth is wicked. There is another doctrine, held by many who would resent the epithet of bolshevism, which is in any country much more dangerous. It holds wealth, with the power it brings, as a thing for envy and not for emulation ; that if we cannot legislate everybody rich it is demonstrably possible to legislate everybody poor. One short way 72 THE STOCK MARKET BAROMETER to that end would be to eliminate the Stock Exchange altogether. But so long as it exists it is our business to understand it. Perhaps in so doing we may develop useful suggestions for improving the barometer and extending its usefulness. Chapter VIII MECHANICS OF THE MARKET IT has been shown that, for all practical purposes, manipulation has, and can have, no real effect in the main or primary movement of the stock market, as reflected in the averages. In a primary bull or bear market the actuating forces are above and beyond manipulation. But in the other movements of Dow's theory, a secondary reaction in a bull market or the corresponding secondary rally in a bear market, or in the third movement (the daily fluctuation) which goes on all the time, there is room for manipulation, but only in individual stocks, or in small groups, with a well-recognized leading issue. A raid upon the oil group, or upon the bear account in it, with special attention to Mexican Petroleum, may easily have a striking temporary effect. It shakes out some weak holders or it forces a few bears to cover, as the case may be. This sort of professional "scalping" is often in evidence in a secondary swing for good reasons. The Trader and the Gambler Every primary market, bull or bear, tends to over- run itself. As the traders say, there gets to be too much company on the bull side ; or conversely, the "loan crowd" shows that too many shorts are borrowing stocks. There is even a premium for lending them, 74 THE STOCK MARKET BAROMETER corresponding to what is called a "backwardation" in London. This is the professional's chance. He buys in a market which is oversold or, with testing sales, he tries out the strength of a market which has been bought not wisely but too well. The small speculator, and more particularly the small gambler, suffers at the hands of the professional. He is a follower of "tips" and "hunches." He has made no real study of the things in which he trades. He takes his information without discrimination at second hand, lacking the abil- ity to distinguish good from bad. He has no business in the market, in the first place, and it could get along very well without him. It is a great mistake to sup- pose that it is he, or people like him, who keep the Stock Exchange houses in business. Every one of these will tell you that their customers are becoming better informed all the time. Of course if ignorant people will sit in a game requiring expert knowledge, against others who understand the game perfectly, they can blame their losses on no one but themselves. They do, in fact, audibly blame Wall Street. A substantial part of the time of most brokers is consumed in pro- tecting people from themselves. It is a thankless job. A fool and his money are soon parted. Giving a Dog a Bad Name But it must be obvious that this is no part of the main current of speculation. It bears about the same relation to that current that the daily fluctuation does to the primary market movement. There are, of MECHANICS OF THE MARKET 75 course, varying degrees of knowledge, but it is a vital mistake to suppose that speculation in stocks (for the rise at least) is a sort of gamble in which no one can win unless there is an equivalent loss by somebody else. There need be no such loss in a bull market. The weak holders who are shaken out in the secondary re- actions miss a part of their profits; and, in the culmina- tion of such a movement, a great many people who have lost sight of values and are buying on possibilities only, with the latent hope that they may unload on somebody more covetous than themselves, are apt to get hurt. So far as blaming Wall Street is concerned, it seems to have become a case of giving a dog a bad name and hanging him. The defaulting bank employee usually pleads something of the kind. All his transactions and contracts are matters of record; but how seldom the court asks him for an exact statement of his specula- tive account. He says nothing about fast women and slow horses, or the many other devious ways of spend- ing other people's money. He pleads that he was "robbed in Wall Street," and sentimental people take him back to their hearts, registering horror at the temptations of the wicked financial district, whose simplest functions they have not been at the pains to understand. A small and unsuccessful speculator, chagrined at his inability to make money in the stock market but failing to understand the real reason, picks up a vocabu- lary of technical phrases which is apt to delude people who know even less of the stock market than himself. 76 THE STOCK MARKET BAROMETER He is fond of denouncing the "specialist" and the "floor trader." He classes them with the croupiers of a gambling house, and says that they are not even as respectable as that because their dealer's chance is extortionately larger. To take the floor trader first, it may be pointed out that his small but real advantage only stands him in good stead against the novice who is trying to snatch quick profits in an active market by the merest guessing. No competent broker encourages the outsider to do anything of the kind, and the brokers of my fairly exhaustive acquaintance in Wall Street do their best to get rid of a customer who is apt to be a liability rather than an asset, and is always a nuisance. The Floor Trader and the Market Turn There is no intention here to write a textbook on the practice of Wall Street and the Stock Exchange. There are excellent books covering that field. All that is necessary is to make sufficiently clear the mechanics of our barometer, and especially those things which may be assumed, rightly or wrongly, to influence it. It is sufficient to say, therefore, that a "floor trader" is necessarily a member of the Stock Exchange, and is usually a partner in a brokerage house. He un- affectedly operates for himself. He pays himself no commission, and he is at an advantage over the outside speculator in the matter of the market turn, which is, of course, the difference between the bid and asked price in the market. The more active the stock the closer this turn is, but it may be averaged at a quarter MECHANICS OF THE MARKET 77 of one per cent. Assuming that the price of United States steel common is 90% bid and go l / 2 asked, the customer who gives an order to sell cannot expect to get better than 90^4, while, if he wishes to buy, he must pay 903/2. The floor trader can often save this turn or part of it for himself not, of course, against a customer. He may be able to deal at 90^ or even to sell at the asked price. Whatever he does has its effect in the daily fluctuation. In practice it means that the floor trader can afford to trade for a quick turn where the outsider cannot. In daily custom the trader goes home at the close with his book even, not hesitating to take an occasional loss, or glad to come out even. "Bucketing" It is obvious then that the floor trader, snatching a turn of a point or so, has an advantage. If the cus- tomer tried to do it he would have the broker's com- missions of a legal eighth per cent each way against him, with the market turn of a quarter per cent; so that, as a mere gamble, he would be betting heavy odds on an even-money chance. A "bucket shop" would encourage him to do that, because the keeper of such an establishment works on the theory of new customers all the time, fleecing them as thoroughly as possible while he has the chance. None of his orders is really executed in the stock market; so that he him- self pockets this extortionate dealer's chance. But we are considering the Stock Exchange itself, and its speculative market as a trade barometer. Bucketing is 78 THE STOCK MARKET BAROMETER no part of the Stock Exchange's business, and the police can stop it elsewhere if they choose. Old and Satisfied Customers Commission both ways and the market turn do not amount to much if the customer is buying on values, with ample margin, or with the ability to pay for his stock outright, together with the tested belief that the stock he has bought bids fair to look attractive at much higher figures. He is the sort of customer the Stock Exchange houses strive to serve. A house which was in continuous business since 1870 has re- cently changed its name. It had at least one cus- tomer who had been on the books for fifty years, and many for twenty years and longer. This does not look as if the outsider always lost money in Wall Street, or as if the conditions of business made losses inevitable. A brokerage house, like any other business, works to get new clients all the time, exactly as a paper or magazine works to get new subscribers. But the ex- perienced broker will tell you that while advertising methods will bring the customers, nothing but disinter- ested service will keep them. I have often noticed that the really successful man in Wall Street is curi- ously inarticulate. Experience has taught him to keep his tongue between his teeth, and he is not at all com- municative. The unsuccessful seem to be unable to keep their losses to themselves, in most cases, and it is usually found that they are thus articulate from a MECHANICS OF THE MARKET 79 radical defect in character. They habitually do too much talking and too little thinking. No Apology Offered or Required This is not an apology for the stock market. Our old friend, our unwilling stepfather, George III, was not renowned for his wit. But when he was offered the dedication of Bishop Watson's celebrated Apology for the Bible he asked if the Bible needed an apology? Let us, therefore, content ourselves with merely ex- plaining that part of the mechanism of the stock mar- ket which should be understood for a full comprehen- sion of the nature and usefulness of the barometer of the country's business. "Specialists" in particular stocks, corresponding in a way to the "jobber," or more nearly the "dealer" in the London Stock Exchange, the brokers on the floor who limit their transactions to one or two active issues and are entrusted with orders in those issues by other brokerage houses, are little understood and much vili- fied. It is falsely assumed that they habitually, or at least occasionally, abuse their confidential position. The specialist has "stop-loss" selling orders in a num- ber of stocks at a point or so below the market price, from brokers instructed to limit their customers' losses in the event of an unexpected decline. It is suggested that the specialist, for his own advantage, brings about that decline. The answer is that even the suspicion of such dealing would cost him his business and his reputation. It recently cost a member his seat on the Exchange, the only instance I recall. 8o THE STOCK MARKET BAROMETER Transactions on the floor are by word of mouth, without the passage of a written contract or even the presence of witnesses. The honor of the parties is absolute, and I can hardly recall a case where it was called in question. There must necessarily be occa- sional misunderstandings, but these are referred for adjustment in the usual way. The specialist could not stay in business if he did not have the interests of the brokers who employ him as much at heart as any other agent in a like position. His very living and stand- ing in business depend upon it. Professional Trader's Limited Influence What is the influence of the active bear trader on the averages? It is negligible so far as the major movement is concerned, a small factor in the secondary swings and mainly influential, at times, in particular stocks in the least considerable movement, the daily fluctuation. Such operations do not affect our barom- eter in any degree worth serious consideration. Re- member the character of the twenty railroad stocks and the twenty industrials used in the two averages. Every one of them complies with the stringent listing requirements of the New York Stock Exchange. Each company concerned publishes the fullest possible figures of its operation, at frequent intervals. There are no "inside secrets," of market value, which could by any possibility affect more than a single stock out of forty. It may be that one of them unexpectedly passes or increases its dividend. The effect upon that particular MECHANICS OF THE MARKET 8 1 stock, if there is any real surprise in the matter (which is highly doubtful), is negligible when spread over the other nineteen stocks of the same group. I do not recall any useful illustrative instance; but suppose un- expected dividend action produced a fluctuation of ten points. It would only make a daily difference in the average of half a point, which would be almost in- stantly recovered if the dividend action presaged no broad general change in business conditions. If there had been any such change we may be entirely sure that it would have already been reflected in the stock mar- ket, which would know far more about it than that, or any board of directors. Short Selling Necessary and Useful A discussion on the morality of short selling would be utterly out of place here. It is true that the bear cannot profit except where another loses, while the bull at the worst reaps a profit which another man might perhaps have made if he had been attending strictly to his business. But every free market for anything is helped far more than hurt by traders will- ing to sell short. If, indeed, there were not this liberty the result would be a most dangerous market, liable to an unsupported panic break at any stage of its progress. Voltaire said that if there had not been a God it would have been necessary to invent one. It must have been long ago, in the days when what after- ward became the London Stock Exchange did its busi- ness in Jordan's Coffee House off Cornhill, that bear selling was invented. 82 THE STOCK MARKET BAROMETER It soon became a patent necessity; and it is curious that some of the most serious breaks in the London market have occurred, not in the wildly speculative securities, but in bank stocks, where the English law prohibits short selling. It was unsupported pressure in some bank stocks which helped to make the Baring crisis of 1890 so serious. There is no such valuable support for a falling market as the uncovered bear account. When it is absent, as in this particular in- stance, nothing but a bankers' combination hastily improvised can check the devastating decline. As the London Stock Exchange was reorganized in 1922 on its old basis, without further government meddling and regulation, Parliament will repeal this law and substitute (as a protection to bank stocks, that com- plete and constant publicity which is always the public's best safeguard. Protection of Listing Requirements When Charles H. Dow wrote, twenty years ago, of speculation generally, and incidentally of his theory of the market movement, some of the industrial stocks, included in the average and traded in freely on the floor of the Stock Exchange, were in what was then called the unlisted department. It would be difficult to imagine The Wall Street Journal speaking to-day of one of the industrials in the Dow-Jones average as a blind pool. But it did not hesitate to apply that epithet, editorially, to the American Sugar of Henry O. Havemeyer's day. The elimination of the New MECHANICS OF THE MARKET 83 York Stock Exchange's unlisted department is one of the most creditable instances of reform from within. It was bitterly opposed by some conservative members of the Stock Exchange, mainly those who profited largely by that vicious vested interest. An ex-presi- dent of that institution, now dead, took upon himself to berate me loudly, in the presence of his customers, for advocating that eminently necessary reform. He said that such agitators were driving business away from the Wall Street in which they earned their liv- ing. He threw out of his office the newspaper and the financial news service with which I was and am connected. But his own customers made him reinstate both, with humiliating celerity. American Sugar and Amal- gamated Copper and the other formerly unlisted securi- ties are still dealt in on the floor of the Exchange. Those companies saw that they laid their management under the gravest suspicion by a refusal to comply with the terms of publicity so wholesomely exacted from reputable companies. Stock Exchange houses are naturally inclined to look askance at reforms ad- vocated from outside. But I have never heard one of them even suggest the restoration of the unlisted department. Federal Incorporation It was said in an earlier discussion that something further might be done for the protection of the public, without the enactment of any of these "blue-sky" laws which only embarrass honest enterprise without seri- 84 THE STOCK MARKET BAROMETER ously impeding the operations of the crook. In this discussion I can briefly set forth the sane and success- ful method which protects the speculator and investor in Great Britain. Under what is there called the Com- panies (Consolidation) Act of 1908 the London Stock Exchange is enabled to deal in any security the moment it is registered at Somerset House, London. That registration cannot be made until the fullest possible disclosure of purposes, contracts, commissions and everything else has been made. However adventurous the purposes of the company may be, the speculator knows all about them from the start. After that, under this statute, the old common-law rule of caveat emptor let the buyer beware prevails. It is properly held that the buyer can protect himself, as he should, when he can find out all about the property, its origin and its present conduct, for the fee of a shilling, at Somer- set House. There would doubtless be all sorts of ignorant oppo- sition to Federal incorporation of this kind, with the law enforced and the public protected through limita- tion in the use of the mails. But I am convinced that it might well be done, and should, of course, be done in a strictly non-partisan spirit. To the utmost of its ability the New York Stock Exchange protects its members and their customers. But the New York Curb Market Association is simply an unlisted depart- ment in itself. I have no reason to believe that its government is not capable and honest, and I have not a word to say against its membership. But sooner or later it is calculated to prove a source of danger and MECHANICS OF THE MARKET 85 scandal. If any of its members imagine that they have something to lose, in the setting forth of the absolute and original facts about everything in which they deal, they are making exactly the same mistake that ill-advised members of the New York Stock Ex- change made when they shirked the disagreeable task of compelling a number of industrial corporations to comply with the listing requirements, on pain of being stricken from the list.- Real Reform from Within Let me disclaim, however, the intention of crusad- ing, or any bent toward that blatant and ignorant "reform" which has made such costly experiments in recent years. In my experience of it the standards of the Stock Exchange have steadily improved, to the permanent advantage of the investor and of the small speculator, who is, after all, only an investor in embryo. Practices were customary in Dow's day which would not be tolerated now. In any future bull market manipulation on the scale of James R. Keene, when he distributed Amalgamated Copper, would be im- practicable, for the reason that the publicity now required by the Stock Exchange, in the accounts of such a company, would make it impossible to persuade the most reckless private speculator that the prospects of the new combination made it worth four times its book value, on any expert test. Even in those days "wash sales" were largely a figment of the public imagination, and "matched orders" were declined by 86 THE STOCK MARKET BAROMETER any brokerage house of repute if their nature was suspected. The Stock Exchange rule against fictitious transactions is obeyed in spirit and in word. It was not a mere letter even in those days, whatever it might have been forty years ago, when the infant giant of American industry was only awakening to conscious- ness of his strength. Chapter IX "WATER" IN THE BAROMETER EVERY effort has been made to simplify these dis- cussions. They have been offered with the most stringent exclusion of extraneous matter. In serial form they aroused much criticism and comment, some of it illuminating and helpful. But old preconceptions and prejudices still survive. One critic, whose scanty knowledge of the subject appears to have been derived from the reading of perhaps two of these articles, says: "How can we trust your barometer if we cannot trust the stocks which the Stock Exchange deals in? You have said nothing about overcapitalization. What about water?" Water is more unpopular than ever in the United States just now. But the financial center of the United States, with the business of the country in view, is far more concerned about watered labor than watered capital. There is only one way to squeeze the water out of labor the factory or apartment house which cost a million dollars to build and represents only $500,000 of real value. That way is by bankruptcy. Of the apartment houses that were built in New York, during a period of high wages and "ca' canny" which 87 88 THE STOCK MARKET BAROMETER set in long before the war, very few have not passed through a stage of financial reorganization, due to watered labor in construction, long before rents began to advance. The stock market has a short and simple method of dealing with water in stocks. It exists for the purpose of squeezing that water out. The process does not involve a receivership. The very word "water" begs the question. You may call the capitalization of an industrial flotation "water" because you do not see the potential values of a great creative organization. But with justice, and better knowledge, the late J. Pierpont Morgan might have called that capitalization intelligently an- ticipated growth. Whatever it may be and I shall give an example from the most striking instance, the capitalization of the United States Steel Corporation the stock market is forever adjusting prices to values. The water soon evaporates. Squeezing Out the Water To recapitulate, we are studying the stock market barometer, having established the fact of its known and orderly movements the long primary swing, the secondary reaction or rally, and the daily fluctuation; and to do this we are taking the averages of two groups of stocks twenty active industrials and twenty active railroads. All adjustments of the prices of these stocks individually must primarily be based upon values. For all practical purposes the Stock Exchange is an open market, and the business of such a market "WATER" IN THE BAROMETER 89 is to adjust conflicting estimates to a common basis, which is expressed in the price. By manipulation, James R. Keene advanced the price of Amalgamated Copper twenty years ago to one hundred and thirty, and obviously the group of financiers which offered the stock at par originally, without success, assumed one hundred as value for it. The stock market does not make its adjustments in a day. But, over a period which seems brief in retrospect, it knocked one hun- dred points off the highest figure Amalgamated Cop- per attained in a general bull market. This is the business of the stock market. It has to consider both basic values and prospects. At the close of a major downward movement, a primary bear mar- ket, prices will have passed below the line of values. The causes of the liquidation will have been so serious that people have been compelled to realize their hold- ings at less than their normal worth; less, indeed, than their book value the worth of the company's assets, that is, irrespective of productive capacity and good will. The prices of the standard stocks will be injuriously affected by the prices of "cats and dogs" dealt in on the Curb market, many of them of such a character that any bank would refuse them as collateral in its loans. When the banks are compelled to call loans made on Stock Exchange securities, the stocks of tested worth, of properties competently and repu- tably managed, will be the first to suffer because it is those stocks which are pledged in bank loans. The constantly recruited Curb group is highly speculative, but trading there is always limited, and indeed safe- 90 THE STOCK MARKET BAROMETER guarded, by the large margin which is necessary to carry Curb stocks. Stock Profits and Income Tax Conversely, a bull market starts with stocks much below their real value, certain to be helped in anticipa- tion by the general improvement in the country's busi- ness which the stock market foresees and discounts. In the long advance values will be gradually overtaken, and toward the close of the advance an uninformed public, incapable of recognizing the bargains which were offering when the movement started, is buying on prospects only. Experienced traders in Wall Street say that when the elevator boy and the shoeblack are asking for bull tips on the market it is time to sell and go fishing. When I sailed for Europe early in October, 1919, to report on financial conditions in Britain and Germany, the market was in the last sanguine stage of a long bull movement. The inflation bull argument then was most curious. It was that the people who had large profits would not sell, and could not sell, because in turning those paper profits into cash they would show such a large earning of income for the year that the tax-gatherer would take a prohibitive share of the profits. We analyzed this fallacy in the smoking saloon of the Mauretania, and at least some of the business men on board concluded to divide up with Uncle Sam. The argument was preposterous in itself, because it pictured the most vulnerable kind of bull account that it would be possible to conceive. It was glaringly up to be shot at, and the poorest marks- "WATER" IN THE BAROMETER 9 1 man could fill it full of holes. Rough seas stove in five of the Mauretania's lifeboats, and put the wire- less apparatus out of commission for the last three days of that voyage. When we arrived at Cher- bourg we learned that the stock market itself had begun to free the bulls of stocks from the embar- rassment of paying excessive income tax. They had not much to worry about in that respect by the end of the year, for the paper profits had been rapidly extinguished. Well-Distributed Holdings There is no way of permanently holding up artificial prices created by an overbought market. One great protection to the public is in widely distributed stock ownership. When a single group in Wall Street owns practically all of the stock in a property like Stutz Motor, that group can call the market price anything it chooses. It will not be the "market" price because there will be no real market. Abraham Lincoln pointed out long ago that you could not talk five legs onto a dog by renaming its tail. All the stocks in the average have shared in the wide and healthy distribution of securities. The average holding of Pennsylvania (which has the greatest capitalization of any of the railroads in our average) or of the five and a half million shares of United States Steel common is noth- ing near one hundred shares for each holder. So far as the public is concerned, there is, indeed, safety in numbers. 92 THE STOCK MARKET BAROMETER "Valuation" and Market Prices To the inquirer quoted at the beginning of this article, who asks, "What about water?" we may answer, well, what about it? He cannot show us any water in the averages. We may go further and tell him that he cannot show us any water, at prices and not at the nominal par, in the whole Stock Exchange list. For the railroads, no valuation which could be instituted by Congress and carried out by a committee of the Inter- state Commerce Commission could begin to compare with the market prices of the securities themselves, taken in a normal month of a normal year, with the prices not inflated on overestimated prospects or de- flated by forced liquidation, brought about largely to protect unsalable securities and warehouse receipts not associated with the railroads or the standard industrial companies in any way. Every scrap of intelligence and knowledge available, uninfluenced in any real degree by manipulation, has been brought to bear in the adjustment of the stock market prices. Reproduction value, real estate value, franchises, right of way, good will everything else have been brought into the free-market estimate in a way which no valuation committee appointed by Con- gress could ever attain. The Interstate Commerce Commission's valuation of a railroad has merely his- torical worth if it has any. As a true estimate of the property, if the method of fixing it were commonly just, it is out of date the moment it is printed, or, indeed, months before it is printed. But the Stock "WATER" IN THE BAROMETER $3 Exchange price records the value from day to day, from month to month, from year to year, from bull market to bear market, from one of Jevons's cycle dates to another; and the bankers of America and any other civilized country accept that valuation and advance real money on it, without reference to the arbitrary estimate of the Interstate Commerce Com- mission. The Fetish of Watered Stock It is astonishing to what depths of foolishness the fetish of watered stock has carried this country. The capitalization in stocks and bonds of its railroads, alleged to represent water, is not one-fifth that of the railroads of the British Islands, mile for mile. It is less per mile than that of any European country or of any government or privately owned railroad in Britain's self-governing colonies. I am not afraid to go on record with the statement that the American railroads are uneconomically undercapitalized, on their real value. The charge of watered stock made against the listed industrial corporations is equally absurd. The stock market had far more than squeezed out the water in that capitalization at the Stock Exchange prices current in 1921. It had squeezed blood. As this is written, United States Steel common is selling under $80 a share. But stringent analysis of an industrial corporation offering the most exhaustive figures of any like company in the world gives a book value to the common stock of $261 a share. In the twenty years of its history it has put upwards of a 94 THE STOCK MARKET BAROMETER billion dollars into the property in new construction, and so little is this watered in the capital that this new investment out of earnings is represented in prop- erty account by only $275,000,000. The quick assets, largely cash, are over $600,000,000 alone, something like $120 a share with the whole concern scrapped. Where is the water? A common stock capital of $550,000,000 looks large, but it is only relatively large. Was not Morgan right if he called this intelligently anticipated growth? If his spirit could revisit the pale glimpses of the moon, surely he would be aston- ished at his own moderation. And yet the distribution of the United States Steel common and preferred stocks, made in the major swing of a great bull market, was brought about largely by the most stupendous manipulation the market ever saw, under the direction of the late James R. Keene. And what was the end of that manipulation? It was to sell the common stock at fifty and the preferred stock at par. If the people who bought at those prices put the stock away after paying for it, would they have anything to regret even at the low market prices of August, 1921, attained after a major bear swing of unusually long duration? Buying on Values Probably some one will charge me with writing a bull argument about Steel common, because I set this simple illustration before the public. There again we have the inveterate prejudice against Wall Street. 1 t I I 9 02 I 1 3 I 1 B 4 I 1 1 S 1 i t 1 07 1 01 1 9 1 1 i 1 1 A COMPARISON OF THE MOST ACTIVE IZ 1913 It 4 1t> I 1 1 I HI 7 I 1 II I 111l12 1! ill I 1 Ui I 1 1 t I 1 1 7 I 1 1 1 I Itlll '!> Ili It 1 J 1CK UNITED STATES STEEL COMMON "WATER" IN THE BAROMETER 95 The facts I have stated are of record, accessible to anybody, perfectly well known to some of the people at least who were selling Steel common in 1921. But they were selling the stock because they needed the money, at a time when most of us needed money. When the Rothschild of the days of Waterloo, a week before the result of that battle was known, was buying British consols at fifty-four, a friend asked him how he could buy with such confidence on an outlook so uncertain. He said that if the outlook were certain consols would not be selling at fifty-four. He knew that with that uncertainty they must necessarily be sell- ing below their value. Everybody needed money at the same time, and he was one of the few people who had any. I suppose no one will ever know how Russell Sage did it, but he could lay his hands upon more real money in a panic than anybody in Wall Street. He believed in quick and liquid assets, short-time paper maturing all the time, call loans and deposits every- thing which could be turned into cash, not to hoard but to buy freely when people who had lost sight of values were selling. A Story of Russell Sage All sorts of stories are told of Russell Sage and his extraordinary frugality. That is not exactly the word I would use; nor would I call it miserliness, for he was anything but a miser. I remember the last time I ever saw him, when I was a young reporter, or at least a younger reporter. I was trying to find out something about a railroad property in which he was 96 THE STOCK MARKET BAROMETER dominant with another financier of nation wide noto- riety, or reputation. Lying is a word which is seldom used (or needed) in Wall Street, -and it would be bet- ter to say that the other financier had given me infor- mation calculated to let me deceive myself if I was not exceptionally wide-awake. With the idea, there- fore, of seeing if Mr. Sage's terminological inexacti- tude would differ from his comrade's, with enough significance to enable me to deduce something from the points upon which the two fairy tales did not agree, I went over to see Sage, who was always accessible to the newspaper men. He greeted me in the most friendly way, as indeed he did anybody whose visit had nothing to do with money. I put my question and he rapidly changed the subject. He said: "Do you know anything about suspenders?" I was exasperated, but I replied mod- estly that I did not know any more about them than any other wearer. "What do you think of these?" said Uncle Russell, handing me over a pair certainly inferior to those worn by reporters, who are not, or certainly were not at that time, given to undue extrav- agance in such an article of attire. "What about them?" I asked. "Well, what do you think of them?" said Sage; "I gave thirty-five cents for those." Per- haps I was a little vindictive, having failed to secure even the poor information I had come to seek. I said : "You were robbed. You can get better in Hester Street for a quarter." Sage looked at me doubtfully. "I don't believe it," he said. But he was really trou- bled. It was not the difference of ten cents, and I "WATER" IN THE BAROMETER 97 would not have sworn to the Hester Street quotation. It was the principle of the thing. His judgment of values had been impugned. Values and Averages And there you have it. The things in which Russell Sage dealt had value. He had to know those values, and it was by knowing them when they had ceased to be apparent to other people that he died worth more than $70,000,000. The stock market barometer shows present and prospective values. It is necessary in reading it to judge whether a long movement has carried the average prices below that line or above it. In looking back over the various analyses of the stock market as a guide to general business, published in The Wall Street Journal since Charles H. Dow died, at the end of 1902, I find a typical instance of the application of the averages which may seem remark- able to the reader, although I regard it as the merest common sense. There is no one so unpopular as the man who is always telling you that he "told you so," but the illustration is impersonal. A Cautious but Correct Forecast No severer test could be taken than the interpreta- tion of the averages in what might almost be called the transition period between a bear and a bull market. The bear market which developed from September, 1902, saw its low points in the September of the fol- lowing year, and it is weeks or even months after- 98 THE STOCK MARKET BAROMETER wards before the change in the major swing can be definitely asserted. But on December 5, 1903, The Wall Street Journal, after a review of the fundamen- tally sound tendency of business in then recent years, said: "Considering the extraordinary advance in wealth of the United States during that period, considering that railroad mileage has not increased in anything like the ratio of increase in surplus earnings, and finally considering that the ratio of increase in surplus earnings available for dividends has been at all times in excess of the rise in market prices and at the present time shows a larger percentage on market price than at any time since the former boom started, the question may well be asked whether the decline in stocks has not culminated. There is at least some evidence in favor of an affirmative answer to that question." A Bull Market Confirmed It would be easy to say that such an opinion could have been given without the help of the averages, but it was given with the price movement clearly in view and at a time when there was an easy possibility that the main bear movement might be resumed. It cor- rectly foresaw the bull market, allowing for the cau- tion necessary in such a prediction and, indeed, for the fact that analysis of the market movement was still in its infancy. The bull market then foreseen ran throughout 1904, and can be said to have ter- minated only in January, 1907. But some nine months after this editorial analysis of the business situation, judged by the averages, was written, The Wall Street Journal tackled the almost equally difficult question of "WATER" IN THE BAROMETER 99 whether the bull market then getting into full swing might be expected to continue. Remember that the advance had been running with moderate but increas- ing strength for twelve months, which would allow for at least some discounting in values. On September 17, 1904, The Wall Street Journal said: "There is apparently nothing in sight to lead one to believe that railroad values are not on the whole maintaining their high position, and that as time goes on this will bring a further appreciation of prices. Much will depend on the coming win- ter, which will at all events bring a clear indication of the general trend of values. In the long run values make prices. It is safe to say that if present values are maintained, present prices are not on an average high enough. "It must further be remembered that the continued increase in the production of gold is a most powerful factor, which can- not fail to be felt in the future as making for higher prices of securities other than those of fixed yield." A Vindication of the Theory Note carefully that last line. We have satisfied ourselves that bonds held for fixed income decline when the cost of living rises, and more gold means that the gold dollar will buy less because gold is the world's accepted standard of value. But it stimulates speculation, and the stock market had seen this in 1904, when this was written, even if the houses with bonds to sell thought it rather "unclubby" to say any- thing which would disturb their business. Of course, these quotations are far from dogmatic, because Dow's Theory was only beginning to be understood. We shall see as the years went on that the theory allowed ioo THE STOCK MARKET BAROMETER for much more explicit statements of the market's condition and its prospects. It is sufficient to record how soon the stock market barometer proved its use- fulness when Dow's sound method of reading it had been set forth. Chapter X "A LITTLE CLOUD OUT OF THE SEA, LIKE A MAN'S HAND" 1906 IN discussions such as these it is necessary to antici- pate objections and explain apparent discrepancies. There is nothing more deceptively fascinating than a hypothesis which holds together too well. Out of that sort of theory much obstinate dogma arises, which seems able to continue its existence after time has proved the theory unsound or inadequate. We have established what is called Dow's theory of the price movement the major swing, the secondary reaction or rally, and the daily, fluctuation and out of it have been able to evolve a working method of reading the stock market barometer so constituted. But we are to guard ourselves against being too cocksure, and to recognize that while there is no rule without an excep- tion, any exception should prove the rule. The San Francisco Earthquake i'he year 1906 presents an interesting problem in this way. It is the problem of an arrested main bull movement or an accentuated secondary reaction, ac- cording to the way you look at it. It has been said that major bull markets and bear markets alike tend to overrun themselves. If the stock market were oninis.cfcnt it would protect itself against this over- 101 102 THE STOCK MARKET BAROMETER inflation or over-liquidation, as it automatically pro- tects itself against everything which it can possibly foresee. (But we must concede that, even when we A have allowed for the further established fact that the stock market represents the sum of all available knowl- edge about the conditions of business and the influences which affect business^ it cannot protect itself against what it cannot foresee. It could not foresee the San Francisco earthquake of April 18, 1906, or the sub- sequent devastating fire. Tactful to Call it a Fire If you want to make yourself popular with that somewhat strident individual, the California "native son," you will not even allude to the San Francisco earthquake. In California it is considered bad man- ners to do anything of the sort. All that is conceded there is the fire. For our purpose the earthquake admits of no argument. Chronic California boosters, however, cannot permit a general impression that there might be, for instance, another earthquake in San Francisco as bad as the last. A fire, on the other hand, might occur to any city, anywhere, without de- tracting from those natural advantages of climate and other things of which California is so proud. There is nothing more charming than the naivete of the Los Angeles native, who says "It is a fine day, if I say so myself." But earthquakes are different. They put the Pacific coast in a class by itself, and a class not at all to the taste of the inhabitants. As A LITTLE CLOUD OUT OF THE SEA 103 Beau Brummell, the great English dandy of the early years of last century, said: "A hole may be the result of an accident which could happen to any gentleman, but a darn is premeditated poverty." Efect on the Stock Market But the San Francisco earthquake came up in a clear sky, and took an already reactionary stock mar- ket by surprise. You will remember the clause in the Lloyds ship insurance policies which excepts "the act of God and the King's enemies." This aberration of Nature was an exception, and it went far to explain an exceptional year in the record of the stock-market barometer. There was an undoubted bull market from September, 1903, reaching a high point in Janu- ary, 1906. It did not hold that point without reces- sion; and it may be said that as a general rule there is often no marked warning line of distribution at the top of a major bull swing, especially when that bull swing has overrun itself, as, for instance, it did in 1919. The market in the spring of 1906 was declining, but with no such precipitancy as to indicate the bull market would not be resumed, or had even been much overbought when the earthquake occurred. We must remember how serious the losses were. The convul- sion set up a fire in the ruins of the immense number of collapsed houses or those shaken to their founda- tions, and this fire rapidly assumed the proportions of what the insurance companies call a conflagration. The American companies, without exception of con- 104 THE STOCK MARKET BAROMETER sequence, and the English companies, paid up promptly, to help the sufferers, although they had an excellent fighting case over the earthquake itself. We might have learned a little of German methods from the action of Hamburg companies, who adopted the opposite policy and repudiated their liability. It might have taught us something of the German meth- ods in the conduct of war and diplomacy, of the German conceptions of the spirit of a contract and of sportsmanship. At least after that time the fire insur- ance companies of Hamburg wrote little insurance in America. Sound Prediction Under Difficulties When the stock market is taken by such a surprise there is a violent break closely akin to that of a panic. The basis of a panic, when analyzed, is essentially surprise. It cannot be said that the stock market of 1906, in the last days of April, got out of hand. But the decline had been sufficiently serious. The twenty railroad stocks which sold at 138.36 on January 22, 1906, on May 3d had declined over eighteen points; the twelve industrials then used had reacted from one hundred and three on January I9th to 86.45 on the later date. There seems to be some sort of uni- formity which obtains in breaks like this. Experience records a recovery of part of the panic break, with a subsequent and much slower decline which really tests the strength of the stock market. In fact, The Wall Street Journal of July 6, 1906, called attention to this A LITTLE CLOUD OUT OF THE SEA 105 fact, in predicting a general recovery from the show- ing of the averages. It said: "It is a uniform experience, over the years when such averages have been kept, that a panic decline is followed by a sharp rally of from 40 per cent to 60 per cent of the movement, and then by an irregular sag ultimately carrying the price to about the old low point. It seems to need this to bale out the weak holders who were helped over the panic. It could hardly be said that the break on the San Francisco disaster was exactly of the panic class, and the market in rallying recovered to 131.05 in the case of the railroad stocks, which is only 1.61 below the price at which the earthquake decline started. The rally, however, does repre- sent about 60 per cent of the decline since January 22d, and the course of the market since has been curiously parallel to the movement observed after a panic rally. It seems fair to infer that liquidation of very much the same kind as that following a panic has been necessary." Seriousness of the Disaster At this distance of time we may easily forget how serious the San Francisco disaster was. The loss direct has been estimated at $600,000,000. The Aetna Fire Insurance Company admitted that the conflagration had cost it the savings of forty years. If that was the effect on the strongest fire insurance company in the United States, and one of the strongest in the world, how severe must have been the consequences else- where. It was all very well for the shallow, half- taught optimist to say that broken windows made worn for glaziers and manufacturers of glass. But it cost you something to put in a new pane, and the money you spent on it would have been spent on something io6 THE STOCK MARKET BAROMETER else, while, as Bastiat said, you would still have your window. If that sort of reasoning were good, the quick road to prosperity would be to burn down all the cities in the United States. We see that the railroad stocks suffered more than the industrials, and we should remember that they were in a higher class, both relatively and positively. But in a sudden and demoralizing break people sell the things for which there is some market in order to protect those for which there is no market. As The Wall Street Journal put it at that time: "The first decline in a panic is scare, and the second and slower decline is the demonstration of the general shock to confidence;" going on to say, in speaking of the market on July 2d, that the line of prices was well below the line of values and that the indications were bullish. Rally From a Break in a Bull Market This inference proved correct, and it has been the custom, which is followed in these discussions, to con- sider the bull market which began in September, 1903, as actually terminating and turning to the bear side, not in January, 1906, but in December of the same year. At the time the bullish inference quoted was published the market was making a line which proved, as the analyst correctly surmised, to be one of accumu- lation. The forecast was soon verified, and on August 2 ist The Wall Street Journal again discussed the market from the point of view of the averages. There A LITTLE CLOUD OUT OF THE SEA 107 was a greatly active market at that time, and it re- marked how absurd it was to suppose that within two hours of trading on a Saturday one single interest could possibly manipulate one million six hundred thou- sand shares. This is a useful confirmation, coming out of the past of fifteen years ago, of what we have already seen for ourselves in demonstrating the rela- tive unimportance of manipulation. In that discussion The Wall Street Journal went on to say: "We can only suppose that the long decline between January 22d and July 2d represented a somewhat extended bear swing in a bull market." 'Average Deductions Uniformly Correct Remember that this correct inference was drawn at the time, and not after the event. I could easily go back and show how trustworthy these deductions have been over the twenty-odd years since Dow formulated his theory. It would be absurd to say that it was possible to call the exact turn in the major swings, much less anticipate the unexpected. But these studies in the price movement did what was much more useful from the point of view of those using the barometer from day to day: they were continually right when they said of a major movement that it was still in progress, even when a deceptive secondary movement had made superficial observers bearish in a bull market or bullish in a bear market. There is a story, probably apocryphal, of James R. Keenc saying that he would be well content to be io8 THE STOCK MARKET BAROMETER right 51 per cent of the time. I don't believe he ever said it. He must have found a much larger percentage necessary. The balance in his favor would not have paid operating costs, to say nothing of keeping a racing stable. But the deductions from the evidence of the price movement have been right, as the printed record proves, much the most of the time. After searching both the record and my conscience I can find no instance of a radical misinterpretation of the meaning of the barometer. The studies based upon its use were uniformly able to anticipate what the public was thinking about business before the public knew its own thoughts. The errors, where any oc- curred, were mainly due to the almost impossibility of forecasting the secondary movement of the market. This is really much more difficult than the interpreting of the major swing, just as it is easier for the Weather Bureau to forecast weather for a large area than it is to say whether it will rain in New York to-morrow morning. Initiation of a Bear Market Near the top of this bull market The Wall Street Journal uttered a caution. It pointed out, on Decem- ber 15, 1906, that there had been a "line," especially in the twenty active railroad stocks, and that the possibility of a break through the lower level of the line should be considered as indicating the warning of a coming decline. This forecast did not commit itself to anything more than a possible bear swing in what had been for three years a primary bull market. It A LITTLE CLOUD OUT OF THE SEA 109 was altogether too early to call the actual turn. In the beginning of 1907, large railroad earnings, materi- alized in the case of the spectacular dividend policy announced for the Harriman roads during 1906, were set off against high money rates, which, as we soon saw, were already beginning to warn the market, and business generally, of that severe crisis brought about later in the year ; when the reserve of the old national banking system virtually went to pieces, call money became practically unobtainable at unparalleled rates, and the banks resorted to clearing-house certificates for the first time since the panic of 1893. In the month of January, 1907, the active profes- sional traders were selling stocks. Political meddling was beginning to scare investors, and before the year was out there was what amounted to a strike of capital. The decline in stocks had already started, and it is interesting to trace the elapsed time taken to decide that a major bear swing had replaced the preceding long-continued bull movement. A decline of prices in January is always disturbing to the stock market because that is a time of year when, other things being equal, the tendency is oftenest bullish. It is a time for cheap money, and the reinvestment of the profits of the preceding year. It is a time, more- over, when it is peculiarly unpopular to talk bearish in Wall Street. The prophet of evil, as I have already frequently demonstrated, is totally without honor in that part of the country. 1 10 THE STOCK MARKET BAROMETER Boom Times and a Falling Barometer In the long bull market there had been an unusually large emission of new issues, and it was then that the late J. Pierpont Morgan originated the phrase about undigested securities. America loves a good phrase, and that one caught hold. Industrial earnings, and especially those of the United States Steel Corpora- tion, continued remarkably good. The railroads were making an excellent showing of both gross and net. But the sharp decline in the averages in January made our commentator most cautious, particularly in de- clining to predict a rally, much less assume that noth- ing more than a secondary reaction had been estab- lished. It was altogether too soon to be positive about the major movement. In fact the severe decline kept everybody guessing; but it appears from the rec- ords that early in March the existence of a primary bear market was conceded and The Wall Street Journal, very like any other newspaper, was doing all it could to cheer up the dispirited investor with a statement of the genuinely satisfactory features. Some Bearish Influences^ But the market was looking at all the facts, and the far-reaching consequences of some of them were reflected in stocks. These bear arguments were given on March 15, 1907, and they read curiously now. They were : "i. Excessive prosperity. "2. High cost of living, due largely to the effect upon prices of a great gold production. A LITTLE CLOUD OUT OF THE SEA 1 1 1 "3. Readjustment of values to the higher rates of interest. "4. Speculation in land absorbing liquid capital that might otherwise be available for commercial enterprises. "5. Roosevelt and his policy of government regulation of the corporations. "6. Anti-railroad agitation in the various states. "7. Progress of socialistic sentiment and demagogic attacks on wealth. "8. Harriman investigation of exposure of bad practices in high finance. "9. War between big financial interests. "10. Over-production of securities. "u. Effect of San Francisco earthquake." There were other causes quoted of only momentary consequence, in which possible bear manipulation was put last. It has been said already that there never was a bear market which was not justified by the facts subsequently disclosed. Are we not entitled to say that some of these influences became permanent, to an extent which even the stock market could not pos- sibly foresee, conceding that it is, at least theoretically, of longer and larger vision than any of us ? As after events proved, the over-regulation of the railroads alone was sufficient to justify investors in protecting themselves, whatever the consequences to the stock market might be. An Abnormal Money Market In retrospect, the year 1907 seems to me the most interesting I have ever spent in Wall Street, and per- haps the most instructive. It is full of lessons and warnings. I wish that the scope of these discussions 1 1 2 THE STOCK MARKET BAROMETER permitted a treatment of it in greater detail. There is no better story of it for the student than that of Alex- ander Dana Noyes in his Forty Years of American Finance. He was financial editor of the Evening Post at that time. I remember that at the beginning of the year, when industry was booming, when railroad gross and net earnings were making about the best showing on record, when the stock market was only receding a little from three years of advance, where prices, moreover, at least on paper, had not overtaken values, he was struck, as I was, by the abnormal money market. That is the time of year when money should be cheap, and it was almost painfully tight in February. The stock market foresaw the meaning of it long before we did, as the major bear swing of 1907 showed. No Bigger Than a Man's Hand There was a broker of that time, since dead, whose face comes up before me as I write. He talked in terms of Wall Street, but his illustrations were vivid and his intelligence was well above the average. He was an educated lover of music, and much more rever- ent than he sounded. He was speaking to me one day about a performance of Mendelssohn's "Elijah" that he had once heard, with the title role taken by the greatest oratorio artist of all time, the late Charles Santley. The dramatic story had appealed to my friend. He talked of the priests of Baal being "corn- ered bears of the stock Elijah controlled," and of "their frantic efforts to cover their shorts." He was "3 impressed with the way Elijah had, as he expressed it, "joshed" them in their extremity, suggesting that their god was taking a nap or was, peradventure, "on a journey." There was a phrase that had stuck in his mind which describes the condition at the beginning of 1907: "Behold, there ariseth a little cloud out of the sea, like a man's hand." The "great rain" fol- lowed in the autumn of the year 1907. Not only was the collapse in business tremendous. It developed with a suddenness which simply took our breath away. At the close of the year I was traveling on the Pennsylvania railroad with Mr. Samuel Rea, now the president and then the first vice- president of the road. The Pennsylvania carries and carried then a tenth of the railroad freight of the United States. Mr. Rea said that at a time when they were only a month away from the peak of their load, apparently able to count upon the crop movement and the industrial traffic, both ways, of the Pittsburgh district, business seemed to shut up like a jackknife, almost overnight. We could see the empty cars in the stub-end sidings and yards all along the system between Philadelphia and Pittsburgh, at a time of year when railroads are normally using everything but the cripples in the repair shops. The Deadly Hand of Politics There had been nothing like it since the collapse of l $93> when that Congressional monument of economic ignorance and sectional folly, the Sherman Silver Pur- 1 14 THE STOCK MARKET BAROMETER chase Act, reaped its grisly harvest in the most demor- alizing and far-reaching panic we ever saw. That seemed to have been a lesson to our lawgivers. The lean years which followed that panic, with the almost universal bankruptcy of the railroads and those who served them, finally put the fear of the Lord into the politicians. For ten prosperous years previous to 1907 they had quit kicking the business dog around. But in that year they had fully resumed that highly ex- pensive sport, and before the end of the year there was a strike of capital. Every man who had any- thing to lose was terrified. Every man who knew anything foresaw what bureaucratic meddling and un- intelligent regulation would do for the business of tl e country. It seems to me, if I am not wandering frt n my text, that this is largely what is the matter with the country now, war or no war, and that the stock market for two years past has been foreseeing some of the further consequences of fool politics. It may also be that in the impending improvement in business, already foreshadowed by the averages and the underlying investment demand shown in bonds, the market foresees some return to sanity, even if the indications in Congress at present are anything but encouraging. Chapter XI THE UNPUNCTURED CYCLE WE have been considering in some necessary de- tail the record of the stock market barometer, and we shall have some further historical study to make in that interesting and little understood period between the bear market which culminated in 1910 and the outbreak of the World War. We have hith- erto paid small attention to the tempting "cycle theory" of human affairs, and especially of business affairs. In an early discussion I set forth the panic dates for the eighteenth and nineteenth centuries as recorded by Jevons, together with Dow's brief account of our panics of last century. But it was essential to establish something of an irregular stock market cycle of our own, not necessarily, and hardly more than incidentally, involving a panic for, indeed, the panic has more than once proved to be merely an interrup- tion in the main movement of the barometer. Our Own Modest Cycle We can see that we have established some sort of irregular rotation through Dow's theory of the stock market price movement its major swing up or down; its secondary reaction or rally, as the case may be; and the daily fluctuation in prices on the Stock Ex- change as reflected in the records of the average*, "S 1 1 6 THE STOCK MARKET BAROMETER But the theory of the longer rhythmical cycle will not down. It seems to be almost an obsession with many of my readers and critics. None of them seems to have analyzed his belief in it in any searching way. The general impression is that there is "something in" the idea; that if it is not proved true it should be true; that the world's panic dates themselves indi- cate a striking degree of periodicity; that, given such periodicity in the past, we may anticipate something like it in the future ; that men will always be as stupid in the conduct of their own business as they seem to have been when judged by the records of history. Basis of the Cycle Theory Probably this unwillingness to analyze the panic theory arises from the fact that in the eighteenth century, according to Jevons, there were exactly ten noteworthy crises at an average of ten years apart. I am content to waive the one Jevons omitted that of 1715, when the Scots invaded England because there were not enough spots on the sun in that year to establish his daring theory of the relation between the two phenomena. We may note that Jevons gave 1793 and 18045 as crisis years, while it is of record that our own first panic of the nineteenth century was consequent upon the British capture of the city of Washington in 1814 an event which no cycle could have predicted, unless we are to assume that the cycle theory could have predicted the late war. But, count- ing 1814, and what Dow calls the "near approach to THE UNPUNCTURED CYCLE 117 a crisis" in 1819, there were ten American crises in the nineteenth century. Let us see how the cyclist if that is the correct word approaches the subject. The ten-year interval between the British crisis of 1804-5 and our own of 1814 might stimulate him at first. And the really serious and nation wide crises of 1837 and 1857 would give him a great deal of confidence. He would recall the ten-year intervals of Jevons, and that we had up to 1837 recorded four crises of sorts, in four decades of the new century. We did not greatly share the panic in Europe in 1847, although it was sufficiently serious there to impress itself upon American memory. But when the cycle enthusiast found a real panic in 1857, ne cried "Aha! We have now discovered the secret. There is a twenty-year cycle, with a big crisis at each end, and a little crisis in the middle. We may now confidently set about humoring the facts to fit this beautiful theory." Misfitting Dates On that showing there should have been another first-class panic, with nation wide consequences, in 1877. But apparently the machinery slipped a cog, for the panic came in 1873. From the devastating folly of overtrading on a greenback basis, it would have come in 1872 but for the accident that we had in that year an enormous wheat crop, which brought splendid prices in the world market because of the almost total crop failure in Russia. Here, then, was a contraction 1 1 8 THE STOCK MARKET BAROMETER of the interval between great crises. The twenty-year theory was deflated to sixteen, and it is hard to derive much consolation from the fact that the Overend- Gurney failure in London in 1866 had marked a date conveniently between the two great crises. The Lon- don panic of 1866 was accompanied by a heavy fall in prices in our Stock Exchange. In April of that year there was a corner in Michigan Southern and rampant speculation. The truthful but cautious Dow says that the relapse from this "was rather more than normal." But the three panic years 1873, 1884 and 1893 did something to revive the confidence of the ten and twenty-year theorists. The first and the last were crises of almost world wide magnitude and equally far- reaching consequences. Our cyclists said: "That slip- up in the reduction to sixteen years for the interval between crises occurring in 1857 and 1873 was merely fortuitous, or at least we shall be able to explain it satisfactorily when we have deduced only a little more about the laws which govern these things." And the twenty-year cyclists prophesied, saying: "There are twenty years between 1873 and 1893. Our barom- eter is getting into shape. There will be a minor crisis round about 1903 and a major panic in 1913, or not later than 1914." Lost in Transit What is the use of the theory, indeed, unless it can be made the basis for at least as much prophecy as that? But between 1893 an d 1907 we have an interval THE UNPUNCTURED CYCLE 1 19 of fourteen years. Has the twenty-year period con- tracted, or the ten-year period expanded, to fourteen years? Is there any dependable periodicity about the thing? We see that there was not the slightest reason for any crisis in the years presumably anticipated by the cycle theorist 1903 or 1913. Indeed, the vol- ume of the world's speculative business was not large enough to make a crisis in those years. It is reason- ably certain that a smash cannot be brought about unless an edifice of speculation has been constructed sufficiently high to make a noise when it topples over. What is the value of all this as a forecast for busi- ness? I cannot see that it has any. The theory has to make so many concessions takes so much humor- ing, in fact that it ceases to have more than a value for record. We see that the sweeping conclusions based upon the cycle assumption had to be changed again and again. Does much that is really useful remain? I am anything but a sceptic; but this whole method of playing the cycles looks to me absurdly like cheating yourself at solitaire. I can understand stringent rules, arbitrary rules, unreasonable rules, in any game. But my mind fails to grasp a game where you change the rules as you go along. Are They Equal? And what becomes of that imposing premise that "action and reaction are equal?" Are they? There is little real evidence to prove the assumption, in recorded human affairs. Of course the holders of that 120 THE STOCK MARKET BAROMETER theory may respond, "Well, if they are not equal they ought to be." I cannot even see why they ought to be. Certainly, holding a Christian faith in the perfectibil- ity of human nature, I do not see why crises should not be eliminated altogether. It is easy to see how the periods between them at least seem to have grown longer. The interval between 1893 and 1907 was fourteen years, and 1920 was no panic year. Unless we are to force the construction of what constitutes a panic until we actually distort it, we can hardly regard the deflation liquidation of 1920 as a typical crisis. It could not begin to compare with the damaging effects of 1893, I 873> 1857, or 1837. I fc had none of the earmarks of a panic year. I dare say I shall believe, in five years' time, that the drastic con- traction and deflation were about the best thing that could have happened to us. They should certainly discount all sorts of trouble in the future. A Business Pathology Needed There must be some sort of scientific pathology of business affairs, or perhaps it might be better to call it morbid psychology. I have suggested in another chapter how utterly inadequate the records of history are in the vital matter of commerce and all that con- tributes to it. But we are beginning to 1 acquire a scientific knowledge of the symptoms of the diseases which afflict it. In this respect we have probably made more advance in the past quarter of a century than in all the years since Carthage sold the purple weaves THE UNPUNCTURED CYCLE 121 of Tyre to Rome. We may well hope that we are de- veloping a scientific method of diagnosing the symptoms of business disease. There was no such method in 1 893, bcause there were no such records as we have today. But why need we assume that once every ten years or twenty years, or any other period, the most intelli- gent part of mankind loses its head and forgets all the lessons of the past? One thing is certain about a panic. It could never occur if it were foreseen. Are we not working toward a sum of knowledge and an accuracy of analysis which will, in a sufficiently safe measure, foresee all but the non-insurable risks "the act of God and the King's enemies?" The Federal Reserve Safeguard I can see a great deal too much politics, and many defects, in the Federal Reserve banking system. But under that system it is hard to imagine a set of con- ditions which would force the country to resort once more to clearing-house certificates, as it did in 1907 and 1893. It would pass the wit of man to devise a perfect banking system ; and what would seem perfect to one would appear utterly inadequate to another. But the progress from the old national banking system to the Federal Reserve system represents the most tremendous stride in business practice which the coun- try has ever seen. Is not the Reserve system itself an entirely new factor for the cycle theorist to consider? It must not be assumed for a moment that possible crises in the future may be dismissed from considera- 122 THE STOCK MARKET BAROMETER tion. On the contrary, they are certain to come. But may we not hope that, with fuller knowledge, they will be at least in part anticipated and, in their most dangerous effects, radically mitigated? Teaching the Teacher If these studies have shown the man who takes an intelligent, even if not a financial interest in Wall Street, that knowledge will protect him there as it will anywhere else, the educational design has been largely accomplished. Certainly one of the desirable educative services of this series has been to show the writer how much there was about the stock market movement which he had never before formulated to himself in any useful fashion. The way to get at the essence of such a proposition is pragmatic to live with it from day to day. The stock market problem, considered in the light of Dow's Theory, is essentially simple. It can be set forth in a thoroughly useful way, provided only that the teacher is neither a crank nor a quack, a gambler or a crook. Harvard University is performing a greatly needed service in putting out tabulations and index charts on general business con- ditions which are above suspicion. The compilers have not tied themselves down to dangerous assumptions. They are not lashed to an assumed "medial line" of national wealth with a constant upward tendency at the same rate of speed in good times or bad, which loses its certainty in face of the grim facts of war, and hysterically changes its course. THE UNPUNCTURED CYCLE 123 Does the Physical Law Apply? Such a system as that of Harvard University is not committed to the proposition that in human affairs action and reaction are equal. That is a fine-sounding phrase, but it should require incalculably more evi- dence than has yet been adduced to persuade us to adapt a law of physics to something so unstable and elusive as human nature itself. Among the many things which our stock market averages prove, one stands out clearly. It is that so far as the price move- ment is concerned action and reaction are not equal. We do not have an instance of a bull market offset in the extent of its advance by an exactly corresponding decline in a bear market. And if this is true, as it demonstrably is, about the extent of the price move- ment in any given major swing, it is still more true about the time consumed. We have seen that bull markets are, as a rule, of materially longer duration than bear markets. There is no automatically balan- cing equation there. I do not believe there is such an equation in human affairs anywhere. Certainly there is none recorded in history. I am compelled to rely upon others for tabular figure compilations of all kinds, and do not profess to have used my modest razor for the cutting of any of these tables of stone. But in all the study of figures prepared for use in my profession, I have been unable to find a balance of action and reaction. 124 THE STOCK MARKET BAROMETER Extent and Duration Incalculable Certainly the stock market barometer shows noth- ing of the kind. There is no approximation to the regularity of the pendulum, either in the arc of the swing or its velocity. We see a bear market declining forty points, a bull market advancing fifty points over more than twice the period, a bear market declining nearly sixty points, a bull market recovering forty- live points, a bear market declining less than thirty points, a major swing upward of not much more than twenty points, a bull market advancing nearly sixty points in the industrials with a simultaneous advance of less than thirty in the railroads, and a different period for each successive swing. This, in approxi- mate figures, is the record for a quarter of a century. There is, obviously, a rough periodicity about such movements. But if we begin to twist them into some mathematically calculable, regularly recurring "cycle," the next main movement, up or down, will leave us all adrift, with nothing to hold on to but an empty theory and an empty purse. Sham Mysteries I do not want to dogmatize about this, although I am trying to make what is essentially a scientifically treated subject popularly interesting, if, indeed, ser- mons are ever popular. One trouble of all teaching, and a moral danger to every teacher, is that the authority necessarily accorded to the instructor leads him to make something of a mystery of his trade. His THE UNPUNCTURED CYCLE 125 unconscious desire to eliminate embarrassing competi- tion leads him to exaggeration of the difficulties to be encountered in acquiring a sound knowledge of the subject. In a brief time, as human affairs run, there will be a sort of cult amplifying and complicating an otherwise simple thesis. Every religion breeds a priesthood, where sacerdotal succession becomes more important, or at least much more jealously defended, than mere salvation. Both in the English common law and the canon law handicrafts were sometimes referred to as mysteries. The plumber who comes into your house likes you to believe that his elaborate preparations, and the general mess he makes, are evi- dence of the difficulty of the task he has accomplished a difficulty you as a layman are entirely unable to measure and a sufficient pretext for the extortionate bill he renders. Tipsters and Insiders I have known some likable people connected with what are frankly stock-tipping agencies. There is a market for what they supply, and they are necessarily excellent judges of human nature. They are never bearish on the stock market. They are often success- ful and prosperous in a bull market, and I suppose that the savings of the fat years support them in the lean ones. They tell the unscientific speculator what he wants to know, but not what he needs to know. Some- times the guessing is good, and always there is the sug- gestion that there is a mystery about reading the stock 126 THE STOCK MARKET BAROMETER market movement. If this is true of what they teach on the general market, it is still more true about indi- vidual stocks. With them "insiders" are always buy- ing. In my experience I have known many insiders, and for every purpose of the small speculator they were far oftener wrong than right. As a matter of fact these so-called insiders, the real men who conduct the real business of a corporation, are too busy to spend their time over the stock ticker. They are far too limited, too restricted to their par- ticular trade, to be good judges of the turn of the market. They are normally bullish on their own prop- erty, in the respect that they believe it to be a growing concern with great possibilities. But of the fluctua- tions of business which will affect their stock, together with the rest in the same group or all the other rail- road and industrial stocks in the same market, their view is singularly limited. It is not mere cynicism but truth to say that sufficient inside information can ruin anybody in Wall Street. That is not only true, but it is an excellent thing that it is true. Of course the executive officers of large corporations should have a sound general knowledge of conditions outside their own sphere. They should be well instructed. They might read this book with advantage, if it only taught them to take a more objec- tive view. But even with the basis of a general educa- tion, such as is required in a good university of the man who intends afterwards to specialize in law or surgery, their very occupation unduly affects their sense of proportion. , THE UNPUNCTURED CYCLE 127 Our Trustworthy Guide This is why the stock market barometer is so valu- able. It makes little of cycles or systems, interesting and even well-grounded inferences or common fads. It uses them all so far as they are useful, together with every other scrap of information it is possible to collect. The market movement reflects all the real knowledge available, and every day's trading sifts the wheat from the chaff. If the resultant showing of grain is poor, the market reflects the estimate of its value in lower prices. If the winnowing is good, prices advance long before the most industrious and up-to- date student of general business conditions can bushel up the residue and set it forth in his pictorial chart. Few of us can be Keplers or Newtons. But it is pos- sible to formulate working rules which will help and protect any man in that forecast of the future which he must necessarily make every day of his life. This is what the stock market barometer does. It makes no false claims. It admits highly human and obvious limitations. But such as it is, it "an honestly claim that it has a quality of forecast uhich no other busi- ness record yet devised has even closely approached. Chapter XII FORECASTING A BULL MARKET 1908-1909 CONTINUING the important and, indeed, vital subject of the prediction value of the stock mar- ket barometer, if we are to prove the validity of Dow's theory of the price movement, the analyses of the stock market averages published at irregular periods in The Wall Street Journal in 1907-8 may be here sub- mitted. These are of record, and there is a personal reason why they should have impressed themselves upon my memory. At the end of the year 1907 the late Sereno S. Pratt, a man of sound economic knowl- edge, sterling character and exceptional ability as a newspaper man, relinquished the editorial chair of The Wall Street Journal for the dignified and less exacting post of secretary to the New York Chamber of Commerce. Impersonal Editorials Apart from the fact that they are not signed, news- paper editorials have far less of any personal quality than the public supposes or politicians assume. The editor is, of course, personally responsible for them, not only to the proprietors of the paper but civilly and criminally under the law. His own editorials arc checked, when necessary, by the experts of the paper who "cover" particular subjects, and what they write 128 A BULL MARKET 1908-1909 129 editorially is in turn subject to the editor's revision. Several competent persons have seen and criticized an editorial before it appears, in any well-conducted paper. I succeeded Pratt at the beginning of 1908, but it is impossible for me to say, even if the matter were not in some degree confidential, to what extent the editorial discussions of the averages were a matter of individual thought, although the methods of an editor unconsciously impress themselves upon his staff. At any rate Pratt and I were of one mind in the method of reading the averages which the paper had inherited from Charles H. Dow, its founder. Detecting the End of a Bear Swing It will be remembered, from the preceding article, that there was a short but severe major bear swing lasting throughout 1907, really culminating on No- vember 2 1 st of that year. In the last week of Novem- ber the industrial stocks rallied sharply, as they might equally have done in a secondary upward swing in a bear market; and the most difficult of all barometer problems, that of calling the turn of the market, pre- sented itself. On December 5th The Wall Street Journal said: "Since November 2ist, when the average price of twenty rail- road stocks touched 81.41, its lowest point, there has been an advance of 7.70 to 89.11, which was the record at the close of yesterday's strong market. During these ten days there have been only two days of decline. This is a very substantial rally, and perhaps it is too rapid, all things considered, although it still 130 THE STOCK MARKET BAROMETER leaves prices on a basis which would seem to discount in large part the reasonable trade contraction of the future." On December 23d there was an incidental reference to the averages in the discussion of the general devel- opments of the week. The writer seems to have felt rather than asserted the change, which it would have been rash to predict, and said: "It will be noticed that there has been quite a typical move- ment of the average price of railroad stocks. It declined twenty- six points from July 2Oth to November 2ist. It rallied nine points in the following fortnight, reacted four points in the next ten days, and has rallied two points in the past week. This is really the shortened swing of the pendulum, as it approaches equilibrium." A Self -Correcting Barometer Before we go further it is necessary to say some- thing about the secondary movement of which this paragraph gives a simple, concrete instance, sufficient for our present purposes. It will be observed that the reaction following the rally from the low points of the bear market was checked before it reached the old low, and for purposes of record it may be said that the movement of the twelve industrial stocks then used in the average was roughly parallel and confirmatory. Perhaps the last sentence "in the paragraph quoted is the most illuminating if it were intended to develop in this article the meaning and function of the sec- ondary swing. It may be said that in that way our barometer tends to adjust itself. At the turn of a bear market there is a chaos of knowledge of all kinds, A BULL MARKET 1908-1909 131 and an almost inextricable confusion of opinion, which is gradually resolving itself into order. It follows that speculators and investors tend to anticipate the market movement and often look too far ahead. Right Too Soon It would be possible to offer endless instances of people who lost money in Wall Street because they were right too soon. One illuminating instance occurs to me as far back as the bull market which developed in the summer preceding the re-election of McKinley in 1900. One of the most conspicuous traders on the floor then was a partner in an active arbitrage house which has long since gone out of existence. For the sake of the layman it may be explained that an arbitrage house is (or was) one of those which did business by cable exchange with the London market, taking advantage of the fluctuating differences between the prices in the forenoon on the New York Stock Exchange and those in what at that time of our day would be the afternoon in the London Exchange. But in those dull summer days there was not enough busi- ness for the arbitrage houses, or anybody else. The total recorded transactions, which have in their time exceeded three million shares a day, dwindled down to considerably less than a hundred thousand. Louis Wormser, however, was as active as a trader could be on the floor in such circumstances. He was bullish all through the summer. Other traders com- plained that he went about spoiling what little market 132 THE STOCK MARKET BAROMETER there was in any stock which was momentarily active. It is fair to say that he was entirely within his rights as a floor trader and a member of the Exchange. The market did not begin to gain strength or volume until the last few weeks of the presidential campaign. Wormser was then on the right side and followed the market up. I suspect he even fancied he was leading it. For three days after the election stocks were very strong. They were so strong that he was convinced the bull movement had sufficiently discounted the re- election of McKinley. He turned bearish, and prob- ably lost in a few days all he may have made on the bull side in the preceding five months. That bull mar- ket, as we have shown, did not culminate until Sep- tember, 1902, in spite of the serious interruption of the Northern Pacific corner and panic. This is an excellent example of a speculator who saw only one of the many factors where the market saw all of them, and who was not content to trust the barometer. It may, indeed, have been that Wormser's prominence in a restricted market, a relatively large frog in a small puddle, had given him the impression, by no means singular, that he alone constituted the market, as he sometimes had in the dull days preceding the rise. A Courageous Prediction Returning to the bull market of 1908 and 1909, which The Wall Street Journal was evidently begin- ning to foresee, on December 25, 1907, that news- paper said, "We have seen the low price for the A BULL MARKET 1908-1909 133 year in all probability." On January 10, 1908, when the country was still quivering from the shock of the developments of 1907, when the clearing-house certifi- cates were a vivid reality, The Wall Street Journal, manifestly judging by the barometer alone, was able to record a significant rally. Speaking of this pre- liminary movement, it says that it gives "the impres- sion that it is one of those sharp fluctuations which follow an extreme low point and precede, at greater or less distance, a permanent turn in the tide." That seems fairly courageous and clear as a prediction, and one of exactly the conservative kind business men were being led to expect from the general consideration of the stock market barometer. Let us keep in mind that Dow's theory is not a system devised for beating the speculative game, an infallible method of playing the market. The averages, indeed, must be read with a single heart. They become deceptive if and when the wish is father to the thought. We have all heard that when the neophyte meddles with the magician's wand he is apt to raise the devil. Reviewing the Collapse Prediction was anything but a comfortable task in the beginning of a bull market which nobody at that time would concede, much less forecast with any degree of certainty. In an earlier chapter of this series great stress was laid on the suddenness with which business collapsed in 1907. The Wall Street Journal recalls the conditions, and the startling change, in its editorial of January 24, 1908: 134 THE STOCK MARKET BAROMETER "Consider, for instance, the rapidity with which the pendu- lum of business has swung in this country from extreme pros- perity to great prostration. Almost in a single night the situation changed from one extreme to another. Even after the panic had swept through Wall Street with terrific force a high official of a leading railroad commented upon the fact that the traffic of his line had the day before touched high-water mark. Three weeks later the same official reported that the business of the line had fallen off abruptly. Anecdotes of this kind could be multiplied indefinitely. "It is only three months since the panic started in Wall Street, and yet that time has been sufficient to produce what amounts to a revolution in the economic conditions of the country. Three months ago there were not cars enough to move the freight. Now there are several tens of thousands of empty freight cars on the sidings and in the terminals. Three months ago the iron and steel trade was at the very height of its activity. It took only five or six weeks to cut off the demand and to close mills. If a chart were drawn to describe the reduction in iron and steel production in the past ten weeks, it would make almost a perpendicular line, so sudden and extreme has been the contraction." A Bull Market Recognized These extracts could be supplemented by and con- trasted with the uniformly bullish inferences drawn from the stock market barometer during the winter and spring of 1908, when the business of the country was, apparently, in the deepest stage of depression. The depression was recognized; but the fact that the stock market was acting not upon the things of the moment but upon all the facts, as far ahead as it could see them, was never allowed to become obscure. It will be seen that The Wall Street Journal set forth A BULL MARKET 1908-1909 135 the known facts in the paragraphs quoted above. A well-known chart showed its lowest point of depres- sion at that time and did not cross its medial line, to begin its ensuing area of expansion, until the following November. But the stock market anticipated that record by a clear twelve months, and the faithful barometer predicted the recovery when there was ap- parently not a patch of clear sky on the horizon. Reprobating the "Frivolous" Recovery Looking back on those days of early responsibility, it is matter of thankfulness to me to have had Dow's sound theory to back me in the face of unbelievably virulent criticism. In the mind of the demagogue Wall Street can never be forgiven for being right when he is wrong. The country at that time was full of all kinds of agitation for the curbing, controlling, regu- lating and general bedeviling of business. Discontent was general, and it was a winter of unemployment. Some of the letters received, in which this bullish atti- tude of the stock market was denounced in the most unmeasured terms, would sound funny now, although they were anything but funny then. We seemed to be in the position of the "coon" at the country fair who puts his head through a hole in a sheet as a target for those willing to pay their nickels for the privilege of a shot at him. The lightest accusation was that Wall Street was "fiddling while Rome was burning." The general charge took the form that guilty manipu- lation by gamblers was in progress. i 3 6 THE STOCK MARKET BAROMETER If you will refer back to the twenty-five-year chart published with an earlier discussion you will note that the recorded sales at that time were the lowest since 1904, indicating a market so narrow that manipulation would have been wasted even if it had been possible. But that charge is always made in a bear market and in the transition period between a major decline and its succeeding upward movement. If I had not already advanced so many arguments to prove what an in- considerable factor manipulation really is, the volume of sales itself would be sufficient to make my point. But these sturdy protestants thought otherwise, and continued to fill my wastebasket with revilings for many months to come. For a time at least, a bull market was positively unpopular. Relevance of the Volume of Trading It is worth while to note here that the volume of trading is always larger in a bull market than in a bear market. It expands as prices go up and contracts as they decline. A moment's thought will reveal the reason. When the market has been under long depres- sion many people have lost money, actually and on paper, and the fund for speculation or speculative investment is correspondingly contracted. On the ad- vance, however, many people are making money, actu- ally and on paper, and the wellnigh universal experi- ence has been that in the last stages of a bull market they trade in stocks beyond their real resources. This is uniformly true of major bull swings, but is subject A BULL MARKET 1908-1909 137 to great modification in the secondary movements. A sharp reaction in a bull market will often stimulate the volume of business. There is a picturesque example of this in the most spectacular reaction of the kind. The average monthly sales in May, 1901, have not been closely approached since. They were more than one million eight hundred thousand shares a day, in- cluding Saturdays, when there is only two hours of trading, and it was on the 9th of May that the North- ern Pacific panic took place. There will be an oppor- tunity to take up the secondary swing in some detail in a future discussion, and it is not necessary for our purpose to expand upon the subject now. An Unbiased Mind Not to be tedious, but to counter the charge of saying "I told you so," on ex post facto evidence, it has been necessary to offer these examples of the prac- tical use of the stock market barometer. There is, indeed, little in these predictions to excite boasting. Any intelligent student of the averages who has once grasped the principle of the stock market barometer can draw such deductions for himself, provided he brings to the task a really unbiased mind. An interest in the stock market would be almost certain to weaken his judgment. It is only human to foresee what you hope and, indeed, what you expected when you bought stocks for the rise or sold them short. But the analyst of the price movement, writing for the guidance of others, must be absolutely disinterested. There are all i 3 8 THE STOCK MARKET BAROMETER sorts of traps to catch him if he is not, particularly if he has previously committed himself to inferences not clearly justified by the premises. Sheer pride of opinion has ruined more speculators in the stock mar- ket than all other causes put together. An Unfortunate Guess One of the shortest ways of going wrong is to accept an indication by one average which has not been clearly confirmed by the other. On May 10, 1921, the New York American ventured into prophecy on its financial page. To reinforce its prediction its fore- caster published a reproduction of the Dow-Jones chart. As the chart and the accompanying figures were taken without acknowledgment, altruists who believe that ill-gotten gains do not prosper will hear with satisfaction that the author of the Hearst Ameri- can article did not even understand the meaning of what he had appropriated. He announced a bull movement for the industrial stocks, even prescribing its limits, a degree of prophecy hitherto unsuspected in the barometer; while the railroad stocks, as he expressed it, "marked time." It was a most unfortu- nate guess, for the industrials declined a further thir- teen points, making their new low in June; while the railroads, so far from marking time, also showed a substantial reaction. Averages Must Confirm Each Other This was a case where the observer was misled by a bullish indication given in the industrial average A BULL MARKET 1908-1909 139 which was not confirmed by the railroads. The former had been making what we have learned to call a line, and after a secondary rally in a bear market showed some strength, at a figure above the line and calculated to suggest accumulation if there had been any evidence of the same thing in the railroad stocks. But there was nothing of the kind, and it is to be hoped that the readers of the Hearst American article did not follow the tip; for the industrials, as shown by the averages, did not cross the closing figure of the day on which the bullish advice was given until the second trading day of December, seven months after. It is possible, however, for us to assume charitably that this expounder of the barometer was not quite so superficial as he sounds. There may have been in his mind a recollection of the bull market of 1919, which the industrials made entirely off their own bat. If you will study the chart published with a later chap- ter, headed "An Exception to Prove the Rule," you will see that such an experience could not be repeated unless our railroad stocks returned to government ownership and guaranty a condition which at that time took them entirely out of the speculative class and left them moving downward with bonds and other securities held for fixed income. These, as we know, inevitably decline in price with an advance in the cost of living, which was then in full flood. This illustration serves to emphasize the fact that while the two averages may vary in strength they will not materially vary in direction, especially in a major movement. Throughout all the years in which both I 4 o THE STOCK MARKET BAROMETER averages have been kept this rule has proved entirely dependable. It is not only true of the major swings of the market but it is approximately true of the sec- ondary reactions and rallies. It would not be true of the daily fluctuation, and it might be utterly misleading so far as individual stocks are concerned. The indi- cations of a single average can, and do, look seduc- tively like the real thing, as I have discovered to my cost; for in that way I find, upon analysis of articles written long ago, that I more than once went wrong. It says much for the value of our barometer that error came from trusting it too little rather than too much. Sticking to Our Text It has been suggested that I should discuss the causes which were related to the major movements of the stock market the depressions in business, the recoveries and the alleged or real overexpansion. I have my own opinion about the causes of the panic of 1907. I do not agree with writers rated as com- petent as myself, who ascribe it to E. H. Harriman and the "overexpansion" of the American railroads from 1901 to 1906; who choose to think that the advance in the Bank of England rate to the sufficiently startling figure of 7 per cent at the end of 1906 was a direct result of gambling in railroad stocks by Mr. Roosevelt's "malefactors of great wealth." And by no stretch of faith can I believe that Harriman pro- duced a panic in Alexandria, Egypt, in April, 1907; another in Japan within a month; what the London A BULL MARKET 1908-1909 141 Economist called "the biggest financial disaster that had overtaken the city since 1857" in Hamburg in October; and still another in Chile all preceding our own crisis at the end of October. It has seemed to me that the subsequent paralysis of railroad develop- ment, which should have gone on at the billion-dollar- a-year rate James J. Hill suggested in 1906, but was suspended almost entirely, was a much more serious matter for the country than the reciprocal ownership of railroad stocks of E. H. Harriman's plans. There could be no menace to the public there, with the Inter- state Commerce Commission to protect us through the freight rates. But all this is beside the point. I am writing about the barometer, not about the weather. History reads queerly fourteen years after the event to those who were in a position to know the facts, who might even have been, to at least a modest extent, part of that history. But where it is necessary to review history here these discussions will still stick to the text. Chapter XIII NATURE AND USES OF SECONDARY SWINGS BEFORE resuming the historical demonstration of the effectiveness of the stock market barometer which has been the subject of our most recent discus- sions, there is a good opportunity here for some con- sideration of the secondary swing. Previous discus- sions have shown how it was possible successfully to diagnose a major swing in its incipient stages. But the secondary movement postulated in Dow's Theory is a different matter. We have proved by analysis the correctness of the theory of the market as containing three distinct and, in a way, simultaneous movements the great primary swing up or down ; the secondary movement, represented by reactions in a bull market and corresponding rallies in a bear market; and the daily fluctuation. It may be that this discussion will seem to be addressed more to the speculator or embryo investor than to those who consider using the stock market barometer as a guide and warning to business. How to Call the Turn It may be conceded at once that if it is hard to call the turn of a great bear or bull market it is still harder to say when a secondary movement is due, although there are no insuperable difficulties in the way of show- 14* SECONDARY SWINGS 143 ing the termination of the secondary movement and the resumption of the main market trend. We cannot dogmatize about the depth of such movements, in duration or extent. We have seen, from a study of what was really a secondary reaction in a bull market aggravated by the San Francisco calamity in 1906, that such a reaction can look deceptively like the real thing the development of a new major swing. It can look so vigorous and convincing, as in the case of the Northern Pacific panic of 1901, that even experi- enced traders will rashly assume that the bull market is over. Dow estimated the length of a counter movement at from forty to sixty days, but subsequent experience has shown that this longer range is exceedingly rare and that the duration may be appreciably less than forty days. The daily fluctuation might be so con- siderable as to constitute almost a secondary reaction in itself, if the extent of it were all we were consider- ing. When it was known that the government would take over the railroads, at the end of December, 1917, there was an advance in a single day in the railroad average of over six points. There have been true secondary movements which did not carry even so far as this. It is a tried rule, which will help to guide us in studying the secondary movement, that the change in the broad general direction of the market is abrupt, while the resumption of the major movement is appre- ciably slower. The latter is frequently foretold by a line of accumulation in a bull market or a line of dis tribution in a bear market. 144 THE STOCK MARKET BAROMETER More Meteors Than Stars Who is to foresee the sharp break? It seems to depend upon a set of causes altogether different from the adjustment of prices to values, which is the main function and intent of the major swing. It repre- sents a technical market condition more than a summing up and reflection of general knowledge. It means, as the professionals say, that there is too much com- pany on the bull side; or, conversely, that people are selling a bear market short, regardless of the dimin- ishing floating supply of stocks. I have declined in more than one place to advise any man to speculate. That virtuous attitude is easy and cheap, but it will acquire more significance if I do not presume to advise against speculating where a free American citizen feels he has the qualities necessary for success and, more par- ticularly, if he is the kind of man who can stand suc- cess. That is the severest of all tests, in other places than Wall Street. There have been many meteors in the financial sky, but few fixed stars. In the secondary movement of the market the pro- fessional has a real and abiding advantage over the amateur. It is an emergency in which his technical experience tells. "Tape reading" is a sort of sixth sense, and the man on the floor can feel a change com- ing even better than the most accomplished tape reader if he has real aptitude for his work. There are some games in which the amateur is better than the pro- fessional. There are many in which he seems at least SECONDARY SWINGS 145 as good. But in the long run, in nearly all games, the professional will win oftener than the amateur. He will win more when there is anything consider- able at stake and he will lose less when losses are inevitable. Advantage of the Expert Some authorities on auction bridge estimate that good cards constitute 80 per cent of the advantage in the game. An indifferent or unsound player can win, and even continue to win over an extended period, if he holds good hands, enjoys rather more than aver- age luck and is messed with good partners. But the remaining 20 per cent makes the vital difference between the incurably mediocre player and the expert. Playing constantly over a sufficient period of time to average the element of chance, the first-class player must win. He will win, moreover, without any unfair advantage. If, indeed, he depended upon collusive information from his partner, for instance, he would be merely a sharper and never a really first-class player. The advantage of the crook has always been overestimated. His mentality is at some point defec- tive, or he would not be a crook. I have fallen in with a few surprisingly few crooks in Wall Street, in both the professional and the amateur class. They are soon detected, and with their sole advantage eliminated they find their level at the very bottom of the heap. Nemo repente fit turpissimus; and, in prac- tice, they amount to little. i 4 6 THE STOCK MARKET BAROMETER Graduating/ Professionals Of the many successful speculators who fight for their own hand, like Hal o' the Wynd, those who, not being members of the Stock Exchange or partners in any brokerage house, are therefore obliged to con- cede the broker's commission and the market turn, all sooner or later become, in every intent, professionals. They devote to the business of speculation exactly the jealously exclusive attention which a successful man gives to any kind of business. The outsider who takes only "an occasional flutter" in the stock market, however shrewd and well informed he may be, will lose money in the secondary swings, where he is pitted against the professional. He cannot recognize the change in movement quickly enough to adapt his atti- tude; he is usually constitutionally averse from taking a loss where he has previously been right. The pro- fessional acts upon the shortest notice, and reactions or rallies give little notice. Wall Street Normally Bullish But the intelligent amateur is on all fours with the professional when a bull market has reacted and be- come dull. In the old days Wall Street formulated a number of maxims for itself, and one of these was, "Never sell a dull market." It is bad advice in a major bear swing, for the market then will become dull after a sharp rally, and experienced traders will accordingly put out their shorts again. But Wall SECONDARY SWINGS 14? Street is inherently bullish. One reason for this is that the financial district does not make money in a bear market, contrary to the ideas of people who think that then is the time when the Street reaps its harvest, and wickedly turns disaster ,to its own advantage. Wall Street lives on commissions, and not on what it might make by selling short the securities it originates. Large trading and large commissions go together. They are a feature of a bull market, but never one of a bear market. So true is it that Wall Street is normally and healthily bullish, by experience, that I have never known a great trader, with his first reputa- tion established as a bear operator, who did not either turn bull or drop out of the market altogether. When we studied the major swings we saw that bull markets last longer than bear markets, and we might have seen that over a period of years long enough to average both bull and bear swings the tendency seems upward, or at least has heretofore advanced, with the growing wealth of the country. Personally, I do not believe that the war has changed this fundamental fact, at least for the inexhaustible United States, if a special movement of the railroads, to be treated later, for a time at least, modifies the assumption. James R. Keene So far as the bear trader is concerned, I am entirely certain that James R. Keene lost as much money as he ever made on the bear side, and that he made all the money he left and spent on his racing stable i 4 8 THE STOCK MARKET BAROMETER by his purchases of securities which subsequently appreciated in value. I never enjoyed his intimate acquaintance. It is not unfair, at this distance of time, to say that newspaper men with responsibilities do not cultivate intimacy with large professional speculators. Such intimacy can be misconstrued, however innocent the personal relations may be, and easily results (for Wall Street is reeking with gossip and scandal) in giving the reporter an undesirable reputation for being the interested mouthpiece of that particular operator. This, of course, is a condition which no clean news- paper could or should tolerate. This is not to say that the newspaper men, or even most of those who had the entree to Keene's highly inaccessible suite at his son-in-law, Talbot J. Taylor's office in Broad Street, were not men of honor. There were good reasons for liking Keene, who was by no means the cold and bloodless bandit some people, with ideas of financiers gathered from the scarehead news- papers or the moving-picture screen, have supposed. He had attractive qualities, and he was a man of his word, even if he was merciless to those who dealt with him and failed to keep theirs. All of us liked his admiring affection for his son Foxall, and his sports- man's love of a fine horse. Little that his enemies ever did to him in the stock market and that was plenty hurt him like the death of his favorite Sys- onby, a horse he bred himself and one of the greatest three-year-olds that ever looked through a bridle. Among the newspaper men who could afford to know Keene was Edwin Lefevre, then on the New York SECONDARY SWINGS 149 Globe. But it is no more than just to say that Lefevre was less a friend than a connoisseur of Keene. He studied him, in a highly amusing way, for use in his cynical but effective Wall Street Stones, in Samson Rock of Wall Street, The Golden Flood and other tales of a like character, now somewhat out of date but interesting reading for those who knew the differ- ent Wall Street of twenty years ago. Addis on Cam mack There is another reason why bear operators are credited with more short selling and market "wreck- ing" than they ever performed or even conceived. Such an operator can bull stocks and keep himself in the background, while a campaign on the bear side is usually dramatic, with the principal figure very much in the spotlight. Addison Cammack's era was rather before my time, but people who knew him well say that his bear campaigns were short, sometimes success- ful and sometimes not, and that he would have been soon ruined or driven into other environment if he had not been an excellent judge of values, and much more interested financially in the growth and prosper- ity of the country than in efforts to check it. He made his big money buying Northern Pacific, on reconstruc- tion, at $7 a share. He probably had more real belief in the greatness of the United States than some of those critics who are so ready to impugn Wall Street's patriotism. Keene was right, if premature, in his abortive bull campaign in Southern Pacific. 150 THE STOCK MARKET BAROMETER Selling Commodities Short A bear has few friends, because obviously he can- not make money unless other people lose it. It is curiously illogical that this feeling against him extends even to the cases where he forsakes stocks for opera- tions on the short side in commodities like wheat or cotton. But there is nothing incompatible with a bull position in stocks and a bear position in wheat. There is nothing antagonistic to the greater prosperity of the country in believing that such prosperity will be enhanced if the humble consuming worker can get more flour or bread at lower prices. It would be utterly impossible to synchronize the movements of wheat or cotton with those of stocks. These commodi- ties often decline when securities are advancing. It is not the general opinion, but it seems to me that a bear of wheat who breaks a corner in that commodity, even if his end is selfish, is performing something in the nature of a public service. Such an opinion as this, of course, will be unpopular with the farmer and still more unpopular with the farmer's political friends, to whom wheat at $5 a bushel looks like prosperity, with wealth beyond the dreams of avarice. It might well mean famine and widespread destitution. The farmer and his friends have become sensitive since their own wheat pool (not different morally from any other attempted corner in the staff of life), formed in 1919 to carry the price of wheat above $3 a bushel, collapsed under the futile leadership of the Non-Partisan League and the moral SECONDARY SWINGS 151 support of some of the members of what now con- stitutes the agricultural "bloc" in the United States Senate. That corner failed, and it is no unkindness to the farmer to say that it deserved to fail. The stock market of 1920 was warning him that such a pool could not succeed, in ample time for him to have realized all his wheat at prices well over $2 a bushel. How the Barometer Adjusts Itself We are not wandering from our text. Weakness in the cotton or grain markets may have much to do with secondary reactions in the stock market, if only for the financial commitments involved. Secondary move- ments, indeed, are influenced by much more transitory conditions than any of those which govern the major swing. The question is pertinently asked, "Do the aver- ages predict a secondary reaction in any dependable way?" There would be such a prediction, naturally, if, in the course of a major bull swing, the market made a line in both averages, and then a price below the line to indicate that saturation point had been reached; and the converse would be true in a bear market. But experience tells us that when the line occurs it is, generally, not before but after a secondary break or rally. This line, then, is most useful to the speculator who has previously sold and wants to get into the market again, because a bull indication after a line of accumulation would point the way to a new figure higher than that from which the secondary decline took its origin. Such a new top would be conclusive evidence, on all our records, that the bull movement had been resumed. 152 THE STOCK MARKET BAROMETER But these discussions are designed less for specu- lators than for those who wish to study the stock market barometer as a guide to the general business of the country. These students may well ask what is the real purpose and usefulness of the secondary movement. If we are allowed to mix our metaphor, it may be said that the secondary movement is not unlike a device sometimes used for adjusting com- passes. Many of you have seen a ship's launch de- scribing circles in the harbor, and wondered what it meant. I am well aware that the metaphor is anything but perfect, but it is clear that the secondary move- ment serves the valuable purpose of correcting our barometer. Our guide is, to that extent at least, self- adjusting. Remember that we are dealing with no such certain element as the mercury in the tube, whose properties we know all about. The stock market barometer is taking every conceivable thing into ac- count, including that most fluid, inconstant and incal- culable element, human nature itself. We cannot, therefore, expect the mechanical exactness of physical science. Not Too Good to Be True We might well be disposed to suspect our barom- eter if it were too exact. Our attitude would be that of a city magistrate toward police evidence, when every police witness tells exactly the same story in the same words. Such evidence is altogether too good to be true. I am repeatedly asked if I am quite sure about the low or high point of a given turning date; SECONDARY SWINGS 153 whether, for instance, the low of the bear market from which we are now emerging was really June, 1921, or should not be considered in relation to the new low point, scored by the industrials alone, in the following August. It has been said that the averages must confirm each other, but if you like to take it that way and it suits your habit of mind, by all means allow yourself that much latitude. I can- not see that it makes any material difference. I have been shown figure charts where bear and bull move- ments, from the course of a single constantly active stock like United States Steel common, were profes- sedly predicted with mathematical exactness. They have not inspired me, and I do not believe that they could stand the long years of test to which our barom- eter has been subjected. There are other critics, far less kindly and with no real desire to help, who find no difficulty in picking holes in our theory because they do not wish to be convinced. They are merely contentious. They can, of course, find plenty of movements, especially secon- dary ones, which they think the barometer failed to forecast. What of it? An instrument of any such accuracy as they demand would be a human impossi- bility, and indeed, I do not think that any of us, in the present stage of man's moral development, could be trusted with such a certainty. One way to bring about a world smash would be for some thoroughly well-intentioned altruist to take the management of the planet out of the hands of its Creator. Chapter XIV 1909, AND SOME DEFECTS OF HISTORY SINCE we have set the understanding of the stock market barometer as our goal, we are not to be discouraged by the real and fancied obstacles still re- maining. We can always hearten ourselves by looking back and seeing how much we have already overcome. Perhaps the reward is in the race we run, not in the prize. This is not to say that the mere reading of this series of studies is any achievement if the reader has not, thereby, added to his mental bank balance. But if we look back we can see that we have not only established Dow's theory of the price movement, but constructed or deduced a workable barometer from it a barometer with the invaluable quality of long distance forecast. We should know our theory by heart. It is that the stock market has three move- ments its broad swing upward or downward, ex- tending from a year to three years; its secondary reactions or rallies, as the case may be, lasting from a few days to many weeks; and the daily fluctuation. These movements are simultaneous, much as the advancing tide shows wave recessions, although each succeeding roller comes further up the beach. Per- haps it might be permissible to say that the secondary movement suspends for a time the great primary swing, although a natural law is still in force even 154 SOME DEFECTS OF HISTORY 155 when we counteract it. My pen would fall from my fingers to the ground or the desk, by the attraction of gravitation, and that law continues operative, if not active. In a like way of putting it, the secondary movement can be regarded as simultaneous with the major swing, which still continues to govern. That Unbalanced Equation It has been necessary to refer in previous articles to business charts and records, and I would be the last to seek a quarrel with the compilers of such useful data. All I contend is that these charts and records are hardly, in a useful sense, barometers. They are hazy about the future, even where they make the assumption that they are based upon a great law of physics that action and reaction are equal. They have still to show me that they have included all the factors of their equation. Certainly these business charts did not include the possibility of Germany win- ning the war in 1918. The bear market in stocks in 1917 took count of all that these tabulations ever formulated, and this overwhelming possibility besides. It is true that we can form little conception of what may happen in the future unless we are familiar with what has happened in the past, where like causes have produced like effects. But forecast may be mis- taken or premature long enough to ruin any business man, with no other guide than that. One of these business-chart authorities not long ago advocated the purchase of a certain stock, on the basis of the earn- 156 THE STOCK MARKET BAROMETER ings and dividends for a period of ten years past. There was a fundamental change in conditions, ag- gravated by an ill-judged change in policy, and the people who bought that stock suffered severe losses. How would a present holder of such a stock as Amer- ican Sugar, for instance, have fared if he had bought the common stock in 1920 on its dividend record? Insufficient Premises Reasoning of that kind has too narrow a base. It lacks foresight. It is like saying that a patient will recover, irrespective of his symptoms, because he has enjoyed good health for ten years past. This is an example of reasoning from insufficient premises. No doubt the possibilities of changes in management and other things, which sometimes wreck concerns with a previously good dividend record, are averaged in the total of a recording agency's tables. But even when these things are averaged they are a record and not a barometer. The data of the Weather Bureau are of the highest value, but they do not pretend to predict a dry summer or a mild winter. You and I know from personal experience that the weather in New York is likely to be cold in January and hot in July. We could infer that much without assistance from the Weather Bureau. That bureau can give us only an inadequately short view. It cannot tell us that there will be fine weather for our picnic the day after to-morrow. Still less can it tell the farmer that the temperature and humidity of the coming summer SOME DEFECTS OF HISTORY 157 will be such that he should plant potatoes instead of corn. It can show the records and probabilities; but the farmer must use his own judgment; while we take chances on the kind of weather that will make or mar our picnic. How Little the Best Man Knows We have seen that the stock market barometer does predict. It shows us what will happen to the general volume of business many months ahead. It even goes further and warns us of the danger of international events which could upset all ordinary calculations based on the course of business as inferred from the records. It cannot be too often repeated that the stock market barometer is acting upon all the knowl- edge available. I recently asked one of the greatest financiers in Wall Street, often credited, by sensation- loving journals, with the most searching knowledge of financial conditions and their influence upon coming events, what sort of percentage of the available knowl- edge he supposed he had. He said, "I have never worked that out. But if I had 50 per cent of all the knowledge which is reflected in the movement of stocks I am confident that I would be far better equipped than any other man in Wall Street." This was from a banker who handles the financing of great railroads and industrial corporations, whose foreign connections are of the very highest class. When he could confess this without false modesty to one he would not be foolish enough to deceive, how absurd must be the 158 THE STOCK MARKET BAROMETER assumed omniscience of the "financial octopus" the politician is so fond of parading 1 A Needless Accuracy We have come a long way in the reading of the barometer based upon Dow's Theory. We have seen that a "line" in the average a succession of closing prices, over a sufficient number of days for a fair volume of trading within a narrow range must indi- cate either accumulation or distribution; and that a movement of the average price out of that line, downward or upward, will confidently indicate a change in the general market direction of at least a secondary and even a primary character, which we can depend upon where either average is confirmed by the other. We have also satisfied ourselves that the averages must confirm each other, although they may not break out of their respective lines on the same day or in the same week. It is sufficient if they take the same direc- tion. It is by no means necessary, as experience shows, that the low or the high point of a primary move- ment should be made in both averages on the same day. All we assume is that the market has turned, with the two averages confirming, even although one of the averages subsequently makes a new low point or a new high point, but is not confirmed by the other. The previous lows or highs made by both averages may best be taken as representing the turn of the market. i SOME DEFECTS OF HISTORY 159 This seems to be a difficulty which is still puzzling a number of people who expect an absolute mathe- matical accuracy from the averages, such as I would be the last to claim, if only for the reason that it is not needed. One critic believes that I am wrong in assuming that the low point of the last bear movement was in June, 1921, because the industrials made a lower point in the following August. But that lower point was not confirmed by the railroad average. Consequently, it is negligible from our point of view, although if it adds to the sum of that gentleman's certainty he will not go far wrong if he dates his upward movement from August and not from June. A Double Top in igog In the present discussion it will be useful to show the turn of the market to the bear side in 1909. This is likely to be confusing to our meticulous critics, be- cause the railroad stocks made their high for the pre- ceding bull movement at 134.46 in August, 1909; while the industrials made a high of 100.12 at the end of the following September, 100.50 early in Octo- ber, and 100.53, the highest of the year, at the begin- ning of November. The last high, taken with that preceding, is an example of what is called a double top. It is by no means infallible, but is often useful; and experience has shown that when the market makes a double top or a double bottom in the averages there is strong reason for suspecting that the rise or decline is over. If, however, I say that a bull market saw its 160 THE STOCK MARKET BAROMETER top in August, 1909, and that the bear market set in from that date, somebody will tell me that the bear movement cannot be said to have set in until the beginning of November. What does it matter? If we combine the condition exhibited then with what we have learned from a study of the line of distribution or accumulation, we shall see that distribution pre- ceding an important downward turn, possibly secon- dary but proving to be primary in this case, had been in progress and had established its inevitable con- sequences, at any rate before the completion of the first week's trading of November, 1909. Bulls of Stocks Well Warned That seems to me about as adequate a barometrical indication as we dare expect from a gauge which has to take into consideration all the fallibility of human nature itself. Never was the bull of stocks given such repeated chances as in 1909 to take profits at the top, or a few points below it. In a previous discussion I have said that the bull market which originated in December, 1907, was actually almost unpopular. The previous bear market had predicted an era of corpora- tion baiting, originated by President Roosevelt, who could never have foreseen the absurd lengths to which his animadversions upon "malefactors of great wealth" would be carried, or the devastating implica- tions which would be drawn by people much more ignorant and far less sincere than himself. The bull market of 1908-9 did not please a number SOME DEFECTS OF HISTORY 161 To Criticize a Critic of highly respectable and competent critics. I have appreciated and recommended elsewhere Forty Years of American Finance, by Alexander D. Noyes. His review appears to have been carried only to the begin- ning of 1909, to judge by his concluding paragraph. He seems to reprehend the bull market then in prog- ress. He certainly failed to see that it would continue in force up to August, so far as the railroads were concerned, up to November as shown by the industrial average, and that, at the end of the year 1909, the railroads would be no lower than one hundred and thirty on December 3ist, as against one hundred and thirty-four in the middle of August, and the indus- trials a bare point away from the top. Mr. Noyes says, in speaking of the bull market, with what can fairly be called a somewhat unsuccessful essay in prophecy : "The end of this singular demonstration came with the open- ing of 1909, when facts were suddenly recognized, when prices for steel and other commodities came down, and when the Stock Exchange demonstrations ended. With the closing of the year 1908, this history may properly close; for it marked the ending of a chapter." But we have seen, from the record of the averages, that the chapter was not closed so summarily as Mr. Noyes assumed. We may say, for convenience, that the bull market had spent its force in August, 1909 or in November, as we choose to look at it. But the 1 62 THE STOCK MARKET BAROMETER bear market which foresaw the next period of depres- sion did not begin to "hit on all cylinders" until January, 1910. Here again we see a profound and able observer influenced by accepting a record for a barometer. A Record Too Brief To a student of history and the writer modestly claims to be something of the kind himself it is source of unceasing regret that there is relatively so little real history to study. Our table of averages is only truly effective for rather over a quarter of a century. When we say that the twenty active railroad stocks must confirm the twenty industrials it seems to me that this implies, at least in part, that less than forty stocks do not give a sufficiently inclusive picture of the market. I might, in some subsequent discus- sion, offer a partial and incomplete record of the years from 1860 to 1880, with an average high and low, month by month, of fifteen miscellaneous stocks. I may as well say now that I do not think that it has any conclusive teaching value; or that if it had been kept contemporaneously with the events of that time, and not compiled years after, it would have given business anything like the thoroughly trustworthy indi- cations which we can read in the more perfect double- average barometer of to-day. How History Records the Wrong Things But my criticism of history goes much further than the mere records of which we are treating. It is that SOME DEFECTS OF HISTORY 163 all available history, as far back as we can trace from Egypt and the supposed cradle of the race in Asia Minor records the wrong things. It tells us all about the dynasties of the Pharaohs, and nothing about those productive middle-class brains of manage- ment which made those dynasties rich gave them a real people to rule over. We know that there were rulers and wars, slaves and industrial workers enjoy- ing different degrees of freedom. We know now that, so far from labor creating everything the prepos- terous major premise of Karl Marx labor creates only a fraction of the sum of human wealth compared with the product of brains. Of the "people" of the past, in the sense that the Bolshevist demagogue uses the word, we know a good deal. Professor Thorold Rogers, of Oxford, many years ago compiled a tabu- lation of wages in England, from the time of the Tudors. But history seems to give something of the bottom and a great deal too much of the top. It tells us nothing, or next to nothing, of the middle class which must be the directing brain force of a nation with any commerce whatever. Where Are the Business Records? What do we really know about the Carthaginians? They were the greatest trading nation of their time. We might well afford to sacrifice the detailed accounts of the campaigns of Hannibal, to throw away most of what we know about the second Punic War, to scrap nearly all that part of history, in exchange for 1 64 THE STOCK MARKET BAROMETER only one year's accounting of a typical Carthaginian merchant engaged in foreign trade. We would have more practical knowledge, applicable to the problems of to-day, from that single merchant's books of the year 250 B.C. than we can get from the Decline and Fall of the Roman Empire, and all it incidentally says about Carthage, to say nothing of the practical conduct of commerce in those days. How did that merchant do his business ? He dealt in tin from Cornwall and dyestuffs from Tyre. He had correspondents all over the known world, which then extended from Britain in the west to India in the east. Did he, or could he, for the tin or dyestuffs he received, pay exclusively in coined gold or silver ? He may well have exchanged one of his commodities for another, or something else for both. How did he pay? How did he settle his balances? Did he have bills of exchange ? I am inclined to think that he did, whatever form they may have taken, although no papyrus or parchment has survived. But history does not tell us the one thing we want to know. How did the Carthaginians adjust their international trade balances? They necessarily had them. The mer- chants of Joppa or Sidon or Alexandria kept books, or their equivalent. They had a record of what they imported from Carthage and what they exported there and elsewhere. Rome owed Carthage balances in account, in triangular transactions which must have re- quired some knowledge of double entry, with more or less regular exchange quotations to balance one SOME DEFECTS OF HISTORY 165 national coinage against another. What does history tell us about all this ? Absolutely nothing. And yet that knowledge would be of infinitely greater value to us, would save us more mistakes, than Xenophon's deathless story of the retreat of the ten thousand. Who Financed Xerxes? Heaven forbid that we should lose the inspiring lesson of Thermopylae. We have seen, in the Great War, that men are still capable of rising to the heroism of the fated three hundred. But what of the contrac- tors who fed and clothed and armed the "five million men" in the army of the victorious Xerxes? "The mountains look on Marathon and Marathon looks on the sea," and they may continue looking at each other, until the crack of doom, without telling us the cost of the ship's stores consumed in the fleet which transported the defeated Persians. "You have the Pyrrhic dance as yet, where is the Pyrrhic phalanx gone?" We could dispense with the dance if we knew how the Pyrrhic phalanx got its necessary three square meals a day, and from whence its food was imported. I am far from endorsing the Henry Ford criticism of history it is not "bunk"; but what would we not give for a trustworthy analysis of the economic con- sequences of Diocletian's price-fixing edicts, in the year 301? Where did the Greeks buy their naval stores ? How were they assembled? How was the account settled? Was it in coined money, or in a draft written on parch- 1 66 THE STOCK MARKET BAROMETER ment, transferring one merchant's debt to another in order to balance the books of a third? All this is left out of classical history, and is sadly lacking in modern history. It was not until the middle of the nineteenth century that Green wrote, not a history of the kings of England, but A Short History of The English People. It was all too short; and the most important part of the English people was loftily minimized that respectable but inarticulate element which goes about attending to its own business and manages to "keep out of the papers." No one would belittle the record of the events which led up to the signing of Magna Charta. But if I am not greatly interested in King John, I want to know much more than history records about those useful mercantile and financial figures personified by Walter Scott in Isaac of York. The tortured Jew's extracted tooth out- weighs, in real historical value, the sceptre of the Plantagenet king. What of the Banking in the Middle Ages? The more we search the work of the earlier his- torians, the more we are astonished at their inability to see a thing so self-evident, for they were almost invariably drawn from the class they failed to chron- icle, except where it touched politics. Froude devotes chapters of a volume of his history to the divorce of Catherine of Aragon. He tells us nothing of value about the financial transactions involved in such a simple matter as the collection and payment of Queen SOME DEFECTS OF HISTORY 167 Catherine's dowry to Henry VIII. I have heard ex- perienced newspaper men say, "The most interesting news never gets into the papers." There is a good deal of cynical truth in that remark, and certainly the most instructive historical facts seldom get into the histories. That is why the diary of Samuel Pepys, not written for publication, tells us more of the real things we want to know than anything which has ever been writ- ten, contemporaneously and since, about the period of the Restoration. It is almost from that date that we begin to get some familiar idea of what banking was like, and how it was conducted in the great city of London two and a half centuries ago. Our knowl- edge, so far as available records are concerned, hardly, in any real sense, antedates the incorporation of the Bank of England, at the end of the seventeenth cen- tury. The records of commerce and banking of the earlier financiers are almost hopelessly wanting. There must have been such records arising out of the colonial expansion of Holland, Spain and Portugal or, working back through the years, in the trade of the Genoese and the Venetians. But these highly respect- able historians seemed to think that the birth of a king's bastard was more important than the opening of an avenue of trade, with the creation of the finan- cial machinery necessary for its development. How New Is Credit? I am credibly informed that banking, and even branch banking, has been in use in China for at least two thousand years, with drafts, credits and the usual banking machinery, if in a much simplified form. It must also be admitted that the great structure of to-day's credit is essentially modern. But it would be absurd to assume that it is all modern, merely because we know so little about history. The trading of Carthage, Genoa and Venice was largely barter. But we may be sure that it was not all barter. Not only the Church canon law but the Bible itself and like works have many allusions to the sin of usury. But usury meant interest, and interest meant credit, just as coinage meant exchange. It was not all pawn- broking; nor was the banking of the Middle Ages. There is some evidence that the same people both received and paid interest. The merchant, then as now, probably had a good deal more practical sense than the theologian, and certainly a clearer idea of the line between legitimate interest and usury. The trou- ble is that historians, up to a late date, have been influenced by the ecclesiastical attitude toward money lending. They are exasperatingly dogmatic on the things they admit they don't know. I am inclined to suspect that it was not the early Middle Ages that were "dark" but only the historians. I am even dis- posed to agree with my friend Dr. James J. Walsh that, in point of real civilization and attainment, both artistic and literary, the thirteenth century in Europe compares favorably with our own. And even he has been unable to elicit anything of real usefulness about the mechanics of commerce. And if this is the sum of our knowledge of the his- SOME DEFECTS OF HISTORY 169 Socialism's False Assumption tory of the most vital part of human affairs, the history of the men who paid the taxes and the men who made the taxes possible; the history of those who took the bare product of labor and fructified it tenfold how difficult is it for us to gather together enough particu- lars to frame a trustworthy generalization from the wholly modern tabulation of the records of trade, industry and finance! There has recently been pub- lished a book by H. G. Wells, The Outline of His- tory, which at least has had the excellent effect of persuading a number of people to read history who have done little serious reading in the course of their lives. But that "outline" is devoted to proving a fallacious assumption that men are groping their way, rather blindly, in the direction of international socialism. Is there one single record in all the inade- quate volumes of history, upon which Mr. Wells and we ourselves necessarily depend, which indicates any- thing of the kind? Everything points to the develop- ment of the efficient individual. There is nothing in the Wells inference which does not ignore the factor of management in production, dominant now and dom- inant always, from the time when man learned to save something out of his harvest, to keep himself and others through the coming winter, and exchange for what he could not produce. A Sound and Conservative Forecast With regard to the use of the barometer in the turn of the market in 1909, The Wall Street Journal on 170 THE STOCK MARKET BAROMETER September nth, a month after the railroads had re- corded their high, said: "The movement of the average on Thursday's break was one which has often marked the commencement of a downward swing. The indication as yet is not very authoritative, but whatever we may think about a resumption of the bull move- ment, 'now that all the bad news is out,' the averages un- doubtedly look more bearish than they have done in a long period. "Pessimism has never been the policy of this paper, but it published an earnest plea for conservatism when the market was at the top. Nothing has occurred since which has not emphasized the position taken." From that time forward, although the market, as we have seen, was remarkably firm, showing only modified secondary downward swings practically up to the end of the year, The Wall Street Journal con- tinued to draw lessons of warning from the averages. On October 28th it said, after pointing out the extent of the rally necessary to re-establish the old bull market : "There is no pretense here to pass an opinion upon the market from any other point of view than a purely technical one, based upon the experience of the price movements as shown in the average record of many years, but the depression in the bar- ometer, here evidenced, is well worthy of the consideration of thoughtful traders." Growing Effectiveness of the Barometer Remarking how widely the idea of a bull market in 1910 was then held The Wall Street Journal was SOME DEFECTS OF HISTORY 171 unpopularly bearish on December 18, 1909, although both averages were within a very few points of the top. It is interesting to note that one of the bear arguments (other than that of the averages) discussed at that time was the high cost of living ! On Decem- ber 28th, any idea of a January boom a movement always talked of at the beginning of the year was rather cruelly discouraged. It would be easy to mul- tiply examples. It is sufficient here to show, before taking up the discussion of the four years of some- what indecisive market movements which preceded the war, how faithfully the stock market barometer, twelve years ago, was already serving its purpose. I Chapter XV A "LINE" AND AN EXAMPLE 1914 N past discussions of the stock market barometer the record by daily averages of the closing "bid" prices of a number of selected industrial and railroad stocks, taken in two separate groups to check and con- firm each other emphasis has been laid upon what is called a "line." It is needless to say that no infer- ence of value can be drawn from a single day's trad- ing. However large the transactions may be, they cannot show the general trend. This daily fluctuation is merely the third and least important movement defined in Dow's theory of the averages. If we could imagine such a thing as an irregular daily tidal move- ment it is just that. The general level of the sea is not changed by an abnormally high tide in the Bay of Fundy or a tidal bore in the mouth of some Chinese river. The ocean's real encroachments and recessions take time. A Definition The line, therefore, may be considered as often preceding an appreciable recovery in a primary bear market or a well-defined reaction in a primary bull market, and, rarely, as the possible turning of a major movement. It can almost be set down as axiomatic for all our purposes that a line is and must necessarily A "LINE" AND AN EXAMPLE 1914 173 be either one of accumulation or one of distribution. For a time the buying and selling power are in equi- librium. There are some most significant lines in the history of the averages to which reference has already been made. Predicting/ the War To show the special value of the averages as a barometer forecasting what even Wall Street itself does not know in any general sense or at any rate does not realize, the extraordinary line made by both averages, industrials and railroads, in the months of May, June and July, 1914, preceding the outbreak of the Great War, is here submitted. No severer test of the averages could be chosen. The war came as a surprise to the whole world. Did the stock market foresee it? It may be fairly claimed that it did, and had predicted it, or trouble of the most momentous character, before the end of July, while the German army crossed into Belgium on August 3d 4th. Let it be remembered that a primary bear move- ment had then been in progress in the stock market since October, 1912. In May, 1914, both averages started to make a line of unusual length. The fluctu- ations in the railroads were between one hundred and three and one hundred and one, and in the industrial between eighty-one and seventy-nine. Only once, or June 25th, did the railroads give a warning at one hundred. This was taken back the following day with a continuance of the line in both averages up to July 174 THE STOCK MARKET BAROMETER 1 8th in the case of the railroads and July 27th in the case of the industrials. At the latter date, eight days before the German army invaded Belgium, the indus- trials confirmed the warning the railroads had given. Definition of a "Line" The accompanying figure chart, taken from May I, 1914, to July 3Oth, answers many questions. The line, like others recorded in the averages, was presum- ably one of accumulation or distribution. At the end of April the bear market had continued for nineteen months, and there is fair conjecture that had there been no war this would have proved a line of accumu- lation, followed by the bull market which actually started in the ensuing December, soon after the Stock Exchange reopened for business. This chart answers also the questions as to the dimensions or breadth of a line, which, of course, in theory may be prolonged indefinitely and in this in- stance had actually extended over sixty-six trading days in the industrials and seventy-one in the railroads. It will be seen that three points was the extreme range in the industrials and four points that in the more stable railroad stocks. The line proved to have been one of distribution, and indeed the market had become so saturated with stocks that the Stock Exchange closed its doors for the first time since the gold panic of 1873. AVERAGES FROM MAY i, 1914 TO CLOSING OF THE STOCK EXCHANGE Each figure represents the average closing bid price of twenty railroad stocks and twelve industrial stocks, and a complete trading day. RAILROADS ^ MAY , 103 103 103 103 103 103 103 103 103 103 IO2 102 IO2 IO2 IO2 IO2 IO2 IO2 IO2 IO2 IO2 IO2 IO2 IOI 101 IOI -JUNE -JULY- 103 102 I O2 102 102 102 102 IOI IOI IOI IOI 100 100 100 100 98 98 98 97 97 97 96 94 93 INDUSTRIALS -MAY- SI 81 Si 81 81 81 81 Si Si Si 81 80 80 80 80 80 80 80 80 79 79 79 79 79 79 79 JUNE > 81 81 81 Si 81 Si 81 81 81 Si 81 81 81 Si Si 81 81 80 80 80 80 80 80 80 79 JULY 81 81 81 81 81 81 81 81 80 80 80 80 80 80 80 80 80 80 80 79 79 79 76 76 176 THE STOCK MARKET BAROMETER What Had Happened? What had happened? German holders of Amer- ican stocks and the best informed European bankers had sold in this market. If there had been no war all this would have been absorbed by the American in- vestor at the unrepresentative low prices prevailing in a bear market which in July, 1914, had been oper- ative for twenty-two months. All of it was absorbed by the American investor in the following year. The supply from Europe then, and subsequently, as the war forced foreign holders to realize, and war loans compelled the liquidation of other investments, took the place of the normal supply of new investment securities which it is the duty of Wall Street to create through concentration of opportunity and of savings and the bringing of the two things together. Over- regulation of the railroads, now recognized to have been an economic crime, had paralyzed their power to create new capital long before the war. The public attention had been diverted for five years before that calamity to industrial opportunity, some of it, like the shady oil promotions of our inflation period, of a dangerously speculative character. Without the for- eign sales of American securities and the war, turning us in effect from a debtor to a creditor nation, there would have been a dearth of capital opportunity; and this is why after the all-revealing break late in July the market made only a relatively small decline on the reopening of the Stock Exchange, in December, imme- diately swinging into one of its great bull periods. A "LINE" AND AN EXAMPLE 1914 177 Relation to Volume Knowledge is valuable not merely for telling us what to do but for telling us what to avoid. Inside information, so called, is a dangerous commodity in Wall Street, especially if you trade upon it, but at least it guards you against the rumors which cannot possibly be so. Diligent study of the averages will sufficiently show where a "line," having proved to be one of accumulation, has given definite information, not merely useful to the trader but valuable to those who look upon the stock market as a means of fore- casting the trend of the country's general business. Here is an appropriate opportunity for adding something about volume of sales. This volume is much less significant than is generally supposed. It is purely relative, and what would be a large volume in one state of the market supply might well be negligible in a greatly active market. If the line means absorp- tion, this aosorption sums up the market supply, whether it be three hundred thousand shares or three million. Showers of rain vary in intensity, area and duration. But they all result from the moisture in the air reaching saturation point. Rain is rain whether it covers a county or a state, in five hours or five days. How to Know a Bull Market It might well be asked, how are we to tell when a secondary swing, upward for instance, has developed into a primary bull market? The result is seen in 178 THE STOCK MARKET BAROMETER the averages in a succession of zig-zag steps. If the secondary swing reacts a little after what would ordi- narily be its culmination in a primary bear market but does not decline to the old low figures, and sub- sequently recovers to points better than the new high established on the earlier rally, we may assume with confidence that a primary bull market of indefinite length has been established. It is, of course, impos- sible for the barometer to predict the duration of the movement, any more than the aneroid can tell us on October 3 O O O CO O <*3 IX COCO <*5 O 0) 00 VO HI O >i>.ioir> co is. q oq co <* t> q\ * "? q vq q c\oq o M M -f * ' . 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'S^Jffff 06 oo 06 oo 06 oo oo oo oo oo do" ~ -^ ~ SS 9 19.9 i to rn OOOOOOOOOOOO 000? < >?o?^SS S^i?^^^* o^^SS^S* ^S^^S^* ot Jot s " sif* 5g?^*^^ 5 ???^' ! 5^^iW^' ^^^N^HTv^H? 2 oo oo ON ON ONOO oo* oo" oo < o?" oT oT oo 0? oovaaoaeaoM* OMQ ,00" t * 9 3 2 > 2S V 2. V 2. vo to ON ON ON v> O to O tovo OrxMVOtotx Ooovootr 3 . y ^t "-T ~* f O^OO w O N ^ to to^ HI t>, M *J- rj- ^- N >O N cj "" c oo oo oo'ob'oo 296 APPENDIX , to M O co 10 M oo N 10 > oo ON co to *i- to P oo p <- N H- f-- ro ft to 9 *J *! w *^" 1 9 P oo >o IONO NO r^ t- i- t~ oo oo oo oo t--oo t- foo ONONOOOOOO ON ON ONONONONONON ONONONONONON ONONONONON ON ON ON ON ON ON 10 ON ON to O ONNO 10 tOOO O OO t- M M p| ONNO P> ON ONOO O OO to 10 1O CO CO 10 O 'S/S.SS <& OV&SNSN SON-S^SS 3 3 $3 % 23 ;SN j| sasasa. *3&^S9.*S8sss! ss^g^s SN M COM txoo O% Q Q Q NMM N p N N N w N M S Q O\OO cc oo \O O\ Ox Ox O O O OOO O O O O O O O O OO O\ Ox Ox Ox Ox M 0. oo ON ^ O o N oo *^?2 OOxOxn ootn^-b*.^O O* r ' w oof^O N f* * o^ v ^ ^ O M'O j g O^ w l^.Os*t-.t oo o\w mw^w^ OST^OO inw n o o O co CO MM MOlHMM ^ o "^ Q Q Q OO t^v O CO OO ON OO OO VO ^ l^ SO OO O O O O O O^QoOO OsOsOONOxOx OxOxOxOsOsOx 8^ M M CJ ViOO H( O * to O Ox i/iOO O ^ N ON -f- Oxvo O |f tx t"^ eo fxOO O A N t*^ t* M J< SO NO SO tC t>. l4 t>SO SO SO t** VO SO IN* ts-OO O\ ^28^^*8 ^$?fi d g vd MM M MM M M rn ^ N txb, -3-OO 1O M 1O 1O M PI 1O t^-NO OO tx ^Np CO NO to 3 \ONONO IO1O1O1OCOCO ONCOMMM MCOCOCOtOtO CONWPIP* vo O u * > ON ON O ONONONONONON ONONONONONON ONONONONONON ONONONONON ^5x 1 >, a 1O *$" M OO OO O< ^ t^OO OOcO OOtOMMQlO NONOO^OW^l*. M tO^O OO M M 1O* OO 1O VO 1O 1O ON* O NO I s * ONOO NO -. OO NO l^*. to O ^ ^ 1. NO^S, cocococococo pi.A *9 < OO ONOO ON ON ON ON ON ON ON ON ON ON ON ON ON ON ON ON ON ON ON ON ON ONOO c CO CONO M O O CO 1OOO tO NOflQMNOf^ OOMNOOOOO OOO^ to O ^" ON* to ON l>. ON M ON* 1O ON CO M ^- *$* N MN ON^-Q* NOP| ONOO o o ? S oo oo oo oo oooooooooooo oooooooooooo oooooooooooo oooooooo ON 0\ 00 00 < _ OO NO CO M OOO^O 1ONO MONOOOOOO ** NO r MPIPICO COCONtOCOPJ CO^COCO^ tj"VO 1O1OCO *^"1O v\ ** oooooooo oooooooooooo oooooooooo oo oo oo oo oo oooo 00 00 M M OO NO N tx ON CONO P>CO NOOtOMlOCO ONtOb^^-lO tO voO * ,j_ ONNO NO ON M * oo 10 O ONOO ei ^ to ON to ON ON 10* N *i- 10 10 co t^^, to m ON "C 1 Q* t>.t^t>.t>.^ txtxootvoooo oooooooooooo oooooooooooo oo 00 00 f R .. to * rt M to T*- IONO t^OO ON O M pi co -t IONO t>.00 ON O M p| to * IONO t^OO ON O 1 ***2 2s APPENDIX 297 W 'view * M to ^"vi ""* "*" rno * tflo M * **" u " 1> * ** n v Qvi vi so ^ *$" *t* ^* ^* ^ ^ ^ ^" ^* ^* to to ^ vt v> vi vi ^ vtso so to 0000 OOOOOOOOOOOO OOOOOOOOOOOO 00 00 00 CO 00 CO CO CO CO CO 00 CO j^oosoMt^ so oo to O O to vi t^ os vi o M to o O so oo t> O *O wtx 5 NOOIHOO^ W^_ * * VI N .jj ^OOQVIWM^ HOOtOtX^- V)0 M VO VI ,. M ST ^* OO Os OS OS OS Os Osoo OO OOOOOOOOOOOO OOOOOOOOOOOO OO OO CO OSOO 4$ SO\OVlQtOO VIMO OSSO O VI V| OSOO V| SO(S)SQ*fOM ^VlOvt O* OMNNH '* ri "s? "*~" s> ' * ' *^ *"" *^* ^ ' OsosOsOsOsOs OsosOs OsOs OsOsOsosOsOs OsosOsOsosOs oo co Osoo *JMO SOOOSMOO osrvit>ooo t^OOsosooo NMSO tooo O Os O ' 1 { ^_ 1 N IH vioo j^ O\ * viso t> to^ Os l> tx to ^>OO oo ^ O O_s O so ^^ j/jtSJN NMNtOtO tOtONtOtOtO M N N M M M HMOsOsQO\ tOO\ OsOs OsOsOsOsOs OsOsOsosOsOs OsOsOsosONOs OS Osoo oo Osoo Osoo tO ""^S. * lf ^ eo OstotoON SOWT$-MVIM viTt-toMSOrt* OsNoooo vtso SM o > . . -- oo oooooooo oooooooooooo oooooooooooo oo oo co co oo co co oo oo ^"^ C ^J^!^?|f ^^^ l ^.^^enNJ f oo^N.o^^o^ cr\*. oo oo \o ' C t oo oo oo oooooooooooo oooooooooooo oooooooooooo oo oo oo oo oo oooo 1 >* U * 3- 3- *" OootoN^O oo^OHiooto txN *fso toso to to to *5 OO OO OO CO OO OO OOOOOOOOOOOO OOOOOOOOOOOO OOOOOOOOOOOO OO 00 CO OO MMOOSO N *xioN'*'OTf Tf os so O O > os O >o O rf- ,. eo^ iv.oo tfi txoo co ^ oo 5 ros5 S ^^ ^ rj-tntofo 4- 4-o*'*'4'4' TJ- ri ^ to TJ- } to ^ oo so so vioo O " w w oo so N ^ CO oooooooooooo oo co oo oo oo oo co'oo 06 co co co oo oo oo'oo 06 j^OsJ^OOs l-lt^Os toOO to MSOSOMOOtO N^M tOOO OS OS viso SO SO so *5 l^oo oo t~ t^. t^. t~.oo oooo ooOsoVo\^o\ oVooVosoVoV ooo>do6f5t>. A t^t^txt^ xl>.t^^l^t> txt.t>.l^.t^t*. 1^-00 ts. t^ tx f tx 1^00 OO OO OO t^- . oo osoo to OooOHtv. M soosOooto woo oo toso so so oo -> so M oo N ^ l>. tosp oo t>.oo ^ .1, ^}- ^J- vi pj to-, so O JK <*> *^ M * """^O i, so OO 00 O\ OO 00 n. 4- -I ooMsoA>n totoM ooo so so so oo oo wioo O oo O *> rt * -I 't" J* "C 1 ^ # "* "C 1 9 ^ ^ *?* ^'O'OI ^^* T*0 H-j totorototo totOTJ-Tt-rfso visdsoso>otAi iA P, *^ 5J H (i) tOTj-nso 1>.OO ^O * N t0^-oso t^oo OsO w N to^f-irtso txoo OsQ M> 5) P3 WWWWWMWItWWO vo ir> txoo tx CO >^1^ VO tx\o OO N ^TQ OONN^PJN^ OO N M IH OOO ^ OO N CT\ c>oo oo ooooootxtxtx rxooooooooo\ e^dscvoooooo CNtx APPENDIX 299 . N O w W N vn u-l^ q vo vA, \o vrt oo M oo O oo to to N O P} f^OO "i- 4- *t- *i- ** ^}- > bs O i* oo M vo t N O i ^- to\O ^ ^ r t ^~. t ^, N ** * to to to to to to to *t-\o ^ * tooo O c* to o OOM o *C* "0 uioo Ooooo ^OOO \o \o to \c to Q ^ T v *5'? VOfi p tntn rn rl N O OOONOO O^O 00 rj- t^ U1 O>O O w "^ O t 1 * O M ^^O'J"* ^J'T 1 ^^'?^* ^"C 1 ^^^ 1 ^* T s< ?'f l t IH ^T fifit'it') tOTt-tntororo NNNCO^-TJ- rj-tnt*>Tt-TJ- ^M . n N Sr T *! l 5^" u ^^' OC^OW CO'O SO O tONtOtOtOtO toO >, tOOOMOMM 00 00 O O O Cv VO VO VS to N VO to VO "^00 00 (3 jk VO "*O >^ CT\ W tO^ to VO O^ ON M OO jk to C4 l~l w% O tO^ OO N T^ 1 tO ^ t 'i to -4- to N MOO 't'" 6 6 JO to N TJ- u-, OX.J *Jvr>A^}-^*j- OOPVONO 3 ?2 * tx tx tx *^3 , 9 " ^ 300 APPENDIX . O O oo co to to ON N ON NO oo ONOO O *0 "> ~ U^Ntoq v O0 *t" *^ *$ 1 1 P **" N N NO N O^ J? NO ti. t^. t>. NO NO VI T}- tO N O t* M O O ON H \O O tO WN tO W OO t^. ON O <* fxNO A *f i- CO O QNNooNONtNj^ ^t-fNjo>ON^ *^^ ^ T y *^ * " C T V O , 4 *}" t 1 *** * 5 "WN M ri to to MMMMriM wodddd odd oQ ON ON OS ON ON ON ON ON ON ON ON ON ON ON ON ON ON ON ON ON ON ON ON ON ON a 5 ^ M ^ ^* tO VN t>l OO tO ON* tM N to M ON ON ONOO OO OO OO OO t^ootoovovo i^ NO _ _ ON to -+-NO to N ^ 9^^ H * t> 'I"* oo rj- ON M TJ- t> A p *t- r>. M >o NO w 0*00*0 *"- 8 * ^NO ON PJ r> trt^ to w *OO O tO^ ri to M ONNO W^ IM ^l to ^^O T*-^ N -t^.ON ONOO ON ddfNJCOCOtO TJ-tod^OtO tNJNtNJ^K ONO\ONONO\O\ ONO\ONONONON OOOOOO O O O O O O OOOOON * MNOtOOV^f* ON O ON ON ON ON ON ON ON ON 8'**OOO\ 00 t-^. t^. t-.VO NO ^-^NtOMN fitONfilHJNi tOrfeoto-4-toON > OO OOOOOO OOOOOO OOOOOO OOOOdOOO J3 ^ ON O M N to ^* VNO r^ oo ON O M tyD P KNNNNiNCNjCNIPJNNeo to- o APPENDIX 301 . oo ao wise to p o to o o\ to co so o * to to vo to o va vo ui o ^# 1 s0 . *> *> *> T* *>^ "I 00 , "0*^* * r>0 r ^ N '"-t * ** O invoONvooo OO OOOOOQOOOOOO OOOOOOOOOOOO d d d d * d ON d d IH MIX oo oo oo oo txoo txoo oo oo oo lx OOOOCOU->OT+- tx N vo co ONVO w lxtotxtotOHi_vor*'Mlxf N OO M ON O ONVO ft w VO vo OO w vo M OO VO OO N ON xj *t"j|f T ? C T' 1 U ? VO .* O O 'fvo VO O^jj txVO ^- N f* (V) *XlX txtXlxtxtxtX txtxtXlXtxtx IxlxlXtXlxlX txOO t> 302 APPENDIX tO M A hs N OX 60 Xt N N M so M SO OO tO U-l W>OXrt *OOO 00 SO to t-, V* fj O *^" t** Os. *$ to oo oo O O t"so O so w t^so v> ir\ t^ OS so O *"* *^ N ON *o *> 4* 4- *** f"> t>> t>* r.sd t> \r\ to tA>* Aso t> to 4- 4-* to to to"**" >As6 * w A K. t^. to Q d . OOOOOO'*' to "^ <"l OS OS OS "* VI OS. fr, p SO N O NO NO > so so 'f t > H !V "^^"^ "f". P. 't M *J tf ** "J 9 T *^ v *: **? . J5 oo * o\"*~oo r>. l>. U1 * N O t>- d O ^* oV i^-so oo rC.od oo os t>"*~ to to* oV to ^M M MWMjH M M O M M Q OOOOQO OO NONO^O ^1">ONO\ M oo M oo O tOp|poOfxto ooOtotONnO tjMiNood* NN<*>to4- ** "*~" N N N N to* A tAi ti 4- to N * 4-sd ^- t^-oo oo oo ^MHMM WMWWWM M M M "H M M MMHH MMHMMMM \o vi txso to w O oo o O os M v\ oo ^ os O ^ to O *^ so N N N os. O+-sd oooosdso* sdotj"^^. t^.oo * oo oo txso \A 4-* so so so t-voo d * O w w 4- .% OOOOO OO OOO OOOOOO oOOOOw WM MO . ox N O oo O oo to o^2o? J? R.~^-^oo"* ssrS'Sv l-c v^i OS SO ^ OS Tj- * tOOO to O <* W M SO tOSO ^ "5 oo oo o\" ~* o\ o\ d d os o J3Z.OOO OOwO>H ' MMIH MMMM^M L^ c/3 j N toso w>vo >n u-v toso >o wioo so oo oo osto -- ? osoo soui'i-wi tort-MQoor^ ^NO ^ l- Q 2,* 7 >,soOoo N SOVIMOS totots.wiro sooo"Noot--O OooOO 1 .lit . -j*- . . *"J # . *V . . -. i * . . . . Qr ^9. *1*"1^* . OS Os Q Os Os O OS Os Os ON O O O O O O O Os OOOSMMMM OO t~- t.OO h H rj- SO >O ON OO ^ M OO t* ^t 1 M txSO M U^SO t*^ to ftSO OO V*i VN *+" ^OO N OO O SO A O> . OO SO OO OO ^ OO O O >0 ti.00 tC. ONOO t>- SO t^-00 00 OO ON 4" boo oooooot^t^t^ t^oo oooooo oo oo oo oo oo oo oo oo oo oo OOOOOO OOOOOOOOoOOO 00 00 00 00 00 00 OO t^OQ OOOOOO oOOOOOOOoOOOt^T3. II J= K. * !- NMNNNNNNNCO to"; Q CM 303 gH^3$^*$iSi *?n3** SSSL.**. sp^as,? P 'g.^g.JtKji: r 1 *^^* **4 4 -*- L to v to t^ oo oo oo oo j O oo ?9??* oo oo" Q 0\ ON"*~* oioioTo^oioi* <2 'S. tlvo^ d v2 OOOOOOOOOOOO OOOOOOOO ONQO >oo oo oo CO Q < i ri c* OOOOOOOOOOOO 0000 0\00 00 >OV MOOVN M . 0^* ^oOj^ooo x oo to -t- O "> t* ovo to to \o t> ^ ir *n ^ vo t>. t>.oo vo vo Avo o ^4'4'toNx osxd O M ood 1 I 00 00 00 00 00 00 00 m o \o 00 00 00 00 00 OOOOOOOOOOOO t^OO 00 00 00 OO t^ *o x to tx t>.oo vrs Os O O N O oo osoo M ^vo *- ov'^'o^^'oo* r^totoxoo . ^ toNVONOoo* wlxxxvnt^^ fs^toOv^Pto OtO *f ^ *n ^ ^ ^ {*) ^- ^- so so so OO Os OO OO t^* 1 t^ t^so t^ t^vo *^ to ON to OO OO OO OO oo OO OO 00 OO OO OOOOOOOOOOOO OOOOOOOOOOOO OOOOOOOOOOOO . ^- X tOVO X O tovo O\ OV OO O N ^J-VO to *-OThrJ-tOio 00 OOOv , -I ? ^ ^ *0 ^ ? *? ^* 1^ ''J ^J"* 'f ? ^^ ^ T* 4-? VC J^ 0< ?* VO ^1 V totOtoNN xxQ Ox xxxMwf} fipis5p4'to ^" 4*d OJ OO OO 00 OO OO 00 00 00 0000 OOOOOOOOOOOO OOOOOOOOOOOO OO OC 00 -j. X VO P (^ f*) f^ f^ ^ _f. QQ QQ Q QQ j^ M ^/^ r) M M VN tO VO X QQ tOVO *f- OO X CWO\ WOO M OS "I O Tf- VI tO VO x oo to to to *o 5-8' P Ov co r^ NNNNXX OO OO OO OO TOO t^-oo oo oo oo oo oooooooooooo oooooooooooo r* r t> t^-oo t>> w - i O\p vrioo ^M MMO\MO<0 ONjj *o ^-oo ^NO^, ^NOOWVO r-- # tx tx tx x t^ r^ * tx tx t". *" oo r-^ 00 Os OsOO to M so oo too oo m f 7 -f 7 - '^P* "OP'J *? OOOOOsd wrid t^t^> 1^00 oo oo oo oo _OO X so \n to " os ps d d d OO 00 Q *> N ts. O tx APPENDIX 305 . -.'* ,00 00 00 00 N t^OO Os Os Os & OOOOOOOQOOOO OO OO OO - ". . 00 00 M O Os W OS 00 oo oo oo oo oo to q ^ co *"j . oo oo oo oo oo ^ O 00 00 Woo oop{pjiN'ro J t" t^ ^.OO ON Os OOOOOOOOOOoo ^- O SO 00 OO W> M a,* -- " ^ ^. V om^|W>\A oooooooooo O x r* " \0 to \O so O\*O SO **" J NNN NNNNto to S^tovoci ootOMtrttnoo *oo>toOoosOooso . *? T^ T# ^f *? *0 ^ *p q p "? < ^ to to ri- 0000000000 OOOOOOOOOOOO OOOOOOOOOOOOOOOO tO M M SO U-> M O\VO O ^?^? ^J^T'* >f * r * f * NNNNfjtsi OOOO OOOOOOOOOOOO OOOOOOOOOOOO !? ^Otoootovooo tooou^totxoo ui o O ->- M <4voost^O>-i c^* 1 * o w ?'} - ^NNto j)( N^N.?,^;;, ;} Tosom N 2,oo 2 totototototo to to to, to to to t-,00 OOOOOOOOOOOO OOOOOOOOOOOO OOOOOOOOOOOO 0000 00 00 00 00 oooooooooooo oooooooooooo oooooooooooo oooooo ?** ^^^1-^^> 5s ^ g. " N^ it 5 J? ^ ?. JC ^ ^-oo JJ. os R. K Swoo ooooo?<2o^ oow<2<2<2 , <2 IOQOOOOOO oooooooooooo oooooooooo . N to } OS O 9 * H *0 <^ *? ? ?* -{ -i- 9 oo oo Oos<>o>d\ dsosO *^ * to Os tr> ^^ p| os w IH o wwdd d ddw oo oooooooo oo eo oo oo oo ^O N 00 Os tovo to o M ., vo to O O N X oo K -O ^2 ft -J 3 i^L co B 306 APPENDIX . u oo N N O i* l* O O O 00 .WI avr* ^- '* - 'O tj. to^ * N totONOw.4 O<> oo oo oo oo oo oo ootx oo oo oo oo oo oo oo oo oo oc oc oo oo oc oo oo oo oo oo oo oo oo oo rx t^oo r^ NO * P ^J so M oooo -J.XO txxO vx. O ( to O "^ w> OX O <^" "l N tx U"IXO fi w VO O N "1 >-l O "^ O OC N oo ox^.jf oo to $ N ONOO vo vo w r vo *$-Q N *^ M ""I ** O * '* -l-o ^ 1 0'*' o 5 CO . tO M txQoo rfO^'1-tOl >. oo fi t^oo ONM MVOrhN">w tO VN M OO >-) * *? T-t- v ^ > . c *)> v M l ^ so cnl ^)* to Ox O ^* *O VO VO N N *i" t^ M A *^ > ON OX ONOXOX ONONONOXOXI JN Ox ON ON ON ON ON ON ON ON ON ON ON ON ON ON OX y H CO g oo ui # o CONO OO 00 NO N M i ^ N **** OxVO OOlxtOQ txMOOHOO r~~ oo oo oo O tx, Q OO OO OO Ox tx t^OO 1 ON ON Ox Ox ON ON ON 1 K^ asss^S; ^sss W1 ON J- ON Ox OX 1 >,Noooo ^ O ON OO M tx N ONVO WxO tx txONVOOvOCO - 00 00 00 C3 T * * * N N N O 'I- l^-VO ^ 1 > w N t^ ON CO.J ^ O N N tx "~^ M '*'. j_ to vv O * P *noo Ox ON Oxoo CN oo oo O ONOOONO M ONONONOxOX ONONONONONON ONON ONO~OO ft \O\O . O N oo ON ONONONONONON ONONONONONON OOoovOoO to wvo tow^N - Wwt^ tOinON^-OvO I^VOVOMO VOtx VON WioOVO *? O O^N^ O OO ON N t^)^ | | r ^,00 VO OO ^.j, VO ON ON _. W N ~ t 1 ^ "> otC.ON NNNQOH ^MMMN to'i-to NN ONM OO OO ONONONONONON ON.ONONONON ONOXON ONON ON O- ox APPENDIX 307 - O\ 5*2 = as s. ? ztzisi, t uiooooooooO V> IH VO O -J-VO SO O tO M OO t~- ui N l~~ . O VO VO O OO ij- Tj- M . W\ON"-lTj- OOSOtOMt S^'t^q 1 ^^* '; 1 ^^"** ^Otowooti. Cn'ow^4w SCot-^P. f y> v> * ** ^-4totototo* rov/-,4ri'i-4* 444444* to^NiAN ._ oo pppqoo oooooo ooooo-orH M >HMWMW C*T; " - - t* to o to > - in . 00000 OOOOOO OOOOoo 000 WMWWW HMMMMM MMW W M SWM .. >> b w u^^o rxoo Os O '^ 308 APPENDIX .!-.>-< O tovo * M eo t^ /> M to to M r>\o so vo ON Q o o " Q M NO o M oo < 1't" t 7 i '}' 1 vf ; ^T^t^l* P *>''!'"! * s s N N N * 4- Q N oo t*. ON ooti>oOA 4-* """"so ir, 4- ^ O O O ON ON ON ON ON ON ON ON ON ON ON ON ON NO NO O . O O oo "> M tooo N to *J- N oo N to Oo rtoo ^ w> to M fs, > ON t>. rs. NO lx 'f ^ M *! ""I ^J P, ?* 1 P 'T 1 o *> o-o ^* rV*"~so r> r>tNo * * N. r^oo ON d * d d oo ON ON* oo tC. VTN" ZOOOO O OOOO OOoOO oOoO OOO i, T O * *> rn n rj- N *>* O*JON << NNN*;> rn* *j> \r> 4- 4- ^ 4-* 4- 4- Aoo O O O O O O OOt>\ <*<7 OOOOOO OOOOOO OOOCT> OOOOO O O\ *- to I >\ oo t W) q tooo ** w^ oo M N q to in^ t^. ri- CN O O e^^ N oo vo \o 3 w>oo oooooo oooodddd OMMNNW tncoww <, oo oo oo oo oo oo oo O\ O Ov CA Os o O O C7\ O\ O\ O\ O O\ ~ . * -f ^ . # .2.00 ON O d ^ ^ ^OO OO ON ONOO OO 00 t^. t^.NO NO N. t^. N. 00 ON ON ON ON 00 00 00 00 00 Ov Q SO OO OO OO OO OO OO OO OO OO OO OO OO OO OO OQ OO OO OO OO ONOO ^^ 3 " *o tn ro to N M _ z > ~' e " 7 ^ ONM SOMOOOO^-M 2* ^-* CN oo oc oo oo ON ^ CO oo t^\ ^ O\ Os&NON<^ONO\ O\OsOsO\OvOv Ot 9^ ^ oo Ov mr^rtvooOM N t^oo oo ^oo oo ovo M vo ON noo vnoo vo \o S ^ M CN w ^ n tO-j PI t^* N ^O -t-^ O ^ ^ M |. Ov^ O N t^-^O t>-^ ^t 1 OS <* Tj-cn^Tt-coto ^ ^^^" ONONONONONON ONONONONONON SNONONONONONV O\ ONOO |, > A w > t^ T-J J> T? ^ ,wt>-*><'> 4-4-Avov6 > 4- 4/ 4- 4- 4- 4- f '*'*> r faO\O\O>ONON ON ON ON CN ON ONONONONONON O\ O\O\ONO\ ^-*r o\b^wMt^v> f^\o ^nQoo*^ r^-^rONON 1 ^^ ~ n *O A ^OO*^^^" *''** NO w N ^O t>*VO * OO N 'T ON N ^^ O x N > * A\0 IN.OO ON O N o * invo tx oo ON O " APPENDIX 309 OS V* N f**so o ON M Os to O N to W W fO to W OO tv frs f* tA O to so w so Os r^ ""> o fx o\Ol^t^N*o ** co wi ui os O wc4^"M w*o W..0 ...... ...... ^^....*Cj0 ,|, .... |, j| . . Q *O t* to^o NO *$ O M M l^so to U"i N so M N o OS f N IM w t/1 NO co > O ** <* N qs t rnOso>" Hlt 7 >p { 1H od f i I'fQ'OPP ? *^" ^ 1 OddOd d"*~dd(jv o\* od rx l^-od O od * oVod od 1^.00 od * ^ ti. t^-t O t> ^WNiwS MI-IQO OOOO'-'O OOOOOO OOO to O t~so OsrJ- ^OoOtON^ O^ OsOO ^O A vtOO OO j CTvOO ( Q .oo ^OVONNO^IH^ *^* 1X C |H ;'*'* ^TI^QO NO 4- 4- so A> vn* ^ r\o so t^ os od od t>.od odod*odoVdoVdO d ** OOOOO OOOOOo OOOOOO OOwOw 1 - 1 O H w Os w vr>so r) OOSOtnOr^r** *" ^- OsOO Ofl to NO"^tN,wOs Nt^pOO>i-p| SOW OsSO OO ^t^ NO ONMSOSO O r t"'^'^ SMM WMCOOst^OO ^-WOO^-V^l^. SOW^ xo*sd-< sdrisoso*sdA>A'}-'A>Ai* o\AOT}-4-4-* ^-TJ-totototn* to*^.to >-> O ri S O O OO OspJNTj-OOu^ O v O* r >N'f sotooot^to^ "^"""^Os dt5 o"" ^o * * o"* * *o o * o^"? 'o *o o" o"* o"" o* o' o 1 o 1 * ? o o o" ? o" o d SOso.OO M >> rj-so N so MN Nt^NNtO *> T- - r-v SO t oo 00 . 3OOOOO OOOC <;o oooooo 000800 0080 t> SlSoIooo N to t^ *^so t^ OsOsONOOs OO^^N t^so l^so 2dd**6* MMMMHM* fitotototo to* NpitototOfi* ripiwuMtoQ* ^OOOO OOOOOO OOOOOO OOOOOO OOOOOOO XO^^oosOoo M M soOto ^to^w^oot^ *^ <^Oso*o Ow too WNN>HM* MNrito to"*~" * ripJwMMW* W-^MMIKM* w tow u, o o o o o ooooo oooooo o o o o o oo vo Q P y> oso ij-oo osop C t t> H-, O 5"ooooo oooooo oooooo oooooo oootjrS w E J= . * H- K _. j. .AVM ^~>/^ONor^ rtso b%oo os O M N to T- i^vo txoo Os O M fcJO S *- M N W tt rv\o too v7s MMMMMMMWMM g NNN ^ NNNNNW W .S' g Q H 3io APPENDIX tj oo . ^ OS * co r>- + M M vi vo O oo OS tO M tv O t^ O so OO vrise M SO SO O 10 M 00 l> Q OS Os Os Os OS Os OS Os OS OS ""100 oo so t t~> OS Os Os Os Os Os t^ t-v t^.00 00 Os Os Os Os Os O^ O^ t** OO Os ON ^ Os Os ON ON Os Os OS o "! 4 SO SO M r-* q oo 00 O 00 00 rt- M ^ OO d ^ so tN. to^ O tooo oo to HJ rt- t^ N r >o j^oo oo q .,, ^"oo M ._ N tv. SO M Q * *? > SO 00 o O to OS 4-sO 4" rj- N M N to OsOSOsOs OsOsOsOs rt-to tnso v Oioio u "i ^suSi>* t^t>." t^so O^S 00 00 00 SO toO to t^ to^oso + M 00 M XOSO M 00 M N -f-*f so to OO OS to^ so o o Os OS 0\^ ss&aSs s, Os Os Os Os Os Os OsOsOsOs OsOsosOsOsOs ON 00 ex Os to f. P so oo so Q ^_ q M oo os 3- 5-^Ss M*|J. N oo oo in TJ-OO O *** O oo oo O \O *t" E M M o o M M M O O M N tO o o CO OO OO OO OO oo oo oo oo co 00 OO 00 00 00 OO oo oo oo oo oo oo oo oo oo ON OSOO so W 10 M M QSO ^ 2 00 P 00 00 so M M so 00 tx 1 N oo f* O vnso # ^ t>. to N c4 t^A r^oo ^ HI tooo . r*1 to r^ j(t oo O so M oo ^*. t** N ON * < tNi SON.ti.txSO' t^txtv.OOOOOo'" M W M O 00 OO 00 OO Osso soOsd^wtH" MMMVO t^ t~- t-~ t^OC 00 00 OO 00 00 00 t^ C/5 tOOO so >. o tnoo oo so 00 tO ^ N o to to Os to * ON 00 ,_) Jp 00 Os *?* -J OO OO SO OO tOjj N OO VI t>.OO j. 00 O O H< M ^ SO OO so t^. *^ to t^ oo < 3 Os OS OsOO 00 t^OO o O O HI t^ I"** o HI N ^ * 4- 4- 4- vo o 10 vo vo t^ 8 I*, tx so u CO T-~l 2 so N *r\ M so M N t^ N *r\ N to wi O so oo to O oo oo to HI *< "2 y t- O O O so OSOO 3 Q 3 H-l so SO sOso^sS OSOO txOsQHI OHIMMOHI VOsOsosot^t^ t>-P~t^txtv.t> M M M OS O O o o o M *j- Z 7 >, M ^oo to to to t- so ^so M OO tT 1 M O OOOOOOO SOOsN"SMtx M 00 \J >o ^r V *"! w^* ^- t^ u ^ Wrf *^A "^~ t^ 4" ON O SO A . to CO . . .... . . 9 . . w ^"- . . so so so so so so so so so so so so so NO sc so so so lx s \ft OS OSOO VOvoNVO SO7J-Tj-fSOO VO^-tOO 'M HI NriNtovovo SO SO so so SO SO SO NO oo oo m N \O OO O VO ^^ OsOO so OO so VO to toso NO NO so SO so NO so ^ M M N pj VONO ju M tooo to N ______ j OOO>ONOsO>Os d^dniVO iov>toovsj ow>to>ovovn, sosososovo APPENDIX 311 MMMM MMMMMM MMMMMM MMMMM 5 M M M S > 4T" S. < SX >V >0 OS *0 N O "1 O M t^VO M WIVO U1 Qw, QVO OOSO O ._ ^ 1 9 ^^ <>Ntxur,oOOO vr^NsTv^qoO vnt^M OOtx 5-io NN ^2 ?iri ?si?i? irfitriirll*il i? ^ONOV ONc^Soo o oqqo oqpqqo ooo'o'oo o" o^ bb ' moo o A oot-*<* 4 4 vA ON ON ON O\ S ?* ^<"?q . rt ojv <^oo (> ts., ^- q ON M vo i>.^ o^^ur,^-oo c, q Jo q ypoo o^ lo o o ^SSSS 00 ^ 1 ^ OOocj*^^ o-.o\oVCT>bv(>\ Q M n f| M ti oNpio^ 5 00 00 00 00 00 00 0> OVOO OVOO 00 OOOOOOOOOOOO ONONOVONOXON OS OX 0\ 0>00 3 i2 APPENDIX so o "i^o os o ^ i>.so *"<^ON so so . T- w>oo vioo so I M Exchange closed on account of War er\CT> * >oo oooo oo oo oo oo oo oo oo oo oo oo oo oo oo oo oo oo vooof>u">*rf* ft O r n > >00 OO 00 OO OO OO 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 t^OO OO OO OO OO to q O O oo O O O w O MMM oo oo oo oo oo oo co oo oo oo oo oo oo co oo oo oo oo t>. . vo i^ M r^ oo oo N vo O tnu^o & V ^ ** Q( t t ?* *?-i*- T Q *0 x <^NNNN fifw w MOO 00000000 00000000 00 00 00 00 i M o rooo so * so 01 $ M * 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 APPENDIX ON m ONOO oo M <*+ > q N NO "5 g N N i , O O O 8* tO N N M M * M o o o o o o oo oo oo ri. l>. r*.* ON ON ON ON ON ON ti a O < NO M OO NO t--. O- O I tO tO N N P N tO OOOOOO O O O O q -t to O\ O oo toO O M PJ P N N N O O O O O 8M M O O O O r? o to to O O 5*88 to to to O tO M g txoo to ON M in NO oo " ^4 -^ tO (Nj ~ M ON to to m vo NO *- p tooo 10 't r- WlNO OO tO ON PI o O O O* to* O 5* 8 8M M O O CN O ON ON ON O O O M M M M to O M to O v o t m n 000 to to O to to to to O sp *o to ri- to r^ ** & oooooo 0* ON'O OO O M '0 Tf- o^o- 00 O ONOO 00 O O O O O NO NO O s-s- NO NO NO NO NO NO oooooo 0*0? U"l t/% O M M dNM OQ tt u*> \n ** \s\ oo H- *> ^?# Q 1 ^ M ** *^# ^*" ^* DO o o o o o o o u^ u-\ -i v> M t^ t^Ow^Oxi 5 OSSO *^ M^A W N M IN* to t*Xj OOO *t*^7*^J ^.*0 ^ rt -i- vA \X *O ""O t^-s t^> OO OO &\OO OO OO OO t"N> ON C\ CK fO C4 -H 30000 oooooo oooooooo-orS o w K M N to rf- NO txOO ON J{ O M p> to <4- ' t^.oo ON O M N to ^ mNO rxoo ox O APPENDIX jj vo * to ^ IH ^vo vo vo ui M t>. vn *j-oo *J * ^ ^ oo * NH . ON ON ON *f tx -^ t>. "?]} OO OO M voONOwO oo^togOtoON O ^o O ^*vo *^A to Ov *^ NO to ^j- O oo c* <>oo oo oo ONOO o^oo oo M r> t^ r^ tx t^ t^ tx t*x t^ t^ t*^ t*^ oo t*> ti ddOMw MMriNNto NtoNNfiri toNcJNMM O toO CO 00*0000000 oo oo oo oo oo oo oo oo oo oo oo oo oo oo oo oo oo oo oo oo oo oo -v >O N VO w f VO tOOO OVO O *t VO !(- OOOOOOOOOO C/3 p Q j tXOO t>.t^MOO O^MOOOOfJ OOMOHXO tOMOOtoQOO ON t.M C 1 ^ V *? *! ^t s to II N >O n W ONOO *"'7 V O ) ( I *NtoONr>,N^OO 'it ^4- 5 ? ! totx -t c\ rj txN^Oto VON vo N ^O 'T f ? ^> OO OO OO OO OO OO OO OO OO OO OO 00 "O OO OO OO OO OO OO OO OO OOOOOOOOOOOOOO-T3..4 5 "o 3 I I ON o w N *" co Jfl K. * ON o bfi ? N to to- o APPENDIX . U-l ON M U^ VO C O ON IH M "> 1VO M VI W W H- 00 H P VO M 00 O M M M M "^VO *> *? t^- <> HI Pj p| HI Up N ^J-00 Tj- N OX *J- * t~, UI M N to 4 4 4 4* g * 8 8 8 8 S 1 * i-**'***** ff * ' ON to * T$- oooo 000 00 o o o o o tO N "''OO tx OS M HI OO VO oo c r i 7- . i M o to p tn co pj * M pi co to eo to* f ST tootoN MNcototo to* to to to p N p * N co to"* to co O O O O O OOOOOO OOOOOO OOO OO Ox Ox O u-i PI vo N oo oo M p) vo co O co wi to . . . . ~ . . . . , . ^ . ^? . T T^ vJ oo f tO N N tO* CO UI rj- rf TJ- ^-* ooooo oooooo odddd . q *>. q up .vo t^vovdvo* vdvdvd t>^ i^,"*""* ^ uS >oo oooooo oooooo ooooo oo MM MMHIHIHIM Hi M H H H M MMMMHIHI MMHIHHI HIM 4 HI CO HI OOOOOO OO N VO HI 00 y-> * jo to ^ to* N HI o to ro TJ- co 4 ^o 4 4 N * to444to 4* to to 6 oooooo oooooo oooooo o oo M to to o to o OOOOOO T O^OOOOOOOOOO* OOOOt^-t^OO OOOOOO OOOQO tO M tO M -OO Tj- 00 00 00 00 00 6s* OSOO t^. l> OOOOOO OOOO U*l t^.VO U^ *H ^Q U"l h^ VO . . N 9 *? VO t> N N Ox Tj-VO & t > f **T U ?'* > ^'i >\ %? f vd u 1 ! TJ. ^j. ^j. rj-* ^ uS u- u-i 4 4* 4 u-i uS u-i u-iOO 4 6 4? " ^^^-.^.^i MMHlMHlM HlMMHIMM M, M N f NO W1 <$ NO tx VN tf| u^ootoqoooooo^ q q N O rx # N N NO txoo t^ N to . topji-j^ N oo oo N Q Q d O\ tx t^ tN. NO NO ONO so A NO NO VTINO tx t>. tx t>. t~.t~.tx l~. fx d ^ ON ONOO OO OO OO OOOOOOOOOOOO OOOOOOOOOOOO OO OO OO OO 00 OO OO O- OO U M ON ^ !. w f ooONOQ Os NO t~.*oOto M r< ^ t- r NO Q -+-00 C "">_- N . ON NO to to- m M os ^ o " * osOtorhOnj.oOtoso j os "i O -j !* w T 1 ^ ....v ...*.i|l-?. T^ . ; . *- o Q M M M o Os O Os O O O Os O O ^ M O O O w M M ON ON ON ON ON ON ON ^K ON ON ON ON ON ON ON Os ON ON ON ON ON QS ON ON ON ON ON ON CSflO O>00 ONONONON ONONONONOSON ONOsONONONON ONONONONON Os OO .U^ONM QtO ^'t~OONO^~NO ONWOOt/>t~,O VIOOVNOO 1 ^! t^OOMOSfs. _^ tO NO NO ., NO tO^ 1H O O ON ^ Nt^'X'htx t~.^ t~.tO^fOnTt-^ O^t~.NOOS 5 3 M M^^ 0\ ,_J ON ON ON oo 8s CT\ CTsOO OO t^OO OO OO O^ O\ O\ O\ OOOOOOOOOOOO OOOOOOOOOOOO ON Os ON 00 00 OO O Os ON ONQO 00 OO Os OS oo oo oo OSOO 3 h ff) l-x t > \A *f\ ^O *+ ^^ O t^ ^ O rx 1^*0 1/N. VO NO 8I~- Os P ON . NO Q o 00 NO O Os, to p oo oo ON Q OO OO OO ON %l 5 O Q ^^ C^ C7N ON CT\ ^N ^ 7\ 9\ ONOO OO OO OO OO OO OO iiass Q O Os vs ON 00 ON OS 5>0\ w OO ONOO 7 ^ Jl to 5- ON t^.. to NO oo Tt~ ^ ^^ * ""> oo v o d to to J tO <* os r- M ro * H U-l 1- ON & d d oo oo ON OSOO OO OOOOQOOOOOOO 00 00 00 00 00 OS ON Osoo OO ON o Os 0\ O Os ONOO oo oo OsOO .JWINOOC* W 11 O ^ O OO N MPMfsoON COOt~.tOtOW j^ q oo t>. ^< [, q^ Nr^-NOsMM^ f 7 -r *t* r i |H '^ *f v ? r T'?" c r voo .# NO O to f tQ* 1 ^ 1 ^ *J 1 t 7 > 1' or i l- "* '^'C'T'T c ^ t |,___ d odddVo\o\ ONoXosONONO* ooefsosodd oo oo oo oo *: O ** O ONO ** O t- "^ T*- toNO ui noo JJ IO v^l ^^ tO -f NO OO NO M . NO OO O t^OO Q M t* t* 'f **? ^ ** *I * [. NO oo t^.oo q M dodddd ddwdd ww OOOOOO OOOOOOOOOOOO 00 00 00 00 CO OO OO CO 00 00 00 00 00 00 -I - e ft P NooOOrhOvo OO tooo Osvo s> OOootO'J'Ot^ 3 ^ 0) * -i- APPENDIX VS O CO Vi SO H f*J Wi SO OO VSsO Os CO VI OO VS o oo so >H M so so IH oo vs u-\ o sooo oo *$ oo oo *o M cooo ocoo '"soO <** osco ' >o co O t- Ostow ift^ t^-oo Q 4- co rj- co 4* CO -- ~ - ; NNN NpjNMM N N H ft fi ft M QQoocn'i- oo-ui NtsJ"N. vri\O Ovv3 M p ^ <* "9^ *I ^ ^ ; *i c ?Q l ^ >H " ^ "C 1 "t" 1 *7 *0 w M * N rj N to* to co ^- to to ,0* cocofoNNN WNNMN "**" * ~ O t) M A O OO soosw oo ro M O VA, o 't'^O vnso cooo ^}-Ncovow^ VO"* * ^*Tj-ts.OsO COOsOOt^^-O^ Ofs^OOOHtrf- OO^^^OOO ^-COM tOl^CO . .. . . <>^CTvd"*"d ddd>>!>* dddddd* t^tHOMpJiH NM t4o WMMr M NMNNXW NNNMNN MNNNNN MN N M .OOQ ")ftoO v OsO OOOv lOSOs (SjCOwOOOOt^. CO^ 00 w 00 00 00 00 o P P P VT| O W CO rj- M * U^OO IH c O oo t^. >o t>. v,Noonoo C3 ^^ (^.soso^Oso* so^itovnvn W COOONCOtO o w q q q p >^ tA* v> so lA C^ m A . . O N o rj- Os O M co ja b. * *- 60 fc * APPENDIX .MOO *! w P> rt- OS M to to M IH t^oo Os t- O P O toso ^> ^so ON *-,!( oo pj to p w J\ OO O O Os Os Os Os. O O n t- 1 ** PI M pi i [ 4 OO OO OO OO r>. t^ t>. l>. OOOOOOOOOOOO OO OO OO OO OO "-t*-t Q *; T *? ^ # ! N M M M I- p OS OO OO OO OO OO OO t>. .; O> t^. OsoO O ** P g so q to # 5^^ M # jr t^V) 00 00 ON 00 O ^~* 1> t> tv t> tx t> OO t-.OO OO OO OO OO OO OQ OO ^OO >* ._ OSSO A tOWt^SOlHt^ . -t^ . .^ . . . . ur <'^i 1- TT ri r OO OO OO OO OO 00 OO OO OO OO OO g to f Q z dO O P) SO OO OO t^ pj OO to PI t^ ^ tO t^ V\ PJ OS SO p< to O Pt 1>*OO Ol OO PI PJ * P4 tO M PJ OS O A ^^ **^ ^ ^* ^" ^jt PI *^ M Pt n vo \fi \r\ Ai4-4 4*^ 00 00 00 00 00 00 00 00 00 00 00 00 00 OO OO OO OOOOOOOOOOOO so OO f p O to Q uiso tvoo Os O to * u-iso t^oo Os O M hfi APPENDIX . rJ-OO v> Ov N OO tx $ l lx to N Ix tx ix tx tx \o tx v\ O M 00 ON OO * to M COVO P P - ^ * *1 *? ^" ^ "C 1 *C* ^ P ^-t ^ MMMMMM MpJfJ to ** .O lM I-U^OO V OMO NOoOnoo t-O t^-t^vo'fo\q t >t ^o'^ 1 C' c 1 "; . ModcScJM* OOC^OOM r}-^ - 00 O W * M O O OO OO ffvOO . \o O *oo ^om ^-OOMM ^Mu^Mvoto Ntn'iO o> <* Q ** o\ co *>* P-f P ^ P P l*?^^ "?^* I'O^T ^ '?* T l "! > "!*f f 1 v ^* P^P Q3(4 pi WMp5rJ*NNNNMN *} O J n t to enMtONNci*ooiN >N N NNNN NNNNNM NNNNMN NNNNN NNM <^ M M MHMM MMMMMM MMMMMM MHIHHHH W l-> M O ... WVOO VO O tl HI \O O <" MOOO ^VO OO V>OHHIU1M OvHIHIVOtx MM c "P v C lc C lc i f-J cyv<>c>oooooooooooooooo *ooo\dddM* wM O i-O<^H. rx o oo \o P *> T *0 oo oo oo oo M tx\O O VO NO "^OO VO OrJ- "^Tj- Tj-QMOOto'*' OOflooOu^OO VOPJfjON .. ^ltO WOO ^"O ^J. N OO M VO M OO CV CO OO OO OO > 2* o vo * vo f^. ti. tx tx tx* vo txvo tx tx ^.* OO OO oo 4 1 - W ffi * 320 APPENDIX . to O t^ O oo ve O O *t- >*t^ r-^oo O to *o O * N to O *-vO r^ O *O <* O ^0 O\ r^. ** N N 't'^ M 00 CJ> *- to^j, Qw O d M CKQ.0 M M tf d M M M'M <>* M M M M oo oo oo oo txoo oo oo oo oooooooooooo oo oo oo oo oo >; O "2 "I "f N O O>, O " ui O oo i-i f^ n O O * "1 NO 00 N N "> N O 1 "I" 00 . ^ . * *^+- N *0 *0 ""* **" 1 ""> * 'f* <*, P -I *? tn * 1 ^ "0 ^ *0 5rxortA"^>rt A AMflM ^j.^.xAiJ.trv'A 4--i-iA Ai rntoN " *l '- 1 oo oo oo oo oo oo oo oo oo oo oooooooooooo oo oo oo oo oo oo oo oo oo oo ^.vo oo vo so oo oo^ so w JN. O t- oooooooooooo oooo oo oo oo oo oo oo oo oo oo oo 06 oo oo oo oo 06 oo f, o oo oo oo oo oo oo oo ov o c^. oo oo oo oo oo o o oo GO OO *N t* O\OO >* $ *** **? w w v> M * ** to N t^vo O * ^N O ^ oo to ^* ^ ^ Os **"* N w A ^o **^ ^o ^" w <^O tx tx l"* tC. oo oo ^\ cKoo ^, O C^ w H O O O ^* ^oo oo ^k ^ &> O^ o ** ^o l>.t^t>it>txt>. txtxtxtxtxOO t^OO OO OO OO OO txtN.JxtxlN.tx txtxtxOOtN. << OM ddoOM Mddww d^^txt>. "*o ^oo N.\O *J to ^ ""ico oo oo oo oo oo oooooooooooo ooooootxtxtx lx(>.txtN.t,tNi oo t>. M I ,00 00 00 00 OOOOOOOOOOOO OO 00 00 00 00 00 OOOOOOOOOOOO 00 00 00 00 00 00 SB * - - 2 **> ^^ fx\e vo oo oo oo oo oo CTV* oo oo oo oo ov c> oo ^oo oo IN. vo e?v ^t" '^ oooooooooooo oooooooooooo oooooooooooo oo oo oo oo oo oo oo oo 7 >% MCtMNMf) tomflNNtO OONVOM rj-vo |N.^> t^ '* -v N ^^ t 18 *0 *t* ^ T S. 2 **> ^^ fx . q * *> <9 O 6 <> o ' >-i o rj ri rj IN MMQOc^d odoooovotv^o N >o oo oo oo o o ooo oo o o CTS o o CA o\o\o> o--oo ON oo oo oo oo oo oo ooo -r rv W M tooo u^ so O N tfloo O N n * w * to\e O M NMI^MVO^. 2 tx^O O OO O tO ^ tO CTVVO tXJ. M(J\tOH*tXW^ tOtOtO *O I IT * tx N ^ tx *O ^. ^^^v^tOraM tOMMNMM NMMM O O s O\ *4" (^ OO OOO OO OQO CTvrtf'*- O NN-"* * "t^to qvoo\M <( r>. . ^ON'?^^*? tog . , . ddd" 2 S M SI fl Ii A NOO oooo oo oo oo oo oo oo oo o O" CTV o\ o\OvO9> ON Ooo ^O v OftN,t>- O* "^^ Ovo Opw>vWr OO^OOvNKff w ^\O fTQ^^ ?* "^^^l^* t > ( ^T p !'*' *^ P ^ ^ ^ *T T* ^ T^ OO OO ri. t> tC. tA. tx\O WVO to J-* tOtoNtOTj-rt- toONMl^N INOOQ CTS Ovc\ APPENDIX 321 . . . NNN* ft M M r5 N to i <( to ?> tn en ** *} to to en -j i__ "**"* **"" oo *J-vo to to rj- O M tooo u-i t^ to t-,vo Th O vo ^oo to w oo so O t-oo to <* q <> tooo e * NW ?Q>" | tor^ NOOTi-o\i^xo N* * oo ao t. N N ** to ooOd<>C)d* ONNNto to* to rj- vr> to to to* Nwc5><* PNN Aoo ^ 3 oo oo >> vr> ^ O r-H woo oo c to O >n tovo NOtoMON t^ 1 '?^^ f^^ '? c j'^ c r d^^^ww MwMpJtn o N^tNNNN NNNNNN .NONOp il-ox tooo "> Os 't-so O^to soootorh -i scs >* N q N * so xy-i rl- -4- t-.^ t>. vn > ^ *; to^ so oo to to - - - -* >-- -' totototo i> csj n Os o M * o^oo MWM NNcito^co to"*" to ^~ to ff) to ^oo tt|N fN M M ff (4 NNNNNN N M N N N f ooOtoirivnos t>'ooot^O'*' toxoMMsot^ OOMO'^OOOO toOM I , NNNNNPJ NNNNrTf* NNNNNN NNNNNN fNpt3 322 APPENDIX . oo NO NO oc N ee n ex MI r. O oo t. w vo j. * r^ u-ivo os to oo oo o oo N o oo NO r}- q _. *? 1 w NO *****. 9 t O vc 3' >0 . 00 ,P '? 00 . 00 . vnv ^.f- ^ ^ ^ *! P, 1 ^ 0*6^ H>M r^-oo oo oo oo oo bVoo oo oo oo ON oo oo oo oo oo oo oo o> c?-, o- o- vo ON ON ON Os ON ON ON OS Os ON Os Os OS Os Os ON ON Os Os Os Os Os Os Os Os Os Os ON ^ * to f' o to M l^oo t- bNO M IH i f- to *>*?*!* T 1 1 "0 *? *? P c> _t7-oo ) oo "P 00 , -r o\ Q Q Os Os osod oo oo oo ON osOsbVQOQ '-'ON O O Os ON Os Os Os Os ON o\ Os Os Os O O O . NO O ON O 1 ^ I*. * 00>^NMNO 4Jf T l> C > "^Q^^jPH* ^"1^ '^Q'C 1 * * *^ H tQ Hlw ? f ^ vOQ O^OOOOOOOO VO VOOOOOOQ OO OO OO OO ^O ONVO M O oc oc NO V O *"^* **9 P ""<*">** **** CO C^ N tO _ _ __ ,_ - _ ** oo t^ O^NO ON ON ON ON ON ON ON ON ON ON ON ON ON 03 ^ VN. *f* tnvo *i* O O 10 O N ^O *o ON ON tnoo to^O^N NMOMf^o^^N j _^ ^ w r ._ ^ t . w^Ov 1 '^^*. ^"ooO^O (H ^ to^O^^t^f^A Ow^cStoMtv.t-^oo <3N<*^ cototocjN t^N*'**^^*^ ^^-^rt-tnTf- ^'4-T^\rvvo^O v ^N ^^ ^ ^ ON O\ O\ O^ CN ^ ON ON ON ON O^ ON ON ON ON ON ON ON o^ ON ON O^ ON ^N O\ 5 J ^^S ^ t) C f* 5 . . M . OS N N * *f * j Os Os Os ON z >>N NONNtOO^O t->^OOONtOPJ Tl-NOl-IOOU^M NC OO OO w~ OO OO( M to^, t^. N to ^J- iri^ ^ f *P t ^' o ^ ei0 . oo . tn 't' oo . H ! vo 4|f ^"O^^t .|. t I- "I *? t? OO *O A n OO OO OO OO OO OO OO OOOOOOOOOOOO OOOOOOOOOOOO OC OO OO 00 OO OO OO NOOOOOsOw O *OO O to to 00 NO w Oto OOr*-NNOtO MOsNN^t- *1" T# 1 *? T 1 ^ *>* T *i M *! ^ SNtONWNN NMMMpjN MNM^NMts) tONtOtOtO<- "S U1NO NO W OOOOOOOOOOOO OOOOOOOOOOOO OOOOOOOOOOOO OOOOOOOOOOOO 00 CO 00 00 00 j3 * to * OsNO ^ M Q NO N N N tONO toN M*t~.i-'> NM oooooooooooo oooooooo oooooooooooo t^oo oo oo oo oo t- *~> oo oooooooooooo oooooooooooo oooooooooooo oooooooooooo Si-J s APPENDIX 323 n s , JJ 2 ^ toooooooMfn ao *t O oo w *c oo ON p } pj^j-iovooovo "*<* M*''* tototototoco p| Ntotoro ^topjtopJPl NP4NPJNN <*^d MMMMMM M MMMM MMMMMM MMMMMM MM 2.P2 2 9 Y?^ "^ 00 00 VO t~. tx 0X00 0V M 000* MMM MM yj j^> vo ov q PJ vo vovo M "i>> 5 q N o, b\To ^vo'oo' o^ 1>. 3 . L 5" 5S" , ^ ^ ^ ^oo oo oo oo * oo oVoo oooooo* oo o\oVd O M M>. ^^^J JN NNNNNPI NNNNNM pp>tototoo w tq MMMMM MMMMMM MMMMMM MMMMMMMM sjvo^-toM OVMI^I \ooo to M t^.oo ooOO ptoOAtoo v^ o tf> oop j P> N P N Pt NP1PJNNN PINNPIPIP) PPPN > N > iNPlprN > ^5p MMMM MMMMMM MMMMMM MMM MM D ^* to O\ W ^j ^m - ~ - NNNNNPI NPPPI vot^vovoM <*pjpjp pjpp}p}''" NNNNPIN' "JN^Nto" pNtotot^ IOM MM MMMM MMMMMM MMMMMM MMMMM MM .OOOMVOVOVO i ^ ^^ "^vo tooo M to o\ n ovo O ovo M f ir, ^- TJ-VO ^Jvot^votovdvo^votovotAvovo* ovdtxt^vovo'*oo>.ooodooox* OOMMVO X M M M M M H MMMMMM MMMMMM MMMMMM PJ M PJ PI 1-1 MMMMMM MMMMMM MMMMMM MMMMMM MMMMM tooo O M O oo tooo oo"* OVONMVO OO O O,VO OoOMVO ^ (A. t-.* oo t^-od oo"**"" 1 "* o, oV osod t^ tx* ^^r-^ovu \oto rvM3 oooo ^ip"^rpN vifiatoMto toto C<> t^-txvoosvoio Mvovorjpito qtx?o^toto pjMtotoooo\ ^^>>^ OlHN ' n '* wlverx00< * v 2* Nr ** n '* vrive * >ooox O M M MMMMMMMMMMNNN'S0 tO-^ 324 APPENDIX 00 00 00 00 00 00 j Q t* W OO f^ t> ** OV * ^"0^ *?P ^^"j ^^ "* ^ ^ a **^ *r T 1 ^ ZN -f ^ '^ r^- rxt^.t>.t^oooo t^K.vovd'o^o vot^N. r>.t>. i>. OON 00 OOOQOOQO 00 OO 00 00 00 00 00 00 00 00 00 00 00 00 00 0000 00 00 00 O m O vo *> tooo ^ /t " OO to N N OO OO t>>OO OO 00 00 oo OO OO OO OO 00 OO OO OO OO OO OO OO OO OO OO OOOOOOOOOOOOOOt-* cooooooooo oooooooooo oooooo O>t^ r>tnr^O>oo\ QOI^I-IOOM >* o <* t~~ *f\ o\ ort'J-o v o voot- *C* O q o ^-oo ^ *r *^o ^O^O^^O^'AMN^ osq^oooM n^ ^ ^- o <6 * j| 9 **"* vo^^-topjw citONNNN '-"NNCO^-'i' ^}->Ad OO 00 00 00 00 00 00 00 OO OO 00 OO OO 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 ex,oo oo N ^ q **oo so r>. 'f^ M . q *f.j_.j_0 . rC. rC. rC. tC. t^ r^.oo oo oo oo oo oo oo t^oo oocfsdos OsCJc5v>s Ol>- SO so so O vo so so so so so vo so so so ts- so VO C^- t>kVO t^so IN Os tx Os Ovoo to vo O t^ to >n M tooo r^ b* - vo oo N tooo OS i- HI N t. M (si O o\ odos odo\o ooo6o>OvC) Wf^t^ V^NM^OX^ oo^-^-OvtoO OsMQ^MVO VO tooo W O ^ \o vooo c ^T t 7 >l 09 f ! '^"J'fl^'f* h ! f i H lT'? t >* o*OQT t 7' ^ v< ? O\O6 MlHlNtOfO^- 4-'l'l' t^oo vo to t -t- O oo w f>. rj-oo w to M O w " '" .wvowi tnoON f>oo o o vo vo o * p to tooo vo O w ovo r^vo M g o fj q ri-vo o *o to N 'T-qoTi-iHtn ^ q t> *> <} T ,WIOOMO>-!O O O O O OOOOOO OOOOOO OOOOOO OMOO'-'O'-'O <\o vo so vo ^ t^oo o t>.oo t.v vo vovdvovovovo vovo t--oo oo ds ^. Wv\d o oooooo oooooo oooooo oooooo ooo co **i Q i-,000 ^MN^WM* Ncntoroto^* *o^iovo*A^O io*AtA*o^ OOOOOO OOOOOO OOOOOO OOOO< 3 vo ON ) o o o ^S SR.^^^^ o^^vT^^ ^^2^^^ ^S v>vo tO ON J 3 fj N O i > O O O O 8M* wOxOoo odd Q oo\ t>- t^-od oo o o do OOOOOO OOOOOO, OOOOOO OO N t" O I ;;" o\ ^^ * * ^^ *ONNOOO t^v^rf-^VOO *AVOwNOxO Nw^*OtO^ vOrj-OOx^O tOxrvDC**OlH T^-Mtx4' 1 Or<^ tOVOMVlM , ^ V\ M 4o2 o o M oo o\ oo u r~ O >ovo oo MtoOoooo"*- toOMOooo o tovo vo O vo M O (8 4 oo oo w N t>. 'i-^ t>. O w H oo oo ^ ^^ wu->ONN^ MooOii^- rJ-0 N O 5 VOVJ(^ti.tC.ON Od^MtHp} H (4 M M 4 ( tOto4to4tO tON oo o oo f^s t^i QQ r>\ ON ON O O ON oooooooooooo OOOOONO ONO OOO OX ONVO t^VO f* ? ON 0\ OOO OO OOOO OOOOOO OOOOOOOOOO dd wwdNpito 4 v '< i A4A'> OO> OOOOOOX OOOOOO O O O O O OOO T3 .2 5 326 APPENDIX j * . ooo i>.oo N iu-iu^ MM oo O x ^ * 9''t' l "! r !99 vo ,9 "?'! *0 * ^J" o w vo ov oo v> ovoo oo oo r wo o ox to >ooo i>.oo N iu-iu^ MM oo o "0 *?* *t"+- *?*?**? *t t>. rx oo N.VO vo \o C/J ..('.Ooo ">N Ktv.iJ-Mwvo O M O t^vo tr> MOONMVNM O^t^Nt^ i) S * *J ^ rp^_oo "flji, ovo vo tx ^j-ju f tft t~. M t*!^ h ;CJv^ M Nrj^ ( MOOOO "noo <3 M 6 M (VI (VlMOOOM MMOOMM MQMMMM Q Ov OO (4 OO * too oo oo oc oo oo oo oo oo oo oo oo oo oo oo oo oo oo oo oo oo oo oo oo t^ r^oo tx 3 t>. tx O\00 00 Ov ON Ov O\ Ovoo 00 lx t^.00 00txt>,tv txOvOOOO {. x ts. f O " *oo oovovi - oo oo oo oo oo oo oo oo oo oo oo oo oo oo oo oo oo u O [,' 1 oo oo oo oo oo 06 060006060000 000606000000 060600000000 0606 oo oo 5 Q.^ oo^ot^^o*^^ *Avcs i ^'OMt' N M o M O oo ^^i^t^-ooo Si.**^ ^* 9N OO OO OO OO OO OO OO OO OO OO l** OO OO OO OO OO OO OO (->. t^"* t**- C^ t^s OO C* 1 t-* dder>O Ov v>OO O\ M | | 4> rt>O txoo Ov w ^ v o ^ . Q ' II Ov O x . APPENDIX 327 ox t-. r~> t^-vo t>. NO vo t- t^oo ox oo t- r^oo oo o\oo o vo 00 00 00 00 00 CO 00 00 00 00 00 00 00 00 OOOOOO 00 00 CMSO W VO *$ * PI ^ ON t^ M M O O O * O tOOO M OS O P K ON O tO tO I* ^ 00 00 OO 00 ' 00 00 00 00 00 00 00 00 CO 00 00 00 00 00 00 OOOOOO 00 00 00 00 C- 00 OO OO OO OO OO OO OO OO ^ ,.^0 iHrj-N f^Qf" 't * . i; ^ 4 * oo > <>o dcJs M M M .-.NO t" t* M T^ O ft*) OX CO PI t^ CO ON M to to *o 00 VO N M tO N ONOO to* g. 0, 5- 5- M o? ON J-J TJ- o w* to pj Q o S'ON OXONSONCX 1 ON'oxO^OsSs ON ON ^O^ONON O M ON Tt-OO O ONOO ^O OO OO O Q rh O M oo oo t>.vo M tO M OO Q C/5 Q 3 \o ^4- >A"*~"vo t>-* o Os fT o" o* o 1 ^ \S} ^O VO t 1 ^ VO ^O o o o o o o g- o"o" r^* vo vo 00 CO O < O PS 8* R < S.5S"S^ .^o ON O ox w <; o o o o M o 2* Os OsOO 00 so * (C. O O O O O O O M M M M M MM so t^. t>. r*.* ox dsoo O O O O OOO MMMM M M M OO OO OO * ON OX OOO O O M M M MM O M M /> O M U* V ON "&?. o" *? Jo w tt. ox ?. * 55Ss2 ro? t OO M PJ to irt**~ ON PJ OX O 000 M M ON ^ . . . "Sdd* O\OONO* M--ciMfiN* NMOO ^MM SMMMMM M MMMM MMMM . " 1 " ' *-oo t.oo vn \r> \f> v\ * to* PPMPMM ^3 NNMNcoN-o.;; MMMMMM G"Q c/> H * -I- ON O M fc C^coeogo 328 APPENDIX ON ON ON ON .,; O oo r- O ooo t^ N oo NO w VONO O N ** N >o to ^ t^ wi t- N tooo goo PI M ^ \5 ^ ON vo to tO^ T Q 9 <1 ^ 1 * ^ O *? 'I T *0 *> 9 'J 4 *? T T to T}- *J- >$ to to to to NtnTJ-^^io j- vo vo vo o ^- ^ vo vo vo vo N ON ON ON ON ON ON ON ON ON ON ON ON ON ON ON ON, ON ON ON , tx p N NO e gtfH Ovo vo vo T^ vo vo ON ON ON ON ON ON wr>.toNO <*^oo txOn nT(-t^rxOO NOON t-^oo **> *7"*^ " *0 ^> n rp PJ oo o^ vo oo * O O >^>0 c^MTt-TJ-^j- 4-ovriAi>Aivo iAA nvo voA O\O\O\O\O\ O\(^OSO\O\O\ to P M N N N M IH N I^^O t~- O oo O oo oo oo oo oo oo C/i W oo ON *$ IH N O ON OO O to M vo N NO to O *O vo vo N OO IH Q, ON w M n tD C 9 f* *? 9 1 1 "? ^* T "! ^ 1*1 9* ^2 *f 9 *? ^^ * QT^^lQ 1 9 -^ 3 ^* <^ vo vo vo vo ^ to ^" ^" to NNM QwNOO Os ON ON t** OO t^ I s ** vo lx H^ t ^ ON ON ON ON ON ON ON ON ON ON ON ON ON ON ON ON ON ON ON oo OO oo oo oo oo oo ON OO d^to^ovooovo, ooooNOwwto O^t^vovooo QvnvONOpjvo ONON vo^ vo rtOlH^t-Ot^* t^OOOPlTj-M*OOO^Ot^^> NIHH^.vo ON ON ON ON ON ON ONONtOtO ONOr*-ONtoO vo VOOO NONOt^ VONrJ-toQ VONO . VOM N. VO ON O O tONO OO txOO MM M t~. VO - *0*> t* 9 t ? v ^ w ? e T t >*4 91 ?*? 1 ?* TPIn *< O O ON OOONONONON OONONONON ONONON COM t^NO ON t^ O ONO O NO y O'roo ) i ( oooqqpi t^-^ ^^^^x*^* T'C' "0^ /? * " vovo^vor^ oot^-ooONOoN OO'HpitoN* NNNPINIH* O\ONONONON ON ON ON ON O O OOOOOO OOOOOO - o APPENDIX 329 .0 so o tx "too M so tn tf> cooo so *}* * w w% N. t-iTj-Nui o NO i>. CJ CO OO SO M COSO N SO U1SO ON tx IX CO M OO N COSO CO VI CO O ON OO VI to J^ so* so NO so to so NO * so txNO 4- NO NO * wi co d w M Ov* oo "^"~ ooOOoo* ONtxoo U O cococococoto cococototoco tocococococl d Ncocojsi PCON , CO ON O M "|00 o* wNr-T- 10 NO NO NO NO NO v tococototofi tntocotomco . oo w N ONOO NO t^No NO NO i>. oo t>. osoo >NO NONdrxtC.tiNd*NONdvriA>^->H tot<->t<->mtif>i tntntotoficn . vt w 6C -t- M NO M OO COSO MWMSO V) Q < o z 3 * w . w ri"*" p5 <* 4-* *f*fcnri ri ri* 'i-^-tori-wi^i* NO tAvd tioo o^* oo 6\oVi-! NN NNN NNNNNN NMNNNN NNNNfN NNNPJ oo t~- NOt- vr >O i frsO^OONW >O O "4" <-> NO O COW) COSO O ed t^NO CONO l" 1 ^^ 1 ^^ IQ ^ 1 ^ ^ON VO OON k MSONOO*Olx * O OO ^" O N)NOMCOqC^ *C lt T" Mt ^ ^^ Q *t ? 9"* copJNNNM* ddw"NN* (t <* M OO OO *SONONO>ONIH* 4" tOM ^ tocococococo cocococococo totocoNNN NNNNdft N toN Ntoto NNNcococo cocococococo NtOfjcococo cocototocotocoN n ON l^oo t^ "^ t^oo cooo u lA A CO* CO rj- CO CO >A rj-* to tototo cocococococo coco cococo NO o\ oo to tocoN CONO COOO NO CO VOOO OQ VONNOtxONXO VOMQ"^ ONO OO n ^J-VO VO . fS Mptco^^i- txt^sow^sooo ooi-tOONN COWN^IXCO ONIOCOCOCO^^* rt-f cocoNco4-* 4-4-4- v "^ONO*sotxtxxoooo*ooootxxtxso* cotovoooN 'r; *~ tococococo cocococococo cocococococo tocococococo cocotococo'o.;; to * wsso txoo ON O M N co *f >T>NO t^oo O\ O w to * vovo txoo ON O * bfi & CINNMNWMCO to-- 330 APPENDIX M O <* N 00 to (^ 7 $ to to N to fsiwNpj O * N N '*'* * WINO i/*, inNO Ov Os O\ Os d ^ OO OO OO OO OO OO SO CO OO OOOOOOOOOOOO OOOOOOOOOOOO OO OO OO OO CO r) co oo u-> w t> o vo OO to tONO Os t^.~ s| CNOO O N O jfc wtOT^-t^Ow* d^oOVO toso .fc N t^ O NO OO NO ^^^WMM ri -i N ri i^ (t Ct d (4 <) N f*NNPNN It ft ft (5 *l d <, OO 00 00 OO 00 OOOOOOOOOOOO CO OO 00 CO 00 OO OOOOOOOOOOOO OOOOOOOOOOOO oo O O vs O O ' i 10 T ^'* ^ O Os 1 K t^. t>.t->!t^t^ t^t^l^t-t^l^ t^t^ .00 OO 00 OO t^ S w to ^"^ t^i oo to Os o oo o\ \n >ooo ON t^ oo to vnm voovitot>.N M . tO O tp 4- 4od f* Osso OON Nt^OsMoOt^ Pi-i^-Nt>.Os OOtoQ'^NNN ON tooo t~. # NI-IOOOOWN^ O"^'f'* N00 * "^""t^NOOOs ONOO OO OO OO ON O O . M Os ^ tO O tO rf-so fv^ 00^tOPtO ^-11 TfwSO VOA VOW J3 ON M rj- in^ OO NO VO N (NJ to^u ^. ^- ^>NO ON N jjj ON ^> j. t C 1( ^'^0^ N ; M J* ,5*dwM>H MNNNtOtO totototo^- 4-vAi lAisoNO >AA sod R.I NO t^ to N ^ to toso ,,. w.oo odd d w M oo Nososo^t>.r^. r^ * t^No J3 . Os O M OC f ^to tO.2? S3 II APPENDIX 33i 8 to vrt M *j-oe ! n < N *ioo O oo M tova vn <( Ixoe O ^-vo * vn OX vo OO vo Ov to OX O OO N O OX N t^ OX N O M tP tnv T e ! A < Vi J O OX* OX O O O M M * MNNNNW* M M M N to to* "* tO N to to* tO OX 3toN Ntototototo totototototo totototototo tototototo toN t^tot--vn ox MOrow M rt-ao rs. ox vn tx tooo Qvovn votorj- t-%M >toNTt-Tt- ON "00^ oxtoq t?^ ox ^'^* > q p J v * i c * v *T T *!* N N pj M * M "*~ OOxbvOO* txO\dOxdd* MNMNKM* NMH*"* 1 fJt^. ^ \---v - . - j* MNMMMO* ddc5d* ddd6N* NNNMHO MNNO Q totototototo totototototo totototototo totototototo totototo H oo NOvi>.Nto \aou^OO< torj-OMtoox r-~ t^oo tooo \o to t> *: o o towtoo\to >< 'f *0 Q ^ **" "C 1 ^ *T T 1 ^ 1 T ^ T^ *T T M M - to N N r) N NNNtototo totototototo totototototo tooo wirj-o ooootot^Mt^ to\o O oo to ^oo t>.\O v\ to M ^ O r^ o^oo tjvo o tooo oo t^oo oorl-O ootowNN VH in 10 M O t^-oo o M to w M n D>A\Avovd^s* t^.t'.rit^.dd* dddd wMpipjiHiN* MNMOvNtA 000 to O 00 1*. t^ N P 0\ r>woo*VO>A to ON JJ M JOV9 00 00 Os W5 >%tovoo QTl to* r*-"*~ * ^- ** T*-* ^ to vn 4- 4- vn* vnvnvnvnTJ-N* tototo ^-vo vo ' , ^.N NNNN NNNNNN NNNNNN NNNNN 22 t >'*' t > ?~ v<^ *1 y <5 ? 5;o\do\t^o<;oo - * t^oo' oo' o\ O o\* ^<>o\^vovn* 4-5-jivovovo* oo-*- oxo ^Q M ft M M M M MMMMN 00 tototowoo vn oo o oo ^t* oo C M to rt" O O tx* t- N N N N M vo oo >n in w oo O ^OMNM* M(4NNN*- 1 -NNNNf5* N to" 1 " N rj- vn * vn to vn O faNNNN NNNNMN NNNNN N N MMMM MMMMMM MMMMM MM MMM MM OvoNooto vnvntJ-MvoOx MVOtoOOH- oo O\vo tx * O oo yn vn to c in M "frq 'TT^Noxrt- T ": ^. ^ *f <1 1 *0 1 ^ *; *?- ? P q q >, cd * *H~ -^ ^ ^ ^Li*L* ^.frC.t^t>.KLoo* oo oc oo oo oxo\* oo txt^oo OxO O M M S- C3 cd* T oo oo oo > MMM MMM o M to rf vnvo t^oo ox o M ( o rh vnvo txco ox MMMMMMMMMMc (N>VO VOVOts, \O VO VO V> M2 VO VO SO VO VO VO tO O N. VO M tO Js, H wNqqvoNt-. ON O W O ON tO VO C VO IN. M r. txoo o to 4" 4- VO O vo q n >. 1^-00 CX5 00 t^ >H 00 OS M N Q N - *> h ;' H pvoOvooooo 00 ON CTs O Os O Oc?vCr> vo vo \O t>.\o t t^-vo vo toVO \O VO r oo vo. to to q O*' NNN VO CV) ^ ^- 4. 4. 4. 4. 4- . t- oot^ovovoN cl*!"; 1 ^* 9ivovoq^ 300000000 oo oo oo oo Ov OO O-.OO OOOOOO , ^ i . ** & x QvowON " * " ovo to ^- to"vo oo oo oo t-, r~, r^. t> t> t^ts t^-oo op oo oo oo oo ^^^^^^ ^^"^ B ooONQoooNvn oo oo m M vooo APPENDIX 333 <>oo so so so r-^* to 4 to 4sd so * so" vd >o A >A-I-* M M M M M too t t. ox to MMMMMH MMHMMM O so vooo r*. t- oo N N N M M N so >o O ^ M * M* f* tx to too > to q o\ t^. T}- to C* to t*. ox topjoo^ooq <* * ? O *?> N ON ON to -7 2> *f ^ JT !? S" if ^^ xd * vd r^sd t^.sd t^,* tivd so + ti. tC.* oo oo oo oo to 2 2 2 2 2 M M M M MMMMMM MMM MM MMM MM MMMMM M MMMM MMMMMM MMM MM MMM MM M OXSO O tOOO M (4 A M VO N OO O ON O OO N tO * M ( O VOOM v"!, 1"?9 C 1 S C ? ?. ox ox to q N vn 5-vo^vo ^. tlvodo5-N to N Z 2* 2 s 2 1 2^ ^ odddf* to* to to to to 4 4* 4 4- 4 to 4 n* to vA ox OO OOxOOM MMMMMM MMMMMM w^HIMM MMQ M MMMMMM MMMMMM MMMMMM MMMMMM MMM . MW NMootort MMVOt^ oxoo O O ''i ovo M (or^NOoo OOM to to M oo N oo M ON oo oo scs oo to ON to q * cj> q n S to 5 ^. ^. to S* ^C 1 ^ r^so tx t^oo * so so i^ t^ r> t%* so vo f*.vd vo tx* r>. t^*oo oo oo 06 o c22 22222 22S2 00 oooooo ooooo oo .O'^osOMQ OOOAOX tovo to vooo OOM OOMO f t> ^?<1^? 5s2!JI!"" MMNcjro to* 4 to 4 4 to to* 4- 4 4 >A A vn* vd A Aivd o ^o 300 dooooo oooooo ooooo ff. to tovof^^to voOoxOOXM NT^MV^MVO OO'^^Mf^ ^to r^ 3 t"** OO ON OO OX ON OX QOOOM Mf^pJM^fNJ* M O ON M Q Q * <*5 t>, ^ H- ) ^ OXOXONONON OxOOOOO OOOOOO OOOxOOO OO\ ^ t O\ OX ON OX OXONOXOXONOX ONONONONOXOX OXONONONONON ONOXOXOX OXON * ^ OXONONONONON OXONONOXONOX OXONONONOXON OXONOXONOX ONOXON ^ vo vo so so t^ so so t**so tsvo so so vo vo vo so vd so vo vo vd vd vo vo t^. vo ^ ON ONONONONONOX ONONONONONON ONOXOXOXONOX OXOXONONOXOX ONOX jj M O O ON O t^SO tOMSOtO MQtOVOMOO MVOOOO t '< SNNNtoN NNririiHM Mtoto4tovo 4'> 1 'i444 >ovd vd vd vd M OXONONONOX OXOXONOXONOX OXOXOXOXOXOX OXONONONONON ONONONOXONOx . O voso MOO O vo voso M ** M tovo MOO (x to >ooo to oo O to feONONONONONON ON O". OX OX OX OXONOXOXOXOX ONOXONOXOX OX OsOX O vooo Moovoto tooxtx">MO toMvo tovo oo tovo O M >, vo vo t. >) voso t. r^vo vo so so vo t-oo oo Ox ox ox oo ox oo oo l>. o\ vr> "~> os cxososoxoxox OXONO\O\OXOX OXOSOXOXONOX oxosoxoxosox oxON J3 ^ ** M N tO * OVQ fNOO OX O M W O r^ VOVO (XOO OX O M f to Tt- tOVO fxoo OX O M_ b f 334 APPENDIX > o _ , - .. , i O vo O vo P T T T *? * P 'T' 00 . . *? *i 10 NO NO NO (C. tC. tC.NO NO NO NO NO NO NO " T}- >^NO w \r> v-t SO to O M to tO 00 OX OX OX OX 4- NO OO^M rt^rtotoMto veoO'oox u "< U^TT *"TJ- m"vrixn^-u^t^f< ^^^.^.j-^-^-a. MMWQO OOOX OXOO 00 OO 00 (X.VO NO NO \T1NO Wl V\ MOOM oo'i-u^t^iios *rt>.OtoO vo *' o *oo XNNNVOMOO >-, OO O N 4 OOOOXOXSOOO* WOXtO^H^Wjj I^^OOOOOQ^ MVOQt^t^ooO "3 OO OO OO OO (v, t~.NO NOA NO^}-^^Ti-^}- cJwNO^O^ O"HMOOOOOV H CO Q . eo oo O O oo t^ covo *o m M Ox^ so sc so t** to *^ oo O Oxoo p< -1-so w> c< * ^ O N fi iSOVONOSO NONONONO OX p ^- b^ ^ rj- tONO M N. OX so so so so so so so so so so so VOVONONO M OO M O N tO O NO oo l^-oo w t NO NO >n 4 ^ T^ NO so NO NO NO NO rj- so O oo so so so so so NO NONONOVO .?$*?? r^- txvd NO NO NO NO NO NO NO O"* oooototoH" trtoo oxOOt"- WOxotoOx ONOt^ vnvo oo to ox ,^ C t NONO^ tooo r^toNOO^vo Oxoo *oooOA *OMQoototo* oxtotoi/^oxxtow ^2* *> * NO tx >" bd to-- CA ffi 4- APPENDIX 335 Ov x OX Ov 00 000 00 w> " "> t^ VO NO K. ^. 4J *f *T" ^0 * Q *t* ^ *i * ^ *o **"* 1^*00 oo ^ oo ^- Oi O *o 10* oo N ^ ^^ ^o oo N to OMNW MINWO^^ <>c>^d\WM c?s M w IN M M Ne^f^NNN^Ov LJVV^NWN C\CTN^v<>iONoo OC oo OO OO Cv ^ OOOsCsO\O\O\ OsOSOs^OvO\CNQO O*l_^t^'^ OO^WtOM HOO V OU^M Ot-~"> CO 1 Q t 100 . * *J *0 9 . T ^ O oo p> o\ o* oo N t~ *To Wi^O>Os^ O^OCT\OS OvOCT\&i&>Os OO O OO &~en . t~* O*ropOO O Tf^ to^o Nwootowvo '1-O bO *?* <^< <> T "? tf* *> "C^ M N 0^ vo oo oo oo oo ^ijj /i <* f os !- w^ O oo P 3vo "iwiHtoNO ^f* ^^o OON. ooodo li iv. oo oo o a 1 , O O O O O Cs CT\ <7\ o s **) Q N rh i I? o o o o o SSoIoo'o' oooooo 000008 o" 1 oo! OO nMMw VO^-NlOO t^ fc \OO V>> ' >< ' V * H t. M O\ N *^ ffv^v ^voo r^, t>, vd rC. r>vo ^do no^-'f'> OOOOOO OOOOOO OOOOO U^xOONOxOM *t- N OONOOO ^vU%r>NO f* ^ t^tONfOOW^OO^t** OxONO^ t^xovxoo ^f^ o 1 o" o""? "o o 1 o" o" 2 o 1 ^ < oo' < o MO* ^wri-Ntnw* "^O Ox ox* oo Ox *oo O O O O O f^vo ^o O **^ oo ^ O ^ c% O O n O * "II 336 APPENDIX o f o Q so to + o w t-. o o t> M O oo so t* t^ O >H M ox t fi N w M M O ox ox o> O w M rsi t^ ox O *nvo w w N O ox w o> *( r- 1^ ox *o M *t- ^> O * > oo 4 *04~ "> *> *J ^ti *T a ^^. "J 1 ^.* ""5 ^ ^ 9 ^*? # ^ 1 'i'-f- 1 Q * ^ OiA >rt rf^^i-N 9 Q M M d M rwNrN NN" (N tod 2 SO SO so VO so so so so so so so so so so so so so 'sO so so so so so so so . V r*-00 HI M r)-OO VOsOlJ- t.Nt^O^O COM OOO t~. * t^SO,OO * tj ^ . "^ *^** *J ? ^ P t^.OO ^j M C5 ^ M V> >Ai^ ^^ ^ *t" f # 9 'T " ^ P VAOO OsonsosOv<3 voAAA>soso votA^iosovoto so so so so so SO SO so SO SO so SO so so SO so so so so so so so so SO ^ SO SO SO SO ^ ^? *?* 1 " 1 > ' T ' T so so SO so ^D so sO so so so so so SO sO so so h in 1 * *l <^ so SO so so so so so so so so so >c so so so so SO SO SO SO so so so SO so SO CO ^ tOSO OX. OX M tx *O O *O $ OX to O to *# M *4- O t^ OX OX 00 >* so N OO **"* < 3 -i- 4- "+ O *f '**}' *}'} -4- -f "A tOso SO SO so SO SO SO SO lv.sO SO O t>. } J t > >O SO so so so so so so SO so so so SO so so so so so so so so so so so so so SO a H CO > so t^so N so ox oo HI O ****" O ox. to HI so oo O (> f* *t- to t- M sor^ t> o* f i"^ t ?"J" *?" *. " 1 ^ ^ Q * ^^ ^" ? *? *>* 1 ^. . 9 t ^^ # * <1 *i ^ f*. 3 SO SO W1 MO wso o "> to toso oo ^ N so m M S! eat^l* OOtosO'J- ox^ tooxoxOtooo^ t^tooooo^-oOjn Tt-tN 9 ^H t^ >OSO SO txso SO SO *O *O *A toso *A ^ 4" "^ *O toso so SO SO SO MJ vt ^5 so so so so so so so so so so so so so so so so so so so so so so so so so .;O^N"* O O so tooo to toso so*tr>M OO'l'4'fto Mtvx HN M q oo oo ^ soso ^xOx>H to^ o *too *r t>.so * M N oo "rso so ^ to to q "S SO SO so SO SO SO so so so so so so so so so so so so SC so so so so SO so so C to O t^ txso soo wr*oosoooOx ox^O vri NM QMIOW ClJM^ tOt^OXHltosO* w tooo N to ^^A *O OX to N to to to O N N ti ill m i5 SO so so so so so so so so so so so SO so SO so SO so so so so so so SO SO SO O oo o t>- M oo oo ^ O A f^SO OX OX tO OX^ OO M *** tt ? t* t ' v. *o ^T^r^T^*o^ TT^O ^^J"^~ *o ^ to *o ^t so so so so so so so so so so so so so so so so so so so so so so Z N to os o p t~.oo to r M ts.se OXPTJ- *"i'*' M '* 1 9L *"* * vv * "^ *^ ** >. s 4 . , . * . ? . P * t tn * * i.**_i.'_i. i-iA,p5 >ca SO so SO so SO so SO so so so so so SO so so SO SO SO SO SO so SO SO so SO "Q 72 1 CO HL, J=5 ., * +* SO 1^00 OS O M N tO * IOSO txOO OX O * N tO f OSO tXOO OX Ol M Ml P APPENDIX 337 M fx l.se os "> J- O 00 w oo M os to o M so to lv Os e ui N N oe oo oo *0 ""* 't" *? *0 ** 'T "0*^3 Q P, P **! "? P, ""I ^ o *T "}" *, 41 ^P0 M , n J~ e r e T's5 . Os >rt to os M SO ON WSO soOM 00 M O so > r OO"* OOOO OsQ OM O OsoVost^* so^Av^^Atov^ lA ^-so sc oo oo oo t^so Ix tx M co Zf* ^ M , MMW M ^ WM S^ MMMMMM *^^S S2 M d O H OOOM ooiOi*oooo ^ ^ V< J T *'i t >P^^* T f ododoo* tC.Arj-'iWT}- d no^-o ooNtoO^os M tooo o ^ "^j^jif * *> ! ^ "?* *? & 'f ^ * T *; ^ ^ *> *i+- 1 *? i li A A\o >O n A \r\V3 w iA xAi Avo "^vo vo t-*O vo vd ti. tx. o rir> >n\o*Ol>.tv vovivl^ 2.NNN NNNNNN NNNN NNNNN NNNNNC* *^M. M M MMMMMM MMMMMM MMMMMM MMMMMM O P^ ooo tx MIMVO^OMO M\O uioo MO MOPMNOO oo om 3 c ^ o ? *?^> * > 0r t 1 tN < t ^ > "t ? *>"? T^ *> 1 *J *? *? "t ? g ^(^ooooooooooc>(>(>,d6* ddMOOO* O>->OOO* O MOO .v W^ N NOOVO\0\OM M0t<*00^ XO O "> "-00 00 M M ^5*5. O Jgootxto ^>N\oootn vri^ co N vn e> N t^-j, * * Q N ^^ OO <> ON ^j. ,|. OO * ** ^M<>O* e>MdC)de>N odcs(> <>od r^. t^-oo o\ovONv ooooooox 2^ ' ^SMM HSMM^M M^MMMS MMMSSS ZZZZ 2 M MMMMM MMMMMM MMMMMM MM JlJ SO N SO N OS Vt ^ . t^l^QMSOO^ ^"^^^^^ *? i ^M MMMMMM MMMMMM MMMMMM ^M MMMMMM MMMMMM MMMMMM SO OS COOO tO ^ Q OO O t*> VS, M *A tx O tOSO f^ O SO O I s1 * ^ t* SO * OO OO M to C4 ^ *^ f^ ^* SO O^^^ j b M MMMMMM MM MMM MMMMM M MMMMMM MM MMM MMMMM m X * - 338 APPENDIX P fx * p NO OOtxu^M^N >r> tx oso tx pj M pj p) M so toso tx PJ XH NO NO NO NO NO NO NO NO NO NO NO NO NO N) NO NO VO NO NO NO NO NO NO NO NO NO r^ ^OO txOO N ^- t*l*O M N *> O M f^OO M N V O\O^-O>CTN MSOVO"^ I~.OO *J 9 ^ 'f *?*$" *>^ 1 *? ? *?* > T <^ ! ^T 01 ?* ^^ ** "t 1 Q * o 'foo TJ- q <* t>NO>A'*'^}-tn vim V wlt&tn Aiir>ri- l '>r>>A oo'>>AA)A ^- .f ^- ^-NO to Q NO NO NO NO NO NO VO NO NO NO NO VO NO NO NO vo so NO NO NO NO NO NO NO O S3 NO NO NO txso nO oo Q pj to q tx q so NO NO NO RNO *" IxNO NOSO SOSONONONONO NO SO SO NO N SO NO NO NO NO NO NO SOSOSOSO txNO T3 B! MM W^VO rxOO M W* IrtSO 1X00 OS O M "S fe * *"! Q" ^ c, N r,c NWW ; g ^ APPENDIX 339 oo to pJ ve Q tOMOeooow^ vo N oo vo w to w> t-% oo r^oo M ui moo o 9 "? *? *? ^ Q * 1 ?* Q 9 "0 *> J V00 , ; c* 00 , ^ *}" N.J^ <"J ^ *} N oo oo q Q* to co *4" *$ N N N n M O O d O M p" -i pj pi pi pi to to <"" "^ *t* ^" O . vivo ,, A ri- * co vo O to ui tv w> MVOQoOMrt- O f>OO >. O X > vo t^.^ to ,_ P tot > f i* u ??'? ve r 1 '^' *?* p oo O to pj o->^ t^ p> . ft N M to ^ M w ^ *^" totOto^ ^-tOtopitotO r^i N ro TJ- u-i -4- ^^^t' ^J'^ *AW ^< W M OO O ^ Q^ to O t^vo OO OO PJ to to ON ^. \ft l^i OO O to O t* OO O w tO O^ *O O ^MvowinVo l^^to^-vo^ CTvvo^ooOHi^ oqoor^vooo^vovtsq^-Of* o oo t>. ti .^.vci * vo vo vo oo o>oo ooooooooosoV ooddddd oVdwdw^o O000o"0 000000 OOgOOO o5SM O^5MSwO n *f * ^f f TJ-VO' vo* t" t>.vo vo" vo t*>\o 4> t>-vo A ^vovnt^oONO t-."">tovoOvf^ meow MOOO tod d>rfvot^dd*ooc?>cvoooooo od^d"*~fil. ^ oo O ON ; <5 o 1 o o" o o' o"o o"o 5^ 5" o ' o M M S S M' M'^ "So" b oo o> to q to to to tOju to i>. o N vo ^^ ^0, ^0 ox q N 4) *0 ^" 'f "C 1 P * P oo .M Ot S- l ^n < NO "o "os P? woo ^'* - ^ " ^ " ^ *" Osvo O O OO rt 't- r^OO ^> VO irt to P> flVO VO O O O tO OS "> OOO VO tVO .^ c j_ t^vo P. ^^ * 'foo N 11 oo ^ oo ^j- q ^>vo ^>jj os q ONOO t^.^ *>*>qoovo ^ g> os o\ os os Ov os os os os os Ov os o\ os o\ ON ov os *O ** S "o S> a 340 APPENDIX 10 tn <* wi t* p*ao vo f v* &, * * O N ovoo to *o T* *?" 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'f" 00 , *0 ?t *? *0 M f ^ P - to 10 < vo P # s O M^ 1 *^ P r- - < . .o (_j o NO vo so vo vo so NO NO so NO so so so so so so so i>. o\ O t~ Q NO "ioo to to to M os O oo rv tx M N > to w os os t^oo o *j fooo < oo 4 *r *i* 1 *i" f *? 1 *. *! *^** , P T* ^t~ T *J"* 1 P * < ^ 1 i. ^ p >j oo oo oo vo r 4- o\ O *j ^o N ^t- o O os vo r^ WOO oo oo oo oo tx. oo oo oo oo O ^ ~ -t^o- r> P SO M tx M OO OO Os (^ tx OsoO ^3 to I I I c/3 v oo O l~-oo OONONM tovowx^r* SOOOONIOMOO ooowiototo oooo J-j CJ <^OO ^ OS ^- O> VOSO ^n O w *< "> 'J'^f OS O tOSO M SO ^ NO 5 M t^-OO ON tO NO O i vovo tovovotovovo vovovovovoio tovotovovnvo vovovovovovo vo vo z o\dsdoooo o\dsd vo vo\O . , . . wMtsid MwwtoNw w sdo NO NO NO NO NO NO NO NO NO NO NO NO NO VOVO ^ OS 10 NO NCxtOONMOO WOOtOMMQ MVOOOVOI^SO SOMSJtN.ONN.^ M OO OO to II so ^ tOOO q OO Os VO^ ^^PP^^i* P^^PTPP 11 ? . *se oo so to *-so so so ON O oo o M JJtOoooo^ toOOvrfooso^ ., <"s>q^-OO J* t>. ri C. oo oo t^. tisd NO t>.sd t>.sd vo>osio -r- tototo UM NO so NO NO ^O so NO NO NO so so so NO NO so NO NO so NO so so so c * ^^I^P* ^^t^ ^* oosdtxNONd sd^*i-to*j-T}- ^-Ti-^j-^-iOT}- ioi- so NO NO NO so so so NO SO so so so so so NO so so NO NO M M t r*- VONO o r "^so _rt * 6C S APPENDIX . to oveo f. 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S S*i^ Os vo vo to O M OSOOVOIV 100st>.0000q 00^222" EL Ssvo ** ~ M toso fsl to Os* 1000 Os *._ ._* -4- Os OS Os vo ^- OOOOoOtOW^ O OSM * fiMfsipiNtslrJwwts; ddOO OOsOOOO Os IOs < OOMOOOOMOO MOOOOOO OOOOOOOOOOOO 00^00000000 t>. 00 ts .OOVOVO M P t^ Os to * OS to 00 OS - to*. O IHX o v T }' v *)> o vy...* .. S'S.^^. ^ll ti ti li^. *.*. * "S.^000000^ dsoo * ds ov os oVoo oV o- o\ oo oi < ?j'S.'S. oo ^S. fc t^ t^. t^ txoo oot^t>-t>. ts>t^t>.t->t^. r c* Is l>.t> c^r sotovoH-M VOt^NtoQto O SO 00 Os Os O to MVO to WJ V 2 s ;S < 5 ?S c , oo ?ososvo~. o ^-osS o. "^oo o o oo f- q q **> i n r*- ^J-oo oo oo Q JO Ov^ OO 'J- ^ w to O ^ Ov CN OV O O O O too* O vo VO tx tx tx tx tx\O tx |x tx\O VOtxtxtxtxtx txtxtxtx IxVO . f * Ix, txOO ** O^OtO^O VOVO *^# oqooMqxjfVOTj-wtoq to^ o> to 5* >A vovovn4-toto pi^j-in>nvovo tnvov M tOOO ^ tO O M 00 O N VO t! ^ O ** to v\ Q o\vo ^-vo ^oo O w \o N o^oo tovo ooO to o I"* to OO JJ VO ON O tx^ OtTj-NVOMM^OOONOXtxNq^ MNOOVr>O\ rj-^, tx tx M to. [T tx pv O ov (4 H M _ tOMNNN VOVOVOVOVO m o O tovo vo ox N *i f oo oo vi ui ix M tx^ txoo ._ to to n^ ox tx NfiNtO^t- VOVO txtxtx VOVO H- vo vo vo vo VO *^ pn >> ft to H ~ tooo O oo vc oo ^ qtoq MMMHMM WMMrJNN NHtOtO^*T^ ^^^tni vo vo vo vo vo xC vo VO VO VO VO VO \o VO vo vo VO vo VOVOVOVO *O - "o en J3 6. +~ ^ f^ to ^- invo txOO o O M N co ^+ invo txoo Ox O * b i> APPENDIX 343 os o" >? ^i oo ao so *** ^ M O tx to O O oo tx,oo OQ tx v\ o tovo to Ixoo ^ N to |NJeo ^i-sovOls.^ topi oo oo oooooooooooo . oo ON N to O *> M ui ON VN.VO N to to coooto u ^ooso Ou^vsoooovn M vn -^- o o o t^oo vi to M so o- oo ^5 oo ONONQOOO d^OOOsOs C5d*< M >< NMtOtOtOtO tOtOtOOV Q is. tx 00 00 oo 00 OOOOOOOOt^tx OOOOOOOOOOOO OOOOOOOOOOOO OOOOOOtH XJtvONVO OOtOHQ^ts. to fv.00 O t 1 - t> tOOO M ^ *? * 1 <* * 9 " *> ? r Q * ^ ^ 't * *t ^ oo 'f M v-iwirj-ri-Ti- 'iA>Ai s oo 0000000*0000 oooooooooooo oooooooooooo oooooooooooo OO VO tOMMtxtOO OMO>WTj-^ O^M OOOOOQOO OOOOOOOOOOOO OOOOOOOOOOOO OOOOOOOOOOOO 00 OC 00 00 00 OOvOooQto rvotorh rM \og^o ooo * T}- 4"*" 4 ' " * oo oo oo 8^, OC QQ VO ft 344 APPENDIX VOrJ-VO O O N *J- vd M OO OOO l IN *J- OO W O to 00 OO 00 OO OO OO 9> Ov O O Ox OVOO OO OO OO OV OX O\ O vo vo vo vo vo vo vo vovo vo vo vo xo vo vo vo vo vo vovo ^ T^ M vo vo to t> O f> vo N et + T? ** "^ " d o\ d d d oo VO VOVO vo vo vo M vo vo to t> O N Q * oo O *~ Ooo f* vo t^ M hO ON ON O OK \ vo ON r^. 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TJ-TJ-tOtOtOtO tONWWwO ON vn vr. vo vn vo vn vovovovnvovo -j- .VOONPlPjut^ tOWVO ji *f O P o-oo rx^ vnvo vo ^tototopipipi pipipj fevnvovnvnvnvo vovnvn O N OO VO to vo o vn vn vn vn Noovovot- O j_ t^ Nt-~oowONOVOMOtoON t>.^ vn CTS TJ- o oo T>- # w oo ^ ^ i^ -. .p <.-. ^, jg- JiJ^MwN fcJfipiMNto totOtOtOPIN PNPPIP>to tow f- -H -- Jo vovovovovovo vovovovovovV; vnvnvnvnvovn vovovovovovo vovo73.^ 5 O ffi fj 4|( txOO ON O H o T*- VOVO t^OO ON O bC "",3 INDEX "A. B. C. of Stock Speculation," 28 Aetna Fire Co., 105 Adamson Law, 201 Agriculture, Department of, 47 Alexandria, Egypt, panic 1907, 140 Amalgamated Copper, 35, 50, 89, 221 Anaconda Copper, 223 Auction Bridge chances, 145 Averages, See Stock Averages Babson, Roger W., 52, 197, His theory, 53 Barrens, 237, 250, 251, 253 Baruch, Bernard, M., 66 Bear Markets, 45, 254 Boston News Bureau, 35, 222, 233 British Company Law, 84 British National Debt, 199, 2OO Bucketing, 77 Bull Market, 31, 32, 44, 256 Cammack, Addison, 149 Carthage, 163 Chile panic 1907, 141 China, banks, 167 Clearing House Certificates, 121 Consolidated Stock Exchange, 271 Coolidge, Calvin, 257 Coxey's Army, 214 Curb Market, 84 Customers, 78, 259 Davis, John W., 257 Definition of the Market, 65 Dolliver, Senator, 8, 46 Double tops, 32 Dow, Jones Averages, 7 Dow, Charles H., 21, His theory, 4; True of any market, 14; His first description, 23; His panic dates, 25, 269 Economist, London, 141 Elijah, Mendelssohn's, 112 England, Bank of, 167 Esch-Cummins Act, 191 Farmers', pool, 48; and Wall Street, 47 Federal Incorporation, 83 Federal Reserve System, 121 Flood, Mississippi, 33 Floor trader, 76 Fluctuation, Daily, 6 Ford, Henry, 165 Forecast, successful, 32, 252 Gamblers, 67 Gambling and morals, 265 George III, anecdote, 79 Gould, Jay, anecdote, 67 ; 268, 270 Greeks, 165 Hamburg panic 1907, 141 Harriman, Edward H., 18, 212 Harvard Chart, 122, 208, 238 Hill, James H., 18, 141, 212 Huxley, Prof. T., 194 Interstate Commerce Commission, 192, 193 Jerome, Jerome K., 10 Jesurun, "waxes fat," 216 Jevons, William Stanley, I, 116 Keene, James R., 94, 107, 147, l82, 221 Lefevre, Edwin, II, 148 "Line," of accumulation or distri- bution, 6, 32, 82, 172, 250 Lincoln, Abraham, 217 Listing, 82 London Exchange, 82 McKinley Election, 82 Manipulation, minor importance, 49; cannot make primary move- ment, 50; Where possible, 50, 51, 234 Marathon, 165 Margins, 266 Marx, Karl, 163 "Matched Orders," 85, 229 Michigan Southern corner, Il8 Morgan, J. Pierpont, 17 Movement, Daily, 6 " Major, 5, 40; dates, 43-44 Primary, see major " Secondary, 5 National City Bank, 222 Nelson, S. A., 28, 29 News Collection, 236 Non-Partisan League, 150, 2l8 Noyes, Alexander D., 1 12, 161 Overend, Gurney panic, 26, Fail- ure, 118 Panic Years, dates, 2; 24 Pennsylvania Railroad, 113, 256 Persians, 165 Piez, Director-General, 202 Pratt, Sereno S., 128 Prediction, 1903, 98, 99; based on all knowledge available, 42; correct, 61, 62, 63; a bad, 138 Punic War, 163 "Railway Business Association," 247 Rea, Samuel, 113 Rhodes, Cecil J., 17 Rockefeller, John D., Jr., 232 Rogers, Henry H., 8, 41, 223, 231; Anecdote, 63 Rome, 164 Roosevelt, Theodore, 160, 21 1 Rothschild, anecdote, 94 Sage, Russell, anecdote, 94 San Francisco Earthquake, 44, lOi; Fire, 102, 103; Loss, 105 Sherman Silver Purchase Act, ii3, 214 Short Selling, 8l, 272 Sims, Admiral, 198 Somerset House, 84 Specialists, 79 Speculator, professional, 70 Spencer, Herbert, 194 Standard Oil Group, 8, 41, 64, 232 Steel, see United States Steel Stock averages explained, 4; Suf- ficient in themselves, 40; A unique barometer, 56 Stock Exchange, closing of, 174 Stock Exchange Governing Com- mittee, 258 Stock Market, bigger than mani- pulation, 41 ; always right, 45 ; never thanked, 46 Stutz Motor, corner, 12 Swings, major, 40; dates and duration, 43-44 Theory, Dow's, see Dow Thermopylae, 165 Tips and Tipsters, 238 Trader, an intelligent, 69; pro- fessional, his advantages, 74 Trading methods of, 36 Transportation Act of 1920, 191 Trinity Church, IQ Undigested securities, no United States Steel, 52, 225, 244; its value, 93 Unique, applied to Barometer, 56 Unlisted Stock, 82 Vindication the theory's greatest, 196 Virginian Railroad, 232 Volume of trading, 136, 177, 205 Walker, Guy Morrison, 202 Wall Street, Extent of its knowl- edge, 46, 47, 58 Wall Street Journal, The, contains all Dow's theories, 28; 8, 223, 252, 253, 255, 257, 269 Walsh, Dr. James J., 168 Wash Sales, 85 Watered Labor, 87, 2O2 "Water in the Barometer," 87 Weather Bureau, 56 Wells, H. G., 169 White, William Allen, 215 Wilson, Woodrow, 191 World War, 251 Wormser, Louis, 131 Xenophon, 165 Xerxes, 165 JJ.CSB IIBRAR* y a.4274 THE LIBRARY UNIVERSITY OF CALIFORNIA Santa Barbara THIS BOOK IS DUE ON THE LAST DATE STAMPED BELOW. Scries 94X2 A 000496133 o