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CHAPTER XII.

CORNERS.

FIFTEEN or twenty years ago the effect of a wellorganized corner was so tremendously drastic that it was apt to leave an enduring mark on subsequent railroad history. But of late years, owing to increased publicity and a more general diffusion of knowledge on the subject of railroad business, the occurrence of an effective corner is comparatively rare. Only at very long intervals are the special conditions necessary for complete success found in juxtaposition. A successful exhibition of the process postulates as a matter of course, first, the existence of a market in a particular stock so active (in its speculative sense) that extensive short sales have been made, and the amount of such sales must bear a very large proportion to the total amount of the particular stock. Secondly, the campaign must be engineered by fairly strong and adroit manipulators. Thirdly, these must be able to rely with reasonable confidence on the entire good faith of their confederates. The leading conditions being fulfilled, it is easy to see that the quiet acquisition or control of the whole or nearly the whole of the stock of a given company will enable the holders to squeeze the short sellers, and make them pay for their release whatever price may be demanded. It has been discovered however by experience that the combination of these necessary elements is very rarely perfect at all points.

Although the holders of nearly all the stock of a company-in connection with which a corner is projectedmay feel that they are logically in command of the situation, their corner may be broken by an irregular issue of new stock. This was the method pursued with much effect by the late Mr. James Fisk Jr. Or again they may be conscious of holding nearly all the stock of a company, and have orders in the market to buy up the small outstanding residue at comparatively high prices. This they can afford to do in view of large profits to be realized hereafter. But presently they discover that there is apparently no end to the amount of stock which they can purchase at these comparatively high prices; and it eventually dawns on them that this high-priced stock which they have lately purchased has been unloaded on them by one of their own confederates. On the whole, it may be considered-for practical purposes—that the oldfashioned corner, in its highly picturesque and dramatic development, is played out. More or less remote imitations of it are still in vogue. But the enquirer will probably be well advised to leave the corner business alone. Outside meddlers with a corner may generally count on getting hurt in one form or another; and, apart from the doubtful morality of the transaction, the investor will generally find that the game is not worth the candle.

CHAPTER XIII.

PUBLICITY.

WHILE it would be idle to suppose that publicity is a specific for all kinds of irregular or defective administration, it is, to a certain extent, rightly associated in the investor's mind with open and straightforward management. The kind of discrimination which has incited pub lic sentiment to favour drastic legislation against railroads would have been in a great measure restrained by the action of publicity, if applied in due time and by wellchosen methods. A judicious and business-like tariff, framed not necessarily by Railroad Commissioners but by skilful and responsible railroad officials, would of course have failed to give universal satisfaction; but it would have afforded all sections of the public the same kind of chance within certain well-understood conditions and limitations. Thus, for example, the right of a transporting company to recognize a distinction between wholesale and retail business, between large quantities of freight delivered at regular intervals, and small quantities uncertain or capricious in point of delivery, would only need the condition of publicity to make it work fairly. It would soon come to be understood that, in pursuance of established commercial canons, the wholesale regular shipper has an intrinsic right to better terms of transportation than the small and irregular shipper. If I want a single dinner provided for me by a restaurant keeper three days in a week, but am not sure on which days in the week or at what hour in the day I shall require it, a business man will arrange to supply me at a reasonable price. But, if I extend my order to fifty dinners a day of the same quality, to be ready certain at two o'clock every day for three months, it is plain that I have a right to expect more favourable terms. The difference between wholesale and retail interchange is a recognized factor in all departments of supply and demand ; and it is difficult to see why transportation-considered as a commodityshould be exempted from the rule, except in cases where it becomes part of an organized national service, like the Post-office or the Telegraph in England. Obviously the making of profit is not essential to a public service of the latter kind, but merely incidental to it. If a profit is made, so much the better. But, if loss accrue, the ratepayer is in the last resort responsible for a deficit. If a public service established on this basis chooses to ignore the distinction between wholesale and retail business, it is of course at liberty to do so. It is not so clear that a State has any right to compel a trading company to ignore this distinction, when it has specifically recognized its position as a trading company, and has accepted a large valuable consideration in exchange for powers conferred under a charter. The advantage of publicity in such a case would be to make quite clear to everybody the terms on which a transporting company could effectually do its business. It would accentuate the proposition referred to above, that it is no part of the business of the purveyors of transportation to equalize at their own expense the inevitable difference between the strong and the weak trader. The wisdom or unwisdom of embarking in a particular line of industry ought to be judged of by each individual trader

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on his own responsibility, with direct reference to his own business aptitudes, capital and environment, and not by the transporting companies of whose services he desires to make use.

While in the case of soundly administered companies a yearly report is found sufficient for all practical purposes, it cannot be seriously supposed that such a mechanism is an adequate protection to the average investor. Let us suppose the case of a speculative administration which, with the aid of its outside friends, has decided to put up the stock. Their track and equipment are badly run down and need large outlay to restore them to average working condition. But their gross receipts are actually, and their net earnings apparently, large; and as the party in control have decided to put up the stock, it is thought desirable to pay a dividend on preference shares in aid of the projected boom. The day for an annual report is approaching.

. What is to be done about the floating debt? It is nominally stated at (say) three or four millions of dollars. But the equipment needed for the new “boom” will run it up to (say) six or seven millions. Now, suppose all the rolling stock and equipment that is needed be procured by means of paper maturing after the date of the official report. These are of course engagements and liabilities which must some day be met, but they are not strictly debts, because the paper has not matured. Our imperfectly informed enquirer may well imagine the annual statement to represent the condition of the floating debt, and may invest freely. But when the next annual report is made he discovers that he knew very little about the true condition of the floating debt at the time of making his investment. Here again it is not impossible that publicity derived from quarterly statements might conduce to the

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