34





The Record and Guide.





October 21—28,1882





Our Prophetic Department.

QuESTiONEE—The doubt you expressed last week, respecting the
solvency of roads built through wUdernesses, is evidently just now
being entertained in WaU street, for the weak stocks, those which
led the decline, on Monday last, were Texas Pacific, Northern
Pacific and Denver Pacific. The Grangers, the coal roads and
Vanderbilt's trunk lines seem to have withstood the "racket"
tolerably well. But the Over-the-Continent new roads are evi¬
dently in disfavor with the speculative public.

Sib Oeacle—It is hardly safe to say that any of these transconti¬
nental enterprises will collapse in the near future. They are backed
by very powerful interests and will, one way or another, all be com¬
pleted. But they will all in time fall into the hands of the bond¬
holders, and even the first mortgages must be scaled down before
interest can be paid upon them regularly. As I said last week,
nearly every road west of the AUeghanies has been through bank¬
ruptcy from one to three times. We shall build 10,000 miles of rail¬
way this year, much of it through desolate regions without inhabi¬
tants, and a new road can no more create its own business within a
short time than a man can lift himself by his boot-straps. The
Northwestern road was reorganized three times; the Northern
Pacific collapsed in 1873 ; the Denver, Texas Pacific and Missouri,
Kansas & Texas will all, in due time, be in the hand?; of receivers.
Take the case of the Texas Pacific ; it runs for hundreds of miles
through a country where there are not two inhabitants to the square
mile, yet its bonded debt is $30,783 per mile, and its stock debt
$23,000 more. The Denver Pacific was profitable during the mining
fever, when it had a monopoly of the traffic bet\''een Denver and
Leadville, But the line now constructed through Colorado and
Utah to Salt Lake City runs through an uninhabited wilderness.
The road cannot pay for the next twenty years, unless on through
business, which it cannot get until there is some way of reacliing
the Pacific coast. But, nevertheless, the construction of these roads
will go on and the country will be benefited thereby, tliough san
guine investors will be the sufferers.

Questioner—How does the stock market look to you now ? Will
there be a rally in prices?

Sir Oracle—In The Record and Guide of September 2, there
was an article predicting the bearish market we have had for the
past six weeks. The reasons given in this forecast were that every
faU a contraction of from thirty to forty million took place in our
market, the money being demanded to move the crops. This con¬
traction could not fail to injure stock values, for the time being.
It was pointed out that in 1879, 1880 and 1881 our local market was
relieved by the importation of large quantities of gold, which was
not to be expected this year. Then we were importing more and
exporting less than in previous years, which would tell against
stock values.

Questioner—But is not the time near when the money which
has left New York should return to it ?

Sir Oracle—Yes, about the middle of October is looked upon as
the period when the exchanges should turn in favor of this city ;
but w-e are confront'^d by certain other facts which are affecting
the minds of speculative operators. One is the elections which
seem to indie ite a change of governmental policy. Now, as Wen¬
dell Philips used to say, there is nothing so timid as one million of
dollars, except it be two million of dollars. The large holder of
securities scents danger in every political change, and as it seems
pretty certain that the November elections will but repeat the
peoples verdict in the October elections, there may be doubt and
hesitancy as a consequence in the stock market for the remainder
of this year. Yet all the. indications seem to point to higher
figures. Stocks are undoubtedly a purchase for ,a " long pull,"
though they may go lower. Money ought to be easy from this
time forth ; railroad earnings are steadily increasing, and now that
cotton is going forward freely as well as grain, .exchange should
soon be quoted at a figure which would permit gold imp>,»rtations.
But for one I do not look for much of a buU market until after the
holidays. The great army of outsiders have been badly hurt this
fall and they will be very cautious in buying stocks when the next
upward movement takes place.

Questioner—What will be the effect of the new gold certifi¬
cates?

Sir Oracle—Now you are asking a very important question.
When our sole currency was greenbacks and bank notes, before
resumption, this paper money returned to New York on and after
the middle of October; but since resumption gold sent away from
New York to the South and West has stayed away. One reason
for this, doubtless, was the cost and danger of handling it in large
sums. It is barely possible that these gold certificates may move
more freely and come Easfc as well as go West, in which case there
might be such an accumulation of funds here as to stimulate spec¬
ulation anew. There is, however, one peril in connection with gold
certificates which bankers and speculative investors should keep in
mind. The gold reserve in the Treasury is low, and if some
national catastrophe should take place, there is danger of a tem¬





porary suspension of gold payments. Suppose something should
occur that would make bankers fear that the Treasury reserve
would not hold out, what is to prevent the presentation of green¬
backs to such an amount as to practically exhaust the reserves ?
For every dollar in gold there are three dollars in greenbacks in
existence. A simultaneous demand for this gold would lead to a panic,
and cause a temporary suspension of specie payments by the Gov¬
ernment, and yet the gold will be returned to the Treasury vaults
in exchange for gold certificates. The gold reserve held to redeem
these certificates could not be used to discharge the greenback debt
of the Government, and the curious spectacle might be presented
of a Treasury overflowing with gold which would be unavailable
for keeping the greenback convertible into that metal. Our finan¬
cial system is like a pyramid; its apex is in the ground instead of
the air, the reason being that for every dollar in gold in the Treas¬
ury, there are seven dollars in greenbacks and bank notes into
which theoretically it may be converted. This dangerous condi¬
tion of things will not be realized until we begin to exjiort gold in
large amounts, which we must do sometime or other as we are a
gold producing nation.

Questioner—I have been asked by a Metropolitan Elevated
stockholder to get your opinion of the financial future of the ele¬
vated road system.

Sir Oracle-—The very heavy and continuous increase of trade
on the elevated roads tells its own story of the future profitableness
of the three stocks which represent the elevated road securities.
From October 1, 1878, to September 30, 1879, both roads carried
40,045,181 passengers, with cash receipts of $3,526,825.26 ; from
October 1, 1879, to September 30, 1880, 60,831,757 passengers, with
cash receipts of $4,612,975.56 ; from October 1, 1880, to September
30, 1881, 75,585,778 passengers, with $5,811,075.85 receipts, and from
October 1, 1881, to September 30, 1882, 86,361,029 passengers^ with
$5,973,633.41 receipts. This answers the question as to the futilre
value of the stock of the roads. If the Court of Appeals' decision
in the Story case should be interpreted to mean that the elevated
roads have the authority, under the right of eminent domain, to
seize all the property its traffic effects, then I do not see why the
shares of elevated stock should not represent fabulous sums, for
while some few parcels of realty have been injured by the con¬
struction of the roads, the addition they have made to values
generally has been simply enormous. 1 do not see how, in equity,
the road can be forced to buy property they have injured without
admitting their right to purchase other property they have
benefited, the valuation to be made when the roads were originally
constructed, and when real estate was at its lowest ebb.
All accounts agree that the structure has fulfilled the promises of
the engineers,  and will need but little repairing.

Questioner—Do you tliink that Gould's action ought to be
endorsed ?

Sir Oracle—Not by any means. If there was justice in our
courts the Manhattan leases would be declared void, because of
non-fulfillment of contracts. The Elevated and Metropolitan
stockholders were deliberately plundered in order to enhance the
value of Manhattan stock, which Gould, Sage and Field, by trick¬
ery, bought for a song. The.New York Elevated stockholders
ought to be in receipt of 10 per cent., and the Metropolitan stock¬
holders, at least, 8 per cent, on their investments, with the promise
of still larger dividends in the future. But by the arrangement
made between these three persons without consulting tho other
stockholders all over 6 per cent, will inure to the Manhattan stock¬
holders—that is to say to themselves.





Worth a Year's Subscription.

Editor PbECORD and Gcidb :

Tour paper now is not only a business paper, but a technical guide to
the different arts, as well as a first-class instructive paper for fche domestic
circle. That ifc merits a circulation among fche arfcs and trades is unques¬
tioned. I have gleaned sufficient knowledge from ifcs first fcwo numbers
to have amply repaid me for its entire year's subscription.

October 14.                                                     Edward C. Oppenheim.





Who Should Bear the Loss ?

Editors Record and G-tjide:

Will you please be so kind as to give me your opinion upon the following
question: A party takes a house by contract to fresco house and repair
roof for a consideration. Two or three months after delivering the upper
floor to the owner in good order, a leak takes place, during this last great
storm, and damages ceiling. Is the party responsible who did the work
delivered in good order for such damage, even if the contractors are still
in the house, and finishing their work in the lower part of the house at the
time of said occurrence?                                                             W. H. R.

Answer: We should say that everything depended upon the terms of
the contract. Without knowing its provisions, there would be no way of
settling the dispute. As stated by our correspondeot, ifc would seem to
require a judicial decision.                                                           Editor.





The largest locomotive ever built has been completed at Paterson, N. J.,,
for the Central Pacific road, and twenty-four more will be constructed.
Their weight will be sixty-two tons each, and they have eight driving
wheels.