The Atlantic Announces as a regular monthly feature a series of noteworthy articles on FUNDAMENTALS OF FINANCE THESE HESE articles, brief, concise, authoritative, will appear each month at the beginning of the financial section of the magazine. The first, which will be found on the next page, is entitled Wall Street's Revolution and is the work of WILLIAM PETER HAMILTON Editor of "The Wall Street Journal" and a recognized expert, with a national reputation in this field. Mr. Hamilton has prepared three more papers which we shall publish in the coming months. Equally distinguished writers will continue the series. This new Atlantic department is not to be confused with the conventional "advice-to-investors' columns of the daily press. It will not deal with individual problems or specific stocks and bonds, but will present important aspects of the basic principles of finance and investment, interpreted by writers of long experience in and intimate contact with affairs of the country's great financial centers. Though concentrated to the 1000-word length, these papers will be similar in tenor and interest to the RIPLEY, CALKINS, and other business articles of recent Atlantic publication. Indeed the widespread response to those celebrated articles has inspired this new department. WALL STREET'S REVOLUTION BY WILLIAM PETER HAMILTON WHEN advice is asked of those who work in Wall Street, it is usually easy to tell what the inquirer needs, but by no means so easy to divine what he wants. Does he want his own judgment confirmed, having already committed himself? Does he want the poor relief of having someone else to blame in a matter which entirely concerns himself? Is it advice that he wants, or is he intelligently seeking for something better than advice, better than the best opinion? When your wife asks your opinion on her new hat, what course do you take, as a man of sense and experience? She did not consult you about the purchase, and that alone should give you a measure of the extent to which she values your advice. You therefore tactfully find out what she thinks herself, seldom a difficult matter, and give her additional reasons, especially if she is not in a position to buy many hats, for congratulating herself on her taste. In more than a quarter of a century's work in Wall Street there has scarcely been a day when I have not been asked for advice or opinion by investors and speculators. Early financial experience in other continents than this, and a happy association in Wall Street with men who were, and are, building up better standards of financial journalism, have taught me how to help such inquirers. When they ask for advice or opinion I give them information, or I tell them where information is to be had. Little more than twenty years ago brokerage houses in Wall Street, almost without exception, were dispensers of advice. They were astonishingly ignorant of the facts about the securities in which they dealt. They took their opinions on new flotations from the great private banking houses which issued the securities. These opinions could scarcely have been disinterested, for the broker could hardly afford to offend a house which could enrich him with remunerative business. There were then three private banking houses of the first rank, and a relatively large number of houses of high standing, whose reputation was unquestionably a substantial guarantee to the investor. These houses all found it helpful to coöperate with each other in that distribution of securities which was, and is, perhaps the most important work of Wall Street. The broker recommended a new bond to his customers, or investment in a new stock issue, with little or no analysis of the in vestment. In a quarter of a century there has come about, quietly, gradually, almost imperceptibly, a revolution in the relation of the investor to his purchase. A modern brokerage house, whether it sells securities to its customers or confines itself, as some of the best do, strictly to executing orders on commission, gives its clients little or no advice, or even opinion, but only precise information upon which the investor can form his own judgment. These houses employ trained experts. They have no use for, or patience with, such quack stimulants as 'inside information.' Modern investment demands and receives, both from the Stock Exchange and from the corporations whose securities are listed there, a disclosure which leaves the once powerful insider, so called, little better off than the man intelligent enough to understand an itemized annual report or a quarterly statement. It is true that there is always an element in any financial community - which instinctively opposes change. It is usually comfortably fixed in the matter of wealth, but is of dull intelli- gence. Changes have come about so gradually that its opposition has not been effective. It will be clearer to call - it obstructive rather than conservative, and I can recall presidents and governors of the Stock Exchange who were - well within that class. This is a revolution. Information about the real position of a corporation, - even twenty years ago, was, with few exceptions, regarded as a perquisite - of the higher officers and especially of the banking house which did the company's financing. Registration requirements by the states granting the original charter offered little or no real protection to the investor. Charters are granted by forty-eight different state legislatures of varying degrees of intelligence, and still more varied conceptions of corporate honesty. London has the enormous advantage of a homogeneous registration, but it may truthfully be said that twenty-five years ago, or even up to the passing of the Companies (Consolidation) Act of 1908, the conditions in the London market, as regards the information of the investor, were not greatly different from those in Wall Street. In some ways we have the advantage to-day, for Professor Ripley of Harvard or ex-President Hadley of Yale would readily agree with me in saying that the information furnished by American railroads is clearer, more prompt, and more complete than that published by the four unified railroad systems of Great Britain. And yet under the English system of registration at Somerset House, London, the investor has been successfully protected. He can obtain the essential information about the company in which he proposes to invest, or has invested, with the objects of the enterprise, the amounts paid for the property acquired, tangible and intangible, the earnings and disbursements and other essential matters, for the nominal fee of one shilling. There is still a high degree of financial freedom in Britain, and the law does not pretend to protect the investor from himself, from his own rashness or neglect. The common law rule of 'caveat emptor' about represents the attitude of the courts. It is to be noted that this remarkable change has come about in America without the assistance of 'blue-sky' laws, and even in spite of them. It has not been a matter of agitation in Congress or at Albany. It is not based, in any considerable degree, on the recommendations of voluntary or appointed committees of inquiry. The credit for the revolution can be widely distributed. The investor himself deserves a part of it, and the conscientious newspapers must not be forgotten. The Stock Exchange itself has done much. The result is highly encouraging to those of us who still believe that we are a people really capable of selfgovernment. A Message to Business Men THEN you need money to carry on the legitimate Wemented on business, your loca helps you. It is their business to lend you money. But with growth there usually comes a time when you need the advice and co-operation of an investment banker, one who has had experience in underwriting and distributing securities. Our services are always at the disposal of executives Address your communications to our Over 37,000 persons have invested in Associated securities, of whom 23,000 are customers and employees. This represents a growth from less than 1,000 shareholders in 1919 to the present number. Customer-ownership, fostered and developed by public utilities, has grown to such proportions that it has given a new meaning to "public" in public utility. Public Utility Management Has Two Responsibilities Not only do the utilities serve the public but they are in a large measure owned by it. This ir turn has added a new responsibility to management. It must provide Adequate service to its customers Customer-ownership is helping slowly to revolutionize the investing and savings habits d' thousands of persons. It offers sound securities with good yields which customers may purchase on a partial payment plan. The management of the Associated Gas and Electric Company is fully aware of this double responsibility to its public in providing dependable service and sound securities. Associated Gas and Electric Company Incorporated in 1906 Write for our Illustrated Year Book 61 BROADWAY, NEW YORK alna: the Atlantic Prize Novel irthright. A Роет Ioral Tales, Past and Present Dissipating Fog. THE NEW WORLD The Irish Experiment. A Record of Accomplishment Catholic and Patriot Atlantic Bookshelf: Revolt in the Desert-The Old Countess - Elmer Gantry-The King's The Financial Counselor: William P. Hamilton 0 cents a copy $4.00 a year |