Ten Years in Wall Street

Say "Wall Street" to five people in 1870, Fowler writes, and five different streets appear. To the banker it is a financial centre, striking balances of trade with London and Frankfort. To the moralist it is a gambling-den full of unclean birds. To the broker it is an honest place to earn a commission.

The speculator sees a caravanserai, somewhere to load his camels and drive them off before trouble arrives. And the great financial commanders see an arsenal: "the stronghold to be defended or besieged, the field for strategy, battles and plunder."

None of these pictures is false, and none is the whole truth. What the Street is depends on where you stand, and a man's fortunes there depend a great deal on which of those streets he believes he has walked into.

Walk into the Street and you will not find much cotton, pork or railway iron. You find paper. A merchant's credit becomes a note that is bought and sold almost like a banknote. Grain and sugar become warehouse certificates. A railway becomes a stack of share certificates, and even the gold in the Treasury vaults takes wing as yellow and green notes.

Fowler's word for this is negotiability. Anything that will pass at a market price and change hands with little trouble becomes something to buy and sell, and a moneylender can count his millions on a table three feet square.

The consequence is the part people skip. Because ownership moves as fast as a price can be spoken, business multiplies, and profits and losses multiply at exactly the same speed. The paper is only the passive force. The men who operate are the active one.

Why does Fowler put so much weight on negotiability, the ease with which Wall Street values change hands?

• Because fast, easy transfers multiply the volume of trade, and gains and losses with it✓Correct answer
• Because paper certificates are much safer to hold than the goods they represent
• Because it lets the Sub-Treasury fix the price of every security in the city
• Because a price that can be quoted instantly is always a fair price

Fowler's point is about speed: when ownership passes as fast as words, the volume of business balloons and profits and losses are duplicated just as swiftly. He never claims the paper makes anything safer or fairer; the paper is passive, and the men trading it decide what happens.

A bull, in Fowler's definition, is a man who buys stock for a rise. He is "long" because he holds the shares, ready to deliver them whenever he sells. The name may come from the way a bull tosses things upward with his horns.

It is tempting to hear bull and bear as moods, the optimist and the pessimist. Fowler never uses them that way. A bull is a position, not a temperament. A gloomy, cautious man who owns five hundred shares of Erie is a bull whether he likes it or not, because his money rises and falls with the price.

That matters, because a position has interests. The bull does not merely hope for a rise; he has every reason to help one along. On Wall Street, plenty of bulls did exactly that.

The bear does something stranger. He sells stock he does not own, promising to deliver it at a fixed price within a fixed time. Fowler's example: A agrees to sell B one hundred shares of New York Central at 180, deliverable within thirty days, without holding a single share.

If the stock falls to 170, A buys it in the market, hands it over, collects 180 and keeps $1,000. If it rises to 190, he still has to buy and deliver, and the same $1,000 goes the other way. He is short of stock, the way a man with no money is short of funds.

The name is said to date from the South Sea Bubble: selling the skin before killing the bear. Notice the asymmetry. The bull owns something. The bear owns only a promise, and a promise must be kept at the market's price.

In Fowler's definition, a bear begins his trade without owning any of the stock he has agreed to sell.

True✓Correct answer

True. That is the whole definition: the bear contracts to deliver shares he does not yet possess and plans to buy them later, cheaper. A man who owns shares and merely fears a fall is still long, however gloomy he feels.