Amidst a continuous uproar in which the onlooker wonders how any business at all can be done, the Standard Stock Exchange is in the thick of the most tremendous business in buying and selling mining stocks in the history of this great mining country

By Gregory Clark, September 24, 1927.

Four years ago, a seat on the Toronto Stock Exchange cost about $7,500.

To-day, when some member dies, and you have a lot of drag, you might get a seat for $35,000.

In 1924, a seat on the Standard Exchange – the mining stock exchange in Toronto – cost about $3,000.

$25,000 is the price you would have to pay to-day.

Just four years ago, The Toronto Daily Star ran a page of financial news. To-day it runs two full pages, plus features.

Four years ago, the clearings of the Toronto stock exchanges amounted to seventy-three million dollars. This year they will run up to five hundred million.

These few facts indicate the enormous increase in the art of investment and speculation that has occurred, suddenly, in Toronto.

There is no way of arriving at a definite idea of the increase in the number of Toronto people who have, in the past four years, started to dabble in stocks. But brokers, figuring on the increase in business and the number of sales, estimate that between three and four times the number of people are in the stock market as compared with Toronto in 1924.

Toronto has always been noted for its canniness. It has been the city in which an unusually large number of people owned their homes. Previous to the war, from the financial point of view, Toronto was conservative even amongst Canadian cities. For its well-to-do population, that might have played the stock market freely, preferred to buy bonds. The stock market was played by a limited number of the wealthy and by the usual motion-picture stock gambler. The mass of the Toronto people looked askance upon the stock market as being mysterious and somehow wicked: like champagne, for the rich who could afford it, and for the worldly who could ill afford it.

All is changed. Toronto’s two stock exchanges are flourishing as never in all their history. It is the longest “bull” market in history.

The change has been, so the financial men say, an extremely good thing for Canadian industry. It has thrown unheard of millions of dollars into industry. It has allowed Canadian financiers to get control of many Canadian industries that formerly were owned in the States, and by re-financing them, on a stock basis, have allowed Canadians to share in the success of Canadian industries. It has created a spirit of optimism which has allowed new industries to launch forth and old industries to expand.

War Bonds Started It

With everybody kicking in their little bit, a great deal of money has been made available to the promoters of industry and wealth production in Canada.

For four years there has been a decidedly advancing market. Which simply means, things have been booming. Things have been on the make. Stocks have been going up. Fortunately for Toronto’s – and Canada’s – thousands of new stock investors, there has not been much speculation.

It is a good thing for industry and finance. Is it a good thing for the people?

The answer, so far, is yes.

Who gets the credit?

The war, and the government.

It was the war that caused the government to issue bonds, and it was the government that used every means, fair and foul, to persuade the public to invest in bonds.

Bonds were issued in small denominations, fifties and hundreds. They were as ready as cash. Everybody was egged on to own a bond. The magic of investment was pointed out. Even the industrial and business men, who later were going to bewail all the money being tied up in bonds, got after their workers, down to the janitor, to invest in these beautiful, comfortable bonds, with coupons attached which you snip off with scissors every so often.

This was high-pressure, intensive education in investment. It was universal. By this means, though nobody saw the turn things would take, the governments of the world turned their people into speculators.

For, in due time, the bonds matured. Five, ten years, the public held its nice bonds and clipped the coupons at five, five and a half and even six per cent.

The bonds came due, are coming due. The dominion government has to redeem about a hundred million dollars worth of them this year. But in the meantime, interest has fallen away down.

The war bond buyer who has been getting five and a half and six per cent. now has his capital handed back to him, and he looks around for another bond. But there aren’t any – at that rate of interest.

He is offered 4 per cent.

So what does he do? He has tasted the joy of clipping five and six percent. He is not content to slip back to mere bank interest. He sees a rising market in stocks. Right there we have born a stock investor.

That is the explanation of the phenomenal increase in the stock market.

Before the war, the Canadian investor in industrials, even the wealthy, preferred industrial bonds to industrial stocks. In other words, he preferred to be a creditor on industry rather than a profit-sharer in industry. Canadians preferred industrial bonds, and let the stocks go over the border.

How Stocks Have Risen

That is changed now. With the great increase in war-made investors, there has arisen a mighty contingent – a great proportion of whom must be small investors – who wish to share in the profits of industry rather than be mere creditors. A constantly rising market has encouraged them in their wish.

The more experience they get, the more daring a certain number of them get. Many of the less assured industrial stocks have no end of speculators, and the mining exchange, in which there is a range of speculation greater than in industrials, with a consequent greater chance of rich rewards, has got clients to a number beyond the dreams of the most hectic days of old gold booms.

To show what encouragement those who have entered the field of stock investment have got in the past three or four years, let us take a look at the bank stocks, which probably reflect the trend in the most substantial of all stock investments.

The left hand column shows the highest point reached by the various bank stocks in the year 1924. The right hand column shows the market price of them about the present moment.

1924 Highest      1927

Bank of Nova Scotia…… $266                     $395

Dominion Bank…..           185                        270

Bank of Commerce……   205                        290

Imperial Bank……              180                        250

Montreal………                   250                        350

Royal Bank…….                  240                        339

That is the increase in value of these stocks in three years, besides paying handsome dividends.

The war bond buyer got his five and a half per cent. for ten years, but when he cashed in his bond, all he got was the $100 he put into it ten years before.

The war-bred investor discovers about these stocks that besides their interest, they have – so far – a most extraordinary gift of increasing their capital value at the same time.

A few of the more famous industrial stocks will illustrate this over the same period.

1924.                    1927.

Brazilian Traction…           55 ¼                       185

Consol. Smelters…            49 ½                       265 ½ (high)

City Dairy…..                       135                        660 (equivalent)

Int. Nickel….                        24 ½                       74 (high)

A man who cashed in a $1,000 war bond in 1924 and bought four shares of Bank of Montreal at 250 with it takes his interest for three years and then sells, and gets not his $1,000 but $1,400!

These are the things, multiplied a hundred fold, and in many cases, particularly in mines, with more Aladdin-like results, which are causing thousands of people who never invested before the war at all to think that the world is not such a dusty old place after all.

The mining stocks have, so far, been the most spectacular. These are the figures for the past three years of actual sales, in dollars, on the Standard Exchange:

1924 ………. $30,000,000

1925 ………. 43,000,000

1926 ………. 125,000,000

So the activity in the stock market is not a matter of the past few weeks or months. And the vast leap in trading in 1926 will in all probability be far exceeded by the figures for 1927.

But it must always be borne in mind that the two extraordinary circumstances have combined – the war-induced habit of investment, the falling due of bonds, the decline in interest rate and a great advance in the stock market – and a steady advance.

It may keep up for years. Or it may all end, like a bubble, overnight. The financial optimists say Canada is on the eve of an unparalleled expansion that will last for years and years. There seem to be certain moments in industry which, if a man start up at that time, his future is assured. The optimists say such a period is at hand.

But the history of the world is so filled with examples of slump and panic that the moralist has plenty of good material with which to warn the small man against the lure of easy money.

Certainly, in getting the material for this article, we listened intently amongst the brokers and financial men, for words or signs of caution, or some phrase that would be a text for a paragraph on caution, but none was heard. The brokers and financial men themselves are faced with so many new and strange factors in their own world, the great increase in trading, the steady, and constant advance in the market, that they do not feel at all inclined to make forecasts of any sort. Stock brokers are increasing in number. The bond companies are branching into stocks. The banks are taking a much larger share in the bond business. There is a sort of transvaluation of all values in the financial world going on, and in the shifting process everybody is excited and happy and money is rolling free.

For there is an undeniable pleasure, a sport, in the stock market, arising out of the gamble. And then there is the lure of money.

The stock exchanges themselves are exciting places. A race track is a sort of country show compared to the floor of the stock exchange at opening hour.

There is no tumult like it. The dog show at the Exhibition is the nearest thing to the sound of it. An old time Varsity inter-faculty brawl is the nearest thing to the look of it. The galleries are public, and some time it would do you good to go and watch the pandemonium that reigns most of all at the opening at ten o’clock and which is sustained, unbroken, all through the hours until closing time at three o’clock in the afternoon.

There is a sort of dance floor entirely surrounded by telephone booths.

On this floor stand a crowd of men, mostly young and all endowed with tremendous, strident, army voices.

The Roaring Stock Exchange

Having seen the financial page and thought the matter over during the night, you telephone your broker to buy you five thousand shares of Thisnthat. His man on the exchange has made a note of it amongst all the other things he has to buy and sell for clients who have also been thinking over-night, and there he stands, at two minutes to ten in the morning, waiting for the bell to ring that will cut the wildcats loose.

They bunch together, eagerly, waiting. The bell goes. And you never heard such an uproar in all your life. Every one of those strong-lunged young men yelling something unintelligible at the top of his voice. They jam and shove each other, trying to hand each other little slips of paper on which the trades are recorded with each other.

Your broker, with his order to buy 5,000 Thisnthat at say 65 – the price you stipulated – hears – heaven knows how – somebody else roaring Thisnthat, and he roars back “sixty-five.” The other fellow, not knowing whether your man wants to buy or sell, may raise or may lower that bid. If he yells back “sixty-four and a half” your man knows he is trying to buy too. So he gets as far away from the other as possible and keeps on roaring Thisnthat until somebody with 5,000 to sell at 65 is found and they exchange little scraps of paper, the thing is recorded on the ticker, transmitted to all the brokers’ offices, put up on all the brokers’ slates in town, and entered in the newspaper financial page that Thisnthat sold for 65.

Picture seventy-five men all yelling at the tops of their lungs and making transactions of this sort in a dense mob on a floor about half the size of a Sunnyside dancing floor, and you understand why they call it a market. The market at Baghdad, in Haroun al Raschid’s day, must have been like that. They took selling seriously in those days. They take it seriously on the stock markets to-day. Seventy-five auctioneers all going at once!

How they complete the deals, how your block of 5,000 is transferred from whoever, sold it through the trust companies acting as clearing houses to you; how you buy on margin instead of paying whole cash; how you can buy and sell without ever putting up the cash; these are mysteries – the old, impressive mysteries – which brokers can explain briefly with smile and the wave of a cigar.

But it is an exciting game; for some time past, a profitable game; and thousands of small folks who never played it before were taught to play it during the darkest and direst days of modern times.

“The most reassuring fact about the present boom,” said one Toronto broker, “is the attitude of the Canadian manufacturer.

“True, he is not going so far as to admit that things are improving. But at least he has ceased to threaten that he is about to quit.

“That, I think, is the most impressive assurance we could possibly have that Canada is on the first leg of one of the mightiest booms in her history.”

Editor’s Notes: Uh, oh, we know how this is going to end.

Harun al-Rashid was an early Caliph. His reign is traditionally regarded to be the beginning of the Islamic Golden Age.

Those banks still exist, though the Bank of Commerce and the Imperial Bank merged, and the Dominion Bank merged with the Toronto Bank. Brazilian Traction became Brascan, which became Brookfield Asset Management. Consol. Smelters became Cominco which merged with Teck Corporation, and is now know as Teck Resources. City Dairy was sold to Borden. Int. Nickel became Inco, which was purchased by Vale.