THE DRUNKENNESS OF SPECULATION. MHERE must be something of intoxication
in exceedingly large gains made with unusual rapidity. At least, that is the only way in which we can account for the extraordinary stupidity which men of undoubted ability sometimes exhibit when their speculations grow too big. Look at this copper monopoly, for example, as its history is now becoming revealed. Any mere arithmetician ignorant of business, but with the figures before him, would have said, we think, two years ago, that copper was a very dangerous article to monopolise. After many years of steady and very profitable prices, some mines with enormous quantities of the metal in them were opened in America, and its price began to sink with a steadiness which was openly pronounced by some of the oldest dealers absolutely "bewildering." They expected a turn from month to month, but it never came, and the fall continued even after the price had sunk below the point at which ordinary mines can be made to pay expenses. Company after Company reported a distinct though usually a small loss, and Chairman after Chair- man comforted his shareholders with the assertion, made, we believe, in honest faith, that that kind of thing could not last, and that copper must rise. We very much doubt if it would have risen but for the speculation, for what had happened was sufficiently clear. More copper was being produced by the great, and therefore cheaply worked mines, than the world would buy, perhaps at any price, certainly at any price which would pay the owners of the smaller mines. The demand might be endless at a figure, say 220 a ton ; but at £40 a ton it was limited, and the market was over-supplied. The cure, of course, was to shut up the small mines and drop the price of the copper yielded by the great mines until a demand had arisen sufficient to eat up their supplies, and, therefore, gradually to raise prices again. Instead of this, a group of unusually able and experienced Frenchmen, with a command of resources large even for this era of "corners," took it into their heads that if they could buy the existing stocks of copper, and contract for a year or two to buy the produce of the great mines, they might, by doubling the price of the metal, secure an enormous profit, six millions, perhaps, on a venture of six millions sterling. No sooner said than done, and to all appearance successfully done. The able men formed a syndicate, and bought the stock of copper, not, however, at its lowest figure, for huge buying soon runs up prices ; then made their con- tracts with the great mines ; then ran up the price to more than double the minimum level,—indeed, to a much higher nominal figure; and then felt at once triumphant and perplexed. They had made millions, literally millions, on paper ; but there was still a little flaw in their calculations. If the world wanted all their copper at that price, they were rich beyond the dreams of avarice ; but then, did the world want it It was the old puzzle of the eggs. Clearly, if a farmer can get 5s. profit on fifty eggs, he can get 25 on a thousand eggs ; and if he can rear millions of chickens and produce billions of eggs, he can pay the National Debt with his surplus receipts ; but then, anew world must be specially created to eat the eggs. Very few people, comparatively, were ready to buy copper at the new price, and of those few a large proportion were supplied in other ways. First of all, the little mines which were expecting liquidation all postponed that process, col- lected funds by sending to market the stocks they had held back, and strained every nerve to increase their out- put, and, as their Chairmen remarked with chuckles, to make hay while the sun shone. Three years of 275 a ton would give them all dividends, and great reserve funds besides ; and as to working " captains " and miners to death, miners and captains who had expected dismissal were only too delighted. Little streams of copper, too small individually to be reckoned upon by the syndicate, kept pouring into the market, and constituted in the aggregate a supply approaching to that which a few years before had satisfied the world. More- over, there was another source of supply which it is said the ablest man in the syndicate admits that he had totally forgotten. According to our experience as onlookers, it always has been forgotten, is forgotten now—witness the wild talk about rabies—and, whenever the next monopoly is started, will be forgotten again. The world's stock of any article whatever which is indestructible, or nearly so, and which has been produced for hundreds of years, must always be enormous in proportion to the demands of any one year. Copper, it is true, is not an indestructible article. A good deal of it goes to the bottom of the sea every year, a great deal is worn away by mere attrition and use, and the surface of the metal decays up to a certain point with most exasperating rapidity. Nevertheless, copper cannot exactly be classed among the perishable articles of commerce. The rusting process stops
at a point ; tools of copper exist which are as old as man ; and if you were to put an old twopenny-piece on the pedi- ment of Somerset House, and leave it alone, it would survive the building. The stock of old copper in the world must always be enormous, and under the temptation of the great price, a good deal of it came forward. Every sleepy shipyard in Europe, to begin with, turned out its old sheathing. The enormous profit made on paper by the syndicate was, therefore, not realisable, was, in fact, a mere dream, like the dream about the eggs ; and they had before them two alternatives, a stupid one and a wise one. The wise one was to take a small yet substantial profit— say, a million on the adventured six millions—and sell their copper at a small advance on the old price, as fast as they could. The stupid one was to venture more money, "absorb" more copper, make longer contracts—though the longer the contracts, the more new mines would be opened—and hold on till the world was compelled to take copper at their price, which was fixed, it is said, in their minds at an irre- ducible minimum of £67 per ton. They chose the latter, with the results which ought to have been foreseen by their own clerks,—that the stock of unsaleable copper grew larger month by month ; that the loss of interest told on their expected profits like a wasting disease ; and that with that huge avalanche of copper, 200,000 tons, a whole year's supply, certain to descend into the market some day, if only to avoid interest and storage, nobody who could help it would buy one pound to keep in stock. He might as well buy eggs for next month's consumption. The evi- dence, therefore, is, as shown in the copper barometer, the price of shares in the great Societe des Metaux, that the monopoly must break down, and the magnificent profit on paper must finally melt away, even if enormous losses are not incurred. The end is not yet, for great capital and wonderful brain-power will be expended in causing rallies ; but the result, not, indeed, to individuals or companies, but to the total body of "bulls "in copper, is a mere matter of the slate. The accumu- lated metal in sellers' hands must be sold some day; and if, when interest has been allowed for, it fetches more than the price given for it,—well, economists will have a new problem to consider. We venture to predict that, although it is said copper costs 240 a ton to send to market, if anybody wants copper on the big scale, and can wait a year or two for it, he will get it, if he seizes his moment, at 230 a ton.
Now, why do unmistakably able and experienced men, men who have succeeded in business, make blunders of this kind, and risk splendid fortunes in speculations almost palpably impossible ? That they should buy up perishable articles of prime necessity, we can understand, for they are sure of an unending market, and therefore of a long time to "get out ;" but that they should buy up a perishable article, not of absolute necessity except for some limited electrical requirements, and this in the face of an over-supply which was ruining little producers, and then, in the teeth of statistics, should buy more and more copper, and make longer and longer contracts, this is to mere observers a real intellectual puzzle. We shall be told that with some of them the compelling force was vanity, which is as strong with some business men as with litterateurs and poets ; that with others it was the well-known dislike to make a loss and be done with the matter ; and with others, positive inability to face their bankers and other lenders of necessary cash. But there must be some reason beyond all this. Our contention, and, right or wrong, it is that of persons far more qualified than our- selves, is that at one time everybody in the speculation could have got out with a moderate profit, and that the amazing thing is not the original operation—which had only this fault, that it was too big for any ordinary knowledge even of one trade—but the later undertakings. We cannot but suspect that cool business men get intoxicated with gain, even if it is only visible on paper ; that they think anything possible, that they lose the sense of proportion, and that the impulse which so often destroys conquerors comes upon them also. Their brains cease to act steadily. We see that in small individuals every day, and the big men have no exemption from human disqualifications. It is not at all likely that any man at the centre of the copper specula- tion was more qualified to conduct it than Napoleon was to conduct his later wars. He could not know his maps better, or have the essential figures more perfectly at his fingers' ends. Yet we all know that Napoleon was beaten, and not wholly by
Providence or fate; that success had, in some way which none of us quite understand, but which all of us instinctively compare to drunkenness, impaired his mental power. We do not see why a speculator should not suffer from deterioration of brain or morale, or both, as well as Napoleon ; and believe that it happens much oftener than is at all suspected. At a point in his career, the great financier has, in fact, no judgment, is sub- ject to the mania which infects speculators in Mississippi or South Sea stock, and must land all who follow him in greater or less loss. That, and not ill-intent, is our own explanation of M. de Lesseps, whose "campaign of Russia" was the Panama Canal; and it is one which our readers will do well to recol- lect, for the special peculiarity of the speculation of to-day is the readiness to follow successful and wealthy individuals into anything, however wild, or however demonstrably certain to end in final disaster.
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