Friends of Financial History

52 Pages·1993·5.2 MB·English

by  Museum of American Finance

Number 50 Winter 1993/1994
Museum
Exclusive
Offerings
THE GREAT WALL STREET GAME BROADWAY AT BOWLING GREEN
This full size poster (26" x 32") will frame beauti- By Kamil Kubik. Kubik is the widely admired artist
fully and bring smiles even to those whose who designed the last two White House Christmas
accounts are down! This art is reproduced from Cards. The scene is available in boxed cards and in
the original illustration of an 1883 board game. a handsome, silk screened limited edition of 300
The game itself achieved the highest price ever numbered posters signed by the artist. Broadway at
paid for a board game at auction in 1992. No bull! Bowling Green, limited addition is $400 and
The poster is $49.95. measures 22" x 27".
ORDER FORM
Quantity:
Order now!
Bulls & Bears Poster @ $49.95
Broadway at Bowling Green Poster. Limited Edition @ $400.00
J
@
Broadway at Bowling Green box of 8 cards $14.95
NY Sales Tax
Shipping&Handling US&Terr. Ouiada Forei^gn
Shipping
BoxedCards $2.9.^ .$4.^.S $5.90
Poslers SGs SIO.TS .$I7.>J0 Total
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'
THE NEW YORK STOCK EXCHANGE
AND OPEN
FAIR
Setting the Standard for the Next 200 Years
• In 1992 we traded a record'
breaking 51 billionshares
202 millionor$6.9 billionaday
• During the year, we listed an
unprecedented 251 companies,
$103 billion worth ' 50% more
than ourprevioushigh
• Our market now represents
$4 trillion - 86% ofthe value
ofall publicly traded companies
in the United States
For TWO hundred years the New York Stock Exchange has been the
worlds most respected etiuity market. In 1992, we entered our third century
with a year that was record-breaking in virtually every respect. The numbers
are impressive, but more important is the strength behind them. No other
market offers more liquidity, higher visibility, or access to a greater number
of investors. No other marker offers shareholders - present and prospective -
a better chance to get the best possible price.
The New York Stock Exchange represents a community of effort that
includes 2,089 listed companies, 503 member firms, more than 10,000
institutional and 51 million individual investors. It is more than just the
largest equity market. It is the most tnisted exchange in the world.
NYSE
Not just a place A way ofdoing business
THENEWYORKSTOCKEXCHANGE
Published by the Museum of American Financial History
CONTENTS
The Fifth Autumnal Equinox P.T. Barnum and THE COLLECTOR
The Museum’s fifth year was “The Art ofMoney-Getting” A forum for the collector of vintage
characterized by continued industry The self-titled “world’s greatest financial memorabilia.
support, important new acquisitions, showman,” who openly boasted of
and extension of the Museum’s frauds he perpetrated on the public, Making New Friends
A
gallery into new locations beyond didn’t say that a sucker was born familiar feature Friends of
New York. By John E. Herzog 4 every minute. He did, however, spend Financial History is expanded to
GmOuoatrnsdytoaansnLdt.ihneMga“cfSkaeltrhivenir,coecfoAnewslaeicdrtedrroendicby fonHifemnaparmunllcmylimaitlnw.goahddBivemiycscaeeAdl.lefHes.cotudSuteraleoxifvo—enbraiannskgrauapmtecayn.1s2 awMidinavtciehllrubtwdioehsxoilentgbtrearunsn,dgcayoamp.rm”oemnitsaeryt,o “dance31
stock trading,’’ has been given the
second annual “Outstanding Service Funding the Growth ofAmerica Official United States government
TMousCeapuimt.alBMyarTk.ePtast”riAcwkaHradrrbiys the 6 Twhaes wfiensatnwcaerddlearxgpealnysbioynaonfeAamrleyrifcoarm bpspeoelfcioicrfyeicoWanolrlfylodrGeeWiragnmraiInnI;vbeBosatnsmdeesnBtiassl,slued
Museum People and News ofmutual funds sold in the United vignettes; How much could these
Paul Cabot, mutual fund hall of Kingdom. Now preparing for a late certificates be worth; An avid sailor
famer; Behind the scenes with winter/early spring showing, the seeks Herreshoffcertificates 32
researcher Simon Davy; Secretive Jay Museum ofAmerican Financial
Gould; Dumb Quote Department .... 8 History offers a snapshot from the AShopping Guide
mutual fund industry’s past 24 detailed commercial guide to
From The Gallery shopping for vintage financial
An importantAmerican financial Sixty Years Over The Counter memorabilia from the United States,
document, penned by Alexander Seven past presidents ofthe Security Britain, Germany, France, Italy and
Hamilton and revealing the tottering Traders Association, the industry Canada 34
confidence in the solvency ofthe new organization for Nasdaq/OTC traders,
Market Place
United States, has been acquired by discuss the evolution of the old Over
Display and classified advertising. 38
the Museum. “...And the timid shall The Counter Market from pink sheets
soon rally,” wrote Hamilton 10 to Nasdaq. By T. Patrick Harris .... 26 Fulton’s Promise 34
Mail Bid Auction
On the Cover: Phineas Taylor Barnum, in apencil and charcoalportrait circa Over 143 guaranteed items are
1885. From the collection ofN. McCabe. Posterprovided courtesy ofPhillip offered in this auction, complete with
Williams Posters, GrandStreet, New York, New York. estimates ofvalue, tenns ofsale.... 41
FRIENDS OF FINANCIAL HISTORY
(ISSN 0278-8861) Issue Number 50. Winter. 1993/1994 Editor: T. Patrick Harris
Managing Editor: Diane Moore
Copyright 1994bytheMuseumofAmericanFinancialHistory,pub- Editorial Advisory Board:
lisher,26Broadway,Room200.NewYork,NewYork 10004-1763.
Telephone: [phone] Fax [phone]. All rights reserved. Lee Doyle, New York Stock Exchange, Inc.
Permission isgranted to reprint with propercredit to FriendsofFi- Diana E. Herzog and Wil Roberts, R.M. Smythe & Co.. Inc.
nancial History,
Douglas PaiTillo, National Association of Securities Dealers. Inc.
Annual sub.scription $25 in U.S. and Canada, $30 airmail Europe.
U.K. Singlecopy$7.00. Paymentmustbemadeindollars,onaNew Arthur W. Samansky, Securities Industry Association
YorkorUS Bank,orby bank wire toRepublicNational Bank,Four Robert Shabazian, American Stock Exchange
WorldTradeCenter,PlazaLevel,NewYork,NY 10048 ABA#026-
004828, Account #456-022430 Joseph S. Sims, Public Securities Association
Letters to the Editor are welcome; please send them to Friends of Richard Sylla, Henry Kaufman Professor of the History of
Financial History at the above address. Financial Institutions and Markets, New York University
2 Fricncls ofFinancialtti.slory Winter 199311994
Exchange
Stock
American
The
1994
O
t rhc American Stock HxchanKC. critical. With customers’orders represented .\t 1 he .American .Stock Exchange, we
thecustomeralways comes first. by brokers orspeeialists. ourauction market combine leading-edge technology with
I hats the purpose ofan auction market, technology permits the immediateexecution traditional auction market yalues. I'hat’s the
with buyers and sellers meeting in the oftrades, as well as the most accurate pricing. way a market should be run. .Simply because
tree and open competition ofacentralized Tradinginstitutions also benefit from it's the fairest way.
marketplace. our innovatise technology. In fact, we're For more informationcall ChiefOperating
Today, thanks to technology. The currently experimentingwith wireless (Officer.Jules Winters, at (212) ,1()b-18,s().
.American .Stock Exchange's auction market hand-held desicestofacilitatecommunication
is a sophisticated, high-speed tradingarena. between traders and their firms. TheAmerican Stock Exchange
To make surecustomersget the fairest There isa difference where acompany is
price in todays market, split-second timingis listed and where you buyorsell securities. Fairtrade. Fairpractice. Fairplay.
The
Autumnal
Equinox
Fifth
The Museum marks its fifth anniversary with continued industry support,
expansion ofexhibits off-site, and important new acquisitions.
ByJohn E. Herzog
T
he fall season brought good
news to the museum, quite hap-
pily. Friends issue number 49,
with a colorful Jay Gould lampoon on
the front cover and an elegant Brooks
Brothers anniversary advertisement on
the back brought many kind words of
praiseforus. We trustyou will find this
Winter issue a treat as well.
One special feature came from our
attendance at the Security Traders As-
sociation 60th annual convention. Edi-
torPatrick Harris attendedthe meeting,
in Boca Raton, Florida. This is the first
big event we've covered and Pat’s
roundtable discussion with seven past
presidentsofSTArevealssome insight-
ful “oral history” of the last half-cen-
tury oftrading over the counter stocks.
In museum circle—s, the personal reco—l- entered into a database program assur- American Revolutionary period finan-
lection ofevents “oral histories” ing that gifts we receive are immedi- cial documents, one ofthe finest in the
is considered a highly credible and ac- ately accessible, notforgotten. In other country. The hammer price was
curate techniqueforrecordingthe past. news, tax law changes have made it $18,000, and this purchase has been
There were other accomplishments more advantageous to make gifts of funded by a gift to celebrate the fifth
over these past few months for the objects to the Museum, and R.M. birthday ofthe Museum!
Museum. Members will be proud to Smythe & Co., will give a pro bono We also have extended ourreach by
know that nationally-known artist valuationforobjects wereceive, sothat exhibiting objects from the permanent
Kamil Kubik, who designed the last you will receive the Museum’s collection at India House, on Hanover
two White House Christmas cards, has acknowledgement and the valuation Square, NYC, and at the Historic
finished his beautiful painting of together. Please don’t discard anything Strasburg Inn in Pennsylvania. We
“Broadway at Bowling Green,”and the without letting us know. would be happy to find additional lo-
museum is featuredprominently. It is a On November 2, the Museum was cations as we have more display cases!
wonderful addition toourcollection.A the high bidder for and won a superb To commemorate the 60th anniver-
copy of the painting is reproduced on and important property offered at sary of the American mutual fund in-
theinsidecoverofthis issue ofFriends. Sotheby’s. It is a letter written by dustry, we'll open a special exhibit
and the painting in full-color was used Alexander Hamilton instructing the planned for late winter/early spring. In
for ourAnnual Benefit invitations. Bank of New York to purchase U.S. the meantime,ouracclaimed Civil War
In the museum news section, you government bonds in the New York exhibit has been held over.
will see The Bulls and Bears posters market. “...I request you to furnish the As I write, we complete five years
have sold with great success. We have Cashier of your Bank with the further since our founding. We have accom-
received a stock ticker, too, the very sum ofFiftyThousand Dollars to be by plished a lot, and there are wonderful
generous gift of John J. Hack. It’s a him applied towards purchases of the and challenging opportunities ahead.
Univensal, Model 3A, in beautiful con- public Debt on account of the United Together, we shall go forward to
dition and the first in our collection. It States...” This manuscript was un- achieve our mission. On behalf of the
will be displayed in our gallery at 24 known to the editors of The Papers of Trustees, the Editorial Board, and all of
Broadway on a ticker stand received as Alexander Hamilton, who printed the us at headquarters, may 1 say thanks for
a gift last year. Over the summer, parts text from a transcript.The letterwill be your support and our warmest wishes
ofourpermanent collection were being added to the Mu.seum’s collection of for a prosperous 1994. Haa
4 /-'rieiul.s/>l /'iiHiiHiulllislory Wiiiier 1993/1994
THE GLOBE THROUGH ADVANCED TRADING TECHNOLOGY.
The Chicaj'o Stock Exchange is making some vital new connections these days. Tn the market-
places of Manila. Amsterdam. And Bangkok, That’s because we’ve become a world leader in
developin']; automated tradinjj technolojjy for emerjjin^ equity markets worldwide. In Manila, for
e.xample, we helpt'd the Makati SukT Exchange s\\itch from a manual tradinf^ system to a completely
automated one in only three months. W’e provided technological expertise. Training for bro-
kers and technical staff. And a customized, fully installed system that provides users on the trading
floor and four remote broker sites with electronic order entry, real-time order matching, market
sur\eillance and real-time market information, We helie\'e in the importance of the new equity
marketplaces. That’s why we’re pleased that so many of them are plugging into our expertise.
The Chicago Stock Exchange
iril
THE EQUITY MARKET AT ITS BEST
One Financial Place 440 S. LaSalle Street 312-664-2222
Museum
Honors
Macklin
With Outstanding Award
Service
The Museum ofAmeriean Financial Histoiy singles out
Gordon L. Macklin as the winner ofthe museum’s annual awardfor
outstanding service to American capital markets.
By T. Patrick Harris
G
ordon L. Macklin, widely-
credited as the father of elec-
tronic stock trading, has
received the 1993 “outstanding service
to American capital markets” award
from the Museum ofAmerican Finan-
cial History.
Mr. Macklin was given the award
for his leadership role in shaping the
over the counter stock market, and
bringing the Nasdaq electronic trading
system “on-line” while serving as
presidentoftheNationalAssociationof
Securities Dealers.
During hispresidency, from 1970 to
1987, Mr. Macklin championed elec-
tronic trading as a solution to many
problems plaguing the trading of un-
listed securities. He believed a screen-
based system fordisplayingquotes, the
original mission ofthe Nasdaq system,
would eliminate the paperwork back- Macklin presenting his casefor "blackbox trading" before the U.S. Senate in the 1970s.
log that, in turn, created an environ-
mentforabuseand missed investorand
issueropportunity. When the chairman Macklinrecallshis greatest satisfaction chairman ofthe National ClearingCor-
of the Securities and Exchange Com- coming from “the achievement of par- poration. He held that post until 1976,
mission, William J. Casey, attacked itywith the listedexchanges.”Through concurrent with part of his term as
abuses of Nasdaq in 1972, in use then the self-regulatory process and elec- NASD president. After leaving the
for only one year, Mr. Macklin re- tronic systems, he says there were vast, NASD in 1987, he served until 1993 as
sponded strongly. He pinpointedatrad- across the board improvements in mar- chairmanofHambrecht& Quist, in San
ing maneuvercalled powerconversion ket surveillance, regulation, liquidity, Francisco. He is currently chairman of
and, within one year, eliminated the volume, media recognition, and com- the White River Corporation, a finan-
practice. During his tenure, he worked petition. This led to parity with the cial services company based in White
with the trading community to modify New York and American Stock Ex- Plains, New York.
the original mission of Nasdaq from changes and created“much more com- Mr. Macklin is currently active in
quote displays to the vast, diversified petitive markets, which is tothe benefit assisting other countries in the forma-
trading and reporting system it is today. of the investor, and that’s the way it tion or development of their capital
Mr. Macklin’s foresight was appar- should be” he says. markets. Working through the Emerg-
ent when, within three years of Mr. Macklin’s industry experience ing Markets Assistance Committee of
Nasdaq’s first day ofoperation (Febru- began shortly after graduation from the Securities and Exchange Commis-
ary 5, 1971 ) he addressed the National Brown University in 1950 when he sion and the International Markets
Security Traders Association annual went to work for investment bankers Advi,sory Board of the National Asso-
meetingand told them “Nasdaq has vir- McDonald & Company in Cleveland, ciation of Securities Dealers, he has
tually unlimited potential.” Ohio. There he became a partner and traveled to Poland, Mexico and Lux-
Among the many changes in un- member of the executive committee, embourg and will soon be visiting
listed trading during his tenure, Mr. leaving after twenty years to become mainland China.aaa
6 Friencl.sofFinancialHi.story Winter 199.V1994
Some
of the
start-ups”
^^little trading stock
in more companies than any other
on
you^ll find
market on earth.
In that
The Nasdaq
time we’ve
watched many
Stock Market*
little start'up
companies like Intel, Microsoft and
Looking back today, it’s hard to imagine MCI grow into major corporations.
that just And although Nasdaq lists
over 15 companies with market values
years ago larger than $20 billion and as
Apple Computer began as small as $10 million,
an idea in a garage in Santa Clara Valley, they all share one
California. thing in common.
Or that an entrepre- A \’isionar>’ approach
neur in England with a to doing business. And a willingness to
$1.5 million loan would challenge the status quo.
invest in a company and in just ten years turn it
into the international conglomerate, Tomkins
PLC, wt>rth
$4.6 billion. Where will the MCls, Microsofts and Intels
Or that ot tomorrow be found? The same place you’ll
in 1970 a new computerized stock market find the MCls, Microsofts and Intels oftoday.
would emerge and change the
way stocks have been traded for
the last 200 years.
Today, just 23 years later, Nasdaq is NASDAq’
The stock market for
the next 100 years.®^
PEOPLE NEWS
&
If There Was A Mutual Jay Gould -
Funds Hall of Fame... Forever Secretive
Now
94 years old, Paul C. Cabot, In a letter to Friends. Sanford
one of three money managers who (Sandy) Mock, a collector of financial
founded State Street Investment Trust memorabilia and a senior vice presi-
in 1924, will be profiled in the dent - investments for PaineWebber,
Museum’s upcoming exhibit on the has written in a follow-up to the last
mutual funds industry. issue’s cover story on Jay Gould.
In his tenure with the industry, Mr. Mr. Mock writes that a piece from
Cabot experienced the great market his collection, a message from Gould to
place highs of the Roaring 20s as well his broker, reveals an even more secre-
as the great Crash of ’29. In his profile, tive plotter than revealed in the notes
Mr. Cabot recalls his observations of featured in the last issue. The instruc-
the time and of today’s market. tions, written on Gould’s presidential
The exhibit will be opened in late stationery of the Erie Railway, open
winter/early springand an articleon the with the mandate: “Write me a letter
mutual funds industry will also be pub-
lished in the Spring edition of Friends
ofFinancial History. Cabot
Speaking of leading creditor nation. Mr. Davy ob-
Mutual Funds... serves the original investment trusts, as
they were first called, have evolved and
As the mutual fund exhibit takes adapted to today’s marketdemands, but
shape, Simon Davy, an intern for the “still retain some of the founding prin-
Museum, deserves kudos forhis impor- cipals which first encouraged individu-
tant research role. als to invest.”
A recent graduate of Oxford Col- Mr. Davy’sresearch alsosheds some
lege, in England, Mr. Davy’s work here light on a popular misconception. In-
focused on the first British mutual vestment trusts were not originally a
funds. According to his findings, these British investment concept.
funds became popular in the United “The original idea of pooling inves- Gould
Kingdom as a means to invest the large tors’ money under one management is
amounts of capital accumulated by credited to King William of Nether-
British merchants in the mid-nineteenth lands in 1822... However, the idea did marked private saying what you have
century. “The growing American not flourish on the European conti- done.”
economy one hundred and twenty years nent,” he writes. Afterabrief, one-sentence directive,
ago,’’ he states, produced a return on Somemutual funds trivia, unearthed the note closes again with the secretive
capital that “regularly reached as high by Mr. Davy’s research and from the message: “Don’t forget to mark the let-
as 12 percent or more.” At the time, he article (to appear in Friends; Spring ter private.” Two mysteries are con-
notes, money could be borrowed in the 1994) by Max Rottersman. In 1920, tained within the undated artifact. In a
U.K. for rates as low as three to four there were less than 6 mutual funds; by seeming contradiction of the need for
percent. Coupled with large amounts of 1929 there were 19 open-end funds and privacy, or perhaps revealing more
surplus capital, Britain became the 675 closed-end trusts. players in the conspiracy, it appears
that a copy was sent, by Gould, to two
people as well as broker Henry N.
Can Take That Back...? Smith. Below Gould’s initials is the let-
I
ter “c” followed by a capital “S” and
File this with the stupid things to say department. the capitals “SS.”
On Friday, October 25, 1929, Charles E. Mitchell, the chairman of the National Could these be accountants, book-
City Bank (now Citibank) was asked about the stock market panic that had over- keepers,orattorneys, writes Mr. Mock?
whelmed Wall Street the previous day. “1 still see nothing to worry about,” de- The other mystery is in the text, but the
clared Mitchell, reiterating a position he took earlier that week. The next business tone remains clear: “Ifyou can sell out
day, Monday, October 28, would go down in history as “Black Monday.” the 111 at 30 and keep the cash stock
Not that the press was any better in their assessment. On the day that Mitchell's do so.” The word appears to be
quote would appear, the front page of the New York Daily Investment News “pruchent,” which Mr. Mock notes is
screamed in oversized, block headlines: “Stock Market Crisis Over.” meaningless.
H FriendsofFinanciutHistory Winter I993II994