The Northern Pacific corner of 1901

Michael Sol has set out an interesting alternative to the usual analysis of this episode in Wall Street/railroading history in Another View: The Northern Securities Saga.

The canonical explanation has the forces of Standard Oil attempting to purchase enough voting (common) stock to seize control of the Northern Pacific railroad from J. P. Morgan, but being thwarted in their attempt by Morgan and his ally James J. Hill, who controlled the Great Northern. The rationale for Standard Oil is seen as:

• To mortally wound their old enemy Morgan
• To seize control of a transcontinental railroad
• To make a lot of money into the bargain by manipulations of the markets.

Michael Sol makes note of certain difficulties with the above:

• Standard Oil, by controlling the board of the Milwaukee Road, already had a railroad, albeit not yet a trancontinental. They were also allied with E.H. Harriman, who controlled two transcontinentals, the Union Pacific and the Southern Pacific.

• The odd behavior of bond broker Jacob Schiff in informing Hill that he was in fact buying up Northern Pacific shares, presumably for Standard Oil, and then going off to his synagogue rather than continuing his purchases. Under the canonical explanation these acts should have earned Schiff a permanent place on Henry Rogers sh*t list. Instead, Schiff was rewarded later on.
• Hill then frantically wired Morgan, who was vacationing in Europe, of the situation, triggering frantic BUY instructions back to Morgan's brokers. By this time availability of NP stock was so low that Morgan was buying at very inflated prices. In other words, Morgan was panicked, presumably at the thought of losing his control of the Northern Pacific, into instead losing a great portion of his fortune.

By Schiff's apparent blunder, Morgan was able to secure enough stock to thwart the takeover, but at great expense. Sol contends that this might provide an explanation for the fact that at Morgan's death his estate was found to be significantly smaller than expected. Sol's notion then is that this was really a Standard Oil, hence Henry Rogers, raid on Morgan's fortune, with no intention of actually gaining control of the NP.

In my readings I have found reasons to take some issue with Michael Sol's account, even though I find it much superior to the canonical one. Some points:

• Sol's account presumes that J.P. Morgan was the target of the Standard Oil raid and any effects on the markets were of secondary importance. No mention is made of any significant stock market prepositioning being done by Standard Oil.

• Sol's account relies on J.P. Morgan being induced to panic. It also implies that, at least in the eyes of Henry Rogers and William Rockefeller, money was of primary importance to Morgan, as it was to them. Thus the way to wound their mortal enemy was to take away his money.
• In Part III, Chapter XXV of his Frenzied Finance articles in Everybody's Magazine, 1905, Thomas Lawson remarks on this situation. According to Lawson, between Standard Oil and J.P. Morgan, a 'corner' was achieved on Northern Pacific stock. When a stock was 'cornered' in those times, its normal liquidity suddenly ceased because its only holders would refuse to 'make a market'. Now cornering a stock would only be worthwhile if it were highly valued, widely distributed and considered to be a blue chip investment. Such was Northern Pacific at this time. A stock like this would be widely used for things like margin collateral and short selling because investors and financial institutions relied on its liquidity and relatively stable value to limit their exposure. A corner on the stock caused both of those assumptions to suddenly become invalid. So it was on May 8, 1901.
• According to Lawson, who was positioned to know, Standard Oil had been short selling a broad range of stocks for months, in apparent anticipation of a large and sudden downward movement in stock prices. Elsewhere Lawson notes that the masters of Standard Oil, Henry Rogers and William Rockefeller, were NOT gamblers. They were interested only in 'sure things'. This suggests they regarded a sudden market fall as a 'sure thing'.
• Sol's argument seems to misjudge the character of J.P. Morgan. He was not known as a person who could be easily panicked. Likewise, various sources attest to his preference for power over money. For Morgan, money was the means to power. For Rogers and Rockefeller, power was the means to money. These worthy opponents would not likely have misjudged each other in this way.
• Subsequent to this, Morgan was able to continue his interventions to forestall market panics, including those attempted by Standard Oil. For example, Morgan successfully intervened to forestall panic following the death of President McKinley and was able to moderate the potential devastation of the Panic of 1907. Thus his fortune was not irrecoverably compromised by the events of May 1901. It seems more likely that his market interventions eroded his fortune.

This is my take on the matter:

• This was definitely a raid planned and executed by Henry Rogers and William Rockefeller.
• The purpose was to create a market panic. Any money extracted from J.P. Morgan was icing on the cake.
• The Northern Pacific was chosen because retaining control of it was crucial to J.P. Morgan for retaining his power. It was one financial thing that he valued more than market stability.
• Rogers and Rockefeller had no intention of seizing permanent control of the Northern Pacific. They needed enough stock to, along with what Morgan needed to retain, effect the corner. This also had to be enough to at least throw control of the railroad into doubt. Considering the risk aversion of Rogers and Rockefeller, it is likely they thought they had enough to give them clear control.
• One thing which Michael Sol points out is that much of the stock controlled by Standard Oil was of the preferred type, which could not be voted. However as Sol also notes, there was a device whereby these shares could be converted to common, and therefore voting, shares. This fact was unlikely to be lost on any of the principal players. That may well have been what Rogers and Rockefeller used to threaten Morgan.
• Another factor here was the large amount of short selling. This created a condition where there was quite a bit more stock in play than actually existed! So both sides could plausibly have held more than one-half of the common stock. This would be naked short selling, where the short seller has not first borrowed the stock. While rules have been established at various times to limit this practice, they were and are not reliably enforced. As can be seen, this literally creates stock, which is then destroyed when the position is borrowed or covered, usually within three days.
• It was probably not lost on Henry Rogers that common stock shares could be created in this way for a limited period of time. He may well have directed some of his agents to deliberately short Northern Pacific, with his proxies as the buyers, at the crucial time.
• Rogers and Rockefeller had probably achieved the corner well before anyone else was aware of the fact, and fed stock back into the markets to disguise that until the time was ripe to act. That time came around with Morgan's trip to Europe, ensuring that he could not react quickly enough to foil them.
• On the crucial day, they informed Morgan of the corner. Either both sides held more than one-half of the common stock, or Standard Oil had clear control and delivered an ultimatum to Morgan. Either way, Morgan was enjoined from interfering in the markets for one day. After that, Standard Oil would act to restore Northern Pacific liquidity and end the panic which would ensue on May 9. Morgan's alternative was to risk losing his control of the Northern Pacific.

A perusal of the evening papers from New York on May 9^th and 10^th, 1901, tells the story. When the stock market opened at 10am on May 9^th, some people who were short Northern Pacific noticed that the closing price on May 8^th had moved beyond their buy level, either upward or downward. They then placed buy orders for Northern Pacific in the usual fashion to take either their profits or loses. At about the same time some banks noticed that some loans which had been collateralized using Northern Pacific stock subsequently sold for other purposes required that the stock be repurchased. No doubt there were other situations which also required immediate purchase of NP stock. However there was no NP stock to be had at any reasonable price. When there are buy orders but no stock is offered for sale at the price, the price keeps rising until stock is found for sale. Here is the terrible beauty of the corner – those holding the corner can sell for any price they choose. Until they choose to sell, the price keeps on rising.

Now consider our investor who has sold short 5000 shares of Northern Pacific at the then prevailing price of $100 per share, anticipating a fall in the price. He/she sets a stop-loss in case the market moves adversely, at $110 per share. At market close on May 8^th, Northern Pacific closes at $110 per share. Therefore our investor anticipates a loss of $50,000 on their $500,000 investment. A nasty slap but our investor decided he/she could absorb it when the stop-loss was set at $110. $50,000 also was the margin limit allowed by the brokerage house for the transaction. So our investor is about to receive a margin call anyway. He/she also likely holds a number of other stocks and securities with that brokerage, which is the reason they are willing to extend the $50K margin.

5000 shares are eventually released from the corner to fill our investor's order, but the price has risen to $1100 per share! Our investor's loss has risen from the anticipated $50,000 to $5,000,000! His/her brokerage house is demanding the immediate covering of the $5M loss on their margin. There is nothing to be done but to sell as many other securities as necessary to cover the loss. These are unceremoniously dumped onto the market by the brokerage house. There is a fair chance that our investor is now bankrupt and unable to cover his brokerage loss. And his bankruptcy is the result of what should have been a normal and low risk investment decision. There may be enough defaults to actually bring down the brokerage house itself!

It actually wouldn't have mattered whether the investor had wanted to buy or not. When the buy price had passed the extended margin of $50K, his/her brokerage house would have called the investor, demanding immediate payment of that amount. The margin calls would have continued at each $50K rise so long as 5000 shares of Northern Pacific stock could not be acquired. Thus all investors who were short Northern Pacific would have had margin calls, probably a number of them, as the price of Northern Pacific stock continued to rise without any sellers being found.

Now this is not nearly the only kind of investor facing a margin call. For instance, as the brokerage houses begin to be squeezed by their Northern Pacific short margins, they need cash immediately. So they begin to call in the margins extended on other stocks. Many of their customers are unavailable or not immediately able to produce the required cash. So the brokerage houses dump their securities as well. The sudden avalanche of sell orders across a broad range of securities starts to drive down their prices, as must happen when sell orders outnumber buy orders. This process must continue until prices are such that once again buy and sell orders balance, thus setting a new, probably much lower, price for each of the securities. Other investors just see the falling values and try to escape by dumping their holdings while they can. And so on. This situation is called a 'panic'. It drives the values of many securities to very low figures, and it does this very quickly, in hours or even minutes.

This was the situation appertaining on Wall Street on May 9^th, 1901 at 10:01am. J.P. Morgan was powerless to intervene because doing so would have been financial suicide. Standard Oil was 'short' a broad range of selected securities as well as having effective control of all the stock of the Northern Pacific (and then some!). They had only to wait until values in their selected securities had become absurdly low, and then buy enough to cover their short positions. They also had the capital to purchase much more at rock bottom prices. By the closing gong at 3pm, the markets were a shambles and Standard Oil had stolen tens to hundreds of millions of dollars from the entire financial world outside of Standard Oil, perfectly legally.

When the price of Northern Pacific stock became high enough to fuel the panic, Standard Oil began to sell small amounts, for enormous profits. When the panic was fully triggered they released much more stock, which began the process of re-normalizing the markets, which Standard Oil wanted as much as anyone else, as a prolonged panic would have begun to work against its own interests. On May 10^th Standard Oil and others offered to allow the short sellers to retroactively cover at $150 per share, thus alleviating some of the most extreme situations.

That is what I think happened on May 8-10, 1901.

The Journey to Hackensack

The Journey to Hackensack

She lived apart, in places queer

Her relatives were nowhere near

And so I wondered, to her face

What happened when she left the place

How would she cope or would she change

Or take what nature would arrange

What I was I am, said she

If burden then, than burden be

I grew up television's child

All circumscribed and reconciled

My life was set upon a course

Including marriage (and divorce)

Of children five and in my age

A government subsistence wage

But somewhere short of Hackensack

My well-planned journey jumped the track

I hit my head (in retrospect)

I couldn't seem to recollect

My destination, or think why

Any abode but open sky

Would ever fit my temperament

And thus it was I finally went

To seek a home in places queer

Where relatives are nowhere near

And so it's here I guess I'll stay

Until the world shall pass away

For me there's just no going back

I'll never get to Hackensack.

©  2014 by John P. Wilson

Modern Evolution Theory and American Indians

Modern Evolution Theory and American Indians

In her book Reservations are for Indians, published in 1970 & 1991, Heather Robertson makes this amazing observation regarding Canada (and the USA by extension) <pp 300>:

The solution for this current Indian problem (poverty, inability to keep a job, chronic welfare) has not been found yet, although thousands of bureaucrats, social workers and politicians are working on it. Soon the solution will be discovered, and soon it too will fail.

All these solutions are based on the premise that Indians are not people. (emphasis mine)

In his book The Beak of the Finch, published in 1994, Jonathon Weiner remarks in a different context:

This kind of resistance (referring to antibiotic resistance in human pathogens) tends to follow the same cycle as pesticide resistance: big companies, big medicine, blanket treatment, followed by almost immediate disappointment.

This could perhaps be paraphrased something like:

All these solutions are based on the premise that people are not animals, that people are superior (in some nebulous way) to animals.

Lets see now, we have 1) people are superior to (are not) animals; 2) Indians are not people (hence: Indians are animals?).

From the above we see that people can in theory, by virtue of their superiority and dissimilar status, control animals. This seems to include the ability and right to eradicate them if desired. People might desire to do this if or when particular animals become inconvenient (like they decimate human food/materials sources, or they are taking up space where people want to build a housing development, and so on). Failing this, people might settle on keeping various animal populations in check. As Weiner observes, current methodologies involve removal of as many of the offending animals as possible. As he also observes, those animals remaining will mostly be the ones who have an innate resistance to the methodology employed. These resistant animals will, so long as the same attempts to control or eradicate them continue, come to constitute an ever larger proportion of that population.

So we have big government, big social programs, same solutions for everybody followed, as Heather Robertson observes, by yet another failed solution.

Sounds like a resistance movement. Maybe the American Indians who want to be European immigrants do leave the reservations and disappear into European-American society. For sure, many American Indians destroy themselves and their lives in various ways, out of all proportion to persons in the society outside the reservations. I guess you could call that a sort of success for the control methodology, just like you could consider mounds of deceased tobacco budworm moth larvae a sort of success for the massive application of pyrethroid insecticides to cotton fields.

The survivors replenish the earth.

What does it take for Indians to be people? I'm here talking about the resistance movement, which is mostly out on the reservations, in Canada and the USA anyway. The answer seems to be something like honoring the culture of the resistant Indians. This culture will likely be found in multiple, perhaps incompatible, forms. This culture will have undergone rapid evolution from the forms extant in 1492 (precisely because Europeans have been trying to obliterate it). Trying to honor the forms of five centuries ago would likely be a fruitless exercise. A precursor to this honoring must then be to figure out what is to be honored. To my knowledge this has not been done in any convincing way.

So long as it is Europeans honoring European ideals only, American Indians must remain beyond the Pale of person-hood.

So long as we honor mythologies rather than realities, American Indians must remain beyond the Pale of person-hood.

Poem - Finally! A Reason to Move to Antarctica

Finally! A Reason to Move to Antarctica

(In case you needed one)

Well early last morning I jumped out of bed

About the same time a drone was flyin over my head

I've yet to get used to lookin up in the sky

Where instead of the sun there's a hoverin spy

So I jumped on my roof and was shakin my fist

They thought I was a terror of a terrorist

Before I could blow on my terrorist whistle

They took their best shot with a Hellfire missile

So I yelled down quick to alert my spouse

That she better hurry up and get out of the house

Then I picked up the dog an ran for the cat

When about that time the missile went splat

Well it blew up the house and it blew up my cool

And it made a big hole in the old swimmin pool

Then it shut down the gas and blew out the lights

And was downright uncivil bout my old civil rights

So I went to the court and I pleaded my case

Said drones are a danger to the whole human race

Not to mention my dog or my terrified cat

Who won't leave our tree, now what about that?

Bout all they could do was offer me a tissue

Seems it's a national security issue

Besides, the judge said while shakin his head

Those drones are real safe so ya shoulda stayed in bed

There isn't any problem with drones when they fly

You shouldn't be lookin up there in the sky

It's your own damn fault if you're shakin your fist

Why anybody'd think you was a terrorist

So we're sorry bout your house but we think it be best

If you went on back home 'fore you're under arrest

(Oh, about your stuff, we think it's a shame

But some kid thought it was a video game)

So I went back home and I looked all around

But all I could see was a hole in the ground

So I picked up the dog and the cat and the wife

We jumped in our van and drove for our life

Drove all night and we drove all day

Bout all we could think was to get far away

Bout as far as we could by natural law

So we drove all the way to Antarctica

Now you'd think we'd be cold but I think it's nice

With bein surrounded by all of this ice

Thinkin bout drones used to make me a fool

But down here it's easier keepin my cool

And if blowin things up is the government goal

We already got us an ozone hole

So we're sendin this card from way down below

Where the missiles don't shoot and the drones don't go.

© 2012 John P. Wilson

The Importance of Pedro Alvares Cabral

In Brazil, Pedro Alvares Cabral is lionized as the discoverer of the country and the person who claimed Brazil for Portugal. Cabral was the fleet commander of a sailing expedition from Portugal to India, in 1500. Since the time of Henry the Navigator, Portuguese captains had been using a sailing technique called volta do mar, which involved sailing far to the westward in order to use the trade winds and currents (the North Atlantic Gyre as it is called) to facilitate sailing to the east. Cabral's fleet veered so far west that they sighted the coast of what would become the country of Brazil. They explored north and south along the South American coast from 22 April til 5 or 6 May of 1500 whence, having performed a Catholic mass ashore and reprovisioned their ships, they struck out eastward for the coast of Africa. Cabral never returned to the Americas. Many doubts have been raised since the 1500's as to Cabral's primacy, but Brazilians have embraced him as the discoverer, and there the matter stands.

The remains of a Roman merchant ship lie on the bottom of Guanabara Bay, the natural harbor of Rio de Janeiro, Brazil, right next to Xareu rock, a submerged navigational hazard in the bay. The wreck was discovered by Robert Marx, a diver and specialist in the salvage of shipwrecks, in 1985. Any doubt about the shipwreck's provenance was removed by the actions of the Brazilian government in suppressing the find, which threatened their legal justification for claiming the country:

At the time the amphorae were confirmed to be "Roman", the large Italian faction in Brazil were extremely excited about this news. The Italian ambassador to Brazil notified the Brazilian government that, since the Romans were the first to "discover" Brazil, then all Italian immigrants should be granted immediate citizenship. There are a large number of Italian immigrants in Brazil and the government has created a tedious and costly citizenship application procedure for Italians that does not apply to Portuguese immigrants. The Brazilian government would not give in and the Italians in Brazil staged demonstrations. In response, the Brazilian government ordered all civilians off the recovery project and censored further news about the wreck hoping to diffuse the civil unrest. http://www.freerepublic.com/focus/news/1038045/posts Romans In Brazil During The Second Third Century?

Mr. Marx said he nonetheless went diving and found that the spot where objects had been close to the mud surface was now covered by a large mound. He added that other Government officials then told him: ''Brazilians don't care about the past. And they don't want to replace Cabral as the discoverer.'' The New York Times Science Section, June 25, 1985, UNDERWATER EXPLORING IS BANNED IN BRAZIL

Here is the 'smoking gun' which the skeptics defending The New Archaeology keep asking for. How strange it is that they seem to have forgotten about it.

Here it should be noted that the Papal Bulls which implemented the “Doctrine of Discovery” conferred discovery rights only on Christians. Considering that a recovered piece of amphora was dated to 19BC, it seems doubtful that any Christians were included in the Roman crew. Indeed it is likely that Christianity didn't even exist at the time of the voyage.

On The New Archaeology in the Americas

"Anthropological hypotheses based on migration and interaction were deposed in much the same way they came into vogue, with a massive backlash ending in a temporary ban on their application in archaeological explanations." - Polynesians in America, Chapter 2, pp 14.

And so we continue with the politics of colonialism, with the continuation of the destruction of the history and identity of indigenous peoples. 

From the Spanish conquest forward, the western European conquerors have systematically eradicated the histories kept by Native Americans. This has been done in the name of promoting whichever European paradigm of the prehistory of the Americas was popular at the time. Archaeologists have been charged with selecting evidence from the material remains to support the then-current paradigm. Skeptics have been charged with debunking, discrediting and, perhaps, even destroying evidence which does not seem to support the then-current paradigm.

A prize granted to conquerors by that very act is the license to write the histories. Rarely do conquerors suffer historians to cast them in anything but an heroic light  Likewise, the integration of conquered peoples into the new order proceeds most smoothly if the slate of their former life and culture is wiped clean. To that end, existing histories of conquered peoples are expunged. This is why anthropologists and archaeologists discourage the study of cultural history. Conquered peoples are encouraged to suppose that their ancestors just sprouted in situ, with no antecedents of significance.

In the case of the Americas, it seems to be that cultural historical evidences (which have so far escaped the skeptical ax) point mostly to places in the eastern hemisphere which are NOT in western Europe. This is also something that the western European conquerors don't care to advertise. One western European locale that does frequently pop up is (God help us!) Ireland. Imagine how popular THAT is with the British!

A cache of Clovis points

This entry is prompted by an article in the July 2014 issue of The Mammoth Trumpet (Volume 29, Number 3), the archaeology magazine published quarterly by Texas A&M University, titled Hogeye Secrets. The article opens: "A cache of pristine Clovis bifaces unearthed by a commercial sand-mining operation in central Texas in 2003 drew Texas A&M archaeologists Mike Waters and Tom Jennings into investigating the discovery. It proved to be a godsend, for the 52 unused bifaces, in varying stages of completion, show lithics analysts the sequence of operations Clovis knappers performed as they crafted tools needed for survival at the end of the last Ice Age." In an accompanying picture we see one of the afore-mentioned archaeologists indicating the sand pile wherein the bifaces were discovered.

Sand pile? Reading further we discover that a workman noticed one or more bifaces in a bucket-load of sand which he was hauling from a sand pit. Over the next several months, most of the cache of Clovis points was recovered from a previously excavated pile of sand as it was processed. One of the steps in processing was to heat the sand to 500 degrees Fahrenheit. We are also told that "A few were also found in earlier piles of rejected material, and Jones was given one biface by another employee."

Hmmm. The article continues by informing us that part of the collection (those belonging to Farris) were bought and sold by various collectors, before being returned to the collection in 2005.

Some difficulties come to mind:

• The blades were not recovered in situ. Further, they were processed on a conveyor belt from which they were rejected as (not surprisingly) too big.
• Many if not all were heated to 500 degrees F before being recovered.
• Many passed through the hands of (undocumented?) collectors before being included in the collection.
• Some roaming about the internet reveals the existence of a substantial community of modern day flint knappers, many of whom seem confident that they can make reproductions indistinguishable from genuine artifacts of the various traditions.
• There appears to be some trade in such reproductions, for profit.