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Columbus' Zipangu, unlike Marco Polo's, thereafter grew swiftly on both economic and personal speculation. Pioneers speculated that living was better west of the Alleghenies and pushed constantly westward; transportation speculatively followed. Railroads were built—and speculated on. Before long, New York's young exchanges were the seats of speculation, and the bulls and bears rampaged with home-grown capital instead of European imports. The ticker tape, in 1867, followed by the telephone in 1878 on Wall Street, made it possible to speculate far from the floor of the exchanges. Jesse Livermore, operating from a hideaway with 30 telephones, became "king of the speculators" by being bullish or bearish as the tape seemed to indicate. Arthur W. Cutten made $25 million in commodities, came east from Chicago to double that in Wall Street.
Ordinarily such big speculators played a lone hand, but they could manipulate together when there were enough small investors to be skinned. In 1929 alone, 105 pools were organized; the insiders in a pool quietly bought up a large block of some corporation's stock, drove prices up by churning sales among themselves, paid radio broadcasters and financial writers to tout the stock. When the price was high enough and the public panted to get in, the pool sold out. Cutten and his partners cleaned up $13 million on one such pool in Sinclair Oil. Tuesday, Oct. 29, 1929, changed all that. In the aftermath, Ferdinand Pecora, counsel for a Senate banking subcommittee investigating securities practices, sternly described the stock market as "neither more nor less than a glorified gambling casino where the odds were heavily weighted against the eager outsiders." Between the SEC and the Conway Report of 1938, which led to complete reorganization of the New York Stock Exchange, speculative frenzies subsided and Wall Street became less a rich man's club and more an everyman's emporium.
The Gun Slingers
The exchanges today are vigorously ethical. The Big Board and the American Exchange constantly patrol members—lately by computer checks—and the respectable brokerage houses in turn refuse suspicious business and use "compliance men" to keep their customers' men honest. As much as he can be, the individual public investor is being protected—against dishonesty and against greed.
In the stock markets, at least, the latest wave of speculation is hardly the work of the individual investor. The market, first private club, later part of Main Street, seems now to be entering a third phase in which institutional investors—banks, insurance companies, pension funds and especially mutual funds—dominate it more and more. Since 1961, the number of New York Stock Exchange shares held by institutions have increased 17%, and institutional trading now accounts for a third of all Big Board transactions. Armed with increasing coffers of cash from small investors, the mutuals have invested $43 billion in the market. Because of their activity, the number of block transactions, or 10,000 share trades, has almost doubled in the past year. Not surprisingly, institutions as a group own as much as 20% of 24 major companies at present. In the case of Northwest Airlines, institutions at one point had 41.5% of all the stock available.