Studies in Applied Economics

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1 SAE./No.29/March 2015 Studies in Applied Economics Unofficial london Stock trading during the Stock exchange SUSpenSion of 1914 Matt Carey Johns Hopkins Institute for Applied Economics, Global Health, and Study of Business Enterprise

2 Unofficial)London)Stock)Trading) During)the)Stock)Exchange)Suspension)of)1914) ByMattCarey About)the)Series) ) The Studies( in( Applied( Economics( series is under the general direction of Professor Steve H. Hanke,Co=DirectoroftheInstituteforAppliedEconomics,GlobalHealthandStudyofBusiness Thisworkingpaperisoneinaseriesoncurrencyboardsandothertopicsinfinancialhistory. TheauthorsaremainlystudentsofProf.HankeatTheJohnsHopkinsUniversityinBaltimore. SomeperformedtheirworkwhiletheywereresearchassistantsattheInstitute. About)the)Author) ) Matt Carey is a senior at The Johns Hopkins University in Baltimore pursuing a major in economics with minors in financial economics and entrepreneurship and management. He wrote this paper while serving as an undergraduate researcher at the InstituteforAppliedEconomics,GlobalHealth,andStudyofBusinessEnterpriseduringtheFall 2014semester. Summary) ) The following study analyzes unofficial trading of stocks during the London Stock Exchange suspension of trading in 1914 at the start of World War I. Extensive data obtained from the LondonFinancial(Timesuncoversstockpricesfromtheunofficialmarketduringtheperiodfrom August 15, 1914 to January 4, This study intends to illustrate the relationship between globalfinancialmarketsandtheoutbreakofoneofthemostdevastatingwarsinhistory.the analysisshowshowarecoveryofpricesintheunofficialmarketcorrespondedwithworldwide eventsduringtheclosureoftheexchange.anaccompanyingspreadsheetworkbooklistsdaily pricesintheunofficialmarket. Acknowledgements) ) IthankDr.KurtSchulerforguidance;RyanBenderandAnnaSchneiderfortheirpreviouswork on the unofficial stock exchange during the 1914 shutdown of Wall Street; and Prof. Richard RobertsforadviceontheLondonfinancialmarketoftheperiod. Keywords:LondonStockExchange,WorldWarI,crisis JELcodes:G01,N24 1

3 Introduction) ) The early months of 1914 were a high=water mark in global financial markets. Innovation in technology and financial instruments stimulated tremendous growth and openness in global markets. Capital flowed freely from country to country, and markets throughout the world experienced connectivity and cohesiveness that allowed for great advancement. All of the major global economies except China were on the gold standard, and forex arbitrage opportunities were capitalized by buying and selling international bonds listed on one s domestic exchange. This advancement united global economies, and more specifically, made Europeanexchangesoneintegratedmarket.Marketsinthefirsthalfof1914werestrong,and thefactthataglobalfinancialcrisiswouldsoonoccurwasnotapparent. The Great War was put into motion on June 28. Amid escalating tensions in the Balkans, a young Serbian nationalist named Gavrilo Princip assassinated Archduke Franz Ferdinand, the heirtothethroneoftheaustro=hungarianempire.theassassinationwasthetippingpointin what was already an extremely fragile situation in the Balkans. Austria=Hungary received full support from Germany on July 6, and on July 23 issued an ultimatum to Serbia, essentially instructingittosuppressanti=austrianpropagandaandextricateterroristorganizations,orface military action. Although Serbia cooperated with many aspects of the ultimatum, Austria= Hungarydeemedtheresponseinadequate,anddeclaredwaronSerbiaonJuly28.Fourdays later on August 1, Germany declared war on Russia after news broke that Russia, which saw itselfasadefenderofthebalkanslavs,wasmobilizingitsarmyagainstaustria=hungary.shortly thereafter, Germany s invasion of Belgium, in violation of a longstanding treaty obligation to respectbelgium sneutrality,broughtgreatbritainintothewar(keegan1998,37). The outbreak of world war stimulated the most severe systematic financial crisis in London s history.arecentstudyofthefinancialcrisisof1914hasclaimedthatitwasunlikeanyother crisis in history. The typical activities that lead to a crisis asset bubbles, credit expansion, euphoria, and speculative mania did not occur (Roberts 2013, 15). Markets were calm in London in the early summer of 1914, and they were relatively steady even after the assassination of Archduke Franz Ferdinand. The real displacement moment for markets occurredonjuly23whenaustriaissuedafinalultimatumtoserbia.theultimatum,andinturn the realization of the likely impending eruption of world war, supplanted greed with fear in investors,andbeganthechainofeventsthatledtostockmarketclosuresallovertheworld. ThedisplacementmomentonJuly23broughtBritishinvestorstotherealizationthatafinancial crisiswasimminent(durden2014).theyflockedtothestockexchangeandthebankofengland inordertoselltheirassetsforcashandgold.therewasfeararoundthecityoflondonthata massive selling would occur, spurring a sharp fall in prices and the failure of many firms. Furthermore,asmoreandmorecitizensrealizedtheirneedforliquidassets,arunonthebanks was forthcoming. Over the next week, from July 24 to August 1, every one of London s key financialmarketscollapsed,includingtheforeignexchanges,thediscountmarket,andthestock market(roberts2013,13). 2

4 The primary reason the London Stock Exchange was closed was because of the impact a massivesell=offofassetswouldhavehadonbrokersandjobbers.brokersactedasagentsfor non=member buyers and sellers, and jobbers quoted buying and selling prices for securities, providingliquidity.onadailybasis,brokersandjobbersconductedbusiness,andhundredsof transactions were made. However, the individual transactions were not actually completed until settlement day, when buy and sell orders were matched and crossed. If a broker had a deficitorsurplusonhisaccount,hewouldsettletheoutstandingtradeswithcash.however, massiveswingsinsecuritypriceswouldunsettlemanybrokers accounts,andforcetheminto bankruptcy. Stock exchange officials realized that a massive sell=off of assets would force the majorityofbrokersintobankruptcy,andfurtherworsenthefinancialpanic. Duetotheopennessofglobalfinancialmarkets,everymajormarketthroughouttheworldwas indangerofcollapsing.onjuly27,theparis Coulisse market,brussels,andosloexchangesall closed. The next day saw the closure of the Lisbon, Oporto, and Madrid markets. Shortly thereafter Amsterdam, Antwerp, Berlin, Milan, Rome, and St. Petersburg all closed their exchanges.londonandnewyorkwerethelasttwoexchangesopencomejuly30.but,dueto thefinancialstrainsplacedonthesystemandthedisastrouseffectsafirehousesaleofassets wouldhavehad,thenyseandthelondonstockexchangebothdecidedtoclosetheirdoors. Officials came to a conclusion that there was no avoiding a massive sell=off if the exchanges remainedopen,andthecommunalsaleofassetswouldcollapsetheentiresystem.onfriday, July31,theLondonStockExchangeofficiallycloseditsdoors.Thedoorscouldnotbereopened untilaneffectivewaytosettlealloutstandingtransactionswasconstructed. Despite the closure of the exchange on July 31, an unofficial stock exchange arose on ThrogmortonStreetinLondon,juststepsawayfromtheStockExchangebuildingandtheBank ofengland.investorsstillhadtoholdtheirpriorassetsuntilasettlementdaywasagreedupon, but securities could now be traded on the unofficial market. The unofficial market gave the Stock Exchange Committee some time to determine the best way to proceed with the crisis. The first trading on the unofficial exchange was recorded on August 15. Trading resumed on this exchange until the House (the official stock exchange) reopened its doors on January 4, This study analyzes the price movements of various securities through the duration of the unofficialstockexchangeinlondon.morespecifically,thestudybringstolighttherelationship betweenthepricerecoveriesofsecuritiesandtheeventsofworldwari.thepricesobtainedin thestudyarerecordedfromdailyissuesofthelondonfinancial(times.beginningonaugust15, nominal prices of major securities were printed on the front page of the Financial( Times. Furthermore on the 15th, an Approximate Guide to Private Negotiations was released. The guideisshowninfigure1.onseptember23,thefirstfulltableofsecuritypriceswasprinted. PriceswereprintedinthisfashionuntilthereopeningoftheexchangeonJanuary4. The Financial( Times is the only known credible source that printed prices from the unofficial market. (It should be mentioned that in that era, the Financial( Times was a well reputed 3

5 newspaper in the City of London, but far from the international powerhouse it is today.) The LondonDaily(Mailranitsownexchangefortheconvenienceofreaders,butmyexaminationof thepricesrecordedindicatesthattheywerenotrelatedatalltoglobal financial markets. All the prices and calculations recorded in this study can be seen in the accompanyingspreadsheetworkbook. The)Unofficial)Market)on)Throgmorton)Street) ) TheopeningoftheunofficialstockexchangewascriticalforthesurvivalofLondon sfinancial economy. The continued trading of securities on Throgmorton Street facilitated the market evaluation of firms, domestic and international trade, and most important, held steady the fragileconfidenceofinvestors.althoughthehousewasclosed,brokers,jobbers,andinvestors gatheredeverydayonthrogmortonstreettoprivatelyexchangesecurities.figure3presentsa picture from the Financial( Times that depicts a typical scene from the unofficial market on ThrogmortonStreet,locatedrightinfrontoftheHouse.Thefirstofficialrecordingofsecurity priceswaspublishedonaugust15.thereleasecanbeseenbelowalongwiththe Approximate GuidetoPrivateNegotiations. Figure)1.)Approximate)Guide)to)Private)Negotiations)) (Financial(Times,(August15,1914) 4

6 Figure)2:)First)listing)of)nominal)prices)) (Financial(Times,August15,1914) OnlythesecuritieslistedinFigure2weretradedontheunofficialexchangefromAugust15to September23.ThereaderwillobservethatthefirstandlargestgroupisacollectionofBritish Empiregovernmentbonds(sometimescalled governmentstock )plusthecommonequityof thequasi=officialbankofengland.atthetime,thelondonstockexchangetradedbondsaswell asequities.theremaininggroupsareequities:thesecondisleadingnorthamericanstocks;the third is British industrial stocks, and the last is South African gold stocks. On September 23, manymorepriceswerelisted,andtradingvolumesincreasedonthrogmortonstreet.securities ofparticularimportanceforgreatbritainincludedthoselistedinthefinancialtimesunderthe categories British Funds and Home Rails. All of these security prices throughout the crisis arerecordedinthespreadsheetworkbookthataccompaniesthisstudy. Theunofficialmarketplayedacriticalroleinthecontainmentoffinancialpanicandtherevival ofthelondonstockexchange.thecontinuationoftradingallowedcertainfailingfirmstobe restructured and recapitalized. The lack of an unofficial market could have resulted in the collapseoftheentiresystem.theabsenceofanunofficialmarketwouldhaveresultedinzero pricesignalstoindicatefirmsofnecessaryrestructuring.themarketwasimperativeforfirmsto keepinorder. 5

7 Figure)3:)Throgmorton)Street) (Financial(Times,October3,1914,3) ) ) 6

8 Methodology)of)This)Study) TheLondonfinancialcrisisof1914hasbeenreferredtoasthe unknownfinancialcrisis. The crisis was not preceded by many of the typical factors that stimulate a panic and crisis. Furthermore, the crisis did not proceed as a typical crisis would. Not much had been written concerning the crisis until Richard Roberts s(2013) book Saving( the( City:( The( Great( Financial( Crisis(of(1914.Inhisbook,Robertsanalyzesthefactorsleadingtothecrisis,andexplainshow thecrisiswasultimatelycontainedandresolved.robertsfocusesonthecrisisitselfratherthan theunofficialstockexchange.inspeakingwithrobertsaspartofmyresearchforthispaper,he informedmethattheonlyknownsourceforanalyzingpricesfromtheunofficialexchangewas thefinancial(times.therefore,thisisthesourceiusedforallofmyprimarydata. IexaminedeachdailyissueoftheFinancial(TimesfromJuly1toJanuary30,barringSundays, when the Financial( Times was not published. To fully understand the price movements and recovery of securities during the crisis, it is critical to see how prices moved both before and after the crisis. Each issue of the Financial( Times shows stock prices on the front page along with a brief overview of the stock exchange from that day. Figure 4 depicts an example of a typicalsectionofthefrontpagepresentingpricesandamarketoverview. The securities I primarily analyzed were British Funds and Home Rails. The British Funds I analyzed were the most important British equities from Some of the principal equities were Consols (British Government bonds), Bank of England Stock, and Transvaal 3 percents (sensitive to gold prices). Home Rails were also critical equities in Rail securities were someofthehighest=volumetradedsecuritiesduringthisera.mystudycontainsaday=by=day price analysis of all British Funds and Home Rails. Furthermore, I recorded a daily market commentary from each day of the crisis. The market commentary helps illustrate why prices moved the way they did. The market commentary was retrieved primarily from the stock exchange report on the first day, but also from other sections of the Financial Times. Major eventsoccurringinforeignmarketsandinthewarareshownintable1andtheappendixtable ofmarketcolortoaccuratelyillustratewhypricesfluctuated. My study intends to accurately depict how and why prices moved and ultimately recovered during the crisis. Studies have been done to show why the crisis occurred and how the stock exchange was ultimately reopened. However, my study is distinctive in that it traces the movement of stock prices when the official stock market was closed. Unfortunately, the Financial( Times did not provide information about the estimated volume of trading on the marketduringthewarcomparedtoprewarvolumetrading.however,thegathereddatafrom theftwillstillgiveanaccuratedepictionoftradingontheunofficialmarketduringthewar. 7

9 Figure)4:)Financial'Times)Stock)Exchange)Section) (Financial(Times,September23,1914) 8

10 Price)Analysis) MystockpriceanalysisduringtheLondonfinancialcrisisof1914beginswithwhattheFinancial( Timescalled BritishFunds BritishEmpirebonds,includingthebellwetherBritishConsol,and BankofEnglandequity.ItracedthetenprimaryBritishFundsthatapparentlyhadthehighest volumes of trading in A cumulative analysis of the ten British Funds finds that prices dropped points from July 31 to January 5, the first day prices were recorded after the Housereopened.PricesdroppedsignificantlyfromJuly30toJuly31,butIwasmoreinterested inanalyzingtherecoveryofpricesratherthantheinitialsinkingofpricesoncethecrisishit. ThetwoBritishFundsthatdroppedthemostduringthespanofthecrisiswereBankofEngland stockandportoflondonbonds.bankofenglandstockdeclinedsignificantlyduringtheweek leadinguptotheclosureofthehouseonjuly31.thestocksank6pencepersharefromjuly24 tojuly31,droppingfrom250penceto244pence.(stockswerequotedinpence.recallthat underthepre=decimalcurrencysystem, 1=240pence. 1 )Thereasonforthissignificantslump wasthefiresaleofassetsforcashandgold.giventhehighpriceofthebankofenglandstock,it wastheprimaryassetthatinvestorsweretryingtosellinordertoobtainmoreliquidassets. BankofEnglandstockcontinuedtodropthroughoutthecrisis.Next,thePortofLondonstock alsorealizedasignificantpricedrop.tradebecameveryrestrictedduringthecrisis,especially overseastrade.theportoflondonexperienceddiminishedusefulnessinthewargiventhelack ofoverseastrade.therefore,thisstockdroppedinvalue. Transvaal 3 percents increased in price during the crisis. Transvaal was the world s most concentrated gold=mining region, gold was obviously in high demand, and imports of gold significantlyincreasedthroughthecrisis.consolsremainedrelativelystagnantthroughoutthe crisisasinvestorswaitedforsettlementday.figure5depictsthepricechangeofalltenbritish Fundsduringthecrisis.ThegraphmarksthepriceofthesecurityonJuly31,thefirstdayofthe closure,andjanuary5,thefirstdayofpricesoncethelondonstockexchangewasreopened. 1 AmericanandCanadianstockswereanexception,beingquotedindollars.TheCanadianandAmericandollars were equal at the time. For bookkeeping purposes, the London Stock Exchange valued the dollar at the round multipleof$5= 1,whereastheofficialparityofexchangewasalessconvenient$ = 1.Consequently, anewyorksecuritytradingat$100wasequaltoalondonsecuritytradingat$102.75(financial(review1915,89). 9

11 Figure)5:)British)Funds)Prices,)July)31,)1914)and)January)5,)1915)) (Bond)prices)relative)to)a)par)value)of)100;)Bank)of)England)stock)in)pence)per)share)) The next category of stocks to analyze is Home Rails. Railways were perhaps the leading industryofthe19thandearly20thcenturiesfortheirimportanceineconomicmodernization, which is reflected in them being some of the most heavily traded securities on the London StockExchange.HomeRailsthereforegiveagoodroughindicationoftheoverallstateofthe equity market in London. On the unofficial exchange during the 1914 crisis, Home Rails continued to be heavily traded, being among the small percentage of stocks listed in the Financial(Times. HomeRailsexperiencedanoverallpriceappreciationduringthelifeoftheunofficialexchange. The18HomeRailsIanalyzedcumulativelyincreasedbyeightpointsduringtheclosureofthe exchange.myresearchsuggeststhatapotentialreasonforthispriceappreciationwasthatthe war brought increased demand for railways to transport war material and soldiers. Figure 6 depictspricesonjuly31andjanuary5. 10

12 Figure)6:)Home)Rails)Prices)on)July)31,)1914)and)January)5,)1915) (Pence)per)share)of)common)stock)) Next, let us examine the daily price changes that occurred from July 31 to January 5. I calculated the percentage change in prices for both British Funds and Home Rails on a daily basis,andthengraphedtheresultstodepicttheoverallpricefluctuationsthatoccurredduring thecrisis.coupledwithmarketcolor,thestudythencorrelatespricefluctuationswithevents thattriggeredthemovements.majoreventsthatoccurredinotherforeignexchangesaswellas inthewaritselfwereoftenresponsibleformajorfluctuationsinprices.figure7illustratesthe dailypercentagechangeinpricesduringthecrisis.thisfigureisfollowedbyatablecomparing majormarketandmilitaryeventswithsubstantialdaysofpricefluctuations.afulllistofmarket colorcommentarycanbeseenattheendofthestudy. 11

13 Figure)7:)Daily)Percentage)Change)in)Prices)for)British)Funds)and)Home)Rails) 12

14 Table)1:)Events)Possibly)Related)to)Price)Movements) ) Major)Events)in)British)Markets July31,1914 LondonStockExchangecloses,pricesdropsignificantly August4 BritishGovernmentannouncesinvolvementwithunofficialexchange August15 FirstnominalpricesprintedsinceclosureoftheHouse August21 Foreigntraderulesreleased,homerailsdropinprice September9 ChancelloroftheExchequerannounceswarexpenditures November11 Parliamentreopens November18 SettlementDayoccursandenthusiasmrisesonthestreet January5,1915 LondonStockExchangereopens Major)Foreign)Market)and)World)War)I)Events) June28,1914 ArchdukeFranzFerdinandassassinated July23 July30 August1 August3 August4 Displacementmomentforinvestors,Serbiadoesn taccedetoultimatum Russiamobilizesarmy GermanydeclareswaronRussia GermanydeclareswaronFrance GermanyinvadesBelgium,GreatBritaindeclareswaronGermany August19 U.S.PresidentWoodrowWilsonannouncesU.S.neutrality September5 FirstBattleofMarnebegins,initiatingtrenchwarfare November3 U.K.announcesNorthSeaasmilitaryarea,creatingblockadeonGermany December12 NewYorkStockExchangereopensforstocktrading Conclusion) ) The financial crisis of 1914 was unique in many ways. The openness of markets allowed for connectedinternationaltradeandfinancialflowstoanextentthatwouldnotbethecaseagain formanyyears.duetotheconnectednessofmarkets,theoutbreakofworldwariputevery major market and economy in the world in danger, especially in Europe. My study first and foremost prints prices from the unofficial stock exchange in London that have not previously beenanalyzed.myanalysisofpricesshowtherecoveryofpricesforhomerailsinbritain,but theslumpofbritishequityprices,mainlyduetothedecreaseofpricesinbankofenglandand PortofLondonsecurities.Furthermore,thestudybringstolighttherelationshipbetweenprice movements and major World War I events. Although price volatility was not extreme throughout the duration of the crisis, there was a correlation between price movements and majorworldwideevents.itisimportanttonotethatafterthehousereopened,pricesincreased significantly.iftheunofficialexchangehadnotexistedduringthecrisis,pricesmightnotbeen abletorecoveroncethehouseopenedbecausepricesignalswouldhavebeenimpairedfora long period, creating great uncertainty about the condition of the firms and bond issuers quotedonthelondonstockexchange. 13

15 14 Appendix:)Market)Color)from)the)Financial'Times)during)the)Suspension)of)Trading) Date) Market)Color) 30=Jul=14 LondonStockExchangeexperiencesoneoftheworstdaysinhistory.Stock ExchangeCommitteeholdsmeetingtoconsidertheclosingoftheexchange. 31=Jul=14 LondonStockExchangeclosesitsdoors.Banksclose. 01=Aug=14 MajormovementattheBankofEnglandtowithdrawgold. 02=Aug=14 (Sunday) 03=Aug=14 04=Aug=14 Announcementmadethatuponreopening,therewillbeorganizedsupportof thegovernmenttowardstheexchange,apparentlyafirstinthehistoryofany stockexchange. 05=Aug=14 ReportsreleasedshowingthatthegoldpositionwithintheBankofEnglandis verystrong.confidenceincreases. 06=Aug=14 LeadersofthebankingworldinconferencewiththeChancellorofthe Exchequertocompletefinancialarrangementsfortheadjustmentofthenew bankingpolicyduringthecrisis. 07=Aug=14 ApproximateGuidetoPrivateNegotiations released.firstsignofunofficial stockmarket. 08=Aug=14 BanksreopendoorsinEnglandforfirsttimesinceclosureonJuly31. 09=Aug=14 (Sunday) 10=Aug=14 AllUKrailwaysputundergovernmentcontrol. 11=Aug=14 FrenchGovernmentbreaksoffallrelationswiththeAustro=Hungarian government.politicaltensionscontinuetorisethroughouteurope. 12=Aug=14 JulyoutputofgoldfromtheTransvaal(SouthAfrica)minesislargestever recorded. 13=Aug=14 ChancelloroftheExchequercompletesarrangementswiththeBankofEngland toterminatethepresentdeadlockonthemoneymarketandallowforthe immediateresumptionoftradeandcommerce. 14=Aug=14 Accesstocreditrestored.Treasurynotesissuedonaconvertible=into=goldbasis. 15=Aug=14 BankersmeetonThrogmortonStreetforfirsttimetoconductunofficial business.theunofficialmarketofficiallybegins.firstnominalpricesrecordedin thefinancial(times. 16=Aug=14 (Sunday) 17=Aug=14 SirWilliamPlender,firstBaronPlender,announcesthatallinteractionswith LondonbranchesofGermanandAustrianbanksmayberesumed. 18=Aug=14 Confidencerecoveringslightlyasunofficialmarketgrows. 19=Aug=14 BankofEnglandreceiveshugegoldimportsasdemandforgoldgrows. 20=Aug=14 Governmentbeginstotakelargerroleintheassistanceoftradeandcommerce.

16 15 21=Aug=14 Listofitemsnotallowedtobeexportedreleased.Aftermuchdebate,teaisleft offthelist. 22=Aug=14 Increasedtalksofgovernmentinterventioninthestockexchange. 23=Aug=14 (Sunday) 24=Aug=14 Firstweekofunofficialtradingprovidesincreasedconfidence,butnofurther advancementsaremadeonsettinganofficialreopeningoftheexchange. 25=Aug=14 AlliesbegininitiatingattacksacrossthewholeWesternFront. 26=Aug=14 CitizensnotifiedthattradewithGermanywillcontinuetobeinterrupted. 27=Aug=14 BankofEnglandannouncesreleaseofnewtreasurycertificatestoincreaselines ofcreditamongstconsumers.germantreasurysells 4millionofCanadian PacificsecuritiestotryandcrippleLondonStockExchange. 28=Aug=14 Statementsreleasedpresentingfiguresonrapidmonetaryrecoverysince closureoftheexchange. 29=Aug=14 LiverpoolChamberofCommercereleasesproposaltoGovernmenttostimulate theresumptionofoverseastraffictoacceleratetrade. 30=Aug=14 Financial(Timespresentsnewguidetoprivatenegotiationsinlightofincreased tradingontheunofficialmarket. 31=Aug=14 SirJohnsFrench,firstEarlofYpres,issuesreportonBritishArmyandtheir success.confidenceimproved. 01=Sep=14 AnnouncementmadethatoverseascommercewithAmericacouldberesumed soon. 02=Sep=14 UnitedStatespricesrising,increasingconfidenceinEurope. 03=Sep=14 StockvolumereportforAugustissued=reportsgradualincreaseinvolume tradedsincejuly31. 04=Sep=14 Goldreportissuedshowingsignificantrecoveryofvalueandvolumeofgold. 05=Sep=14 06=Sep=14 (Sunday) 07=Sep=14 IncreasedconcernarisesinGermanyaboutthestateoftheirfinances.The Germaneconomywastheweakestofallcombatantnationsatthebeginningof thewar,anditcontinuestobeofsignificantconcernforthenationnow. 08=Sep=14 Discountratesexperiencesignificantdrop. 09=Sep=14 ChancelloroftheExchequerannouncesthefinancingofthewarwilltake precedenceoverallothermonetaryactivities. 10=Sep=14 U.S.FederalReserveBoardconsidersplantohaveAmericanbanksunderwritea fundof 150millioncredittobeusedasclearinghouseforBritish=American debts. 11=Sep=14 TradingwiththeEnemyBillreleasedtoproperlymonitoralltransactionswith enemynations. 12=Sep=14 Tradereportsshowthatduringthefirstmonthofwar,only25%oftradereturns havebeeneffected,mainlythecottontradeandconstructionofvehicles. 13=Sep=14 (Sunday)

17 16 14=Sep=14 Announcementmadethatvariousfirmsofauctioneerswillbeginauctionsof sharesofstockintheunofficialmarket. 15=Sep=14 StockExchangeCommitteedecidestofixaminimumpricefortruststocks. GeneralsentimentonThrogmortonStreetisbestsincethecrisisbegan.Lotsof animationonthestreet. 16=Sep=14 InfluxofTreasurybillsintothemarket. 17=Sep=14 Lackofnewsonwardecreasesconfidenceofinvestors.TradingonThrogmorton Streetreduced. 18=Sep=14 Releaseofpricerestrictsbusinessandtradingdecreasesfurther. 19=Sep=14 Nofurthernewsfromthewarreleased.Minimumfixedpricesandlackofnews continuetocripplebusiness. 20=Sep=14 (Sunday) 21=Sep=14 AhalfmillionpoundssterlingingoldwasreceivedbytheBankofEngland. 22=Sep=14 23=Sep=14 Morenominalpricesreleasedtothepublicontheunofficialmarket. 24=Sep=14 ThreeshipslostintheNorthSeadecreasesconfidenceamongstinvestors. Sellersofsharescouldnotfindbuyers. 25=Sep=14 AplanisconstructedtoendthefixedminimumpricesputintoeffectSeptember 15astheyhavecrippledinvestmentsoverthepast10days. 26=Sep=14 Oneoftheworstweeksontheunofficialmarketcomestoacloseasalackof newonthewardoesnotgenerateconfidenceininvestors.pricesdropallweek. 27=Sep=14 (Sunday) 28=Sep=14 Increasedmeasurestakentoprohibitanysortoftradingwithenemies. 29=Sep=14 ThrogmortonStreetdrawslargestcrowdssincetheopeningoftheunofficial market,butdealingsstillataminimum.littlemovementinpricesobserved. 30=Sep=14 StockExchangeCommitteesubmitsplantoGovernmenttosafeguardthe interestsofborrowerandlenders,aswellasdebtorsandcreditorsindealing withthemarketandbankofengland.arrangementshouldhelpincrease investorconfidenceinmakingdeals.verygoodsteptowardsreopeningthe exchange. 01=Oct=14 ThenewscirculatedyesterdayaboutthealliedsuccessintheBattleoftheAisne significantlyincreasesinvestorconfidence.animationonthrogmortonstreet. 02=Oct=14 IncreasedinvestorconfidencetakesoveronThrogmortonStreet.Significant increaseindemandforhomeandcolonialrailstocks. 03=Oct=14 StockExchangeCommitteecomestoadecisionthatwillprohibitdealingsin AmericanstocksatpricesbelowtheEnglishequivalentoftheNewYorkclosing quotationsofjuly30th. 04=Oct=14 (Sunday) 05=Oct=14 Governmentannouncement:itisillegalto"enterintoanynewtransactionor completeandtransactionalreadyenteredintowithanenemyinanystocks, sharesorothersecurities."

18 17 06=Oct=14 Committee'sdecisionfromSaturdayregardingAmericanstocksreduces investorconfidenceinamericanstocks,andbringstradingtoastandstill. 07=Oct=14 AnnouncementsfromSaturdayandMondayreallycripplingmarket. 08=Oct=14 Newshort=term5percentBritishTreasurybillissued.Highdemandon ThrogmortonStreetforit. 09=Oct=14 InvestorsinquringforbondsofEasternalliesRussiaandJapan. 10=Oct=14 Reductionindepositratesincreasesdemandforhigh=classstockssuchas ConsolsandColonialGovernmentstocks.Investorswanttotransfertheirfunds intosoundinvestments. 11=Oct=14 (Sunday) 12=Oct=14 ThefallofAntwerpovertheweekendreducesinvestorconfidence.Pricesdrop. 13=Oct=14 Foreignexchangetablereleasedforfirsttimesinceexchangeclosure. 14=Oct=14 StockExchangeCommitteeissuesfixedminimumpricesforAmericanstocks inordertofacilitateanincreaseintrading. 15=Oct=14 16=Oct=14 BankofEnglandreceivesstrongreturnfromtheweekintheirdealingwithboth goldandreserves.transactionsintheunofficialmarketstillataminimum. 17=Oct=14 18=Oct=14 (Sunday) 19=Oct=14 Astheendofthemoratoriumisinsight,expectationsarisethattheStock ExchangeCommitteewillannounceit'stermsonstockexchangeloans. 20=Oct=14 Recentsuccessinthewarovertheweekendannounced.Thesinkingoffour GermandestroyersincreasesconfidenceonThrogmortonStreet. 21=Oct=14 ContinuedpositivenewsonthewarincreasesconfidenceonThrogmorton Street,buttransactionsstilllow. 22=Oct=14 Talksresumeabouttheopeningofthestockexchange.Housepredictedtoopen November18,butnoofficialopeningoftheexchangewilloccur. 23=Oct=14 AlargeamountofbusinesswasconductedontheRoyalExchangebetween London,Paris,andNewYorkasoverallattitudetowardstheAllies effortsinthe warturnspositive. 24=Oct=14 Thedealingofcommoditiesbegintorise.Positiveattitudesprevailasthe financialsystembeginstoreturntothenorm. 25=Oct=14 (Sunday) 26=Oct=14 Afterafewweeksofalliedsuccessinthewar,theGermansrampupeffortsto breakalliedlines. 27=Oct=14 Asconfidencehasbeenrisingoverthepastweek,anincreaseindemandisseen inthehighestclasssecuritiesincludinghomerailwaypriorstocksandthebest Americanbonds. 28=Oct=14 29=Oct=14 SouthAfricanrebellioncomesasshocktoEngland,createsnervesforsome investors. 30=Oct=14 Aninfluxof 3.5millionofgoldand 1millionofreservesincreasesBankof

19 18 England'sposition. 31=Oct=14 TheentranceofTurkeyintothewarspursincreaseddemandforshort=term notes. 01=Nov=14 (Sunday) 02=Nov=14 LatestpositivenewsfromFrance,Belgium,andPolandincreasesconfidence throughoutengland.militaryreportstatesthatwarshouldbeovermuchsooner thaninitiallyexpected. 03=Nov=14 UnitedStateselectionsoccurringtoday.InvestorsinbothAmericaandLondon waitingtoseeresults. 04=Nov=14 IncreasedconfidenceaboutwareffortsandUSelectionsspursdemandfor highestclassstocksonceagain. 05=Nov=14 StocksinUSriserapidlyafterresultsofelection. 06=Nov=14 Thedayfordividendsettlementsisquicklyapproaching,andallofthetalkon ThrogmortonStreetconcernedtherulestobepassedsoon. 07=Nov=14 08=Nov=14 (Sunday) 09=Nov=14 ThecrisisproposesnewissuesfortheInvestmentTruststhataretocloseto. Talksopenaboutwhattodowiththetrusts. 10=Nov=14 Businesswasdulltoday,butpricesremainsteadydespitelackoftransactions. 11=Nov=14 Parliamentreopenedtoday,andtalkswereinitiatedaboutanearlyissuanceof Governmentstockforthepurposesofcarryingonthewar. 12=Nov=14 ThefinancialpositionofBritainisevaluated.Itisbeginningtobeunderstood thatmassivelosseswillbeseenduetothewarefforts,andtaxationwillbe higherforthecomingyears. 13=Nov=14 Emergencyrulesreleasedforthehandlingoftheclosureoftheexchangeand thehandlingofsettlements. 14=Nov=14 Thedemandforthehighestclassstockscontinuestoincrease,andinsome casesthefloatingsupplyhasdisappeared. 15=Nov=14 (Sunday) 16=Nov=14 ConfidencehighonThrogmortonStreetasstructureisreturningtothemarket withthelatestemergencyrulesandimpendingwarloan. 17=Nov=14 Businessintheunofficialmarketpredictedtoincreasesignificantlyafter settlementthisweek. 18=Nov=14 Dividendsettlementtooccurtoday.Lotsofenthusiasmonthestreettoday. 19=Nov=14 Wednesday'ssettlementwentverywell.Aftermuchpreparation,manyfirms wereabletosettle,barringsix.businessexpectedtoincreaseafterthis. 20=Nov=14 Asexpected,therewasmuchactiononThrogmortonStreetThursday,and manypricessawincreases. 21=Nov=14 ThesuccessfulsettlementWednesdayhasinvestorshopefulthattheexchange willbeopenedwithinamonth.businesscontinuestogrowonthrogmorton Street. 22=Nov=14 (Sunday)

20 19 23=Nov=14 ReviewoftheSwissBankonthewarstatesthatfinanceswillplayasignificant roleintheoutcomeofthewar.thesidethatexhaustsfundsfirstwillbein trouble. 24=Nov=14 RussianvictoryinPolandincreasesconfidence,homerailsontherise. 25=Nov=14 26=Nov=14 AmericanmarketsontheriseuponnewsthattheNewYorkStockExchange wouldbereopenedfordealingsonlistedbondssaturday. 27=Nov=14 BigvictoryforRussiaonthebattlefieldspursdemandforRussianbonds. Animationonthestreetatthehighestpointsincethebeginningoftheunofficial market. 28=Nov=14 Saturdaycapsastrongweekintheunofficialmarket.Americanstocksand SouthAmericanrailsmakelarge,positivepricemovements. 29=Nov=14 (Sunday) 30=Nov=14 Novemberendsonapositivenote.Thesettlementwassuccessful,industrial andminingmarketsgrew,andtheexchangeisexpectedtoreopenwithinthe nextmonth. 01=Dec=14 Foreigntradeinhealthyconditionafterpositivetransactionsintheunofficial market. 02=Dec=14 ImpendingNYSEopeningandalliedsuccessinthewarspursincreaseddemand forforeignbonds. 03=Dec=14 Despitelotsofpositiveinformationandbusiness,pricesremainrelatively stagnantontheunofficialmarket. 04=Dec=14 Warloancurrentlyinhighdemand. 05=Dec=14 Novemberreturnsreleased.BankofEnglandstockrisesuponsolidreturns. 06=Dec=14 (Sunday) 07=Dec=14 NYSEofficialsmeettodiscussopeningoftheexchange.Sentimenthighthat NYSEwouldbeopenedbyweeksend. 08=Dec=14 AnnouncementmadeintheUnitedStatesthattheNYSEwillresumefullactivity Saturday.ConfidenceincreasedinBritain. 09=Dec=14 PricesholdsteadydespitenewsthatGermanshavetakenLodz(Poland). Businessisslowhowever. 10=Dec=14 Russianwarcostsannounced=extremelyhigh. 11=Dec=14 BankofEnglandofficialsmeettodiscusspotentialchangeinbankrate,butno changeismade. 12=Dec=14 WallStreetofficiallyopensfortradinginaspecifiednumberofstocksand bonds. 13=Dec=14 (Sunday) 14=Dec=14 OpeningofNYSESaturdayincreasesinvestorconfidenceonThrogmorton Street.Americanstocksrisesignificantly. 15=Dec=14 Asthewarcontinuestoaccelerate,Germansarefacedwithadvancing economicpressures. 16=Dec=14 ThereopeningofWallStreetaccountsforhealthytoneonThrogmortonStreet.

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