September 30, 2011

Mario Boone's Auction 47

Mario Boone will hold his auction 47 and bourse on October 22 and 23 at the Crowne Plaza Hotel in Antwerp.

As typical, his beautiful catalog is fully-indexed with almost every lot illustrated in color.

This particular sale features 1,573 lots, of which 211 are North American. Obviously, every collector will have particular favorites. If I were a serious collector, my favorites would include a stock certificate from Polska Ruda Zelazna, a Polish iron company.

As I write this, the Euro is roughly equal to $1.35. Speaking strictly for collectors, this is a significant improvement for collectors over as little as five months ago when the Euro was $1.48. Two years ago, the Euro was hovering around $1.58. I mention this because most of Mario's start prices (for the certificates I specialize in) are very reasonable even when converted to dollars. This is especially significant when you take a close look at the offerings.

Within my railroading specialty, the sale features 73 lots of railroad certificates from North America. While you will recognize pictures of many of the lots offered, there are some hidden gems that may not jump out at you at first blush.

For instance, practically everyone has encountered pictures of distinctive stock certificates from California's Mount Tamalpais & Muir Woods Railway. That familiarity makes them seem much more common than they really are. Truth be told, I have only recorded thirteen issued examples in twenty years. I'm not saying that's all there are; I'm saying issued certificates from Mount Tamalpais & Muir Woods Railway are scarcer than most collectors realize.

An even scarcer certificate is hiding in plain sight and I suspect even fewer collectors will give it a second glance. Mario is offering a bond from Scott County, Illinois issued in aid of the Rockford Rock Island & St Louis Rail Road. This bond will only be the sixth certificate of this type that I've ever found offered for sale. Given its scarcity, the start price is very fair.

Still not impressed? How about a generic certificate issued for the Fairmont Helen's Run Railway from West Virginia. I've never understood it, but I know many collectors snear at generic certificates with typewritten company names. Never mind that essentially all are either very scarce or rare. This certificate is only the second one to come to my attention since I started recording railroad stocks and bonds and the start price is only 50 Euros.

Mario is offering a few items that are new to me. One is a municipal bond issued by the City of New Britain, Connecticut for a subway project. I've never seen the bond before, but that does not automatically make it rare. The same goes for a stock certificate for the Jordan Electric Train Signal Company (ME) and a bond from the Schenectady Railway Co.(NY) Where there certificates will go from here is anyone's guess; I can only hope that the winners send me good images.

For a catalog and more information about the bourse and the sale, please contact The Scripophily Center at

September 20, 2011

Round lot shares

Shares are commonly traded on the New York and other exchanges in standard trading units of one hundred shares. On U.S. exchanges, shares that trade in units of 100 shares are referred to as "round lots".

Before the advent of heavy electronic trading, round lots traded faster and more cheaply than either "odd lots" (fewer than 100 shares) or "mixed lots" (odd lots combined with units of one hundred).

Obviously, it takes a lot of money to freely trade round lots, especially when dealing with high-priced stocks.

I bring round lots because Max Hensley (editor of Scripophily magazine) and I recently exchanged a series of emails wondering about the extent that round lots are reflected among collectible stocks. Unfortunately, with the exception of my database on U.S. railroad stocks and bonds, we currently have no access to reliable numbers. I can make my database divulge all sorts of summaries, but we cannot possibly know whether the trends we see there translate to other specialties or the rest of the hobby.

In gross terms, round lots (any increment of 100 shares) represent about 26% of all certificates I currently have recorded in the database. Obviously, investors have always been able to buy stock certificates in any denomination that suited them. It turns out that the most popular single denomination was 100 shares (24%) with the second most popular being 1 share (14%).

The lion's share of collectible certificates currently reported are what I call odd-share certificates. 68% of all collectible certificates currently recorded are certificates with no pre-printed denomination. Such certificates usually have a simple line or a blank spot meant to be filled in with the number of shares being purchased.

The second most populous category is pre-printed 100-share certificates (17%) followed closely by pre-printed less than 100 share certificates (11%).

Companies issued certificates with other pre-printed denominations, but none were very popular. One-share certificates were popular in Mexico, but relatively few have been recorded from U.S. companies. A few companies tried other odd-lot denominations such as 10-, 25- and 50-shares, but not a tremendous number survive. Very few companies pre-printed large round-lot certificates such as 500- and 1000-shares.

The chart above shows the percentage of round-lot denominations that are currently known to appear on odd-share certificates and the four major groups of pre-printed certificates. As mentioned above, certificates denominated in round-lot amount account for about 26% of the collectible certificates in my database.

Both Hensley and I thought that the percentage of round lots should have been higher. Survivorship is certainly a great unknown. The current understanding is that round lot trades greatly outnumber odd lot trades in today's stock markets. Does that assumption extend far back into the past? Were round lots as popular in the past as they are supposed to be today?

The term "round lots" has been used for quite some time I can find the term in common use as far back as the 1850s in published discussions about shipments of iron, cotton, tin and other commodities. I can find reference to "round lot" stock trades (sometimes also known as "even lots" and "board lots") as early as 1930. However, Henry Clews never mentioned the term in his 1887 book Twenty-Eight Years on Wall Street. It is also curious that Haight & Freese, the famous Boston "bucket shop" operator, never mentioned "round lots" in any of its series of Guide to Investors from 1894 to about 1904. Merriam Webster's Collegiate Dictionary estimates the term was used as early as 1902, so I defer to its robust etymological research.

I suspect the earliest certificates with a pre-printed 100-share denomination appeared around 1868 or 1869. The earliest examples in the database are certificates from the Milwaukee & St Paul Railway and the New York Central & Hudson River Railroad, both dated 1870.

While I suspect that less than 100 share certificates probably appeared at the same time as the earliest 100-shares, the earliest surviving <100-share examples date from 1872 (from the International Railroad and other companies.)

Up until the time that 100-share certificates first appeared, round-lot trades accounted for about 10% of the certificates in the database. I have absolutely no way of knowing whether that number represents the percentage of all trades before 1870 or not. By the end of the 1870s, surviving round-lot certificates had grown to represent 19% of the trades (according to surviving certificates.)

After noticing the growth in round-lot certificates, I queried the database to give me round-lot and odd-lot certificates by decade from the earliest to the latest.

The chart below shows how the percentage of round-lots (in red) have trended through time. It is readily appearent that the percentage of round-lots increased substantially in the last four decades. Unfortunately, because of my own time constraints, I rarely record recent certificates because they are normally priced far below my $20 cutoff. Consequently, readers must understand that the database is skewed toward earlier certificates.

Regardless of the accuracy of the count of recent certificates, the chart definitely shows a justification for 100-share certificates appearing when they did. The chart also illustrates how strongly odd-lot trades have persisted, very much counter to prevailing wisdom.

One final note.

I also checked whether there was a propensity for celebrity autographs to be associated with round-lot trades. There IS a relationship, but it is very tricky to draw conclusions. First, the number of survivng samples is relatively low. Second, many celebrity autographs (Gould, Dix, Durant, Sage, Devereux, Forbes, William K. Vanderbilt and Cornelius Vanderbilt II come to mind)  appear on stock certificates in the roles of corporate officers as opposed to stockholders. If I limit the search to simply stock ownership, celebrity autographs appear on round-lot certificates with a little greater frequency, but it's insignificant. We must remember that the biggest stock operators in history (Gould, Harriman, Vanderbilt, Little, Sage, Mellen, Roberts, Morgan et al.) purposely hid their ownership behind squadrons of intermediary brokers.

So, yes, I most assuredly believe that there is a very strong relationship between round-lot trades and millionaires. It's just not provable.

September 13, 2011

The Wall Street Bourse

Experienced stock and bond collectors know John Herzog as the long-time owner of the venerable R.M. Smythe Co. in New York. For many years, John and his wife Diana organized the wonderful bourses at the Historic Strasburg Inn in Strasburg, Pennsylvania. They retired from the scene after selling Smythe, but (as anyone can imagine) retained their interest in collecting.

John founded the Museum of American Finance and has spent an enormous amount of time breathing life into that project. The independent museum is dedicated to educating the world about American financial history. The museum now has an envious location at 48 Wall Street near the New York Stock Exchange. The museum became an affiliate of the Smithsonian in 2001.

After a long hiatus and after listening to countless comments and requests about Strasburg, John decided to stage a new bourse for collectors in New York next month. The Wall Street Bourse (click link for a larger view of the ad at left) will be held on Friday October 21 and Saturday October 22 at the Museum of American Finance. The bourse will feature approximately 20 top dealers in American financial material, including stocks, bonds, bank notes, coins, medals and autographs.

Admission to the bourse and museum (10am to 4pm) will be free. If you are anywhere near New York on those days, please consider attending. Bourses are where you get to meet dealers, see wares you will seldom see in person, and rub elbows with other collectors.

Of course, no bourse is really complete without a live auction. Consequently, Archives International Auctions will hold a 500-lot auction on Friday night at the nearby and historic India House at One Hanover Square. The auction will start at 8pm and will feature live internet bidding for those who cannot attend.

The museum is a not-for-profit entity, so the bourse is completely independent. You may learn more about the bourse and auction by contacting Virginia Besas at 212-758-8119 or

September 03, 2011

Join the International Bond and Share Society

A couple days ago, I read with horror that the International Bond and Share Society (the IBSS) had lost 44 members between the end of 2009 and the end of 2010. Such a meager loss would not even be visible to an organization like the American Numismatic Association. But the IBSS is no such monstrous club. Six months later, by the time of the report at the Society's Annual General Meeting in July, membership had decreased by yet another 33 collectors, leaving a grand total of only 541.

While some of those members will certainly rejoin, the fact remains that all of us, including myself, are falling down on the job. We are simply not doing enough to promote the hobby. After all, the number of collectors who have contributed to my project over the years or who have contacted me about stocks and bonds is almost as large as the total membership in the IBSS!

And I'm just one guy involved in one specialized part of the hobby!

I am here to ask all my readers and all my contributors to step up and do their part. I ask everyone to do three things:
  • join the society
  • stay members of the society
  • realize their involvement will have an unknown, but crucial future benefit
Let me explain "future benefit" by asking a little question. If someone is currently collecting certificates, who will they (or their heirs) ultimately sell to?

Other collectors. That's it!

Future prices of collectibles depend entirely on one thing and one thing only! – the number of collectors active at that time. Consequently, there are only three possible scenarios.
  • If there are fewer collectors in the future, there will most assuredly be less demand for certificates. In short, fewer collectors equals lower prices. The equation cannot be any simpler.
  • If there are the same number of collectors in the future as there are right now, prices will be roughly the same as they are right now. It is my unshakeable opinion that if hobbies are static, the amount of money collectors receive upon sales of collections will be roughly equal to their initial investments after accounting for sales commissions and inflation.
  • If there are more collectors in the future, there will be increased demand for all certificates, hence there will likely be real price growth beyond the rate of inflation.
Those are the pure, unadulterated economics of collecting. Yes, I know there are collectors who like the current state of the hobby because prices are so absurdly cheap relative to rarity. But those same collectors will cry and whine and weep in the future if the hobby continues its apparent decline.
A static or declining hobby helps no one. Conversely, a healthy, vibrant growing hobby helps everyone.

I contend that helping the IBSS means helping grow the hobby. As obvious as that position seems to me, it is equally obvious that many collectors are staying away from the IBSS, the only organization I'm aware of that involves the collecting of stocks and bonds. What are their objections? I can't say conclusively, but I can address some of the objections I've personally heard.

I think 'Bond and Share Society' seems so ... European. Okay. What if the organization had been named the "International Stock and Bond Society"? I can imagine collectors in Europe (where the hobby started, incidentally) saying, I think 'Stock and Bond Society' seems so ... American. Regardless of the name, the purpose would remain the same: to promote the hobby of collecting financial bonds and equity shares.

The are too few articles in Scripophily about certificates I'm interested in. That's true for every member, no matter their specialty. But, so what? The fact is that every intermediate and advanced collector has a specialty that is shared by very, very few others. And yet, I guarantee that every collector will find knowledge in every issue of Scripophily that will impact his specialty in some manner.

There are only three issues of Scripophily per year. That's $10 apiece! Again true. And the truth is that at this time, some people literally cannot afford $30 per year. I fully recognize that. But I am not talking to those people. I don't mean to sound insensitive, but a person who cannot afford $30 per year to support the hobby should probably not be collecting. There have been times when I have had to stop collecting. There is no dishonor in pulling back, regrouping. It is infinitely more important to feed the spouse and kids before feeding an obsession. But, if someone IS fortunate enough to be able to afford a collecting hobby, then I think there is a responsibility to support that hobby with a $30 per year membership. I suggest that every semi-experienced collector will overpay that much in a single auction, maybe even a single lot, simply due to the inability to control auction fever. Furthermore, average collectors will almost certainly spend more than $30 on unnecessary food, bottled water, soda, coffee, beer, whiskey and tobacco in a single month.

I won't get any benefit from IBSS membership except for Scripophily magazine. This is a trickier complaint to answer. Few collectors want to go out of their way, but they must in order to appreciate additional IBSS benefits. With only a little extra effort, collectors who become members can freely gain:

  • invitation to IBSS member breakfasts at certain shows and bourses.
  • access to the full web site.
  • free ads in Scripophily magazine for collectors
  • access to a complete directory of dealers and collectors.
  • access to past articles published in Scripophily magazine.
  • access to reviews of several years of past auctions (worldwide.)
  • access to other members. (So they won't feel so all alone.)
  • access to bibliography of books and articles related to stocks and bonds.
  • opportunity to bid in IBSS auctions.
  • opportunity to share insights and discoveries by writing articles for Scripophily.
Readers have now heard my rants and reasons. I personally ask everyone to join the International Bond and Share Society. At the same time, I also want everyone to understand that I don't want anyone joining if they are unwilling to continue supporting the hobby and the organization in the future. A one-time blip in membership is pointless. The hobby – and that includes ALL collectors regardless of whether they are 'joiners' or not – needs participants who will support the hobby for their entire collecting lives.
  • So, if you're ready to support the hobby you enjoy, come join us. Accept my invitation to become an active participant in the "stock and bond" / "bond and share" / "scripophily" / "wertpapiere" hobby.