THE NEW CENTURY THROUGH THE WORLD WAR
Cycle Q began in November of 1900, and was preceded by a decline in interest rates, and by advances in security listings, stock prices, and bond prices. For two years there was a great advance in the prices of railroad stocks. The volume of business in many lines was of record-breaking proportions. The panic of 1903, known as the Rich Man's Panic, was impending and its approach was indicated far in advance by financial developments which were in reality warning signals, but which were not at the time recognized for what they were.
The downturn came in April of 1903. For 29 months previously interest rates had been advancing, and during 26 months bond prices had been falling. Security listings turned downward 17 months before the downturn of business, and stock prices began to decline seven months before. The depression was not very long, and the reductions in production and employment were not particularly serious. It was reported that Mr. J. P. Morgan said in reply to a question that the cause of the panic was undigested securities.
He meant that the volume of new capital issues floated had been so great that the market for them had become saturated. Banks had lent heavily against bonds and stocks as collateral, and both banks and insurance companies had invested in large totals of the new securities. The upturn to Cycle R came in August of 1904, and was preceded by a decline in interest rates, and by advances in security listings, stock prices and bond prices.
The prices of bonds did not advance far or long. They entered upon a prolonged decline shortly after industrial production