Dividend rates were maintained, but were not increased. This particularly affects the simon pure speculator. Nothing will drive him into a panic quicker than a decreased dividend, and nothing makes him so sanguine of higher prices as an increase in the rate of payment. He is always basing his operations on rumors of higher dividends, and when one of these rumors fails of verification, it is almost as bad as a decrease. And dividends did decrease in one important quarter; United States Steel, the speculative favorite, capitalized more heavily than a dozen ordinary corporations, cut its rate from 4 to 3½%, with every promise of a further reduction. This had a far reaching effect, both on speculators and small investors. It is certain that fundamental conditions have more to do in shaping prices than has speculation, but the speculator helps, and in 1903 he was particularly potent because of the excesses engendered by the unusual speculative advances of 1901 and 1902. He helped to make the prices and he helped to break them, so he may be considered a factor in the reversal. The small investor helped. He, too, is a dividend man; he seldom looks at earnings, improvements, or extensions--he wants dividends. United States Steel was a body blow to him; it not only affected his purse, but it frightened him. And it is probable that an army of small investors sold their holdings for another reason--they discovered that they could make a higher rate of income in other channels. So long as both dividends and prices advanced they were satisfied. They were speculating, not investing, but you cannot convince the ordinary man that buying a stock outright, in the hope of an advance in price, is speculation pure and simple. Much of the money diverted from the stock market in 1903 by the class last mentioned, has never returned to Wall Street. This bears out the theory that higher rates of interest are being found elsewhere. Never before has the public refused to enter the stock market during a period of great prosperity. They are absent now, and furthermore, they show no intention of returning. Possibly they are wrong. The same influences which are operating to give them better returns may be operating to greatly enhance the value of the shares they ignore,--but the small investors want dividends. Their failure to enter the stock market would seem to be strong evidence that they are finding other investment-speculations more attractive than listed shares. If this is the case, the influences leading to higher interest rates are already at work, although not clearly discernible. Diversification of investments would tend to obscure the truth for a time. But whatever the causes for the stock market relapse of 1903 may have been, the recovery has been complete. The average prices of 1906 were the highest on record. _Cycles of Grain Speculation._[5]