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In automated financial market, old-fashioned paper stocks hang on
Bob Kerstein loves his paper stock certificates.
At a time when stock trading is dominated by rapid-fire computers, he relishes paper stocks for their palpability. Wall Street seems cryptic and far away, but certificates are something he can see and hold.
They're a pleasant throwback, a tangible marker of company history, a wisp of inky artwork in a canyon of electronic solemnity. So when Facebook went public this year and decided not to print paper stock certificates, Kerstein was bummed.
"A travesty," he says.
He's used to it. For years, people have been writing the obituary for paper stocks. They're derided as hard to track, easy to lose, out of date and out of place.
And yet they keep sticking around, stubbornly analog in a world gone digital.
Die-hards hoard Enron certificates in hopes they'll be worth something someday. They hold on to Bear Stearns because they lost everything on it _ or, for a few, because they made a ton of money betting against it.
They scramble for Disney because their kids are into Mickey and the stock, graced with the image of the famous mouse and Walt Disney himself, looks nice in a frame.
Joe Wildberg, an auto industry retiree in Wolverine, Mich., has been accumulating stocks of old Michigan copper-mining companies since he ran across a few shares in a house he inherited.
"Where else would you find a document going back to the 1840s?" he says.
Tom Carroll, a sales director in Reston, Va., was a hit at a family reunion when he doled out stock of the old Pennsylvania Railroad, where his grandfather worked for 52 years.
"Everybody was getting them framed and hanging them up to remember our grandfather," he recalls.
Kerstein's favorite is a certificate for a business with the unfortunate name Shadyside Operators. The stock he owns is dated Oct. 29, 1929 _ during the most infamous crash in Wall Street history.
Kerstein makes a living hawking paper stocks on a website he founded, Scripophily.com. But of Shadyside, he vows, "I'll never sell."
Long before companies churned out TV commercials and Twitter feeds, they used stock certificates to establish their public image. They hired artists, picked out elaborate lettering, added fancy borders.
Sometimes the decorations made sense, like drawings of locomotives on stocks for railroad companies. Sometimes they didn't, like pictures of toga-clad warriors on stocks for refrigerator businesses.
But today, paper stocks are, to put it gently, out of place. Finance firms time trades in milliseconds, and banks accept smartphone photos of checks. The government hasn't issued paper versions of Treasury bonds since 1986.
And yet paper stocks command an odd resilience - even odder when you consider how many times people have tried to kill them.
The Depository Trust & Clearing Corp., which handles most of the administrative underpinning of stock trading in the United States, set a goal this summer to eliminate paper stocks, perhaps as early as 2015.
The DTCC likes to point out that more than 700 issuers on U.S. stock exchanges no longer offer paper shares, including big names like Apple, General Motors and Microsoft. But more than 6,300 still do.
The DTCC can't figure out why. "Having possession of a physical certificate really adds no value to the investor or to anybody else," says Daniel Thieke, managing director of settlement and asset services. "You can't do anything with it except look at it and put it in a file cabinet."
In 2003, the Group of Thirty, an influential coterie of the world's business and government leaders, called for an end to paper stock trading worldwide _ and extras like the paper documents that investors get to confirm their holdings.
Three years later, the group concluded that "islands of paper and manual processes remain and are a persistent source of inefficiency." The G30 hasn't made further recommendations.
As far back as 1991, the Government Accountability Office warned that paper certificates in the U.S. would "hamper the strength of our markets" and noted that Denmark, France and Norway had already gone virtually paperless. The agency, which works for Congress, hasn't updated its report, either.
To be sure, the paper-haters have had success. In 1990, there were more than 32 million physical certificates stuffed into the DTCC vault for safekeeping. Now there are only about 1.2 million.
States have gradually gotten rid of laws that required companies to issue paper shares when asked. The DTCC now charges $500 to brokers who want to withdraw paper certificates.
In 2005, the DTCC estimated that paper stocks were involved in about 0.1 percent of trading each day in U.S. markets, based on