New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1921-01-16
Pool Operations |
Important Part of
Market Trading
Functioning of Combina-
sions of Stock. Holders
Is Explained by an Ex-
change Firm in Letter


An orranized stock market is place
where great economic forces clash. ana
the resulting prices owe ra long period
represent the viewpoint OF the spcesS
la.ive mind regarding forthcoming cot"
ditions On any given day, however.
The barometric service of a market
place may be obstructed by manipula-
tion and pool operations. Ordinarily
pools operate behind the scenes. and
rarely are the curtains lifted 70 permits
the public to study the machinery By
which pools take advantage of specu-
latsve technique.
The Stocs Exchange firm OF McCsave
q Co, IN its current weekly market let
ter. sets forth Is understanding Of the
nature and functioniag of pools.
Pools organized after great iiquidat-
ing markets usually have in view tho
retention Of permanent position until
5he return TO prosperity says the firm
In many eases they represent large
holders - no provide capital for liberal
ad6lficn1 purchases for pool account
and vino combine their holdings under
condrsi 81 . pool manager. During the
eAAfHMes o. The depression accumuls-
ton taxes place. Pools are often or
gained at such times to protect the
market and tne accumu alton which
then take p3ace has. q some instances.
been held over period of years. This
VAS the case after the Spanish Ameri-
can " ar. f9f some pools then organized
remained intact for nine or ten years.
ir general way the pOoi Interested
In ma lnaivieNel stock is prepared 1T All
times to protect that stock by buvincr
on scale down. and is also willing to
prevent runaway market by selling
Oh a scale up.
A peel to be successful must always
have Ii large reserve buying power
that IS. iarge reserve capital TO d..
nance additional purchases. Part OF
the history Of 1920, when IL is finally
written, wiH UnqueStionably he that
during the advance from February to
May owe fconhdtnt pool managers used
up tAeir reserve baying power in eff
ipFts "a acN4ace stocks more rapidly
than facts warranted, or IN efforts 20
pre-, emit tneir part cular stock from de-
Ginning to levels which coming business
conditions warranted. so that n the end
different stocks lacking pool protection
and pa many cases being obliged 70
absorb pool holdings on account of ex~
44Elta goH resources broke far below
prices representing intrinsic values. In
such eases ocHs 81 stock were often
taken over by individual capitalists. or
hg ~ urs o. cap tali~ts al low prices
ANA are the basis Tor pool operations
ln What wc be4tNe Will be the bull mar
ktt of 1921.
Successful pool operations require
the preservation Of large reserve buy
iag mower. i pool, having accumu-
lated say 30 per cent of what It's capita
permits. continues to buy st advancing
prices. Il continuously Increases the
-
average cost Is $50 share and the
stock s selling at $50. the pools origi-
nal capital is intact until after the
stock sci below %. ii By buying an
equal quantity at 90 it makes its aver
age cost 30. is capital is encroacheo
upon the moment the stock breaks be-
low IS. TX is manifestiy unwise for 4
po9i 70 continue buying at advancing
prices except when there Is large
public demand from spectators. i'm
vcstols or an overextended short inter
est waTranting the belief that the poole
accumul ation at high figures can be sold
promptly, and with but slight loss, II
necessary.
a we'll managed pool whose holdings
avcraee $50 share should have re-
duced its holdings somewhat when 60
was reached. even if it believed the in
trinsic value par and expected that
rric Is rbeachca Stock sold at adj
vanclng prices creates an added reserve
buying power on reactions.
On the course eff every advance
tin. always comes when the poh'ss
- profit. When outside offeringu
are large. pool managers usually en-
deavor to sell little below the prices
asked hv other holders. If their sales
are easily absorbed showing a large
public demand, i s. then possible that
The manager may decide to absorb
The putlie offerings at advancing prices
In such cases sharp further advance
usually fol ows. II public buying does
uo follav the market up the prudent
pool manager abandons his effort TO
acyarce prices ard i decided reaction
is thcn q probability. Should he per
siat in buying under such conditions.
he increases his average price and en-
z csssrers his success.
"When the market hesitates after
considerable advance, 1T is the part Of
J prudence for speculator TO take his
J profits r after hesitancy, the advance
] is rsumod into new high territory it
is evidence chat the pool manager be-
lieves il nossole to put the stock con-
= siderablv hieher'