Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-11-17
WALL STREET POOLS


people advised him that they would
have to sell considerable part OF their
holdings. On this occasion the reason
was that the dividend rate on one OF
the preferred stock issues of the trust
was approaching and there was no
earned profit on hand to pay the divi-
dend 1t would be necessary to sell
some of the stock in which the pool was
operating in order to realize proht for
this purpose After the dividend date
the pool could depend upon further
support for its operations from the
trust, but now they must take profits.
Pool Breaks with Trust.
There was nothing for it but to sell
the stock for the investment trust, de-
laying the pool operation until this
liquidation could be effected. BY this
time the pool manager was IN no mood
to continue the arrangement. In re-
! turn for his assistance in marketing the.
shares as requested, which gave the
| trust cash profit with which to pay
dividends, the pool manager forced the
investment trust to tie I'D the re-
mainder of the shares it had taken
| from the pool for a period of six
months. Before the end of the six
months he had closed operations in the
stock, and decided to conduct his pool
| thereafter without the assistance OF COL
| laborators in the investment trust field.
Its a little too complicated for my
simple mind, this investment trust
| business" he said.
The investment trust concerned in
| these transactions was entirely sound.
in fact, throughout the period covered
by the operation described, it had large
cash resources. But only certain pro-
portion of its capital could be invested
in stocks and the amount varied as
changes were recorded in the book value
of its holdings. And dividends could
only be disbursed from profits realized
in cash. Considerations of this kind
| have resulted in the purchase and sale
of stocks by Investment trusts in ways
which completely upset the usual cal
culationS of market operators.
| To be sure, the unexpected activity OF
investment trusts has worked both
ways, to the advantage as well as the
disadvantage of pools. On more than
one occasion buying by the investment
trusts has saved the market" for GER
tain stocks. and prevented large losses
by the pools operating in those stocks.
Sometimes this investment trust SUP.
port has come after the pools had given
up hope of survival and some pool man
ayers have had reason to be grateful for
the ''unpredictable" trades of the in
vestment trusts.
The investment trusts sponsored and
managed by important market interests
have been less trouble and of less as
sistance, to pool operators. Trusts of
this class tend to conf1ne their commit
ments to the stocks for which their
| sponsors are responsible marketwise,
land their activities can be predicted
without much difficulty.
Trust Cannot Halt Declines.
The much discussed probability of
the elimination of severe declines in
stock prices through the buying power
of the investment trusts is, in my opin-
ion, pure nonsense. Well managed in
vestment trusts must adopt the same
attitude which other investment inter-
ests assume in times of financial stress
they must defer action until the bank
ing and general financial situation per-
mits action-t to support the market. The
October diff1cultieS pretty we'll demon
strated the fallacy that the investment
trusts would act as windbreaks in bad
weather. The investment trusts. like
other experienced investors, laid low and
waited for the storm to pass.
But while it is altogether impossible
Continued on Ninth Page.)