Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-10-06
|DEC[|NEIN STOCKS
HAS BEEN GENERAL
Drastic Shake-out of Past
Week Seen as Sequel to
Wild Speculation.
BY CHARLES r. SPEARE.
oecial Dispatch to The Star.

D1 SnAnAES II EAAbEs
! Special Dispatch to The Star.
NEW YORK, October 5.-A market
that moves steadily forward over long
period of time and against traditionary
bear factors usually comes to a halt
through some sudden development out
side of its own field. Such precedent.
months collapse In prices, which has
been due more to the technical con-
ditions within the market than to any
| foreign influence.
These, no doubt, have been aggravated
by situations that had an intimate re-
lationship to the market. such as ex-
tended brokers' loans, the advance In
the rediscount rate of New York and
in that Of the Bank of England and the
troubles of the speculative group in
London.
It was, however, the overexploitation
of stocks by groups of capitalists, either
acting individually or through trading
corporation of their own creation, which
produced the pyramid of prices that
has toppled over this week.
Four Month Bull Market.
There have been numerous extrava-
CANT phases of the ball market since 1t
started in 1924, but none to equal that
of the period Of four months ending
about the middle of September. This
witnessed the elimination Of the adj
vance in industrial and public utility
shares which had carried them up As
per cent from their low level of the
year, and in railroad stocks. which had
advanced 80 per cent. These figures
should be kept in mind in considering
the subsequent declines, for, although
the industrial and public utility average
has dropped Sc points since September
3, representing the greatest loss in
points alone that has occurred in any
reaction in five years. 1t amounts TO
only, Is per cent. while the drop OF 20
points in the average of the rails rep
resents a 10 per cent shrinkage in
prices after three times as much adj
vance.
Not only has the present decline
hid a wider sweep than others during
the past year-or since 1924. the So
point drop in the average of the in
dustrials and public utilities comparing
with one Of SO points last December, IS
points in March and May and OF Is
points in August-but the selling has
been more prolonged than in previous
reactions.
This has been one of the ominous
features of this weeks transactions,
when decline has followed decline of
large proportions and rallies have been
feeble and grudgingly permitted.
Big Shrinkage in Motors.
What has taken place in a large
group of selected stocks does not repre-
sent the stress that has come to the
holders of individual groups Of securi-
ties. Take, for instance. the motor
shares. in which the depreciation in
market worth has been from 80 TO over
60 per cent: or the aviation stocks.
which, within two months, have in
many instances shrunk so per cent.
Even such substantial issues as Cen
eral Electric, United States Steel, West.
inghouse Electric, Montgomery-Ward
and Consolidated Gas have declined
from IS to about 80 per cent.
In spite of all this, the latest COM
pilations of brokers' loans by the New
York Stock Exchange and by the Fed
eral Reserve Board indicate concen-
tration of banking credit in securities
on a much greater scale than before
the def1ation in stocks started three
weeks ago. This can be traced to the
common practice among corporations,
including public utilities, industrials,
finance trading corporations. as well
as banks and trust companies, OF
issuing their stock in constantly in
creasing amounts to q public that has
been obsessed with the desire to own
stocks at any price. This stock Is not
for the normal purpose OF promoting
business expansion. A large proportion
of the proceeds of it has gone into the
call money market at profitable rates
and has helped to establish higher and
higher levels for both speculative and
investme It securities.
The fact cannot be denied that not
few new companies of the trading
type have been created simply to sell
stock to the public and without much
idea of a permanent program or in
vestment policy.
Free Riding Expensive.
It has also been q time when men of
ordinarily good judgment and common
sense have lost their heads and capital
lied their regulations in the form OF
new stock issues that were immensely
popular for a time but do not now look
so good. If one will go over the list of
quotations Of trading corporation shares
and compare them with the prices at
which they were originally offered to
the public in July and in August he will
find that much of the free riding" OF
such shares has been an expensive
pastime to those indulging in it.
It would also be of interest to COM
pare the current quotations of the list
uf 81 stocks which one of the most dis
cussed trading corporations took in. in
exchange for its own shares, with those
of mid-August. This would establish the
fact that three-fourths Of them are
anywhere from Is to 40 points lower
than the exchange level which would
have been a good trade If the shares
which the seller received in exchange
had held their market. Unfortunately
they did not.
One common belief exploded by the
recent reaction in stocks is that invest
ment trusts, or more particularly, trad
ing corporations, stand ready to save
the market situation whenever 1t be-
holders of securities might themselves