The Washington times. [volume] (Washington [D.C.]) 1902-1939, 1929-10-05
MARKET BREAK
HITS MARGIN
TRADERS
by w. 8. COUSINS

NEW YORK, Oct. Q.N.s).-.
Thursdays devastating break IN
speculative stocks, the worst since
the big bear market of 1925. swept
the ground from under the feet Of
the bulls in Wall Street this week.
The market toppled with q crash
as wave after wave of forced SELL
Ing broke on the big board, while
similar movements were reported
In the curb market, the unlisted
markets and organized markets all
over the country.
Money Causes Crash
Though misgivings about trade
and business conditions in the steel,
motor car and other industries was
All important factor In the fall Of
prices this week. the crash was
more directly related to money mar
ket conditions and to so.called tech.
nical conditions within the market
itself. The various brokers loan
and bank statements. for example.
showed conclusively that the out
side public, instead Of trimming
sails" as it had been urged to do.
had loaded itself up to the ears
with stocks purchased on margins.
These stocks looked cheap be.
cause they have fallen all the way
from 10 and 90 to 100 points from
the high Of the year, and repre-.
sented in the opinion of tre ders
excellent opportunities to purchase
favorite stocks at attractive prices.
Account had not been taken In
the meantime, however, of the slow.
ing down of important lines OF
industry, like the steel, motor car
and building construction, with the
CONSEQUENT, downward revision in
security prices. A stock which sold
at 1875 earlier in the year, and
which at that time oyer-discounted
the most favorable developments In
the corporation by which 1t was
| issued, might easily swing back to
Is on a moderate setback in bust
ness and still be out Of line with
actual values based on earnings.
Intrinsic Values Ignored
In the crash of stock prices this
| week, little account was taken of
intrinsic values. Profits accumu'
lated over the course of year
| or SO were wiped out before the
onrushing tide of frenzied selling,
which stocks held In the hope Of
ome.back by small traders also
| Joined the swelling tide of forced
| liquidation. 1t was "sell at the
market" for most of these holders
of margined stocks, who once again
witnessed the washing away of
equities built up in long laborious
process, in and out of the stock
| market.
Compared with the high prices of
last week, losses extending from
10 to more than 100 points have
been recorded in the active in"
dustrial utility and railroad stocks.
United States Steel. generally re-
garded as the belwether OF the
market, lost 81 points.
Commercial Solvents lost lis points
Allied Chemical 35; American Can II;
American and Foreign Power IS;
Auburn Motor IS; Columbia Gas and
Electric IS; General Motors Il; Cen
eral Electric IS; international Com.
bustion Is; international Telephone
and Telegraph 20; Johns Manville, 30;
New Yory Central Is; Public Servise
of New Jersey "a; Radio IA; Westing-
house Electric 40.
| Changes Philosophy
It will be noted that the motor
stocks have been the enthusiastic
leaders in the most rampant bull
market ever known, the market OF
1928 and early 1893. The rise in
prices in that period changes the
whole philosophy OF thousands OF
small traders and investors all over
the country, particularly in relation
to prices paid for equities in in
dustrial corporations.
A ten.to-one ratio between corpo'
ration stock prices and annual net
earnings was discarded and specu-
lators paid all the way from 20 to so
times earnings for stocks Of whose
real values they knew no more than
the man in the moon.
Repeated warnings by reserve
bank heads, foreign bankers. bust
ness and industrial leaders and we'll
posted economists relative to the
tying up Of the country's credit sup
plies in the speculative markets have
finally borne fruit in the enforce
dumping of stocks on a demoraliz nd
market and the paralyzing Of the
speculative activity of thousands o.
small traders who have been the
backbone Of the market for a year
or more.
Losses Halt Traders
Losses inflicted upon these traders
will forbid their entrance into the
market for many moons. II it does
not keep them permsuently off the
speculative boards.
The big reaction has naturally re-
leased from margin trading accounts
millions of dollars and these. in ad-
dition to the return flow of funds
from October interest and dividends.
eased up the money market suffi.
GENTLY to force call loan rates down
to 6 per cent, against 10 per cent
earlier in the week. Squeezing OF a
half billion dollars or so from the
cali loan market would hep the f.
nancial situation considerably, since
1t would provide funds for both home
and foreign projects. For the time
, being. at least, the cream appears to
be off the stock market, though at
current prices high.grade stocks are
doubtless under accumulation by
/: shrewd investors.
u n EnuyIor To Honorod