Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-11-12
WALL STREET POOLS
nv POOL MANAGER, AS TOLD TO JAMES ABELLE

10. 900 shares of an industrial stock then
selling under 100. During the bull mar
kets of the succeeding three years this
stock steadily advanced, with only minor
interruptions. On several occasions
rights were granted stockholders to SUBJ
scribe to new issues at favorable prices.
This year the stock was "split up
giving stockholders several additional
shares for each share held. The 10000
shares of 1926 have grown to more than
SO, 600 shares, which at present quota
tions show a profit of nearly 500 per
cent on the total cost to my ex-banker
friend.
"Did you lose another hat on your
way to collect the cash?" asked
IT can't take the profit" he replied
plaintively. THE income tax would
amount to more than am likely to
lose in any possible reaction"
Herein lies the explanation In many
cases of the great strength of the mar
ket for the "blue chip stocks"-the high
priced issues selling above 5000, In
come tax is not payable until profits are
realized in cash. And, regardless of
market fluctuations. many wealthy in
vestors refuse to sell and take profits on
the good stocks" in which they have
large accumulated paper profits. This
situation gives the pool manager a
wears ago. On reactions the price of
stocks in this class may dip" so points
or more without unsettltng the commit
ments of the larger investors, and on
advances there seems to be no limit to
the willingness of wealthy stockholders
to refrain from taking profits. When
satisfied as tn the "long pull, future
possibilities of stocks the big sharehold-
ers, both insiders and outsiders, con-
tinue to "stay aboard" no matter how
high prices climb. The pools have to
deal only with the smaller investors, the
margin traders, and the investment
trusts.
"Big Shot" Heads Pool.
Another instance of this reluctance
on the part of wealthy men to accept
profits on which large income taxes
would be payable was furnished last
August. when a prominent pool mana
GER was relieved of the necessity OF
marketing his stock. Before the May
reaction of the market this operator
was called in by some of the important
stockholders of well known corpora
ton, the shares of which are distinctly
in the price category of blue chips"
The corporation has assets of enormous
potential earning power-assets which
appear on the balance sheet, however,
at the original cost, only small frac-
ton of the probable value. Reports
are published only at the end OF the
fiscal year and cover only current earn
ings, with no indication of the future
possibilities. No one but the insiders IS
in position to make an accurate esti-
mate of the true worth of the shares,
which command a market price mucn
higher than could Doe justified On the
hoSia of statistical ANALYSIS During the
early Spring there had been irregular
price movements in the market for this
stock, and it was feared that there
might be considerable liquidation by
shareholders who were without COM
plete information covering the con
cealed values" behind the issue. The
competitive situation in the industry
made it inadvisable to publish this In
formation, and it was thought desirable
to organize a powerful pool to take
care of the stock"
The man selected to conduct this OPP
Grafton is we'll known In Wall street,
one of the ''big shots" of the market.
After making an examination OF the
assets and prospective earning power OF
the corporation the big operator stated
that he would handle the market for
| the stock.
How much money will be neces-
sary?"
"Twenty million dollars as call for
| it." he said, and another $40, 0O0, 900
| If call for it."
He agreed to furnish one-eighth of
| the amounts named for his own ac-
count. For his management Of the OPP
GRAFTON he was to receive 10 per cent OF
the pool profits. in addition to the profit
| on, his personal participation. The pool