Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-11-13
CHAPTER ".

Support Pools and Accumulation.
(Sone of the most conservative
CORPORATIONS, Which mould shudder
at the mere mention of the lDord
pool" really dcllieDe the most sue
cesstul operations OF this sort. How
one organization accomplished its
purpose and rewarded pool man
doer NTH $4,000, 900 profit is told
in this tSsue.)
1t very often happens that the con-
trolling interests of large corporation
have very little understanding of the
market possibilities of the stock. They
know the corporation is increasing its
business and profits and that the shares
will pay larger dividends as the years
pass: they know that the stock is a val
liable investment holding and they are
content to retain it for themselves.
Such men are not interested in creating
a wider market for the corporations
securities, especially if they are very
therefore able to finance new capital re-
quirements without appeal to the pub
lie. So long as the shares enjoy a steady
market at a price which reflects the
investment value on basis of the cur
rent dividend return men of this con-
servative stamp refuse to trouble about
the stock market.
The reports of these corporations
make very dry reading for the general
public. There Is no window dressing"
the term which Wall Street uses to de-
scribe the modern practice of display
ing facts to the best advantage. No ex-
pensiVe publicity men are employed to
dramatic underlying values and future
potentialitieS of profit to stockholders.
It is considered SUFFICIENT to outline ac-
tivities in the dullest of formal Ian
guage, supplemented only by the fig
ures supplied by accountants. The cor
poration may apply all the subtle prin-
ciples of advertising and sales psychol-
ogy in selling its product to customers,
while in its dealings with stockholders
these principles are wholly ignored.
Members without Knowing II.
For all that, however, nine times out
of ten the important stockholders OF
these corporations do actually engage in
pool operations. without knowing it.
They may shudder at the word pool"
and vehemently deny any interest in the
"gyrations of the stock market" Yet
nearly always these conservative gentle
men have an arrangement with some
firm of bankers, as conservative as
themselves, whereby the stock will be
picked up" in times of financial stress.
Tn, bankers accept all offerings when
ever the price declines below the figure
at which the insiders" value the shares.
This operation is known in the Street as
cleaning out the market" The bankers
then rediStribute the stock to the shrewd
investors who know its value. When
financial conditions improve and stock
prices again advance, these investors
may dispose of excess holdings at tidy
profit, If they happen to need the funds
so employed for other purposes. When
the amount of shares to be resold in
this way Is large, the stock is returned
to the banker, who feeds 1t out" at
rate to avoid depressing the prevailing
market price.
There is, of course, no pool agree
ment; and no harm is done to any one
by the refusal of the parties concerned
to apply the name Support pool" to the
arrangements under which these trans
actions are consummated. The late
Diamond Jim" Brady Is reported to
have covered this ground on one occa-
sion with a famous remark: Gentle
men, let us not speak in unpleasant
terms! I do not ask you TO join pool.
I ask you to pool your interests"
But however the operations may be
described by ultra conservative finan-
cierS, every one agrees that the protec-
ton of sound investment stocks II sea-
sons of financial bad weather is an al
together meritorious undertaking. And
the existence of the friendly arrange
ments of pooled interests" to prevent
the collapse Of stock prices explains the
saying frequently heard among the
more realistic members of the Wall
Street community: There Is a support
pool in every stock-unleSS the stock Is
worthless"
Support Stock Returns TO Market.
It is also true. nine times out of ten,
that stock bought to support the market
is purchased with borrowed money, or
with funds which cannot remain per-
manently invested In this way. This
gives the explanation of another saying
often heard In Wall Street that sup
port stock always returns to the. mar
ket" After the period of trouble has
passed, and prices are again rising, the
shares which were bought to halt the
decline are quietly redistributed. It is
this redistribution which usually causes
the ''esecondary decline that so often
follows the first recovery of prices after
a violent break of the stock market.
The situation is entirely different
when the purchase Of stock in market