Evening star., 1929-11-15
STOCK PYRAMID|NG
. BLAMED IN CRASH
Business Analyst Declares No
Long Trade Depression
Is in Sight.
BY JOHN F. SINCLAIR.


NEW YORK, November 15.--"Per-
sistent pyramiding far beyond the
values of dozens of the market lead
ers at q time when the credit strani
had been continuously aggravated by
the rapid formation of holding ana
trading companies of immense capl-
talization."
Such is the explanation of the stock
market smash given by John Moody,
we'll known business analyst, whose re-
ports have been an important part OF
the business records of the United
States since 1900.
Yes, business Is bound to be affect
ed by 1t, even though basically condi-
tions are sound. The smash will tend
to intensity q general business reces-
sion, such as was probably due in the
country, regardless of what might have
been happening in the stock market
circles" declared this whlte-haireo
business observer.
Future Of Business.
''The future for business-what is in
storeP" I asked, and Mr.. Moody re-
piled:
Credit growing easier-not more
strained, such as occurred in the panics
of 1898 and 1907; an abundance or
money and credit at low rate before
1880 gets we'll started: renewal of in
terest in sound security buying, accom-
panied by a decrease in equity buying
that is to say, from stocks to bonds"
Mr.. Moody paused moment ana
then said there would follow:
Long periods of dullneSS on the
stock market, with one and two million
share DAYS, rather than seven ana
eight millions. No major or serious
business depression of any length IS In
sight. In other words, we shall return
ia the first principles, which we have
largely lost sight of in the last f1ve
years, with safety of principal return
ing to the first place in the investment
field and the rate OF return moving
back into second place.
When I asked how long the bus1-
ness recession would last, Mr.. Moody
before the year 1880 closes definite
upward trend in business will be wit
messed"
Companies Buying Of Stock.
SHOULD a company, in q stock mar
ket crisis, protect its stock by taking its
own money and buying stock on the
open market in sufficient quantities 10
preyent the inevitable drop which other
stocks, not protected, Suffer?"
That question is asked by Wall
Street banker.
Study the gyrations Of the 1900
stocks on the New York Stock Exchange
during the last 80 days. 1t is easy to
pick those which were ''pegged"-sup-
ported-held up. When Black Thursday
dawned some companies, after meetings
of the officials, decided to peg" their
stocks at certain definite figures ana
to buy all stock offered at such prices.
Others decided to let their stock drop
to its own level.
One corporation-very large and
prosperous an all-night confer
ence, decided to support its stock. Eff
forts to communicate with its presi-
dent, who was in Europe, were unSuc-
cessful, so 1t entered the market and
spent more than $100, 100000 Of its
own money, buying the stock at the
high ''pegged" price.
But there is a limit even TO that
kind of activity. There was in this
case, So much stock was offered that
the company finally had to throw its |
hands up and let the market take its |
course downward.
Now its ofacials are fully convinced |
that 1t would have been better to let
the stock drop, even II it went to a
fraction of its former price. Here is
q case where q company was far too
interested in its stock and too little in
tereSted In its business. With $780,
600, 900, which was frittered away, 1t
could now have started building and
expanding without asking any one for
cash.
Yes, the big organizations have. made
mistakes, like the little ones. Some Of
them have made mistakes in the last
two weeks from which it viii take years
to recover.