Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-09-01
INVESTMENT TRUST
SWINGS MARKETS
New Influence Has Potent
Effect on Prices of
Listed Stocks.
BY CHARLES F. SPEARE.


mas become the influence OF investment
trusts in the imagination OF Wall Street
people that it may be asked, What
would the stock market do without
them? Possibly the trusts may be eX-
erting a smaller effect on prices than
Is generally supposed.
A recent study of the value of shares
listed on the New York Stock Exchange
placed this value at $85,000,0 00,0U0
on August /. A conservative figure Of
the capital represented in the Ameri-
can investment trusts now operating IN
securities is $2,000,000,000. This Is
about 2la per cent of the amount given
as the selling value of the Stock Elk
change shares.
Not all of the funds of investment
trusts go into common stocks. mod
crate proportion represents domestic
and foreign bonds and preferred stocks,
also the shares of banks and insurance
and trust companies. Probably 20 per
cent of the 2,000,000,000 is in call
loans. 1t is doubtful, therefore, If the
equivalent of 11a per cent of the
$85 100000, 900 is at present being en-
ployed by the investment trusts and
trading corporations in accommodating
stocks for short or long term commit
mentS.
Effect on Issues.
Even this comparatively small amount
might have, and undoubtedly has had,
a powerful effect on issues whose float
ing supplies have been steadily reduced
during the past year. In sense. IN
veStment trusts, which represent thou
sands of individuals, are doing on
grand scale what the pools did formerly.
They investigate certain stock, accu-
mulate 1t and, at level which appears
to represent its ultimate value, realize
all or a portion of their profits. Another
trust comes into the situation and duplt-
Gates the performance of the first trust,
SO that there is constantly higher
plateau of prices created. Instead of
pool selling out to another pool, as In
former days, one trust or trading COM
pany distributes its holding to another
trust and the public, as the holder OF
unit shares in these trusts, indirectly
become their owners.
This process of pyramiding and with
it steady decrease in the floating sup
ply of the high grade corporation
shares, explains why they advance from
day to day. Also it explains the re-
curing buying waves in them after
all of the cream seems to have been
SKINNED from particular issue. There
is as much unintelligent buying OF
stocks going on at present In behalf
of the investment trusts as there is
Dy LIle pubic every tAIHS pIASCS dlAO
values part company.
On the other hand, a principle to
which the investment trusts and cor
porations have held closely Is that OF
limiting their purchases to the highest
shares available. This is the best as
surance against future heavy losses
that they could adopt. Their judg-
ment as to permanent values may be
faulty, but what most OF them are
carrying among domestic securities IN
their portfolios will pass any inveSti-
CATION with high rating. Their policy
of careful selection explains why such
large percentage of listed shares are
declining while others are enjoying ire
mendouS favor. Seldom has there been
a market situation in which the empha-
sis is all on the side of rising prices,
but where from 40 to so per cent OF
quotations on active shares on the New
York Stock Exchange show minus IN
stead of plus signs from month to
month.
Public Watches Moves.
What the investment trusts may be
doing in the market is copied by in
regard as a good lead. 1t is no longer
what the Morgan interests" or the
National City crowd or the Fishers,
Cuttens, Durants, Meehans or the du
Points are doing that counts, but the
activities of the dozen most conSpic-
uouS trading corporations identified
with industrials and public utilities and
now branching out into the banking
field.
It is we'll to keep constantly in mind
that where there is concentrated buying
of stocks there will be. under conditions
the reverse of those today, the posi-
bilitv of concentrated selling.
Consequently the stock market might
easily have a bad bump when this oc-
ours, in spite of the talked-of
cushion" which the investment trusts
have in reserve in the form Of cash
available for purchases in the event OF
any severe break.
Most of the men who are managing
the aggressive investment trusts are con-
fident that business will continue active
for another six months and probably
longer, and that there are just ahead q
number of important "split-ups" which
will have the same effect in stimulating
speculation as did those which were
consummated in June and in July. More
than this they have never taken fright
over the money situation. Some Of them
have been outSpoken in their criticisms
of Federal Reserve policy. This explains
to some extent the ability of the stock
market to advance in the face of the
huge increase in brokers' loans week
after week until they are now 1898 ,000,-
900 above the figure of June IL, which
represented the bottom point of loans
following the May decline. The per
cent rate for call money during the
greater part of this week has not made
the slightest impression on those in
terests that have been buying stocks
persistently all through the Summer
and who rather expect to see even
higher call rates during the Autumn.
Business Situation.
Turning to the bushes situation,
which is the foundation on which prices
of stocks must be built, We find indus
try moving at high speed for this sea-
son of the year. There are nominal re-
cessionS in some fields of industry, but
in general high degree of production
and advance orders guarantee active
Autumn and Winter months. There are
a number of situations that have been
unfavorable and in which little progress
seems to be made, and where there must
be revolutionary changes before per-
manent improvement can be made.
Commodity prices have been steadily
declining, and are now back where they
were in June, when they took sharp
III 4CopOLloC W tAAC oCAAo1oAOAAoA
rise in prices of farm products. Inven-
tories are increasing in some lines,
though very little in proportion to the
demand for manufactured goods and to
the temptation to speculate in raw ma
terials that usually comedies with a
period of great activity in securities.
The most striking advances in stocks
this week are those that have occurred
in the railroad list. This is the second
time this year that railroad stocks have
enjoyed public favor. They have dem
onstrated that they can move as rapid
ly as the industrialS or the public util-
itiaS II WOULD haua been strange If