Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-10-01
SPRECKLES URGES
SHORT SALES BAN
Temporary Restriction on
Bears Would Stabilize Mar
ket, He Believes.
BIZ JOHN F. SINCLAIR.



worse thing for an American to sci
American stocks short than for the So
Wet government to sell wheat short or
the Chicago pit" was the cryptic com
nent OF Rudolph Spreckels, American
xinancier.
Mr.. Spreckels thinks the primar,
reason for bad economic conditions nov
Is largely due to bear operations on thu
Stock Exchange" He analyses the sit.
uation in this fashion: During the stocl
market boom every one was talking
stocks and many buying them. Wher
the crash brought disaster to rich anc
poor alike, few found themselves left
with idle funds.
CAS- a result, the bears can depresS
almost any Stock Exchange security by
offering large blocks of stock without
fear of being unable TO cover their sales
at lower prices" says Mr.. Spreckels
Unfortunately. the public still looks
upon stock quotations as an index to
the condition of business. Consequently
every time there is dip in the market
quotations people become convinced
that bad times are ahead. and strict
economy is practiced. Buying of abso-
lutte needs is the order of the day. De-
creased buying means curtailment of
production, and reduced production
means more men and women deprived
of employment, and their buying power
destroyed.
1T is a vicious circle, and those primarily
responsible for these conditions, in my
opinion, are the bear operators on the
Stock Exchange. 1t is estimated that
/. about 5000 900 shares Of stock have
been borrowed by the shorts to deliver
against sales. The sale of stock which
the shorts do not own, in the absence of
public buying. enables that crew to de-
press stock prices almost at will and
~ Efr rrrlHf Ia StFr1Nf IN
public confidence. and thereby under
mining our industries and general busi-
ness"
what is your remedy" I asked.
st believe that If Congress enacted
. law making it illegal. for period
not longer than one year, to sell Sc
curities not actually owned by the SELL
er. security values would be stabilized,
public confidence restored and increased
demand for commodities would restore
production to normal and within rea-
eOnably short time unemployment would
be thing Of the past
Mr.. Spreckels suggests this as emer-
gency legislation only.
Raskob Opposes Idea.
John j. Raskob, flnancier and chair
man of the Democratic National Com
nlittee, is opposed to the Spreckels idea.
II never sell stocks short, so have
no selfish interest in the matter. My
real feeling is, however, that If the pub
tic in good times and bad could be
taught to sell stocks short and become
rs expert in this as they are in buying
stocks long, the tendency would be to
keep stock prices from mounting too
high as well as from going too low, for
the reason that if there was a great
short interest in the market with prices
high, this short interest would supply
. very definite buying power when the
market started falling because people
short of stocks would be purchasing on
. scale on the way down in order to
definitely establish their profits, thus
making the decline more orderly and
less severe"
asked him to make this point more
specific.
When you think Of it, there is really
more reason for selling 100 shares of
Steel common, which you have, than
there is for selling 100 shares which
you have not. II you think the price
Is higher at the time of the sale than
It is likely to be at some time in the
future
IAN our industries really sell short.
For instance, when the Du Point Co.
signs a contract to supply dynamite or
powder for a subway job at a definite
price per pound oyer the coming year,
the company is selling most of that
short because not only do they not have
the dynamite on hand which will be de-
livered 4, 6, and IL months
hence. but they do not even have
the raw materials on hand, so when
they fix the price of finished product,
they are specializing as to the prices
they will have to pay for the raw ma
terials and labor necessary to manu-
Hactutre that dynamite
Cites Drop in Loans.
But do you not think that the
bears can depress the present market
ct will?" asked
No, 1t Is not true that the bears can
depress the market at WILL AS matter
Of fact. the stock market reacted to a
point after which very definite buying
came in. The decrease in collateral
loans at banks and brokers loans ag
gregate about $4,000 ,000, 900. II the
average price Of stocks listed on the
New York Stock Exchange today is $50
per share, this means that 90 900 900
shares of stock have been purchased
not on margin. but paid for outright
and the purchase price has been used
TO pay off these loans.
Brokers loans aggregated about
es.O00.00o,0o0 at the peak. Using $50
per share as the average value of shares
on the exchange Il merely pick this
$50 figure out of the air, as 1 do not
know what the average isl means that
there must have been about 100, 900, 900
shares of stock on the speculative side
OF the market which it would have been
necessary to sell in order to liquidate
all OF the loans. Therefore, the co.
100000 shares as related to the total
OF l60.000,000 shares, seems to indicate
that 10000, 900 shares really is a huge
amount of stock to have been handled
on balance in a depression"
But you do think the psychological
factor is big one in any market?"
he was asked.
II thoroughly agree that depressions
are aggravated and made more severe
by people retrenching more than they
should. Generally speaking, however
consumption has gone ahead apace and
not only have our shelves become very
bare, but think the reserves at home
in the way of extra suits Of clothes,
automobiles, etc, have been materially
reduced through wear and all of this
will have to be replaced just as soon
as the turn comes"
Here are two big business leaders
who disagree as to methods of con-
trolling stock speculation Both side:
are given in order that the American
people may understand the complexitN
of the problem.
fcoDyright, 1890, by North American News
paper Alliance.)