Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-06-08
Resignation of CatChings
From GoIdman-Sachs Co.
Arouses General Interest.
BRITISH AND AMERICAN
POLICIES ARE COMPARED
Effect of Market Crash on Some
Companies Securities
Was Severe.
BY JOHN F. SINCLAIR.

NEW YORK, June f-Wnen Wauueu
Catchings so, resigned recently from
the presidency of the $3.50 100000 Gold
man-Sachs Trading Corporation, one
big investment trust, as we'll as from
his membership in the old Wall Street
firm of Goldman, Sachs & Co., 1t
brought to public attention the spectac-
ular career of this New York banker
since the war.
But more than that, it brought wildly
to the attention of the public, the prob
lem of the investment trust.
Few American business leaders have
had more experience in this field than
Mr.. Catchings. Goldman, Sachs &c
Co., known in every country in the
world, is the financial agent for As
American corporations. Mr.. Catchings
represented the company on the boards
Of more than a dozen of them, includ-
ing such we'll known companies as the
Studebaker Corporation Postum-Cereal
Co., Roebuck, National Dairy
Products, Cluett-Peabody, Continental
Can Co., Endicott- johnson, and Warner
Brothers. Mr.. Catchings' sudden with
drawal from the firm, therefore, has
been the cause of widespread comment.
Stocks Popular.
The Goldman Sachs Trading Corpo-
ration stock, under Mr.. Catchings'
leadership, was issued in December,
1928, at $104. The stock was popular.
1t rose rapidly. Then presto-it was
split two for one. In August, 1929, the
split-stock was selling at SIG a share.
Everything looked rosy.
The Shenandoah Corporation was
formed. 1t, too, was trading invest
ment trust, organized in July a year
ago by" the sale of 100000 shares OF
common stock offered at SIT a share.
A few weeks later, it moved up to S42,
while 1000 900 shares of the Shenan-
doah preferred, first offered at $50,
went to $50. Nothing looked finer
everything hunky-dory.
The Blue Ridge Corporation-a third
Goldman-Sachs venture-started late,
on october %, 1929. But the marKet
crashed shortly afterward and TINS
company had little chance to expand,
like its two lusty, healthy, shouting
brothers.
when the market did crash, Shenan-
doah dropped from $685. to 67s; Blue
Ridge from 299s to 3l2. Now Blue
Ridge is selling at around $1l and
Shenandoah at $14. This story Is
typical-similar to the stories of hum
dreds of others. That's why it Is used
merely as a graphic illustration.
What of the future OF the invest
ment trust? Nearly 500 of them exist
LII 0OdOCS, WAeAA oO0SSS
ably exceeding $4,000, 100000. They
are not supervised or controlled or
directed, except by their officers and
directors They make no report OF any
kind to either the State or the Federal
Government. They have grown up
rapidly and are of many different varI-
eties-fixed, semi-fiXed, security trad
ing corporations, and general manage
ment companies.
nf
trust--the cardinal principle Is 10
minister to investors who are unable
to maintain a continuous vigil over
their security holdings and who, In
any event, could not hope to be as
uniformly successful with limited
capital as the trust with its great aggre-
gate resources"
This principle has built the British
investment trusts into positions of great
conservative, not
speculative as in the United States.
DR.. Leland Robinson. one of Amer
ica's leading authorities on investment
trusts, in an estimate made of British
trust holdings, found that they owned
bonds to the extent of As per cent,
preferred shares to the extent of %
per cent and common shares to the
extent of 80 per cent.
British Investment Policy.
This shows how important the bond
investment is considered in England.
Quite the reverse is true in American
companies. In a recent analysis of the
reports of about 40 investment trusts.
with holdings totaling $500 100000
on December 81, 1929, their average
bond investments amounted to only
6.35 per cent of the total resources,
preferred stocks amounted to 1859 per
aud ctnpkS ahcnrhnd go OK
per cent-while 1894 per cent con-
sisted of cash and call loans and 5.07
per cent of the assets were of miscel-
laneouS character.
The portfolios of 81 companies (the
only ones reporting) revealed that l1.31
per cent of the common stocks held by
them were railroad issues, 81. "a per cent
public utilities, and the remaining $685.
per cent bank, insurance and miScel-
laneous stocks. Obviously a wide differ
ence in the investment viewpoint of
the management of English and Amer
lean companies.
Another distinction between the in
vestment trusts of Great Britain and
the United States lies in the fact that
the British companies continue to make
it practice, as they have from the be-
to pay dividends only out of
current income. so that profits from
allowed to accumulate as reserves" I
know of few American companies fol-
lowing such a conservative practice.
Again. the English trusts publish a
list of their portfolios at least once a
year. few American companies fol-
low this practice, but the vast majority
give but thumb-nail report each year.
In the golden days" of 1929. the sky
was the limit. There seemed to be no
top prices.
Thus one corporation, for example
publicly advertised that it would take
United States Steel at 238, Union Car
bide g. Carbon at 119, Allied Chemical
at 324, General Electric at 395, and
would give its own stock in exchange
for these various securities. The four
shares would have cost the trust SLOTS
After the crash the four were worth
s595.50.
Assets Shrink.
Thus the assets, of Just Is investment
trusts associated with some leading
banking houses, showed a shrinkage due
TO stock market losses of SITS, 725, 900.
Another investment trust, not in
cluded in the Is, has but recently pub
ished its statement, disclosing that 1t
Jwnetf over 100000 shares of COM
non stock of a public utility company
11e .Y1srl<et for which u,as 1ada ay, a