Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-10-09
MOB PSYCHOLOGY
. IN MARKET SCORED
Standard Statistics Com
pany Warns Against Dump.
ing OF Securities.
Special Dispatch TO The Star

NEW YORK, October 9.-The sue
cumbing Of the average intelligent man
10 mob psychology in the securities
markets during the past several weeks
is scored heavily by the Standard Sta
tlstlcs Co. Of New York, in its current
bulletin on the outlook for the securities
market, which points out that while
conditions are undoubtedly bad never
IN the long history Of mankind have
hard times lasted forever Salient ex-
cerpts from the bulletin follow:
During the recent past, and especially
curing the last fortnight, economic and
financial events have been moving with
such rapidly have taken such a de-
cislVe turn, that the mere term de
preston has ceased to constitute an
adequate description of, the current sit
uation
Indeed, 1t must be obvious to every,
intelligent observer that this country is
now passing through a form of mild
panic, 1t seems to us far the better to
openly recognize this wholly unpleasant.
but equally unacceptable fact and ter
porarily at least. to gear business and
investment policies to it.
Facts of Situation.
so far as the major facts themselves
are concerned. there is absolutely moth.
ing which one need go down in the
basement to whisper about-nothing
which any intelligent observer cannot
learn for himself if he merely reads his
daily newspapers These major facts
may be stated quite briefly.
The securities markets-the markets
for common stocks, preferred stocks and
other forms of indebtedness-have
reached a stage which amounts to vir-
tua1 decentralization. After due allow
ance for normal seasonal influences. do
nestle business is. at the moment, grow
ing worse rather than better.
Due to abandonment of the gold
standard in numerous important coun-
tries actual in some cases; merely
technical, but equally effective, in 9TH
ers), international commerce is in a
state of chaos, and promises further
disturbances before the necessary ad-
justmentS are made.
The boarding Of currency continues
In this country, TO the distress of the
banking system. The banks themselves.
In their natural desire to preserve a
high degree of liquidity, are not being
as helpful in their lending policies as
might be desired.
Courageous and effective leadership
either by important financial groups
acting in concert or from Washington,
IS thus far lacking.
These are the most essential bald
facts themselves. in broad outline. and
We see no purpose in trying to dodge
them Quite to the contrry, it is upon
their open and frank recognition that.
under the circumstances, intelligent
business and investment policy must
be based.
In the shaping of such policies. we
feel the following observations to be
pertinent:
I'D The individual investor or bust
u-h
tions, takes his cue from the herd
rather than from calm reasoning, does
himself and his situation an i'll service
"t2) Never in the long history Of
mankind, has panic lasted forever.
"t3) Panic psychology is normally
worse than the facts themselves; the
present constitutes no exception.
90 Recorded prices in the security
markets at time like the present, are
meaningless. They reflect a panicky
psychology, and nothing more than
that.
"t5) Therefore. the investor who
dumps good securities on a market
| such as now exists, is running with the
herd rather than standing calmly by
with the intelligent men.
"(6) In other words, unless Amer
ica's hour as an economic power has
finally and irrevocably struck. the pan
icky dumping of good securities at this
time would seem to be one way OF in
surfing oneself of a permanent loss.
Caution Is Imperative.
800 On the other hand, a situation
as serious as the present one makes
conservatism and caution absolutely
imperative. sane long-term viewpoint
is one thing; reckleSsneSs in the snort
term viewpoint is quite another thing
Therefore, we have no hesitancy In
continuing to advocate that investors
still maintain adequate cash reserves.
We must assume that the average in
weston is carrying some securities at the
present time. These are being carried
at a loss. That makes the necessity
for caution all the more imperative.
The next step in accumulation may
be not far distant. But, under condi-
lions Srch as now prevail. it should not
be taken merely on 'hunch.' 1t should
be taken for some good reason-some
tangible reason. A measurably lower
level of prices. brought. about by
climax of panicky liquidation, might
well constitute one good reason 1or
another moderate step in accumulation.
The prospective development Of del
initely favorable factors. either in the
markets themselves. in the information
al situation, in the domestic business
or banking situations, or in domestic
psychology, would constitute an even
better reason for another bite in the
common stock accumulation program