Evening star., 1932-06-05
Quotations Held
No Guide to True
Values of Stocks
Market Axiom CHALLENGED
After ''Story of Tape
Is Analysed.
Special Dispatch 70 The Star.

i
NEW YORK, June 4-One Of the
axioms of the marketplace and one that
has greatest currency in Wall Street is:
The tape tells the story" An inquirer
once asked DR.. Einstein how he had
discovered his theory of relativity. The
answer was, by challenging axioms." "
This is a time when many shrewd
judges of market values are beginning
to question the accuracy of the daily
quotations of securities as an index to
the true state of affairs in leading
American corporations.
!. It is only necessary to 60 back to
the Summer of 1929 to establish proof
that the inflated quotations for indus
trial and public utility shares then did
not correspond in any degree to the
immediate or prospective worth of such
equities" 1t was the blind following
of the tape by men who were supposed
to have good Judgment that subsequent
ly led to the loss of their fortunes.
Only those who challenged the axiom
that has been quoted and led the
minority retreat from inflationary con-
ditions came out of the situation with
strong bank account.
Unfortunately the attitude of large
body of stock and bond holders toward
their investments is today being de-
termined by the current quotations
printed on the tape. To many Of them
selling at ridiculously low figures is
evidence that dividends are to be passed
or interest defaulted. The correspond
ence of numerous large corporations
whose stocks are listed on the ex-
changes reveals the stubborn insistence
of shareholders that the figures of earn
ings given them do not tell the whole
story and that there are some unknown
factors in the background which the
tape alone honestly interprets and
which foretell impending disaster.
Lord Rothschild is reported to have
told one who asked the way to easy
fortune that it could be made by sell
ing stocks at the top and buying them
at the bottom" This Is a simple recipe
and one that might be expected to be
used by a multitude of spectators and
investors. Actually, however, most
people buy near the top and sell near
the bottom. That is what they did in
1929 and are doing in 1892
There is another kind of speculative
philosophy which does not encourage
the purchase of securities in a rapidly
falling market, but whose followers pre-
fer to wait for a moderate and sus-
tained rally before beginning an accu-
mutation for long pull" This school
has many disciples. There is logical
basis for its theory. One frequently
hears men who have been in Wall
Street for years say they would rather
buy United States Steel or New York
Central, or Consolidated Casio take
three typical and diversified shares
at level 10 to Is points above pre-
va1l1ng low prices, when once the mar
ket had been stabilized, than to try to
catch the last eighth" In other
words, they regard this premium as an
assurance that the decline has run its
course, with all of the bad factors in
the situation discounted and nothing to
give them further worries, even though
there may be no nearby profit on what
they have bought.
Bulls Turn Bears.
A singular phase Of the recent Wal
Street psychology. and perhaps natu.
raj one, Is the intense bearishness on
the part of those men who were most
bull1sh two and half years ago. Real.
lzing that their judgment was at fault
IN buying and recommending securities
at the highest prices ever reached, they
are today strangely ttnid about sug.
gesting purchases even when the mar
ket price corresponds closely to the
liquidating value of corporation assets