Evening star., 1935-01-01
PATIENCE TESTED
YSTOCK MARKET
Investors With Vision Had
Opportunity to Buy
at Low Levels.
BY ARTHUR HI. NORRIS.
(Cambridge Associates Staff)

BY ARTHUR H. NORRIS.
(Cambridse Associates Staff
"The vision to see them, the courage
to buy them and the patience to hold
them" In this concise and lucid
manner did the late George F. Baker,
who made tremendous fortune in
common stocks, define the essentials
of successful investing. Through the
see-saw shakeouts and false starts of
the 1884 stock market, the vision, the
courage and the patience Oh most in
vestors were put to an acid test. For
those fortunate few who possessed
these qualities of character in abun-
dant measure, the 1884 stock market
spelled opportunity in large letters
opportunity to pick up stocks at
ridiculously low figures in relation to
known values-opportunity to dispose
of less attractive holdings for others
with more favorable futures-oppor-
tunity to study the CHARACTERISTIC
technical, emotional and economic
OF a typical accumulation period-one
in many respects strikingly similar to
the 1928 period of preparation just
prior to the l9241929 Coolidge bull
market"
But to most investors the year just
passed has been nightmare of dashed
hopes and headaches. Although the
general market averages closed the year
fractionally higher than they began it,
the average investor may count him
self fortunate if his capital is still un-
impaired by the vicissitudes Of the
1884 stock market. 1t was year of
cross-currentS. Strong attempts at
penetration of previous high points
faded out ss the critical areas were
reached. Conversely, sudden and
sharp declines recalling the dark days
of the 1929 crash drove Wall Street
into a state of blue funk. but petered
out on dullness just when talk of the
coming bear market" reached its
height.
Confusion Of Influences.
Behind the ups and downs of the
stock market curve one saw the con-
fusion of influences tugging away at
security prices in New Deal lin
vestment market characterized by
thinness Of both bids and offers, wide
spreads between bid and asked prices
and consequent extreme sensitivity
to concentrated buying, selling, or
news influences. Basically, the coun-
try was entitled to a continuation of
the bull market trend in 1884 Fol-
lowing long bear market dehation
cycle to mid-1e32 with only small
recovery by 1888, the business back
ground, an enormous amount of idle
capital, the favorable action of bonds
and commodity prices and the po-
tential desires, resources and capabili-
ties of the Nations population all
pointed to the inescapable conclusion
that there were in this country all
the ingredients for happy and pros
porous business year in 1884. 1t
was on this major premise that most
investors based their stock market
policies. Those who had the vision
to see these basic elements of pros
perity, the courage to buy stocks, and
the patience to hold them through
the reactions of 1884 will undoubtedly
see themselves rewarded in the fu-
ture, but from an immediate stand
point this major premise failed to
produce profits.
The countryS situation throughout
1884 may be compared to a chemical
phenomenon where all the basic ele-
ments in a desired compound may
be put in a test tube without any
reaction taking place. What is needed
to effect this reaction, and secure the
desired compound is known techni-
cally as "catalyst." Its function is
to speed and promote the solution of
blending of the elements.
Catalyst Is Confidence.
Under the capitalistic system the
"catalyst" of prosperity is confidence.
With capital, labor natural resources,
markets, consumer needs, business
ability-all the ingredients of pros
perity-assembled in the great ma
tional test tube, the 1884 reaction,
lacking this catalySt of confidence,
was only dull and imperfect-at times
almost suspended. 1t is perhaps un-
fair to criticize the methods of the
national administration while it is
engaged in the staggering task of
leading the Nation out of the morass
of depression, yet it is certainly the
impression of many disappointed in
vestors that reform" and crack
down" measures all too frequently
nipped recovery in the bud, discon-
certing business confidence at crucial
times and promoting uncertainty and
fear because Of an apparent unwill-
ingness to take a definite stand on
any given policy. At any rate the
stock market seemed to spend most
of its time and effort last year in in
terpreting whether the next move of
the national administration would be
to the mythical cleft" or right" and
as result getting nowhere.
Despite its nerve-racking perform
ance in the eyes Of those whose per-
sonal fortunes were tied up in the
market, one can see in retrospect that
the 1884 market pattern had practi-
cally all the characteristics of major
accumulation period. Indeed, if one
goes back over the yearly market rec
ord to the beginning of the last bull
market, he finds in 1923 a year almost
exactly similar to 1884 in price action
and performance. The irregularity
and sidewise up and down movement
of late 1922 and 1923 constructed the
strong foundation on which the most
potent bull market in history was
built. So may the same type of mar
kets in late 1888 and 1884 be building
the basis for something important in
1885 and the years to follow. The
striking similarity of the market pat
terms in these two preparation" years
Is set forth in the table below.
1922-l923.
Date. 1nds. Rails.
Rallied 80. Oct., 20 103.43 1910
Declined. Nov, 90 9203 82.17
Rallied Mar, '23 105.38 9063