Another and fascinating phenomenon has arisen on the American scene. I refer to the investment trusts. People too timid to risk their own judgment and money in the stock market can now buy brains to invest and speculate for them. At this writing there are more than 450 investment trusts in the market, with a total capital of three billion dollars; nearly 300 of these gigantic groups have an average capital of $2,500,000.

Here, then, is our old friend, the public, in the market stalls in still newer dress. Seven years ago, there was only one such company in the market, and it took it three years to peddle its $250, 000 worth of shares. A few weeks ago, an investment trust, capitalized at $100, 000, 000, had its total stocks over-subscribed many times. These companies, of course, invest in corporations, and the extent of their new influence and activity can be judged, perhaps, by the recent prediction that an investment trust for investment trusts will soon be formed.

It is impossible to calculate the precise boundaries of their manipulations, since many of these trusts do not disclose their holdings. But there presence in the market is always felt. The frequent appearance of big blocks on the tape, the relative number of inactive stocks and the small increase in brokers’ loans after a broad advance in stocks, attest to their activity.

In one sense, these trusts are the public’s own defense against itself. These trusts act as great cushions against the market’s shocks. When matters started to go to pot a few weeks ago, it is said, many of these trusts pegged the crumpling leaders by throwing huge buying orders into the maelstrom. The weaklings then took heart. Such influence, such terrific resources in constant reserve, have given the market an internal buoyancy it never possessed in the old days.

Since everybody in Wall Street is intent upon making money, they all seem to have hit upon the happy solution of keeping Mr. Calvin Coolidge’s Bull Market on the hustle. Verily, it is a weird business.

One wonders whether such things can continue indefinitely. But why bother. As I crossed Broadway the other day, at the foot of Wall, I observed, with a queer sense of heartening, the push cart peddler there. Surely, I thought, here is a man who produces himself, to whom vicariously earned wealth means nothing.

Moving closer, I saw that his nose was buried in the financial pages of a newspaper. His pears were piled golden in his cart. But he had no eyes for them.

He was dreaming of another fruit, probably, a melon which would soon be ripe for the cutting.

Source: The Outlook, 18 September 1929

The desire to make money is not limited to minds trained in making it. The easier money can be made, and the more quickly, the better it attracts the public. Just now the most fabulous money-making machine in the country seems to be the stock market; so the public has enthusiastically gone shopping there.

Savings banks have been not a little alarmed by this migration. Money that once remained in their vaults, soberly gathering 3 1/2 and 4 per cent interest, has now gone adventuring among common stocks, where dividends may be just expectancy, but where the greatest lure is the chance of selling out at twenty points profit. More than a billion dollars of deposits flowed out of the country’s national banks during the last fiscal year, and the authorities ascribed the withdrawals to investment and speculation by the middle class.

Down on the lower East Side, where the residents recognize no international problems save Grover Whalen’s minor incursions with patrol, the stock market has opened a new door to El Dorado. There are push cart peddlers who appoint an agent, chip in $15 or $20 each, and buy two or three shares of General Motors or U. S. Steel. Dividends are rigidly split, and the profits of sale divided perhaps ten ways.

A New York publisher, who made millions by getting in on the ground floor of America’s self-discovered concern with sex, seems to have tapped another latent reservoir of desire by bringing out a daily tabloid devoted exclusively to financial news. Its price is three times that of any other afternoon newspaper. But its circulation is booming.

For months, a morning tabloid, the New York Daily News, has been featuring a financial writer whose function is avowedly that of tipster. He. has made the stock market as colorful—more so—as the race track. He is its Walter Winchell.

“Dupont is a corker . . . there’s at least 40 points in it if bought at the market.—Stick with the Standards of N. Y. and N. J. . . . For a high-flyer, Eastman Kodak can’t be surpassed. . . . Natural Dairy Products are about ready to go …

“Buy Montgomery Ward and reap a substantial profit by August 26. . . . The Market Goose hangs high as Brokers’ Loans dip. . . . U; S. Freight is to have a swirl upward. . . . The rails never looked better. . . . Don’t so to bed tonight without having some American and Foreign Power in your strong box. …”

And so on, day after day. Not being concerned with such things, I have never attempted to calculate the success of this anonymous artist. Some experts who have followed him say his predictions have averaged 6 per cent correct. Others fix the percentage considerably lower. But all of them agree he has been immeasurably assisted by the great Bull Market. Within the past three months—May 27 to August 27—100 representative industrial and railroad stocks have risen on an average of $28 per share, according to the New York Herald Tribune’s recapitulator.

When the market sagged in the face of his bullishness, the tipster saw in it a good portent—”a corrective reaction,” which he likened to a dose of castor oil. His rival newspaper writers simply smiled. They are wondering how he will fare when he must try to pick winners in a falling market.

Source: The Outlook, 18 September 1929

Since the beginning of 1929, the United Press has thrice revamped its financial news system in quest of greater speed. Two years ago, a single Morse wire, with a capacity of thirty words a minute, provided member newspapers with all the financial news they wanted. Most of them wanted only Curb and bond reports. Local brokers provided them with what news they wanted of affairs at the Big Board.

These days, however, a high-speed automatic double-trunk channel, with an output of 125 words a minute, is hard put to fill demands and new vehicles will step up the volume. A San Francisco newspaper which never printed any financial news save a general half-column summary on the markets, now requires three wires to accommodate its need. And all over the country, even in the smaller cities, editors have increased the space devoted to financial news to columns and pages.

Editors have said—and it is credible —that the public’s awakened interest in markets has changed the complexion of the entire daily news report. Since her affairs impinge directly upon our national prosperity, Europe has become a more vital element in the news. Stories of European politics, crops, budgets, and whatnot, which not long ago would have speedily found their way to the editor’s commodious wastebasket, are welcomed now with palpitating headlines and inexhaustible space. And the most technical reports on credit mergers, stock distributions, soluble only to experts, plow into the public prints.

It does seem rather far-fetched, though, to believe that the public as a whole either cares or understands a great deal about these technical elements which in their inner harmony or discord affect the whole structure of world financial equilibrium. Most of it is too oblique. Where in it, we ask, lies the granule that may dislocate the scale plans balancing United Ironing Board common? No, most of us have neither the knowledge nor the patience to determine such things. We have an authority more personal, more comprehensive. It is, on the whole, instinct, “hunch,” if you prefer it, and “red hot tips.”

Source: The Outlook, 18 September 1929

All this has had a most striking influence upon the country’s press. From the doubtful prestige of being “too technical” for the average reader’s mind, financial news has risen—or fallen—to the persuasive estate of being front page news, when, as and if issued. Ten years ago the financial department of even the greatest newspapers consisted of an editor, two or three assistants, and two or three pages of paper. Now it is one of the strongest departments on the editorial staff. Ten to fifteen pages of solid financial news is the ordinary thing for the New York Times. And the trucks of the afternoon newspapers, whose placarded sides once blazened the promise of the snappiest race track summaries, the best features, now clamor for attention for their “latest and most complete financial reports.” The greatest appeal of the leading Hearst newspaper in New York City is the contended excellence of its financial pages, to whose columns contribute some of the highest-paid financial brains in the country. Even more bewildering is what has taken place within the wire services, which serve the country at large. Five years ago, the Associated Press gave the country’s editors 500 words of a general lead on the stock market and a few dull briefs, and they were satisfied. The daily output has since reached 10, 000 words, and it still continues to grow.

Less than five years ago even the large cities in the interior printed only the low, high, and final quotations of leading stocks. Such summaries meant little, simply served as a sop to the inconspicuous percentage of readers who must know such things. Now even the suburban editors are demanding volume and net changes, and the larger editors have managed to get a special wire service, with the “latest leads” on conditions on the Curb and Exchange. One wire alone of the A.P.’s magnificently operated West Wire service chatters on things financial all day long.

Source: The Outlook, 18 September 1929

Not even the lifting of marginal deposits from ten points to thirty points per par value share has diminished the public’s activity. The professionals are bearish. The public never.

“The higher the market goes, the deeper the public is in it.” He reached for his customers’ book. Just after the last debacle, the number of customers fell off to barely 140. Now, in the midst of August’s great surge, the total had grown to nearly 500.

The extent of the public’s participation has placed a terrific load on the over-worked ticker, which was never designed to shoulder such a burden. The ticker is fast. Not long ago it was the fastest news courier in the world. But marvelous mechanism that it is, it is not quite fast enough for its job.

The function of the Stock Exchange is two-fold: (1) to provide a trading place for stocks and bonds and (2) to announce the factors of these sales— quickly, at once. The one is as important as the other, for they are internally dependent. In its first function, the Exchange is more than holding its own. In the second, however, it is increasingly hard pressed.

Every minute, between the 3 o’clock, some forty or fifty trading hours of 10 o’clock and trades are made. In the bowels of the Exchange, a mass of machinery—cogs, belts, wheels and levers—as intricate as that of a Leviathan, is geared to drive the thousands of tickers below Fulton Street. And to drive the tickers beyond this frontier, a still greater assemblage of machinery is operated by the Western Union.

The ticker must be on time. Vancouver must get word of the trade as soon as Miami, Tulsa as soon as Boston. But the ticker is in a traffic jam. The most heroic entrenchments have failed to keep it abreast of trade. Characters have been shorn to cabalistic symbols. The sale of 100 shares of Steel, which used to read on the tape 100 US 112, now reads X 112; Anaconda has dwindled from Anc. to C., General Motors from GMO to GM, and others have been equally slaughtered. And during the great surges, volume was dropped from the tape altogether, until it caught up with trade.

Fractions of seconds were penuriously scrimped. Electrical impulses to relay points were accelerated; one one-thousandth of a second was saved there in the transmission of a character; 400 new characters were added to the ticker’s daily capacity. By such devices was the ticker’s output boosted from 235 characters a minute to 296. Still trade moves faster. It is a rare day, now, that the ticker is not four minutes behind the market; and on one grievous day it lagged 100 minutes. A corrective, however, is promised. The Exchange is now experimenting with a new ticker—a marvelously fast machine capable of producing 900 characters a minute. This means tearing out all the old machinery, costly stuff. Nevertheless, the change seems to be economically worth-while. Time is at a premium in the stock market, nowhere more so.

Source: The Outlook, 18 September 1929