The Recent Market – Bull or Bear Part 2

Last month did something to improve the record. The same list of stocks rose approximately 60 points from late May to early September, placing the average price level at a new high record. The average price appreciation was one and one-quarter points, or $1.25 a share a day for each trading day in June, July and August, the months formerly regarded as the slowest of the year for the stock market. Now, a dollar and a quarter a day will enable a margin trader to disregard even 15 per cent call money and to be wholly oblivious of dividend payments. The average stock sells for less than 100 a share, so that a 60 point gain means in many cases doubling of capital where the shares are owned outright, and perhaps quadrupling actual capital of the margin trader.

Price advances in individual stocks have been even more spectacular than the “averages” indicate, for the stocks which are the best known to the rank and file of investors and speculators alike and which are the recognized market leaders have risen in a manner which would have been almost unbelievable a year or so ago.

But that is only part of the story. The statisticians tell us that on May 27, when the average price index was at its low point for the year, 516 separate issues appeared on the Stock Exchange ticker tape. Of that number 366 advanced in the past three months and 150 declined. That means the odds were only about 5 to 3 that a trader, picking stocks blindly, would have made money had he bought on that day and held on. Such a well established stock as General Motors, for instance, the stock which made many a fortune in Wall Street in tlie past three or four years, was much of the time selling below its May price and even at the end of August showed little or no advance. One doesn’t need to talk to many traders in Wall Street to discover that the summer hasn’t meant much in the way of stock market profit. Most of the big gains have been made by powerful investment trusts and a few individuals.

Source: Outlook and Independent, 18 September 1929

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