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

Related posts:

1. Wall Street 1929 Part 7
2. Wall Street 1929 Part 11
3. Wall Street 1929 Part 6
4. Wall Street 1929 Part 4
5. Wall Street 1929 Part 2

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