BREAK IN STOCKS

Dominion, Volume 23, Issue 33, 2 November 1929, Page 11

BREAK IN STOCKS

REASONS FOR WALL STREET COLLAPSE HATRY GROUP’S CRASH A FACTOR OPPORTUNITY USED BY BEAR ELEMENTS (United Press Association. —By Electric . Telegraph.—Copyright.) New York, October 31. Opinions regarding the initial incentive to the recent Wall Street collapse differ variously, but it is agreed in practically all quarters that the basic causes are purely technical and psychological. Thus it is asserted by some that the crash of the Hatry group’s interests in London was the first impulse towards the New York decline. They reason that the Hatry failure caused heavy selling of American securities, which paved the way for a general run, not only because many stocks were thrown on the market, but also because the loss of confidence became international in its aspect. There are others, however, who assert that the bear elements which had suffered severely for a long time past in bull markets took advantage of the first opportunity, when what should have been only a temporary reaction set in, to send the list crashing. Many Stock-holders Without Substance. The fact remains, however, that neither the Hatry collapse nor even the most strongly organised bear movement could have affected the market to such an extent had its technical position been strong, but this was not the case, for this break emphasised the importance of the fact that it is not so much a question of the level of the market that determines the stability of price structure as it is who owns the stocks, on which probably lies the whole answer to the disastrous slump. It is admitted on all sides that for some time past an enormous number of people were dabbling in the market who had no right whatever to be there and who had no substance wherewith to withstand any severe reverse. During Wall Street’s many prosperous days large numbers of even small traders made considerable profits. After this the speculation fever grew and prices in many individual instances rose to heights unjustified by current or expected earnings. Thus the earliest stage of the decline received the greatest impulse from the liquidation of holders of securities whose margins had been uncovered, or who were threatened by a possible increase of recession. Psychology of Fear. After that the remainder of the story was the pure psychology of fear. The smallest traders first ran panicstricken, their numbers increasing in snowball fashion as the word spread that the market was falling, in exactly the same manner as runs are caused occasionally on even sound banks. After the small traders had been cleared out, the bigger and more stable ones, who had watched their departure with considerable satisfaction, began to taste the same medicine. They found that a feeling of anxiety had attacked even some of their own number, and the same process was repeated in exactly the same manner. First several large holdings were thrown in for anything they would bring. Then enormous numbers of wealthy traders lost their heads, throwing vast investments on the market, the selling being accompanied by as great excesses as had previously been witnessed in the bull markets. Moreover, many'even of the bear elements ultimately lost out, because they themselves never anticipated such a tremendous drop in values as occurred. It is considered in best-informed circles, however, that the bottom has been reached, that good investments are obtainable at bargain prices, that confidence has been restored, and that the market is recovering after a necessary major operation. Spectacular Rises at Close of Market. The stock market closed with another whirlwind finish, many issues furnishing spectacular rises. Orders poured in from all sections of the country for the short three-hour session, and the market opened at noon with a spectacular rush of buying. _ The total sales were over seven million shares, with prices in many instances up 1 to 40 points. Some had risen as far as 75 points in the early trading, but met with the inevitable profit-taking. Then they started upward again in a more orderly fashion. The leaders spurted near the close, which helped the entire list upward. Scenes reminiscent of the late bear drive were enacted on the floor of the Exchange. The brokers, fatigued after three days’ heavy business, rushed about to execute orders ranging from 50 000 shares, the confusion being heightened by the scurry of shorts to cover. Values increased some 10,000 million dollars, and eased off only a fractional amount from that figure. DECREASE IN BROKERS’ LOANS Washington, October 31. Brokers’ loans bn the Federal Reserve in the New York district for the week ending October 30 totalled 0038 million dollars, which is a decrease of 1016 millions from the previous week.