Evening Post. THURSDAY, NOVEMBER 14, 1929. WALL STREET AND THE STOCKING

Evening Post, Volume CVIII, Issue 118, 14 November 1929, Page 8

Evening Post. THURSDAY, NOVEMBER 14, 1929. WALL STREET AND THE STOCKING

Cable messages this week report that the Wall Street panic is not yet ended. Bears, we were informed on Tuesday, caught the bulls off their guard, and support was shot from under United States Steel. One may judge how widespread are the effects of the selling rush when the shock is communicated even to what has been termed the foundation of American industry. Financiers of known strength and probity, to whose words nations listen with respectful attention, have intervened, but they have been unable to restore confidence. The seriousness of the position was set out in detail in a New York message of 7th November. The panic of deflation, it was stated, had not merely eradicated the "lunatic fringe" of speculators and wiped out billions of paper profits.

It^is now frankly admitted that the nation's business is suffering, and will possibly suffer very seriously. .. . Many consequential corporations . have nearly lost the market for their shares.

. . . There is a definite element of uncertainty throughout the body economic of America.

Confidence has gone. The investor who is not a speculator and has no intimate knowledge of financial business has seen the stocks which he deemed solid crumbling away, and he is bewildered. He has no longer a reliable guide to his investments, and he will hesitate to invest at all.

Though in no way related to the Hatry crash Vfhich disturbed London at the end of September, the Wall Street panic emphasises some of the lessons of that crash. Particularly does it point to the obligation resting upon the solid leaders in finance to guard the capital subscribed by small investors. Within comparatively recent times the area from which capital is drawn has been greatly extended. Among the "capitalists" of the present day are many thousands who have overcome the timidity which formerly hindered them from making their savings available to industry. They have taken their savings from the stocking and placed it in shares. These investors have no means of deciding with certainty which are solid ventures and which are speculative. They must be guided by the market, trusting that the ihfluence of sane and reputable financiers will dominate that market. When the Hatry crash came* the City Editor of "The Times" stated that "the fall in the shares did not cause much surprise in the best-infoVmed circles of the city." But that can have afforded little consolation to ill-informed circles outside the city, where the collapse occasioned surprise and shock. Fortunately the shock area was restricted. "The Times" stated that the losses would fall mainly in quarters well able to meet them without the slightest difficulty, and "the affair is so largely concentrated among the professional elements that it is reasonable to assume that it will not cause prolonged or general inconvenience."

The effect, however, might easily have been disastrous to a wider circle, and this fact has led to a general examination of the existing safeguards against wild finance. "The Nation," in an outspoken comment upon the crash, said that it was not "a case of a wholly unexpected and hardly credible revelation of something wrong with the affairs of men who have enjoyed a name of the highest repute and whose credit and stability have been regarded in all quarters as above suspicion. Mr. Hatry had a past ... a past of pro-! motions which ended in liquidations and enormous losses." Yet he was able to obtain cash advances, directly or indirectly, which must have amounted to millions of pounds. "The, Nation" questioned whether there had been a sufficient regard for the public interest in the institutions which had given their support to finance of the type disclosed. "The Spectator" further pointed to the need for protection of the wage-earn-ing investor. His property in the Stock Exchange markets "should be as far as is humanly possible protected from excursions and alarms which in a single day's quotations may sweep away the results of years of honest saving." The honourable management of the Stock Exchange Committee was acknowledged by "The Spectator," and also the fact that gambling can best be cured by self-restraint; but it was urged that company law was in need of revision to meet modern needs. In New Zealand the same issues arise, though fortunately their urgency has . not been demonstrated by a crash. Here, even more than in Great Britain, the contributions of the small investor are necessary for the provision of national capital. The confidence of the man, or woman, of small means must be retained. We have the best foundation for security in the high repute of our bankers and the safe management of the Stock Exchanges. Yet there are ways in which investors can be deluded if they become a little bolder and reach out for a higher return. An investigation of our company law would be timely to assure that it is at least made as difficult as possible for public confidence to be shaken by the operations of risky financiers.