SMALL INVESTORS

Waikato Times, Volume 121, Issue 20388, 31 December 1937, Page 7

SMALL INVESTORS

THOUSANDS RUINED STOCK EXCHANGE LOSSES VALUES FALL; CAPITAL LOST (From a Correspondent.) LONDON, November 27. Mr C. Redman, manager of a Manchester branch of the Midland Bank, said in an address this week on “The Money Market” that ruin had overtaken thousands of small Investors who had been tempted to join in the gamble on commodity values and share prices in the early part of the year. This in turn had been an important factor in undermining the stock markets, for it had removed a large number of small operators who had played a definite part in their normal activities.

“I witnessed a good deal of this kind of thing myself in Manchester,” declared Mr Redman. “A tremendous wave of gambling began when commodities started to rise after announcement of the rearmament programme, and everybody thought market operators would be in clover for at least a year or two. Thousands of people with a capital of £2OOO or £3OOO were buying vgheat, cotton and shares on margin. Tnen the bottom fell out of the market and these fellows kept going down and down until their whole capital was lost. It Is impossible to estimate any figure, but from what I know the total round the country must he tremendous.” Local Examples Mr Redman, who said that no expert alive could really explain why the markets had collapsed when every known index and pointer indicated trade progress and prosperity, gave what he termed some “astounding local examples” of the complete divorce between prices and realities which marked the present state of the markets. In one case a certain firm had made loss after loss for years, some of the losses being really substantial. This year it was doing well and trading at a profit—yet the price of the shares was now lower than when it was making losses. In another case he had seen the accounts of a firm which was doing well and whose break-up would probably yield £1 per £i share of the capital. Yel the shares could be freely bought at 12s 6d.

“There is no explanation for this sort of tiling other than that in finance and economics we are up asainst tho human clement,” said Mr Redman.

“You cannot calculate reactions in finance; no matter how ♦well things are going, one whisper of war, for example, will bring the whole edifice crashing. As recently as August we seemed all set for prosperity, prices were rising and trade was expanding. Then oame the N.D.C. proposals to give the market Its first scare, followed by the rumour that Roosevelt was going to depreciate the dollar. Tho Spanish complications and now tho Sino-Japanese war have completed the undermining of confidence. How amazing the position is can he judged from the fact that while you cannot get a steel order fulfilled to-day, the basic price ■■!’ Mu’ metal is falling.”