Evening Star Newspaper, November 11, 1929, Page 12

12 BY A POOL MANAGER, AS CHAPTER II Second or “Outsiders” Pools. (This, the second article in the series on the Wall Street Pools, tells an exciting incident of how a “sleeper” (a dormant stock) was waked up with a nudge that sent it rocketing, made 19 points profit for the pool where no profit was bejore and left everybody cheering.) It should be obvious that the purpose behind the largest and most important stock market operations is not to gather direct market profits for the interests represented in these operations. The men in control of the financial affairs of leading corporations are usually very little concerned about ‘cashing in™ profits on their personal stock holdings. Their interest lies rather in maintain- ing and improving the financial position and financial structure of the corpora- tion. The real purpose, therefore, of the most important market operations is to foster distribution of the corpora- tion's securities among permanent in-|a vestors, to establish markets for new| ol issues, thus providing capital for ex- pansion on favorable terms, and in times of stress to prevent large fluctua- tions in stock prices which would in- jure the prestige and financial power of he corporation. To be sure, large amounts of liquid capital and credit are often required for these purboses, and such capital must earn a return, but it is doubtful if the larger operations of this charac- ter return market profits in excess of the current interest rates on money. On special occasions, of course, large-scale speculative operations -work in con- junction with the investment interests “_for example, when a merger is to be effected or some unusual program to be financed. And the “big shots,” the large pool operators who assume the risks of these transactions, take profits or losses | in proportion. But the real strength of | such “inside pools” lies in the co-opera- | tion of stockholders who do not take advantage of price advances to dispose of holdings. Nine times out of ten | these major operations extend over long periods of time; and actual cash profits are realized only when the stock is ul- timately distributed to genuine invest- ors, a matter of months and years rather than days and weeks. -The men Who manage operations in this category are obviously only concerned to estab- lish a steady, dependable market for the stocks in which they are interested. They endeavor to prevent, so far as possible, the rapid fluctuations in stock prices which tend to disturb the con- fidence of investors. Little Wheels Inside Big Wheels. However, whenever major operations of this kind are under way in an active and widely-held stock, opportun- ities are opened for smaller operators. Small pools are formed to take a vantage of the situation by accumulat- ing the stock on technical reactions, thereafter running up the price for a rapid profit. These smaller operators are protected against large losses by the ng power of the major operators, who cannot let prices fall off at a rate to endanger their own undertak- ings, and the smaller pools are aided by the favorable information which is released by the major interests for the purpose of expanding the investment market for the stock. By rapidly bid- ding up the price the small pools at- tract a following of margin traders, and the pool manager is frequently able to unload his comparatively small holdings at a substantial profit. Most of the pools operating in the stock market are “secondary” or “out- siders’ pools” of this description. Dur- ing the bull markets of the last few years members of secondary _pools which have been amply financed and ably managed have made a great deal of money. Perhaps the best way to explain the methods of these smaller pool operators will be to recite . the actual history of a recent pool. The one I am selecting for this illustration was_formed last July to operate in the stock of a public utility corporation. Within 60 days the price of the stock had been advanced 30 points, and the pool closed with a net profit of 19 points on 20,000 shares of stock. Pool in Utility “Sleeper.” The stock in which this pool oper- ated was “discovered” by a young sta- tiscian, who has since become a partner in a firm of stock brokers. One very hbt day last July this young man rushed into a private office in lower Broad- way, where a small group of men habit- “‘I{! meet after the cloge of the stock market. “I've turned up a wonderful ‘sleeper,’” he announced, “the best bet I've seen in months.” * Another man replied: “Well, it will have to be good if I listen to you today. It's too hot to talk about making money.” .“You will forget the heat when you hear about this,” the statistician re- turned, and he was right. In 10 minutes the heat was forgotten and the men in the room were laying a plan of campaign. One man present was a member of the Stock Exchange who confines his business to trading for own account and for a few pro- fessional speculators who carry rather heavy lines of stock. ' Another man was & pool manager with a following of wealthy friends who find it worth while to follow his judgment. . Some of his “backers” were in the group this July afternoon. ‘The “sleeper” which our young man described was the stock of a sub- sidiary corporation of an importanc public utility holding company. The parent company had been for many months engaged in a program of rapid expansion, taking over a number of large properties and constantly increas- ing its capital by the flotation of new securities. The price of the parent company had advanced to high figures, more than 25 times the current earn- ipgs. The stock of the subsidiary had not advanced; it was selling at only | nine times earnings, with a dividend yileld above 5 per cent on the current | price. This in spite of the fact that the subsidiary was an important link in the combination and contributed substantially to the parent company’s income. Trading in the subsidiary corporation stock had been dormant; the .“sleeper” was so inactive that | many days it did not even appear ou the list of active stocks. | “What's the matter with that crowd?* the pool manager asked. “Why haven't suy run this stock up? The statis- clan replied: “The parent company owns 60 per cent of the shares. They not have to worry about controi. the outfit has every dollar it can y its hands on at work on the hola- company expansion program.” 1 + “That’s nice. Who owns the other geper cent of the stock? Have you stockholders’ list?” { + “Certainly,” said the young man; “here it is.” + The list of stockholders showed that the minority stock was in the hands of ihvestors, most of whom had held it aver a period of years. Discreet inguiries | rer the telephone brought the informa- jon that the floating supply of the stock in the Street was almost negligi- Kle. The statistician went on with the presentation of his deductions: “The holding company people cannot afford to sell stock to ‘run us out.” While they are floating the holding company issues they cannot permit declines in the stock of an important subsidiary. The insiders cannot do anything but when we start to put it uj “But where can we get any stock? ‘There is none in the market, and we would have to bid it up over the roof answered Mr. Statistician. of these stockholders have held on a for some action. I have a hunch we can ‘ke‘t’ some options if we work fast This hunch proved correct. Men were sent out to call on a selected list of the stockholders and succeeded in bringing in options for 20,000 shares. These stockholders were induced to give ognom on part of their holdings in WALL STREET POOLS TOLD TO JAMES ABELLE. They profited on the shares retained for themselves. With the options -in hand the pool went into action. One August morning all stock offered at the opening of the market was taken at a figure 4 points up from the previous sale. When the stock in the market had been absorbed the bid was again raised, one and two points at a clip. As these transactions appeared upon the ticker tape wide at- tention was drawn to the operation. The usual rumors of “important develop- ments” began to appear on brokers’ wires and in newspapers. A market fol- lowing was soon in evidence. This pub- | lic buying assisted the bidding process, and after 10 days the pool began to sell stock on scale up, bolstering the market with new buying orders when interest flagged. By the end of August the price had been advanced 30 points and only 5,000 shares of stock remained under control of the pool. This stock was dis- posed of on scale down in the early part of September. The le closed with rofit of 19 points on the 20,000 shares inally taken under option. Large margins had been provided, yet less than $1,000,000 was employed at any time; the profit to pool members on capital tied up less than 60 days was in excess of 40 per cent. Needless to say, this operation was attended by good luck all the way through. The holding company, which controlled the stock, made no attempt to % of $20 RESILIO SILK CRAATS for that week-end trip or overnight jaunt THE EVENING STAR, WASHINGTON, D. ©, MONDAY, NOVEMBER 11, 1929. “run the pool out of the market.” No formidable short selling was encoun- tered. And the pool was “out of the woods” before a general reaction of the market appeared. Dozens of simi- lar operations are under way at all times in Wall Street. But not all of them are concluded so happily! The next chapter will describe the “blue clip” pool. (Copyright, 1929, by Current News Features BANK CHECKS ISSUED. By the Associated Press. Coincident with the slackening off of exchange transactions last week, the aggregate of bank checks issued in principal trade centers of the country also decliped. Figures for the totals of checks issued during the week and comparable periods, as announced by the Federal Reserve Board, follow: Week ending Nov. 6 $24,608,417,000 Preceding week .. 28,983,579,000 Same week last year 15,564,982,000 New Vork district checks issued last week amounted to $16,483,075.000, against $20,597,592,000 the same week last year. In the Chicago district for the same periods the amounts were $2,173,573,600, against $2,285,991,000. STEEL PRODUCTION. NEW YORK, November 11 (#).—Steel producers in the Youngstown district are reported to be maintaining opera- tions at 65 per cent of rated capacity. Of 51 open hearth furnaces, 25 are melting, and of 120 independent sheet mills 76 are operating. Tin m working at 75 per cent of capacity, and 14 of 21 pip> mills are producing. 00DWARD & LLoTHROP THE MENS STORE, SECOND FLOOR JOIN THE RED CROSS The skill and craftsmanship of the Old World, handed down through the generations, is seen today in these richly colored silks from France, Switzerland and Italy . . . beautifully tailored into Resilio Cravats. And —because of the Resilio patented construction—every silk, even the sheerest, will tie with absolute correctness, and without slightest trace of a wrinkle. See these Resilio Four-in-Hand Cravats in our F Street Windows, or stop in the Men's Store to see them. $2t0 ¥8 ‘THE MEN’s STORE, SECOND FLOOR. to get . 1 “That’s the only doubtful question,”/ “But some|, the hope, which they later realized, that the operation would result in a Jasge advancs in tbe price of the stock § 7 ( Men’s Traveling Bags of genu- ine top-grain cowhide leather over a strong frame, reinforced on corners. Leather lined and finished with three pockets; double handle. 18 and 20 inch sizes; black and brown. Other Bags... $16.50 to $35 Luccace, FOURTH FLOOR. Commodity Steel. Special Dispatch to The Star. YOUNGSTOWN, Ohio, November 11. —While operations of Mahoning Valley steel mills have sagged to approximately 75 per cent of capacity, an excellent in- crease in specifications for November shipment is reported. 0il SAN FRANCISCO.—Gasoline sales in California during the third quarter set new records and exceeded those for the similar period in 1928 by 16 per cent. The State collected close to ten million dollars through the 3-cent levy on the 334,318,767 gallons sold. It is estimated that State will secure for highway pur- gvlsses $34,000,000 from the gas tax dur- g the whole year. .Lumber. NEW ORLEANS.—Mills of the South- ern Pine Association report that orders received in the last week increased 10.6 per cent to 60,288,000 feet. . Shipments rose 1.6 per cent to 61435 feet and production totaled 60,836,000 feet. Un- filled orders amounted to 176,190,000 Railroad Equipment. CANTON, Ohio.—It is reported that Timken Roller Bearing Co. is building a locomotive in which a new type of bear- ing is to be used. The locomotive, ac- cording to reports, will be turned over for actual inspection by the railroad engineers and if tests prove successful will create & new product for the plant. For Comple Satisfaction—Use Only “SANICO” BREAD Baked in Our Own Ovens LONG BOY—ROUND TOP SPLIT TOP—SANDWICH WHOLE WHEAT RAISIN EXTRA LARGE—RAISIN Office and Warehouse 1845 4th St. N.E. These Prices Prevail in Our Washington Stores Continuing the Low Price on Washington’s Favorite Coffee! Shriver's Silver Brand Peas ™ 10c OUR FAMOUS Silver Lake Cut ™ 10c Beets Silver Floss Sauer Kraut m™ 10c Campbell’s Pork and Beans T 10c Trusty Friend \ OFFEE “On the T ables of Those Who Know’’ GREEN BAG 335c Fancy Quality Le Seger-Cared | SLICED BREAKFAST BACON Packed by one of Wasl ton's most famous packer: Half- N e 17 ¢ 3ic “Off tluDC.tlvb":tht[lllr" Corn m17le “‘Sanico” Large No. 5 Seive Peas Snider’s Rosebud Beets Large Santa Clara Prunes . 22 Sun Maid “Seeded or Seedle: Raisins rie. 1215¢ Friend’s—Really Oven Baked Beans & 23c Seasonable Foods Reasonably Priced! ® A Great Help in| Are You Making Pies Drinking Dromedary Golden Dates. ... ...... Pk 20c FLAKO |Sauer Kraut | } Orange or Lemon Peel............"» 30c Pie Crust JUICE Old Homestead Mincemeat. . ........."™ 19¢ Social Club Mincemeat. ...... ... .2 Jar 43¢ Jacobs Mushrooms. ... . ..H""* 30¢, 39¢, 55¢ Advised by Many as Make Ple Crusts as a Health Drink You Would Pancakes For a Delicious| A Wonderfully Breakfast Drink | Good Product— Pineapple . | ond Evononicnt JUICE Teo! oS | ™ T oney 1 Tin L Brand Per Libby's . k Pkg. 5c Kra King Cole Brazil Nuts. .............." 25 1 Juice l 5c Del Mdo:te &hlilu:'l:‘ S e T L 10: No. 2 Size Tins of Richardson & Robbins Plum Pudding. .*"» 29¢ Tomatoes 3 2 20€ | fesm o Gy S~ 23 S n Gerber’s Stfained Vegetables. . . .. .ti» 121/ Campbell's Carpenter’s Fresh Figs............. .10 lfic Tomato Soup lliogu&'l::n Syrup. s S 97, 52¢ Tine Pkgs. rto Olive Oil... TR T e Quick or Regular Quaker Oats Phillip’s Piece Bacon 6 to 8 Pounds 3c Pancake Enjoy America’s st Quality Butter Land O’Lakes SWEET CREAM BUTTER Pound Special This Week! 99 “Sanico Mayonnaise As fine a quality mayonnaise as you can buy anywhere. 8-Ounce 1 9 C Jar 2 for 35¢ P & G SOAP. .. .2 cakes 9 LAVA SOAP..... .o 6c Special This Week! MEDIUM SIZE IVORY SOAP for LIGHT BULBS. . 100 watt 35¢ LIGHT BULBS. . . others 20¢ LIGHT FUSES. . . .5 for 22¢ Special This Week! Protecto Safety on HUNT’S SUPREME Hunt’s Supreme Californ appreciate. substitute in any way this offer. Hunt’s Supreme California Fruits ALL STORES Phillips’ Original PURE PORK SAUSAGE ‘Wonderfully Good Sausage! To enjoy ssusage at its best, try this way Pork Roast END PORK CHOPS.... Eastern Shore SWEET POTATOES Swedt Potatoes grown on the Eastern Shore of Virginia need no introduction to our trade. Pre-Thanksgiving Offering Fancy California Fruit Fruit is unques- tionably the finest quality fruit packed in Cali- fornia—fruit that we know our patrons will That our patrons may become acquainted with the quality and goodness of Hunt's Supreme Fruit we are making an exceptional offer for this entire week. . . . As this offer is to acquaint you with the several varieties of fine fruits, under no condition will our clerks be permitted to vary or In Our Meat Markets! of_preparing: or oS el SN 2R e iR Per SHOULDER LAMB CHOPS.....'Ib, 3sc | Per Eufer cover sausage one- half over with RIB LAMB CHOPS iy Water: cover with lid and put on siownre Lb, £ LW N || N'° LAME CHOPS..... veveeen.n.db, 60 | L, 808, Brol 81 DA, hiemove” sousase 2 sty Stoak from skillet; add slight amount of water to avory Steaks iich, Sil; Sad skt amou of wier fo reast o Ib. Neaotity sausage before serving. Priced DEL MONTE SMALL GREEN Asparagus items in the Del Monte line— a big value at this price. Special This Week! SMALL SIZE =—CHIPSO0— o 4 for LIBERTY BELL MOPS, 50c SNAP BROOMS. . . e2<k 35¢ FLOOR OIL. ... ™ 20c Special This Week! Del Monte EAS— MATCHES e R A Cherrier | fii ol Tin, 17¢ Do c Apricots CIAL : Bo::l: 23 421c Bartlett Pears TR 3 1;:’28 506 e 42c Fruit Salad $ 75 DIAMOND BRAND CIGARETTES !| 32ic Y. C. Peaches . PWALNUTS 3 er c?f‘:n 2 Pkgs. 25c $2.02% Regular Price Lb. 350 $1.25 4 fe——ceecommi e oo TS — Round n 28¢ | cTEAKS .Ib., 29¢ IDAHO POTATOES 3 25¢c ICEBERG LETTUCE Head lo c NEW FALL KALE The season is now fast drawing to a close and we feel that our customers would appreciate the opportunity of buying these fine Sweets once again this year at a reasonable price. Therefore, we are delivering to all of our stores a generous supply and will offer them all this week at the very low price of 8--19 4--10¢ 4 s 250 RED RIPE TOMATOES From California 2 Lbs. zsc LEMONS "= 40c CELERY = 10c |