Taboo on Tips

Stockbrokers were sternly warned last week against rumormongering. The warning came from Emil Schram, NewYork Stock Exchange's president, who fears that a speculative boom in low-priced securities might: 1) collapse and rob a lot of small investors of their savings; 2) bring demands for even more stringent Government control of the Exchange.

President Schram's warning closed the barn door a little late: rumors had already touched off a buying spree in low-priced auto shares. Through the grapevine from Detroit poured an endless cackle of tips and gossip as the auto industry jockeyed for postwar position. Biggest whoppers from the gossip mill last week concerned the future of the four Fisher brothers (TIME, Aug. 14). The dope had it that the Fishers were going to: 1) buy aging Henry Ford's titanic empire; or 2) buy control of three or four smaller companies and merge these into one automaker powerful enough to buck Ford, General Motors and Chrysler. (Wall Street could trace neither rumor to fact.)

Since early June when Charlie Sorensen quit Ford and moved in as president of Willys-Overland (TIME, June 19), auto shares have sped ahead in Wall Street trading. In a one million-share day, 50% of the volume was accounted for by these favorites. In recent weeks main gains were scored by: Willys-Overland, which jumped from 8 1/8 to 20 1/8; Graham-Paige, which went from 3 to 7; and Hupp Motors, which moved up from 4 1/8 to 6.

Said C. Norman Stabler, New York Times financial editor: "The move in motors, for a time, had all the earmarks of the worst days of 1928 and 1929. . . . It was just this kind of situation that led to the creation of the Securities and Exchange Commission."

But low-priced motor stocks were not the only offenders. The utilities had their inning too. Typical example: one day board rooms buzzed that some "highly favorable news" about Electric Bond & Share would be announced at 1 p.m. Nothing was announced, but the stock shot up.

But the real pressure under the low-priced shares was due, less to rumors, than to cash burning citizens' pockets. Unable to spend it for goods, they were ripe for a flyer in the market.

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