Cash Buying

The Federal Reserve Board last week cocked an eye at the big bull market and tried to put a crimp in speculation. It raised margin requirements from 50% to 75%.

The FRB action was mainly a political move to show that, after cracking down on housing and retail credit, it was playing no favorites. Actually, there was comparatively little credit in the market. On Jan. 1, the amount of borrowing on stocks by New York Stock Exchange members was only $698 million, less than 1% of the total market value of listed stocks. Such credit was actually lower than in July, when the market itself was far lower. In short, the market's rise had been caused almost entirely by cash buying--notably by pension funds, investment trusts, etc. Last week the market proved again that it did not need the credit. The same day margins were raised, stocks rose to a new high of 248.01 in the Dow-Jones industrial average.

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