Hot Pennies

"It's not my place to say whether the market is too high or too low. That's for buyers and sellers of stocks to decide for themselves. . . . But I don't like the looks of the recent flurry in stocks selling at a few dollars a share. That kind of activity in 'penny' stocks may mean, the uninformed person is coming into the market--and that is a matter for concern."

This statement safe & sane though it might sound to most laymen, caused many an old eyebrow to rise in Wall Street last week. For one of the New York Stock Exchange's oldest and most honored traditions is official silence on the state of the market. And the speaker was forthright Charles Richard Gay, the Exchange's "New Deal" president, talking to an Associated Press reporter.

On one trading day this month no less than nine of the 15 most active issues on the Big Board were stocks selling for less than $10 per share. Churned in volume lately have been such "penny" favorites as International Paper & Power Class C ($6.50), Elk Horn Coal preferred ($5.50), General Realty & Utilities ($4.50), Alleghany Corp. ($4.50), Commonwealth & Southern ($3.50), Pierce Petroleum ($2.75), Seaboard Air Line Ry. ($1.75), Consolidated Textile ($1.25).

"Many stock buyers seem never to have got over the idea that a stock is a bargain just because its price is low." declared Mr. Gay as he thumped his desk. "I can't stress too much the plain fact that just because a stock is selling at a low price is no guarantee it is cheap. A stock can be selling as low as $2 and still be the dearest security in the country. Make no mistake about it: the right-minded people in Wall Street don't want to see the public rushing into securities without first finding out what they're buying." Setting a new high in Stock Exchange frankness, President Gay continued: "We have a number of Federal rules and regulations, set up to protect the security buyer by making it easier to get all the facts needed in studying values. But as far as I know there are no laws to protect buyers from speculating on a hit-or-miss basis, and that's where potential danger lies.

"About 14 months ago I called attention to the need of keeping our financial fire-fighting apparatus in order. Since then the stock-market has advanced considerably, and I think the warning is still in order."

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