The Pools of 1929

 In the months before the Crash of 1929 the phenomenon of “bull pools” gained great popularity. A bunch of wealthy individuals would pool their money and proceed to pump up stocks on the NYSE, often with the cooperation of the floor specialists.  The manipulation was rampant and, astonishingly, often public: many pools were announced in the press in advance in order to induce wide participation by the gullible public.  It was a kind of Ponzi scheme, where those who got in early and got out in time made money.  After the pump came the dump, of course, and the rest lost everything.  Think "meme stocks".

What is today's equivalent?  To me, at least, the constant announcement of enormous triangular AI investments between the usual suspects looks like bull pool redux.  Time will tell.

From TIME magazine, May 30, 1932

Pools. Any Wall Streeter knows, but few Senators do, how pools are run. Because the risks are great, the pool’s sponsor usually invites only his richest friends to form a syndicate. Each shares in the profits (or losses) in proportion to his subscription. Each usually makes a cash deposit for the pool manager to use as margin in his trading operations. Each is pledged to strict secrecy. With dictatorial powers, the pool manager begins accumulating stock, buying a little more each day than he sells. Stock is dumped if the price rises noticeably. When the manager has the stock he wants, publicity is shot out, bullish rumors about the company appear, the stock is “tipped,” for it is now advantageous to whisper the existence of the pool. The stock is churned over & over, bought & sold to attract attention. When outside buying begins, the pool manager drives up the price by concentrated buying. Outside enthusiasm grows, amateur traders hear a big rise is in prospect. Most pools do not play for large advances but for small profits on large blocks of stock. When the profit in sight seems satisfactory, the pool manager starts selling more than he buys, transactions increase by leaps & bounds. Canny chart readers sell too, for they readily spot the end of a pool movement by very heavy turnover with little change in price.