The Intelligent Investor: The Definitive Book On Value part 29. The purpose of this book is to supply, in a form suitable for laymen, guidance in the adoption and execution of an investment policy. Comparatively little will be said here about the technique of analyzing securities; attention will be paid chiefly to investment principles and investors’ attitudes. We shall, however, provide a number of condensed comparisons of specific securities - chiefly in pairs appearing side by side in the New York Stock Exchange list in order to bring home in concrete fashion the important elements involved in specific choices of common stocks | 266 The Intelligent Investor Dealings with Brokerage Houses One of the most disquieting developments of the period in which we write this revision has been the financial embarrassment in plain words bankruptcy or near-bankruptcy of quite a few New York Stock Exchange firms including at least two of considerable size. This is the first time in half a century or more that such a thing has happened and it is startling for more than one reason. For many decades the New York Stock Exchange has been moving in the direction of closer and stricter controls over the operations and financial condition of its members including minimum capital requirements surprise audits and the like. Besides this we have had 37 years of control over the exchanges and their members by the Securities and Exchange Commission. Finally the stock-brokerage industry itself has operated under favorable conditions namely a huge increase in volume fixed minimum commission rates largely eliminating competitive fees and a limited number of member firms. The first financial troubles of the brokerage houses in 1969 were attributed to the increase in volume itself. This it was claimed overtaxed their facilities increased their overhead and produced many troubles in making financial settlements. It should be pointed out this was probably the first time in history that important enterprises have gone broke because they had more business than they could handle. In 1970 as brokerage failures increased they were blamed chiefly on the falling off in volume. A strange complaint when one reflects that the turnover of the The two firms Graham had in mind were probably Du Pont Glore Forgan Co. and Goodbody Co. Du Pont founded by the heirs to the chemical fortune was saved from insolvency in 1970 only after Texas entrepreneur H. Ross Perot lent more than 50 million to the firm Goodbody the fifth-largest brokerage firm in the United States would have failed in late 1970 had Merrill Lynch not acquired it. Hayden Stone
