Flight From Bonds to Stocks 217

Conversely, funded indebtedness is absent, or the
restriction of such indebtedness as compared with
total paid-in capital, so that bondholders and shareholders
 are both protected. Also, there has been
comparatively little borrowing of banks, the investment
 trusts, Mr. Robinson says, “having only in
exceptional cases exceeded the limits of prudence in
the use of short-term credits.” He finds that many
leading funds and companies were in reasonably
liquid position at the time the most serious price declines
 started. Many had been strongly fortified
late in October by a relatively high proportion of
call loans and cash items.
Of the public financing to a total of $2,440,000,
000, reported by the Commercial and Financial
Chronicle for “investment trusts and trading and
holding companies” during the first ten months of
1929, it is stated that over 9§ per cent was in stocks.
Mr. Robinson observes that the greater part of all
this capital was ‘“‘obviously raised for finance, trading,
 and holding companies, rather than for investment
 trusts.” For this reason he warns against the
easy habit of lumping together such radically different
 companies, funds, and common law trusts. When
they are properly defined, it will be found that investment
 trusts proper weathered the panic in much
better condition than the speculative pools and individual
 operators, chiefly through their steady reliance
upon the principle of diversification and skilled scrutiny
 in making and changing their investments.