In the late 1920s a group of traders could hand one stock to a single manager, let him trade it for a few weeks, and split whatever came out. Some of the pools paid newspaper writers along the way. The most famous one ran for about a week in 1929 and split a profit of millions. Here is how a pool worked, the law that was written against it, and what a careful count says pools actually did to prices, which is less than the legend.
One stock, one manager, one split
A pool was an agreement, often on paper. A group of investors put up money, a single manager traded one stock on their behalf for a set period, and the profit or loss was shared out at the end. Often an insider was in on it: in a study of 55 pools whose agreements survive, at least 12 included an officer or director of the company whose stock was being traded [1].
What the law later said they did
The clearest list of what pools were accused of is the law passed to stop them. Section 9 of the Securities Exchange Act of 1934 bans trades in which nobody really changes hands (wash sales), buy and sell orders matched in advance with a friend, a run of trades meant to make a stock look actively traded so others will buy, spreading word that a stock will move because someone is working it, and being paid to say so [5].
The tool was apparent activity. A ticker full of trades in one name looked like news, and news brought in buyers.
The writers on the payroll
In April 1932 the Senate's inquiry into stock exchange practices was shown cheques from a publicist working for pool operators to financial writers at half a dozen New York papers and financial sheets, in sums from $50 to $468, around 1924 and 1925. A tabloid market columnist, putting up no money of his own, made more than $19,000 from trading accounts guaranteed by a big market operator [3].
The committee's conclusion was that it was "usual and customary" for pool operators to pay newspaper writers for publicity dressed up as financial news [3].
Seven days in the radio stock
Radio was the glamour technology of the decade. US radio stations went from 5 to 556 between 1921 and 1923, and radio sales grew from $60 million in 1922 to $843 million in 1929. The leading radio stock rose about 200-fold over the decade and split five-for-one in March 1929 [4].
That same month it got the most famous pool of all. According to testimony read into the Senate record in May 1932, the pool was organised on 7 March 1929 and closed out on 30 March. The real trading took about a week, between 12 and 20 March; in that time the pool bought about 1.5 million shares, and the stock hit a high of 109¼ on 18 March [2]. The study's list of pools gives the same formation date [1].
The backers had put up roughly $12.5 million, and the profit read into the record was between $4 million and $5 million [2]. (Popular accounts give other years and other sums; the surviving newspaper copy of the exact figure is hard to read, so this page gives the range.) The company, it turned out, was in merger talks that became public shortly after the pool began [1].
How it ended
The radio stock peaked at 114¾ in September 1929. By May 1932 it was around $2.50, a fall of about 98% [4].
The hearings that aired the pools led to the 1934 Act, and Section 9 made the methods above illegal on any national exchange [5].
The legend was bigger than the pools
The textbook version is simple: a syndicate rigs a stock, the public buys the top, and the price collapses when the pool sells. Three economists tested it. They hand-collected daily prices and volumes for 55 of the 107 stocks named in the Senate's report [1].
The average pool moved its stock about 4% while it was buying. Over the whole life of a pool, results ran from −24% to +42%. The rise did not reverse while the pools were selling. And from September 1929 to December 1939, pool stocks (leaving out a few tied to share offerings) lost 38.4%, against 38.3% for comparable stocks [1]. Their conclusion: the evidence looks more like informed trading, by people who knew something was coming, than like manipulation [1].
Both halves are true at once. The paid columns and the matched orders happened; that is why Section 9 exists. But the average pool did much less to the price than the story says.
The game on top
A pool had everything a pump needs: a hot sector, a busy-looking tape, a friendly column and an insider who knew the news before the market did. Synthetic Demand is a satire of exactly that. You are the CEO of an invented company with one job: make the stock go up before you sell. The markets you can be dealt come from real years of market history; 1929 isn't among them yet.
Every call you make is graded A to F. The average pool of 1929 moved its stock about 4%. Doing better than that is the game.