The Washington times., 1906-02-25
STOCKS HIGHER THAN
AT ANY TIME BEFORE
Level of Security Prices Highest in History
of Country--Large Amount of High
Class Buying Last Week,

NEW YORK, Feb. 24-Despite recent
declines in the stock market. the gen
eral level OF security prices is higher
than il has been in the history OF the
country. It is quite generally said IN
explanation of the belief that stocks
should decline. that they have advanced
so rapidly that they cannot be expected
TO continue advancing and so must re
cede. OF course the contention is that
they have advanced too far and there
has been much moraliZing upon tile
probable fate awaiting the so-called
rash spectators who have bid securi-
ties up to new high levels. In cOnnec-
ton with this condition of feelings and
opinions it was noteworthy that last
week during the most aggressive of
the bear attacks upon the security
market, there was a great amount of
investment buying of stocks by wealthy
men who are seldom known to invest
money excepting when stocks seem in
1rinsically cheap. What was the reason
Tor This class OF buying?
Reasons for Activity.
In the first place, the unparalleled ac-
1iVity Of the COuntrys industries has
created an investment demand and has
furnished large fund of investment
capital without creating additional ave
nues for the employment of funds OF
course, there have been bond issues,
and large totals, too but the issuing
of high grade bonds has not been in
excess of the records of previous years,
remodeled TO the large scale of the
country. Furthermore bond issues of
high grade are not the Investment op-
porJunities sought by wealthy men who
are always ready for bargains
In previous years. the capitalization of
new industries and the launching of new
and amalgamated enterprises, calling
for heavy stock subscriptions. have at
traCted the class of capital referred to
and. in every case. have finally used up
all of the available funds and have
created an overextended situation which
has resulted in a crash. Up 10 the pres
ent time there has been no expansion
comparable 10 that which invariably ac-
companies a boom in its final stages
Hence there is so much capital available
that the slightest appearance of a good
reaction in old and tried securities re-
suits in an invasion Of buyers.
Dividends Don't Warrant Prices.
This is n rather broad assertion, but
it is based upon conditions which have
but to be looked into for the evidence
The dividends paid by many stocks do
not warrant their prices. There is that
back of the dividends paid which makes
investors disregard the income for the
hidden v4IUe. Nor is It contrary 10 cur
rent feeling that the money situation is
strained ard that money is scarce, to
say that there is a vast amount of capi-
tai ready to avail of good opportunities
for profitable employment. The activi-
ty OF business withdraws funds from the
loan markets, but does not remove the
money from the attractions If new ep-
terprise. The substance Of the situation
is that new industries have not pre-
sented opportunities, while vastly in
creasing business has magnified the
values OF existing securities and made
investors ready TO buy them at reces-
sions even though the prices are com
parativelv high.
During the week, as an instance of the
attractiveness of old issues, Chicago and
Northwestern authorized an issue Of Sl5.-
267 400 of common stock. an Increase OF
% per cent upon the present total capi-
Tallzation of common and preferred
stocks The new issue viii be sold to
the stockholders at par, to the extent
OF 20 per cent of their present holdings
AS an investment proposition. Chicago
and Northwestern common. paying {
per cent and selling above 230. with no
chance of an increase in the dividend
until the preferred stock shall increase
it's dividend from per cent to 10 per
cent, cannot be called attractive solely
from the dividend yield. But the value
underlying in this case is very &C
curate illustration of the similar value
underlying q great many properties and
this will serve as an Illustration.
Chicago and Northwestern has no need
of money. The construction Of over
300 miles OF branches is to be financed,
as well as much new extension work,
and ii is thought that it is no longer
just TO draw upon earnings for these
large outlays. as has been the practice
in the past. How plentiful earnings are
for such work is shown by the fact that
the company has expended some $27, ,000.-
600 for construction purposes, charged
against income account. within the last
six years. During this time the average
earnings upon the total of common and
preferred stock has been about 121z per
cent, after the payment of all fixed
charges. In the last six months there
has been a substantial gain in earnings,
the net increasing S1,617, ,4S7. with gross
gain Of S3,323, PSF. This represents a
large percentage of increase upon the
$lo.H7S22 measuring the total net earn
ings of 19O4-l9O5-
A Great MOneymaker.
For six years the net earnings have
been practically unchanged around $10,-
100000. Doubtless the investor is at
tracted more by a change in this con
dition than by any other fact. It is
not in Chicago and Northwestern only,
but in many large railroad systems, that
a change In the proportion between gross
and net earnings appears. The years of
waiting for this change have been te-
dious and have well nigh obIiterated
the knowledge that a change must
come.
only those who have constantly re-
membered how our railroads used 10
operate before they began to reinvest
al OF their earnings in the plant have
been able to appreciate the growth
which has already caused a great ad-
vance in stock prices. The Northwest