The sun. [volume] (New York [N.Y.]) 1833-1916, 1906-05-06

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Ths bank statement, caased asMalas suf.
pflas. Az eeefts ~ stptstn the show me
seenied eniy ~ Involve " ~ afratef obscufist
The incfsase Nv l1ahs. while amall. waa 20
Nntifely ~ variance With The eNBrVtstlens
based on the hsa w llduldatise IN sf0ets that
The borrowing BY the city 0e% efnS was not
regarded NJ q full explanation of The df1ef-
sace. especially - u was Thought That q
great deal NJ this money had alaoe ound Ne
way back 10 the banks. Most psople wefs In
cilned 10 attribute the unexpected showiHu
10 the defects % tho average system IN row
putting changes and 10 argue that the present
Inaccuracies would bs correotsd lh q very
favorable presentation 9 week hehce.
II was q rush Of shorts 10 cover IN Readlns
from start 90 finish. The stock opened NJ q
substantial advance from Fridays cI0aing
figure and added 5 points more 10 its gain be-
fore the end Of the days business. II its
strength was especially conspicuous AZ any
one time II was lust before Tho close. and the
last quotation was az the hiRhess Of the day.
Thsrs could hardly be q better Indication Of
the blindness Of the speculative trader In fol-
lowing en- apparently successful lead than
the extent Of the short interest In Reading.
A very large amount Of the stock IL perma-
nently locked up ln the Baltimore and Ohio
and Lake Shore treasures. Other large
blocks are hardly less securely looked up
with some OF the strongest financial interests
In Wall Street. 40 that floating supply In COM
paratively small. Those who cell short can
borrow some Of the locked UP stock. but when
IL comes TO buying they must I'LL their require
ments elsewhere. This 10 not always easy.
II did not prove so yesterday, and some OF
the traders who felt happy on Thursday over
their venture on the short side have since
covered their contracts and are now long Of
experience.
It would be wrong to g ssume that the
market strength OF Rsadi ng Is based entirely
on its technical position. The real strength
lies ia the intrinsic value OF the security.
which really was the prime cause In shaping
the favorable tschnioa position. Directly.
and through its CONTROL OF Jersey Central.
Reading Ia q tremendous factor In the anthra-
cite coal industry. Tne use OF anthracite 10
Increasing, while the law OF supply and de-
mand makes II practically certain that the
price Of the O ommo1lty will i~ncrslss. Read
ing ls now earning little short OF IA p1r cent.
for tho omm IN stock. There Is little doubt
that In time o rate OF dividend very much
above the present level can be paid and
maintained.
Rumors OF an advance In the dividend rate
10 10 per cent. accompanied the rise In
Shelters. As the stock went on q 7 per cent.
basis only last October. the rate previous
to that time being 8 per cent. 1t seemed as II
talk OF an increase to 10 per cent. was en-
tirely premature and that its object was to
intimldate the short interest and force some
covering. Whether It really had much
influence In this direction or not 1t Is certain
that quite q little short stock was covered
and that many OF the traders bou ght for q
rise, expecting 10 see o movement something
like that In Reading, apparently on no other
ground than that these two stocks were
conspicuous leaders In several upward move.
ments last year. The probability is that the
decline In Shelters q few days ago, by shaking
out some OF the weak bulls, strengthened the
technical position Of the stock and threw q
good amount of 1t back again into the hands
OF strong interests.
Those who thought that the bulls would
endeavor TO the bears were dis
appointed. 1t was. however. better for the
market that this should not bedone. A
short interest Ii at all times an element OF
strength. Every seller OF short stock must
In time become q buyer In order TO cover his
contracts. The bull may be scared away,
but sooner or later the bear must buy II he
has gratlhed his propeuslties by short selling.
A bull movement is best served by keeping
the bear short at fifst and compelling him to
buy after tho advance has gained good head
way. His buying and the impetus which
IL gives to prices arouse enthusiasm and stimu-
late other buying, whereas II he covered In
the early stages OF the movement ne would
be ready to sell again on o further rise at q
time when, II properly handled. he might DO
compelled 10 buy instead. A numbe OF the
bears have already been killed. 40 one wag
expressed 1t, but enough will be left TO propa-
gate the species,
Restoration OF natural conditions making
for q bull market In what some conservative
brokers now look for. In one important re-
spect conditions for many months have not
been natural. The best bonds. those which
are legal Investments for savings banks.
have shown . decline In the last year OF about
az per cent. This was o consequence OF the
high rates for money and the relatively hl~h.
return which was sought for on capital. TIL.
increase in the worlds gold supply may have
had something to do with 10. Many Thought
| full people think DO; but whatever may be their
| opinions on the subject. they are willing to
| admit that an Improvement In the bond
| market would probably have q good effect
| on the prices Of stocks. Should present
| expectations OF q return to normal conditions
in time money be realized q decided improve
ment In the demand for bonds would be seen
| before long, and this In turn might be fol-
lowed by greater strength and stability In
the market for stocks.
Delaware and Hudson. the Erie issues and
Ontario and Western made substantial ad-
vanoes on the practical settlement Of the coal
labor trouble. The short interest In these
was not 80 large as In Reading, but on account
Of months Of neglect the weak bull account
had been eliminated and the ct ocks had be-
come concentrated In strone hands,
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