Omaha daily bee. (Omaha [Neb.]) 187?-1922, 1907-07-22
Speculative Values of Securities Are
Entirely Too High.
BUSINESS VOLUME TOO LARGE
Demand for Capital Increasing Faster
Than the Supply.
INTEREST RATES WILL ADVANCE
He Also Says Prices of Raw Materials,
Notably Metals, VIII Fall
Events Bear out Part OF
Prediction.

NEW YORK, July n.-The stock market |
Of the last week has revealed the cross
currents Of speculative sentiment, running
on the one hand through the channels of
the northwestern and Pacific railroad
stocks, where efforts centered for ad-
vance in prices and a stimulation Of specu- |
lative interest. and on the other hand in
the industrial group, where evidences Of |
trade reaction caused some depression and
hesitation. The easing tendency of the
money markets has been a reviving in
huenco on securities, but this was under
the restraint of the dubious Interior pros
pect and the short time remaining before
the strain Of the interior demand for cur
rency to move the crops may be expected TO
draw on New York banking resources. The
stirring speculative interest in a limited
group of stocks has not proved convincing
of any revival OF substantial investment de-
mand, which must be relied upon for any
conclusive relief of the troubles caused by
the scanty available supplies OF capital.
The Indications of trade reaction are in
accordance with the expectation generally
felt ever since the disturbance in the Sc
curities market first gave warning of the
forces at work to that end. Nevertheless
and the measure Of their counterbalancing
forces which may operate a check and
to effect recovery are 80 far undisclosed
as to leave opinions unsettled and capital
still doubtful about embarking in invest
ment.
Period of Imitation.
A recent article by M. Paul Leroy-Beau-
lieu the distinguished French economist.
analyzing the problems of the decline In
investment securities and the prospects for
their recovery Is given respectful attention
amongst students OF conditions. His con-
elusion that a period of inhation has led
{ lp to the present situation commands gen.
a sral agreement. The course of events bears
Y out the assumption that bank liabilities
cannot expand indefinitely, bank reserves
cannot fall of continually, nor can business
perpetually support high money rates"
There must come. frst. shrinkage in
speculative securities; next, a fall in prices
Of raw materials of manufacture. notably
metals Real capital he holds. presents
IN insufficient supply for nations whose
spirit OF enterprise so far stimulated as to
lost sight OF all limitations, as he maintains
has been the case both In the United States
and Germany. He calculates that the
United States has undertaken to spend
single year for all Industrial and financial
purposes $500, 900, when the annually
accruinR capital of the United States prob
ably does not reach one-third OF that sum.
Meantime foreign supplies of capital were
absorbed In unusually large home enter
prises and were depleted also by the de-
struction OF capital in war loans and in the
San Francisco earthquake. From which 1t
hos followed that users Of capital must
pay more for It in a higher interest rate
and they will have to postpone or extend
for several years many enterprises for
which preparation had already heen made
Industrial and financial markets must, in
a measure, reduce their scale Of prices,
and In some proportion the price of raw
material must come down.
Events Prove Theory.
Events have too far proved the opera
tion OF all these forces to leave room for
dispute. The Journal Of Commerce has
made a compilation of new securities
created in the United States during the
first half of 1907 showing a total OF N,27s,-
72s, 500 with issues since January l, OF $780,
Aa2,IOO or this amount S5OS, 600 has been
In short notes at high interest rates re-
necting the urgency OF the requirement.
The summing up of NJ. Leroy Beaulieu IL
that "the existing situation In the financial
markets offers to capitalists and investors
generally the opportunity Of which they
have been deprived for nearly twenty
years OF securing a suitable return on
their invested capital"
Nevertheless the investment demand in
the New York market stin halts One OF
the principal restraining factors during the
last week was the declining tendencies in
the metals. The copper market remained
In an unstable condition after the reduction
made previously by the principal producers
and made below their quotation.
Metal Markets Falling.
Reports from the iron and steel markets
were Of a falling of in orders for finished
products and. condition Of complete dull
ness In the iron market with fears Of a
possible deadlock between buyers and SELL
ers such as characterized the copper mar
ket Other metals at the same time de-
Ginning in prices. Authorities in the iron
trade have foreseen this result and have
expressed satisfaction over the prospect.
promising a return to more normal con-
dition with an assurance OF a waiting de-
mand on a readjusted price basis, sum
cient to afford continuance OF highly
prosperous conditions. But the time Of
readjustment Is inevitably time Of un-
settlement. The sustained activity in the
branches Of the iron and steel trades is
AatllNiedly uue 70 Ahe WolhhiBN on VI dc-
eumulated orders. and 20 the completion of
plans OF construction partly entered upon
before the shortage OF capital became man
fest- The completion OF many OF these
projects has been with money borrowed
on onerous terms. The extent to which
the eurtailment In future plans OF the rail-
roads may afect the demand for iron and
steel Is, as yet, an unsolved problem. In
lsS which is the latest period for COM
parison OF similar conditions the railroads
we're pushed for capital supplies and forced
10 Tetrench, but without marked effect on
the resumption OF iron products until dur
ing the second half OF the year. when the
trade was In deep depression before the
nF