The Washington herald., 1907-01-28
Probable Next General Move
ment Is to Higher Level.
MONEY RATE TO GO LOWER
Wall Street Concerned Over What
the Effect of Lessening OF Interest
VIII Have on Loan Money from the
Northumberland of Government
Deposits TO be Slow Process.


inert for considerable period. If the
decline. instead of being more or less
slowly conducted. is violent, that is to
say. II the market had passed through
demoralized OF semi-panicly state. sharp
recovery often takes place, the rally
sometimes carrying values half as far
upward as they had previously fallen; but
after such a rally the same dullness as
that following a more gradual decline is
almost invariably witnessed.
The resulting movement of prices is, in
other words. toward equilibrium. Trading
spectators are inclined to buy stocks,
but they are still suspicious Of the mar
ket, ana many OF them are less able to
make purchases than they were before.
On any advance. too. stocks bought by
banking interests for the purpose of sup
plying support are usually for sale so
that the market backs and fills for a
greater OF less length of time, until Il is
definitely discovered whether 1t has
reached point at which liquidation has
ceased and investment purchases are
made by people who are looking to
greater prospective profits than those
accruing from mere turn.
Next Rise In Market Higher.
When market becomes steady, there
fore. after a great fall in prices. and be-
HAYES generally as it did in our own
stock exchange throughout the last week,
1t IS frequently found that the true mean
ing of the phenomenon is that the next
general movement in values viii be to
higher level There is. of course. not the
slightest certainty that the stock market
at the moment is in this condition. but
there are many evidences all pointing to
such a probability. Right at the close of
last week there was a resumption. al
though on much smaller scale. OF the
selling movement in the market that was
observed at the end of the previous week.
and this brought the average level of
stock market prices TO about the same
low point as that touched on the former
occasion.
The selling. however. seemed to betake
moro definitely than il did before Of a
speculative character. It is unquestiona-
bic that very attentive thought is being
giyeE By investors 10 the great extent Of
the decline III prices that has occurred.
Some Of the most active and prominent
stocks Of the c0untry's greatest railway
systems have declined during the last six
months all the way from % to 80 points.
and are now selling at prices where the
interest return on them presents no wide
disparity with the rate of interest that
can be obtained upon loans of money
made in the open market.
Basis of Value of stock.
People are remembering. too, that it is
quite unfair to adjudge solely the value
Of any railroad security by its mere pres
ent interest yield: since if this were the
proper basis railroad and other stocks
not bearing interest would not be worth
anything at all a large share of the ad-
vantage derived from investment in the
stock of any corporation rests upon the
value OF the property covered by it. the
earnings present and prospective Of the
corporation as distinguished from the dis
tributiOn currently made and the general
financial equities possessed by the com
pany.
Thus, in the case Of the Great Northern
AMI Northern Pacific shares. which have
fallen SO greatly, it is still to be ever
borne in mind that aside from the fact
that they could materially enlarge their
dividend distributions il they wished 10
90 so, they still own an equity in the Chi
caso' Burlington and Quincy Railway
property, worth scores of millions of dol
lars apiece to each of them. and which
VIII some time be divided among their
stockholders Much the same considera-
lions can be urged for the AtchisOn com
mon ShareS-sOOn 10 90 on per cent
dividend paying basis-and for the South
ern Pacific, the Union Pacific and other
prominent stocks.
In the second place. a very decided
Improvement has taken place i'm the
money situation. 1t is true that this is a
season Of the year when banking institu-
lions here and in nearly all other c0un-
tries see their reserves mount up. But
the quantity OF idle money in the banks
has already become such as to force a
contraction in interest rates much greater
than was anticipated by any one few
weeks ago, ard there are no signs that
this declining movement in money rates
is over.
Money Rate to Lower.
Money is pouring into London from all
quarters, return Of the large sums OF
money sent from London 20 Egypt during
especially noticeable; and it is clear that
if the authorities Of the Bank Of England
were not afraid that an outbreak Of spec
ul3uon FOR the rise in this country might
again serve 10 draw money from their
institution, they would make a further re-
duction in the institutions discount rate
As II IS, the general belief appears to be
that a further reduction i'm the bank
rate to ~ or per cent cannot be long
postponed. In our own country. the in
terror banks report a great influx OF
money at last from the country districts
and the general result of these forces is
that cali money here has fallen 70 the
lowest rate maintained for nearly d year
while firms in good standing can easily
obtain five and six months money on ap-
proved collateral at 81 per cent. In fact
few people are willing To bid more than
per cent for time funds
Three anxieties only at the moment are
expressed in Wal! street regarding tn,
money situation, so far as actual move
ments OF cash in and out OF the city ar,
concerned. 1t is thought that the weak
ness of money rates here may cause tn,
Western banks 10 withdraw from thi;
center the money that they have beer
lending 10 us. The truth is. however tina
the Western banks will be very glad [,
lend money here on time at per cen
under existing conditions. Two banks il
the city of Chicago are at the presen
hour lending in New York on call an'
time over SS1000,000, and II may be sail
that the heads OF these institutions be
Heve that loans at existing rates. OF ever
az rates materially loser, made on New
York Stock Exchange collateral. offer tn
best means of employing their money tina
they have or are likely TO have Offere'