The Washington times., 1912-08-25

that the stock market always discount
| ed events by advancing in anticipation
' of any general industrial Improvement
| long before the development assumed
definite shape, or by declining in the
case of an impending contraction
| months before any signs of diminishins
| activity we're observable. Why the mar.
ket has not lived up to its traditions
on this occasion is mystifying to the
| rank and file in the Street, for the in.
| dustrial revival Is now clearly apparent
yet It was preceded by no such anticipa.
tory movement in securities as the spec
ulative fraternity counted upon, and II
seems utterly impossible to arouse pub
lie interest in speculation.
Assuming that Wall Street has not
lost Its potency in anticipating develop
ments, but merely missed fire on this
occasion, there is another question
which deeply concerns the speculative
element. That involves a determi-
nation of the question: What pos
sible situation or condition in the future
is the present unsatisfactory market
discounting? During the week the
course of securities was most disap-
pointing, the more so, perhaps, because
the moderate revival in activity and the
strength of prices in the preceding in
terval encouraged the hope of better
movement. This was not realized. how
ever, except in the case Of a few in
dustrials and specialties. Activity was
much curtailed, and the railway issues
on the list were distinctly reactionary.
Industrials VS.. Railroads.
The cleavage in the market between
the railroad and Industrial shares was
more pronounced, II anything. than has
been witnessed in this particular for a
long time. In fact, the market acted
very much indeed as II railway shares
had been under a slow lqBidation for
some time past, for they yielded readily
to light pressure and made poor recov-
cry. The Street had no more satisfac-
tory explanation to offer for their heavi-
ness than the rabid hostility to the rail-
ways manifested by Congress and the
Administration in passing the Panama
canal bill, but that was an event
chargable to developments of the pre-
ceding interval rather than to the week
under review.
1t was. however, in the bond division
that Wall Street showed Its most un-
favorable phase. That liquidation is
running in that quarter is unmistakable.
and. moreover 1t seems to be gathering
force and increasing IN volume. Bond
dealings on the exchange, to be sure
showed falling Off. but probably not 10
per cent of the transactions in bonds In
this city are passed through the ex-
change. The largest dealings are lover
the counter in bond and investment
houses, and In this quarter Increased
offerings were reported by investing In
stitutions and individuals, who were
willing to make concessions in price.
The offerings were chiefly high-grade
railway issues OF strict investment char
acter. and the liquidating movement is
assuming proportions which are really
becoming disquieting.
Liquidation In Bonds.
Quite possibly as very many econo-
mists maintain. the heavy production Of
gold in recent years. altering the worth
of investment capital. Is the great un-
derlying factor in depressing high-grade
bonds. but superimposed upon that are
other factors. such as the high cost OF
living, which Is diminishing surplus
everywhere and forcing men to seek
higher income yields; the heavy output
of well-secured public service corpora
ton bonds. returning from to 5h per
cent. which are finding increased favor
with investors. and finally the dimin-
ishing net earnings OF the steam rail-
roads. and the hostility shown toward
them by legislative bodies and commits
sions. including the interstate commerce.
board. 1t would really seem as though
the old type of per cent railway mort
gage bond had not a friend on earth at
the present time. and II is evident from
an inspection of bond dealers offerings.
which now include very few such issues
that they are going out of fashion-at
least temporarily.
What an investor ought to bear In
mind at the present time is that the
railway mortgage bond is the best gem
eral investment issue which the coun-
try affords, and that at prevailing prices
they are returning attractive Yields.
Many OF them, IN fact, are selling today
below the panic prices of 1907. 1t seems
to me that many bond dealers are pur-
suing a very short-sighted policy in
turning cold shoulder to the high
grade railway bonds and in forcing the
sale of issues less we'll secured, which
doubtless give them larger profit, for
II the standard railway per cent mort
gage bonds are eventually depressed to
q per cent basis, which some dealers
predict, we may rest assured that poor
er Issues will not remain immune.
Though the decline In these high-grade
issues entails enormous losses through
depreciation on investing Institutions,
the increased yields ought to appeal to
new investors, for not in years have
they been able to buy bonds of such
high class to such advantage.
Optimistic On General Business.
1t strikes one as wholly anomalous to
turn from the situation as presented in
Wall Street to that presented by the
country in general. 1t Is we'll sum
married. In the report of business con-
ditions by Dun's Review as follows:
with crop prospects increasingly
brilliant with the principal Industries
working to full normal capacity, with
trade distribution continuously expand
ing, and with business sentiment becom-
ing daily more and more confident and
buoyant, the whole situation, both in
fundamental conditions and in volume
of transactions, is better than 1t has
been for years. The problems now are
not those of depression, but are be-
coming those of prosperity. 1t is no
longer shortage of orders but a ca
pacity to supply demands. A shortage
of labor, not alone in the wheat fields,
but in some of the industries, is report
ed, and there is a prospect of a short
n fn ha tra 10