The Washington times., 1912-02-04

Paul dividend from to 8 per cent,
carried over into the present week and
paved the way for the most active mar
ket and the most considerable break in
prices that stocks have experienced In
several months. II Is quite true that
the decline of Wednesday was asso-
ciated directly with the unsatisfactory
statement Of the United States Steel
Corporation, but as a matter Of fact
the earnings OF $23 1O5,115, reported for
the quarter, were fully up to the Streets
expectations, and they very much ex-
ceeded some pessimistic estimates OF
what they would be which were made
a couple of months ago or before the
heavy buying by railways developed.
One must have some knowledge Of
market mechanism and of market psy-
chology. to figure out why earnings of
the Steel Corporation. which were fully
up to the average OF Wall Street ex-
pectations, and were in excess OF many
forecasts emanating from Pittsburgh,
should be followed by a 4h-point break
In Steel common, a decline OF about 31
in Union Pacific and recessions of from
to 21h points in other active issues.
The phase of the stock market. mechan-
ism referred to involves an acquaint-
ance with expert methods of liquidation;
that is, the selling of long stock in
such a manner as to Great the impress
sion that 1t is a short sale. This is ac-
complished by the sellers deferrtng for
time the delivery of the certificates
actually sold by him and by borrowing
shares in the market.
# Some Scientific Selling.
Actual short selling, as Is very we'll
known, impsrts an element of strength
TO a speculative market, because when
stocks decline the short sellers buy
back to cover their commitments and
secure their profits. When liquidation
by important interests Is in progress,
and II serves the purposes of the big
men to conceal their operations by
the clever device of defcrring the de-
livery of the stocks and borrowing
shares in the market, the transaction
has every outward appearance of a
short SALE but the operation does not
give the same element of strength, be-
cause the sellers are not short ami
have not sold for turn in the mar
ket. and hence do not necessarily buy
back on the decline. Their selling has
continued, perhaps, for a long time
pected development of the remote fu-
ture. What the impelling cause may
be is of course. the secret of the per-
son or persons who have thus con-
I Ccaled their operations, and that can
not be determined.
brokers' Circulars have made a fea-
ture of the heavy bear selling of
Union Pacific, Steel common, and many
| other stocks, and the magnitude of the
alleged outstanding short account has
been used as bug-a-boo to frighten
| brokers. No doubt there has been
great deal of selling of this character.
but with 1t there has been also a con-
| siderable volume of slow Hquidation
| carried on in the manner described.
| This Is indicated by the severity of
the declines in the precise issues In
| which the short account was said TO
be the largest. and by failure of these
| issues and the general list to show a
snappy recovery after the breaks.
| Reading alone has been the one con-
spicuous issue which has shown by its
| action in recovery any evidence OF a
large outstanding short account, and
| that probably has been reduced by the
weeks advance in price.
The Influencing Factors.
| Az to the psychology of Wednes day 8
market, though the break was asso-
cia,td with the quarterly report o: the
United States Steel Corporation, one
really has TO go back to the St Paul
dividend action for the contribu-
tory II not the chief influence. The re-
duced els sburs ement started Wall Street
upon new line OF thought-the possi-
BILE effect of poor or unsatisfactory
| business upon the earnings and dlN-
Cends of ,thAr uorporations--and the
| consideration which the Street was Civ
ing to the matter was accentuntcd by
the explanation made of the cut by
Chairman Roswell iar Msier' ,Snordd oL tne tSs St;
drain on the ST. Paul resources from
the Puget sound division entirely and
attrib'l:ed the reduction, In part, to the
two unsatisfactory harVestS IN I'e the
larIy to the unpromising outlook of
business for the coming year.
1t is a simple matter TO trace the
workings of the Wall Street mind.
Starting with the reduction Of the div
idend by the old-tlme market leader,
st. Paul and noting the reasons as'
signed for 1t, an unsatisfactory busi-
ness outlook. it passed to second de-
ve!opment-the poor gross and net earn
ings BY the Southern Pacific and the
Union Pacific roads, the latter-the
present market lIader-and tEtn 10
thnd Development - the Lnfarorable
Quarterly showing Of the United States
Steel CcrpOr"ti-n. tho grtatGst of taC
WUIld's corporations; dealing in 4
basic OF baTometric commodity. 1t Is
not strange that Il Spectator should
see in these developments not only un-
satisfactory present conditions but an
lInulr-nt confirmation of Mr.. Millers
prC,h, lions of an -unfavornble industrial
wear with the possibility of reduced
earnings and a revision Of dividend dis
bursements by numerous corporations
Poor Business and Railway Earnings
As a matter of fact, however there
is no assurance that the predictions OF
the chairman of the st. Paul road will
be fulfilled and In banking quarters
he has been much criticised for attriD
uting 80 much of the action OF tn
st. Paul road on its dividends to ar
unpromising business outlook, and thu
effects of the spring wheat shortage
in the Northwest and overlooking the
heavy tax imposed upon the road IT
opening up a virgin territory. The
new Puget Sound division is naturally
slow in developing profitable opera
lions but these should come in time
AS for railway earnings I'm general
while leaving much to he desired, anC
while the returns of large Western
roads have been unsatisfactory, East
ern roads have done very We'll as il
evidenced by the weeks returns of thu
| nd