The sun., 1916-08-28
FINANCIAL NEWS
AND COMMENT
Condition Of Money Market
Argues for Higher Stock
Market Prices.
BANKS, POSITION SECURE
Recent Reaction Looked Upon
as Only Temporary, Prompted
by Caution.

In the last few days OF reaction Wall
Street naturally has been wondering
whether the advance which carried the
market leader. United States steel. to a
new high record was merely q tenn
porary squirt or the initial phase OF an
important bull movement. Sentiment
certainly has not been pcssimlstic. and
IL Is safe to say the great majority
OF bankers and brokers felt confident as
the week drew to a close that there
would not be more than a temporary
decline in any event. and that the ten
dency soon would be upward. On Satur-
day advices from Washington indicated
the railway wage dispute was again
approaching a critical stage. but little
uncasiness was felt as to the outcome.
In forming an opinion as to whether
the Improvement In stock market val
ues will continue many things OF
course. must be considered. but one OF
the most important determining factors
Is the money market. Regardless OF
| other conditions II Is extremely difficult
to engineer an important advance in
| stocks when none Is scarce Similarly,
II other conditions are favorable. prices
are very apt to advance IL there is a
plethora of funds available for specu'
lative purposes.
Since the early months OF the war the
wealth of America has been increasing
almost steadily. Earnings OF corpora
tons in many instances have doubled
and trebled. and In all walks OF liz
prosperity has been on the increase. II
other words. the majority OF domestic
factors bearing upon the stock markc
have been favorable.
These conditions were not reflected II
the stock market until the year 1915 wa!
well advanced. Bankers, business mel
and Individual investors were cautious
1t was difficult therefore To arouse on
thusiasm until Il became apparent tina
money was pilinc up rapidly In banl
vaults and that the bankers thenselve.
were growing FESTIVE under restraint.
Mig Bull Campaign started.
Tie New York banking position wa
highly satisfactory IN MAY ard June
1915. The average condition in Apr
also was good. II was In those month
| hat the big bull campaign Of 1915 go
under way. Gold was being received /,
large mounts from Europe. and thank
10 such increases In our reserves tn
| banks were able 10 expand withou
weakening their strength.
This continued until almost the mid
die Of September. when tho averag
; strength cs The New York INSTITUTIONS
began gradually to rccede. This wa
| shown clearly by the ratio Of excess re
serve TO reserve requirements. on Sep
TENDER II this ratio VAS IS per cent
; The decline was almost continuous vi
til the end OF the ear. and while l
continued Il became more and more ap
parent that the stock market a over
bought and prices could not be eNpecte'
to advance much further.
The decline In the ratio preceded I'll
| collapse Of the bull movement. but Ion
before the high prices OF 1919 wer
reached conservative men were rea!i1in
on their commitments and advising thei
friends to do likewise.
Even though banking conditions a
that time had been more favorable.
reaction in the stock markc; woul
have been inevitable. because price
cannot advance indefinitely. 1t may h
remembered, however. that the ma1orlt
of men were predicting a resumption c
the bull movement early in 1916. Con-
netent observers at the time cited rea
sons for a contrary belief. and one {
those reasons was the steady decline !
the reserve strength or the associate
banks and trust companies or New iof'
Again referring to the ratio OF exces
reserve to reserve requirements as III
dicating with a fair degree or accurac
tho real banking position. 1t may D
stated that with few Interruptions tn
strength of the banks declined froi
January 90 10 juno 3. From the first G
June until about two weeks ago pahh
ing conditions were more or less VI
settled. The excess reserve ratio al
vanced from less than 9"t per cent. I
approximately 1871. per cent. dropped I
A. per cent. advanced TO almost :
per cent. and declined In the followin
week to 10 per cent.