New-York tribune., 1918-08-19


ulus Of reports that a satisfactory
settlement Of the railroad contract
controversy would be reached with
in few days, railroad shares ad-
vanced sharply at the beginning Of
last week. Transactions in this sec
ton OF the list on Monday and
Tuesday exceeded the turnover in
any preceding sessions this year.
But the squirt was short-lived, and
by the end Of the week the market
had relapsed into the state Of tor
pidity that had prevailed for
months. The net result Of the move
ment was an advance Of less than
point in the average price of
twenty representative railroad is
sues. The outburst Of activity in
the rails failed to arouse interest in
industrials, and this section of the
market had the same stolid appear
ance as marked it in the preceding
week. A loss of about a point in
the averages was the net result Of
the weeks trading.
But, while there was no lmpor-
tant change in the general level Of
security prices, nor in the character
Of the trading, two important
things we're pretty we'll demon
strated. The first was that the con-
trolling factor in the stock market
is money, and the second that the
outside public cannot be persuaded
to indulge in speculation at this
time, even with the lure of rising
prices. Undoubtedly it was the
shortage Of funds for speculation
that abruptly halted the advance of
railroad stocks. Confronted with
the necessity of meeting heavy
Withdrawals by the government and
of providing funds for the payment
of the final lnstalment of the third
Liberty Loan, the banks had to call
Stock Exchange loans, and, lacking
funds, traders were compelled to
sell stocks. Thereafter the volume
of trading decreased steadily. Dis
couraged by their experience earlier
in the week, traders refrained from
making important commitments, eX-
cept in one or two of the so-called
"specialties," in which the rumor
mongers are busy again. The i'm
portant thing is that what happened
last week is almost certain to be re-
peated from time to time as the war
goes on. The control of money is
complete, and the movement to with
hold Credit from non-essential uses.
such as speculation, is gaining force.
The outlook, therefore, is for a dull
and narrow market, relieved occa-
sionally, perhaps, by spasmodic out
bursts Of activity.
There was little doing in invest
ment securities last week, nor is it
likely that the general bond market
will display any great amount of
activity until the Federal tax pro-
gramme takes definite form. Until
1t becomes possible to gauge with
reasonable accuracy the extent to
which incomes from bonds are like
ly to be affected by changes in the
tax rates and in the methods of an
plying the levies, most investors will
prefer to hold aloof. One Of the pro
posals which tends to restrict actiy-
lty in bonds is that unearned in
comes be taxed at higher rates than
earned incomes. If the PROPOSAL
should be adopted it is obvious that
a readjustment Of the prices Of
fixed yield securities would follow.
The demand for tax exempt securi
ties naturally would expand, but
This would be offset by decrease in
the demand for taxable issues. The
rise OF Liberty 31las to a point well
above par illustrates clearly the
value Of exemption to the large in
VestOr
Money was unusually tight dur