New-York tribune., 1918-03-13

don Stock Exchange since the begin
ming of the war will furnish food for
thought. The latest figures avail
able, as compiled by "The Bankers
Magazine" of London, show that at
the close of 1917 bonds bearing a
fixed rate of income were selling on
a basis OF rs per cent Of their market
value on July 20, 1914, having shown
q steady decline from the very start
OF the struggle. Stocks with variable
on the other hand, after
falling in 1915 to 80 per cent of their
ante-bellum market value, have since
recovered to 92 per cent Of the July
20, 1914, value. This authority says !:
In the three and a half years the
market value of stocks with fixed in
terest return has shrivellcd over 20
per cent. This is only to be expected
in view of the heavy demands of the
government upon the saving classes
for subscriptions to the necessary
loans to finance the war, the only
incident in regard to the decline be-
ing that it has slackened toward the
end as q result Of the modification
latterly by the government Of its
borrowing policy toward lower value
of money within the country. If the
stocks with variable dividends are
studied it will be noted that the
movements have not been uniform
throughout the period. Between July
90, 1917, and December II, 1915, there
was a steady fall on the whole of
these securities as result of the
shock created by the war, but since
then there has been a persistent re-
covery, SO that, roughly speaking,
almost the whole of the earlier de-
cline has been regained, and prices
are but little below the level reported
at the outbreak of the war. This is
all the more remarkable as in this
range of securities are contained
certain categores of securities which
have been specially affected in an
adverse sense by war conditions, such
as electric light and gas stocks, and
also sections of securities which
promise to be hit in very special
measure by the enormous expendi-
lures created by the war, such as
Lo% Fl l.: i
Although little attention has been
paid to the matter, it is clear that
outside of the competition of the
continued issues of government debt
the difference Of experience between
the two classes Of securities may be
traced to a distinct alteration in the
character of business coming to the
Stock Exchange. Previous to the war
a considerable part of the business
done by stock brokers was on behalf
of the purely saving class. These
had been accustomed to look upon a
security with fixed rate of interest
as being the most suitable for in
vestment, since the income secured
was not liable to fuctuation and any
suspension of payment was very i'm
probable. AS a matter of fact, the
income received from fixed interest
stocks has, with very few exceptions,
been fully maintained throughout the
period that has elapsed since the war
began, and the decline in prices is not
due to loss of revenue, but to other
circumstances. In the first place, there
was the effect of heavier taxation, and
especially of income tax, which has
been the most potent factor in main
tanning the depreciation which was
established in the first place by the
shock of the outbreak of war. A large
number of holders of gilt-edged Sc
curities are subject to the higher
rate of tax, and accordingly it's level
of five shillings in the pound sterling
reduces the revenue received by some
% per cent. A bond that was yield
ing per cent before the war gives
the holder only per cent, and this
at time when expenditures, owing
to the higher prices for commodities
and heavier taxation, press very
severely upon the investing classes,
so that certain amount of selling
must have been induced on the
part of those desirous Of obtain
ing a higher return on their capt.
tai In the second place, this reduc-
tion in yield has diverted money
from going into the bonds, especially
as there is still uncertainty whether
the income tax may not be raised still
further; and, in the third place, there
has been the inevitable offering of
those securities on behalf of estates
of deceased persons in market
which is reluctant to absorb them.
The experience of stocks with vari.
able dividends has been different
They had first to meet the higher re-
turn demanded by the conditions pro.
duced by the war This meant tnat
an all-round reduction in values was
established in the first year and q
half of the war period. BY that time
the enormous expenditure necessi-
toted by the war began to have its
effect upon industrial development ir
England. Large profits were made