The sun. [volume] (New York [N.Y.]) 1916-1920, 1918-09-03
BRITISH REBUYING
RAILROAD STOCKS
Acquiring Canadian Pacific
Shares They Disposed Of
Early in the War.
ALLIED SUCCESS FACTOR
Twenty Per Cent. Increase Of
Freight Rates Also Attrac-
tive to Investors.
Special Despatch to THn Sun.

Special DespaseA to Tns Sun.
TORONTO, Can, Sept. a Bankers
In Montreal and Toronto were consid-
erably interested IN the news from
New York to the effect that the recent
rise in Canadian Pacihc stock as
quoted in Wall Street was partly due
to repurchasing by British investors.
The London agencies Of Canadian
banks have a personal or intimate
Of the reluctance with
which the British holders of Canadian
Pacific Railroad sold out in the early
stages Of the war. practically under
and they have been expect
Ing that these parties would move to
regain their stock at the earliest oppor-
tunity. Doubtless the course Of events
on the French battlehelds since July
has convinced some that the repur-
chases should not be indefinitely de-
ferred. This has it's application not
only to Canadian Pacific stock but to
the entire list OF standard American
securities. On many occasions before
the war Lcndan has shown a remark
able capacity to sense important move
ments In stocks due to great political
or financial developments, and we may
be sure that this acuteness will be in
evidence toward the close OF the war.
While the movements of British in
vestors may have been expedited by
the signs Of a complete allied victory
at no late date. they doubtless were also
impelled to buy Canadian Pacific stock,
just as Wall Street spectators were
impelled to buy IT. because OF the 20
per cent. freight rate increase effective
from August l. The out-and-out Gov
ernment ownership papers In Canada
comment regretfully upon the fact that
while the former rate increase Of Is
per cent. granted in March was 50
hedged about by special taxation and
stipulations as to make II impossible
for the Canadian Pacific Railroad
Company to make any net addition to
Its surplus through the working of the
extra rate. this new and larger rate
Increase appeared to be granted with
out any conditions In other words, II
the higher rates permit. Canadian
Pacific stockholders may derive some
benefit. But owing to the fact that
the extra wages will absorb a great
part Of the expected increase of revenue,
the attacks on the Canadian Pacific
bitter rs was the case several months
ago.
Special Taxation Problem.
The average trader here is somewhat
perplexed as to how the special taxation
Of Canadian Pacific will work out under
the new rate increase. When that spe.
cial impost was applied it was not fore
seen that another freight rate increase
would have to be allowed almost imme-
diately. The special stipulation applied
to the Canadian Pacific Railroad when
the Is per cent. increase was granted
was that the company should share with
the Government on a ffty-hfty basis
all net revenue from railway operations
and special income In excess Of 10 per
cent. on the common stock-it being
provided that the Government should
take all OF this surplus UP to $1,000. 900.
after which the Canadian Pacific Rail-
road Company participates. Another
stipulation was that any excess OF net
revenue from railway operation. over
and above the net earnings for the year
ended December. 1916, ascribable to the
10 per cent. rate increase IL not covered
by the other tax should go to the Govern
intention being to prevent the
increasing its surplus earnings
beyond the figures shown for 1916 by
means of this rate Increase. The cur
rent impression is that this last stipula-
tion becomes practically dead letter
now that the new rate increase Is in
II the net earnings OF 1915
are exceeded in any year II will doubt
less be a result OF the second and larger
rate increase However. 1t is thought
the fifty-ffty division Of surplus earnings
over and above the 10 per cent. dividend
will still apply. The holder of Canadian
Pacific Railroad stock contends that the
new rate Increase will help out in this
matter, inasmuch as It will insure the
annual surplus Of earnings over the
900 as to allow the company a sub
account. where it will work in some
manner for the beueit OF the stock
holders With the termination OF the
war it is likely that the holders Of this
stock will expect benefits of some kind
from the extraneous assets OF the COM
pany.
Activity in IndustriaIs.
A number of the prominent Cana
dian industrials have been actively
dealt in latterly at rising prices. and
the speculative spirit Ia again in evil
dence more or less In Montreal and To-
ronto. To a certain extent 1t is thought
the more active buying and rising quo
tations constitute a reaction from the
long period of arbitrary repression OF
Stock Exchange enthusiasm. There
has been very little money available
for financing margin purchases, and
that was a potent factor in creating
dulness. Also there has been a strong
sentiment against speculation of all
kinds-in stocks. grain and other com
modities. Now. however. human nature
Is reasserting itself. People see the
records indicating that certain indus
trial companies are making extraor.
binary profits and that increase OF divi-
dends or special bonus distributions are
In prospect and they proceed TO buy.
A number OF dividend increases have
already been put into effect. and II the
war news continues favorable 1t Is prob
able that others will follow.
Apparently the money market has
eased OF to some extent as the brokers
seem to have had little difficulty in pro-
curing the credits required to finance
the increased turnover. Another sign
of temporary Improvement in the
money supply Is seen in the scarcity of
high grade investment bonds. The
dealers are said to have their stocks
reduced to small dimensions; and as
the new Victory Loan Is due to come
out soon there is not likely to be
many other new issues for the market