The Bridgeport times and evening farmer., 1919-12-15
HENRY CLEWS'
 WEEKLY LETTER

treaty prospects during the past week, l
 Washington indications are strongly E In favor of q compromise which will
 result in the adoption of the docu- ~nent with sundTy reservations shortly
 after the holiday season. This out
 <ook encOuragin,g as it is, neverthe-
 NeSs foreShadows a period of conun-
 ued uncertainty and postponement of
 definite business relationships with
 foreign countries during which but
 little improvement can be made.
 The interchange of views on the
 railroad question during the past
 week appears to confirm the predic-
 t1on that the roads will be handed
 back to their owners at the close Of
 the year or soon after, while the de- lay of Congress and the apparent diff
 ference Of view between the Senate
 and the House on the whole subject seems to point to the possibility of a
 gap between the date of return and
 the date when fresh legislation coy
 ering. the whole railroad situation is carried to the statute books.
 The issue is, however, still in doubt.
 On the other hand the adjustment of
 the coal strike, despite the fact that much damage has been done through z shortage and through the closing of the plants, as a result of fuel restric- tions, tends to afford q prospect of
 relief to many industries whose pros
 perity is dependent upon obtaining
 an early supply of fuel
 With improvement thus in sight in
 various departments of domestic busi- ness life, the financial situation never E theless continues perturbed both at
 home and abroad The state of things
 should impress upon the mind of the investor the necessity of prudence and
 foresight pending further develop 4 mentA.
 The Trade Situation
 Current developments are showing
 how serious is the trade situation
 (and consequently the financial out * look) in our relations with foreign
 countries On December II sterling
 demand dropped to $3.69, while lire I have flUctuated around 13.40 and
 marks of late have been below ? 4 cents.
 Those who bought heavily of for
 eign currencies during the autumn
 are now feeling the consequences, and
 some have become exceptionally dis
 courased, and have attempted to un-
 load their holdings. The effort to do
 so has, of course, depressed quota tiOns still further. The most serious
 factor in the exchange situation, how ever, is not the mere decline of the quotations, but is the great quantity of exchange which is now Overhang- I ing the market
 Exporting houses have for some time past been in the habit of Ieav- ing their funds on deposit abroad or have extended credit on open account to foreign buyers.
 The result has been to increase in
 a very great degree the volume of
 business which is being carried along
 on open credit and. in consequences to produce a large volume of bills
 which might be sold at any moment These in fact are being offered when
 ever any improvements in quotations permit.
 Neutral European countries are in worse position than the United States, and the prospect of these con- ditions undoubtedly is such as to point to further severe shrinkage un- less something be done to support ex- change. Such shrinkage would un~ doubtedly mean a falling off in in our foreign trade. These conditions are reflected In the low values of foreign securities of all kinds. AngIo-F'rench 5s are practically on a 10 per cent. basis, and many other strong foreign obligations in much the same posi- l ton. Should some action be taken in the future for the stabilization of ex- change many of these issues would be genuine bargains AAAo ouIlOOk- Efforts to contract the loan account ! of the reserve banks have not thus far been very successful, and accord i 1ngly there is no reason to expect any reduction in call rates for the i'm mediate present. During the past few ] days there have been temporary re- auctions in call money, but thev have promptly been offset by reactions to 1
 high levels, closing figures ruling around 10 or 12 per cent. most of the time. The reports of the reserve banks show that. in spite of technical i'm provement here and there, there. has been only very narrow margin. of lending power, which Is being almost l entirely required for commercial uses The natural influence has been drawn i from this situation that the call money volume now in the market could not be very greatly enlarged and that sudden or unusual demands upon it would accordingly result in higher prices for such funds as were
 available, the loans then going to the highest bidder. Many who would have been glad to purchase securities at prices which have prevailed for some of the Issues within the past week. have been deferred from so doing bv the fact that they would have to pay so heavily for the loanable funds
 
 until favorable opportunities arise for taking a profit. There has been some indication during the past week of a turn in the tide of crop moving demands which has fallen heavily upon the reserve banks during the past autumn Funds are now moving back into the banks. but they cannot be expected to bring about material change in the situa- tion before the end of the year. Buyers who are obliged to borrow must therefore not count upon cheap CT money. The action of the Federa! l
 Reserve Board of New York in ad- vancing discount "a tes was expected 1
 and therefore largely discounted. It 1 should, however, be accepted as 8
 warning of the limitations of the
 money market, and as evidence of the
 intention of banking authorities to | impose more restraint upon excessive imitation. Prices and Values.