The Bridgeport times and evening farmer., 1919-11-18
HENRY CLEWS'
 WEEKLY LETTER

undoubtedly been more notable in the market for securities than those of any corresponding period for long while past. Advances in the discount rate at Federal Reserve banks, which had been ordered on November 4, did not begin to exert their full influence before the end of the week, because it was only then that the weakened condition of the reserves of the Fed eral Reserve System became known through publication on the Sth of the condition of the system at close of business November '. Weak market conditions on Monday, were followed by a liquidation of increasing violence, which reached it's continuation late on Wednesday, when extreme reductions, running in a few cases as high as 65 to 70 points, were noted. This was followed by a recovery on the follow ing day and the apparent restoration of more normal conditions. The di- rectly influential factor throughout this whole market situation was the high rate for call money, growing out of the policy of the Federal Reserve System and the knowledge on the part of bankers that they must con- serve their resources if they would avoid being brought face to face with an inability to obtain more redis- counts at Federal Reserve banks.
 Cause of Shrinl1age.
 What has occurred during the past week has frequently been the subject of comment in this circular and the causes of it are evident. An advance of market prices in some fayorite se- curities considerably above invest ment values naturally left them in precarious position, while the rapid shrinkage of the free resources of the Federal Reserve System compelled bankers to look to their own safety by cutting down the volume of their market loans. Their method of at taining this result has been that of fixing money rates at high points and holding them there in the effort to discourage undue borrowing.
 Maintenance of large margins has been consistently favored and those who have followed the suggestion thus afforded have found the protec- ton especially serviceable during the decline of the past week. The ques- tion remains whether a further re- eovery may now be expected to set in, as is so frequently the case after period of unusual weakness. In this connection predictions are as usual hazardous.
 The apparent buoyancy of the mar ket exhibited whenever money rates will permit, indicates that traders are strongly confident in the industrial future of many shares. On the other hand, the point already referred to deserves to be especially emphasized the fact that quoted prices have in many cases exceeded investment values. Decline of net earning power, due to high costs of production and to continue burdensome taxation, naturally depresses the immediate investment valuation of shares which are affected by these conditions. Taken altogether, the factors in the case once more emphasize the need for caution and suggest the necessity of careful protection of all commitments for some time to come. The warnings issued by the banking authorities of the country, with reference to the overloaning of funds upon lands comm odities and securities, indicate a disposition to curtai1 the volume of banking accommodation which, if ad- hered to, will necessarily limit the scope of trading.
 Foreign Trade and Exchange.
 Not the least interesting feature in the situation during the past few days has been the movement of foreign currency. Both sterling, lire, marks and francs have reached record low levels and 1t may be expected that the process of recovery will be slow, although upward movements from time to time will not be surprising Essentially, the value of these cur rencies depends upon the success to be anticipated in the placing of for eign securities with American invest ors.
 The advancing of the Edge Bill by Congress brings that measure nearer to enactment and paves the way for the formation of financing concerns whose purpose 1t will be to further the shipment of goods. On the other hand, the high money rates and stringent conditions in the market have tended to curtat1 or nullify various undertakings whose success would otherwise have been regarded at least probable.
 American investors have shown a greater degree of indifference toward the applications of foreign countries for credit than had been expected, and the lower levels of values es- tablished in the securities market are likely to discourage the placing of foreign issues before American buy CTS. Nevertheless, as current an- nouncements have shown, foreign borrowers stand ready to to take American capital at high rates when ever conditions seem to be such as to warrant an offering of securities. One
 
 put before the investor, but have ab- sorbed only slowly.
 The Railroad Situation.
 During the past week the appear ance of new form of the bill known as the Esch measure indicates the probability that the Cummins bill, heretofore considered the leading railroad proposal before the country, may be superseded. Both measures
 
 many highly technical questions. Either one would give the railroad in vestor a much better assurance of protection than he could have without them, and they have accordingly been favorably received by owners of se- curities. Neither measure would give the investor more than very mod crate amount of return and effort will undoubtedly be made to revise which ever of the two emerges from the leg is1ative discussion in such a way to \ give to the investor better recogni-