Evening public ledger. [volume] (Philadelphia [Pa.]) 1914-1942, 1919-08-02
'h|GH PRICES CHECK
SECURITY MARKET
Cost of Bonds Themselves and
Rise in Money Rates Slow
\ Up Transactions
GENERAL OUTLOOK IS GOOD

New York, Aug. 2.-The New YORK
! Suns financial review of the week
3 reads:
If person has the itching to buy
y something, finds he must borrow the
E money with which to make the purchase
and must pay IL to Is per cent for the
privilege, only TO discover at the last
:, that the price itself is pretty high, what
does he do? One person in such a case
( will buy any way but reluctantly and
z with mental reservations as to his course
faof action should the situation repeat
itself. Another person, similarly placed,
will not buy at all. He will wait either
until the price goes down or the cost
Of borrowing declines.
This is one way of explaining why
the stock market has turned quiet and
the list heavy and at times weak. \
= share of stock is a commodity aS much
as loaf of bread is. One is bought
to satisfy a desire for profit. the other
to appease hunger, but the principle Of
acquisition is exactly the same. In
:, proportion as the difficulty of buying
Increases, just so will the operation be
= deferred or exercised as sparingly as
Z prudence or circumstances will permit
T. Brokers borrow money from the banks
Tor the purpose of financing the stock
purchases of their clients. 1t was fore
q seen long time ago that conditions.
after peace had been signed would en- :
/ tail scarcity of money for stock ex-
\. change purposes for the simple reason
that money would be needed far more
imperatively for industrial and com o
y mercial rehabilitation and for various
phases OF economic and humanitarian
!, relief, and that such needs must be given
priority.
That is why the more responsible
Droherage houses began to advise eau
: ton and why from day to day and
week TO week the tiresome reiteratiou
continued. The time has now come
+. when the truth can be seen at a glance
. when the call for money outside tbe
market circle has become a fact instead
Oh theory to be harped upon.
Record Made in July
N Record activity in july. in which
month some 5000, 900 shares wort
dealt In on the New York Stock Ex
cnange, was traceable not only to tn,
q last phase of the speculative fever, bu
Z. also to the very large number OF list
1ngs. 1t takes time to overcome a we'll
developed enthusiasm for buying stocks
3 Such enthusiasm almost invariably over
h laps the point at which it should b,
materially tempered. Twice the Fedora
reserve Board at Washington ISSUED
warnings against an excessive use ot
money for that purpose. But the blame
& for not needing these warnings more
thoughtfully cannot be placed WHOLLY
at the door of the individual specula
tor nor yet at that of the brokerage
houses.
Z Z The banks themselves yielded to tn,
4 temptation afforded by rising rates fol-
q call loans. For months the time money
! market has been virtually at n stand
z still, until recently and at this moment
4 we have the spectacle of a big STOCK
market financed almost exclusively by
call funds. This, indeed, gives tho
banks the whip hand, so to speak. over
stock speculation, but it keeps Wal
street in constant state of perturba
tion which cannot be wholesome anC
Z which must react with disturbing effec
in more ways than one.
August bids fair to see the luIl il
(. market operations which July or
dinarily experiences, but did not thi
q year. The lull, however, has beel
Z forced bit too drastically, it woulI
appear, and has left something of /
sting. In one session this week trans
actions dropped to around 10000
shares. Others were not much over
million shares and the tendency i
toward still further curtailment in tn
volume of business. Signs of rea
liquidation were not curtailed althoug
considerable distribution of stocks wa
in evidence.
y The bear elements were given rar
opportunity in one way or another
signally by rising money rates occa
stoned by the calling of loans both b,
metropolitan and interior banks an'
banking houses, which they were no
slow in taking advantage of. The shor
account was notably Increased and t
the point, in the estimation of many
which hinted at an oversOld condition
Commenting in its August circular o
the prevalence of speculation, tn
Federal Reserve Board stated, however
that an investment demand has re
vealed itself and that an unusuG
amount of stocks is reported to hav
Z been taken from the market, "the con
sequent decrease in supply resultir
g In further increase in prices in tn
4 face of continued demand"
General Outlook Good
z This gives rather broad hint q
ri.to the technical position within I'll
market at present. And the reserv
board, like Judge Gary and othe
leading spirits, is optimistic as to til
general business outlook and Gro
prospects. On the one side of tn
=. scale, therefore, are large short in
terest and limited supply of stocks
on the other a heavy withdrawal G
i public participation in trading and
4 consequent impairment of buyin
power. This situation would seem I
VI spell a quiet market and firm under
tone for a time.
The basic elements of strength ar
there, and perhaps they must renal
d merely potential until such time as til
money market eases materially. Th
money fairy this week was cause
8 largely by temporary considerations
It SO happened that the French an
Canadian loans matured yesterday, an
that other August l obligations, in
Guiding interest and dividend disburse
ments, totaled in excess of $165, 200,
600.
With these out of the way, none
~.