The New York herald., 1920-01-04
SAYS HIGH PRICES
CHECK BUYING
BY MERCHANTS
Reserve Agent Reports Short,
age in Credits in All Lines
of Merchandise.

In his report on business conditions In
this Federal Reserve District the Federal
Reserve agent here says -
The banking problems OF the coming
year viii centre largely around the greatly
expanded volume OF bank credit which the
war required and with which the subsid-
ence OF war financing leaves us
There are two effective checks to such
expansion; one. the higher cost OF goods
which. when supply and demand become
more nearly balanced. will decrease con-
sumption; and the other, the higher cost
of credit which will make II less profita bic
for banks to borrow and thus reduce the
supply of credit available to them for
further expanding their loans. The rates
of the Federal Reserve Bank should he an
effective influence upon the cost OF credit.
They have been raised twice, on November
and December II. but have nevertheless
been closely related to the certificate rate
policy of the Treasury. They have, how
ever, given clear indication to the member
banks Of the desrability in their own in
terest of extending credit with increasing
restraint and circunspection and OF ad-
dressing themselves to the gradual reduc-
tion OF their debts to the Federal Reserve
l Bank.
The high price of money in November
caused marked reduction in the aggre-
gate of new issues by domestic corpora
tions. p The total for that month was
$22s3, ,00O,0OO, as compared with $3eOOCocUo in
October and 500, coo in November year
ago. This falling off seems to register the
passing for the time being at least of the
high tide of offerings to bond houses by
corporations which are anxious to enlarge
their capital Nevertheless, 1t is reported
TO us that the applications are still so
numerous that the best bond houses are
able TO consider only small proportion
of them and in the aggregate they are
much beyond the power of the market
to absorb.
"A possible indication Of the extent TO
which new capital is sought appears inl
the total of new interpretations. Doubt
less only fraction of the total is IN
tended for immediate issue. depending pri-
/ narily upon the capacity of the pubic TO
buy: and many OF them are. OF course
Of the highest character Nevertheiess'
tho total Is noteworthy. In November new
u incorpora ions in the Eastern states
amounted to s1.3n. 10000 and in October
81 &3, ,000.0Oo. as compared with SlSl'UWo
I'm November a year ago. The montnly
100000. which is nearly seven times The
monthly average shown by the five years
rrior to the war. Most of the new incnr-
\ porations are of oil, shipping and chemical
companies and concerns engaged IN the
manufacture Of articles tho current prices
OF which are high and the margins oil
rrofi. on the present basis exceptionally
good In many cases the chances or re-
| turn for the investor are limited TO the
i maintenance OF the present price ieVc.
J. The operations of dealers in poor or
worthless stocks are particularly serious
at time of great expansion sucn as .ue
present. Certain cases OF apparently
fraudulent intent have already been
brought to the attention of the federai
or local prosecutors, but in the past most
prosecutions have succeeded onIy when
the fraud has been completed ana the IN
vestor has lost his money. 1t is tnere-
fore essential that individuals buy only
a fter seeking advice from trusted bankers
or others who are equipped with sound
information and good sense on financial
matters.
4 "Ino,,ry from, ten department stores IN
New York show that the sales UP 10 the
middle of December as compared WIN
the corresponding period or 1910 Increased
on the average forty per cent In the totai
value Of sales and nineteen per cent In
the number of units sold. Some OF the
merchants expressed disappointment IN
the size of Christmas buying. which may
| be attributed to expectations based on the
immense sales both relative and absolute.
for the month of October. II appears also
that the repressve measures called for by
tthe shortage of coal affected sales in this
| period Nevertheless the present holiday
season is the heaviest In the experience
of New York stores.
! Certain of the stores report that the
sales OF utilities have fallen off more than
NJ. 1.. 1ntv v,HJl
/ not only because OF the nature or holiday
purcha sing, but because Of the inclination
referred 10 last month of buying expen-
l sive articles regardless OF thcir inherent
value. Demand for high priced goods IL
generally reported. but at the same time
| 1t appears that purchasers are inclined TO
I watch prices little more closely than
hitherto In one instance II is reported
that the demand for goods of the highest
\ price has fallen off somewhat Cash pur-
chases are still large and an increase OF
buying by out OF town purchasers " OBJ
I served.
"The high prices now prevailing IN al
most all lines of merchandise have resulted
in general shortening of credits. While
it appears for the present at least, that
production is far short Of the demand, eau
tious manufacturers are disinclined tol
commit themselves in their business deal
ings 20 q continuance Of prices at the pres
ent level over a long period.
| Most manufacturers and distributors oil
dry goods. textiles, hardware. boots and
shoes and similar merchandise are sold
up as far ahead as they will take orders.
Most contracts are placed at present price,
levels. though In few cases the stpula-
ton has been for the fixation OF prices at
the date OF delivery, or tho making OF n
price now. with delivery at the conven-
fence Of the seller. Some of the largest
manufacturers and distributors report that
their contracts, based upon present prices
run only about half as far into the future
as in normal times; thus manufactured
and distributors who have been In the
habit OF contracting for six months ahead
at fixed prices are now committing them
selves through aAperiod of. only three,
months. In brief. both sellers and buyersl
aim toward a quick turnover.
AN emphatic Improvement In labor con.
dtions has taken place In this district
The report OF the New York State Indus
trial Commission for the month OF Novom-
Der shows an increase of three per cent