Evening star., 1920-03-13
BY STUART T.. WEST.

BY STUART T.. WEST.
The principal factors which m
fuenced this weeks remarkable re-
Nersal in Wall street operations were
the two Supreme Court decisions, the
one on the stock dividend tax case,
the other fixing the basis for railway
Valuation, the continued progress in
the rehabilitation of the foreign eN-
changes and the easier tendency OF
money rates, which. though slight.
furnished a very agreeable surprise
because it came at the time when
most people had been expecting
severe pinch.
The high-priced industrial shares.
which were the ones chiefly affected
by the stock dividend ruling. recov-
cred at one bound the greater part
of what it had taken month and Il
half to lose. After such an astonlSh-
ing recovery there is no need ior
further defense of the view that has
been so constantly expressed al!
through the downward movement OF
the last four months. namely thal
while credit stringency could tenn
porarily force prices down severely
il could not destroy the basis of IN
trinsic values in stocks. and that the
principal holdings of the industrlals
which had large accumulationS OF
war profits on their books had never
been distributed because the wealthy
. individuals back of them realized
that values in the end would tell and
were satisfied to bide their time. The
correctness of this analysis has beeh
fully borne out by the promptness
and completeness of the rally
market could have never ac'ea e, ehis
way in which stocks had been shifted
from strong to weak hands; nobody
of experience has to be told TINS.
Can Go Ahead With Pinns.
The big Industrial corporations can
now go ahead with the plans when
they have long had under considera-
tion for distributing their war sur
pluses to shareholders. Probably the
Immediate possibilities OF price en-
hancement were pretty we'll measured
at the levels which the high-prlced
industrials reached in the excited
buying wave following the announce
ment of the tax decision.
:. But in the meantime an OBJECT res
son has been given that this is not a
situation in the market which can be
gagged by old-fashioned standards
The extraordinary feature all through
the vicissitudes of the past year has
been that the great majority of our
manufacturing companies which made
huge profits out of the war PAID out
very little of them to shareholders
!. and that really vast accumulatioh
accrued in surplus accounts when
constituted an element of potential
value quite independent of current
earning power or of the current busi-
ness outlook. 1t is entirely this ele-
ment of potential value which ex-
plains why stocks like Crucible Steel.
Z American Car and Foundry. American
Wool and numerous others that might
be mentioned could regain in a space
of two days from half to three
fourths of their entire loss since Oc-
tober. and how this could be accom-
plished with very little let-up in the
credit stringency and very little
abatement in the uncertainties con-
-nected with the business future
which had been SO pesSimisticaliy dis
cussed in January and February.
:. Had Reached Pinnacle.
We do not say that the Supreme
Court decision declaring stock divi-
dendS tax exempt is going to furnish
= the material for a big speculation, for
We believe that most of the stocks
were entitled to go at the top of their
upward swing this week. But We do
say that the knowledge that indus
trial melon cutting can now proceed
will afford a powerful support to the
present price level. far more power
ful support than it has had at any
time in the last six months.
Speculative sentiment in it's violent
reaction from the previous all-per-
vading pessimism was in danger of
forgetting that there are still many
troublesome problems to be disposed
of before the business situation gets
out of the woods. The most formidable
of these problems is what to do with
the stocks of merchandise of various
kinds which have to be sold in order
. TO pay off bank loans that have been
called in the process of Strengthening
the credit structure. 1t is certain that
the policy is now becoming very gen.
~ m H.
nation in commercial loans. distin-
gushing between strictly business
lines and those which are specula-
tive. In cases where goods have been
Of turning speculative profit credit
Is now being hatly refused.
Loans Must BE Paid on.
The loans thus called in must be
paid on and the only way they can
be paid OF is through the sale Of the
goods constituting their collateral.
This is what is meant by the CONNER
cial liquidation now so much dis
cussed. Some bankers are frankly
pessimistic, believing that this Iiqui-
dation cannot be accomplished with
out a severe decline in commodity
prices and serious disturbance in
trade generally. Others believe that
(. II properly handled the liquidating
movement can be made to assume a
gradual character. extending over a
long period perhaps. but being slow
enough not to produce an upset
The indications are that we are past
The peak of credit difficulties and that
while Improvement may be very slow
II will be sure. At the close of last
week the New York reserve bank
reported a total Of bills discounted
secured by other than government
war obligations. Of $457, 100000. as
against only s69.0O0.o 900 in the same
week last year. AS this is a class
'of accommodation granted to COM
mercial as distinguished from finan-
cial borrowers. il gives some idea of
the imitation that occurred in this
quarter. At the same time these loans
secured by the pledging of govern
CORY the purely Wall street borrow
ing falls, were down from S775O0O-
900 last year to s5S2, 900. 900 this year
Here we find some measures of the
Wall street defiation and an illustra-
ton of the familiar truth that the
financial markets in any readjustment
move far ahead of the commercial
markets.
Gall Loan Market Encouraging.
The claim is made that time money
has loosened bit and that rates are
somewhat lower but this is doubtful.
The action of the call loan market,
however, has been distinctly encour-
aging. On all sides it had been pre-
dicted that the week preceding
March Is. when the huge income tax
payments and the subscription to
Treasury certificates fell due. would
see an acute disturbance in the money
market. quite likely exceeding any
that had previously occurred. In
stead. with the exception of a little
squirt toward the close of business
yesterday, which was extremely