New-York tribune., 1920-02-23
Trade and Finance
Developments Of tho Week
and Their Bearing ON
the Outlook

tuc Ol1t1OOk
The despised railroad stocks came
to life with startling suddenness
last week. At 2:26 on Tues
day afternoon tho market for rails
was practically at = standstill.
There was little or no demand and
offerings were scant, 90 that prices
drifted idly. At 1850 the rail-
road section Of the list was boil
ing, with spectators and investors
fairly scrambling to get aboard.
What happened. apparently, was
that single Stock Exchange house,
seeing bull argument in the an
nouncement that the railroad bill
was to be reported out of conference,
made haste to load up with trans
portation shares. Their orders came
on market 80 thoroughly liquidated
that even relatively light demand
was enough to start prices booming;
and once the movement got under
way orders poured in from so many
sources that the rebound gained mo-
mentum with unusual rapidity. But
in spite of the fact that it began in
spectacular fashion, the recovery
was something much more substan-
tial than mere speculative rally,
for it continued steadily until Fri
day afternoon, and very large part,
and perhaps the major part, Of the
buying was for nvestment-that is,
buying for the long pull, rather than
professional buying for turn. The
bargain hunters were much i'm ew-
dence. In nearly every brokerage
house one could see the faces Of
those who appear only at rare in
tervals, usually either at the end Of
sustained decline or near the top Of
q sustained rise. They came, bought
what stocks they could pay for and
disappeared again, leaving the at
tenuated floating supply Of railroad
stocks still smaller. The sound char
acter Of the buying was shown by
the fact that heavy profit taking
which appeared toward the close of
the week, after an advance reaching
nearly 8 points in the average and a
good deal more than that in many
cases, did not cause much of a set
back. Without exception the rails
held the greater part Of the gains
which had been scored in preceding
sessions, and a few actually ad-
vanced.
1t may be interesting to compare
the price position Of the rails when
the recovery started last week with
preceding periods. The average
price of twenty representative is
sues at the recent low was 58.70-
the lowest level in two decades. At
this time last year the average was
in the neighborhood of II. On
March 1, 1918, the average stood at
$3.50. During the peak of the war
boom it was as high as $3.50, while
in the last prosperous year before
the war began it touched 103.10.
With only one important Interrupt
o%o
going down since October, 1912, and
the average loss in this period, at
the recent low, was more than "a
points. During the same period the
average of industrials arose, at the
maximum, Sc points, making net
difference in the price movement Of
the two groups Of 100 points. 1t will
be seen, therefore, that whether or
not the recent low prices were war
ranted, there is still plenty of room
for improvement.
The course Of railroad bonds has
followed that Of the stocks very
closely. Since the beginning Of 1912
the average Of ten standard issues
has dropped about Is points, to tho
lowest level thus far this century.
That Is why good many Wall
Street observers are saying that the
next big speculation will be in such
securities.
One Of the evils Of railroad inanc-
ing in the past was that too much of
it took the form of funded debt, so
that fixed CHARGES tended ALWAYS to