Evening star., 1920-02-14
STOCK UPHEAvAL
F.. CHARGED TO TALK
Of MEN HIGH Up
AIarmist 0utgivings Said to
Have Been Largely Re-
! sponsibIe for Selling.
by STUART T.. WEST.

Whatever else is uncertain in thi:
weeks upheaval of the stock eN
change, one thing is clear, and that i:
that a great deal of unnecessary dam
age has been done by the alarmist out
givings of men in high places. The
remark of a prominent banker leaving
for Europe that history would he
written in Wall street. while he wa:
away was widely construed as a pre-
diction of panic. The speech delivered
by conspicuous member or the
House of Representatives., in which NJ
talked about another 1899. was al
equal piece of sensationalism. These
statements. published broadcast ovel
the country at a time when confidence
had already been undermined by three
months of declining prices. unques'
tionably did enormous harm. IheI
were calculated not only to produce
selling. but to deter investment buy-
ing and to bring about precisely tha'
state of unreaSoning fear in the pup
lie mind which leads up to panic
When the new Secretary of the Treas
ury took issue with these pesslmlstif
predictions in his very sane and cain
review of the situation it acted as
tonic upon the market. but the oni!
trouble with it was that 1t came too
late. In the meantime lot OF SINAI
investors had been induced to thro"
over their holdings at a fearful loss
and at entirely unwarranted sacri'
nee.
No Resemblance in Conditions.
There is absolutely no resemblance
between the conditions of 1920 and
those of either 1893 or 1907 In 1893
the essential troubles were industrial
overproduction and currency being
rapidly deprecated by the iniquitous
silver purchasing act. In 1907 there
also was an overproduction of indus
trial goods and general lack or con-
fidence brought about by govern
mental attacks upon and law suits
directed against the big Industrial
combinations.
The present situation is diametric-
ally opposed to that of 1893 in that
instead of overproduction there is
Onderproduction in the principal
products of industry and instead OF
a depreciating currency there are the
highest bids for gold and silver in all
history. 1T is opposed to the situation
OF 1907 likewise because the relation
Of industrial demand and supply is
sound instead of unsound and because
accumulation of undivided profits are
real values and not largely paper val
'ues, as they were then.
Experience of 1903.
II there is any parallel at all for the
recent market movement it is to be
found in the experience of 1908. This
was the time made famous by the ex-
preston 'undigested securities"
There had been a great overissue of
new securities and large part of
these had been thrown back upon the
hands of underwriting syndicates.
The money market became very tight
and these new f1otations were thrown
out of loans. 1t was then a case of
selling the good to protect the poor,
Of realizing upon everything that was
marketable. regardless Of price. in
order to look after the stun that was
nnmarketable. We had then the IA
Through the summer OF 1903 and hav-
ing it's sequel in a time of general
stagnation in 1904.
The difference now is that general
business is in a much healthier state
second that the output of new
securities, while undoubtedly excess
sive. has been nothing like as ex-
treme. On the other hand. the pres
ent situation has been aggravated as
1t was not then by the abnormal po-
sition OF the foreign exchanges, which
has made it to the advantage of the
remaining owners OF American securi-
ties abroad to cash in. even at these
very low prices.
Sources Of Selling Movement.
In an analysis of the sources of the
IcScHt selling movement one would
say that they were twofold. On the
one hand syndicates hung up with a
lot of new securities which they could
not sell have been forced under the
pressure of credit curtailment to sac
rifice stocks and bonds which could
other hand. with the tremendous fall
in the foreign exchanges and the pro-
poftionate increase in the premium on
the American dollar. Europe has been
tempted to throw back upon the
American market a good part of what
1t did not sell in the early years of
the war.
This European liquidation would not
have had as disastrous an effect had
the investment position of the rail-
roads been clearer. AS it is, there has
been enough uncertainty about the
pending legislation and just how this
will leave railroad investments to de-
ter fresh buying in this quarter. and
it was the lack of buying power quite
as much as the pressure of selling
that brought about the extreme low
prices at which railway shares sold
this week.
Railway stock Situation.
Despite the unfavorable course OF
the railway stocks in the market,
those who have given the most care
ful study to the Cummins-Esch bill
believe that it will work out very
form. The principal doubt was as to
the meaning of the 5A per cent guar
anty on property investment. But 1t
is now generally assumed that the
basis for calculation is the physical
valuation of the lines. and in the
cases where this valuation has been
completed by the Interstate Com
merce Commission it has proved high
by comparison with the market prices
of the securities concerned.
of tAc he
trusted that are being privately cir
culated some of the low-priced rails
with rates on a 5 u per cent basis OF
their property valuation are an ex-
tremely promising speculation. The
only reason why this has not showr
more in the market is simply because
the new measure is not yet a law anC
because the investing public are not
yet enlightened as to its significance
Thinks Worst Ii Over.
The worst is over undoubtedly ir
both the call money market and the
foreign exchange market. The funds
drawn out week ago by the gov
ernment have been returning to the
depositaries and at the same time
the enormous liquidation and still
more the greatly reduced prices or
the stock exchange have released a
purposes is abundant. The time
money market, however, continue.
very strained, and until this dead
lock is broken there will be nc
ground for any expansion in financia
operations.
1t has been the unloading of oul
stocks and bonds by Europe which
has turned exchange rates upward
This selling, plus our own invest
ments in European securities ant
European loans, which the Secretary
of the Treasury estimates at $4,000.
0oO. 900. has brought about a more