New-York tribune., 1920-07-05
Trade and Finance
Developments of the Week
and Their Bearing ON
the Outlook

the Outlook
High money rates operated as q re-
straining influence upon the action Of
the speculative security markets last
week, but failed to produce liquidation.
Despite the intense dullness-the mar
ket relapsed into a state Of absolute
stagnation in which tho volume Of busi-
ness fell to the lowest level since Sep
tember, 191S-stocks displayed under
lying strength and toward the end Of
the week exhibited advancing tenden-
cies which we're considered as hope
full sign. presaging better market
during the current month.
Wall Street paid moro attention to
the tense credit situation than 1t did
to the developments at the San Fran
cisco convention. Last week was a Pc
ket The banks were called upon to
meet the abnormal demands Of the mid
year settlements and transactions Incl
dental to the large corporate disburse-
ments and government operations re-
flected in rising rates for money on call
as we'll as in the commercial bill market.
On three days call loans touched ii per
cent, and on another day went to Is
per cent. These were the highest rates
since April. The stringency denoted by
the rise in money rates was not duo to
any heavy demand for money for stock
market purposes, but was occasioned
rather by the scant offerings of lending
Institutions, which had their hands full
taking care Of the heavy seasoned de-
raands Of business. In the commercial
paper market borrowers on prime bills
paid 8 per cent for accomm odGtlon.
Indications are that with the COM
pletion of the July disbursements and
the flow back into normal channels of
temporarily at least the local credit
situation should undergo relaxation.
Wall Street has been building its hopes
for a successful revival of bullish op-
erations in stocks this month upon the
prospects Of such temporary easing of
money. Stocks acted toward the end of
last week as if it required compare
lively little effort to mark prices up
ward. Moreover the bear contingent
seemed to be disinclined to add much to
their outstanding short commitments.
To many shrewd observers the market
looked to be thoroughly liquidated and
therefore in position to respond we'll
to favorable developments.
There are number of developments
pending to which the financial COM
munity Is looking forward with quiet
confidence. One is the prospect of a
better money supply. Another is an
early decision of the Interstate Com
merce Commission in the case of the
railroads for an advance in freight
rates. The latter, if it is as favorable
as the Street thinks it will be, might
easily serve to restore confidence in
railroad securities and so put new life
into the whole investment market. 1t
could not help but prove beneficial to
speculative securities as we'll, for the
backwardness Of railway issues has long
been drag upon the entire market.
Some interesting figures on the pres
ent position of the stock market loan
account have been compiled by a COM
petent authority, which show not only
how important factor the interior
banks are in the domestic money mar
ket, but also emphasize the enormous
liquidation of collateral loans that has
taken place since the peak of last
year. At the moment the total of bank
loans for financing security market
operations in the New York district
stands at $850,00O,O00, of which banks
in the interior of the country are
credited with $40O,o00,00o, or nearly
so per cent. From January to April
iuSAOol'o IHO average outstanding
stock market loan account was $1,1O0,-
100000, of which interior banks con-
tributed $500,0O0,0Oo. At the peak of
last year the loan account aggregated
$1,45O,00o,0O0, with the interior insti-
tutions accounting for $75O,0o0,000 of
the total. These figures suggest that
the stock market credit account is in
stranger position than at any time
since the money committee Of the
Wartime emergency relinquished its
control Of the market.
Somehow tho myth has grown up
that investors are analytical. Of
course some ares but tho vast majority
of the smaller investors are far more
influenced by the recommendation of a
friend or of bond salesman than they
are by a perusal Of balance sheet.
Statistics for the average bond buyer
are useful to Justify purchase after
it has been made.
Human nature does not become
transformed into cold. mathematical
mind when it steps south Of Fulton
Street. The old emotions and the time
worn prejud!ces continue to sway men
even after they have entered the