New-York tribune., 1920-10-04
Trade and Finance
Developments of the Week and
Their Bearing on
the Outlook

dualism of the marketplace became the
most striking aspect Of the period
During the week approximately as
many railroad securities attained the
highest prices thus far Of the year as
industrial stocks slumped to the lowest
level reached up to the present in 1920.
Moreover, the rails gained remarkably
in point OF relative activity, and on the
closing session of last week partici-
pated in three-ffths of the days trans
actions. After a decade in the back
ground, railroad stocks have at least
temporarily regained primacy.
Unless present market tendencies
are checked it is reasonable to assume
that they will be overdone in both di-
rections. The average prices of rail
stocks and that of industrials are fast
approaching point at which they will
intersect. Clearly the railroads are
better off now than they were earlier
in the year, before their future was
delineated by the passage of the Esch
Cummins act and the subsequent in
crease in rates. Although it seems too
early to suggest that the rails by their
rise in recent weeks have discounted
fully their new status, 1t Is we'll to re-
member that optimism regarding the
railroad stocks will eventually become
inconsistent with utter pessimism in
respect to the industrial outlook. This
= 20 1xv bor hot $ho Hnnro q
sion in railroad securities or the boom
in industrial stocks in recent years
does not require correction. However,
expectation Of reasonably large earn
ings on the part Of the railroads i'm
plies sufficient activity in the mills
and the factories of the nation to keep
the volume Of freight in transit high.
The present scale of rates Is based on
the expectation of q fair degree Of ac-
tivity and industry.
Men Of business are becoming ex-
ceedingly conscious Of the desirabi'lty
of effacing uncertainty regarding the
future Of commodity prices. There
have been further accumulations of
evidence OF the anxiety Of trade fac
tors to force quotations Of goods to
levels where confidence would be re-
stored. This striving has been the
motive force behind many Of the re-
cent reductions. In some instances
price cuts enormously stimulated buy
ing. especially where the revisions
and 6r9mafl
instead Of gradual and indeclslve. More
generally, however, there is a disposl-
tion to remain cautious until the ultl-
mate consumer begins to benefit from
the lower cost Of living. Hesitation
halts trade, but it multiDlies the de-
ferred demand. Its danger lies in the
fact that it may cause the dissolution
of industrial units, which require con-
tinuous buying to keep them intact.
In the motor industry, where lower
nrices have become fairly general
since Henry Ford led the way, drastic
changes have taken place since the be-
ginning Of summer, when a translt1on
started from a period of unprecedented
prosperity toward more normal con-
ditions, possibly via temporary de-
nression. The alterations within the
industry encouraged heavy selling of
motor shares in the speculative mar
kets during the past week, and they
are now nearly all at the lowest prices
of the year, far below the spectacular
heights scaled during the bull mar
llet days of 1919. The stocks Of acces-
sorv and rubber companies have been
similarly affected, and in brokerage
quarters toward the close of the week
the view was frequently expressed that
such securities had been thoroughly
liquidated. The tendency of the pro-
fessional bears is now to look toward
industrial stocks whose technical mar
ket position is less strong, such as
the oils and the steels. The steel COM
panies will be affected somewhat by the
adjustment in the automotive industry,
and besides there have been evidences
of an easier price tendency for this
barometric metal. For nearly year,
the steel shares, with other industrial
stocks, have tended lower, chiefly in
anticipation Of future adverse develop
ments Consequently they may now be
said to have discounted at least part
Of any unfavorable conditions that
may manifest themselves.
simultaneously with the fall in COM
modify prices the quotations on invest
ment issues have been rising. The ap-
petite for good bonds, particularly for
railroad and Liberty issues, continued
avid. This movement is in accordance
with economic theory. Fixed maturity
| obligations fall in value when the
worth of the dollar in terms of COM
modities declines, and the reverse is to
be expected when the prices Of goods
tumble and the worth of the dollar
| ascends. Moreover, the market posi-
tion Of high grade bonds reflects cur
rent interest rates. A persistent squirt
in bonds might we'll be interpreted as
+! the expression of the opinion on the
part of investors that existing abnor-
mally high rental charges for money
lent will not last much longer.