New-York tribune., 1920-01-05
In Wall Street

II ELEASED unexpectedly from
X the repressive influence ex-
erted by the scarcity of funds
for speculation, the stock market
opened the new year most auspi-
clouslN On Friday money opened
and renewed at Is per cent, which
was precisely what most traders
had been looking for, the general
expectation having beeh that no
real money ease could be hoped
for before the middle of the
month. But, instead of advancing
sharply, as had happened each day
for some time, the rate began to
topple in the afternoon, and finally
got down to 6 per cent, the lowest
point touched in several weeks.
Since, as far as could be told from
surface indications, the acute money
situation had been practically the
only restraint on the market, specu-
lators found in the sudden ease an
irresistible argument for buying
stocks. They did not hesitate.
Standard speculative issues, such as
United States Steel common, were
promptly rushed up to the highest
levels attained since the November
smash, while the so-called special
ties were even more buoyant. TO a
certain extent the rise was due to
repurchases by those who had sold
short in expectation Of further de-
cline and to purchases of those who
had sold to register losses for in
come tax purposes, but the bulk Of
the demand apparently came from
spectators who had decided to take
a position on the long side as soon
as money conditions warranted them
lin dong so. At the end of the week
the Street was very bullish.
1t is a question as to whether or
not the improvement in the money
market is at all permanent. Bank
ers had said that there was little
prospect for easy money before JAN
uary Is. But apparently they over
estimated the demands which were
made upon their resources as a re-
suit of first-of-the-year disburse-
mcnts and found themselves all at
once with an abundance Of funds
available for stock market uses. The
supply is by no means inexhaust-
ible, however. A few days Of ex-
cited trading-and trading is begin
ming to have more or less excited
appearance-would almost certainly
cause things to tighten up again, in
view Of Saturdays poor bank state
ment. Many brokerage houses, while
believing in higher prices for stocks,
are inclined to advise their custom
|ers to wait bit and see how long
money will stay cheap and plentiful.
There seems to be little doubt that
a tremendous speculation would de-
velop if the funds to finance it were
available. But the Federal Reserve
authorities have given no indication
cf change in their attitude toward
speculation. On the contrary, their
previous warnings against the use
of banking resources for that pur-
pose were repeated in the monthly
bulletin, and, indirectly, by another
advance made last week in certain
rediscount rates.
tits seriously to be doubted if the
Federal Reserve Board can rectify
the present abnormal business stu
alton merely by curtailing credits
for speculation. Speculation is a
product, rather than q cause, of in
fation. Indeed, speculation-we are
speaking rather of speculation in
consumable goods than of specula-
tion in securities-tends to promote
production, and, left alone, will pro-
vide its own remedy. The plain fact
is that the American people have
greater spending power than they
ever had before, and with the patri-
cite fervor present in war lacking,
nothing except crisis can stop them
from using it. If it were not for
the unfortunate fact that labor is
slothful and cannot be persuaded to
produce goods in normal way, the