The New York herald., 1921-08-08
FINANCIAL NEWS
AND COMMENT
Business Expands, Railroad
Earnings Improve, Credits
Become Easier.
BUYING POWER SLOW YET
Better Days for COuntry's Car
riers Expected as Gains in
Earnings Are Reported.
BUYING POWER SLOW YET

The impression gained from stock
market movements is that sustained
buying power remains sluggish despite
signs OF creeping expansion OF busi-
ness, despite improved railroad earnings
and in the face or broad movement
of credit into a position OF increasing
ease. Some OF the reasons for this are
not hard to discover.
One OF the most encouraging develop
ments in recent months is the growth OF
railroad operating income reported for
June. While all the returns are not In
yet. the reports thus far tabulated for
Class l roads indicate that balance
after expenses was earned to the ex-
tent OF $4,000. 900. compared with a
deficit in excess OF s15.7oO.ooo in June,
1920. AS a IL per cent. wage cut went
into effect on July ! and this and other
cost adjustments will apply to those
months OF the year in which traffic is
the heaviest, IT is expected that Rail-
way net income for July will make a
favorable showing.
But the public that buys railroad stocks
in an Intelligent fashion Is not yet salts
fed with the results OF one month, nor is
it likely to be with the product of two
months. The public can see in the de-
tailed statements OF rail earnings by
systems that a powerful reason why net
revenue increased in June was because
railroad managers let UP on maintenance
outlays and got along with as few en-
ployees as traffic and upkeep permitted.
Effects of PAIRING Looked For.
1t win take time to learn whether
some Of the roads used an axe upon
maintenance so actively as to have a
real bearing upon the state of physical
property. And. furthermore, while a net
income OF s50.0oo,o0o in Juno was a
striking Improvement over preceding
months, 1t was still many millions OF
dollars behind the total which tina,
month should produce in order to have
a return Of 51s per cent. on invested
capital in a full year.
Railroad stocks from their lowest
points OF 1921 to their highest levels
reached in many cases last week, showed
gains extending from to more thar
90 points. A rise OF this calibre was
naturally sufficiently large to invite
profit taking sales from spectators
Eut the point to be made here is not
that such selling, coupled with re-
sumption of speculative sales for the
fall OF values, knocked off to points
OF the advance in three days, but that
declines occurred because OF the absence
or consistent buying by the public. The
professional speculator aided largely In
putting prices UP, and he was instru-
mental in Topping the top off the ad.
vance.
The railroad outlook, however, Is not
impaired by the reluctance OF investors
to accumulate and hold stocks. The
public Is waiting to be shown. but the
evidence. unless some strong signs fail
is clearly pointing toward better days
for the. carriers The extraordinary
movement OF wheat to market suggests
that the July and August gross income
OF grain carrying roads will make good
reading. and control of costs. as demon
strated In June. forecasts gains In net
over the same months OF last year.
And 1t is well worth saying again that
the railroads will be strengthened meas
urably as soon as they get their quotas
of cash from the proposed 100000, ,00C
fund which the Treasury plans to put
at their disposal. The benefit to ac.
crue both to the roads and to the cor
porations OF which they buy equipment
materials and supplies through an en-
hanced cash position OF railway treas.
uries is constantly being emphasized by
men in position to examine the facts
from all angles.