New-York tribune., 1921-01-03
Speyer Sees Seven
Fair Years Ahead
For L. S. Railroads
Temporary Slowing Up of
Business May Prove Bless
ing in Disguise for Car
riers, Is View of Banker

After seven lean years the owners of
railroad securities may now look for
ward to seven fair years, in the opinion
OF James Speyer, head Of the banking
firm of Speyer & Co. Calm consider
alton of all the circum stances, Mr..
Speyer says. warrants the conclusion
that they should not feel discouraged
Prices of securties,' the banker
adds, always are Influenced by gen.
eIal economic and financial conditions.
The destruction of capital and the
waste Of labor in economically unpro-
ductive enterprise during these last
years all the world over have naturally
increased the cost Of capital, as evil
denced by the general rise in the inter-
est rate, which latter. in turn, has
found it's expression in comparatively
low prices for fixed interest-bearinp
securities.
"lf one considers the enormous
issues of government bonds-some with
special tax ptons-and the large
amount of our securities which Euro
pean holders had to sell back to us, for
all of which new purchasers had to be
found, 1t Is perhaps to be wondered at
that our railroad bonds did not decline
to larger extent. This decline. of
course, does not imply a correspond
ing decrease in their intrinsic value.
The shares of industrial corpora-
tions have experienced heavy fall in
price, partly through forced liquida-
ton and partly as a reflex of the vio-
lent price readjustment in all com
modltles. Of course, railroad shares
have been affected by this general
liquidation, but in spite of this their
holders Will find that they had not de-
cl'ned as much as industrials and
that in fact, some are selling at about
the same price as or even higher than
year ago.
The first six or twelve months un-
der resumed private operation of the
carriers cannot be taken as a fair cri
teron OF what results may be OBJ
tanned under the new conditions. 1t
is generally admitted that the roads
were returned by the government to
the owners, certainly undermain
tanned and overmanned, and consider
able work will have to be done to
roadoed and equipment to bring them
up to former standards. The general
price readjustment which has taken
place has resulted in a temporary
slowing up IN business, which natural
ly affects the volume of railroad traffic.
guise. as it enables the managers of
our railroad companies to put their
houses IN order and to handle bust
ness more economically and to buy
necessary material and equipment at
lower figures.
"The year 1920 has brought two
events of far-reaching Importance for
railroad security holders, which should
have an increasingly beneficial effect
on their properties and on the pros
perity Of the country as whole.
"flrst-ln spite of attempts at de-
lays, and contrary to propositions of
men like Mr.. Plumb, the railroad prop
critics were promptly returned to their
owners by the government, in accord
ance with the overwhelming desire Of
our people. For the time being this
dlsposes of government ownership and
government operation. and the country
Is to be congratulated, not only be-
cause this would have proved very
expensive undertaking to all taxpayers.
but also because it would have proved
extremely dangerous, politically, to
our country at the present time. The
owners of railroad securities, in COM
mon with all Americans, ought to bene-
TIT through the cessation of govern
ment operation, and it now becomes
their duty. more than ever, to provide
and progressive management.
"Second-This year has also brought
the first piece of real constructive leg
lslation affecting railroads that has been
passed by Congress in twenty years, viz,
the Cummins-Esch transportation act
Of 1920"
whether the rates as now fixed will
produce the return which the act SAYS
should be produced remains to be
seen, but one thing Is certain-for the
INST time IN many years the managers
OF our transportation system will not
have to fear. or fight against, reduc-
ton in rates and other harassing and
punitive legislation. This is a tre
mendous advantage for the owners and
should enable the officials of the com
panies to devote their whole time and
;ttention to making the management
honest, efficient and economcal' and
to see to it that capital expenditures
arc reasonable. The Transportation
act particularly provides that the In
ierstate Commerce Commission should
watch the management and see to it
hat this be done ~