New-York tribune., 1921-01-03


dividend constitutes no new adverse
factor. 1t is an effect rather than a
cause. The cause-which is the sig
nificant element-is the reduction in
earnings which results from the re-
cession in industry. Where it has been
known that the income Of corpora
tion has been growing smaller the de-
cision of a board Of directors to pay
less than the usual amount or moth
ing at all to stockholders cannot be
regarded as bearish. 1t would be more
unfavorable if a corporation continued
to nay high dividends in times of de-
preston, when the corporate treasury
IS depleted. Framers of the policies Of
corporations are serving the best IN
terests Of stockholders in Withholding
dividends whenever paying them would
impair the financial strength of com
pany. Common stock represents spec
ulative capital, which is first to feel
the shocks of a downward swing in
industry. On the other hand, in boom
periods of common share holders BEN
eft most handsomely. The investor in
need Of regular, stable income usually
can do better than purchase common
shares.
Nineteen-twenty was the year In
which the excesses Of 1919 in tho stock
market were offset. However, Just as
bull markets usually run beyond the
margin that fundamental conditions
justify, so downward reactions usually
go too far. That is why recoveries
are to be expected. Necessitous selling
often depresses prices long after the
holders of securities feel that quota
tions have receded enough to discount
altered economic changes. It is more
than likely that in 1921 some of the
excesses of 1920 will be overcome, as
business men and spectators after
endless experimentation discover new
normals, perhaps somewhere between
peak prices and pre-war quotations.
Like struggling giant, escaping
from chains which restrained him, Sc
curity prices toward midday on
Wednesday began an upward spurt.
The turning point in the weeks trend
resulted from lifting of selling pres
sure for the purpose of establishing
tax losses. By midweek most of this
kind of liquidation had been completed,
and those who had been sellers to cs-
tablish their obligations to the Inter-
selves into buyers, and as a result
both stocks and bonds rebounded
sharply. Professional operators who
had been short Of securities were i'm
medately sensitive to the change, and
began to cover their commitments, add
ing onspicuously to the demand for
stocks.
Railroad stocks were especially firm,
and the average Of twenty representa-
tive securities in this group rose from
61.70 to 65.25 in the week, and the
average Of thirty industrial stocks
jumped from 69.63 to 72.o0 in the
week.
With the new year a reality, many
plans for aiding Europe financially in
new ways are under discussion. How.
ever, until the exact reparation bill
which Germany will be asked to pay
to the Allies is presented there is little
disposition to make definite commit
ments. Under the terms of the treaty
this invoice-the largest ever present.
cd-must be prepared by May / next
AS soon as it is made public there will
be quickening of efforts on the part
of business men and bankers, as there
will be a better basis for Judging the
stability of European finances. The
chief factor of uncertainty will have
been removed.
Unless 1921 brings q relief of tht
strain in the money markets the fore
casts of the ablest bankers will hay,
gone aStrlV Aq ot0n fro,or Law,