The New York herald., 1921-06-20

wild upward swing than the boundaries
provided by economic facts
1t is necessary, however, before label
ing as the product of a sort Of specu-
lative hysteria last weeks great fall
of Mexican Petroleum and its allied
stocks. together with the establishment
OF new low records tfor the year, Of
certain steel, sugar and tobacco stocks,
to survey the business outlook. Frankly.
It has not improved appreciably. On
signs Of overproduction and undercon-
sumption throughout the world than
there were two months ago. But the
question is entirely fair, Is not the
stock market merely considering from
closer perspective than before con-
ditions which were practically as clear
long ago to those in position to get
the facts?
Situation In OIL Industry.
In the oil industry, the situation Of
which was probably the true bulwark
OF the bear position last week, an ap-
preaching period of oveIproduction was
known to farsighted men in the in
dustry as long ago as last March.
Although the price OF Pennsylvania
crude oil, grade especially sought
after by refiners, turned upward for
a time in the early spring, the more
important index Of the trade was the
fact that midcontinent crude received
no stimulus from the normal enlarge
nent of spring consumption and fell
back at a time when the Pennsylvania
price was strong. The midcontineut
price movement was the real signboard
and was so discussed at the time; but.
now, with quotations edging downward
toward the level of 81 a barrel, the stock
market has appeared to act as though
congestion Of supplies was something
brand new.
In Mexican Petroleum the factor of
lessened consumption in this country
and abroad was more influential in the
the decline of the stock than the Street
was aware OF. The spectacular strug-
gle between opposing forces. which
differ about the life OF Mexican oil
fields. last week submerged the out
lines of economic pressure that have
been bearing down on oil shares in all
markets. that pressure being the pres
ent decline Of earnings because OF a
lessened demand. It is possible tha
time will show that Mexican Petroleum
shares merely held out longer than
stocks OF any competing companl
against the tendencies Of the current
deflationary period. And when they be-
heavy bear selling because OF doubt Of
the permanency OF oil production in the
existing Mexican fields or through liqui-
dation from other causes, tho fall was
intensified by the very resistance that
existed before.
Business Outlook Unimproved.
The business outlook is not yet show
ing much improvement. except in dlrec-
tions in which defation was carried
through grimly during the winter and
largely because the situation OF foreign
buyers is not satisfactory. In South
America are many warehouses contain
ing goods sent out OF the United States
shipped back here to find a market. In
Europe the prospect for future business
is clouded by complications brought
about by severe strikes and by the move
ment in Germany TO consume as few
imports az possible; at the same time
that as much goods are exported as the
mills can make and the markets con-
sumo. In England a steelmaker reported
recently there scarcely a blast furnace
was In operation, largely because of the
prolonged coal strike, which not only AZ
fected producers of iron and steel but
consumers as we'll In Britain and on the
Continent where British coal used to 60.
The export situation means a great
deal moro to the American manufac-
turer than IL did before the war. In
dustry is 20 closely interlocked that a
lack CT demand for so-called surplus
products In the export trade cannot slow
down in one line without backing up on
some other line. Once the way Is clear
TO ship goods abroad on a big scale. for
cash or for credit. the effect will be seen
soon in mill activity and in business sem
tinent. IL is likely that the initial
movement toward a new prosperity will
come through an enlargement OF domes-
tic demands for home products.
Roads Need Much Steel.
The railroads assuredly need thou
sands on Thousands Of tons OF steel, and
growth of orders from the carriers
would speed UP the mills from the cur
rent 90 10 80 per cent OF capacity
operations, but the employment Of pres
ent facilities could not be maintained on
horne orders alone.
The settlement cf critical phases OF
the German reparations matter has
cleared the way for the reopeuing OF trade
routes long in decay. Although little
has been said here or abroad about
means 10 stimulate international busi-
ness enterprise In the last few weeks.
the subject IS under active discussion In
eli capitals. And an easier tone Of
money and credit In the United States.
which seems imminent may bring be-