The New York herald., 1921-01-10
FINANCIAL NEWS
AND COMMENT
Causes Back of Advancing Se-
curity Prices and Increase
of Absorption.
FOREIGN LOANS COMING
Outlook Changed in Compari-
son With Prospects Of IL
Months Ago.
BY WILLIAM JUsTUs BoIEs.

BY WILLIAM JUsTUs BOIEs.
The sharp upturn OF security prices
last week reflected not only heavy pur-
chases for the account of speculative
buyers who figured prominently in the
! December declines but good buying by
! genuine investors who took the view
| that fundamental conditions had
greatly improved and that the market
would go ultimately considerably higher.
That judgment was predicated on the
knowledge that the stock market closed
/ the year with prices not far from the
panic level of prewar times. that the
| drastic readjusunent of commodity
prices had eliminated the most serious
! initiation OF the war period, that mer-
| chandise production had fallen below
| the requirements of actual consumption
and that for the first time In five or
/ six years the people and corporations of
this country were spending less than
| they earned Besides all this the wealth
of our foreign trade, with another enor-
nous export margin for the year just
ended. have placed the nation In an
exceptionally strong position with ref
erence to the rest OF the world.
Strong Fundamentals.
Those changes show that fundamental
conditions are in all respects more re-
assuring than they were at the opening
of last year. when average industrial
stocks were quoted at S10S.50, in con-
trast to less than $68.50 when the year
ended. Railroad stocks closed the year
at about their opening levels. notwith-
| standing material Improvement In trans
portation. as evidenced by largely in
creased freight rates and much greater
| efficiency of railroad labor Further
more. the country Is fast reducing living
expenses and stabilizing prices at a level
at which credit strain will be less acute
and expense Of doing business materi-
ally reduced.
There are many uncertainties to deal
! with, but the outstanding fact Is that
the traditional common sense of the
American people is forcing the nation
to abandon extravaganza and adopt re-
| forms which will be of immense benefit
in the end. Instead of insisting that
blue sky and sunshine would never end,
as the stock market activity year ago
indicated that people believed the de-
mand now is that the old abuses shall
cease and the cost of Federal, State and
municipal government be promptly re-
duced.
Weak Spots.
The weak spot is still the credit situ-
alton and the immense volume Of frozen
loans held by banks OF agricultural
states as we'll as by institutions in the
manufacturing and mercantile area.
Those conditions hereabouts are being
relieved gradually by the downward
trend OF retail prices. which is doing
much to increase consumption and
bring into the market again the multi
tude of buyers who went on strike sew
/ t-.l vAzlr. - M H..
participants in the outlaw strikes of
last year.
The protest was against the continu-
ance OF war prices In peace times and
the foolish disregard by many manu-
facturers and merchants of the changed
economic conditions prevalent every
where. Those reductions are fast de-
pleting merchandise stocks and thaw-
ing out an unwieldy loan account ac-
cumulated In days when merchandise
brought almost any old price that the
seller asked for prompt deliveries. That
readjustment is orderly. but 1t is ef-
fective in restoring the prices of essen
tial merchandise to something like the
pre-war basis. The movement is still
in full swing and 1t is likely to con-
tinue for several months to come, be-
cause conditions are not the same In
all Industries, just as they are not the
same in all countries
Getting Liquid.
The special sales of mems clothing
and other apparel being held are liqui-
fying bank assets and increasing the
supply OF credit available Tor com
mercial needs, which does not mean
that easy money is in sight, and one
sure thing is that no easy credit is In
sight. But the country's loan account
is being purified In remarkable way
and slowly but surely loans are peins
shifted from weak borrowers TO strong
horrowers. The red!scount facilities OF
our reserve system are oelne saie-
guarded zealously because, although
the strain Is less tense than u was .he
world Is beginning to realize that the
- ,raatest factors In the investment
situation of 1921 will be the Bank OF
EnyIand and the reserve system OF the
United States. 4.
THE Bank OF France Is doing what II
can TO promote deflation because tne
World Ia burdened enormously py war
dohts and evils growing out OF situa-
t,on In which this country Is planhlns
70 spend for armament this year sSoV'
900 900 more than the total interest ana
sinking fund requirements OF us ma
,iopal debt Those conditions are sug-
s-ostIya Of the urgent need for public
and private economies with the staolllz-
ing OF all industry on materially loWer
nrlce basis. The attitude OF the whole
country toward those problems mas
changed radically within few months
and most sellers of merchandise are no
longer cherishing false hopes. They re-
alize that war profits are thing OF the
nast and that new commitments this
year must be undertaken with the idee
of assisting the restoration OF normal
price levels.
Solid Basis.
BY that means the country Is develop
ing a new order OF doing business which
win be highly beneficial for producers
and consumers. With the fall In com
modify prices and the increased produc-
tivenass of the dollar. the demand for
fixed interest bearing securities carrying
a high income return will broaden as II
usually does when interest rates decline.
There has been no fall In interest rates,
but the broader absorption Of Libertys
and other high grade securities has been
in anticipation OF such movement, ex-
pected 70 develop during the next six
weeks.
The public Is not Interested heavily
In the security market In speculative