The New York herald., 1921-12-27
FINANCIAL NEWS
AND COMMENT
Lack of Last Years Big Inven-
tories Makes Merry Christ
mas for Many Lines.
BANKING SITUATION GOOD
Firm Front of Stock Market
Viewed as Rcflecting De-
flation Now Going On.
BANKING SITUATION GOOD


The season has arrived when indus
try sets out to learn where il stands as
the result of years business and whcr
the banks strengthen their position fol
the start of a new year. 1t Is not sur.
prising. therefore. that very little new
information about business activitie.
came to light last week. This week wil
see about the same condition II conven
tlons of other years be followed. The
period OF annual inventory taking re-
suits In the closing down of many plant,
and of much reduced operations in 9th.
ers. The fact that the United State.
Steel Corporations works In the Pitts
burgh district slowed from 50 per cent
to As per cent. of capacity while other.
receded proportionately meant little a.
far as basic conditions were concerned
The actual picture of the manufactur.
ing outlook in steel and other commodi.
ties Is not likely to be visible until the
later.
Corporations are able to examine
their inventory accounts this winter
from a viewpoint quite different from
producers have taken the losses result
ant from a year of vast denation. They
have the right to feel now that, ever
though 1922 may prove to be a rather
Indifferent year for business. they are
not entering into It with such topheavy
supplies of raw materials or finished
goods as to infiict upon themselve:
months of uncertainty and worry.
New Incentives to Fronts.
Surplus accounts have been cut down
but that process Is in the past. The ad-
ditions made to inventories in the sec.
ond half Of the year were at prices sc
far below the top figures Of 1920 as tc
promise a fair profit in the resale. The
elimination Of excess profits taxes and
the lowering Of personal income sur.
taxes add an incentive to the making OF
profits which did not exist in 1920 and
in 1918.
Industry has been thoroughly debated
In the last year, and It would be sur
prising IL the stock market had not
taken account of that fact In its firm
front of the last three months. The
prices of stocks do not always reflect q
present state Of earnings. On the con-
trary. a broad movement usually antici-
pates events expected to happen several
months later. Stocks were as thor
oughly Debated as was business In the
first six months Of 1921; hence a nat
ural rebound would have been expected
from August onward. after the first
clear signs of business stability were
seen. But the market has appeared to
be disclosing more than a mere read
justment from an overdone decline. Ex-
cept for tho two or three days Of reac-
ton last week. the tone Of stocks has
been persistently firm since October I.
From that date until the present many
issues have advanced to Is points un-
der buying which had the earnsarks OF
accumulation for the longer future.
The stock market has been shaped in
part by the very general belief that the
worst phases of the after war deflation
were completed last summer. With tho
toughest part of the road behind them,
spectators and investors calculated
that the tendency OF business. although
slow and haiting, would be forward,
and they have found no reason thus
far to change their opinion. 1t Is prob
able that some Of the enthusiasm which
accompanied the initial sessions of the
Conference for the Limitation OF Arma-
ment has cooled of and been dissi-
pated marketwise. 1t Is likely that the
stimulant derived from the recent rise
of tho foreign exchanges has been
weakened by tho failure of exchange
rates to hold their advantage.
Real weakness 10 Not Seen.
It has been plain In the last few
days that operators on the destructive
side of market values have been en-
couraged by the dullness Of industry.
seasonal though this Is In part. But
the market structure has given no gen.
uine signs of weakening. and there are
numerous factors working to keep UP
the courage Of tho partisans OF con-
structive results in industry during the
next few months.
Certainly the banking situation gives
all reason for expecting moderate credit