Evening star. [volume] (Washington, D.C.) 1854-1972, 1921-02-05
BY STUART p. WEST.
Special Dispatch to The Star.


| change this week has been explain
ed by some critics as the result of
| the advance in money rates and COM
mercial discounts. While this has
| been something Of an influence no
doubt the movement of prices could
be accounted for quite as well by
conditions within the market itself.
The upturn in the first fortnight of
January was altogether too rapid
for the bargain hunters of December
to follow. Nobody supposed that the
time had come for any sustained
speculation for the rise, consequent
ly there was no buying power sup
piled from speculative sources after
prices had had their ten to fifteen
point advance.
These high figures were reached
wholly through the excited bidding
of traders short of stocks, and when
these covering purchases were over
there was nothing to hold the mar
ket at it's high level A reaction that
would carry prices back to where
they would once more attract real
buying was inevitable. 1t would have
come about regardless of the course
of money rates. This reaction is
what has been taking place during
the past week. 1t has left the mar
d
what little fresh speculation was
initiated a month ago has been un-
done and the short interest consid-
erably increased.
The Bond Market.
The real test of the Importance of
the higher money rates has been wit
prices are down generally from their
top, but considering their previous
rise the reaction is very slight. There
has been no setback to speak of in
preferred Industrial shares and in
other investment stocks which mad
such a large advance during the first
half of last month. Had the harden
ing of money been taken very seri-
ously, were it expected to last. securl-
ties Of fixed yield which had gone up
on the belief that the main tendency
Of interest rates was to work lower
would have certainly shown more
sensitiveness than they have. AS
matter Of fact, even such little falling
off as there has been in bond prices
could be ascribed to causes other
than the rise in money. 1t was clear
two weeks ago that the long-term
mortgage issues which had got back
to a 5Aa5k per cent basis had
reached the utmost limit OF their
advance.
Moreover. there has been the con-
stautly increasing competition with
htese fiotations of high investment
rank and more attractive yield In
view of the enormous outpour OF new
ofYerines during the last month it is
not surprising that the bond market
should have paused in its advance:
1t is only surprising that 1t should
not have reacted more.
A. to Call Money.
The s and 9 per cent call money
rates and the advance from 6k to
II. per cent in time loans on indus
trial collateral are to be accounted for
in part by the large requirements of
underwriting syndicates bringing out
the various new capital issues. in part
by heavy government WlthdraWals
and in part by Wall streets OVERRIDING
the relaxation last month and lower
ing it's bid for funds to such an ex-
tent that the interior banks withdrew
their money from New York for the
more profitable uses offered at home.
These are temporary influences only.
The big things are the Improvement
in the general banking position as it
appears in the Federal Reserve Board
ratio and the reduction in the obliga-
tions Of reserve banks in the agricul-
tural regions to banks in other sec
tions, which have not been under such
a strain. 1t would be quite easy I'M
der the federal reserve system for In
situations having high percentage OF
reserve to take over discounts from
the New York bank and so relieve
what tension there is in the New YORK
market. This has been done to some
extent already; that it has not been
done on larger scale is simply an
indication that the heads of the
banking community see no necessity
of it, that the money market at New
YORK is expected to ease without
much help being required from the
outside.
Trade Recovery Slow Process.
The general trade situation is still
a good deal mixed. but there Is no
fresh ground for pessimism: The
movement of industry Is following
precisely the lines anticipated at the
outset Of the year. There has been
further price cutting in some direc-
tons, notably in oil. sugar and steel.
On the other hand, the motor trade
is doing better, with plants starting
up again, and the reports from the
textile industry and from the dis
tributive trade are better than they
the Federal Reserve Board: who Is
perhaps in closer touch than any
other single individual with financial
and commercial conditions, has again
taken occasion to state publicly that
the crisis is passed, that all danger
of panic Is over. that the credit situa-
ton is steadily on the mend. and that
while recovery in trade will be slow
i. has positively begun in some quar-
tiers, and may be expected in time to
extend to others. This seems to be
an eminently sane view Of things.
and it is the opinion OF the man VINO
was one of the first to sound the
warning in the autumn Of 1919, and
one Of the first to forecast the change
for the better when the situation was
at its worst toward the close OF 1870.
The Railway Situation.
Regarding the very important rail-
way problems which must soon De