The Birmingham age-herald., 1922-10-22
TREND OF BOND
 MART WAS DOWN DURING PAST WEEK
Eager Demand Noticed For Tax Exempt Bonds-States and Cities Encouraged to
 Extravaganza
Fly BYRON SELLER
Special CorresDondent of The Age Herald (ConYright 1929, by The AEe-Herald)

Fly BYRON SELLER
 specInI CorresDondent of Tue AEe-HeraId
 Copyright, 1929. by The ASe-Herald)
 New York, October 21.-The week has been one of great irregularity in the bond market. In the main the trend has been downward, but indica- tions have not been lacking of sup port at the new level. The story is best told In the averages. On De- tober 19 the average price of 10 rail- road bonds of the highest grade was 87.77. This was a gain of 9.73 points in a year, but loss of 3.67 points over month ago.
 Similarly the average price of lo second-Rrade railroad bonds on oc- tober 10 of s6.61 was iO44 points above the average of a year ago but 1.ss points down in a month.
 The average for 10 public utility bonds showed gains of 1S.44 points Tn a year and losses of l.o4 points In month. Ten industrials gained ll'26 points in a year and lost .s6 points in a month. The combined average showed a gain of 11.22 points in the year and a loss of 1.ss points in the month.
 A check to the downward move ment was noted in the closing days of the week. In some cases quota tions for high grade investment se- curities apparently had reached the point where purchasing power was attracted.
 This was notably the case with Atchinson general As, perhaps tho most representative railroad invest ment bond, which at this weeks low was down points from the high of the year. Anything to yield around per cent had good market. Ex. amples are: Tennessee Coal, Iron and Railroad 5s and New York Gas, Elec- trio Light and Power 5s.
 Money Plentiful
 Some authorities claimed to believe that the readjustment in money mar ket conditions as evidenced by the attractive yield as the new govern ment issue had been completed. It was pointed out that the supply of money was still abundant, both for legitimate commercial needs and for investment. Moreover, increased busi- ness might be expected eventually to increase funds available out Of profits for reinvestments In securities.
 Other equally well informed au- thorities were not so confident. Both agreed that the demand at present was for prime. short term obliga- tions. By short term was meant bonds to mature not later than 1880 and by prime issues was meant only the best secured issues of the strong est corporations. An investment policy founded on this principle must be safe, no matter what the future of the general market. It is elemen tary that the price fluetuation is the greatest in the long term bonds.
 Liberty Bond Demand
 Perhaps the most sensational cpl sode of the week as far as the in- vestment market was concerned, was the demand for Liberty 31as, and the consequent increase In price to q new high for all time. It is doubtful whether there will be any abatement in the inquiry for ax-exempt secu- rites.
 Certainly there Is no indication of any decrease in surtaxes in the pres ent condition of the treasury. And Wall street takes fright every time anyone suggests some new taxation scheme may be adopted by Congress Witness the excitement over the re- port that corporations surpluses would be taxed. So many good judges believed demand for Liberty SIS and the high grade state and municipal issues will continue.
 Undoubtedly the obligations of the federal land banks and of the Joint stock land banks, which are entirely tax exempt. will meet with increased favor from very wealthy investors While these bonds are not teach nically obligations of the United states, the security Is so good and the supervision of the federal gov ernment is so strict that the bonds may be considered of the very high est grade.
 Tax Exempt Bonds
 This same eager demand for the tax exempt securities has undoubt- edly encouraged extravagance on the part of the states and municipalities. This Is particularly the case with ex- penditures for highways. The Bank or America In recent compilation, showed that over 34 per cent of the proceeds of existing state debts had DoSit "Ppiiou to tne construction of roads.
 South Dakota leads in this classi. fication. Seyenty-five per cent of It's gross state debt having been incurred for the purpose of building highways. oregon Is second with 53 per cent. and Massachusetts third with S5 per cent. It Is question how far this can continue without the investor as well as the taxpayer taking mo- tice.
 Railroads are already complain ing they cannot understand why they should maintain their own roadbeds and pay taxes thereon, while the mo. tor truck operates over Toad built and maintained by the statS out O., the proceeds of tax exempt bonds. It IS very doubtful. however whether the movement to prohibit further is sue of non-taxable bonds will sue ceed. Even if 1t did the effect woula be to increase the value of outstand- fa - ~~$sAN>