Evening star., 1922-12-17
SUPPORT LACKING
IN BOND MARKET
Investors Studying Foreign
Loan, Railroad, Tax and
Trade OutIooks.
BY BYRON SELLER.
Special Dispa tch to The Star.

BY BYRON SELLER.
Special Dispatch to The Star.
NEW YORK. December 16.-There
is a lack of speculative support in the
bond market. That is one of the rea
sons that may be given for the in
activity and lack of trend shown by
the investment markets not only this
week. but for a month past.
Neither investors nor traders are
buying bonds with the expectation OF
capital appreciation, except In the
case OF few speculative issues
Stabilized prices discourage trading
Ihis condition is apt to continue until
the new year, and the course of the
market after that date will depend
ON number of factors.
First and foremost is the European
situation and the relation thereto OF
our own government. 1t has been the
fashion among stock market specula-
tors to minimize the Importance OF
Americas foreign trade. Grain grow
ers and grain spectators know bet
ter. The price of our cereals Is fixed
in the world markets and unless
Europe Is able to pay the price the
American farmer viii suffer. And the
country cannot be permanently pros
porous without a prosperous and con-
tented-put emphasis on contented-
agriculture.
Rate Question Vital.
Just now the railroads are bearing
the brunt of the attack by the repre-
sentatives of the agricultural inter
ests in Congress. The campaign
for lower rates is being actively
Commission is now hearing argument
on an application for lower charges
on agricultural products. Secretary
of Agriculture Wallace testified the
other day that unless the railroads
reduced rates there would be gen
agricultural production in the United
States.
The demand for relief from the
farming interests becomes more in
sistent every day. Probably the only
let-up in this campaign can result
from a substantial rise in the price
of farm products. particularly grain
and unless the general European stu
alton improves no such rise is prob
able.
The week has been marked by more
or less contradictory reports as to
the intentions of the administration
at Washington in connection with its
situation appears to be fast nearing
crisis. The dispatches describe
Germany as approaching complete
financial paralysis" There is talk OF
a huge loan to save the German stu
alton
Workable Loan Dimcult.
1t is hard to see what security could
be given which would enable such
loan to be placed in America. But
if. out of all the confusion over repa-
rations and international debt, any
workable plan comes. it Will clear
the way for consideration of our own
business and financial condition on
it's merits and so permit the invest
ment markets to take their natural
course.
Minor influences are the pressure
on security prices from so-called tax
sellers or those who sell to estab-
lish losses to avoid tax payments.
Quotations are artificially depressed
in this process. Such selling bears
most heavily on the obligations OF
any railroad. for instance, the earn
ings of which have been COM
paratively unfavorable.
Unless there has been some decline
in the price of the security held.
there can be no loss recorded by its
sale. the amount of which can be de-
Quoted from net income for taxation
to distinguish between the loss in
market price which may be due to
perfectly logical reasons and that
due to this artificial condition. After
the first of the year this load will
be lifted.
Trade Outlook Good.
There is always also uncertainty
as to how far the present improve
ment in general business will go. If
it should continue throughout the
winter and spring there would be
I,b inv Mt
poses and the outlook for security
prices would be correspondingly i'm
proved Aside from the agricultural
unrest and the foreign situation. the
outlook is good. 1t is also note
worthy that merchants are pursuing
of stoc',s of goods, which, it is said.
will be smaller at the end of the year
than at any similar period since pre-
war days.
The most favorable development of
the week, as far as investment secur-
tiles go, has been the rapid absorp-
ton of new issues. This was par
ferred stocks which gave an at
tractive yield. quality considered. 1t
is reasonable to expect a good deal
more such financing in January.
There has also been eager absorp-
tion of tax-exempt obligations. AL
IHOusH tHe pLoCeSS VI dIucuulHS Tile
Constitution to limit further issues
of tax-exempt bonds must necessarily
be very slow, the sentiment in favor
Of such action seems to be increas-
ing. and consequently the demand for
outstanding tax-exempt securities is
improved.
Taxes Check ON Bonds.
This matter of taxation has a very
vital relation to the price of high
grade industrial and railroad secur-
tiles. Investors of large wealth no
longer buy taxable bonds. The de-
mand for these must come either
from institutions or from the man OF
moderate means. This leaves only
the current rate for money as the de-
termining factor in the price of many
such issues. 1t is not likely that
high-grade first mortgage railroad
bonds will reach the levels attained
back in 1906. when Atchison general
As sold at 104h. Bonds of that grade
now yield about 4 Y per cent at the
market, and, with the demand limited
by the income tax barrier, they are
not apt to go higher.
(CopyriEht, 1927