Evening star., 1922-11-26
DECLINE IN BONDS
/ THOUGHT NEAR END
Money Market Outlook Is
Easier-Doubt as to Rates
Being Relieved.
BY BYRON SELLER.

BY BYRON SELLER.
Special Dispatch to The Star
NEW YORK, November 25.-The
decline which came when the bond
market turned downward last August
and September now seems to have
run its course. Prices for prime is
sues appear stabilized. for the pres
ent at least. The reason generally
ascribed for the decline was the
doubt as to the future of money
rates. There is now no expectation
Of any material advance in quotations
for time money.
The second factor materially to
affect the market was liquidation on
the part Of banks of securities bought
a year or SO ago. WIN demand Ior
funds for business purposes was at a
minimum. This liquidation for a
time was very heavy and prices suf-
fered correspondingly. That. too. ap-
pears to have run its course for the
present
Next came a wave of pessimism as
to the situation abroad. Doubt as to
the ability OF foreign governments
to meet their obligations was freely
expressed. The decline in prices for
foreign bonds became acute. Here.
too, the pressure has been lifted,
temporarily at least.
New Factor in Market.
This week new influence has
come into the market for investment
securities. 1t is fear as to the at
tempts Of the radical group in Con-
gress to modify the transportation
act to the detriment OF the railroads.
The effect has been very plain in
the stock market. but bonds have not
been exempt. Issues so well secured.
both by property value and earning
power. that no conceivable decline in
net income would affect them are. of
course, unchanged. but the great ma
jority Of second-grade and specula-
tive issues have been in disfavor for
the. same reasons that brought about
the selling OF railroad stocks.
Investors look to dividends on
stocks as a margin Of safety for con-
tinued payment OF interest on bonds
on stock a qualification for bonds
legal for savings banks and trustees
Any development which threatens the
railroads as whole has disturbing
effect on the holders Of railroad
bonds. And even If the holder does
ready to buy until the outlook be-
comes clearer.
1t is perfectly true that there is
little likelihood of any legislation ad-
verse to the railroads before the new
Congress meets in regular session a
year hence. but the discussion by
leaders OF the so-called agricultural
bloc as to the imperative necessity OF
a reduction in rates has its effect OF
sentiment.
Rail Bonds Weak.
Then, too, the revelations as 70 the
enormous costs of the strike to the
railroads have been disturbing. 1t
was a shock to many investors to
hear from the president of the Bal
strike to that road was between
$4,000 900 and $11.000.000. The usual
crop OF rumors as to the financial
condition OF TIVE weat"r roads has
also been in evidence all the week.
Probably all the rumors were base
less. Certainly they were promptly
denied In all cases where they had
crept into print. Bu| the cumulative
result was bad. Nor did figures show
ing regular car loadinEs and general
business improvement serve to coun-
teract the prevailing feeling. 1t
must be remembered that all this talk
about prospective troubles for the
railroad was superimposed on a bond
market which had been declining for
months.
Now all this is entirely illogical.
Not even the radical leaders in Con-
eress are going to destroy the value
which protects good railroad bonds
Government ownership and opera
ion would. not do that. And some
day the leaders of the agricultural
population will realize. even II they
do not at present. that neither the
farmers nor any one else can be pros
porous il the railroads are not al
lowed to earn enough to provide
themselves with adequate equipment
to meet the transportation needs of
the country.
Also If the other factors which
have adversely affected quotations
could be removed and the general
yersed the prevailing uneasiness as to
the railroads would likely be dissi-
pated.
Business Outlook Good.
Meanwhile If We get away from
kets the business outlook continues
favorable. The wholesale drygoods
trade continues active. Automobile
manufacturers are preparing for
record business in the spring. The
Department Of Agriculture believes
the boil weevil. The cotton grower
is marketing his product steadily at
prevailing high prices. Many cor
porations are increasing dividends.
Credit Is available to merchants on
reasonable terms. The trend of prices
Is upward which always breeds .op-
timism. The demand for labor
especially unskilled labor. is In
creasing. Probably some attempt viii
be made to modify the present immi-
grafton restrictions. While no boom
is in sight, neither is there any in
dication of a depression.
Opinion as to the correct attitude
Of America toward Europe is still
very confused. 1t can hardly be said
that the visit Of Clemenceau and his
speeches have helped much. Most
foreign bonds have held the gains
they made last week. French Issues
improved their position. 1t is an open
secret in bond circles that powerful
interests have come to the support of
certain foreign government obliga-
tions. It is still true that extraordi-
narily high yield rewards the investor
courageous enough to buy and hold
foreign bonds.