Evening star., 1922-11-05
RECOVERY IN bonds
OF VITAL IMPORT
Change in Market Tone Held
Even Greater Than Rise
in Price Quotations.
BY BYRON SELLER.
Special Correspondent of The Star

BY BYRON SELLER.
Special Correspondent of The Star.
| NEW YORK. November A g. 4
markable recovery OF confidence has
taken place in the investment market
in the last few days. after weeks %
continued reaction. Bond prices. tb.
average Of which had been steadily
declining. turned right about aft-r
midweek. led by United States goli
ernment obligations Measured in
quotations the Improvement was not
as large as in the underlying marks:
tone. So far as could be seen. fun6a-
mental conditions were unchanged. 81
doubt remains as to the reason for
the recovery and Its continuance.
| Even in period of declining price
points Will be reached from time l.,
time at which support is encountereG
| This is just as true of investment a.
of speculative markets. Sooner o.
later falling quotations make prices
look cheap. How far this is the caso
in the bond market at present is un-
certain. II may be, OF course, tina.
| the improvement is a permanent turn
| for the better. Only the future 81
| determine that.
/ Second Grades Strong.
! IT was noteworthy that speculate.
and secondGrade securities were fully
AS prominent in the upturn as Nh"
| purely investment issues. In fact.
! the turn in stocks and bonds cam
! the same day. This would argue thai
the status of the high grade bonds
has not been materially altered. F"S
increasing business. which make
| speculative obligations more secure.
also makes more demand on mons
j
4; down the price OF the highest grade
| of investment bonds.
! Meanwhile. commodity prices slow
| ~ but surely move upward. Whea u
corn. oats and coffee. are all highe
| The action of the Studebaker CON
cars has meaning for investors :;
well SPECTATORS, provided IT is =
| all typical nj the automobile in
dustry
| summarized. The car shortage re
iported by the American Railway As
| sociation on october IL was the large
| on record. The indications are tina
| this shortage will increase dur IN
the next few months. Current il
;Quiries on the part Of railroads e.
| icars, both freight and passenger. n.
also the largest at any one time
| the history of the roads. Not ~.
! the equipment but the steel ma
4
Some Weakening Factors.
| The other side of the pictur.
pears in the uncertainties abroad a.
! the threat. remote as il seems AT pl.
ent. of another coal strike next Apr.
There is also continued complaint "f
[ increasing labor shortage. For tn"
| minute. nevertheless. the favora HI.
outweigh the unfavorable condition
| The question of interest, of Cour>'-
! is how ali this VIII affect the prIc" 80
! securities. As far as prime iny'S'-
| ment bonds are concerned. only
money. of which there is now ltr:.
sign. is likely To matter. The slfun
tion is quite different in the secor'f
grade and speculative classes.
Take the case OF the rallroau~
Bonds of the savings bank type s..
to yield little more than libertys. Oh
legations of roads which have ou.E
recently shown substantial earnins:
power are still very attractive. II IN"
railroad situation improves as il IS
now expected to improve. the pri'"
! of securities of this class may be ~
pected to increase.
Change Little Realized.
Actual investors are very SLOW -,
realize a change in the outlook f."
any particular road. With them
| records of the past weigh NOR
! heavily than outlook for the futult-
| If any one will take the trouble !"
4 compare present poor earnings al
F.; some of the roads always classed as
| strong with present good earnings
| of some of those generally c!asssu
! weak and note the failure to refec'
! these conditions in the price OF m
| respective bonds the point VIII h''
F! clear Spectators make these CON
! parisons constantly. Certainly IN IL.
| last analysis 1t is earning power AL"
| not property value which gives 4
! railroad bond investment worth.
| The rally in the foreign list was =
| investing feature of the week. I.
| came without any change in the f"2-
eisn situation. Exchange rates, ID.
| fact, Went lower as foreign gove:'
| ment securities payahie IN aoIIa
\ went higher. Only the fact that th'S'
/ bonds are selling on a basis OF Su't
p, an attractive yield can account i'f
| the unturn Probably any nsw
| "crisis'' unexpectedly arising wou''
! depress quotations again. II is re
| assuring. however, TO kho" th"'
| there is a limit to when pesstr,IiSi.
| as to the foreign situation can go. Z
least so far as il is reflected III IL
/ price of foreign bonds.
Possible Taxation steps.
! discussion as to constitution
+. amendment to prohibit further iSSG'
| of taX-eNempt securities contlhu'H
President Harding and the Secretar
of the Treasury are SAID 10 pe ''
! favor of such an amendment
| 1t is very interesting to note thA
savings banks are being ADVISED |"
nurchase state and municipal issue
at present prices with the eNpecta ,l"N
of disposing of them at proht wht,
aud if tax exemption comes to an cnh.
The process of constitutional amend
ments is slow and long time mus
elapse before any action is takel,
but that does not mean that prizes
of outstanding securltles may noL o'S
1 co,nt the event well beforehand.
Vigorous opposition to the chang
NAV be expected from states an"
ounicipalities. which are now able I"
borrow on such easy terms.
Copyright, 1872,