The New York herald., 1922-06-26
FINANCIAL NEWS
AND COMMENT
Sensational Rise i'm Mexican
Petroleum Stock Starts
an Investigation.
RAILS ALSO ARE STRONG
Bank Rate Cut to 4 Per Cent.
Is Another Sign Of Return
to Normally.
RAILS ALSO ARE STRONG


financial community and resulted in an
investigation by the authorities of the
New York Stock Exchange. Mexican
Petroleum has been for years a bone Of
contention in Wall Street. SO violent
have been its movements at various
times that the majority of traders have
come TO the conclusion that 1t has no
place on the list Of orderly stocks in
which a position may be taken on either
side without mourning the danger Of tre-
mendous loss in a short time. Its rises
and falls have been so extreme and so
rapid during it's hectic career on the list
of the New York Stock Exchange that
traders in many instances have been
caught unawares thereby suffering
heavy losses.
In It's gyrations last week Mexican
Petroleum completely outdid its best
previous performances with a gain of
fifty points and more in six days. an
average of almost ten points day.
| Whether the rise was warranted Is a
moot question and one that time alone
will settle satisfactorily. Officials iden-
titled with the company assert that the
stock has never sold at anywhere near
it's real value On the other hand, there
are those who declare that the Mexican
Petroleum properties in Mexico are near
exhaustion and consequently that the
stock is not worth the high prices at
which 1t has been sold. The investiga-
tion Instituted by the stock exchanges
committee on business conduct may or
may not determine definitely whether
the action of the stock last week was
based on a restoration of the price to a
point which measures it's real value or
whether 1t was purely a manipulative
operation which recognized nothing ex-
cept the large short interest which was
massacred during the almost unprece-
dented swing upward. m
Investigation Is Proper Moves.
The Exchange has done well in decid-
ing to investigate the situation. 1t. VII
| do better it, when its work is completed
it makes known it's findings. The prin'
cipal fault with Stock Exchange inves-
| t.gations Is the secrecy with which theii
results have been surrounded in tbs
past. Now and then an investigation
| has revealed facts which have made L
necessary for the Exchange to take
drastic action, and as a result these
facts have become public. Other In
auiries have been started, however
about which nothing has ever beer
learned beyond the four walls OF the
Exchange. II an investigation reveals
that no wrong has been done and that
no rules have been violated, the public
should know the fact In order that con-
fidence might be so much more quickly
restored.
| Aside from the movement in Mexican
Petroleum shares. the trading in stocks
last week was featured chiefly by its ir-
regularity III the closing days strength
was manifested In certain railroad IS
sues in recognition Of their improved
earning power and also of greater con-
| fidence that a strike will do no lasting
harm to the carriers. Other stocks
have fluctuated more or less aimlessly
for the last week and In cases where
pool manipulation has been used arbl-
trarily to advance the prices OF various
issues the methods were plain to be
seen.
Reduction of Rediscount Rate.
| In the field of credit the outstanding
feature was the reduction to PEI
cent. by the Federal Reserve Bank OF
its rediscount rate. Although by uo
means a surprise. this step was vel
coined throughout the length and
breadth OF the land as one more evi-
dence OF a return to conditions more
| nearly normal. The reduction indicated
also that the liquidation by member
banks of their Indebtedness to the re-
serve institution by almost s4O0 900 900
In the last year had proved satisfactory,
AT present the member Institutions owe
tne Federal Reserve Bank some s42, ,0o0.-
900, compared with s41g,00O. 600 a vear
age. Until something substantial had
peen accomplished in the way of smaller
rediscounts the bank felt no inclination
tc lower its rate.
For some time. however. the omen
market rates for money in New York
have been below the bank rate. Call
money has been relatively easy for
some weeks and In the last several
days has hung steadily around 3 Der
cent. dipping under that mark on two
or three occasions. A gradual working
lower of market rates is not unlikely 10
follow tha rediscount cut and an expan-
sion OF bhsiness would not be an un-
expected development, although 1t must
not be too pronounced.
Too heavy borrowing by industrial
interests as result OF the reduction
would be frowned upon by bankers.
whose principal fear has been at ali
times that the easy condition of money
would foster undue expansion and re-
newed Initiation and undo much that has
been done In correcting the postwar
difficulties Of the nation. One of the
principal effects Of the bank rate cut.
however Ia the manner In which II is
likely TO restore confidence.
Industry In the last week has shown
further signs OF advancement. The
steel industry has reflected the coal
strike only In stiffening of prices.
Labor troubles have retarded progress
somewhat and the developments in the
strike region of Illinois late last week
have not served to increase confidence
with respect to the settlement of the
differences between capital and labor
Increased confidence was shown last
II