The New York herald., 1922-06-19
FINANCIAL NEWS
AND COMMENT
Stocks Dip in Reaction After
Squirt That Discounts
Business Gains.
PUBLIC DEEP IN MARKET
Scared Traders and Short Sell
ers Help to Force Decline
With Money Easy.
PUBLIC DEEP IN MARKET

expansion Of industry and. having done
so, are subject to internal adjustments
which cause prices to retrace part OF
the distance gained in the discountine
| process. Such a fall of quotations as
stocks have experienced. running in a
few days from S to 10 points. has hap
pened time and again In other periods
of business recovery. Rapid and vio-
lent reactions were frequent in 1915 and
1915 when war orders, in hand and pros
pective. were bewildering the speculator
with their promises OF profit. Allied
reverses and disasters at sea were some
times instrumental il bringing about
,eactionary movements in those years
but 1t was the topheavy speculative
structure. per Sc. which caused declines
| to be prolonged and, on occasion, merely
temporarily over extended account or
force a correction through abrupt price
| recessions.
| 1t would be difficult to select particu-
lar economic happenings as the cause
! Of the recent reversal Of stocks. The
great ease of money rates. practically
throughout the world. was effectively
demonstrated during last week by the
marking down Of the Bank Of England's
discount rate to a level a full I pei
cent. under the redscount figure Of the
New York Federal Reserve Bank; by the
cut from to per cent.-four weeks
ago it was per cent.-in rates of the
! Bank of Bombay and the Bank of Ben
| gal; by the fall of Federal Reserve re-
discounts to quite the smallest total OF
the last four years. together with the
decline Of outstanding Reserve currency
to the minimum of 1922. AS far as
business was concerned. the trade re-
ports at home suggested more active
condition of factories and more ex-
tensive flow Of goods into consumption
than had been noted before this year.
Shown by Rails and Steel.
Railroad traffic reports and the
operations of steel mills, both basic in
their Interpretation of the industrial
situation, were fully as effective as at
any other time in the last three months
in disclosing a growth of production
ished products. Only the spectre of
possible fuel shortage in the future, q
result OF the coal strike. was present
| last week to suggest that later there
might be forced change OF Industrial
prospects. Mention should be made
also. in respect to international rela-
tions and their bearing upon business
that one of the most constructive items
of this year was last weeks rapproche-
ment of the Mexican Government and
international bankers on ways and
means for readjusting Mexico's debt
obligations.
| A week containing so many fortu-
nate developments would hardly be con.
sidered fruitful of pessimism in the
stock market And yet the fact of fall
ing prices was facing the observer mos,
of the time. To state that speculative
enthusiasm over enlarging business,
easing money and improving condi-
tions in Europe had been too forcefu
for eight consecutive months and hence
brought reaction in its wake hardly ex.
| planned the market situation adequately.
While the history OF stock market
swings proves that last weeks reversal
was quite conventional. 1t must needs be
that all speculative setbacks during
plainly improving business cycles are
not alike.
| Often, as In 1919. danger signals
supplied by Tightening money rates af-
forded reasons necessary for the reces-
sions OF stocks. But this time money,
instead of being even firm, has been
almost ridiculously easy. witnessed by
call loan rates Of and 31s per cent
over the quarterly date for Government
transactions OF great magnitude. The
possibility that stock market prices
have run ahead of actual business ex-
pansion indicates a likely reason for
checking the advance, but hardly gives
full explanations for a sharp setback.
| situation in Brokers' Loans.
1t is possible that. while national
monetary conditions were altogether sat
| isfactory last week, the situation in re-
| gard to stock brokers' loans was not &c
good. The Wall Street estimates of such
loans are usually fairly close to the
| mark, and a recent calculation tha,
1900, 900 of borrowed money was
being used to carry securities. mostly
stocks, caused some deep thinking In
speculative as well as banking circles
For the shrewd speculator a loan ac-
count so large suggested that the public
was as heavily involved in the marke,
as IT was in any period Of the war boom
and was almost as widely extended as
In the extravagant market demonstra.
| tion OF 1919.
The speculator who knows his Wall
| Street undoubtedly felt that the slug.
| gishness Of stocks from the middle oi
| May 10 the second week OF June had
| made many traders In the publics ranks
rather dubious of gathering additiona.
profits A state Of mind like that Is
productive of quick sales once prices
begin to look shaky, and the size of the
| general loan account suggested that bor'