The New York herald., 1922-04-03
FINANCIAL NEWS
AND COMMENT
Confidence in Improved Busi-
ness Is Augmented by Re-
cent Events.
STOCK MARKET FEARLESS
Vulnerable Point Seen i'm Ig-
noring of Potential
Dangers.
STOCK MARKET FEARLESS


weeks events to lessen the impression
impaired by expanding steel and iron
manufacture, enlarged freight car load
ings and a situation of monetary ease
In the first half of March. 1t looks
now as though those cheerful prophets
at the end OF 1921 who predicted that
the spring season would bring much
better results than did the final quarter
OF last year had reckoned better than
they knew. The real spring period,
when business traditionaily throws Oft
the thrall of winter. has not opened
yet. but industry and trade in many
directions are undoubtedly much i'm
proved. and give promise OF fairly con-
sistent advancement nenceforth.
1t is. a question. however. whether
the buoyant state OF the security mar
kets Is based altogether on current busi-
ness facts and future prospects. The
rise since last November of to 20
points in stocks-sorne have climbed
higher than this maximum-certainly
has discounted great deal of business
expansion. The rise OF Liberty bonds
from prices yielding more than 51s per
cent to levels returning no more than
l3o per cent Is q measure OF relaxed
money rates. and the easement Of
money has largely been caused by the
lack OF use for It.
Bonds have been impelled upward. to
degree. because business dullness re-
leased credit which had to find work
somewhere and flowed into securities.
Just so. growing plenitude Of money
brought rates In the last month (for
fixed period collateral loans) lower than
had been seen in more than four years.
and this development was of itself a
temptation to spectators to accumulate
stocks on credit.
Rise Based on Cheap Money.
A stock market stimulated and nodded
by the sheer power OF cheap money Is
not altogether healthy. Granted that
share values had been depressed lower
in the slump OF 1921 than assets back
OF them warranted. It Is to be remem-
bered that somewhere in rising move
ment prices will balance real considera-
ton Of asset worth and the opinion
which conservative investors have Of
the outlook for earnings. Such bal
ance may be maintained for several
weeks or It may be altered In a few
days by the arrival OF new facts to
promote new speculation. The point is
that periods OF equilibrium appear in
bull markets and not infrequently they
are accompanied by a sudden decline
instead OF a gradual slackening OF the
advance. When such an interval comes
after sharp setback 1t is a sign that
factors working for the rise have been
overvalued. Spectators have been
looking through glasses Of too bright a
color.
One reason why the current market
has not experienced any really extern
sive reactions this year lies In the abb
sence OF unfavorable developments In
the financial and business fields. The
big poolss have plenty Of capital. have
made their plans and carried them out
with hardly any discontinue at all
from happenings with O bearing on
prices. That portion OF the public which
invested money last year has had rea-
son to congratulate itself on its fore
sight. Spectators outside the iTnmedi-
ate environment OF the market have
been go impressed by the steady ad-
profits. These conditions make for a
strong price list and 1t Is likely to con-
tinue until something happens.
The fortunate BACKGROUND Of the
stock market has been demonstrated
by nothing more pointedly than the
coal strike. Normally stoppage of
fuel production would be little short Of
a calamity for industry. The lamenta-
tions OF spectators would be loud and
prices would fall But the very fact
of slack manufacturing. quiet state
of shipping and a fairly large accumu-
lation OF supplies works this time to
remove fear of serious consequences of
a shortened coal output, although no
one may forecast what the situation
will be two months hence II the shut
down is still in effect and Industrial
consumption grows at the rate OF
4 ebruary and March. The stock mar
ket is counting upon the ending OF the
strike before the pinch comes. and. by
the same token, Il seems to be relying
upon tho absence OF unsettling occur
rences in all other directions for some
time TO come.
In this attitude there is a vulnerable
spot. The market has almost forgotten
that things are not right In Russia
that Germany Is seething with political
discomfort and struggling with finan-
cial problems which no one has been
able to solve. The outlet for surplus
American goods is smaller than at any
time since 1914. Many countries are
trouble by difficulties brought by 6e-
preciated currencies.
The recent strike In South Africa and
the present New England textile tieup
supplement the true meaning OF the
coal strike: namely. that much labor
Is unwilling to retrace the steps taken
since the war. In conditions surround
ing any of the facts mentioned lie pos
sibilities of unexpected news at any
time which would have effect upon
any exaggerated stock market move
ment The pools are quite adept at
stepping out from under for, q time
when a hitch occurs In a speculative
program.
The outstanding new influence in the
markets last week was the favorable
impression made by railroad earnings,
disclosed In reports OF February opera
tions. While not much more than halt
OF the statement issued during the
s.tA al Nnu t. xt.xe.