Evening star., 1923-03-04
COMMODITY PRICES
MUST Be WATCHED
Money Rates Another Vital
Topic Now PuzzIing
Financial World.
NO REACTION IN SIGHT
Liberty Bond Prospects-High
Steel Production Strengthens
Business.
NO REACTION IN SIGHT
Bl BYRON SELLER.

BN BYRON SELLER.
Special Dispatch T." The Star.
NEW York. March 3.-The attention
of both investors in bonds and specu-
lators in stocks. now is ccntcred on
two questions almost exclusively.
They are concerned about the money
market and the intentions of the
federal reserve authorities on the one
hand and about rising commodity
prices and Imitation on the other.
The attitude which they take to-
ward their respective markets de-
pends on their views as to these two
problems NJ other topic is discussed
with such deep interest. Repeated
rcferGnces are made To the experience
Of 1921. which was hcralded by the
raising of the federal reserve re-
discount rates in November. 1920.
Watching Reserve Board.
Bond dealers and traders see
visions Of slowly mounting charges for
money and consequently slowly de-
dining prices for investment securi-
cs. Stock spectators. while willing
/" go along with the rising market as
far as il will go. are putting their
houses in order for the storm they
appear 10 believe will break should
lie federal reserve authorities pa
enthusiastically decree that speculation
in stocks and commodities alike must
hG curfad.
The curious feature of all this is
that stress is placed neither on the
almost monotonOuS output of favor
able earnings statements on the part
IL 90 sIl ,l
roads nor on the demand from consul
mcrS in response to which, in part at
least. "A rise in commodity prices must
hC due.
II is not wise to overlook either of
these two sets of controlling influ-
"nCes. Money rates certainly have
much TO do with bond prices and
nothing is more sure than that Specu
lation always ovcrdoeS itself whether
IN securities or commodities with in
Nvitable reaction. But there are other
factors which must be taken into
consideration, and it needs only a lit
tic reflection to show that the fears
of both bond investors and the stock
SpeculdtorS cannot simultaneously be
justified For if the advance in stocks
and commodities is halted whether
artificially or otherwise it cannot but
have the effect of SteadXing the bond
market, always provided that trade
conditions continue as good as they
are at present and of Il change here
tnere is no sign.
Liberty Bond Outlook.
Let us consider the situation as to
investment securities d little more in
detail. Liberty bonds, of course. may
be taken as standard. There has
been a good deal of talk this week
about lower quotations for govern
ment securities and predictions have
been made that the Secretary of the
Treasury would be Obliged to pay
more than 412 per cent to refund the
maturities coming in the middle of
the month.
Supposing all this to be true: it by
no means forecasts any such reaction
in liberty bonds as marked the great
decline two or three years ago. BY
the same token there is no reason to
believe any similar fall in the price
Of other high grade industrial and
railroad securities can come about.
Only in so far as individual issues
have been selling out of line with 9TH
ers of their class can substantial
losses be expected.
II is true that the old tradition.
which makss railroad securities su-
perior as A class to induStrialS, when
earning power is approximately equal,
still rules. Legal restrictions govern
ing investments of savings banks and
trust funds in some states help main
tain this tradition. Undoubtedly
there will be some readjustment along
This line which will accord to indus
trials and utilities ID higher relative
standing than they used to have. But
that is not q condition which affects
the market as whole.
Real Values Vital.
It is worth while also to give some
attention to the intrinsic merit of the.
n
which speculation has been most ac-
tive. and to real demand for the
commodities, such as cotton, which
has had the greatest advance. IL
the quotation for the security and
tho price for the commodity do not
seem unreasonable in view of the
actual condition, such as the earning
power. present and prospective, of
the corporation and the supply and
demand in the case of the commodity,
there does not seem to be any loSlcaI
reason for anticipating any great col
lapse in values.
Meanwhile the most extreme pes
simist can find no warrant for his
views in business or in trade reports.
buyers throng the wholesale centers.
New York, Chicago and st. Louis have
the same story to tell. Confidence In
good retail activity is well establish
ed. Reports have it that the United
States Steel Corporation is operating
at between s. and 80 per cert OF ca
pacity, and this. it must be remem
bered. is IL capacity measured by
wartime expansion.
Railroad reports continue amaZ-
iugIy good and even when we look
abroad the Industrial situation. as
distinct from the political and tinan-
ciaI. is undoubtedly improving. In
The face of all these facts it seems
. a little premature to predict a gen
cral reaction