San Antonio light. [volume] (San Antonio, Tex.) 1911-1993, 1923-02-25
BONDS DROP
/. AS DISCOUNT
!. RATE RISES
Advance in Investment Sc
curities May Be
Halted.
RAIL ISSUES REACT
Business Outlook, Never
theless, Is Still
Bright.
RAIL ISSUES REACT
BY BYRON SELLER.


spanking, was the raising of the dis
count rate by the Federal Reserve
banks of New York and Boston. As
far as the general money situation is
concerned, the increase is not i'm
portant, simply bringing as it does
the Eastern banks into line with the
rest of the federal reserve system.
The significance lies in. the official
recognition of a change in the trend.
If this change is more than temper
airy it means two things, first that
the rise in high grade investment Sc
curities, which has been in progress
for the last couple of years, has been
definitely checked, and second, that
the demands of business for more
funds are making some impression
upon the supply.
Taking up the first point, fridays
bond market showed that investors
and spectators alike took the same
view. Liberty bonds and prime in
vestmcnt rails were all reactionary.
Highly speculative issues continued
to be affected by conditions peculiar
to their respective properties. The
losses in quotations for high grade
securities were rot large az the mar
ket for sometime has been diScountinS
some such development. In flc5 tie
action Of the bank Poy errors was only
n recognition 81 conditions which
have been prevailing in the opsn
money market.
No Great Decline jim Prospect.
1t should not be- inferred. however,
tina. any great additional de.lina in
bond quotations is in prospect. Nor
is there any indication of any strin-
gency in the money market. The sup
ply of funds for legitimate business
purposes is extraordinarily large. The
effect of further advance in commo-
dities, is, of course, factor that can
not be overlooked. Such advances
sometimes have almost as much effect
on bond quotations as the raising of
the money rate. But these advances
in commodity prices may themselves
be checked, at least as far as specula-
ton is concerned, by the same stiff
fleming in money charges. ."
In the last analysis the problem
centers on the consumptiye demand.
If the demand continues good, both
raw materials and manufacturing
goods will be produced to supply it
and eventually prices will be fixed so
as to assure the producers q reason
able profit. The best criterion OF
consumptive demand are bank clear
ings and car loadings. While these
continue on their present scale, no
concern need be felt MS a continuance
of good business and this without
much regard to the money market.
Sooner or later there comes n point
Mt which consumptive demand is
checked but when that point will be
reached no one can predict.
Al! this is said as to the industrial
situation generally and without re-
gard to any particular industry. Con-
ditions in any one trade or with any
one commodity may change with great
rapidity while the general situation
remains practically unaltered. IT. for
instance, sugar prices should continue
to advance under the dual impetus OF
speculation and fears on the part OF
consumers of scarcity. it might hap
pen that the experiences of the last
sugar boom would be repeated. Sugar
is a commodity produced in many
countries and high prices quickly
stimulate an inflow of imports. But
this might happen without any adj
verse effect on the general industrial
situation.
Business Outlook Still Bright.
As examples of the proposition
that consumptive demand is the main
factor in the present situation, the
instances of cotton and copper may
be taken. Cotton maintains its
present high prices and copper has
risen to its new level with buying
power in Europe. especially Ger
many. at n low ebb. 1t is hard to
see how anything else than a genuine
domestic demand can account for
| present quotations and If so the whole
business outlook is still bright.
Turning to the foreign situation,
| which the American financial mar
kets still ignore. we find conditions
| il no better. at least no worse. Ii is
| true that the deadlock between the
French and the Germans shows no
signs of breaking. but the explosion in
many quarters has failed to material
| ize. And an explosion which is fully
anticipated is not likely TO do a great
! deal of damage to innocent bystand-
ers. 1t is becoming more and more
! evident that the European situation
cannot be considered rs a whole. The
| foreign exchange market shows this.
| Otherwise how account for simultan-
cous strongncss in sterling and weak
ness in francs?
French Bonds Remarkably Firm.
An illustration of this was afford.
ed this week by the report from abroad
that the republic of CzeChoslovakia
was considering the funding of its
debt to the United States. The adj
ministration of the finances Of this
new mid-European republic has long
commanded the admiration of conser-
vative observers. Meanwhile it ought
to be observed that French bonds
| hive been remarkably firm and that
the panic which seized investors n
| few weeks ago seems to have abatcd.
No review of the week could he
! complete without some reference 70
the situation in Washington. As the
session draws tn n close. threats 81
legislation, detrimental TO the rail-
roads, are no longer as terrifying as
they were when the election returns
began 10 come in last Novembe-. II
loOfE now ns though tho much beSet
TRANSFORMATION systems of the coun-