Evening star., 1923-08-26
F|NANC|ERS WATCH
DOMESTIC TRADE
Definite Fall Trend Being
AWaited-''CycIe Theory"
Also Market Factor.
WHEAT MUST COME BACK
Erie Issues Weeks Biggest Sur
prise-Huge Surplus of Gold
Still Piling Up. e.
WHEAT MUST COME BACK
BY GEORGE Il. HUGHES.

NEW YORK. August 25.--In the
weeks trend of the investment and
speculative markets there has been
little to throw light on the immediate
business future. The speculation
has been entirely professional, and
investment dealings have been on too
small scale to be of Significance
This is the natural state of affairs for
the season.
II is significant, however. that a
more cheerful feeling prevails. This
appears in the resistance which spec
ulative securities show to unfavor-
able news developments and in the
ready absorption of such few new in
ve&tment offerings as have appeared
AT the same time there is too much
uncertainty for any aggressive move
ment in either direction. Nor Is it
likely that the situation will be
cleared UP until the outlook for do
nie"tic trade in the fall becomes plain.
The fact is that IA great many busi-
ness men as we'll as investors and
SpeculatGrs have become converted
TO the So-Called 'cycle theory" ac-
cording to which there is a more or
less steady progression from pros
ptrlty to depression and back again.
The result is that the present gen
orally favorable condition is looked
upon with suspicion rather than
compliance. In this state of mind ii
viii take something pretty definite
permanently to turn the markets.
UnfavornbIe Factors.
The unfavorable features of the
stuation have been repeatedly dis
cussed. These are the low price of
some agricultural products, low in
comparison TO the general price level,
and the failure to reach any solution
or the reparations problem abroad
To these has been added concern over
the effect of IA possible suspension of
work in the anthracite coal region.
A hard coal famine would bear heav-
lily upon houSeholders in New Eng
land and the north Atlantic coast
states, but would not necessarily
hamper general business, which is de-
pendent more upon the supply Of bi-
luminous. The hard coal operators
and the railroads, the chief traffic of
which is in hard coal, would. of
course. be hard hit, but the public
utilities and manufacturing generally
would go on about as usual. A SYM
pathetic walk-out on the part of the
soft coal miners would be much more
serious. but this is not considered
probable at this writing. So it comes
back again to general trade condi-
tionS and the usual indicia-bank
clearings, Carloadings and steel and
iron production-are being closely
watched.
Wheat Must Later Come Back.
AS far as wheat is concerned what
ever may be the temporary course Of
the market no product permanently
sells below the cost of production.
While in the normal order of things it
takes a year for readjustment of
production to consumption in the case
of farm product speculation may be
trusted to anticipate such readjust-
w
grain trading exercised under the new
law has been blamed for a great
many things. il is highly improbable
that this control will be used to
wheat no matter what the source
of the buying that advances the quo
tationS The situation abroad may be
dismissed with the observation that
more impossible it is to believe that
a way out will not be found.
Erie Issues Big Surprise.
The week has been marked by
spectacular demonstration in the
stocks and bonds of the Erie rail-
road, which was all the more note
worthy because of the lack OF conf
dence IN railroad securities general
1y. Even those Wall street profession
al advisers. who have been urging
for the past half year the purchase
of railroad stocks because OF record
car loadings and excellent earnings
statements, have begun to waVer. Inc
advance in Erie securities, therefore,
was a phenomen for which there was
no ready explanation. 1t came more
over, in the face of threatened coal
strike which if. 1t materialzed, was
sure to cut Erie's profits
Other roads also have MADE re-
markable progress in recent months.
but there has been no speculative
activity in their obligations. The
suggestion that some new new interest crest
hardly accounts for the strength in
the Erie's better bonds, which. in
its way was as pronounced as the
rise in the stock. Lacking any oth-
er. however, this theory of buying
from a special source was the best
available.
Problems Facing Rail Stocks.
For the balance of the year rail-
road shares will be under the con-
flicting influence of the peak traffic.
which comes in the fall, with the
corresponding increase in gross
earnings and the doubt as to the
ductions which will be demanded.
the one on behalf of the railroad
brotherhoodS and the other on be-
half of the agricultural shippers.
There will also be uncertainty as to
what the new Congress will do with
the present railroad law. On the
face, it looks as though the un-
favorable factors outweighed the
favorable. 1t must not be overlook
ed. however, that good deal of the
troubles TO which the railroads have
fallen heir may have been discounted
in the present price of their Sc
curities.
Gold Surplus StflI Piling Up.
Any review of the financial situa-
tion and of the securities markets
would be incomplete without some
reference to the gold movement
During the month of July gold ex-
ports were s522826. the lowest since
March. 1921. Imports We're $685.
444. The latter were exceeded this
year in January and May, but the
excess of imports for the seven
months amounts to S137,047,531. It
Is hard to see how prices can fall
in the face of this great gold surplus.