Evening star., 1923-12-30
INVESTORS STUDY
1924 PROSPECTS
Tax Reduction and Money Rates
Have Vital Bearing on
r.! Future.
NEW OFFERINGS COMING SOON
Weeks Gives Little Indication of
Next Years Trend.
Special Dispatch to The Star.
BY GEORGE r. HUGHES.

NEW YORK, December 29.--As the
year ends the problem which invest
ment bankers and others interested
in the investment markets are trying
to solve is the probable disposition
OF the large sums which will be dis
bursed on the first of the year as
dividends and interest
January is traditionally the time
for the reinvestment of such funds
and this year the amount so avail
able will be very large. 1t has fire.
quently been the experience in the
past that the January reinvestment
demand was anticipated by sub
stantial rise in the quotations for
prime securities during the closing
days. of the preceding year. Such,
however has not been the case this
year. The advance in the stock mar
ket and the incidental speculative ac-
,tivity are matters of entirely differ
ent sort and in no way connected
with this reinvestment phenomenon.
The bond market. meaning there
by the market for high grade Sc
curities. this past week has thrown
no light on the future. Apparent
ly. on the contrary, it has been gov
erned by an entirely different set of
influences.
Chief Factors OF Week.
The controlling factors for the past
week have been the outlook for tax
reduction in Congress on the one
hand and the probable course of
money rates on the other. Coupled
with the matter Of tax reduction is
of course the matter of the bonus.
The theory is that any substantial
reduction in the rate of Surtaxes
demand for taX-exempt securities and
release that much additional capital
for business or for investment in tax
able bonds, which amounts to the
same thing.
There is always at the close of the
year a certain amount of selling for
the purpose of recovering losses to
be written off in income tax returns.
Such selling obviously comes only
into securities the price of which has
suffered considerable decline dur
ing the year.
There has been more than the
usual incentive for this kind of SELL
ing this month in that the plan of
Secretary Mellon contemplates abol-
ishing the privilege of writing off
capital losses in this manner.
Tax Selling Discounted.
How great a factor these sales are
1t is very difficult to estimate. The
tance Is not as great as is ordinarily
believed. In any case, however, the
possibilities involved make 1t more
difficult to interpret the markets ac-
ton. No one processes to be at all
certain about the outcome In Con-
gress as TO either the tax reduction
proposal or the bonus. 1t Is rea-
onably assured that money will con-
ttnue comparatively easy.
Meanwhile the bankers are prepar-
Ing. long list of new offerings with
which to test the market In the new
year. These new offerings will come
into competition with seasoned issues.
and although the available investment
FUNDS are enough to support both, no
one can say which will attract the
larger proportion. For the most of
the year just passed there has. been
no opportunity for speculative profits
In subscribing to new issues. More
often those traders who attempted to
make such a profit took L loss in
stead.
Stocks Helpful to Bonds.
In repeated instances when the syn
dicate support was withdrawn the
price broke anywhere from to 4
points. There was great Improvement
in this respect In the last few months.
prices being well maintained, but
still with no disposition IL advance.
This condition will have a certain ef-
feet on the market next year. Nor has
there been any incentive 20 acquire
outstanding investment bon1s from
advancing prices. Probably the turn
In the trend of speculative opinion in
the stock market has been helpful
to investment, but on the otier hand
1t has also drawn away attention
from investment.
OF one thing there Is no doubt, and
that is that railroad securities have
fallen from the high esteem In which
they were. held by all conservative
investors. 1t Is particularly evident in
stocks, but it also appears in the
middle-gra railroad bonds. The
market price of the very highest
grade of railroad bonds has been held
UP by the fact that these securities
are legal Investments for savings
banks and In New York and most
other eastern states are the only
legal investments outside Of govern
ment, state and municipal issues.
Speculation Active.
This results in giving them an arr
fcally high quotation out Of all line
and utility obligations equally well
secured. Here the tradition that rail-
road securities are exceptionally safe
still prevails. There Is one other ex-
ception to the general rule. Foreign
buyers are still partial toward the
rails. but the individual Americ iE-
vestor not subject to legal restrictions
as to his holdings is turning steadily
more and more to securities outside
the railroad field. This is all the hard
er to explain in a year Whlcn hns
been so exceptionally prosperous for
the railroads as whole.
Turning to the speculative markets.
l. the week has been marked by re-
sumption of activity for the rise and
by the spread of optimism as 10 the
Copyright, 1921