Evening star., 1923-07-08
HIGH YIELDS seen
AFTER BIG BREAK
Stocks and Bonds Appear to
Offer Opportunities for
Good Investments.
UTILITY GROUP STRONG
Risk Also Greater, With Higher
Interest-Bear Arguments in
Wall Street.
UTILITY GROUP STRONG
BY GEORGE T. HUGHES.
| Dispatch 10 The Star

BY GEORGE T. HUGHES.
Special Dispatch TO The Star.
NEW YORK, July 1T may be
.har some light will be thrown upon
che relation between the price of Sc
.:urities and the financial and COM
mercial situation by an examination
Of the investment return at current
quotations..
IL an impartial student were TO sit
down and make a tabular statement
OF the yield given by both stocks
and bonds, shares in and obligations
of long established and prosperous
American corporations, and if the
only information he had were the
said yields and the prevailing charge
for time money, he would be forced
to the conclusion that American in
duStry was on the road to bankruptcy.
For it would not be simply business
reaction that would be indicated, but
business disaster
Many High Yields Noted.
Now We know such conclusion
would be absurd. American industry
is not bankrupt. 1t is not on the way
to disaster, it may or may not be on
the road to serious reaction. Opin-
ions about that differ and the evidence
alarm recently shown in Wall street
is out of all proportion to the fun
damental facts.
Such a study of prices and income
return at present dividend rates and
present quotations would reveal that
the stocks of the public utilities ana
from other companies are giving the
highest yields. Eight per cent on the
investment Is common and 10 per
cent is not unusual and there are
stocks selling to return everything
between these two points. 1t is, OF
course. admitted that all such stock
holdings are speculative and that
risk obtains with r.gard to all OF
them.
The question is whether the risk is
as great as the price indicates.
Status of Auto Stocks.
Take the case of the motor industry
first. Few people realize how great
an industry the production and sale
of automobiles has come to be. The
notion that the automobile is lux
ury is outworn. The automobile is q
necessity. The so-called saturation
point recedes farther and farther each
year and the replacmnt dmand as
year and the replacement demand as
steadily grows
1t is a business subject to great
seasonal riuctuation and responds
readily to general business conditions.
1t is also buSines III which compe-
titon is peculiarly intense. But no
sane observer can doubt the perma
nency of the motor industry as q
whole and no examination of balance
sheets OF the leading producing com
panieS can fail to demonstrate their
remarkably strong financial position.
Comparisons with 1920 and 1921 are
absurd: There are. to be sure weak
sisters" among the motor corpora
tions, as everywhere else. Perhaps
here and there, dividends will have to
"a l,rt RI
that possibility had been more than
discounted in the current price of the
motor securities.
Utilities Group strong.
The case with the public utility cor
porations is even more striking. NO
matter what may be ones views as
to the continued demand for auto
about electric light and power or
even gas. Tho electric light COM
panies are continually beset with ap-
pcalS for more service.
Almost each day witnesses the deNel-
opment of new use for electricity
There are no greater laborsaving de-
vices than those thar employ the cleo
rric current as the motive power ana
the progress of civilization depends
in large measure upon the develop
ment of labor saving machinery. And
yet the price at which shares of lead
ing public utility corporations, both
holding companies and those dealing
directly with the consumer, are sell
ing would indicate the conviction
that all this demand was about to
vanish into thin air.
Same In Bond Market.
The same phenomenon, although not
so marked. is to be seen in the bond
market. Speculative bonds have
shared the fate, of speculative stock S.
This is especially the case with The
railroad bonds, except those Of the
strongest roads. Record d-breaking
earnings are entirely without effect.
Attention is paid only to talk of re-
duction in rates and to the political
hostility which appears to center in
the agricultural midwest.
But ii is not presuming too much
10 suppose that the American people
are going to start out deliberately to
bankrupt the country's entire rail-
road system. And if they did so start
out, would thev not find a baIrie.- in
the Supreme Court? In other words
is the case really as bad as Il seems
Wall Street Arguments.
What does Wall street say to argu-
mcnts such as here presented? AS al
ready indicated, it dwells upon higher
labor costs. lower commodity prices,
political threats. but most of all upon
the huge outpouring of new securi-
ties.
Only the last-named need be dwelt
upon here. The flood of new offerings
is. indeed, a serious matter Notwith-
standing the disturbances in the Sc
curity market. June corporate fnanc-
ing showed an increase of $74.473.S25
over May. and 1t is not to be won
dered at that the quotations for older
issues were unfavorably affected. But
why is not this very situation the op-
pOrtunity of the genuine investor
with real money?
(Copyright 1927