Evening star., 1923-12-09
RAILROAD STOCKS
SHOW MORE LIFE
Lines Still Face Difficulties,
But Outlook Is Held to Be
Much Improved.
GOLD SURPLUS PILlNG UP
Weeks Record Inflow Thought to
Indicate Easy Money for
Long Period.
GOLD SURPLUS PILlNG UP
By GEORGE IT. HUGHES.

By GEORGE #. HUGHES.
Special Dispatch 20 The Star
NEW YORK, December S.-From
the long range viewpoint the two
important developments OF the week
affecting the security markets were,
first, the Presidents message as bear
ing upon taxation and the future Of
the railroads and. second, further evil
dence of the steady accumulation of
gold with It's implication OF a contin-
uation Of easy money and tho proba-
bility that such ease would be a
standing invitation TO speculative ac-
tiyity.
II is almost superAuous to say that
the Presidents attitude commended
itself TO Wall street The financial
community expected him to indorse
Secretary Melons program for lower
taxes. Interest ccntered on the
Presidents discussion OF the railroad
problem.
Railroads Less Worried.
The only reasonable explanation of
the failure of railroad securities, both
stocks and junior bonds, to respond
TO this years record breaking car
ioadings and increase in net income
has been the fear that the incoming
Congress would make successful
attack upon the transportation act
and that new and oppressive meas
ures of regulation would be proposed.
II now appears plain that however
these attacks may develop, they must
be carried on in defiance OF the ex-
pressed views of the Chief Executive.
. 1t sounds like d truism to say that
confiscatory rates cannot be imposed
upon the carriers because the Con-
stitution forbids confiscation. Yet
this very phantom of sweeping rate
reduction and consequent bankruptcy
for some of the weaker roads has
been haunting Wall street for
months. That ghost at least has been
laid.
Merger Specter Removed.
OF nearly equal interest is the mat
ter of consultations. While no one.
has been able to explain just how
compulsory consolidation was to be
enforced, there was always the vague
fear that somehow or other strong
roads would be saddled with the
weaker ones and that the only re-
suit as far as railroad securities are
concerned would be to depress mar
kct values. The President did not
attempt to say how any cOnsolida-
tion plan could be enforced. He did
propose. however. that combinations
be preceded by conferences with Sc
curity holders. SO that in this case
also as we'll as in the matter of rate
making there should be no confisca-
ton. So IS removed another specter
which has been haunting the street.
All this is not to say that the fu-
ture of the railroads Is not without
difficulties. Investors in railroad Sc
curities must continue to take the
business risks involved. They must
still expect that their properties
would be subject to regulation in the
public interest, and that all they can
the capital involved. Probably the
day of wild speculation in railroad
stocks is past. 1t does clear the
ground for a consideration of these
securities on their investment merits.
What Gold Influx Means.
The second development of the
week which challenges attention is
the continued inflow of gold
Figures made public this week
showed that during the last seven
days in November British banks had
placed aboard ships bound for New
York 4,s42,105 pounds sterling. or ap-
proNimately $2+,000,000. The average
monthly total of gold imports for the
year has been around S3U.001.000. In
other words. nearly as much gold
came in one week as has been coming
in an entire month.
Various explanations are made of
this movement. Secretary of Com
merce Hoover attributes it in large
measure to purchases of American
securities by foreign buyers. No
doubt there has been very extensive
buying of this sort. A good deal of
IT has come from Holland, and the
chances are that German investors
have figured in the transactions. 1t
is hard to explain the buying Of some
nf I, Dh
rate railroad bonds of the savings
bank class on any other theory. The
return on these bonds at present mar
ket prices Is so low that they attract
only that investor who places safety
above every other consideration.
There has also been accumulation
of some of the foreign dollar issues
listed in New York for account Of
buyers on the other side. What these
foreign Investments in our securities
represents is the desire to secure an
obligation payable in a stable cur
Sency. II is hardly surprising such a
desire should be strongest in those
investors who have suffered from the
greatest depreciation in their own
national currencieS.
Reserve Boards Plan.
But whatever the reason for our
mounting surplus of gold, the result
is the same. It means an abundance
business demands, and probably for
speculative activities also. Nor is il
likely that any course adopted by the
Federal Reserve Board can per-
ranently conceal the real monetary
situation or avert the natural conse-
ouences. The federal reserve authori-
ties this week have allowed 1t to be
understood that the reserve banks are
about to resume the purchasing of
gorernment securities in the open
market. Last spring the policy was to
dispose of holdings in government
bonds and Treasury certificates.
Now apparently they are to re-
acquire. The motive may be, as has
been stated, to increase earning as
sets, but tho course to be adopted
testifies to the existence of this same
surplus. There are many economists
who believe that Ultimately all this
leads to gold imitation, with the at
tendant rising prices for commodities
and the temptation to excessive
speculation.
Whether or not such will be the re-
suit, only the future can reveal, but
it is a matter which either investor or
lot tal int