San Antonio light. [volume] (San Antonio, Tex.) 1911-1993, 1923-03-11

SECURITIES
SUFFER DROP
Reaction Is Felt in All
High Grade
Issues.
BUSINESS is GOOD
Improvement Advances at
an Accelerated
Pace.
BUSINESS is GOOD
BY BYRON SELLER.

New York, March 1O.-Commer-
cially and financially the weeks rec
ord may be summed up in sentence.
Business improvement went ahead at
an accelerated pace, stocks hesitated
and investment securities reacted.
As to the progress of business, there
can be no TWO opinions. Production
steadily increased and just as steadily
goods went into consumption. Labor
of all classes was in demand. Wages
tended to rise and there has been
confident buying for forward delivery.
A study of the fundamental conditions
perhaps may throw some light on the
problem of why there has been hest
tation in the speculative and reaction
in the investment markets. -
First cs to speculation, which has
grown more and more cautious III
stocks if not in commodities. Proba-
bly, the chief influence has been psy-
Geological. Stocks lave had long
rise and all experiences teach that
some time the advance stops and the
tide turns. On the first of the month
200 representative stocks had scored
a gain form the 1921 lows amounting
to over so per cent. This justifies, if
not caution, at least sober reflection.
Sober Reflection Lacking.
But, for the most part, just such
sober reflection has been lacking and
there has been substantial blind faith
in the so-called cycle theory now so
widely accepted, and according to
which, business and speculation fol-
low each other in orderly procession
from lows to highs and back again.
So it is argued that simply because
the rise has been so long maintained
the decline must be near.
If, however, economic history, on
the reading of which the soundness
of the cycle theory is founded, is ex-
amined, it will be found that spec
ulative movements for the rise have
| come to n halt either because the
speculative movement has been car
ried to an excess SO tina. it tOppled
over from its own weight, or because
the markets were forecasting a bust
ness reaction.
As to whether the first explanation
answers, only analysis of prices of
specific securities in comparison with
earnings present and prospective can
reveal. On this point opinions will
probably differ, but it would be diff
| ficult to sustain such q conclusion on
| the facts. As to the future for gem
cral business, all that can be said is
that if the speculative markets can
foresce a reaction there is no indi-
cation thereof elsewhere.
HiHi.grade Securities Lower.
The case with the investment mar
ket is different. The money mar
ket and quotations for higher grade
securities show definite trend to-
ward lower levels. 1t should be OBJ
served that the weakness has been
most apparent in railroad bonds of
the saving bank class. 1t may be
that the process here merely a re-
adjustment of market value as a re-
| suit of the competition. of government
securities.
There does not seem to be any
good reason with Liberty bonds SELL
| ing on a 4.25 to 4.50 basis for first
mortgage loans or even the strongest
railroads selling to yield only a lit
| tie more. The traditon that railroad
securities as class are superior to
| industials still lives in the bond mar
ket, although long discarded by trad
ers in stocks. Nevertheless, it must
be admitted that there is steady
pressure Of liquidation which cannot
be accounted for in any other way
than by the expectation of hfgler
rates for money. In so far rs the le-
| Ultimate business demand for more
funds is concerned, this expectation
is justified.
Ought to Balance One Another.
Study of the weekly returns Of the
federal reserve system. however, show
that no kind of stringency is any
| where near at hand. And so long as
gold continues TO pile up, the effect
must be to sustain il not to advance
prices. 1t should als1 be said that
savings and profits, due to full en-
| ployment for the workingman and tn
prosperity for the business man, will
SOONER Of later flow into investment
channels and so support the market
for investment securities.
SO far this discussion has been con-
firmed to purely investment bonds
When the case of the second grade
and speculative bond is taken up, the
opposing forces of anticipation OF
higher money and Strengthening OF sc.
curity because Of improved financial
condition of the debtor corporation
ought TO be found to balance one an.
other. .....
The more speculative the security
the greater will be the effect of i'm
provement in earnings. This is shown
in the present market where obliga'
tions, fixed interest bearing Of rail
roads. the financial future of which
looked very dubious a year ago. are
now rising against the general trend
of the market.
FINISHED Product Must Advance.
Going back to the business situa-
ton, one Of the most favorable indi-
cations is the conservatism manifest
ed in the face of rising prices for COM
modities.
While burning is free. there seems
10 be no danger Of merchants OF
manufacturers accommodating high
priced inventories. Moreover, 1t Is
well realized that the upward trend
in raw materials must sooner or later
be translated into a high price for
the finished product. This higher