Evening star., 1923-09-30
FEAR Of CONGRESS
HURTS RAIL SHARES
Investors Dodge Securities
Pending Possible Cuts in
Freight Rates.
AUTO ISSUES ALSO WEAK
Hints Of 0verproduction Used a.
Bear Factor-Japanese Loan
Now Fully Expected.
AUTO ISSUES ALSO WEAK
BY GEORGE II. HUGHES.
Special Correspondent of The Star.


Special Correspondent of The Star
NEW YORK, September 2S.-For
the persistent refusal of both specu-
lators and investors to take advan-
tage of the many apparently attrac-
1--WE securities at present market
prices there are many explanations,
put none of them really satisfy.
1t is hard to understand, for. in
stance, why there was not more re-
sponse to the action of the directors
of the Baltimore and Ohio this week
In restoring the common stock to a
dividend basis 1t is true that the
stock advanced substantially. but at
the prevailing quotation at the close
of the week it was still selling on an
SA per cent basis, and the situation
with the bonds is even more mys-
terious
In view of the strong financial con-
dition and favorable outlook thers
can be no question about the in
yestment merits of even the junior
issues, but one of these is still OBJ
tainable on a better than Z per cent
return.
New Congress Feared.
1t can be said, and said truthfully,
that investors fear legislation by the
new Congress adverse to railway Sc
curities. Outside of the railway ex-
ecutives and the stockholders, the
railways seem to have few friends
The Secretary of Agriculture only
this week could suggest as a remedy
for the unfortunate situation of the
wheat growers nothing better than
cut in freight rates on grain destined
for export.
The Interstate Commerce Commits
sion is now engaged in an investiga-
ton Of the propriety of the present
rate scale on anthracite coal. Secre-
tary Wallace's proposal, to put It in
his own words. is that rthe railroads
must not be crippled, but a reduction
of at least % per cent on freight
rates, especially on agricultural ex-
port commodities, should be brought
about in some way without further
delay. The entire structure of
freight rates should be analysed"
Nothing could be more disturbing
to railroad stockholders than this
course.
Fair Chance Probable.
The chances are that, in the end.
sane counsel will prevail and that
the railroads will be given a fair
chance. But the fact is that in
vestors are reluctant TO add to the
business risks inherent in ownership
y
which 1t is difficult to measure
There is, however, another factor
than politics. That is the effect of
the income tax on investors of large
means.
In pre-income tax days very rich
men could be relied upon to carry
the speculative risk. That is no
longer the case. y very rich man
is better off with tax-eXempt bond,
and there Is every reason to believe
h
is retiring from the stock markeR
whether for investment or speculaf-
tive purposes.
Investment bankers for a long time
have felt the effectSof this conditioR
They have been comtlslled TO develop
new clientele. They are compelled
to sell in smaller lots and To larger
number of individuals, thus greatly
increasing the cost of distribution.
All this has one advantage. A Sc
curity widely distributed is generally
permanently placed. 1t may or may
not be significant that the steadiest
stock on the entire list, American
Telephone and Telegraph, is the one
which has the most stockholders.
Auto Outlook Causes Worry.
There are, of. course, those in Wall
street who argue that the markets
are diScounting the reaction in gen
eral business. They foresee many dis
turbing possibilities, which is not hard
when you set your mind to it. To
mention only one, great concern is
expressed over the future of the au-
tomobile industry. Except possibly
the oils there has been more specu
1ative selling of automobile shares
than of any other class of stock.
No one can deny that there, is d
limit to the expansion of automobile
output. From the standpoint of
value of product the industry is now
third in the United States. This
years production is estimated around
three million cars, trucks included.
More than 100000 workers are said
to be dependent upon the motor car
trade. But when the so-called satU
ration point will be reached 1t is
doubtful whether the automobile
manufacturers themselves can pre-
Japanese Loan Expected.
Although the weeks news from
abroad has been of the greatest i'm
portance, it has had little effect upon
security prices here. Only the for
eign bonds and the foreign exchanges
have responded to developments on
the other side.
Negotiations are understood to be
under way for a large loan to Japan,
and if the conditions are at all rea-
sonable no difficulty is expected in
placing such an issue. Listed Japa-
nese securities have been inactive,
but firm in anticipation of favorable
reception of the new financing.