Evening star., 1923-09-16
INVESTORS REMAIN
IN WAITING MOOD
Possibility of Lower Prices
Keeps Many Out of Big
Wall Street Markets.
GLOOM HELP TO DECLINE
Banking Situation, However, Is
Sound and Credit Abundant.
Retail Trade Good.
GLOOM HELP TO DECLINE
By GEORGE j. HUGHES.

Special Dispatch to The Star.
NEW YORK September 15.-Specu-
iative sentiment has been very pessi-
mistic this week. Both bond and
stock markets have suffered in conse-
quence. The week saw the sharpest
break in prices in a month.
For all this gloom there was no
cause in the news and little in trade
developments. The market had stood
up very well under the shock of the
japanese earthquake and under the
threatening situation in southeastern
Europe. But with better understand
ing of the damage in Japan, and with
the easing of the crisis on the other
side there came a fresh selling of Sc
curities. AS to trade, there was only
the slackening in the steel industry
and the continued unfavorable condi-
tion in the oil business. Wall street
however, was in the mood to make
the most of everything unfavorable
and to ignore the favorable.
Investors in Waiting Mood.
It is generally true that a specula-
tive movement like this goes to ex-
tremes. no matter in which direction
the tide is running. Just now the in
vestor Is standing entirely aside. He
sees sound stocks and semi-specula-
tive bonds selling to yield him any
where from to per cent and more.
But he is in no hurry to enter the
market while prices are still going
down. Naturally enough, If the de-
cline is to continue, as appearances
indicate, he would prefer to wait
There is also always in the back of
his mind a suspicion that the real
reason for the lower prices is that
something Is fundamentally wrong
flaar v1rif ho q ofrg nf he
tion in the securities of which he is
interested or with business in general.
Nor is he convinced to the contrary
until there comes a shift in the specu-
lative current.
Retail Trade Remains Good.
One thing is clear. There is no justi-
f1cation for unbridled peSsimism with
regard to business. II is true that the
sharp increase in activity which was
expected after Labor day has so far
failed to materialize. 1t is true that
manufacturers are operating with
great caution, and that retail mer-
chants are buying very conservative
ly. But retail trade continues very
good, there is practically no unem-
ployment, and wages are higher and
the buying power of the ultimate con-
sumer is as good as ever. This must
sooner or later result in merchants
being compelled TO replenish stock.
and probably on n larger scale. Nor
l II
situation is entirely sound, and that
credit is abundant
If this reasoning is correct. con-
servatively capitalized and efficiently
managed corporations must continue
to make satisfactory profits.
That the investor takes this view
seems probable by the lack OF evi
dence that there has been any inn
portant liquidation of genuine in
vestment holdings during the slump
in, f1 ian
Bonds Offer Good Yields.
When it comes to applying these
principles TO the purchase of secur-
ities the investor considers quito
properly relative values Reason
ably good bonds are selling to re
turn per cent, and that being tho
case, IL is not out of line to expect
4 on the common stock of a corpora
tion, whether industrial or railroad.
There must be some compensation for
the additional risk the stockhoIder
always takes over that assumed b.
the bondholder.
y lower return indicates eXpecta-
tion of an increase in the dividend
rate, and higher return than per
Gent indicates some doubt OF the con
tinuance of the present rate. These
figures represent fairly the present
tradition has good deal to do with
the matter. For instance, railroad
stocks, simply because for so many
years they were considered to be
safer than induStrials in some cases.
still sell to give lower returns than
industrials of equal grade, although
this is rapidly changing. In a few
instances. as with United States Steel.
the stock sells TO give Il relatively
small return because of its great in
herent value.
Labor Costs Active Factor.
There is one notably expIainable
discrepancy in the general price
levels of investment stocks, and that
is the comparatively low quotation
for the shares of the public utilities.
American Telephone and Telegraph.
admittedly the leader of this group,
returns per cent at the market.
while stocks of good gas and electric
! light and power companies, operating
on their own account, give the in
vestor Z y and s per cent. and those
of holding companies and ., ard
even more. Partly this represents
fear of adverse public regulation, but
that cannot account for it all
Earnings of public utilities are re-
markably stable in good times and
bad times alike. Their greatest
handicap is increasing labor costs.