San Antonio light. [volume] (San Antonio, Tex.) 1911-1993, 1923-09-16
BONDS SUFFER
SHARP DECLINE
DURING WEEK
Break Is Sharpest in a
Month Sentiment Is
Pessimistic.
NO CAUSE FOR SLUMP
Investors Stand Aside
Awaiting Sterilization
Of Values.
NO CAUSE FOR SLUMP
BY BYRON SELLER.

Copyright. by the San Antonio Light.
New York. Sept. 15.-Speculative
sentiment has been very pessimistic
this week. Both bond and stock
markets have suffered in consequence.
The middle OF 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 under
standing of the damage in japan, and
with the easing of the crisis on the
other side, there came a fresh selling
of securities. AS to trade, there was
only the slackening of business in the
steel industry and the continued UNI
favorable trend in the oil business.
Wall street, however. was in the
mood to make the most of everything
unfavorable and to ignore everything
favorable. 81
1t is generally true that specula-
tive movement like this goes to ex-
tremes no matter in which direction
the tide is running. Just now the
investor is standing entirely aside.
He sees sound stocks and seml-specu-
lative bonds selling 10 yield him any
where from six to eight per cent and
more. But he is no hurry to enter
the market while prices are going
down. 1t is quite natural that-if the
decline is to continue as appearances
indicate, he would prefer to wait.
There is always in the back of his
mind a suspicion that the reason for
the lower prices is that something Is
fundamentally wrong, either with the
affairs of the corporation in the
securities of which he is interested,
or with business in general. Nor isn
he convinced to the contrary until
there comes a shift in the speculative
current.
Pcssimism Not justified.
One thing is clear. There is no
justification for unbridled pessimism
with regard to business. 1t is true
that the sharp increase in activity,
which was expected after Labor
Day so far has failed to materalize.
1t is true that manufacturers are
operating with great caution and that
retail merchants are buying very con-
servatively. But retail trade continues
very good. There is practically no
unemployment, wages are higher and
the buying power of the ultimate
consumer is as good as ever. This
must sooner or later result in mer-
chants being compelled TO replenish
their stock and probably on a larger
scale. Nor must it be forgotten that
the banking situation is entirely
sound and that credit is abundant.
If this reasoning is correct. con-
servatively capitalized and efficiently
managed corporations must continne
to make satisfactory profits. There
may be no justification for the reck-
less bidding up OF security prices, but
there also is no justification for
equally reckless attempts to depress
them.
No Cause For Alarm.
That the investor takes this view
seems probable by the lack of evil
dence that there has been any i'm
portant liquidation of genuine in.
vestment holdings during the slump in
quotations this week. What specula-
tors do with stocks bought with bor-
rowed money is of interest mainly TO
themselves. 1t should not alarm real
investors or business men when the
outlook is so encouraging.
When it comes TO applying these,
principles to the purchase of securities
the investor considers quite proper rel
alive values. Good bonds are selling
TO return 6 per cent and that being
the case, ii is not out of line to ex-
pect seven on the common stock OF
corporation. whether industrial or
railroad. There must be some COM
pensation for the additional risk the
stakeholder always takes over that
assumed by the bondholder.
A lower return indicates expecta
ton of an increase in the dividend
rate and n higher return than per
cent indicates some doubt of the con
tnuance of the present rate. These
figures represent fairly the present
money market. In individual eases
tradition had good deal to do with
the matter. For instance, railroad
stocks simply because for SO many .
years they were considered safer
than industrials, IN some cases. still
sell to give lower returns than in
dustrials of equal grade, although
this lis rapidly changing. In a few
instances, as with United States
Steel. the stock sells to give rela-
lively small return because of iis
great inherent value.
One notable discrepancy in Il.
general price levels of investment
stocks is the comparatively low quota
tons for shares Of the public utilities.
American Telegraph and Telephone,
admittedly the leader of this group,
returns seven per cent at the market.
while stocks of good gas and electric
light and power companies. operating
on their own account, give the in
weston IL and per cent and those
of holding companies s and 8 per
cent and even more. Partly this
represents fear of adverse public regu-
lation, but that cannot account for
it ALL
Earnings Of public utilities are re-
markedly stable in good times and
bad times alike The greatest handi-
ic tporoocfr- lahnr ,,-t.