Evening star., 1923-03-25
BUSINESS GOING
AHEAD BYLEAPS
Prices Hold Firm, But Many
Financial Experts Fear
Break Before Long.
MORE CAUTION DEVELOPS
Possible Higher Rediscount Rate
Causes Wide Discussion.
Bears on the Alert.
speelal pisLatcl 10 The Star.

Special Dispatch to The Star
NEW YORK, March 24-The week
closing today has brought multiply
ing evidences Of business activity.
COnSumptive demand persists on an
unexpectedly large scale, notably In
the case Of cotton, cotton goods, pig
iron, lumber and automobiles. The
railroads are hard pressed to care for
the increasing traffic. The American
"oolen Company has raised wages
/ in all its plants 12hz per cent, and its
example is generally being followed
throughout New England.
The demands OF expanding business
are reflected in the increase in re-
discounts shown in the Federal Re
serve Boards weekly statement as a
whole. although the New York and
Dallas banks are exceptions TO the
general rule. The distinct stifenlng
of money rates and the heavinesS of
the bond market alike testify to the
fact that trade is absorbing more
ana more Of availab bic funds.
Commodity Prices Strong
Commodity prices hold strong and
the most part speculative securities
are firm. AS to all this there is no
dispute. There is, however. a sharp
difference Of opinion as to how long
these conditions will continue. or at
least how long il will be before the
speculative markets begin to forecast
q chang.
The doubters point TO the expert
ences Of 1920 and 1921. They recall
the buyers strike and the consequent
mi L.. -
ties and stock. Sugar Is a case in
point. II is doubtful whether there
ever was such sudden and perpen-
dicular decline in any commodity as
was the case with sugar some two
years ago. Now sugar prices are
climbing again, and prophets are not
lacking who proclaim that history
in this particular case Will repeat
itself.
Cotton is another instance To the
assertion that the statistical position
JustifieS the present price II is replied
that the price will enormously stimu-
late production and so bring about
its own correction. This contention is
perfectly sound and undoubtedly
eventually affairs will take the turn
predicted.
Changes Come Quickly.
Generally. however. such a change
comes when il is not expected SpeciI-
spectators are cautious, and business
does not expand to the danger point
when merchants are erring on the
side OF conservatism. And that is
just about the condition today. Bear
operators who missed the beginninR
OF the big bear market which fol-
lowed the post -armistice imitation do
not intend to be too late this time.
Ihe consequence is that prices ad-
ranced against so little opposition on
l..I I1.. nf 1.t
men who were caught with big in
ventories in 1921 are taking no such
chances now. For the most part the
consumer is setting the pace. Under
these conditions IL is hard TO see any
near reaction. either in trade or in
securities. which are responsive to
trade.
Take the case of the automobile in
dustry. for instance. Its prosperity
is astounding. Production in Janu-
airy vas the highest on record, ex-
c"pt for June last. According to De
partment of Commerce reports, Feb
ruary was even better. Output of pas
senger cars increased from o23,7o6 In
January to 254,416 in February. and
1876 cars In January to 21,354 in
February. Comparisons of sales for
the first two months of 1928 with
those for the Similar period in 1922
are even more striking. Yet in the
face of all his embarrassing demand
the automobile manufacturers as a
whole are showing praiseworthy re-
straint in expanding plant facilities.
Great Care Being Used.
II is the same way with the equip
mcnt companies. which are almost
overwhelmed with business, but are
exercising the greatest care in keep
ing down inventories. Nor, to go
back I" the case of sugar again. are
there any large companies now i'm
porting great quantities of sugar at
peak prices to meet an Anticipated
shortage which by the time sugar,
arrives may not exist.
More attention has been given to
tho money situation also. Stock
spectators have not forgotten and
do not allow any one else to forget
who comes in touch with them what
happened after the federal reserve
governors tardily started to check
the imitation of 1919. No matter how
often II is pointed out that the bank
ing situation is as different now
from what il was then as daylight is
from darkness. they insist on look
ing on any raising of the rediscount
rate as necessarily destructive to all
present market prices.
Situation in Bonds.
So much for stocks. With bnods
the case is quite different 1t is to
be expected with money flowing into
business and with the market for
time funds advancing, that the price
of fixed interest rate bearing securi-
ties will readjust itself to the re-
turns obtainable elsewhere with equal
risk.
Such readjustment, however, will
not go beyond the point justified by
the open market rate, and that there
are some authorities who do not be-
heve there is to be any actual strin-
gency in the money market is testi-
fed to by the conditions on which
tho Secretary of the Treasury
financed the governments needs last
week and by the price at which the
bankers offered the I.ackawanna
bonds this week. 1t must not be for
gotten that the United States still
holds the greater part Of the world s
gold.
Copyright, 1921