Evening star., 1924-07-27
NEW INVESTMENT
ISSUES TAKEN UP
Lower Grade Securities Given
Attention as Prices Still
Move Upward.
GOLD INFLUX CONTINUES
Merger Talk or Belief in Lifting
of Restrictions Aids Rail
Bonds, Stock.
GOLD INFLUX CONTINUES
BY GEORGE II. HUGHES


NEW YORK, July 26.-With the in
vestment market established on what
appears to be permanently higher
level there has been a shifting of in
terest this week from the so-called
gilt-edge securities to those of slight
ly lower grade. This is the normal
development when the advance in a
bond market has reached a certain
stage. There comes a time when the
yields to be obtained on the very
highest class securities are no longer
attractive and investors begin 10
persuade themselves that they can
afford to sacrifice little quality for
the sake of a little more income.
The difficulty is that no one can
say just when this stage has ar
rived. The professional trader and
dealer is almost sure to be ahead of
the market. What appears evident
to MIN he believes is evident to other
people and so while most of these
professionals claim to be convinced
that present quotations for Govern
ment bonds and first mortgage rail-
roads have about discounted tho
money situation, their conclusion may
we'll be premature.
Not Shown In Quotations.
As far as the quotations go there is
al yet no sign of any substantial re-
action. Not only is the average for
second-g railroads, industrials
and public utilities at the high of the
year, but the high point for 10 in
the first grade was also reached this
week: If the rise to date has run
ahead of the fall in money rates il
does not yet show in the quotations.
There is also the possibility that
these market commentators are de-
ceiving themselves about the future
of money. The expectation is that re-
viving business with it's increasing
demand upon the banks for com
mercial purposes as we'll as the needs
of the crop-moving season will take
up some of the slack in the money
been the order of events in times past
and. of course, stiffening in money
rates would check the rise of high
grade bonds even though it might not
turn them downward. The peculiar
difficulty in any forecast just now is
that there is no precedent to go by.
Gold Influx Unparalleled.
country, or i any other for that mat
ter, has there been such a steady
inflow of gold as has been pouring
into the United States for the past
year or more. No one can say when
this tide will be checked. or, if not
checked. will be absorbed in bust
ness and speculation. Study of the
weekly statement of the Federal Re
serve Banks affords no ground for
the opinion that any change in
fundamental conditions is at hand:
The figures are instructive. Total
gold reserves of the Federal Reserve
Banks are at the high of the year.
of discounted bills keep
going down. The loss in this total
this week over the preceding week
was s14.40o.o00. while the loss for the
year was s469,700.0o0. Federal re-
serve notes in circulation dropped
s30,10o.000 and are now $412.2o0.ooo
below what they were the same time
to talk about the effect of a larger
demand for money when it begins to
show in the reserve bank statements.
There is, however. another pos
sibility to be taken into consideration.
That is that the disparity in money
rates between London and New York
may induce flow of funds from this
side to the financial capital of the
Old World
Foreign Investments Noted.
1t is more than probable that some
shifting of this kind has been going
on this week and accounted in part
for the strength in sterling exchange.
Here again we have the difficulty that
political considerations as well as
money movements govern the ex-
changes. About as far as 1t is safe
to go then is to say that forecasts
of money and investment conditions
are valueless unless close attention
is paid both to the Federal Reserve
Bank Statments and to the exchange
market.
have been considered Any review or
the week would be incomplete with
out reference to the extraordinary
strength exhibited by securities lower
In quality. There has been active
speculation in low priced railroad
bonds corresponding to the same sort
of buying of railroad stocks. There
is this difference, however. that th1
rise in the bonds has more to justify
it than the stocks. This, at least. y
the case with roads whose earninr1
have been unsatisfactory in the pas'
few years.
Strange Price Differences.
There have been some curious dis
crepancies in the relative prices
quoted for the stocks and bonds OF
these roads. While the stocks were
being bid up three to four points the
bonds of the same corporation were
obtainahle at prices to yield any
where from to 9 per cent and more.
In some instances there have been
large accumulations of unpaid interest
on income bondS Wnlcn must pe
cleared up before stockholders can
receive anything on their investment
and vet speculation in the stocks has
60 on just as if these accumulations
did not exist. Some of these dis
crepancies have been partially can
celed this week by higher prices for
the bonds, but many of them remain.
The motive for the buying which
has advanced quotations for railroad
stocks ana bonds alike has not been
Increased earnings. 1t may have been
talk of mergers or 1t may have been in
spired by confidence in the near ap-
proach of a time when the railroads
will be allowed to work out their
own salvation with minimum of
political interference.