Evening star., 1924-03-09
TAX CUT STEPS
HELP SECURITIES
Lighter Burden Next Year
Would Greatly Improve
Sound Investments.
ALL EYES ON CONGRESS
Bonus Legislation Will Have Great
est Effect on Market for Lib
erty Bonds.
ALL EYES ON CONGRESS
BY GEORGE r.. HUGHES.

BY GEORGE r.. HUGHES.
Special Dispatch to The Star.
NEW YORK, March 8.-Despite all
the uncertainties as to tax and bonus.
legislation the investment market az
the week ends manifests remarkable
steadiness. In the controversy over
just what plan shall be adopted for tax
revision, whether the Mellon rates or
some compromise is worked out. il
seems reasonably certain that relief
from the present scale will be given
In other words. the burden next year
Is almost sure to be less than at pres
ent. And even if this relief is not as
large as might be wished for. i;
ought TO be substantial enough to
improve the demand for the securi-
ties for sound enterprises. Nor does
there seem to be any reason for CON
Germ over bonus Legislation until the
form it will take becomes more evil
dent AT any rate that seems to be the
view of the market at present.
Liberty Bonds Reactionins.
1t is in the United States govern
ment bond list that an adverse effect
Of a bonus bill is most TO be feared.
And even this depends upon the
method of financing. Liberties, there
fore. have been slightly reactionary
all the week, but there is always the
potential support of buying for the
account of the British government to
recko on with. This support is not like
ly to advance quotations for govern
ment bonds so much as to hold them
around the present level. The interest
of the British is founded upon the
privilege they have of paying install
ments on their debt TO the United
States in libraryS at par and SO the
nearer the price goes TO par the less
the incentive to buy them for this
purpose.
Short Terms Popular.
Meanwhile the pressure upon the
banks to employ their surplus funds
continues. There has been especially
sirable short term bonds and notes.
In fact, the market for this class OF
security has been pretty well cleaned
up. There has been less disposition TO
take long term maturities, but even
here the tone has been better. Demand
is not SO much for the very highest
grade as il is for securities yielding
around 5L per cent and still of un-
doubted merit. The large backlog OF
money available for investment is
the real strength of the investment
market. In this respect there has
been no change for the past two
months.
Fewer New Securities.
An additional source of strength
very recently has been the let up III
the output of new securities. How
long it will be before there are large
additional offerings cannot be pre-
dicted. Bankers are watching tn"
market closely in order to select q
favorable time. They are not Hkcl!
to permit any congestion if they
can help it. The price of new offer
ings also is being carefully consider
ed There have been too many sc-
rte
subscriptions have been followed by
sharp breaks in the quotations to en-
dissolution of the syndicate, to en-.
courage any eStrava-ant ideas as t"
the figure at which new security
can be marketed. This has been no.
tably the case with certain foreign
bonds. In consequence. investors haE"
been inclined 10 hold off until th''
this operates for caution on the part
of the investment bankers.
New Investment Move.
A good deal of interest is taken in
the movement to make certain pubiic
utility bonds legal investments for
savings banks in this state. The ruiD
in New York up to now has been ["
allow savings banks to buy only gov
ernment and state bonds and certain
municipals and first mortgage rails
where dividends have been maintained
on the stock at a specified rate for a
specified period. 1t is now proposed
to admit to the legal class publ"
quirements. The practice of other
states. particularly in the west. has
been more liberal in this respect. but
the effect upon the market TOT pupli''
utilities of relaxation OF the ruie
in New York is sure to be marked.
Not all bond men are agreed as to
the advisability of the change. but the
arguments against it are not very
convincing.
the tangible property upon which
telephone bonds. for instance, are
secured is not equal to that back of
railroad bonds. The great strength
of the telephone companies, the con
stantly expanding demand lor 'ntif. a
services and their demonstrated sta
! bility of earning power, are the eeS'
answers to this objection.
Higher Ratings Deserved. -,
No valid reason appears why first
mortgage bond of prosperous electro
light and power companies shouId hok-
be accorded as high a rating as thos2
Strength. Private investors and in,
surance companies are eager purchaS5
ers of these electric light and power
bonds. 50 I..y
been concentrated upon certain raiI-
road issues. notably those OF the 81.
paul and Missouri Pacific. Reports
thar the bankers were taking up inc.
matter of refunding tho st. Paul7S
large maturities of next year We're
foliowed by a violent upward move =
ment in the bonds. There was no cons
firmation OF the report, but specu-t
Iatiye interest was maintained AT 4.
high pitch The matter is important
as revealing change of attitudn'
toward the railroad outlook In gen.
erai. I.
OF more Importance from an IN
vestment standpoint is the prepafa
tions understood to be under way Iot
a similar refunding in behalf or theF
Raltimore and Ohio. This VIII De
very large operation. one OF the IT, - 1,
est ever attempted in the raiiroau
6eld but success is undoubted, N
view of the Baltimore and ONO re-
arkable recovery the past year anu
its present financial position
The attitude of the investor toWaru
foreign securities Is much @ ,lole
doubtful. For one thing. the coiiapse
in French francs has shaken cor
fdence none too we'll estdDlisnd
French dollar bonds have lost groui,u
although, it must be admitted nor III
nroportion to the weakness In the en-
change. ,o,.,