Evening star., 1924-06-22
EASY MONEY LIKELY
TO EXPAND TRADE
Abundance of Credit in Past Has
Resulted in Marked Advances
in Business.
GOLD FLOOD CONTINUES
Influx Indicates Low Borrowing
!, Rate for Long Period.
BY GEORGE Il. HUGHES.

Special Dispatch TO The Star.
/. NEW YORK, June 21.-The invest
snent market has been very strong
all the week. High-grade securities
If all kinds have been in demand,
and, while from time to time there
have been minor reactions, due to
nrotit- taking, at no time has there
been any weakness. Confidence in
the future of the market has been
confirmed by the weeks develop
inents.
The result has been quick absorp-
tion OF all desirable new offerings
and in many cases subsequent sales
at a premium over the original price.
This in itself is a striking change
from the conditions that had pre-
vailed during the past six months.
Up to few weeks ago new offer
ing which maintained its quotation
after the support of the offering syn
dicate had been Withdrawn was an
exception. not the rule. ON the con-
trary. a price slump of from to 6
points was not uncommon. Now all
this has changed and the invest
nOt the buyer.
/ The reason for all this strength is
| he money situation and not any i'm
I arovement in the trade outlook.
Factors in Money Market.
| 1t is not enough. however. to say
nat cheap money has been the stimu-
,us 70 the market advance. For a
complete understanding of the situ-
StiOn it is necessary to go a step
&drthcr and inquire whence comes
.chiS enormous surplus of funds. The
Generally accepted explanation is that
rade reaction has released money
.-om business which is forced to find
.yome other employment and so turns
~ investments. Undoubtedly this has
Something to do with the matter. If
-hat were all, however. it would fol-
pnw that business revival would bring
| about a reversal Of the entire situ-
.ltion.
AS q matter of fact the slacken-
| iHE in trade has been only one factor.
| ;.nd probably the least important one,
Lsl the money market. The other in
| fsuenCe and predominant one is the
| ,teluge of gold which has been in
ndating the United States for the
/ laSt two or three years Treasury
estimates are that June | this coun-
! .Fy held about $4.40O.OOO. 900 in gold.
! which is the largest stock of the yell
I nw metal ever aSSe mbled in any one
| '%Duntry at any one time. This is
rot all. The gold is still coming.
The official forecasts are for an
| i,nportatiOn of about 100000. goo
l ,Ort. during 1924. 1t will take a
! t>ade revival of considerable proper
lion to make any impression upon
| these totals. 1t is upon this argu-
! rent that the case for a continu-
| . ice of the present case in money
and so for sustained strength in in
| iSstment securities, rests.
| Business Expansion Likely.
! 1t should be clearly understood
! then, that this assurance, so often
| { SpreSsed in the future of an invest
went market founded upon easy
! II oney. does not imply lack of CONT
| G>-nce in trade revival. Under pres
| e&t conditions it is perfectly possible
| f,$r the two to go on together. II
viii be contrary to all experience If
| TIE ultimate result of an abundance
! O credit is not an incentive to bust
/ MSS expansion. 1t has always been
! So in the past and there is no reason
! t.. believe it will not be so in the
/ future No one can predict the exact
| ti!ae when this will come to pass. but
that it will come admits of no dis
I Fpute
! .rhe two features of investment ac-
! ti>ity this week have been the de-
m4nd for new offerings and incTeas-
| in% favor shown toward foreign
| br6ds. Probably the latter phase has
m@nt interest
Basis of Speculation.
| 1he speculative attraction, how
| ev r, is founded upon the investment
! situation. The case of French bonds
! may be taken for illustration. 1t is
| do,tbtful whether the buying this
wC-k which carried French dollar
! issses up to the highest points of the
/ ye:Sr was primarily for investment.
| Ra ther it has been speculation built
| upe.n the fact that to borrow money
| at current rates and buy with the
| pr :ceeds any security yielding from
! ~ to s per cent is profitable opera
| tioti. provided, however, the u to 3
| pei. cent return is reasonably certain
! Foreign countries with new flnanc-
| inc to do are expected to take ad-
vantage of the present market. The
| railroads are likewise making the
mc;t of the opportunity. Most OF
them owe large sums to the govern
meat in the shape of notes on Whlch
the interest charge is per cent
Naay carriers are in a position TO
raise money at a much lower charge
in the present market and the plan
is ~ nav off these government per
| cent notes with the proceeds OF ioans
made in the open market at a lower