Evening star., 1924-11-23
RAILROADS CREDIT
IN bETTER.SHAPE
Restoring of Proper Balance
Between Funded Debt and
Stock Predicted. ,
FACTORS BACK OF RISE
Much Conflicting Talk About Div.
idends-Europe Reveals Real
Improvement.
FACTORS BACK OF RISE
BY GEORGE T. HUGHES.
,ecial Disnatch to The Star

BY GEORGE T. HUGHES.
Special Dispatch to The Star
NEW YORK, November 22.-Invest-
ment interest this week has again
been centered on railroad securities,
for the most part in the low priced
class. and under active buying these
obligations have enjoyed sharp ad-
vances. This was partly due to the
general speculative enthusiasm and
partly to concrete developments in
the railroad field.
OF these DEVELOPMENTS two stand
out: One. the offering and sale to
the public of common stock of three
carriers, and the other, the announce
ment that the New Haven has COM
pleted it's plan for the refunding of
its European loan. which natures
next April. 1t has been a long time
since railroads were able to inter-
est investors in their stock TO the ex-
tent OF becoming partners in the
business. The reasons for this are
we'll known. Railroad credit for
years has bene at low ebb under the
influence of adverse Government reg
ulation, actual and prospective, and
OF unsatisfactory earnings.
Obstacles Cleared Away.
iCoC SCclil HOW " nave
been cleared away, and sentiment is
so favorable that common stock can
be marketed on a satisfactory price
basis If this condition continues,
and there is no reason to believe that
1t will not, the railroads will be able
to rectify their capital structures
and restore a proper balance between
funded debt and stock Much more
of this kind of financing is expected
in the near future.
The other matter, that of refunding
operation. which the New Haven now
expects to carry TO a successful con-
clusion, is also striking testimony of
improved conditions. The difficulties
under which the New Haven has op-
Grated for so many years and the
pessimism as to its future now seem
to be things of the past. The effect
of the announcement was not con-
fined to the securities of the road in
question. The St. Paul has an equally
important refunding problem to
solve and holders of St. Paul securi-
ties are encouraged to believe that
their troubles are perhaps similarly
coming to an end. 1t is remarkable
what a change a few weeks have
brought about in the outlook Of these
two roads.
Many Conflicting Reports.
AS 10 the Others IneTc is continued
talk about initial dividend declara-
tions by some roads and increased
rates by others. Some of these re-
ports will come true and some will
not. But in the main the stage is
set for railroad prosperity and for
the enhancement in market price OF
railroad securities.
Turning TO the high-grade invest
ment railroad obligations. the general
n19rkaf has hPen only h2 rely steady
The public view is that this class of
bonds is high enough, and that the
yield is now down 10 where it is no
longer attractive. At the same time il
must be admitted that there has been
remarkably little selling of these
high-grade investment issues. And
some large blocks of these so-called
gilt edge bonds have been placed
privately this week al prices to yield
the purchaser under j per cent. which
would indicate that there are some
investors left who do not expect any
| material decline in quotations for
this grade of security.
Money Market Steady.
All that, of course. depends upon
the money market outlook, and as to
that there has been little change
during the week.
Speculative Wall Street has been
directors of the different Federal Re-
serve banks Will raise the rediscount
rate if speculation appears to be
getting out of bounds. No action
along this line was taken this week
| nor, in the opinion of those best in
| formed, is any likely in the i'm
| mediate future. better guide to
| the long-range outlook for money
will be the action of the Secretary
tof hn Tra1 -itl1
| the Government financing in Decem-
/ Der. Some authorities expect that
| the Secretary will offer a long-term
; bond issue. thus taking advantage of
| the present low money rate. So far
| he has confined himself to short
| term offerings, and so far his judg-
| ment has been justified by the event.
Europe Really Improving.
! While speculation for the rise has
been going on in railroad securities,
| foreign government and Industrial
| obligations have been either neglect
| ed or inclined to sag. French bonds
| in particular have been heavy. Under
| these conditions it will be interesting
| to note the reception accorded the
new French loan. A new element
| enters into this new French offering,
and that is the uncertainty as to
| French finances. At any rate the
| outstanding French dollar loans dealt
| in on the New York exchange have
| been selling down to a parity with
| the yield it was expected the new
| issue would bring. Other foreign
bonds have been affected adversely
| to a slight extent.
Meanwhile, taking Europe as a
whole, conditions have certainly i'm
proved. The foreign exchange
market is sufficient proof of this.
Countries whose exchange is now
practically at par include Holland,
Switzerland and Sweden. 1t has been
suggested that the dollar bonds of
these countries will now be attrac-
tive purchases for citizens of the
borrowing nation because of their
tax exemption feature at home. This
may be an important factor in the for
sj1n bond grOup soon