Evening star., 1924-09-07
WEEK IN FINANCE
PROVES CONFUSING
Stocks Turn Down, But
High-Grade Bonds Gain
Steadily in Strength:
MONEY TO REMAIN LOW
High Yield on Foreign Issues
Makes Investors Favor Large
Loans Abroad,
BY GEORGE IT. HUGHES.


Special Dispatch to The Star
NEW YORK, September 6.-The iu-
Vestment market has been subjected to
series Of confusing cross-currents
this week
speculative bonds were heavy in synl@
pathy with speculative stocks Invests
ment bonds, ordinarily responsive to
changes IN the money situation. wera
steady to firm, notwithstanding the fact
mat money rates showed signs of ad-
Vanclng. Not only We're call loans
higher during the week than at anv
time in the past two months. but time
funds stifened materially Call money
quotations are unimportant as indica-
tions of long-range tendencies. Tims
FUNDS are more important. Federal r,-
serve weekly bank statement showed In
creased note circulation as well as
larger rcdiscounts, and the reserve ratio
Tor the system as n whole, as well ~
that for the New York Federal Reservl
Bank, declined rather sharply
Good Securities strong.
These considerations would naturally
lead to the expectation that prime in-
vestment securities should also decline.
AS a matter Of fact the contrary was
the case Particularly at the close of
the week there was an insstent de-
mand for the high-g grade savings bank
bonds on a 4 TO 5 per cent basis, un-
explainable by any of the known facts
in the situation. The only reasonable
inference was that the purchasers cf
these low-yielding obligations. generally
financial institutions, were of the opin-
ion that the higher charges for money
were only temporary, and that tnS
longer outlook was for continued case
Cheap Money to Remain
In connection with the money situa-
ton. discussion was heard this week as
to this demand on the market of Eu-
rope. The expected German loan Of
slo0.000,00 this being the figure set
as the American share, will doubtless
be only the beginning Not only gov-
ernments but industrial and utility en-
terpriseS operating on the other side
will make drafts upon American capi-
tai resources. PURCHASE of foreign Sc
curities in any cOnsidera BILE volume Will
undoubtedly have some effect upon the
total of funds available for domestic
requirements, but it is hard to see how
this movement can go far enough tn
make any important impression upon
the enormous surplus of money now
existing in this country.
Much depends upon the attitude of
the individual American investor.
Generally speaking, lie diNides all se-
curities into two classes, domestic and
foreign. The former he is willing 10
consider on their merits, the latter
he deems speculative almost without
regard to the credit standing of the
borrower There has been some
changes in this attitude in recent
months, but it is still typical of the
feeling outside the large financial
centers. Even the banks in the
smaller cities are unwilling to take
chances" as they express it. on for
eign investments. That this feeling is
illogical does not alter the fact that
it exists.
High Yield Draws Investors.
OF course, the only counteracting
influence 10 all this distrust of for
eign Investment is the temptation
afforded by the high yield. which the
more speculative of these securities
return. A case in point is the new
Hungarian 71@s. The underwriters of
the original offerings purchased this
week from group of Hungarian banks
81, 500 900 of these bonds originally re-
served for issue in Hungary. No public
offering of these additional bonds was
made, all being placed privately and,
according to the best information,
quickly taken.
Another instance is the success Of
the new issue of Belgian bonds carry
ing a 612 per cent coupon and sold at
prices 10 WELD less than outstanding
issues of Belgium with a seasoned
market. Taken as a whole, however.
the average price of foreign government
bonds dealt in in New York was lower
at the close of the week than at the
beginning.
Political Factors Ignored.
Domestic railroad securities con-
tinued to be dealt in on the basis Of
merger plans. present and prospective.
rather than upon earning power. There
were a few exceptions to this rule
but they We're unimportant. 1t is curious
how little attention is paid to political
factors which might affect railroad Sc
curities. a year ago these We're the
predominant considerations in any dis
cuSsion of the railroad outlook Today
they seem to have been lost sight of.
The position to be taken by the
Interstate Commerce Commission on
the railroad mergers already announced
is yet to be revealed. No one can pre-
dict the attitude of the new Congress
towards the carriers. Perhaps the i'm
proved condition of the farmer has mod
flied the hostility toward the railroads,
although there is no proof that such is
the case.
Rail Outlook Unsettled.
AS to the railroad financial outlook,
car loadings this week made d new
high for the year, but still were below
the million car mark and short Of the
same week year ago. Net operating
income of 50 class l roads for
July totaled 5s,545, 900. as compared
with $66, ,25l 600 in July a year ago. II
decrease of about 1ll2 per cent. Net
income of the same roads for June this
year were s53, l0l 900, so that July was
an improvement over June.
Obviously the future depends on gem
eral business, the outlook for which is
not at all clear.
hv