Evening star., 1924-01-27
EASY MONEY RATES
BIG MARKET FORCE
Stocks and Bonds Also Go
Higher on Prospects of
Tax Reductions.
OUTLOOK is BRIGHTER
Much Investment Buying-steel
Dividend speculation-Drop in
Passenger Traffic.
By GEORGE IT. HUGHES,

BY GEORGE II. HUGHES.
special Dispatch 10 The Star.
NEW YORK. January 26.-The cIosa
OF the week finds the financial com.
lhunlty quietly optimistic as TO the
luture of prices for securities bo,b
investment and speculative.
ihose who We're inclined TO doub,
nave mostly been converted bv tba
course or the markets. The strength
IN investment bonds and the advance
III speculative stocks combine To for.
an argument not easily refuted b. the
al street mind. There are, of course;
exceptions to the trend, but thev ar.
exceptions and generally explainabS
On some ground that does not ann,-
TO the market as a whole. While III
weeks advance has been most con.
spicuous in speculative stocks -
strength in investment bonds u
been more impressive.
Big Week in Liberty Bnods.
There has been remarkably&e&v
buying of United States governments
issues carrying four OF the Iiberti,~
TO new high records for the VEN
and to higher points than were reach.
ed IN all Of 1923. at the same tinA
enere has been slow. but steadJ
advance in the better railroad ana
Industrial obligations 1t has bee
more marked among bonds just out
side the class legal for savings banks.
In explanation OF this investment
buying two reasons are assigned. one
the prospect Of tax reduction ana
the other the ease in money. The
chances are that the latter has been
the more potent The tax situation ia
stIll too involved with politics 10
make II at all certain what will be
the hnal outcome. The money out
look, on the other hand, is plain l.
needs only a casual examination OF
the federal reserve weekly bank
statement to make this apparent. The
reserve ratio this week equals the
high point Of 1922 and except for the
record which was made in the week
ending August 9, a year ago, It is at
the record high since the spring Of
1917. Coincident with this rise IN the
has fallen off sharply. Sur
plus funds must go somewhere ami
they have been going into inveSt-
ment bonds.
Opposing Forces at Work.
AS far as tax-exempt securities are
concerned. there are opposing infu-
ences at work. On the one hand, q
surtaXes would make these bonds less
attractive, but. on the other hand if
there should be a restriction put upon
further issuance of taN-eXempt OBJ
legations. and the sentiment in favor
of such restriction seems to be grow
ing, outstanding bonds now exempt
would occupy a strategic position.
No one proposes to take away tho
taX-exemption privilege from bonds
which have already been issued. As
the Secretary of the Treasury puts
il. that would amount to confisca
tion.
Investment buying this week. how
ever has not been confined to bonds
There has been heavy absorption OF
the high grade common stocks ard
to a less degree of some of the pre-
ferred stocks. Here the factors have
been not only the two operative in
more liberal attitude of corporation
directors in the matter OF dividends.
In this connection Wall street awaits
with deep interest the action of the
United States Steel board on Tuesday
next. 1t will be remembered that
the turn-about in the stock market
came at the same time as the dee
laration of an extra dividend of !
quarter of / per cent by the Ste..
Corporation. All sorts of guesseS ar,
current in the street as to what w
be done next week.
Extra Dividend Expected.
The most conservative view is that
another. extra of the same amour
will be declared. Some there are who
profess to believe that either thu
stock will be put upon a straight 5
per cent basis or that the extra will
more. There IS no doubt of the abiS
ity Of the Steel Corporation to paS
almost any dividend within reason,
but the well known policy of the
:, 1nn
side of moderation in the matter OF
dividends. II has not escaped notice
that before Judge Gary went away
this week, speaking of the plans for
expansion of the board always to
keep strong in cash and cash re-
sources" and that I'VE receive man.
requests from time to time for eN-
which seem to be promis-
ing but which we decline to recon
mend or POSTPONE for lack OF reaaE
money" In any case the action, what
ever 1t is. is bound to have innuenr"
upon the market.
Railroad Shares Quiet.
Compared with the interest in ia
dustrials little attention has been
paid to the railroads. 1t looks more
and more doubtful whether there will
he any new legislation affecting the
carriers by this Congress. Mean
while, the peak of carloadings seems
to have passed for the time being.
There is still a good deal or DISCUS
sion about consultations and the ef-
feet of the recapture provision of the
transportation act. which has been
upheld by the Supreme Court AS u
matter of fact on present earnings
very few roads will come under the
recapture clause, as very few are
earning per cent on property valu-
alton. Moreover. valuations as
reached by the Interstate Commerce
are not accepted by the
railroads concerned and there is sure
to be prolonged litigation. One pos
sible result of the enforcement of the
recapture clause is to encourage
strong roads with high earning pow
er in proportion to valuations to take
over weak roads with high valua-
tions but low earning power. In this
way the valuation of the combined
system would be raised to the point
where per cent earned would not be
high enough TO come within recapture.
Startling Traffic Facts.
It may not be without interest 10
point out that while the railroads
have been making record gains in
freight loadings, passenger traffic
over a period of years shows a heavy
off. Statistics established
that fewer passengers were carried
in 1922 than in 1918. Last year pas
senger traffic made a slight gain. but
the private automobile and the motor
bus have made deep inroads upon
this branch of railroad service.
Copyright, 1924