Evening star., 1925-04-12
INVESTMENTS GET
SPECIAL ATTENTION
French Bonds and Doubt
Over Outlook for Rails Grip
Public Interest.
GEORGE II. HUGHES.
Special Dispatch to The Star.


Special Dispatch to The Star.
NEW YORK, April lit has been
a week of extraordinary interest in
the investment market, one of confus-
ing cross currents and apparently con-
Trajectory tendencies but one in which
three features stood out a sudden de-
Velopment of doubt as to the outlook
for the railroads, a favor shown to
securities founded upon the automo-
bile industry and grave concern about
the future of French finances marked
by weakness in French dollar bonds.
New Attitude on Rails.
The public attitude toward rail-
road investments has undergone o
complete change from that held last
January. Then expectations of divi-
dend increases by corporations already
sharing their prosperity with their
stockholders, and of initial disburse-
ments by roads not at that time on the
dividend paying list as well specu-
lation as to the effect of mergers.
present and prospective, were all the
fashion. Now 1t is just the opposite.
The talk of dividend reduction and
most of the merger plans worked out
with so much detail in Wall Street
have been forgotten. The delay in
the consummation of the Nickel
Plate consolidation forced by the at
ttude of the minority stockholders
of the Chesapeake and Ohio was very
diScoura ging to the merger enthuSi
asts. The acute weakness which
cropped out in the shares of the
Chicago and North Western on the
Stock Exchange, bringing with 1t the
suggestion that the dividend was in
danger, and the selling of Pennsyl-
vania stock later in the week, although
without any talk about dividend
change, had a disturbing effect.
Pessimism Overdone.
Probably pessimism on both these
accounts was much overdone. That
is the way with Wall Street. It was
officially denied that there was any in
tention of disturbing the Chicago and
North Western dividend and this ap-
pears reasonable, when it is remem-
bered that continuation of payments
of at least per cent annually Is
necessary to the maintenance of the
company's bonds on the list of invest
ments legal for savings banks.
As to the Pennsylvania, the princi-
pal influence was doubtless the pub
lication of the detailed figures in the
annual report, showing they did
heavy decline in net earnings from
those of 1928. There was really little
new in the totals or at last nothing
which could not have been deduced
from a study of the monthly reports.
Emphasis was laid, however. on the
damage done by automobile compe-
tition, not only in the matter of
passen ger, but also of freight traffic.
The same plea was made in behalf
of the st. Paul at the time the re-
ceivership proceedings were started.
Railroads Must Change.
t. 10, .,,1
condition than any variation in earn
ings due to changes in business ac-
tivity. AS was pointed out in the
Pennsylvania report, if the public in
sists on paying the higher charge of
motor transportation there is nothing
for the railroads to do but to adjust
their affairs accordingly 1t means
the abandonment of branch lines
which are no longer profitable. and
the cutting down of service in other
directions. This process of readjust-
ment will take time and until it is
completed net income must suffer.
Complaints on this score come from
practically every section of the
country, but in less degree from the
South and Southwest.
For the optimism about the auto
mobile industry, the financing follow
ing the sale of the Dodge Brothers
>
sponsible. The success of the first
offering of the new Dodge securities
was a surprise even to those who had
been most confident. Wall Street is
Constitutionally skeptical in such
matters, but the outside public was
enthusiastic and applications for the
stock We're greatly in excess Of the
supply. Taken as whole this
Financing is the largest for the ac-
NF fpI at,
on record, the nearest approach to it
being the sale in 1928 of the Ana
conda Copper bonds. This fact alone
is striking commentary on the
phenomenal growth of the motor car
business.
Faith in Auto Industry.
The rush to buy the new securities
is also proof of public faith in the
future of the automobile trade. AS
an investment proposition it is nee
essary to bear in mind that these
automobile stocks depend for their
merit entirely on earning power and
not on asset value. Commentators
made a good deal of this point in the
case of the Dodge Brothers sale, but
the same criticism applies in greater
or less degree to all automobile COM
pany shares.
French Loan Held Unlikely.
There was nothing surprising about
the weakness in French bonds.
Although dollar issues, and so not
affected by the vagaries OF the franc,
concern on the part of holders was to
have been expected. To argue that
no matter what may be the outcome
of the French financial tangle there
will be no disturbing of the external
debt is logical but ineffective as a
market factor. Under the circum-
stances, the placing of a new French
loan in this country would involve
payment by the French of an ex-
brilliantly high interest charge.