Evening star., 1925-05-10
-FOUR BIG Factors
!, IN MARKET MOVES
Utilities, Foreign Liens,
| Junior Rail and Mortgage
Issues Gain During Week.
BY GEORGE r. HUGHES.
,ecial Dispatch to The Star

Special Dispatch to The Star.
NEW YORK, May 9.-The four
chief points of interest this week in
the investment situation have been:
First, the extraordinary advance in
public utility securities; second, the in.
creased favor shown toward foreign
bonds; third. speculative buying of
high yielding junior railroad bonds,
and fourth, the strength of the in
vestment demand for high grade rail-
road mortgages and taX-exempt mu-
picipals.
Utilities Spectacular.
OF these four the most spectacular
development was the advance in the
utilities, but this was principally con-
fined to stocks evidently accumulated
3n the expectation of price apprecia-
tion rather than strictly for invest
ment. Common stocks of some OF
these utilities, chiefly electric light and
power and gas companies, have been
pushed up to new records for the last
two or three years. The theory on
which this buying has been founded
is undoubtedly sound.
All these companies are doing good
business at satisfactory profit margin
and public relations are favorable.
Moreover, the commodity price level is
all to the advantage of the utilities,
but d speculative movement like this
one almost invaribly runs to extremes
and it is a matter of opinion whether
this point has been reached now or
not.
Bonds Also Advance.
Along with this improvement in the
market for utility stocks has gone
investment demand for high grade
dc tc
matter to get better than per cent
in first mortgage bonds of an estab
hshed electric light and power com.
pany. Junior liens are obtainable to
give considerably more than 5 per
cent. but there is a scarcity of the
underlying securities, which becomes
evident any time an attempt is made
TO acquire any large block.
The one grade of public utility Sc
curity which has Jagged behind is the
preferred stock. The explanation is
that preferred issues are not con-
servative enough for the average bond
buyer and lack the possibilities of
speculative advance that the common
stocks give The result is that any
where from to Z per cent can still
be had on these preferred issues,
making them one of the best available
Investment opportunities for the man
who wants reasonable security and
liberal return. It would seem that this
condition could not continue indefi.
pitely.
Foreign Liens Improve.
The better feeling towards foreign
bonds has not yet been reflected in any
very considerable price advances.
Probably what has been happening is
that in the search for higher returns
1n1
lected in the belief that yield Is out
of all proportion to the risk involved.
One of the features of the trading in
this group this week was the large
blocks of Japanese bonds which were
taken at record high prices.
If the market is any guide concern
over political complications is at end.
Significantly enough, the statement
of Ambassador Houghton on the
American attitude toward European
reconstruction has no unfavorable
effect upon outstanding European
loans. On the other hand, there has
been little of that buying for British
account, which was anticipated when
sterling exchange first returned to ap.
proximate parity. Foreign bonds,
which are dealt in both in London
and New York markets. sell higher
in London, so there is every induce
ment, with sterling at par, for the
British investor to buy the dollar
rather than the sterling bond.
Easy Money Big Factor.
The higher prices for speculative
railroad bonds have not been uniform.
but have come mostly in securities
representing systems operating in the
South and Southwest, where railroad
conditions are better. comparatively,
than in other parts of the country.
For the strength in the strictly
high-grade investment bonds the ease
in money is still sufficient eXplana-
ton. Prices in this group have gone
much higher than bankers generally
had expected, but the demand ap-
pears just as strong at the new level
as it did lower down. One day this
week a block of over $4,000 900 of an
old line listed high-grade railroad
mortgage bonds was unexpectedly of.
fered and taken without making any
Rppreciable effect on the market,
banks being the principal buyers and
the bulk of the dealings being over
the counter.
Another illustration Of this invest
ment demand was the sale Of $780,
600 900 New York City bonds at the
highest prices in Is years. Here, of
course, the buyers were investors, to
whom tax exemption was an es
sential.