Evening star., 1925-11-08
STRIKING ACTIVITY
/ IN BOND MARKET
Height to Which Stocks Have
! Scared May Be Causing
Il, Transfer of Funds.
BY GEORGE T. HUGHES.

BA GEORGE Il. HI GHES.
Special Dispatch TO The Star.
NEW YORK, November THE
PAST week has witnessed a striking
improvement in the bond market,
striking in contrast to the lethargy
sDf the past month or more, and strik-
ang in the testimony it gave that the
demands of the record-breaking specu-
1atlon i'll stocks had not diminished ma
terlally the large supply of investment
capital.
The Improvement extended over Il
Wlde range of issues, including as it
did United States Treasury bonds.
middle and second grade railroad bonds
anu finally, foreign government obliga-
tons.
Foreign List Holds Well
With respect to this last named
group. the interesting feature was that
the sagging tendency in French bonds
vas without disturbing effect upon the
balance of the foreign list. 1t would
nave been reasonable 10 expect that
the very serious crisis in French
finances would have discoura ged in
Nestment buying of foreign loans gen
orally. but such was not the case, and
ar the close Of the week the average
price Of the foreign dollar bonds listed
on the New York Stock Exchange was
within small fraction Of the high OF
the year.
For the favor shown TO foreign in
Sestments, u partial explanation is to
pe had In the announcement that the
unoffcial ban upon foreign financing
had been lifted in London. and that
British bankers We're now free to par
tlcipate with American investment
houses in distributing new offerings
ror account of European and South
American governments and industrial
corporations. The news had a slim
ulatlng effect upon the American mar
het for this class OF investments.
Change Since World War.
one reason was that foreign bonds
have always sold on a lower WELD
oasis in London than in New York
SIMPLY because British buyers have for
generations been more accustomed TO
sending their money out Of the coun-
try, while American investors only
entered this field during and since the
war. This IS still true Of bonds f1oated
4 rev years ago, partly in the London
and partly in the New York market,
The corresponding London issue de-
ilands higher price than does the
american. This situation has not been
changed by the somewhat higher
side.
He CONCLUSION IS that when new
issues are offered simultaneously in
ooth markets 1t will be at a lower re.
turn to the investor than has beeD
the rule during the past wear. and If
this is so 1t must result in improve
1nent IN prices for outstanding foreign
loans. The French situation is still a
menace, II Is true, which might unset
caiculations, but, as has been said,
hnere has been no adverse effect yet.
Money Situation Good.
Turning to the domestic out1ooL,
the money situation is satisfactory.
1t is true that enormous sums arr,
being employed in speculation and
that there has been 4 moderate in
crease in demand for commercial pur
poses, but rates are still compare
lively low. The slight decline in the
reserve ratio OF the Federal Reserve
system as whole and Of the New
Aork bank, even though for the IL
ranks the ratio Is at the lowest of
The year TO date, does not seem sig.
nlncant. The volume of new financ.
LnS Is not large, the total for October
being the smallest of the year with
the exception OF August
mo large number Of bond issues
being retired Is evidence of the com.
Portable position in which most OF the
COFpOTdllOnS
themselves. The selling of Liberty
bonds on the theory that a reduction
In income taxes would make them
less attractive and which resulted In
carrying several Of the issues down
to the low of the year was appar-
emily completed during tho week and
some recovery followed.
Bonds Neglected for Stocks.
More important than any OF these
temporary factors is the trend of
commodity prices. Recently a theory
has gained ground that diversified
stock holdings are more satisfactory
Investments than bonds over a. period
OF years simply because q stockhold
er IS guaranteed against a depreciat-
ang dollar. The argument is that
while the income of the bondbolder Is
stable In dollars it is unstable In pur
chasing power, and more or less that
has been true for a series of wears
long antedating the war
In a measure this belief accounts
Tor the neglect of bonds in favor. Of
stocks, which has been 50 conspicu.
Gus a characteristic of recent mar
hets' II, however, commodity prices
ere no longer trending upward. but
in the opposite direction, and there is
GOOD ground for the opinion that this
- the case now, the bondholder Is no
longer at a disadvantage compared
With the stockholder as far as the
purchasing power Of his income goes.
Dangerous Time to Buy.
Moreover, the buyer Of stock at
the high levels now obtaining is
surely going TO see epreciation In the
market valuation OF his securities
sooner or later, no matter how sue
cesSful the investment may prove in
rhe long run. Even if the new theory
is correct, it would seem that this is
not the time 10 begin to practice II.
a subconscious realization of this
principle may be responsible for the
week s raNiNal il1tereSt In lcr,as.