Evening star., 1925-12-06
BONDS ARE CLOSING.
! YEAR VERY STEADY
Buying BY Financial Institu-
tions Is Keeping Up
Current Values.
BY GEORGE T. HUGHES.

Special Dispatch to The star.
NEW YORK, December 5-The i'm
presHve feature in the investment
market at the opening of the last
month of the year is the Steadiness
in bond prices in the face of practi-
C:tlly no trading interest and compara-
lively small buying by individual in
vestors. leaving it to the financial in
StltutionS TO maintain current values.
Then, too, notwithstanding the fact
that the discount rate of the New
York Federal Reserve Bank this week
was left unchanged at 31c per cent,
no one expects interest rateeS to go
lower. On the contrary, it Will be
surprising if over the longer period
they do not 30 moderately higher.
The raise in the Bank of England
rate was intended to attract gold and
already, at the end of the week, there
were indications that balances We're
being transferred from New York to
London. The rise in sterling to the
highest in three months showed
pretty plainly what was going on. In
other words, ii appears reasonably
certain that an increase in the New
York bank rate is only postponed.
All Of which makes ii more notable
that the bond market is 80 firm.
Commodities Higher.
The explanation is that bond prices
nre not governed entirely by tiuctua-
tions in money. There are other ele-
lnents that enter into the problem.
One of these is the price trend OF
commodities. Just now that, too, ap-
bears to be upward, but there are Il
good many authorities who believe
1.,f, olTI-
lies are more apt TO sell lower than
higher. II this comes TO pass 1t Will
not act as a stahiliZer to the bond
market.
These considerations have an i'm
Dortant bearing upon the theory
which has come to be so widely ac-
Cepted of late that common stocks
possess investment advantages over
bonds III that ownership of shares in
industrial enterprises protects the
purchaser from the depreciation of the
dollar. Elaborate statistics have been
assembled i'll support of this theory
und they have convinced good many
people. Certainly the case is strong
one if the period from 1896 down to
1920, a series of years in which the
commodity price trend was upward
with only minor interruptions, and
period in which the phrase high
only one TO be examined.
Purchasing Power Lower.
No one can deny that the purchas-
Ing power of the $40 annual coupon
from a bond like Il West Shore Four
to take d seasoned high grade issue,
is far below what it was 20 years ago.
II this loss of purchasing powere were
to go on indefinitely no one would want
To buy bonds a tall unless ii was bank
or insurance company whose Obiiga-
tionS could be met in dollars regardless
of purchasing power. But to expect
anything of that kind is ridiculous.
Some day there will be a long down
ward swing in commodities and appre
citation in the purchasing power of the
dollar ana then the bond holder will
be the gamer. Perhaps the present
bond market is forecaSting something
of this kind
There has been a let-up this week
In the amount OF new tianacing, at
least III the foreign field. II was
welcome rest to u market which was
becoming congested. New German
municipal loans had been following
each other so rapidly that even the
dealers could hardly keep track of
them All of these loans may be en-
tirely good, but it will take time to
place them permanently with Ameri-
can investors. Seasoned foreign is
sues have held their ground we'll, even
the French.
Averages Hold Steady.
The average price is almost a point
below the high of the year reached in
the middle of November. but it is
about where il was Il week ago. and.
considering the competition OF new
issues and the grave doubts that per
siSt about French finances, the mar
Set has given a good account OF
itself.
The most important news develop
ment in this field was the intimation
that the German potash loan will all
te placed abroad, the non-participation
Of American bankers being due to the
opposition of Secretary Hoover to
American loans to maintain the price
OF commodities on which foreign in
tereStS have a monopoly. This was
the ground of the objection to another
coffee loan to Brazil.
No injury is done to the investor
by the elimination of this class of
loans, even though the investment
bankers do lose opportunity for ad-
ditional commissions There are
plenty of foreign bonds left for him
to buy, and the variety and quality
are varied enough to satisfy all
tastes. Why demand more securities
TO yield I TO IL per cent when there
is already such an abunda nee?