Evening star., 1925-06-21
RAILROAD AFFAIRS
. GRIP ATTENTION
Nickel Plate Merger Ruling
Vital to Huge Sums in
Rail Securities.
RY GEORGE T. HUGHES.
gH%cial nIsn1tch tn Tbe Star

Special Dispatch to The star.
NEW YORK, June eo.-Railroad
affairs have taken a large part in the
development OF the investment stu
alton during the week just closed
Mainly this has been due to the in
tsrest taken in the Nickel Plate
merger situation before the Inter
state Commerce Commission. 1t Is
hard to exaggerate the Importance
which the financial community as
cribes to the outcome of this pro-
posed combination. In the first place,
railroad securities still form the bulk
Of the investments of the financial
institutions.
Enormous Rail Holdings.
Life insurance companies have
enormous holdings in railway bonds
and anything pertaining to the future
OF the transportation companies is
vital not only to the institution but
10 the policy holders. More or
less, 1t is the same with the savings
banks. They, too. are heavy investors
In railway obligations and through
them the average depositor has
great deal It stake.
Now it is the settled policy of the
Government under the present law TO
encourage consolida tions. For many
Years the idea was that competition
anu u6lNSFSdl WAS tne
one desirable end from the public
standpoint as far as the railways
We're concerned. The transportation
act changed all that and the Inter
STATE Commerce Commission WAS in
structed TO draw up a scheme which,
while preserving certain amount OF
competition. would insure the eCono-
mics incident to combining the rail
roads Of the country into a certain
number of large systems.
Ruling Forms Precedent.
The decision in the Nickel Plate
case will form a precedent and is be-
ing watched closely on that account.
The feeling in Wall street this week
has been very doubtful as TO the COM
mission indorsing the merger in it's
present folm. The minority stock
holders of the Chesapeake & Ohio
have put up such a determined fight
that the belief has been gaining
ground that some revision must be
accepted by the Van Sweringens be
tore the commissions consent can be
obtained.
This has had depressing effect
upon speculation in railway stocks
and has even been disturbing to in
vestment interests. Logically this is
unsound reasoning. Speculation based
upon benefits anticipated from
mergers, carried to excess as it was
during the Winter. has no bearing
upon the investment problem.
Points for Investors.
Whether any particular alignment
is allowed or not, what the investor
has to consider is still the funda-
mentals of property values and earn
ings. Ultimately combinations are
sure to come and when they do it is
safe to assume that the holder of the
most desirable obligations under
present conditions will fare the best.
Buyers of railway stocks and bonds
who give their first attention to
demonstrated values are not going to
suffer in any merger arrangement
and those who proceed upon any
other theory take grave risks.
Fully as important as the merger
matter is the question OF higher
rates for the Northwestern roads.
Curiously enough. while speculative
Wall Street has been pessimistic
about the merger situation. ii has
been optimistic about the rate out
look. There is no doubt that We're
the Northwestern road to be allowed
the increase in rates. 1t would put
different aspect upon The whole rail-
road situation.
Rates Extremely Vital.
Here. again, however. investors
will do we'll not TO be swayed by
speculative sentiment. Nobody knows
in advance what the commission Will
do on the subject of rates any more
than they do on the subject of
mergers Probably the St. Paul will
be held up as a horrible example of
what an inadequate rate structure
will bring about, but how far this
will influence the action of the COM
mission remains to be seen.
Meanwhile genuine investors should
be- guided by what the road. the OBJ
legation of which they are consider
ing, is able to show in the way of
earnings under adverse conditions.
This is the real test. Minor matters
include the prospect of demands for
higher wages of railroad employees
and the experiment now being made
by the New England roads in going
into the bus business.
General Market Strong.
The general investment market has
been just as strong as ever all the
week. At times tra ding has quieted
down, but never did prices show any
signs of weakening. Money rates
have been unchanged. but Liberty
bonds have been working steadily
higher until now all the four active
issues are selling at the high points
of the year, and one of them at the
high of last Summer when money
was at its extreme low. Similar
strength has been shown in the
Treasury As.
A ii this points one way, namely. to
a continuance of the present abun-
dant moNey supply.
Copyright, 1925.D