Evening star., 1925-07-04
BY ROGER w. BABSON.
Special Dispatch to The Star.

special Dispatch TO The Star.
WELLESLEY HILLS. Mass, July
4.-The stock market always reaches
it's lowest point during the early por-
ton of a period of depression. After
the insiders have accumulated such
holdings as they desire at the lowest
prices they begin to gradually talk
optimistically. This optimistic talk
continues throughout the period of
depression, and is accompanied by riS-
ing stock market prices. AS these
people have large security holdings,
they are naturally interested in bull
ing the market. Hence they give an
optimistic Interpretation to all news
whenever possible. They endeavor to
suppress bad news and exaggerate
good news. This situation continues
throughout the period of depression
until the market climbs to high fig
ures, when these market operators
begin to liquidate.
Stock Market Now High.
The stock market usually reaches
its highest point at the beginning of
an era of improvement. Statistics in
diCate that we are at or approaching
such a time at present. This accounts
for the liquidation which is going on
now in the stock market, and explains
profits. Gradually, as the insiders sell
out, they turn pessimistic. It is an
old Wall street quotation that "the
greatest bear is a sold-out bull" "
Surely this has been true throughout
my lifetime. and very noticeably so.
After the insiders liquidate they
begin to eXaggerate bad news and
suppress good news, because they then
are interested in producing lower
prices, having taken their profits in
the market. All of this means that If
a medium sized wheat crop is indi-
Gated when stocks are low, this wheat
crop is reported as a fairly good
crop, which will probably be sold at
record breaking prices" If, however.
the Government forecasts a similar
crop when the stock market is very
high, then these same operators state
that ''the crop will be very short and
prices very low, thus bringing great
losses to the agricultural district"
Good Crop Returns Predicted
This seems to be the situation at
the present time, and readers must
recognize the fact when considering
crop reports.
Without doubt, the Winter wheat
crop will be disappointment this Fall
as to bushels, which will be less than
for several years. Moreover, from
present indications, the world wheat
crop will be quite good, thus keeping
world prices down to a fair figure. On
the other hand, the United States
tariff on wheat must not be forgotten,
which means that the American peo-
pie must pay considerably more than
the world market. Hence our West
ern farmers should be able to make
fair profit even on the present crop
indications, because the price to our
farmers should be quite good. Hence
l believe pessimistic crop reports are
being exaggerated, and that even the
wheat grower may have a fairly good
year.
Business Should Be Hopeful.
However, the purpose of this inter
view is not to discuss either the stock
market or the wheat crop, but to urge
business men to keep on an even keel
and not let either the bulls or the
bears of the stock market rock their
boat. l want TO impress upon bust
ness men that the financial interests
are always bullish during the early
part of a period of depression, and are
always bearish i'll the early part of a
period of improvement. All of this
means that the present high prices of
stocks and the pessimistic talk which
is now coming from certain interests
is one very good indication that we
are entering a period of real business
improvement.
In addition to the general reasons
above given, this is borne out most
clearly by statistics. Most of the fun
damental subjects show an improve
ment over last year, notwithstanding
the pessimistic talk you hsar today.