Evening star., 1925-01-11
MONEY B|CFACTOR
IN WEEKS TRADING
Bell Phone Issue Feature in
BondS-Gold Exit Draws
Attention.
CALL LOANS 2 PER CENT
New Offerings Heavy - Second
Grade Securities Come Into
Active Demand.
CALL LOANS 2 PER CENT
BY GEORGE It. HUGHES.

BY GEORGE It. HUGHES.
Special Dispatch TO The Star.
NEW YORK, January 10.-The rui
ing influence in the investment mar
ket this week has again been money
conditions. These probably had 4
good deal TO do with the active sped
ulation for the rise in stocks. There
can be no doubt that they were the
all-important factor governing in
vestment SECURITIES.
After a brief period during which
rates hardened with the end-of-the
year demand, money again dropped
back to the levels of a couple Of
months ago. Call funds on the stock
exchange. which had touched a high
of 5 y per cent around the first of the
year, fell back to the midsummer low
of 2 per cent, while 60-day accommo-
ditions were quoted a quarter OF ]
per cent lower. Some such recession
in rates Is entirely normal at this
season The movement may be re
versed in the Spring, when there are
greater demands upon the banks for
commercial purposes, but, however
that may be, the immediate result
was to advance security quotation
all along the line.
Gold Draws Attention.
A good deal has been made out or
the fact that gold has begun to dow
out of the country and the advance in
sterling exchange to a new high
since the war, approaching parity,
has been pointed to as indicating
that this gold export movement is
likely TO increase. Inasmuch as the
ease in money over the past year has
been due largely to the enormous
excess OF gold imports, it is piausi-
BILE to argue that a turn in the tide
would mean higher rates and so
fundamentally change the entire sit
uation. II will not do. however, 20
expect any sudden readjustment
In the first place, the country'S
excess of gold is still very large. In
the second place, the policy of the
Federal Reserve Banks in pushing
gold certificates into circulation has
resulted In an artificial holding down
or the reserve ratio. How impor-
tant a factor this is may be judged
from the fact that gold certificates
In circulation increased from $2i4.-
100000 on October I, 1922, to ssss.-
100000 on October ], 1924, an increase
in two years of 684,000,0o0.
These certificates could be called
In by the Treasury Department at
any time and theoretically every dol
lar represented by a gold certificate
so called IN would furnish the legal
basis for $3.50 in federal reserve
notes. Such a large expansion in
circulation is, of course, improbable
IN the extreme, except under the most
extraordinary circumstances. but IL
serves to emphasize the possibilities
OF the situation.
BeH Issues Bond Feature,
Turning to the bond market itself
the most significant event Of the
week, as testifying to the abundance
OF investment capital, was the prompt
sale of the new American Tefephone
and Telegraph per cent debentures.
Excepting only United States Govern
ment operations, this was the largest
single issue since the Japanese loan
OF a year ago. Recent experience
teaches wariness in accepting too
readily deductions from these over
subscriptions Of new offerings.
There have been too many cases
where the enthusiasm for a new bond
issue has evaporated after q month
or so OF trading. Not until an issue
has been permanently placed with In
vestors can its real success be es-
tablished, but the eagerness with
which these telephone bonds on d
6.So per cent basis were taken was
very impressive. In listed issues
.. Liberties have been quick to respond
to lower money and even some of the
savings bank railroad mortgages have
been fractionally higher.
Middle Grade Liens Active.
The most encouraging thing about
the market has been the greater at
tention paid to the good, middle and
second grade securities. For a long
time now these have been entirely
neglected. On the one hand they are
not conservative enough for the In
yestor who demands only gilt-edre
securities, and on the other hand
they have no speculative appeal in q
market like the present, because the
chances of price appreciation are lin
tied. This applies 10 both bonds and
preferred stocks selling on a to
per cent basis, the lower return on
the bonds and the higher on pre-
ferred stocks.
Changes In the money market are
| not reflected in quotations for this
grade of investments, and up to very
recently the improving outlook for
| trade and the rising stock market
have had no substantial effect on this
particular group. Spectators have
been absorbed in following the up
| turn in comlaon stocks and in bid
ding up adjustment and income bonds
And yet If the advance in all these
highly speculative obligations 1fs
justified, the investment status, Of
these middle-g grade bonds and of these
| reasonably good preferred stocks
must have been raised.
This week recognition of these
| discrepancies seems to have awak-
ened- So far the movement has not
gone very far. but beginning has
| been made. In the judgment OF some
authorities, no better investment op-
portunity exists just now in any
| market than presents itself in this
| class
| The foregoing observations apply
| more to the utilities than to the rail
roads, There are a good many rail
| road bonds which have failed to re-
| fleet improved earnings positions, but
they are few in number compared
with the utility preferred stocks
which are still available to give high
| returns. Railroads have a long way
1 to go before they catch up with the
| utilities in the matter of enlfsting
| public interest in their securities.
| Copyright, 1921
1