Evening star., 1925-07-26
RAILROAD BONDS
GIVEN MORE STUDY
Passenger Traffic Drop Held
lmportant-Foreign Loans
Still Popular.
BY GEORGE t. HUGHES.

BY GEORGE I. HUGHES.
Special Dispatch TO The star.
NEW YORK. July 25.-After sag
cing all the week the bond market
steaded at the close. The keen edge
of the investment demand has been
dulled, but there has been little liqui'
dation so far.
Selling of securities by the banks
in preparation for an increased de
mand for funds on business account
has been well absorbed, and the mar
ket for new issues of desirable quality
Is reasonably good. but there is praC-
tically no speculative buying, for the
advance and large blocks of both old
and new bonds are being carried on
borrowed money.
Higher Money Seen.
The general expectation is for a
hardening of money rates as the sea
son progresses with some lower level
for investment securities. The theory
ON which this belief is founded, how
ever, finds no support in the Federal
reserve Bank returns. Indeed, the
weekly statement published Friday
made a showing entirely unexpected
In that the reserve ratio both for the
system as a whole and for the New
ork bank was up from the previous
week a point for the former, and al
most two points for the latter
AT the same time the OUTSTANDING
note circulation fell TO the lowest of
the year. 1t was impossible to read
IN these figures any sign of higher
money, and, accordingly, there was
some hardening in bond quotations.
Rail Rates Get Attention.
Developments in the railway situa
ton have been given more attention
this week. The two major problems
are the fate of the application of the
interstate Commerce Commission for
hlShef rates in the Northwest with
Whom the st, Paul reorganization is
involved, and the attitude of the com.
MISSION on the proposed Nickel Plate
merger. 1'''
Rightly or wrongly. the banking
community looks TO the decision in
thls one case as establishing a prece
ueht. some disappointment is ex.
pressed over the slow progress being
made in the hearing and the wide
scope of the inquiry, which seems IL
oe going beyond the question OF
whether or not the consolidation is
IN the public interest
Investors to Be Heard.
AS 10 the application for higher
rates, new party will be heard this
time when the side of the security
owners is presented Hitherto il has
been the shippers versus the railroad
management in rate hearings. Now
the owners of railroad bonds propose
that consideration be allowed their
claims. In fact. the dispute over the
81. Paul reorganization hinges on this
point.
Meanwhile the discussion as to the
ultimate effect of motor car and motor
truck competition with the railroads
goes briskly on. One thing is plain
Passenger traffic is falling off In the
first four months of 1925 there was
decrease of more than $4,000 .00C
In the number of passengers carried
by class / railroads under the tota1
carried during the same period the
previous year. The totals for these
four months are 319, 9,706,O00 in 1924
and 296, 10000 in 1925.
Passenger Revenues Drop.
The result was a loss in passenger
revenue of S23.303349 Curiously
enough passenger traffic fell off more
in the Western district than any
where else. The railroads have
always claimed that passenger traffic
was a minor matter, but these losses
are too considerable TO be lightly sci
aside.
The bright side of the picture is
the increase in car loadingS, which
sldS SOIlG on COlIlClueHl Will the OEOl
In passenger traffic. June earnings
now being published, make a favor
able showing and the expectation is
that July will do the same. The high
record of net income of the railroads
was reached in 1916, and some au
thorities go so far as to predict that
when the full results for 1925 are
available it will be found the 1916
aggregate is equaled or even ex
cd tlat iSy hn iY,Nra fN,.S
need have no present concern about
the status of railroad securities as a
whole.
Foreign Loans Popular.
In another quarter the investment
situation is not altogether satisfac
tory to the conservatively minded
That is in the foreign field. Loans te
foreign countries are continuously be
ing brought out and the total sum
involved is steadily mounting. In
quality these new offerings vary from
the gilt edge to the questionable.
The trouble is that the inexperi
enced American investor puts all for
eign securities into one class just be
cause they are foreign, whereas in nc
other field of investment is discrimin
alton more essential. There are tech
nical differences, too. in these for
eign loans which it takes training To
appreciate.
For one thing, some day there may
be difficulties in procuring the ex
change necessary to make payments
of interest and sinking fund on GER
tain of these loans. Investment
bankers owe it TO themselves to see
that their clients do not put their
money into foreign securities unless
they are able TO take the risk involved
Soeo Co,,r.o
The nature of this risk is very diff.
ferent in Europe from what it is in
Latin America. The credits extended
TO Europe have been for the purpose
of balancing budgets, supporting ex.
changes and repairing war damages
whereas the accommodations af
forded TO South America have been to
make available undeveloped resources
The safe course is TO diversity com.
mitments geograp phically.
Many good judges believe that the
market price of foreign bonds over
estimates the risk in Latin America
even if it does not underestimate
the risk in central Europe. They say
that political instability in South
America is less a menace to invest
ment safety than financial uncertainty
in Europe.
Copyright 1929