Douglas daily dispatch., 1926-04-29
WEEKLY COPPER REVIEW

The weekly market report shows
that the general market is likely tc
resolve itself into a process of adj
justing prices to earnings. Where the
latter ara of are likely to be insuffic-
lent to justify present figures le,
alone excessive levels recently reach,
ed, some further reaction is to be ex-
pected, but this process should have
little, if any, effect on fixed interest
bearing securities. Report shows that
United Verde Extension nets one of
the largest returns Of any of the more
important copper mines
Corporations reports for the first
quarter of the year make an excellent
showing; if one could be at all cer>
tain that this rate of earnings would
be maintained one would feel very fav-
orably disposed toward the majority of
common stocks, even at current high
levels AS a matter of fact, indica,
tions point to some slowing down of
business in certain lines, and there
fore of decreased earnings. For in
stance, the present incoming business
of the U. S. Steel corporation, which
no doubt is in at least as good a po-
sition in this respect as the balance of
the industry, is shown to be but about
one-half of it's capacity.
Some of the larger automobile COM
panies have already curtailed produc-
tion; the textile business continues so
depressed that southern mills are cur
failing. AS these are among the lar
gest industries their effect is apt to be
reflected on others. Naturally the re-
suit of this tendency Will not be trans.
lated into dollars and cents" until
the latter quarters of the year., but if
the market is true to it's usual func-
tion of anticipating the future, it is
hardly likely that any extended ad-
vance in industrial equities will take
place until this contracting tendency
is checked, and a balance is again
struck between supply and demand.
Henceforth the. drops will playan
important part in determining the
future course of the business. These
now promise well, but it is to be re-
membered that the much lower price
that these command as compared with
a year ago is also an important fac
tor. Even with as good yield as is
now promised the purchasing power of
the farmer, as measured in money,
must be considerably less than last
year. This isl not saying that the
agricultural section will slip back to
anything like the unfortunate condi-
tions of 192O-21. 1t has paid off a
large proportion of it's indebtedness,
impetus to general business from this
as great as it was last year.
The settlement of the Italian debt
and reports Of an impending settles
ment of the French Indebtedness are
most gratifying. Whatever one may
think of the economic effect of the
payment of these claims, the funding
of this indebtedness will do no more
than any other one thing to straighten
out the present rather difficult French
financial problem, and rehabilitate her
international credit. No doubt, as in
the case of Germany it will also
strengthen her industrial fabric, so
that she will become a still more for,,
midable competitor in the world S
markets. Such competition, however,
we must be prepared to meet. In the
long run it is much better to have
strong competitors that are also good
customers for many of our products
than the reverse.
In any discussion of the market, q
sharp distinction should be drawn be-
tween investments and industrial equi-
ties, whose earnings are likely to
show considerable variation. With a
tendency toward declining commodity
prices the purchasing power from the
income of fixed Understanding Sc
curities becomes greater Bond lew
els, it will be noted, have not only
been entirely unaffected by the recent
define in common shares but have
actually reached new high level.
This diveHging tendency is apt to
continue. 1t is quite possible that we
may witness a reversal of the last de-
cade when, with rising commodity
prices, those with fixed income were
at disadvantage, and one could keep
with the rising prices only by owning
equities whose earnings tended to in
crease as prices rose. Bonds of al
most all grades, and even stocks yield
ing good return whose dividend is
we'll secured, should give good ac-
should also be drawn between indus
trial and railroad issues. The latter
as a class were never unduly inflated,
and in many instances still net reason
able returns: Even if the volume of
business should recede this is not
likely to prove serious, and should be
offset by lower cost of material and
reduced operating expenses.
United Verde Extension selling
around $28 share and making dis
tribntions as it is now doing at the
rate of SO per share per annum, nets
one of the largest returns of any of
the more important copper mines.
1t is questionable whether this stock
in view of its record and its present
physical and treasury position, is not
entitled to sell on a lower basis of
income. 1t is true that unlike the So
called porphyry mines this is a type
of property where it is neither possible
or advantageous to open up very large
quantities of ore many years in ad-
vance of extraction. 1t is also true,