Evening star. [volume] (Washington, D.C.) 1854-1972, 1926-12-31

DCtJ UtiDtNI Wy tIit COItSLdHl dSS VI
ance that it did not matter whether
call funds We're available from day to
day at az per cent or whether they
rose occasionally to 5is and 6. An
abundant supply was certain, and SO
long as there was no overtrading
there was no danger of the banking
| authorities suddenly curtailing their
| advances.
On the other hand, as part of the
! excellent equalizing system of the
| Federal Reserve, Wall Street specula-
tors do not look upon the reserve
ratio of more than 20 per cent for the
| country as a whole as an invitation
to go recklessly ahead. They realize
that no actual drain upon bank sur
pluseS, however large these SURPRISES
were, would be tolerated If intended
merely for speculative uses.
Investment Demand Exceeds Supply.
The past year in investments has
. been remarkable for the accumula-
ton of great sums of capital seeking
employment. Enormous offerings of
| new securities. both home and foreign.
have not entirely served to take up
the slack. In November United States
/ Treasury loans sold at the highest on
! record. In December, getting ready
/ for the new year reinveStment de-
mand. it was difficult for institutions
wishing to buy good-sized blocks of
very high-grade bonds TO get offers
| around the prevailing level. which
was also close to the top level of the
year.
/ Capital has had to be content with
/ a constantly diminishing return. This
! has been one of the central features
of the financial situation in 1926. In
/ veStment issues of the highest rank
were pushed up to what were almost
prohibitive premiums. Then the de-
mand shifted over to bonds of in
| ferior grade because of their high
yield. to investment stocks. and espe-
| cially to the securities of foreign gov
! ernments.
The rise in European obligations,
a number of which reached their high
est for the year in the closing weeks.
and few broke their records for all
/ time, constitutes a chapter by Itself.
How much of this advance is to be
explained by the urge to buy for the
sake of comparatively large return
and how much can be set down to
, improved economic conditions abroad
! Is a question. Both considerations
have entered strongly, of course.
Before going further into foreign
| financial conditions. which have play
| ed a more vital part than in any
| year since before the war. it is well
1 to take up some Of the main aspects
of the situation at home.
Wall Street Overoptimistic.
The year 1926 started out with ex-
pectations in Wall Street that were
not destined to be realized. There
had been u big speculation on the
Stock Exchange in the Autumn of
| q 10 Of this the
| idea that the opening months, per-
haps the first half of the succeeding
year would witness a trade boom.
Leaders in the business world were
talking about this: prominent bank
ers were for the most part optimistic.
The public got its anticipations up,
only to find that 1926 was not to be
as much of a boom year as it had
been led to expect: that il was to be a
year of good business in the main,
but with exceptions in certain indi-
vidual lines. Some manufacturers
were unable to get selling prices up
where they would leave a reasonable
profit margin.
Wall Street. in consequence, had to
face a radical reimbursement of its
ideas, and starting with the second
week in January and not terminating
until the early part of April, there
movement on the Stock Exchange.
1t swept individual prices down all
the way from Is to so points in the
speculative leaders. Then the slump
was checked, and after two months
of uncertain variations the market
started forward again. Once more
the rise in July and August was based |
upon too sanguine a judgment of the |
business outlook. and in the latter |
part of September and the first half |
of October a reaction occurred which |
extinguished a good portion of the |
Midsummer gain.
After the middle of October the posi- |
ton was improved. Stocks rallied con-
sistently until the general average |
was brought up to and even ahead of |
the previous high of the year But |
there was no excited speculation, such |
as there was in October and Novem-
Der, 1925. Wall Street shaped its
operations with due conservatism as
to 1927. Extreme ideas either way |
were not popular.
Twelve months ago the point most
upon was that there was no
of supplies in the
I