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

PAASe Act tte lower coupon issue, be-
cause 1t had possibilities of market
| price advance which the other did not
have.
Convertible Bonds Popular.
In one respect the activity and
strength in the stock market was re.
hected in bonds. AT times the spec
! tacle OF rapidly rising prices for stocks
detracted interest from bonds, but the
| investment bankers surmounted this
| obstacle by offerings of bonds with
participating or conversion privileges.
Not at any time since the war has
| this type of bond been as popular as
1t was in 1926. It's use answers the
objection that the bondholder. al
though he assumes appreciate risk-
not in the same degree of course, as
the stakeholder. ,but still to some ex.
tent-has no share IN the profits of
the enterprise if it proves successful.
Advocates of the superiority of a
diversified list Of common stock over
bonds for a long-teTm investment
pressed their claims vigorously and
with much success all the year, 50 that
some concession appeared advisable
and the convertible bond was the re-
suit Any new issue carrying a fea.
ture of this kind was quickly snapped
up. Seasoned bonds of this type, both
rails and utilities. scored striking adj
VanceS as the market price of their
respective stocks went up in the series
OF Dull movements of which the
1926 stock market was made up.
The convertible bond had another
advantage. in that it could he bought
by financial institutions which were
prohibited by law from investing in
STOCKS. 1t is no secret that a good
many of these institutions embraced
this opportunity to acquire a Specula-
tive security which they could not OBJ
tam in any other way. OF course, this
opportunity had to be paid for The
conversion privilege was used to sell
obligations which could not have been
marketed on any terms so favorable
to the borrower otherwise.
The fundamental reason for the re-
markable and persistent strength in
the 1926 bond market was the album
dance of investment capital. the com
paratively low rates for money and
the widely prevalent belief that these
conditions were going to persist for a
long time to come. 1t is true that the
money rates did not fall to the ex-
IRENE lows of two or three years ago.
but considering the high level of bust
ness activity and the large demand
oPCtA AitV supply 4iOiII SlOth HkdIkGJ
operations they were remarkably low
indeed.
Call Money Variable.
Call money ranged between 3 and &
per cent, the low rate obtaining in
April and the higher for the most
part at month ends, when interest
and dividend requirements were
heavy. The range for time money
was from to 5i4 per cent. which was
a little higher than in the preceding
year, but still low measured by war
and postwar standards. Commercial
paper fiuctuated between and 4a4
per cent. AT no time during the year
did the Federal reserve weekly state |
mentS reveal any drain whatever
upon credit resources.
On balance the United States was
an importer of gold during the year, |
thereby adding TO the huge stocks |
which have accumulated in this coun- |
try until it is estimated half the world |
supply is on this side of the Atlantic. |
For the first 10 months of the year |
gold imports totaled $179.349.261. |
against exports of 500. 743,771. In |
1925 the movement was directly re- /
versed, exports largely exceeding inn |
ports.
1t was not so much these concrete |
statistics, however, that the bond |
market was rejecting, but rather the |
historical analogy of conditions exist |
ing after other great wars. and es-
pecially the apparent downward trend |
in commodity prices. For it is not |
only interest rates that affect bond !,
values, but the amount of goods that |
the proceeds of a bond coupon will |
buy
q
downward trend in prices for com |
modities it must mean higher quota !
tons for bonds. Opinions may differ /!
as to whether any such trend has been
definitely established. The various
index figures show only that the high |
for the year was recorded in January. |
and that fluctuations since have been !
uncertain. If the curve is plotted, |
however. it will at least be plain that |
the tendency is not upward.
Perhaps some light will be thrown |
on the subject by examination of q |
list of typical commodities, comparing |
prices today with what they were a |
year ago. Taking the foodstuffs first, |
wheat is down sharply and corn !
slightly. Rye and oats are much the |
same; flour is much lower. Coffee is |
down, but sugar is up. Butter is a |
little higher, but eggs are lower |
Lard, pork and beef are all very much |
lower. The average for foodstuffs is |
distinctly down.
Now take the metals. Iron is down |
but steel is unchanged. Lead is much |
lower. So is copper and zinc. The |
only exception is tin. which has had !
a sharp advance. Coming to the tex /
tiles, cotton, as every one knows, is |
way down. Print cloths and silk are |
down also. In the miscellaneous class |
rubber is much lower. Hides are |
down a little. Gasoline and crude oil /
show advances. having moved against |
the rest. If this showing means any /
thing 1t is that prices as a whole are |
trending lower.
The upward movement in foreign |
bonds paralleled that in domestic obli- |
Continued on Twenty-third Page) /