Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-06-29
BY GEORGE T. HUGHES.
Special Dispatch to The Star.

bered in financial history, not only
as the period during which the av-
erage price of all stocks listed on the
New York Stock Exchange went to
the highest point on record. but for
the sustained strength the market
showed during all this time. The re-
actions that ordinarily accompany
prolonged advance were shorter and
less pronounced than in any other
bull market.
Both rails and industrials partici-
pated in the upward movement. The
industrial average went to the best
for all time and the rail average to
the best in 20 years. Both were sig
nificant of speculative sentiment, but
the greater change was in the atti-
tude toward the railroad shares. There
have been other markets in recent
years when industrials have been the
objects of a broad and confident buy
ing movement but none in which the
favor extended to railroad stocks has
been as conspicuous. Not since the
property of the carriers was returned
to private control after Government
management during and just sub
sequent to the war has there been
such an exhibition Of investment in
terest in railroad securities Of the
junior type.
Many Exceptions i'm Industrials.
But while the average for all stocks
set up a new high record, there were
plenty of exceptions in individual is
sues, practically all of them among
the industrials. This condition made
it possible for bear market to exist
in certain stocks while a bull move
ment was in progress in the rest Of
ha let LovNy1nNAA hfY4
definite groups. as, for example, the
oils and the motors.
To a lesser degree it obtained among
the steels. In this respect, also, the
1927 stock market to date has been
unique. Analysis shows that when
ever there was irregularity of this
character within a certain class OF
stocks it was always the shares Of the
larger corporations that stood out ac
tive and strong in contrast to the
stocks of the smaller organizations.
Examples are General Motors in the
automobile group and United States
Steel in its class.
Commodity Prices Decline.
This leads to another feature for
which this market has been remark
able. The first half of the year was
marked by generally declining COM
modify price level. 1t has been the
subject of wondering comment over
and over again that stocks could keep
on going up while quotations for CON-
modities were going down. NeceS-
sarily lower commodity. prices mean
for most producers a narrowing mar
gin of profit which, under ordinary
circumstances, would make their
stocks less attractive.
The explanation for the seeming
paradox is that the stronger corpor-
ations. with abundant capital re-
sources and the ability to put into ef-
feet sweeping economies. could oper-
ate at satisfactory profit while their
weaker competitors were unable so to
accommodate themselves to condi-
tons. The market recognized this
distinction.
There is one more factor that de-
serves notice in any review of the
past six months. Speculation for the
rise at times apparently has verged
upon recklessness. Stocks have been
bid up violently, fluctuations have
been extremely wide and the turnover
has been huge. On certain days dur
ing this time there have been more
single issues of stocks dealt in than
ever before.
Authorities differ as to the extent of
public participation but it is difficult
to define just what is meant by pub
lie" as distinguished from profession
al speculation. The point is that the
thing has been done on an extraordi-
narily large scale. Now all history
teaches that this sort of excitement
leads to a collapse sooner or later, and
yet the 1927 market as June passed
was most free from such extreme re-
action.
Spectators Learn New Caution.
The explanation is that the market
has been really more conservative
than it appeared. There was almost
no trading on thin margins. the po-
tential danger Of the situation had
been universally recognized and there
had always been a more or less large
bear party fighting the advance with
greater or less-usually less-success.
In other words. what the spectators
call the technical position" had not
been impaired as much or as often
as in other advancing markets of
the past.
The fact is that it was not only
the business men Of the country who
learned a lesson from the great de-
f1ation Of 1921; spectators took it to
heart also. Just as hand-to-mouth
buying has become the accepted GUS
tom in merchandising circles. so the
trader in stocks has been protecting
himself by liquidating his holdings
more or less regularly and by always
bearing in mind the possibility, if not
the probability. of sudden turn. This
is one Of the reasons why the turn
was so slow to come.
Back of all the strength of the
! market and its principal cause has
been the ease in money. The surplus
Of investment capital first made it's
presence felt in bonds. Then. when
prices for fixed interest bearing Sc
curities went so high that returns
were no longer attractive, 1t showed
itself in stocks. Investment issues.
whether rails or industrials. have
been the leaders in the upward swing
throughout.
This feature Of the buying did much
to inspire confidence. While the
moneys which went into stocks Of
this grade were, as is generally
claimed, in part an overflow from
the bond market. there also was a
good deal Of buying of the equities
which common stocks represent. on
the theory that over the longer period
the result to the investor Is better
than IL he confines himself TO bonds.
At any rate, by June the rise In In
vestment stocks had gone so far that
the margin Of advantage in yield over
bonds had been cut very substantially
and in a few instances had been elm
mated entirely.'
Railroad Reports Excellent.
Second only to money as a factor
in the rise was the improvement In
the railroad industry. This was re-
'vealed in long series Of record
breaking car-loading figures. as well
as in the dividend announcements
that occurred, including the extra on
Atchison, which. If continued. as is
expected, will put that stock on a
$40 basis. Then there was the initial
declaration on Rock Island and many