Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-08-20
TRADE CONDITIONS
NOT UP TO NORMAL
Drop in Money Rates Accept
ed as Rejecting Slack
ness in Industry.
BY CHARLES f. SPEARE.
Special Dispatch to The Star.

NEW AOItht August -U.-~So lar as
one may now observe, the future
progress Of the stock and bond mar
kets is connected almost exclusively
with the margin of capital supplies
over business requirements and the
cheapness of money.
1t would not be possible TO build up
a stock market from this level on the
basis of trade conditions as they eN.
list today or as they promise for the
next four months. Measured hy Old
Standards, the volume of business is
large, but business componsations are
unsatisfactory. The very fact That
money rates are going down at the
end of August instead of rising indi-
Gates a slackness in industry that is
more than seasonal.
There are promises. however. for
the future that men in industry and
in the business ot merchandising are
3 watching closely and from which
they should have definite lead with
in the next 80 days.
There has been nothing this week
to unset the calculations Of those
who have been trying 10 supplement
the Governments crop measure
damage by black rust in the North
west. while in the Canadian wheat
provinces brilliant sunshine has re-
placed the frosty days of the week
nreypus. Serious floods have oC-
CURED in Kansas to the detriment of
growing corn and the late harvesting
of Winter wheat. In the cotton belt
the conditions are none too promiS-
ing. As a result. the price of the
staple has been up to 20 cents
pound again.
Farmer to Profit.
The picture of agricultural Condi-
tions, therefore, has its light and dark
shades, but all in all, it need not pro
duce any uneaSness in the business
world. In fact it has been estimated
recently that the present high level of
prices of farm products will bring
81 900 600 900 more into the pockets
Of the American farmer this year
than in 1926.
The effect Of such potentially large
Increase in the purchasing power OF
the agricultural States is already be-
ing shown in the earnings of retail
stores, chain stores and the big whole
sale merchandising houses, all of
whose securities this week have adj
vanced quite sharply on the prospect
of an excellent showing for the second
half of 1927.
1t is no doubt true that business is
hoor in some sections of the country
and in a number of the most impor.
tant manufacturing industries. Where
this occurs it is due mainly to over
production or to an inability to bal
ance effectively the cost of labor and
of raw materials with the selling
price of the product turned out.
There is considerable unemploy-
h1ent in one way or another through
out the country, and in the conceS-
sions that labor has been making this
year, as compared with other years
since the war, there is ample evil
dence that those who have employ
ment are jealousy guarding them
selves against the loss of it.
Business 0rganically Sound.
This overproduction reveals itself
In lower rents in many communities,
in a steady decline in commodity
prices from last September until the
early part OF July and much irregu-
larity since then as grain and cotton
have fiuctuated widely, as well as in
the price concessions that have been
necessary to move various lines of
manufactured articles. Consequently
one may properly diagnose the bust
ness situation as rather enervated
after a long period of high tension, but
with no serious organic disorders.
The result of the slowing up in
business in different parts of the
country has been to force on the New
York banks, and from them TO the
market for securities, an unprecedent-
= xzF,, nt1 n
history has the percentage of call
money loaned for interior banks been
30 high with the New York institutions
as it is now A compilation just pre-
pared shows that within the last u
months the net demand and time de-
POSTS of reporting member banks have
Increased over $900.0 900. while the
items indicating commercial require
ments have increased less than $780,
600, 900. The bulk of the increase of
available funds has gone into the mar
ket for stocks and bonds and into real
estate mortgages.
Stocks and Bonds Compared.
: The experience of last week. when
the stock market was upset by the
collapse Of several weakly protected
Industrial pools, and again this week
when it was found necessary 10 sup.
port IT on the news Of Judge Gary S
death, suggests period Of more mod,
crate price movements in stocks from
now on and greater discrimination
between the good and the questionable
issues. Although an analysis of the
average yield on stocks shows that il
IS today slightly below the yield on
honds-and this has happened only
once or twice before in the last &C
years-there is still a good deal OF
momentum to the market and the
public is willing TO pay high prices
for an interest in all Of the ConserVa.
lively managed and well margined
American corporations. There will be
throughout the rest Of the year an
emphasis on the good stocks and an
equally strong prejudice against the
poor ones.
Bonds Cross the RubicOn.
AS for the bond market, il seems II
have crossed its rubic0n and 70 bf
moving forward steadily into higher
ground. 1t Is as strong today as &
was in April and Nav. after having
been in a state of collapse during June
and July. With money on call at 81
per cent and quite likely to decline
10 81 or 3 per cent before the END
VI tIic SUMMIT tLif-lN - -ltb4F tt w
pose the rising tendency of invest
ment prices in spite Of the fact thai
the average is high The difficulty
Of the investment banker today is u
find enough bonds for hls clients,
Inasmuch as the stock market has
favored railroad shares recently. II viii
he interesting to see how they react
u the July statements of earning.
that viii he published next week The
preliminary figures have not been sat
isfactOry The roads are having .
hard struggle TO ha!ance such gross
gains as they enjoyed in the first par
Of 1897 against the higher wages OF
current months. Losses from the Mis-
rissippi food are proving more serious
than at first admitted. while the re
auctions in the soft coal output, ii
he Winter wheat movement and II