Evening star., 1927-05-14
BY CHARLES F. SPEARE.
special Dispatch to The Star.


NEW YORK, May 14.-Stocks are
still in the possession Of institutions
and indivuals with ample resources of
cash and with reserve borrowing ca
pacity. AS there are no trade. political
or foreign complications sufficiently
serious to cause liquidation, the mar
ket holds at a high level on the
foundation of easy money rates.
From the standpoint of speculative
psychology the most significant fact is
the defiant attitude market leaders
take toward all unfavorable develop
ments here and abroad. This is often
the mood of the market when 1t Is ap-
preaching it's permanent top or COM
ing to temporary turn in its course.
''Trees never quite grow to the sky,
is an old saying in. Germany, where
the application of it was to be found
this week in the collapse of indus
trial securities that had been pushed
to extravagant heights by public
that could see nothing ahead but
steadily mounting quotations. Today
many of them are penniless. 1t was
this same disregard for actual values
that led thousands into purchase of
Florida real estate at the end of the
boom in 1926 and ended in disaster
to majority of the late buyers.
Investment Security Position Sound.
While the stock average Is high,
particularly in that group of shares
that reacts most quickly to stories of
hidden possibilities" it is not yet
on dangerous ground, SO far as the
securities of well managed and pros
porous companies are concerned. This
distinction between the two classes
Of stocks should always be kept in
mind in analyzing the present mar
ket position.
So long as money remains abundant
and at low rates, there will be a re-
sponse to it on the part Of bonds, pre-
ferred stocks and the shares of what
have been classified as standard in
vestment issues. There. is still a mar
gin of from l to 2 per cent between
the yield on corporation mortgages
and corporation common stocks. AS
time goes on this difference is likely
to be narrowed down somewhat.
Inasmuch as the bull market is
promised on cheap money, 1t Is I'M
portant that the elements in the cred
it situation should be plainly set
forth. The obvious ones are that un-
der the influence of small borrowings.
hand to mouth buying, quick trans
pOftdJlOn IdclltleS, anu an euoIiiiouS
supply of gold, loaning rates for capi-
tai have been slowly falling. This
week 1t has been possible to borrow
into next November at Az per cent.
Long money has been relatively
easier than short money. In fact. at
no time in the past 10 years has its
rate been as easy as at the present
time. Conversely, call loans have been
quite firm on account of the heavy
borrowing against speculative COM
mitments In securities and to finance
new issues of bonds and stocks.
The expansion in banking credit In
the last few years, built upon rising
gold reserves, has been mainly to the
advantage of the markets for domestic
securities and to the foreign borrower.
Since January, 1925, the total in.
vestments in securities of the report
ing member banks of the country
have increased from $4,555, 100000 to
SIS 1924. .000, 900, or 80 per cent in a little
less than two and one-half years.
Foreign Money Situation Different.
Throughout Europe in the last two
years it has been the policy of all
banks of issue to reduce their dis