Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-06-12
EASY MONEY BIG
FACTOR IN MARKET
Wide Variations Are Evident
in Business 0utIook-Gold
Holdings Heavy.
By GEORGE r. HUGHES.
oonIaa yN;enatnh 20 The Star


NEW YORK. June 1i.-Seldom has
there been a financial or economic
situation more difficult to analyTe than
the one that presents itself at the
close of the week. Inconsistencies
abound in all directions.
Stocks in the main are firn' anu
that lis saying a good deal when u -
remembered that the general lever ol
quotations is at the highest in years
Money is abundant and cheap. But,
and this is the illogical thing, oohos
are weak. There is an enormous sup
ply of undigested new offerings, the
weight Of which is beginning to tell on
the market for seasoned issues.
There are wide variations in the
business outlook Building construc-
fion is on the decline The motor car
manufacturers are experiencing an
uneuually distributed prosperity, but
the rubber and tire companies are
suffering from competitive conditions
accentuated by the slump in prices
for the commodity. Railroad car
loadings keep up we'll but net income
does not make so good a showing
partlv because of wage increases and
partly because of the damage done by
the Mississippi flood. Bank clearlngs
are up from the same time year ago,
but the gain is due largely to the enor-
NOUS transactions in stocks.
Easy Money Factor.
Speculation for the advance in the
stock market still rests upon the
foundation of easy money. AS far as
rates for call loans go the buyers
seem to have no reason for concern.
For the first time since May %, day
to-day accommodations have been OBJ
tainable this week at 4 per cent on
the exchange and at concession from
this charge in the outside market.
The heavy drafts made upon the
supply by the investment houses that
are carrying new bond issues snow
in the total of brokers' loans. but not
in the call money market. The week
" statement of the Federal Reserve
Banks gives no sign of any check to
the advance in stocks on the credit
account. Gold holdings are larger and
the reserve ratio is higher.
That the speculative community
realizes the important part money is
playing in the current market was
demonstrated by the uneasiness
shown on Thursday, when report
got about that the Federal Reserve
a statement after the close. The re-
port was unfounded, but for while
prices weakened on the idea that a
warning against excessive speculation
was coming from this source.
Rediscount Rate Cut.
Along the same line is the intense
interest taken every week in the meet
lng of the directors of the New York
bank. Well informed bankers can see
no reason for a reduction in the re-
discount rate, and yet predictions that
action to that effect will be taken are
widely circulated regularly the day of
the meeting.
In the railway field the most inter-
exiting happening of the week was the
announcement by the B. & o. of it's
AlAn to finance by common stock. 1t
Hras only four years ago that the Bal
Guhore & Ohio resumed dividends on
the common after the period during
which payments were suspended COW
ering the after-the-war defiation. In
1920 the stock sold as low as 275s. 1t
did not cross par until 1926. but today
it is selling some 90 points above par
and is paying per cent dividends and
earning the amount twice over. More
significant still is the confidence of the
directors that the market situation is
such as to allow the sale OF nearly
SIS 900 i'm railroad common stock.
TIE New York Central is expected
20 make a similar Offering in the near
future and perhaps other railroads
will do the same. The incident marks
q change in the public attitud- toward
the carriers that only the most Opt.
<nistic would have dared to forecast
I've years ago.
Bad News Ignored.
Not the least striking fact about the
stock market status of the rails is the
Eay in which the unfavorable develop
ments have been ignored. Denials of
merger applications have had only
temporary effect. Losses caused by
the flood have not been reflected in
Etock prices. Probably no attention
will be paid to the showing in this
weeks crop report, with its decline in
estimated production of Winter wheat
and the unsatisfactory outlook for
corn. 1t may be that the market will
wait until these conditions have been
translated into a falling of of earn
ings.
OF course it is still early to speak
with confidence about the crops, and
tn final result could easily be much
better than now appears. The point
is that the market for railroad stocks
concerns itself only with the bright
aide of the f1icture