Evening star., 1927-10-23
STOCK LIQUIDATION
| UNSETTLES TRADE
li0Idcrs Realize Their Shares
Have 0utrun Normal Returns
and Prospective Profits.
BY CHARLES j.. sPEARE.

Special Dispatch to The Star,
- NEW YORK, october 22.-Iiquida-
tion in the stock market this week
has not been large in volumHe, but 1t
has been constant and of the sort that
Is unsettling, Since October 5, when
the high average of the year was
REACHED, the decline has amounted to
Is points. This is about the same
average loss that occurred in August
following the announcement of Presi-
dent Coolidge that he would not accept
third term nomination. The selling
motive, however, has been quite diff
farent in the last instance than in
the FIRST
Primarily, it has been due to belated
recognition of the fact that market
values for speculative shares had ont
run both normal income returns on
these shares and prospective earninsr
AN obstinate bull element Eao LOen
for months bidding up prices on the
suppoSitlon that easy money was th"
only factor that counted in the situa
ton, and that. whether or not business
improved. the public would continue
to invest its surplus funds in securities
Eventually the bull position becnme
overeXtended and stale, and with
fncrea sing evidence that the returns
to industry and transportation were di.
I;linishing, with competition, domestic
end foreign, growing more intense
holders of stocks began to reyiSe their
opinions and Tighten their commit
IneDts.
Future Trend Disputed.
There is a wide difference in the
professional viewpoint regarding the
immediate future of the market, On
the one hand is the argument that
the present decline represents only a
minor disturbance in q bull market
and that as soon as the technical
status has been strengthened another
advance will develop. The opposing
opinion is that stocks must be liqui.
dated to an even greater extent than
they have been so far and the situa-
tion with respect to brokers' loans
must be greatly improved before the
public will again appear as supporters
of the stock list From now on it will
ne necessary to appraise market
Ralues solely on the two factors of
8asy credit and decreasing earnings
: nd disbursements. There will always
be a certain amount of investment
Iuying in a market that has had a
break of this weeks proportions by
those who have stood aside while
prices have been violently advancing.
z There have been times recently
Nhen It, appeared that the market
needed support and was being treated
10 a kind of artificial respirati tion. The
survey of business conditions made by
The Coolidge administration was one
evidence of this. Another was the
Sudden decline in the call money mar.
Ket to 312 per cent after rate of Az
Der cent had been established. Moth
ing that has come from official Wash
1ngton circles has been received with
such skepticism and questioning of
/. Ehe motive for 1t as the business sum-
mary which made 1t appear that trade
t&vas satisfactory in all directions, al
Aheugh statistical evidence does not
support such view. In fact, there
IS a growing amount of proof that
business is poor in many quarters and
has failed to realize the expectations
of those who were even moderately
optimistic month ago.
J Four Major Industries Analyzed.
! The state of general trade may be
Overwhelmingly, iron and steel,
motors, oil and. building construction.
! In the first the price situation has
become more important than that of
isFoduction. With the mills operating
Between SO and SO per cent of capaei-
ty, producers have been quietly max
ing concessions to consumers in order
to stimulate orders and have created
q very unstable price condition, There
is level at which buying viii be re-
Sumed. The hopeful feature is that
this level has been reached. Such re-
ports as those of Republic Iron and
Steel and Trumbuil Steel for the Sep
tember quarter plainly reveal the ef-
fects Of low prices and small output
during the Summer months.
After sailing along gayly through
out the year and being the most con-
spieuous of all American industries
for large profits, the automobile world
has finally wakened 10 the possibili-
ties for reduced earnings that lie in
the forthcoming appearance OF the
new Ford car. This has resulted in
much LIQUIDATION in the shares OF the
ieading producers even where there
~. and will be, abundant margin of
return to justify continuance of pres
INT dividends. For the time being,
however, it is fairly well established
in the minds of bankers that 1928
record of net earnings cannot be du-
plicated by the three or four COM
panies that have had a harvest time
while the new Ford model was in the
making.
From the standpoint of production
the OIL industry shows improvement,
The daily average output is falling
prSOpTS