Evening star., 1927-11-27
CHEAP MONEY BIC
FACTOR IN MARKET
Weeks Trading Ignores
Prccedents and Optimism
Carries Prices Up.
ny CHARLES 4. SPE.tRE.

ny CHARLES 4. SPEtRE.
Special Dispatch 20 Tho star
NEW YORK. November 2G.-One
must respect the manner in which the
stock market conducts itself even
though one may not have much faith
in the lasting quality of the present
rise. Given an inch in the way of
business improvement, the market
takes an eli in price advance. 1t Is
easier to bid it up than to force II
down
This weeks market has possessed
the qualities OF great breadth ana
strength. In some ways II has been
the most remarkable of any this year.
IT has repeatedly VIC atcd the prece'
dents that are supposed to govern
speculative movements in rushing up
TO new high average after session
or two of enormous transactions ana
obvious liquidation in stocks that pre-
viouSly had governed the action of the
entire list. 1t has risen on news that
, was good. on reports that were bad,
and on symptoms of fatigue III both
General Motors and L. :. Steel stocks.
that the public has not Yet had its I'LL
Of spccu alton for a rise and still sees
on the business and political horizons
events that are promising rather than
depressing.
Various Groups Taken Up.
Distinct from others of the past
month. this weeks market has gath
cred 10 itself all classes of securities
and given each one an opportunity
to display its strong points. Ihere
have been vigorous campaigns in the
Independent motor company stocks IN
spite of the approaching shadow OF
the new Ford car. With oil pruduc-
tion filling all reserve storage capacity
of the country and further dividend
reductions on oil stocks threatened,
the oil group has shown confidence
and a substantial average advance.
Railroad stocks have been buoyant,
concident with large percentages of
decrease in October gross and net
earnings.
The Improvement in the metal sit.
uation and the possibility Of 14-cent
copper before long have justified
different attitude toward copper
stocks. although some of them are
selling higher today than when cop
per was much above the current price
and earnings per share in some cases
We're double present earnings.
Stocks of chain stores. of national
distributing houses. agricultural inn
pements, fertilizers, food supplies
electrical and radio manufacturers
Gamers and tobacco companies have
enjoyed legitimate response TO the
broadening of the markets and the
betterment in prices of their products.
Here again it is to be remembered
that they have for months been dis.
counting the future and had fairly
we'll caught up with The element
of stock recaptalizations and of ru-
mored consultations have entered into
the appraiSement of market values to
q greater extent than warranted. The
examples that have been given in 1927
of industrial combina tions do not bear
out the original estimates of economies
created by merging one manufacturing
concern with q competitor.
Cheap Money Supports Market.
If the existing facts of business do
not justify a rise in prices of stocks |
above the level at which they stood !
when trade was good, what other ele- |
ment than that of cheap money is |
there TO support the present specula |
ton?
1t is repeating old statements to say
that money is cheap. that Il will re-
ii
prices of securities must continue TO
adjust themselves to discount rate
of BIZ per cent and to an income level
not very much above 3 per cent for
United States Government bonds This,
however, is about all there is in the
situation. Perhaps nothing more is
needed to explain it. If man has a
normal blood pressure and a strong
heart his chances of coming through
nbr,iA
cellent.
The inconsistent phase Of Wall
street reasoning is that which predi-
Gates the present and prospective tise
IN stocks on considerable expansioD
of business. If trade broadens appre.
clablE, money rates must advance.
The redlscount rate of the Federal Re-
serve Bank must go up. Logically
stocks that have been rising on easv
money must come down. 1t would te
a much healthier situati if we had
rediscount rate today of or 4ls per
cent rather than one of 31a per cent.
The former condition would reflect ar.
tiVlty in lines of industry where there
IL now stagnation, and easonah1e
profits In contrast with returns that
1eopardize the position of MANY Sc
Curities.
Commercial Loans at StaudstiU
Just how much longer the eynan.
sion of credit against securities ,an
continue without affecting the entire
banking situation is a question thar
worries those at the head Of large in.
stitutions. but is evidently a matter nr
little concern to the ma ajoritv. Thjs
weeks statement Of loans on stocks
and bonds tn brokers and dealers in.
dIcated an increase of over So5 900 o00
which brings the total close 10 81 500
100000. In the past - months these
loans haXe expanded nearly 5000 n00
600. or almost 81 per cent.
The significant fact in this great on.
largement of borrowing is that while
1t is taking place there is hut little
expa in loans for commercial
purposes. The rediscounts of the yari
Gus Federal Reserve member banks
are about as low AS they have been
- ct any time in their history. %ot
only is the public loading itself I'm
with securities at high prices. but the
same policy is being carried out from
necessity, so il is argued. by many
banks and trust comDan MES which are
more concerned with increasing the
earnings on their stocks than in main.
tanning liquid position
Gold in the amount Of over sci
100000 has been exported this week To
Canada and South America, with the
exchanges Of Europe steadily fayoring
shipments from New York.
December 10 Bring Test.