Evening star., 1927-07-04
BY CHARLES F. SPEARE.
,cial Dispatch 10 The Star

A'A A<A AA~aS'
Special Dispatch TO The Star.
NEW YORK, July 4.-Having com
pleted the first half of 1927, of which
the earlier quarter was distinguished
bv buoyant markets for stocks and
bonds and the later period by lrreE-
MAR movements in stocks and de-
pressed condition in bonds. Specula :
tive and investment circles now are
endeavoring to appraise the possi-
bilities of the second half OF the
year
At the moment the outlook is some
what diScouraging. The high level
to which stocks have advanced re-
Gently has removed them from the
attractive investment class and dis
counted much that has developed to
their advantage, or may develop IN
the next few months. The bond
market is overshadowed by a great
mass of undigested securities which
move slowly from the hands OF
syndicates into those Of the public.
Technically both markets are in a
weak position.
Price Readjustment Needed.
The situation might easily be cor
read iuStment of prices to terms at
which the public would again become
a buyer To illustrate: At the high
figures of a month or so ago. the
common stocks Of a group of rail-
roads with long dividend record
showed return slightly under D
per cent This was not sufficient to
interest the person who demands.
along with the speculative chance, a
return we'll above that available on
4 bond. In the reaction that occurred
during June. the same stocks
dropped in price until the yield to-
day is $40 per cent. The investor
is again beginning to take notice of
them.
In April and May legal railroad and
public utility bonds, as well as many
of the secondary issues, rose to the
highest prices in 20 years. so that
some of them gave return of less
than 414 per cent. As result lnsu.
tutions. as well as individuals, ceased
buying. With the subsequent decline
of TO points, the yield has I'M
proved between one-eighth and one
fourth per cent, and bids are again
coming into the market for these
issues.
A large number Of new foreign
bonds came into sight this Spring at
prices paralleling those at which old
issues sold at their best. They have
not been distributed. However, with
an average decline Of 5 points in 20
issues in the last few weeks, which
means on improvement of from three
eichths to one-half per cent in the re-
turn, they have reached level where
they will command attention II the
quality is unquestioned.
Syndicate Diss0luti0ns Would Help.
As the first step to correct an un-
satisfactory market situation, there
must be concessions by the seller who
placed too high a price on his Sc
curities at the outset. This fact has
been sufficiently confirmed by the way
in which the bonds siumped this
week Just as soon as the artificial re-
strictions Of syndicate were re-
moved. An example of the unnatural
price basis is given in one large issue
now offered in the street at points
under the original figure.
The hest thing that could happen to
the bond market would be the early
Termination of many of these syndi-
Gates and the establishment of free
market and at the same time an agree
ment among investment houses for a
month or so not to bring out new
issues for which there was no urgent
need. 1t may be said also that the
public would enter with more conf
dence into future commitments in
investment bonds il the practices or
advertising issues as ''all sold" when
they have only been passed on in
mart to dealers, and of marking up old
issues to initiate the price Of new ones,
were abandoned.
Purgatiye, Not Operation, Needed.
The difference between a bad tech
nical market condition and funda-
mentally bad one is the same as be-
tween a functional disorder in the
human body and an organic one
There is nothing fundamentally
wrong with either the stock market
or the bond market. Both need
strong purgative. Values are based
on sound credit and business condi-
tions. and on the prospect of a con.
tinuation. certainly through 1927. OF
a sufficient volume Of trade to protect
stockholders against any general re-
duction in their dividends.
1t is true that there are quite
number Of weak industries in the
country whose listed securities give
higher visibility to this weakness than
ever before The great basic trades
are strongly fortified, transportation
and public utility companies continue
to show wider margin OF safety to
cover their securities, defiation in
commodities rather than imitation
continues, and at the basis of this
strong price structure is the fact OF
abundant money at moderate rates.