Evening star., 1927-04-26
MEN AND MONEY
By NJ. s. Rukeyser~
fCopyright. 1912

Wall street is a human place, sub
ject to all the whimsicalities or the
race.
Fashions in securities change with
almost the mercurial rspidity of styles
in milady's wardrobe. This column
directed attention a few weeks ago TO
the evidence of the beginning of a new
vogue for public utility securities
Since that time shares OF public utility
operating and holding companies,
which have been showing a forward
trend of earnings, have been in public
favor.
Since imitation was checked in 1890,
the fortunes of -ublc utility com.
panies, with the exception of trac-
tions, have turned upward. Rising
prices during the war and immedi-
atelv after the signing Of the armistice
almost ruined the credit of the public
utility industry, whose profits were
universally reduced and in many in.
stances effaced. The utilities suffered
from rising costs and fixed rates.
Since 1920 the utilities have benefited
not only from rate increases, but also
from a decline in the cost Of mate
rails and supplies from the inflated
war levels. Besides, the growth OF the
country has caused q great expansion
in the demand for services, particu-
larly in the power and light industry,
whose volume has been expanding at
the rate of Is per cent a year, largely
as a result OF the finding of new uses
for electricity in this era of push-but-
ton, drudgery-free housekeeping The
country has also been in a period of
public utility mergers, both of f1nan-
cial and physical character.
The consolidation epidemic has not
been without it's abuses, as Prof. VII.
liam u. Ripley of Harvard University
has eloquently pointed out. On the
other hand certain well conceived
financial mergers and physical links
through the interconnection of power
lines-as part of the development of
so-called uperpower-have made for
economies in operation and improve.
ment in management.
The we'll operated public utility
units-especially in the field of pow
er and communication--h shown a
steadily increasing earning power.
These facts first seized the specu-
iative imagination in 1925 and early
in 1925, and as a result public utility
stocks became a foot ball OF specula-
tion. Issues rose without rhyme or
reason, and as result when cor
rective movements took place in the
stock market, first In November, 1925,
and again in March, 1926, public util-
ity stocks suffered sharply-perhaps
more so than any other group. Tn
like the general array Of railroad and
industrial stocks, public utility shares
did not regain or surpass the earlier
peaks, and, in spite of the recent
rally, are in most instances still far
below the best prices of the 1924-1927
CycIe of bull markets
The return Of the utilities to specu-
lative and investment favor was based
on the recognition that after the
whirling in recent months of indus
trial and railroad stocks to unprece.
dented peaks the public utilities were
somewhat out of line. The chief spec
ulation is in the shares of holding
companies, rather than operating com
panies. The securities Of well man.
aged and profitable operating COM
panies are more or less in the invest
ment class, assuring a good income
rather than dazzling speculative
profits. The other issues Of a more
volatile character involve correspond
ing risks. as any one who can remem.
Der back as far as the Winter Of
1925 well knows.
During this whole period the best
class Of public utility bonds has been
In increasing favor among the most
discriminating class OF investors
especially among the insurance COM
panies. Several States also have ad-
mitted utility bonds into the class OF
investments legal for trustees and for
the funds OF savings banks.
The best class of utilities are little
affected by fluctuations in ordinary
business prosperity and depression.
The chief hazard of the well man
aged and economically operated utii-
tiles is a period of imitation, or rising
commodity prices. The current mod
crate downward trend Of commodity
prices, which has been taking place
for nearly a year, is helpful to the
earnings of utilities, enabling it to
make repairs and to buy supplies on
slightly more advantageous terms.
Declines in ordinary building activ-
tiles have thus far been to a large ex-
tent offset by an increasingly large
program of public works. Current re-
ports indicate substantial ordinary
building operations in the large cen
ters, but a slight decline in smaller