Evening star., 1928-08-26
MARKET REFLECTS
/ PROSPERITY ISSUE
Rising Prices of Stocks Dur
inq Week Laid to BuSi-
ness Gains.
BY CHARLES T. srEARE.
.isi Dispatch to The star.

By CHARLES r. SPEARE.
Special Dispatch to The star.
NEW YORK, August 25.-~The money
market and the stock market continue
to reflect the opposing views Of con-
servative buyers and spectators, There
is no sign that the opinions VIII mar
monige for some time to come.
The average rate Of call loans this
week has been the highest since the
esrlv part Of July. Stocks have been
stronger more active and more aggteS-
sively bought than throughout the rest
Of the Summer. The average Of lnouS-
trial shares today is well above tAat
reached on the eve q thc June break.
Since August "a 80 prominent issues
have had an average gain Of nearly
IL points.
1t is a prosperity market. Last year
the extensive rise might have been eN-
nlained in part by the long and heavy
inflow Of gold which was then culnl-
mating There was certain amount ol
imitation connected with II. We now
have A reverse condition, Gold has
moved out faster than II came III, re-
curing an adjustment in The credi.
base, But stocks have been affected
bv il only temporarily and as the in
Fuence Of a reduced supply Of credlt
has been displayed in the records Of the
banks, they have forged ahead as stead
liz as before.
The country has witnessed the re-
n1srkable paradox Of speculative mar
ket moving up under pielhofa o.
money and again going ahead AGAINST
a prolonged and substantial restriction
Of credit facilities.
Optimism Still Rules.
Last year stocks were not disturbed
bv the evidences of business conUac~
tior. which began 20 be Visible IN me
early Summer and became more pfolnl-
nert in the Autumn and Winter. TINS
ron63fio,, was offset bv an abundance
of money at the disposal Of those who
we're engineering scores OF pools IN
good. bad and indifferent SecurltleS,
Now with trade excellent and earnings
on the increase. but with money scarce
there is as much optimism over the
rpw conditions as there was IN the old
A no more contradictory set OF cir
cumstancos has ever surTounQeo
market situation. THIS Is III A4is
hands Of a powerful group OF capital-
lists who are pientifullv supplied with
funds and are apparently determined
n show what they can do under olfh-
cuIties. One thing they have not Yet
been able TO accomplish is TO bring
back the public into the market. III
spjte Of a 100 per cent increase IN
trading recently.
The small speculator cannot pay
the price of trading in high level stocks
when lis brokerage charges run be-
tween and per cent month
Since the first Of June the average
rate on call loans has been over el2
per cent. This month IT will be higher
than in july. It will cost nearly
twice as much TO carry the stocks that
have been recently active as they re-
turn in income al their present quota
tions.
Business Conditions Improve.
with business over the country good
and the crop outlook in the whea,,
corn and small grain territory excel
lent. there is every reason 10 ehpscs
satisfactory earnings IN the second
hsH Of the wear, with progressive in
crease in the last three months ana
better comparison with year ago
than IN the other quarters. On the
basis Of accepted standards this con-
6ttion of material well-being has been
reflected in the prices Of all securities
and overdiscounted in many. There
fore. IL is felt that the market Is ap-
preaching the same dangerous siate
that Il fell into last June, though with
TfgE G4g1sL HON GggAAE& WI 4AAS3IfS& 1@
being an active factor in Its move
n1ents.
twelve stocks that have figured
prorninentlv in this waeks advance
average nearly $50 q share, The aver
age yield on the group at present cost
prices is less than 8 per cent. the
significance Of this Is that ii costs so
much to indulge the temptation TO
speculate in this type Of securities that
another period of capitalization, or
MULTIPLICATION of shares, Is ahead. IN
many issues the formula that IS times
earnings should represent the market
value of a stock has become passe.
Credit Problems UnsoIyed.
From surface indications the Federal
Reserve Is making little progress I'm
correcting credit conditions. The trend
Of brokers' loans and Of bank borrow
srtgs is an irregular one rather than
constantly In the direction Of a reduc-
ton in both items. The pressure on
the interior banks is beginning 70 be
felt and iE reflected In their Withdraw
ais of funds from New York this week
Il vas necessary 10 establish a balance
e. the expense If the New York banks,
whose loanS have been declining for
come tin1e.
growing cut of the high money rates IL
the reduction in the acccptances of
American banks and the ability Of the
London markets for the Arst time Eince
last November 10 ou,bld New YORK for
thiE business.
The comment Of acceptance dealers
on this unfagorabie turn Of events IS 10
this effect: we have becn forced into
tf2e present high rate situation by the
abnormal money developments made
necessary by stock market operations,
which is poor consolation for American
institutions that have done 50 much to
develop a billion dollar acceptance bQsi-
npSE IN fh1s country"
This Is another important point al
which the requirements Ot the STOCK
market come into competition Hlth the
legitimate departments q banking and
ard business. II IS much more the
function of the Federal ReaorTe 70 pre-
serve and protect 4 uarget that gives ug
q credit standing throughout the world
than 70 support measlres looking 70 the
stimulation ot ore for securities already
e9erinflated.
Bond Market Stronger
Some reljsf has come from the Iiqgu~
ost!on qf bonds and the passing oi q
portion n tne nars If Jn5HtYibutnd
D%N fHa2f% AtB&& t4tAt 5tHEstE ~ tBAt4f "a
ti9e investor Ibe bond market haE
bsen undergoing cefattgu white 6toekA
have beer inflated J'hls market is ne4
in a stronger condition than At any
, tin1e IN ne past 1re month";
The market Uas beeB TOO broad t3l57
week 10 IDENTITY AUF group al Gtpck
that nJiatf have 9epn ha}peG By sections
of Got auii5s speech II acceptance
II remains - be GegB Hhetneg lfie
price ~ aAcat aUd com. HgH dian0ur-
ag.Dg.y aoN f9g ina producer, has il
gresieE 0f lesser effect oH the political
npstlnles ot lhe eounify than fol the ae~
cuf1fies ot our great industries, public
Hliliflea ana lEansuNflat.nn E4slemH.