Evening star. [volume] (Washington, D.C.) 1854-1972, 1928-08-04
MARKET RECEIVERS
FROM RECENT DROP
Notable Advances Mark
Trading During Week.
Money Rates Tighten.
Special Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK, August 4.--Money has
been tighter this week, stocks and bonds
have been firmer than might have been
expected with credit conditions as they
are, and in Wall Street, at least, more
satisfaction has been expressed over the
progress of the political campaign.
Evidently the June decline in stock
prices corrected many wrong conditions.
The slump In bonds in july was pro-
nounced enough To attract an invest
ment demand of sufficient size to abb
sorb securities of merit. This aspect
Of the market situation has been inn
proved by the withdrawal of new Offer
lngs. There Is today complete ceSsa-
ton of bond undertakings.
Early this week the average price OF
industrial stocks had worked back to
within a few points of that at which
it stood on June /, with numerous issues
rising steadily under the influence OF
expanding profits in industry and in
merchandising until they had exceeded
the levels previously reached. There are
still those who are willing TO run the
risk of high carrying charges of stocks
and high average level of prices in the
belief that the earnings and outlook OF
some of our strongest corporations have
not been fully represented in current
market quotations.
Prosperity Growing Steadily.
The country is undoubtedly prosper
Gus. It is steadily becoming more So
The hesitation t.Iae was first shown Just
year ago and continued for nearly
nine months has been replaced by an
aggressive attitude under the favor OF
large domestic and foreign trade ard
increasing indications that American
crops this year will again be abundant,
The diversified interests of the country,
and its natural resources, together with
the backlog of reserve wealth and saw
ings accumulated in the past five years,
form combination that does not per-
NIT of a prolonged industrial reaction.
1t may be argued that. surface condi-
tionS are more promising than those
that lie farther down in the business
and credit structure. Certainly we are
experiencing a Midsummer nightmare
over money and credit conditions. These
arc bad enough. If they were as bad as
they seem. would they not before this
have affected securities and business to
far greater degree. Left to themselves
they may work out satisfactorily before
the peak of the countrys money de-
nands is reached. The inhibitions that
have been placed on money lending this
week by the New York banks are not
severe enough to correct what has come
to be the strangest phenomenon of this
years money situation. If this is acute,
why wait until September in order to
relieve 1t and give fun accommodation
to the commercial and agricultural re-
quircments that commence to accumu-
late about the middle Of August?
Lending Call Money.
Capital always flows in the direction
of highest return. In the period after
the Civil War this proved TO n the
building of railroads. TIL surplus
funds of Europe then assisted in the
financing Of such enterprises.
Later it found its best outlet in COM
binations of industrial companies,
f1ouriShing in the trust" era. IS and 80,
years ago.
During the so-called Coolidge BUN
market, and especially IN the latter
phases of 1t. money was drawn from
nearly every source and center to pur-
chase industrial and public utility
shares and the stocks of banks, trust
companies, insurance companies and in
vestment trusts.
Today, because money rates are high
and the fact that they are high has
been advertised fully to the entire world
idle capital Is being loaned out in
Wall Street by the banks of practically
every state in the Union, by nearly
every large corporation in the United
States, by thousands of bank deposit
tors who formerly were innocent of the
rate OF interest paid on their deposits,
and to such an extent by the money
markets of Europe and Canada, that it
has affected the exchange rates of Lon
don, Paris. Berlin, Amsterdam and
Montreal
1t is now as common to hear men
say that they are lending money ON call
to Wall street at 6 and per cent as it
was TWO months ago Tor them to tell of
tneir pronts III General Motors Radio, |
Steel and other popular issues. Every
body has been doing 1t, even those with
bank balances as low as 5000. 1t is
the money making fad Of the day.
Shaw Action Recalled.
When call rates frequently went from
20 per cent to SO per cent, and Leslie
Shaw, who was then Secretary of the
Treasury, had to dump Government
money into the banks in order to pre- !
vent further RISE none but the larg-
ISL AiahtNdtAuklS ul NEW IOfk. BOSTON, /
Philadelphia and Chicago took ad- |
vantage Of these rates Few small |
country banks loaned on call in New
York prior TO the war They did not |
know how To go about the business
The public has never until now reccq- !
nized the simplicity and safety with |
which 1t could transfer q per cent de- |
post account into q or Z per cent
call money commitment. Having learn |
ed the trick 1t will not soon forget IL /
Another element in the situation that
has never operated to any extent Is |
that OF the use of funds in the call /
money market that were originally raised t
for investment in securities or for BUSH I
ness projects, but which are temporarily /
directed into the open market for money |
as the best medium for profits.
What Is necessary 10 loosen up the /
% per cent of brokers loans that is now |
supported by the funds OF all lenders |
except local and outside banks?
Obviously greater business activity /
ana range of security prices that will |
seem In commemorate fhr0ltpf !