Evening star. [volume] (Washington, D.C.) 1854-1972, 1928-07-01

/ On the record day 49, ~ ~
/ the ticker took l ~ A>.+.sa.esz#
/ hour and SO min ID S~s%w
uteS after the final ~ zzM
/ gong had sounded M
I to complete its 49, ~
record OF transact m M
/ tons. incidentally ~,
this happened when Ssssa''aE
an abbreviated sys-
/ tenn of reporting George r. HUGHES.
/ sales had been put into effect. Under
/ the old method it would have been
hours later than 1t was.
/ Not only did the mechanical facili-
/ ties break down. but the human ones
were strained to the breaking point.
Employees of brokerage Offices, working
day and night. were unable to keep
their books posted. The result was a
+ series of Saturday closings of the ex-
change to bring the accounts up to
date. This was supplemented By a
week in which the hours of trading
were cut from five to four.
! Broadest Market on Record.
/ So far all these records were based
on a public participation in the market
! which had never before been approach
/ ed. This feature is impossible to ex-
| press statiStically but it is indisputably
/ true that more people in more places
/ and OF more degrees of financial re-
/ sponsibility were buying and selling
/ stocks in the first six months of 1923
/ than ever before.
! Another record set up in this period
+ was one for the violence of the fiuctua-
/ lions. On this point it may be objected
/ that there was no session comparable
/ TO the famous panic days of the past
/ as for instance the historic Northern
/ Pacific corner. This is true There
/ was no such day this year. and yet on
the average there has never been such
series of spectacular movements
+ before.
/ 1t has been a broader market than
ever before seen. More issues have been
| dealt in in single day than ever be-
| fore. Listings are larger. Because of
/ this very fact sensational skyrocketing
/ of individual stocks, followed by equally
/ sensational nosediveS, have not had the
effect upon the general list that they
would have had in the old days COR
ner-or what appeared to be a corner
/ in one stock would not upset the whole
market as 1t used to do. The fact is
/ that there were markets within markets.
/ Seasoned Traders Guess Wrong.
| 1t is doubtful whether there has ever
/ been a market In which conservative
and seasoned trading opinion was so
often wrong. Traders who had spent
/ their whole business lives in Wall street
1 repeatedly predicted disaster and re-
/ repeatedly they were proved to be III
/ error.
| This does not mean. as is often as
serted. that the old rules no longer
apply. Water still runs down hill. and
excessive speculation for the rise must
and will eventually be corrected. But
what the premature prophets of collapse
/ failed 10 take into account was that
things are done on a larger scale nova
days. 1t takes longer for these forces
| to operate. That is all.
Effect of Easy Money.
What were the underlying causes?
To what extent was the rise justified.
and what of the future? The sequence
of events is too familiar to require an
extended review here. The market rose
Violently from late February until May.
when Ii began to react, breaking sharply
IN June. In June many stocks sold at
new lows for the year. The six months
period is generally thought of as one of
predominantly advancing prices. but
that IS not correct. The only uniformity
was In the volume of business.
Fundamentally the most influential
factor In the long advance was easy
money. This is true, although the
money trend was completely reversed in
the first half of 1928. 1t was the cumu-
lative effect of abnormally low interest
rates in preceding years that brought
on the extravagant speculation for the
rise. continuing long after the original
cause had ceased TO operate. II is an
axiom OF every speculative market that
an advance goes farther than actual
conditions warrant 1t Is the same way
with declining market. So ii is accu-
rate to say that back of all the excite
ment was the abundance of money.
Travelling ON Momentum.
When money began to harden the
rise did not halt at once. The average
rate for call loans during January was
1926 per cent. The range for new loans
during that month was from ST., To Sle
per cent. During the same period time
money ranged from AS 10 Az per
cent. Contrast this with the Z per cent
rate for new loans obtaining in early
June, charge unequaled In seven years.
Compare also time money at the begin
ming of the year Nth the Saa per cent
rate at the end of the six months II
Is plain that the trend was irregularly
but surely upward
This danger signal was disregarded al
nrSt The mounting total of brokers
loans was similarly minimiZed, The
Stock Exchange compilation, which is
MADE public once a month reached its
peak for all time at the end Of May.
when the total was $S,274,046, 2sl The /
report of the Federal Reserve Board, |
which Is made up on somewhat differ /
cnt basis, made its record high in the /
week of June &. when IL went 10 $4,-
56S, gao 900. Spectators for the rise /.
dismissed these figures with the simple |
explanation that iiStings were larger, |
that bank resources were greater. that I
commercial requirements were smaller, !
and that brokers loans were bound TO !
grow The point they overlooked VAS |
that the supply of credit Is not unlim- /
tied even II the demand is,
Federal Reserve Steps In.
Then the Federal Reserve Bank took /
hand by raising the rediScount rate !
II was May Ia when the New York Bank |
put Its charge up from 4 To Al per !
cent, still the speculative fraternity |
was not convinced. and Ii took specific |
warning from the Federal Reserve Board !
and the spectacle of a waversng market |
itself to bring about any degree Of |
liquidation, Even when this was plainly |
impending leaders of the campaign for |
higher prices were giving out state |
mentS 10 the effect that the bull mar |
ket was Just beginning"
Disregarding now the money outhSok. /
II h reasonable to ask how far prices I
ran ahead OF values during the rise, /
From this viewpoint II Is possible 20 1
make out fairly good case for the
market, Seemingly the most extrava-
CANT performances were those OF stocks
representing new industries Radio and
the airplane shares come under this /,
classification Even here no enc can
say Dramatically how raSa toe tar the !