Evening star., 1928-12-23
TRADING IN STOCKS
SHOWS EXPANSION
Public Has Not Abandoned
Market, but Is Using
More Caution.
ny CHARLES r. sPEARE.

after-eHectS OF the pre2& In STOCKS a
fortnight ago are gradually disappear
ing. In spite of the nearness of the
holidays, the trading volume has ex-
panded again, although it is still about
one-third less than in November.
Stocks that cost more to carry and
give the lowest return on capital in
vested have resumed their leadership.
Twenty such issues this week showed
an average recovery of % points from
the low Of December 8. A few are ap-
preaching top prices of the year. The
markets convalescen3e has been re-
nlarkably rapid, but careful nursing is
still needed.
The public has not yet abandoned
Wall Street It is more discriminating
and more moderate in its operations
but eager to avail itself of the poSsioili-
ties presented by attractive situations
and willing to advance its money i'll
order to participate in them. A short
time ago it subscribed $325.000,000 to
= 500, 100000 investment trust of the
management type. Last week it poured
in its orders over the cable for the new
Ford Co. of England stock, which today
is quoted at premium Of 225 per cent
over the subscription price. This week
it absorbed without difficulty the $70,-
100000 offering of another finance cor
poration, paid IS points more for Radio
than 1t had been required to pay in the
recent decline and bid eagerly for a
number of the copper, steel, rubber and
tire and rail shares when members of
these groups were selling not far from
the years highest level
Professionals Again Busy.
Professional operations have obviously
low Nrfn nvNf nvk tS,
covery. For this reason too much sig
nificance may be attached to it. The
average gain is not quite so per cent
Of the average decline from the Novem-
Der 80 pinnacle. 1t is notable, however,
that even this amount of improvement
could be made in the face of existing
money conditions and in the absence of
eonspicuously favorable developments
A market that has had several years
of momentum liquidates slowly. With
this weeks decrease of S65 100000 in
brokers loans the total reduction from
the high point last month is only about
$284 .000,0 600. With the price average
considerably lower last June than in
December, the shrinkage in loans in
the two weeks following the June break
was $l0,000,000 greater than in the
same period of time this month This
Goes not satisfy either the Federal Re-
serve OF those bankers who cannot rec
Oncile the employment of S5,110000 900
IN the speculative market with the
maintenance of sound commercial con-
GitionS.
Because of the deflation in prices
and the correction of large number
Of serious market situations the higher
rates for money this week have not
0ccaSioned any alarm. Their main
effect has been to intensity the dullness
IN bonds and to produce some liquida-
ton in low income-bearing securities.
There are, however, threats in this
Neek's rates for various grades of paper
Alast may well be needed. Acceptances
are now close to the rediscount rate.
II they carry into the year at the pres
ent level, this would foreshadow a pos
sible advance in the Federal Reserve
1ate,- which for nearly six months has
been S per cent.
Market COmpetes for Funds.
There is another quarter from which
2MterfeTence in. money conditions may
aTriVe, namely, London, whose banking
EcServes have dropped off sharply due
- loss Of gold and whose protection of
domestic resources may be enforced
through the medium of higher discounts.
All Of this may be traced directly to our
Atock market, which Is competing for
funds In every part of the world and
1andicapping certain lines of industry
mat can only prosper when there is
available to them abundant supplies of
capital at moderately low rates Of In
4ereSt e
: Fortunately, commodities are not irl-
lated as they were seven or eight years
AlJo, when rates for commercial paper
were quoted at parity and sometimes
above rates for time money. in contrast
with the present situation when the
spread between the two, and to the ad-
vantage of the former, is from 2la to 3
per cent. The inventories of most of
she large corporations at the closing of
TIE year will be low relative to current
volumes Of production Their LIQUID as
eets in the form Of cash in banks. money
On call and marketable securities will be
higher than ever
II the foundations of the stock mar
Pet are insecure at some key points.
At Is satisfactory to know that those of
business are quite generally strong and
should remain so, unless the fever of
speculation infects the manufacturer
hnd the merchant and urges them to
Accumule.c raw materials In excess of
requirements, on the assumption that
o rise in commodities must follow an
advance in stocks.
Railroad Situation Strong.
The exploitation during the past year
nf nearly every group of stocks except
khe rails gives the latter a preferential
position in market that has been
Through corrective process and is
booking for new leadership. There are
strong features of the railroad situa-
sion that recommend railroad shares to
Mat portion of the public desiring
reimbursement type of security on
which the income return is still well
above that on bonds.
Railroad earnings are satisfactory.
There is every reason to expect a
heavy movement of traffic we'll into
1929. Increased dividend possibilities
have not exhausted themselves in this
group, although railroad managers are
extremely conservative and still fear
the effect on rates for their services
if they show evidence of reasonable
prosperity in the dividends they pay to
their shareholders The argument is
again advanced here that when earn
hgs have averaged nearly twice the
dividends paid and, If maintenance
were on a normal scale, would even
exceed that amount, 1t Is only fair to
the railroad stockholder that he should
be given larger proportion OF the
profits. So far as the effect OF such
Iiberality on the Interstate Commerce
Commission or on State commissions
goes, evidence is lacking. as rate max
ing by these public bodies seems to
bear no relation to the merits of the
case, and it certainly does not conform
to the requirements of the transporta-
hon act.
Competing Agencies Increase.
on the reverse side Of the situation
respecting railroad stocks are such de-
cisions as that made last week by the
Interstate Commerce Commission,
which emphasizes the development by
the Government of the inland water
wavs. These are more and more COM
ing into competition with rail lines
and, like motor trucks, taking from
fI1a carriers a norton of their profit :.