Evening star., 1928-04-28
RAIL MERGER TALK
BUOYS UP MARKET.
Public Buying on Hopes for
Rise and Not on Basis
of Income Yield.
Special Dispatch to The Star.

Special Dispatch to The star.
NEW YORK, April ga stage in
the present bull market had been
reached early this week where stocks
we're betraying the effect OF Federal
Reserve Banks efforts to reduce specu-
lation In five districts the discount
rates had been raised from per cent
to AZ, per cent.
Brokers we're demanding increased
margins: polls in industrial shares were
exhibiting caution; the capitalistic ele-
ment was disposed to be~paSSive. On
Tuesday the average price OF 80 issues
was off 7 points from the level OF April
l6. Thirty stocks, at one time or an
other the bell-Wethers OF the market,
were down an average OF II points.
This did not include the four tobacco
company shares that have shrunk $780,
900 900 in paper value since the price-
cutting war began and are off twice
this amount compared with their
highs of the year.
Rails Stimulate Market.
Into this unsettled situation came
rumors bearing on an Eastern railroad
merger. These we're persistent and
palpable as well as palatable. Nearly
every one in the speculative world by
Wednesday seemed to know that Della
ware g. Hudson stock was the accepted
means to a quick fortune, although the
negotiations which ended Thursday
with the transfer of control OF the
Lehigh Valley and Wabash holdings
from the Loree interests to the Penn
sylvania Railroad were being conducted
with great secrecy.
The unexploited railroad shares sud-
denly became popular; in particular the
securities of properties IN which there
was a stubborn minority interest with
a none too modest idea of what its stock
should be worth to the corporation in
nominal control.
SO there has developed a railroad
market of larger proportion and OF
greater strength than any in years. but
on the same kind of foundation as that
previously erected for the induStrials
and public utilities; namely, on that of
prospective mergers and on the elrcum-
stantial evidence that control OF this
or that road was being purchased on
the Stock Exchange. TO be turned over
later at a substantial profit to some
other road in great need OF it. This
market has been built up while earn
ings for the month of March and for
March quarter have been coming in
showing a very slow recovery in traffic
in those periods. with April car load
ings still well below those of year ago
Industriais Rise Greater.
If there is still legitimate basis for
an expansion in stocks. such eXpan-
sion belongs more properly to the rails
than to the industrials. They have
had All average rise since January,
1927. OF only 25 points. compared with
81 points in the others. They yield
from Az To per cent, with the ma
iority on about per cent basis.
Even at this weeks top figures the re-
turn on New York Central, Pennsyl-
vania, Union Pacific and Atchison Is
4.85 per cent, compared with about
$50 per cent on General Motors,
United States Steel and General Elec-
trio and nothing on Radio Corporation
stock.
In proportion TO their capitalization,
this group Of splendidly managed rail-
roads has put back into property as
reserves as much during the last three
or four years as those companies whose
stocks have fred the public in1agina-
ton for so long time Three OF them
have increased their dividends during
the past IL months.