Evening star., 1928-05-20
CREDIT CONDITIONS
CURB SPECULATION
Situation Coming Under the
Control of Government Bank
Authorities.
BY CHARLES F. SPEARE.
pecial Dispatch to The star.

| Special Dispatch to The Star.
NEW YORK, May 19.--No greater
proof that times and values and the
measurements OF values have changed
and that investment standards have
undergone a revolution could be given
than is contained In the text OF a
public offering of trust shares made
| this week.
The trustees Of this company are men
who stand at the top of the banking
and commercial world in New England.
| Among them is an Adams, an Abbott
and Coolidge. Their plan is to form
! a Massachusetts, trust primarily for
the purpose of purchasing for possible
| future increment bonds, notes and
other obligations Of corporations, busi-
ness organizations. governments and
| political subdivisions thereof, domestic
| and foreign, and preferred, common
and capital shares Of banks, insurance
| companies and other corporations and
business organizations, domestic and
! foreign"
In essence this is an investment trust
wish the subscribed capital distributed
| throughout q wide range of securities
In order to diversity the risk as well as
| to enlarge the income on 1t and the
appreciation possibilities that come from
| a shrewd selection of stocks and bonds.
Trustees "BilI of Rights"
The striking features of the declara-
ton are found under the head OF
trustees powers" Herein 1t is stated
that the trustees may invest and re-
invest the trust property in their un-
controlled discretion, and in so doing
may exercise the utmost freedom In
choice of investments" and further
that mo transaction shall be deemed
improper because Of its speculative
character, or because a greater pro-
portion of the trust property Is invested
therein than Is usual for trustees.
II may be accidental-at least 1t is
siqnificant-that this document, which
might be described as a new bill OF
rights of trustees, should have been
published coincident with the first evt-
dence that the speculative situation is
gradually coming under the control OF
the Government banking authorities by
way of higher Federal Reserve redis-
count rates and in a week that has
witnessed the most extreme manifesta-
tions of speculative insanity.
The importance of the incident Is
this, that 1t indicates the confidence OF
investment values and with an intimate
knowledge OF business conditions. In
the future of American and foreign
securities, though prices at the moment
may be very high 1t does not mean
necessarily that the capital now pouring
into them will be invested at present
levels.
Public Eager to Buy.
A good part of the money being raised
today by investment trusts and by pub
lie utilities is for future rather than
for immediate use. 1t is easy to get.
The public Is in q mood TO subscribe,
especially TO common stocks or to pre-
ferred stocks with common stocks as
bonus. One cannot, however, fail to
recognize in such a venture the new
spirit OF the times which demands a
participation In the equities of business
and Is tired of the honor and small
>molumentS Of q creditor, and which
looks forward to an expansionA rather
than TO a contraction in the CONNER
ctai and banking power OF this country
and to profitable investments in those
parts Of the world that have now set
tied down to the pursuits OF peace.
1t also suggests that securities In the
past classified as speculative may today
properly be regarded as investments
Along with this go new standards OF
values. There have been score or
more OF stocks this month selling above
5000 share and some above $500 O
share. From the standpoint OF COM
penSating investment, several OF them
do not qualify, for either they pay
nothing or so little that the return at
the market Is less than per cent. In
cidentaliy. IS Of the most prominent
issues in this weeks stock market new
are yielding less than per cent.
though the carrying charge on stocks
this month will be per cent.
With the developments taking place
in business, the securities that appear
to be so much inflated today may have
ranking position In the portfolio OF
the investment trust Ave years hence.
This week revolution in transportation
has come about In the rail-and-air
line from coast TO coast. Some equally
important project which viii initiate one
set of securities and depress another
may be announced next week.
Therefore the investing trustee who
thinks he knows his business and has
always been able TO keep hts feet on
the ground wants 10 be In position
TO deal with conditions as they are
rather than as they have been or
ought TO be. The democratizatton OF
trusteeships Is only one OF the many
signs OF new era.
Credit Situation Tightens.
Unfortunately the vast American
public that is today speculating madly
has no sense of proportions and has
lost It's balance. In many instances 1t
knows nothing of what 1t buys. Please
inform me as 10 what parts OF the
world your wires rum" wrote q Stock
holder 10 the president OF a company
manufacturing wire cables. Tor l nave
recently bought ] 900 shares OF your
stock" This is typical OF the Ignorance
displayed
The world now centering Its thought
on Wall Street is gambling In the same
way that 1t does at the race track or
at the faro table. While IL is In this
mood, careful men look on and husband
their resources for the period OF IN
evitable decline. This may be a cor
rective reaction" or go further. Indica-
tions at the moment are that credit
conditions are steadily strangling the
hold OF the public and the professionals
on the market and that season OF
lower prices and OF a reduced volume
OF transactions will develop. with a
possible recurrence OF HnkncT HhIhctS
late in the Summer under the influence
OF business expansion and clearer elec-
tion results.
Amazing Market Growth.
The growth Of market operations has
been amazing. The 100000 0-share
Stock Exchange session Of Wednesday
does not tell the complete story. On
Monday the transactions Of the New
York Curb Market were 1885 900 shares,
This was within 100000 shares of the
turnover on the big board year ago