Evening star. [volume] (Washington, D.C.) 1854-1972, 1928-08-19
STOCKS AND BONDS
ACQUIRE STRENGTH
Weeks Activities Marked by
Broad Recovery--SpecuIa.
tive Spirit Revived.
BY CHARLES r. SPEAHE.

lest level o. the Nea9s III AAViS@a
money was down TO ala per cent
e,oucAS rose an average of ia points
This momentum carried partly throusl
FRIDAY. Bonds. after month OF Stas
Ration. became huoyant,
me change from n condition OF &c
preston 10 one OF speculative eXhllara
tinn This week was as sudden and posi-
tive SIS those Oh the typical Angus
vrstner man. where areas of low pres
surr snd humidity give way quickly Il
forecasts Of days Of sunshine ana IN
MIGRATING air
The main thing 10 determine nov
} Is whether the change that has occurre'
in the speculative and investment mar
ketS Is permanent or transient.
Stocks Advance Steadily.
The situation In stocks is quite diff
ferent from that In bonds. me lot
ner have been advancing steadily Il
markets Of about half the size OF those
Of last Spring. ~ -,
The industrial group early this weeE
Approximated the hiSn average Oh las
June. The yield on lis members, WnlcI
haS been low then, is more out o.
harmony with such measurements a:
time money. the rate for commercla
rsper and acceptances and the rullns
FEDERAL Reserve Bank rate than III
.J,tnA To compensate somewhat ioi
this Is A better exhibit OF nouSulal
earnings in the June quarter thah ~
the first three months Of the year, VIII
Additional Improvement taking place III
INV ard in the first half OF August
II viii cnst the holder OF stocks on
MARGIN however. from / TO Ia per
cent more to carry them during me
REMAINDER Of the Summer than IN May
and Tuns. The question, therefore
whether those stocks that nave oeeh
most popular recently have true OASIS
for further appreciation wnen tns
favorable and unfavoraole clrcun,
starc.s that surround them are oal-
snred against each other. The rise in
Their, since july | seems sufhcieut ana
{t11iv responsive to improved earnings.
Bonds Feel Pressure.
Investment securities are more serlsi-
tsss to money rates. from season 70
season. than are speculative issues: II
WAu Street has q real complaint
AGAINST the Federal Reserve banks Tor
puttirc the screws on the money mar
kat. it should be that portion OF It
whose business is the underwriting ana
distributing of bonds and preferred
stocks. It is to these securities that
the greatest injury has been done. to
say nothing Of the embarrassment OF
the Treasury Department, whose poilcy
in fefunding the third Liberty 4l4s
must be formulated at time OF the
most acute money strinsency in seven
years.
Tie Federal Reserve action has OBJ
viously forced the investment market
into q condition where the flow OF
new issues from the originator 20 the
consumer is nearly suspended. The
fault i not entirely that Of the Federal
Reserve authorities. Investment bank
ers cannot blame others for overlooking
The market with securities at unreason-
sose prices between January and
R.ay ! when there were abundant EVIL
6e-ieeE that interest rates were rising
and the supplies of credit were de-
creasing A considerable portion Of
this new financing vas expedient IN
that IL refunded high interest bonds
and stocks into comparatively low in
terest and dividend yield obligations.
II was not az ali required for business
development Proof Of this VIII be
found IN the large sums transferred
into the call money market from the
The investment banker may argue,
however. that the expansion in business
In the last three months requires ad-
ditional capital In order to accornn1o-
date II but that. owing to the high In
terest rates, he cannot sell new secur-
itieg to his regular clients. This might
throw the onus Of restricting trace on
the Federal Reserve banks. II is at this
point that one finds a sensitiveness 70
the criticism being leveled at the sys-
TEN.
Money Situation Unchanged.
There has been no basic change this
week In the money situation. The tenn
porary ease and the abundance Of funds
DO not signify that rates viii be lower
from now on and 50 provide opportun-
aty for q resumption of broad specula-
ton In stocks or another outpourirlg Of
bonds
II does not contribute 10 the prestige
Of New York as an international money
center 10 have interest rates of 8 per
cent one day Az per cent the next
and per cent the day following, or 70
suggest an apparent superfluity of funds
or Thursday followed by an acute scar
city on Friday Nothing establishes a
money market like stable rate; moth
inS brings il into disrepute so quickly
o. the fluctuations that have occurred
FL New York during the last few days
II vas recognized by nearly every one
isrt Spring that public participation in
the stock market had reached dangerous
proportions and that interference on the
part Of banking Interests was right and
proper
After Two months 81 comparative IN.
ACTIVITY in sfoeks but with 2 1radual
sr4s VIZ a Es11 sgee
fY quarters thai were conservative III
MAY q spirit Of irritation and resent.
u4ent that the Federal Reserve author
flies should continue their pressure ana
MAINTAIN their policy Of releasing credi
from securities for commercial needs
This weeks fiaTe-up IN prices has dem
crlStrzted clearly enough what woulS
haupen 10 The stock market X any con
6esSions were 70 be made 10 Il in tn.
way Of lower interest rates. II may b.
accented as q fact that the policy o
the FEDERAL Reserve banks has no
changed and will not change until tn
peak Of the commercial demand oi
money mas been passed In October o.
fl November.
Businfzs Outlook Good.
TIE business indications this weel
have BEEN satisfactory. also condition
ia the agriculture States Railroad car
lesdings are increasing ss the produe
ten of the larger industries expand
end the crops already harvested NOV
o. market.
with Mr.. Hoover's speech IL accept
s,7tt las Saturday and that If Coz
en11gu reHt Wednesday The politics
campaign viii enter rs most activ
r-ffed. and forecasts Of The eiectio
fy1Io tine 10 time viii be factor j
the speculative markets. There Is &
little difference between the two plat
fersse and In the temper Of the w
candidates with respect 70 cuisines
,y1nctDles that if viii be dificuit tn
year fc establish the logic Of move
Sssggtt in prices either way Ia harmon
- ea..r.o.aa hating ode R.0l