The Washington times. [volume] (Washington [D.C.]) 1902-1939, 1928-02-06

the nose.
Accordingly, the income return
on many high.grade industrial
stocks has fallen below the yield
on prime United States Govern
ment bonds.
The recent gesture Of the Fed
eraI Reserve authorities against
.overspeculation" has infused in
vestors with hopes Of turning
the tables in Wall Street.
Accordingly, numerous mana
gers of estates and individual
investors, who lean to the view
that common shares are suitable
for long-term investment. have
been sitting down and figuring
out In cold blood prices below
the market at which stocks would
become attractive for their pur.
poses. One investment house re.
ports that 1t has orders to. buy
100, 900 shares Of railroad, indus
trial and public utility securities
at prices running between 9
fraction and 141k points below
the present price level.
It can be inferred that invest.
nnent buying ON any prolonged
weakness In the markets win be
81 sustaining factor. which may
mitigate the intensity Of any SELF
ing movement.
Investor Successful
Az 4 class, the investor il usu-
ally mora successful than the
speculator class. The latter buys
primarily because he expects to
be able to find some one else who
win relieve him Of his holdings
at 3 profit. The investor, on the
other hand, buys present and pros
pective income. When current
prices begin to discount the dis
tant future so extravaga that
they are out Of all reasonable re-
lation to dividends and earnings,
speculative investors are inclined
to take their certi ficates from their
vaults and let the avid spectators
have them. On the other hand,
when periodical money pinches,
technical reactions and interludes
or public fright cause prices to
sink below the level OF true values,
the investor class, in the spirit Of
bargain hunters, return to the
market place to replace their hold
ings.
An extraordinary phase OF the
current speculative situation Is the
premium that security buyers are
willing to pay for industrial as
compared with railroad earnings.
The reason for the discrimination
is that Theoretically industrial cor
porations have unlimited earning
power. whereas railroads are By
law restricted. The question arises
whefhar current prices are not
overIlauling the freedom Of indus
trial corporations IA factor In the
situation Is that security buyers
know that some industrial stocks
will again prove bonanzas. Accor.
dinghy, in the spirit OF the lottery,
they pay literally for industrial
stocks in general.
Known earnings and genuine
assets can in the current market
be bought more cheaply In rail-
road than industrial stocks. The
rails have the advantage Of SUPP
ervision which provides for uni
form accounting methods and
monthly reports on earnings and
expenses.
Moreover. under the present
law. there lii an implication that
the railroads are entitled 70 4
fair return on their property
value. In the case of indus
trials, there Il no artificial assur.
ance Of 4 fair return; outside
competition, new methods and In.
ventions. changing public tastes.
and other factors may invalidate
- Atatyack - 8s
Moreover, in the present period,
industrial profits are restrained
by excess plant capacity and BY
ruthless spirit Of competition
on the part OF weaker factors
who before being crowded out
are making . final struggle for
existence.
Marked Falling OFF
Railroad stocks have recently
been adversely affected by
marked falling off in earning
power. The recently published
December earnings have empha.
sized the decline In traffic and
In revenue. On accOunt Of the
favorable character of earnings
during the first quarter OF 1927,
the first three months OF 1928
are also likely to make distinctly
unfavorable comparisons. More.
over, 1t IL unlikely that the sec.
ond quarter of 1928 will do better
than equal the net operating in.
come reported during the second
quarter of 1927.
What will happen In the sec.
ond half Of 1928 is even more
problematical. Some shrewd rail-
road men, however, expect a rela-
tive Improvement In the second
half of the year. particularly since
comparisons will be made with a
period of loan earnings in 1927.
Some railroad men look for a
moderate improvement in the
fourth quarter. One railroad au-
thority. who accurately forecast
the slump in net operating i'm
come in 1927. predicts that the
fun year 1928 will show an in
crease of at least $5O,000,000 over
the 1927 result. He added that
net operating income in 1928
.iaa,,1N - foaNn.. $50.