Evening star., 1928-12-16
PRICE DIMENSIONS
OF MARKET SHRINK
Stocks Make Partial Recov-
cry After Violent Break
Last Week.
BY CHARLES F. SPEARE.

BY CHARLES F. SPEARE.
Special Dispatch to The Star.
NEW YORK. December 15--The
trading proportions of the market this
week have contracted 80 per cent,
compared with those while liquidation
of stocks was in progress the week
previous. The price dimensions Of the
market are also smaller.
With an average decline of over 90
points from the high of November 80
facing it on Monday morning, the
market had recovered about 40 per
cent of this by Wednesday noon. To-
day it was to Z points higher than
last Saturday. but over a dozen points
on the average lower than two weeks
ago.
1t has, therefore, acted as most
markets do act after they have been
swept by cyclone of selling. This
results in readjuStmentS both ways.
Crippled accounts that were carried
through the storm have to be bolstered
up by selling the strongest units III
order to protect the weakest ones
Those who have been waiting for op-
portunities such as was given in the
recent break become active instead of
passive and absorb large quantities of
standard securities. This is one OF
the back,ogs of every unsettled market
Short Interest Smaller.
Another effective medium through
which prices are sustained is the short
interest, which was probably smaller
in this instance than ordinarily, for
those who have sold stocks in the lG3t
six months have been badly Scalped
from time to time The secondary
reaction that comes after the first re-
covery is usually due to the realizing
profits on stocks bought when they
were on a bargain basis and the re-
sumption of short selling, if the mar
ket shows signs of hesitation and
transactions diminish on the rally.
AS it was primarily the unstable tech
nical position of the market that caused
it to collapse with such suddenness,
rather than any new unfavorable de-
velopmentS, the influences surrounding
it this week have been chiefly of an in
ternal character. It is true that call
money rates are easier. Renewals Fri
day, which carry over until Monday,
were Z per cent, compared with 9 and
10 per cent week ago. After four
months of continuous advances in
brokers' loans, with an increase between
July % and December 5 of $1,l6l 000,-
600, a decrease of about 219,000,0 900
has taken place and is likely to be ex-
On the other hand, time money rates
are quoted at the highest of the year,
and Friday bank acceptances were ad-
vanced and now stand nearly at par
ity with the Federal reserve discount
rate. The reserve ratio of the member
banks of the system is at the lowest in
7I2 years, though still sufficiently above
the danger zone to give protection to all
legitimate money requirements.
Market May "SettIe Down."
1t would be unusual if the market.
considering the season of the year and
the approaching period of business re-
adjustments, did not settle down, and
instead of being the playground of the
speculative public, become rs per cent
trading or professional proposition.
While the average loss this month and
the size of the decline in individual
stocks has been greater than in June,
the shrinkage in percentages is not SO
large as it was then. for both averages
and specific prices started from their
maximum level in the second break.
For instance Montgomery Ward at
the end of May was $3.50 share. BY
the end of November it had been as
high as $440 a share. Radio Corpora
ton was $215 in the earlier period. Its
decline last week began at a price 100
per cent higher than this. American
Smelling & Refining meanwhile had
advanced nearly 100 points, General
Motors IS, General Electric As, Kenne-
colt Copper SIS, Union Carbide over SO.
and United States Steel about 3d.
Scores of others were up in proportion.
About $500 900 900 has been added to
the market valuation of less than so
per cent of the active share list since
the recovery from the June break be-
gan early in the Summer.
Novice Shows More Caution.
It would seem, therefore, rs though
In order to bring prices into closer con-
formity with values, further reaction
would be necessary. The public has had
a severe shock It's severity was in
tensifled by its suddenness. This has
deep psychological effect, especially
upon the novice in speculation. It
starts him thinking along new lines and
introduces for the first time the idea
that possibly his market judgment IS
not infallible The effect of all this is
to produce greater caution, the wedding
out of the weak members of his list and
the adoption of a trading unit that is
more within his means.
That there will be significant upward
movements in. industrial stocks, or
groups OF STOCKS, even Wnlle the BSIeIdl
list may be showing signs of staleneSs,
is obvious. Good corporation names.
and names that are identified with sue
cessful promotions will be sought after
with enthusiasm Proof of this Is the
subscription within the last few days Of
1926. 600. 900 to a $i00,000,000 invest
ment trust and the tremendous over
subscription to the English stock of the
Ford Co. In contrast was the Scant
over subscription for the Az per cent
United States Treasury certificates.
While money rates may embarrass the
corporations and the Government in
their borrowings, they cut very little
figure so far in the distribution of pop
ular equities"
Some Leaders Hard Hit.
One of the most significant trends in
this weeks stock market has been that
in few stocks which during the year
have held positions Of leadership. Some
CT them have declined even lower +han
week ago. While the rest of the
market was rallying, they have been
sagging.
This may be the result of an ex-
hausted buying movement in them or
it may be indicative of coming changes
in the industries which they represent.
1t is. at least. movement that should
be kept under observation, for it might
have wide-reaching effects.