The Washington times., 1928-09-25
BANKER WARNS
PUBLIC ON
STOCKS
BY w. 8. COUSINS
Interna tIOnaI News Service

NEW IOhA, sept. 20.--l ne A"eL
Scan public il over specializing II
the securitay markets; stock prices
are too high. measured by the rigit
yard-stlck OF current corporation
earnings and income yields.
Bankers and conservative business
men have been sounding this warn
Ing against the present tendencies
In the stock markets, which are run
ming strongly to the speculative
rather than common sense invest
Tnent type, according to Francis w
Sisson, vice president Of the Guar
anty Trust Company of New York
enc OF the best-posted and clearest
thinking banker-economists in the
United States.
In making these statements he
pointed out that while business last
year ran ahead OF the stock mar
ket. the situation in 1928 has been
sharply reversed, and the stock mar
ket has 80 far outstripped business
As to cause considerable concern
to those who have the best interests
Of the country at heart.
buying of stocks has gone too far,
said Sisson, in discussing this I'M.
portant subject today. Prices OF
stock have been boosted beyond the
level where they can be sustained
by present earnings or income re-
turns to investors.
This is not an investors market
: we have today; but spectators
market pure and simple, and the
ultimate LIQUIDATION of stocks Will
doubtless bring about the restora'
ton OF values as well as release
millions OF dollars of bank and
corporation money now tied up in
the so.called brokers' loans"
Sisson fastened to point out,
however. that seldom in the Ma.
tons history were Fundamental
financial, industrial and economic
conditions any sounder than they
are today. Neither IL there any
question as to the ability OF most
lines of business. at the proper
time to sustain a high level OF
prices for many OF the STOCKS
wAich have been favorite specuia-
tite mediums.
Business May Grow
The difficulty is that many
stocks have run 50 far ahead Of
business that some form Of correc-
tive should be applied. to establish
q normal relation, and this may not
unnaturally come in the form Of a
gratifying increase in the business
OF the corporations.
so great has been the expansion
In legitimate business and industry
an the last five years" said Sisson,
THAT it IL difficult for the imag-
ination to envision the future of a
vast Industrial and commercial
atructure such as that which sup
niles the needs OF the American
people, to say nothing of the for
eiRn markets. Looking back over
the past five years gives us the
opportunity to see that many stocks
have justified the speculative ex-
pectations OF ahrewd buyers, ad"
vancing from modest valuations.
Sisson emphasized the fact that
heads of the banks and corpora
tfons whose stocks have furnished
the principal market sensations
were often the most surprised or
ell. and could hardly credit the
spectacular market movements or
the stocks of their own enterprises.
He cited one instance of promi'
nent corporation head who became
alarmed when the stock Of his giant
enterprise crossed 125 a few years
ago; today, that stock, with its
various split-ups and extra divi-
dends, il quoted at close to 500 a
share.
Needed Restriction
No gene.aI criticism of the poll
cies of the Federal Reserve Board
and the reserve bank officials in
the present tight-mOney period can
properly be made. in Sisson s
opinion. In order to promote world
wide financial recovery and TO as.
sist in financing our Government
obligations. the reserve banks
marked down rediscount rates last
year. reversing the process this
year and changing the Open.marEet
policy In respect 10 the buying and
selling Of Government bonds ard
bankers paper. In order 10 curb
initiation.
The reserve banks. said SIsson.
have perfect right 10 see where
the money they loan to member
DahHT II SOlHSs JUST 81 tnH HientbJti
banks are justified In requiring
such information from their Dor
rowing depositors. This is the cx-
planaton for the reserve bOarl's
statement calling upon the banks
to reduce their loans when it was
generally understood that toe large
proportion thereof was tied I'D in
collateral loans in the stock mar.
ket
Have Money to Loan
Sisson dispels the falidcy that
American business and industry are
paying the cost OF the present
excessive trading In the stock
market in the form OF high money
rates. Though time money on stock
market collateral commands a rate
or 712 per cent at the present
time. purely In accordance with the
laws OF supply and demand, Dusi.
ness men and corporations have
generally been financed at rates
below s per cent.
In many cases corpora ton fin.
ancing was completed at low rates
long before the and per cent.
Call loan rates were introduced.
and profits have been SO large that
many OF the big corporations have
money TO loan on call AT the present
attractive rates.
CunRT TERM cErUpITIEc