Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-03-03
RECOVERY |N.STOCk'
MARKET PERSISTS.
Rallies Follow Attempts of
Reserve Board to Curb
Speculation.
BY CHARLES F. SPEARE.

Special Dispatch to The Star.
NEW YORK, March 1.-THE Federal
Reserve has been for over year active
| ly employed in an effort to curb specu-
! lation. A survey of the movements of
stock prices during that time suggests
strongly that it has so far failed to
divorce the American public from its
passion for common stocks. It's policies
have tended to destroy the bond mar
ket. to make Government financing
more and more expensive and to raise
the tax on those who must do business
on borrowed capital.
But the main purpose of the Federal
Reserves campaign against Wall Street
has to date been thwarted each time
it became positive, either in the form
of higher rediscount rate or through
the medium of implied threats against
its member banks.
Since the average of industrial stocks
went to 20l at the end of January, 1928
having risen from 80 in the middle
of October, 1924-there have been 10
separate and distinct upward trends,
each eliminating at higher level than
the preceding one and reaching their
maximum on February S, 1929, at 322.
Rally Follows Each Stump.
After rising an average of 20 points
between January and June last year. the
market dropped back 10 points. BY Sep
TENDER it. had rallied 40 points. A
month and a half later it had gone up
Is points more and, on November 20,
it was IS points above the range quoted
four weeks earlier. 1t reached its APP
parent summit at the end OF Novem-
Der and then crashed down within
;rt,k
ed then as though the Federal Reserve
had finally won the battle. It had not.
A 5O-point average rise was the answer
to the highest rates for call and time
money during December in eight years.
Another Jump of Is points during
January put the industrial average at
800, or 1876 points higher than when
the first of the three rediscount rate
advances was heralded as the initial
shot in the fight for deflation in prices
of stocks February witnessed a 20
point average decline between the first
and the middle of the month; then one
of those contradictory and seemingly IL
logical recoveries that have been the
sequel to every attempt by Wall Street
to repress its speculative desires and
in which 10 of the 20 points have been
regained. 80 .s*
The Federal Reserve will win In the
end, although its progress Is as slow and
its power to force the issue apparently
as insufficient as was that of the allies
up to the Spring of 1918. When the
turn came then things happened
rapidly. So they will, once the sec
ondary lines of defense of the Stock
Market are broken through. 81.
Banks Showing Concern. -
If the public is not yet scared BY the
high prices and the extreme rates. for
money the banks throughout the coun-
try show signs of deep anxiety There
is abundant evidence coming into the
banking district of New York today
that those who have had free access
to banking capital for their speculative
adventures will find it steadily more
difficult to borrow, and eventually this
will be almost prol1ibitive. That Is why
the Federal Reserve Board In its reply
to the Heflin resolution In Congress
this week stated that lit could count
upon the cooperation not only Of the
Federal Reserve banks but of leading
member banks everywhere in the coNps
try in making successful an ehoM 70
bring about an orderly readjtistmeI1t Of
the credit situation, and the board has
been confirmed in this belief by what
has taken place SINCE. This EXPIRES
sion of confidence is made. in spite Of
the fact that more than two-thirds of
the average decline that developed out
of the Federal Reserves warning last
month has already been recovered and
trading on the Stock Exchange has
recently expanded so per cent.
The greatest handicap that the Fed
eral Reserve has to face in its contest
with Well Street is the strength Of the
business situation and the increasing
emphasis from every quarter, specula-
tive as well as fiduciary, that common
stocks are the backbone of American
investments today and will go on in
creasing in favor and in value with
the years.
No edict of any regulatory or admoni-
tory body can stop public possessed
OF an enormous amount OF money from
buying copper stocks, for instance, when
the price of copper metal keeps going
up day by day and almost hour by hour
and the dividends on copper shares are
being rapidly increased. Nor can 1t
persuade this same public from ventur-
ing into public utility issues that seem
to increase their vitality with every 90
point advance. And what does the
average man care about the Federal
Reserve in comparison with his respect
for a corporation like U. S. Steel, whose
officers seem to be giving encourage
ment through this weeks announce
ment Of bond redemptions to just the
kind of commitment in stocks that
the banking authorities are attempting
to discourage and on whose common
stock numerous fortunes have been
founded in the last quarter century?
Commodity Situation Healthy.
The Federal Reserve policies are also
minimized by the fact that there is APP
parently no serious situation in either
the banking world or in the field of
industry. There is no commodity COM
pick today. While the average of COM
modify prices has risen a point in the
past two months. it is still more than
| a PORT under the high of 1928. 1t
would seem as though speculation in
securities might have corrupted the
market for commodities. It has not TO
any extent. Some commodities like
rubber, copper, lead, cotton and a num-
Der classified among farm products"
! nave been rising. In contrast to their
trend is the fall in hides and the de-
pressed markets for sugar and oil.
The 1923 reports Of corporations indi-
cate small inventories Of merchandise
! and large items of cash, call loans and
securities. There is some fear that in
stead Of being overbought in commod
tiles, as they were in 1920, the present.
day concern may have too long" a
position in securities, for it has been
the practice Of many Of them not only
| to let out their funds to Wall Street
borrowers but to take stand in the
stock market similar to that of the in
vestment trusts and trading corpora
tons. So. while they have a more
LIQUID status than they did in cOmmOd-