Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-06-09
BY CHARLES F. SPEARE.


average of IL months ago. The high
figure of the manufacturing group 1!
due to the steadily increasing valuation!
placed on this class Of security. anc
especially to a small number of con-
spfcuous stocks in this division and at q
time when there is a tendency to dis.
criminate against industrial shares as
a class and to shift speculation int
public utilities and rails.
1t Is a significant fact that through
out the periods of disturbed markets
since December, and in spite of their
having six months ago established
themselves at what was then regarded
by power and light arrangements as an
extravagant level of values, the public
/ utilities have continued to advance and
to enlarge their speculative followings
This is due not only to the continued
expansion in the gross and net rev.
enues Of majority of the operating
and holding companies and to active
programs for extending the commercial
and domestic usage of their products,
but to certain large consolidation
| projects that have been undertaken
especially in Eastern sections Of the
United States. These consultations
have brought outstanding operating
companies under new and aggressive
controls. Along with this has been a
succession of new stock issues and valu-
able rights" to shareholders.
Rail Shares Still Debated.
Undoubtedly there will be other prof.
| ects of similar character to stimulate
interest in public utility stocks. These
are today selling on a basis of prices
to earnings higher than that of any
other active group and twice as high
as railroad stocks. Therefore 1t can
| NJ ho flaf q ~
shares are market-wise, where they
may be Unfortunately purchased or
where banks to which they are offered
as collateral in loans are willing to
continue lending continually On such
collateral. Houses that have been
most friendly to public utilities for a
long time are beginning to take the
position that they, like the industrials,
| have run their course, and that the safe
| policy to pursue is to reduce commit
ments in this group and enlarge those
In railroad stocks.
The argument is that the rails are
| still debated in price, compared with
! either industrials or public utilities, and
represent a comparatively small total
| in the aggregate of collateral loans.
! Therefore they are preferred by the
banks. Their position as to earnings
is most satisfactory Although closer
| Court decision in the st. Louis and
OFallon case leads to considerable con-
fusion and doubt as to the merit Of
this opinion In clearing up the valua-
ton situation, it undoubtedly has put
the public into more generous frame
| of mind toward railroad securities. The
difficulty in developing a sustained
speculative interest in rails" is THAI
| there is no mystery about them, nor is
| ~ 10 he ia
favor promotion of consultations that
were nipped in the bud by the Inter
state Commerce Commission last year.
Market Technically Stronger.
Technically, the market has been
strengthened by the purging of last
month, which reduced values approx
mately $3,000,000,000 and cleared out
a great many weak accounts among
which were those of several of the most
| militant bulls of the 1928 market. II
also has been assisted by a sterilization
| in money rates. For nearly three weeks
there has been freedom from wide daily
| fluctuations in call loan quotations.
The daily rate latterly has been per
cent, compared with per cent from
May % to June 3.
The borrower is not so much dis
| turbed by a moderately high rate for
| up and down and gives him no clue
one day as to what he may have to
pay the day following. There may be
| higher rates next week and In the latter
part Of the month. The present indi-
cations are that Wall Streets money
trials are coming to an end in so far
as rapid daily shifting Of rates is con-
cerned, and that fairly uniform quo
tation, but still high average for the
season, will obtain between the first Of
July and the middle of September.
1t Is equally important to the bond
market, as to the market for stocks.
that uniform rate for money be
established and If the Summer provides
stabilized money rates this should be
beneficial to a division of securities that
has suffered at the expense of specula-
tive stocks. This weeks Treasury issue
of nine months certificates of indebted
ness at a rate of SIS per cent probably
represents the peak Of the borrowing
cost to the Government since Treasury
bills were placed at 31s per cent In No
vember, 1927. 1t is rather interesting
to remember that the Treasury has
frequently fixed its rate low In a rising
money market and high in a market
that was on the eve of decline.
Discount Rate Rise Unlikely.
Suggestions have come recently that
the Federal Reserve Board proposed to
ease credit through the purchase Of
bankers acceptances. There is so much
friction between the board and district
officials that it is difficult to obtain a
satisfactory idea of what is going on
behind the scenes of the most intense
controversy and the deepest internal
disturbance since the Federal Reserve
system was established There is OBJ
viously less occasion today for raising the
rediscount rate than there was few
weeks ago. Unless Wall Street returns
to It's old habits and tries to regain pos
session OF the funds released by the May
liquidation, such an advance is not
likely to be proposed.
For the first time this year loans Of
those other than banks are showing a
contraction, having decreased $780,
100000 in the past two weeks. This
compares with decline in such loans
after the May break In stocks of S52,-
100000, but with a reduction of $780,
100000 when the corporations drew
out their funds for year-end require
rnents in December and placed heavy
temporary burden on the banks.
Sentiment has been helped this week
by the ralley in the prices of grain.
July wheat is IL cents a bushel higher
than it was at the end Of May. with