Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-07-07
return OF PUBLIC
TO MARKET IS SEEN
Expansion of Trading Taken
as Proot-Standard
Stocks Popular.
BY CHARLES r. sPEARE.

and over, the stock Market thls Weei
has moved further forward and estab
lished itself at a price level well aboV'
that from which 1t declined IN May. =.
The significant fact In this latest al
vance is that 1t has been greatest II
those standard investment issues tina
for more than quarter OF centur!
have laid the foundation OF America
largest private fortunes. These include
such industrial stocks as United State
Steel. General Electric and American
Can. rails IKE New York Central. Penn
sylvania, Atchison. Union Pacific anC
Southern Pacific, and of the public
utilities, American Telephone ~ Tele
graph and Electric Bond g. Share.
The public Is gradually returning Il
the market, from which 1t was pushed
out In March and In May or from
which 1t withdrew temporarily whil'
the credit situation was in process o
correction. But it is not gambling Al
in the earlier days. It will follow TIT
good stocks, even though they are II
what seems to be a very high price
area. Tips" are not so abundant anC
II accepted they must be supported b!
proof that the stock recommended ha!
value and a sustained earning power
Income Factor Ignored.
The factor Of income does not great
ly concern present buyers. To illus
trate: The return at this weeks high
price of Steel common Is $50 per cent
on Union Pacific and AtchiSon about
per cent; on New York Central, 3.6(
Der cent: on General Electric about
per cent; on Pennsylvania Railroad
4.4O per cent, and on American Car
common, $50 per cent. or an average
for the seven stocks of less than 81:
per cent.
If yield were the first consideration
the investor would buy Steel preferred
to net him per cent: Union Pacific
AtchiSon, Pennsylvania or New Yorl
Central legal bonds. to return over a
per cent, and General Electric specia
at nearly So per cent, or American
Can preferred. which gives double thu
income afforded by the common. He
is, however. trying to build up equities
from the present period Of unparalleled
industrial prosperity and will postpone
any program for creating annuitie'
until q later day.
The question one hears most fire.
olently in Wall Street is What Is
going on in stock" This Is
asked over and over again and is APP
piled to scores Of popular issues. The
feeling seems to be that movements
In securities must be accounted for
by some radical change in their status
either that of ownership or of financial
structure. This implies that the public
doubts the logic of stocks selling from
IS to 40 times their earnings and is
advance that lie apart from operating
results.
Mergers Excite Interest.
The merger possibility excites most
attention and proves the simplest me-
dunn for attracting a speculative fol-
lowing. Because combinations have
been so numerous in the past year and
have involved such conspicuous COM
panies In industry and in the public
utility field. it is dificult to deny the
probability of other consultations
which Wall Street daily discusses.
In a majority of cases combinations
actually effected have been preceded
or followed by substantial advances In
the securities Of the properties sold, as
we'll as those Of the purchaser. Not
only this, but dividends on increased
amounts of stock have been paid at the
same rate as on smaller capitalization
Under these circumstances 1t is difficult
to persuade the holder Of low yield
ing stock that he should exchange this
but a n-participant in any develop
ment that might occur during period
when extravagant prices are being paid
for control Of strategic business sit
uations.
Few Signs Of Opposition.
Except for the informal inquiry made
by Gov. Roosevelt into the recent pub
lie utility merger in New York State
and his address this week in which
he spoke at some length on the in
dustrial and commercial combinations
now taking place, there has been little
sign Of opposition to movement that
must eventually result in important
economic changes in this country. II
there is value in them aside from what
may be derived by holders Of secur-
tiles and banking syndicates, they mean
the turning out of q considerable army
Of men into the ranks Of the I'M
employed.
Whether 1t produces "a new economic
feudalism dominating the life of the
country" remains to be seen. The same
fear existed 80 years ago when the first
great industrial mergers were effected.
IT is probable that we may now be tax
ing up some Of the slack in corporation
affairs that was allowed to develop dur
ing the unnatural expansion Of the
war period.
Surplus Money Absorbed.
The problem before the holder of
common stocks of strong companies,
therefore, Is not pressing one He has
on his side plenty Of evidence that
earnings will continue satisfactory for
the remainder Of this year He will con-
tinue satisfactory for the remainder of
this year. He will receive as much in
dividends as he has been getting dur
ing the past six months and probably
more. AS the volume of market transac-
tons is expended under a growing pub
lie interest in stocks, there are likely to
be more frequent Interruptions to the
upward trend, and high average prices
will absorb more and more of bank
funds.
The showing for May made by the
New York Stock Exchange in the mat
ter Of brokers loans, now above ST.
070, 600, 900 for the first time, and the
S227 00O, 900 increase this week and fol
the past three weeks of $485, 900 900,
indicates the extent to which the re-
newal Of stock exchange and outside
speculative activities is absorbing sur
plus money. With this condition no one
today worries over the prospect of an
increase In the Federal Reserve redis-
count rate.
1t will be dificult, therefore, to dis
lodge strongly margined stocks even
though they are high in price and do
not pay their board" for their hold
ers in searching the business. horizon
do not discover any signs Of disturbance
except those that are to be expected
as one season runs into another and
Q time Of the year comes on when trade
normally slows down.
Farm Situation Improves.
Even this Is OFFSET by the improve.