Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-01-20

IL.
ries have been taken, accounts balanced
and a start made on another year
program.
Currency that had been required FOL
the holiday trade has flowed back int
the banks Along with it has been the
return of dividend and interest money
not set aside for other purposes. Wha'
has to be done in the way OF relnvest'
ing these funds has been accomplished
or indefinitely postponed.
The secondary rise in money rates
took place while these movements were
under way. but with the paying of OF
hank borrowings, the strain has beer
relieved. The influence Of this is seen
in the last few days in lower rates on
call.
Stock Movements Irregular.
Markets, therefore, have now entered
a neriod where they must respond more
TO the conditions growing out OF 1923
developments than to the carry-over 70
those that we're influential at the closing
of 1923. This explains some OF the heSl-
fancy in making both speculative and
investment commitments, ana reIecIS
in irregular movements in stocks and In
the difficulty in pushing the average of
prices very far ahead of that which OBJ
tanned at the beginning Of the month.
In fact, this average yesterday was ap-
proximately the same as on the nrst
business day of the year.
The speculative stream, however, Is
forging some new channels. ThlS Is
likely to be a characteristic OF 1t during
the next two months, for unless the
public has different material to work
on and a new horizon from which TO
observe the situation, 1t may grow nst-
less and unresponSive to speculative
suggestion.
One of these new channels is being
marked out by railroad stocks. the
members Of this group that are oelng
most seriously considered are those WIN
a long record of dividend payments and
of conservative arrangements when
have been given slight consideration IN
recent years, even while the shares OF
weaker roads have enjoyed popularity
and have had in some instances nearly
as high a percentage of appreciation as
industrials and public utilities. This is
a trend that is good for the market as
a whole, as it re-establishes confidence
in it at a time when confidence mao
begun to fail because of the continued
exploitation of the same kinds OF Sc
cur1ties.
Some Rail Yields Drop.
The comparison made last week be-
tween the return on industrial common
stocks and that on bonds showing that
from an investment standpoint alone
A. Is more profitable to hold bonds than
stocks. has a parallel in the relative in
come Yields of industrial stocks and
railroad. stocks. 1t is highly probable
that as the year progresses the return
on these two groups Of securities may
come closer together: for as the public
which has studied the equities IN the
TRANSPORTATION field is educated as IN
tensively as it has been in industrials
1t will be willing to purchase rails at
high prices and at low yields with the
same enthusiasm that it has accun1u-
lated industrials in the past two years.
Already some of the rail yields have
dropped down below the return on legal
railroad bonds.
The public is strongly stock-minded
and just as strongly set against the
purchase of bonds This provides the
market for stocks with new source OF
capital supply with which to absorb the
steadily diminishing volume of high
grade shares. At the same time en-
couragement to purchase stocks instead
of bonds is given by the leading invest
Fnent organizations of the country,
which are emphasizing the strong fea-
lures of various corporation stocks,
while the formerly well cultivated bond
fields are growing up into weeds.
Money Conditions Easier.
The money situation still gives occa-
nion for concern to those who view II
primarily in its ultimate effect on bust
ness. Temporarily, conditions are easier
since December 26 there has been a
reduction of $346 1000, 900, or 80 per cent
in the total bills discounted by the
Federal Reserve banks. This Shoulc
remove the possibility of an early ad'
vance in the rediscount rate, for tbs
Federal Reserve has been more con.
cerned with the size of bank borrowings
than with that of brokers loans, even
though the latter continues to grow ano
now approXimates the total OF six weeks
ago.
Temporarily, too. the strain abroad
has been eased. The reserve ratios OF
the Bank of England and the Bank Of
France have advanced, the latter stu
drawing on this country's gold supply
to build up its own to satisfactory
level. At time of discussion Of higher
rates for money. the Bank of Germany
has made answer by reducing its reds
count from to 612 per cent.
Another, and apparently contrary
phase of the subject, Is this weeks rise
In bankers acceptances NOW flush with
the Federal Reserve rediscount rate. I
Is another of the evidences that thoSt
who buy and sell commodities and man
ufactured products, who build, trans
port, mine coal or metals, or make thel
living from the products of the farms
will pay higher tax this year than las
on money borrowed because OF tn
absorption of so large a portion OF thu
country's credit supplies in the marke
for securities.
Business Situation.
The basis for a stock price level
whether it is high or low, is bushes
and the net earnings that business pro
duces. So far as it can be said tina
1929 has developed its own tendencies
these are satisfactory. The OUTSTANDING
feature in the market this week ha
been United States Steel common
whose performance would not have beef
possible with indifferent trade condl
tions even though it might be felt tina
the accumulated profits Of other year
had not been fully represented in cur
rent market values.
The volume of iron and steel produc
ton is high for this season OF veal
Prices are strong. This is typical c
other important industries that hav
prospered during the past nine months
with others that have been through sc
rious crises, like rubber, shaking of tn
1andicaps that have held them down
There is apparently no overproductio
or overbuying. The commodity pric
average is the most highly stabilize
item in the entire range of business sta
tistics. This is at times difficult to ur
tions that are taking place in the graf
lions that are taking place nj the graf
markets and the abrupt changes frol
week to week in the prices Of metal
rubber, hides, provisions and textiles.
If the ratification of the Kellogg ant
war treaty this week is important polit
sally, SO Is it in an economic sense. :