Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-02-10
MARKET POSITION
t DECLARED STRONG
Weeks Average Loss O
More Than Is Points
Held Not Serious.
By CHARLES F. sPEARE.


NEW YORK. February s.--The I'm.
winding film of current financial events
has thrown on the screen this week q
set of pictures different from those to
which American and foreign audiences
have been accustomed since the middle
of December. They have been somber
They relate to incidents that may have
q pronounced effect on security prices
In the next two months.
One of them portrays the conserva-
Eve and artistocratic directors of the
Bank of England battling against forces
, that we're disturbing the credit position
of this great institution and eventually
erecting defense in the form OF 512
per cent rediscount rate, the highest
since 1921.
Another represented the governors Of
the Federal Reserve Board in solemn
session In Washington preparing a
statement of warning to Wall Street.
which re-emphasized the consequences
of a protracted withdrawal of credit for
business purposes into the channels OF
speculation.
It remains to be seen whether the
. Hpsitive act of the Bank of England
will be followed by one equally emphatic
from the Federal Reserve, or whether
the objections of the latter to Wall
Streets operations are to be continued
solely in verbal form.
Test of Reserve System.
The members of the Federal Reserve
Board and the governors of the IL dis
trict banks must by now realize that
the system, as whole, is facing the Sc
verest test in its HISTORIAN even
greater one than confronted it in the
defiation period eight or nine years ago.
The present situation is not so acute as
it was in 1920. It deals with securities
rather than with commodities and also
with a rising instead of falling mar
ket. Because of the Nationwide specu-
iation, however, involving directly l5,-
100000 people, the immediate policies
of the Federal Reserve are OF more per-
manent consequence to the country
than were those during the early crisis.
fully weighed and administered with
courage and with no preference to any
special class of business.
The Federal Reserve may justly be
charged with catering too much 10
foreign influence and with gingerly
treatment of serious domestic problems.
It is evident from this weeks develop
ment that 1t has divorced itself from
the one and Is showing disposition to
deal with the others more positively. IL
has been heckled so much by WAN
Street and by Congress that it has be-
come exasperated and militant. From
its own admissions, however, 1t Is dlffl-
cult to see Just what 1t can do more
than it has already done or how 1t can
change its program and still preserve
the status of commercial credit which
It rightly regards as its primary func-
ton.
The emergency which caused the di.
rectors of the Bank of England to take
the unusual action of raising their re-
discount rate per cent arose directly
out of the speculation In stocks in the
United States This speculation has In
q degree "cornered" the American
money market and put it In the con-
troll of agencies outside of Federal Re-
serve jurisdiction. With this has de-
veloped the high rates for call money
which, in turn, have attracted funds
from all over Europe, recently repre-
sented in terms Of gold drawn either di-
rectly from the Bank OF England or
taken out of the market of origin for
American account.
This condition compelled protection
Of the Bank of England gold reserve,
which could only be accomplished by
raising the rediScount rate and stopping
the decline in sterling exchange and,
as another phase Of the same situation,
the transfer OF funds from market Of
low discount to one where money earn
ed twice as much. So intimate are in
ternational relations today that specu-
lative excuses In the United States pro-
duce business disturbance and political
upheavals across the Atlantic.
Market Technically Strong.
II will not be easy to stop the mo-
Ynentum of a four-year rise in stocks.
Since March, 1926, there have been
only three serious declines in the mar
Eet. The first came nearer to major
reaction than the other two, which were
those Of last June and last December.
This weeks average loss has been slight
~ over Is points, which is not serious
or convincing and has made compar-
atively little impression on the margin
accounts of the hosts of people now
carrying them. Technically. the mar
ket Is better situated to Withstand at
tack than 1t was In either June or De-
cernber.
A great many speculative bubbles
have been punctured In the past eight
months and aside from small group
OF public utility holding stocks, the pub
. lie preference recently has been for
shares of companies that are moving
onward and upward and which have
either increased their return to their
stockholders or are preparing to do so.
At the same time there has been In
various parts Of the market recog-
milton of unfavorable conditions and a
readjuStment in prices to them. This
was not the case last year. We have
had this week an advance In copper
metal to ID cents a pound and a rise
in the Anaconda Copper dividend to
81 share. The dividend on the COM
mon stock of the Chicago, Rock Island
& Pacific has been increased to 2
ger cent and that on the junior shares
Of the st. Louis & San Francisco to
per cent. The new common stock OF
The General Motors Corporation has been
placed on basis equivalent to $3.50 on
the old shares, which was justified by
the increase in net earnings in 1925
OF 1712 per cent. Pig iron production
last month was the greatest for any
January on record Various commodi-
{ ties have been rising out of the slough
: into which they had dropped and where
they remained during the greater part
OF 1928. Prices of farm products have
also been improving.
Profits StiIl Pile Up.
The background Of the market, there.
fore, is not unfavorable from the stand
point of business and business profits
of which the American stockholders viii
receive larger share in 1929 than ir
1928. It is to protect this situation
and keep intact its strong element.
that most concerns the Federal Reserve
today and urges 1t to reverse year-olc
policy of sparing the rod of high re-
discount rates and thereby spelling TIT
Wall Street child
There are three elements in the pres
ent market situation that are modern
and explain to a considerable degre,
why stocks have been rising so per
sistently and why the declines of thu