Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-08-18
MARKET DISPLAYS
AMAZING STRENGTH
Quick Recovery and Further
Advance Follows Break
of August 8.
BY CHARLES r. sPEARF.
special Dispatch Dol The Star.

nothing that so favorably advertiSeS q
stock market to the public as its ability
to get up on its feet after having had
what looked to be knockout blow. This
it has done with extraordinary swift
ness during the past week, replacing
q 10-point average decline with q IS
point average recovery, which reamrms
the argument that 1t Is better policy to
hold good stocks, even though they APP
pear to be at fantastic prices, than TO
sell them during the frequent storms
that sweep over Wall Street and leave
the wreckage Of small speculative ac-
counts behind.
It is as difficult to justify many Of
the quotations daily being recorded on
industrial and public utility stocks and
on some rails as 1t was in earlier PEE
RODS Of the prolonged bull market.
Scores Of common stocks are selling
from 10 to 20 times their earnings, not
q few from 20 to 80 and even 40 times.
No one can predict what these earnings
may be six months or a year hence.
Business Momentum Great.
The momentum of business is ire
mendous. It will take long time for
1t to spend Its force. There are al
iron and steel trade, with overproduc-
ton, increase in inventory and a state
of mild congestion in the automobile,
oil, tire, coal and building industries.
These conditions, however, are over
balanced, In the Judgment OF those who
are buying securities, by the great prog
resS indicated in other directions and
which makes each quarters net cor
poration returns better than the pre-
viouS one.
Above and beyond everything is the
II Nf ne ~ 4
nent concerns continue to advance, and,
after each setback. 60 higher and
higher. This they have done following
every considerable reaction since last
December. So 1t is not strange that the
public is hypnotized by the daily pro-
ceSSion OF new high record prices that
moves across the ticker tape and by the
romances in business fortune that come
out Of Wall Street week by week.
All the time the chaf Of the market
is being winnowed. Only the solid
kernels OF value remain. In nearly
every session this week the number of
stocks that made new low prices for
the year greatly exceeded those reach
ing new high prices, and less than 90
per cent Of the transactions were in
the gilt-edged list. The public holds
the one class as well as the other, which
explains why so many individuals re-
main beariSh and refuse to admit that
we are In ball market. They are like
the manufacturers Of textile, the pro-
ducers Of sugar, the miners Of coal and
others, whose perspective of the coun-
try's business Is narrowed by their In
dividual miSfortunes.
Credit Situation Easing.
Next to the influence on this weeks
market OF the technical improvement
in its position is that of the lowering
Of call money to q parity with the s
per cent rediScount rate and the be-
ginning OF policy by the Federal Re-
condition by building up its portfolio
Of acceptanceS. At the high point last
December the Federal Reserve held
$729, 100000 of bills and Government
securities. BY August of this year
these had been allowed to run down TO
$236, 100000. Acceptances were only
$7s,000,000 when the 6 per cent rate
was made effective, and, coincidentally,
the buying rate for bills was reduced
This week aceeptances increased $3s,-
100000, with the momentum Of the
buying movement bound to gain until
the peak has been reached late In the
Autumn.
The guild pro quo that the Federal
Reserve gave Wall Street In exchange
for the per cent rediscount rate will.
In the end, effect temporarily that
change in the credit situation antici-
pated from liquidation Of stocks. The
Federal Reserve could not accomplish
this by threat. Undoubtedly business
In some form will suffer where local
interest charges are based on the Fed
eral Reserve rate, but what Is lost in
one field Of enterprise will be more than
gained in others
The situation in London is one that
continues to puzzle international bank
erS and seems to be controlled more by
political exigencies Of a domestic and
foreign nature than by the traditional
policy Of the Bank Of England toward
safeguarding its gold reserve. The
animosities that have continued through
generations between the English and
continental peoples are cropping out
now in the market places rather than
on the battle-ground.
Investment Trusts Active.
The part that the investment trusts
and trading corporations are playing Is
an important one. That they bought
a great many stocks on the decline of
August . Is verified by brokers who act
for them. That the floating supplies
of high-priced issues are constantly
into investment trust portfolios Is also
well known and Is a partial explana-
ton Of the unusual day-to-day adj
VanceS. 1t Is somewhat difficult, how
ever, to explain the fact that brokers
loans, which include those Of the In
vestment trusts and other corporations,
have decreased this week when both
were supposed to be drawing on their
funds and employing them in the stock
market and when the average rate for
call loans was the least satisfactory to
New investment trusts are constant
ly being organized, controlling vast
sums of money. This week alone COM
panies with an aggregate capital Of ap-
proXimately $150,000.000 have offered
their shares for public subscription.
Presumably they have anticipated these
offerings by investments at . lower
level. Men Of shFewd business and
market Judgment are on their boards
trusts are to specialize in railroad
shares and In the stocks Of oil produc-
Ing and refining companies, both OF
which groups are recognized as back
ward relative to others, majority en-
phaSize their preference for public
utilities, which have had the greatest
percentage of gain of any class OF Sc
cuRitieS and are selling at prices 10 ais
count the future to q degree that ap-
pears fantastic.
Concentrated Buying and Selling.
Investment trusts, with their enor-
nous resources, have been regarded as
one of the strong elements in the
situation, providing cushion" for the
market whenever 1t had bad tumble.
This might have been true Q year or
two ago before the level Of prices had
reached its present figure and when
trusts and fewer trading corporations.
II cannot now be so 0onSidered. These