Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-08-25
INVESTMENT TRUST
CAMPAIGN PUSHED
Action of Huge Capital Struc.
lures Apparently Supports
Present Market.
BY CHARLES F. SPEARE.

favorable as those today in the united
States. 1t may be illogical, however,
for them to move forward at such a
tremendous rate as In the past W
portion to the income they yield or to
the ratio of earnings known and an
ticipated.
Each week In Wall Street brings out
sone new aspect of the present I'M
usual speculative situation. In some
cases this adds to, and in others sub
tracts from the composite picture in
which the essential facts of the mar
ket are revealed. Probably the most
significant incident since last Saturday
was the promotion of a third investment
trust under the auspices of bankers who
previously had been successful in
financing two others, and in the latest
of their creations, established an ex-
change basis on which they agreed to
accept prominent corporation shares at
approximately the highest figures in
their history.
New High Average.
This appeared to give sanction to q
price level that many had disowned.
1t had the effect Of leayening a large
additional list Of industrial. public
utility and railroad stocks, sc that en-
other high average has been reached
and the public has already forgotten
in the rise Of nearly IS points in in
dustrials since August 10. the l0-point
average decline that occurred when the
Federal Reserve Bank Of New York
raised its rediscount rate to 6 per cent.
A popular. topic OF discussion just
now Is whether what one sees in the
stock market represents a new era"
or is a more modern form of an old
fashioned period Of imitation. Support
ing Tho former opinion we have this
week in Dun's Review the following
statement:
with the further advance of the
Summer. the fact is being made still
palmer that seasonal fluctuations in
trade are narrowing, and that the
movements of many other years al
though not wholly without barometric
significance, are not a criterion of
present conditions. Methods Of oper-
alton, of buying and selling. have
changed in no small degree through in
creasing numbers OF mergers, and this
is altering the economic structure.
Hence 1t is now that the trend during
any given period cannot be accurately
gagged by former standards, the exist
ing comparative activity In various lines
demonstrating this point"
One very positive effect OF this Is to
IIldkc Tic IICI COI pOI dIIOI IlCtlcI dLlu
the poo n poorer. This is illustrated
in the steady advance In the securities
Of the one class with those of the other
being steadily depressed and to use
the Wall Street ver%nacular, being
backed off the board"
Business Tragedies.
There are thousands of business
tragedies taking place throughout the
country oh0i,f vfhirh M nno hparS q
great deal and which involve small or
moderate sized corporations, all going
down before the giant combinations
and sacrificed to the American passion
for huge assets and gross earnings. 1t
is yet too early to determine whether
many of the industrial mergers that
have been effected will produce the
economies or the increased earnings on
which speculation in their new securi-
ties has been promoted. just as it is
necessary for the policies of the IN
vestment trusts to ripen quite a while
longer before an accurate judgment
can be made Of the permanent value
of their shares.
In its new surroundings the market
measures values largely by COMPARE
ons Let A represent a stock selling
at 200. Another stock, B. is quoted at
$50, although it is identified with the
SdIne Industry DIS "a cdiIS do IhuCiA anu
may possibly be paying q larger divi-
dent. Therefore. it is argued, B should
sell at the equivalent of A. But pos
Sibly A Is only valued today at is times
its earnings, while a third stock. c, is
selling at 20 times earnings. SO A goes
up to C's level and B follows A.. This
merry game continues and all three
stocks. as we'll as their dividends. re-
main unchanged. 1t is a Wall Street
adaptation of keeping up with the
JOneSeS."
A phase of it may be recognized in
investment trust practice. where the
overlapping of financial interests creates
a profitable basis on which the attract
the speculative public, though a trou-
blesome n to deal with should any
thing suddenly go wrong in either the
business or financial situations. From
being one of the strongest factors n
investment trust and trading corpora
ton craze is becoming one Of the most
dangerous in sight.
Not only is the American public in
volved in the stock market on a greater
scale than ever before, but the markets
in every other large center Of the world
have been partially abandoned. This
is the magnet that attracts funds from
Europe, South America and the Far
East, drawing capital out of those
tries and impovershing them for their
home requirements. 1t is not too much
to say that a considerable portion of the
liquid funds of the world is at present
at the disposal of the American market.
With demand for our securities exceed
ing the supply 1t is not strange that
prices continue to advance.
Brokers' Loans.
Tast week brokers loans decreased
$68, 000, 900. Stocks responded vigor-
ousiy. This week they increased $133,-
900, 900 to a new high record, and prices
went higher than ever Two opposite
tendencies, therefore, had the same
stock market result, with other condi-
tons remaining unchanged. Quota
lions frequently advance when money
rates go up. They are just as likely to
rise when money rates fall. This is q
feature of the new era" that at times
gives 1t a fictitious appearance.
Since the Federal Reserve rate was
increased the total of bills discounted by
the Federal Reserve banks has decreased
$78, O00, 600. The bills purchased IN open
market have increased $53, 00O, GOO, put
the holdings of Government securities
have decreased SO, 000, 900. It cannot be
said, therefore, that the Federal Re
serve has as yet done a.great dea! TO
ease the strain on the money market.
While the brokers' loans of New York
banks have been declining and those OF
out-of-town banks changing but little
funds have flowed into the market from
other sources and today are higher than
ever. The total increase in all brokers
loans in the past IL months has been
81, 883, O00, 900. OF this amount only
1891 900, 600 represents the banks. The
remainder Is the money Of corpora
tions and individuals. In this latter
group are also the foreign lenders whose
commitments are estimated at between
81, 000, 000, 600 and 81, 500. 000, 900. IN