Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-01-27
IMPRESSIVE STOCK
GAIN IS RECORDED
Bull Party Cuts Down Short
Interest During Weeks
Campaign.
BY CHARLES F. SPEARE.

4CkiUlGlltS VI wall olIcCb DullS VI llllS
week have advanced furthur than ever
before the into territory Of the enemy
The short interest-and by good
strategy have occupied positions that
seem to be impregnable.
The Big Bertha" of the demonStra-
ton has been United States Steel COM
mon. whose impact on the market has
been sudden and demoraliZing to those
who have attempted to stand up against
it. Since January Is the value OF this
stock has risen over $200.000,000, or
more than all the gain of the iron and
steel group of shares in the months of
September. October and November.
Once more speculation has appeared
10 be running out of bounds, as it did
last March and April and again in No
vember and December, but in this in
stance the buying has been more dis
eliminating than in the earlier periods.
It has been the high priced shares
and those of the strongest American
corporations that have led the advance
and in which millions of dollars have
been represented frequently III the unit
of trading. One operation O this sort
known to have taken placS involved
100000 shares of a popular Industrial
and at an outlay of about S2s,000000.
To this character of buying IL due the
rapid rise in the average of prices, now
10 points higher than at the end of
December, and well above the level at
which the market stood when it had its
unexpected collapse in December.
Brokers Display Caution.
The market this week has been one
In which earlier restraints have been
shaken off and where fresh adventures
in speculation may be recognized. For
some time there has been rather
ominouS feeling in Wall Street that Sc
curities were facing another severe
break Both bankers and brokers have
been putting their houses in order by
means of higher margins. which now
average nearly so per cent OF the cost
price of stocks purchased.
Credit conditions have impressed
bankers as more serious than ever and
because of the rise in acceptance rates
we'll above the Federal Reserve rate OF
rediScount, it has been taken for grant,
ed that this rate would be advanced, as
1t was just a year ago. Several large
institutions have withdrawn from the
bond market from fear of this. The
steady expansion in brokers loans, now
about S50000,000 higher than on De-
cember 5, also gives cause for alarm
in some quarters despite the fact that
since January there has been re-
duction in the bills discounted by the
members of the Federal Reserve system
by nearly one-third.
In other words. while the acconmo-
dationS of the banks to Wall Street
operators have been contracted-thoSe
of the New York banks alone being 20
per cent less than year ago-loanS to
Wall Street by corporations, tnStitu-
tions, individuals and others. have risen
in IL months. $50 per cent There is no
sign that the limit of this new army
of lenders has yet been reached.
Because of this apparently mex
haustible supply, professional operators
in stocks are little concerned over the
money situation, and as the banks have
greatly improved their status with the
Federal Reserve this month, there does
not appear to be a strong argument In
favor of changing the rediscount rate.
Two Influences on Stocks.
The two major influences operating to
exploit stocks and initiate their prices
are consultations and the extensive
purchases by what are popularity known
as investment trusts" but which act
ually are finance or trading corpora
lions. There is every indication now
that 1929 will rival 1900 in the num-
Der of mergers of industrial companies
and that there will be many consollda-
tons among public utilities.
Consolidation is in the air. It is,
first of all, an efficient means Of pro-
tecting the profits of industry during
a period of intense competition. Sec
ondly it is being promoted by mdi-
viduals, or groups OF individuals, In
control of one or more enterprises which
h. L,.tl To CIV r
ing and financial basis, and who are
eager to sell out while the public is
as strongly stock minded as at present.
This duplicates the situation in the iron
and steel trade in 1900, when Pittsburgh
was full of newly made millionaires
after the formation of the United States
Steel Corporation.
Trading Corporations Classified.
The trading corporations which have
been so much of factor in the market
are of two kinds, one operating on a
large scale in and out of stocks and
with temporary market position
rather than a permanent one. and the
other, as eXemplified in two that were
announced this week, formed primarily
to distribute to the public blocks OF
stock that have been accumulated by
individuals who expect to tighten their
loads by passing them over to the public
through an intermediary security.
The investment trust" fad is running
away with Wall Street. Instead of be-
ing a source of support in a declining
market the overloaded trading COM
pany may really be one of the most
serious elements in a situation where
one break in stocks succeeds another
and what were profits at one level OF
hnOnF1n 1nccnc
There are strong elements in the
business situation sustaining the OPP
timiSm expressed by leaders of the
stock market movement. Both the Fed
eral Reserve Board and the Secretary
Of Commerce have just emphasized the
prosperity with which the country is
blessed. This seems likely to continue
during the first half of 1929. There Is
perhaps too much of this prosperity de-
pendent on the automobile industry, as
well as on other lines of trade repre-
sentlng the consumption of luXuries
rather than of necessities, all of which
would f1atten out quickly under period
of unemployment However, both in
the field of transportation and in thai
OF the generation had distribution Of
power, conditions and profits are stead.
lily increasing.
Stockholders Reap Benefits.
The disposition is to give stockholders
an increasing share in the earnings Of
corporations. One reason for this i.
that the stockholdingS of the manage.
ments are larger than ever and the re.
wards Of management are demanded
when available. The other is tina
financing with stocks rather than Will
bonds is more desirable and that il
order to do this there must be an at
traction in the way Of fair dividends
One of the criticisms of the presen
stock price level is that it has advanced
about three times more on the averag
than earnings during the past fou
years and that there has also been
much larger increase in the percentag
of dividends paid than in earnings.
While this may be true of induStria