Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-10-26
BREAK IN STOCKS
AFFECTS BUSINESS.
New Financing Will Be Cur
tailed on Account of
Drop in Market.
Special piapatch to The star.

Special Dispatch TO The star.
NEW YORK, october 76.-The COLI
lateral effects Of the most serious stock
market decline since 1914 are now
deeply concerning Wall Street and the
business interests of the country.
It has been for months the opinion
Of bankers. who have stood aside and
watched the speculative fever run It's
course, that there would be no halt
in industry 80 long as certain large
sections Of it were being fed on the
profits, actually taken or available to
take, in securities. They nave felt. how
ever. that as soon as the public was
unable to make money easily through
speculation there would soon be wit
messed o decided decline in the eoun.
try's buying power, especially a. IL
had previously been applied to luxurteA
or TO non-eSSentials.
Effect on Gold Movement.
The second effect Of liquidation which
releases funds and reduces interest
rates is likely to be q rise in exchange
rates to the point where gold will Be
exported TO England and France. The
one needs IL, the other already has q
large surplus Of 1t, as has the United
States. It Is now more profitable for
the foreign lender to keep his money
at home, with the English bank rate
6k per cent and other Continental
markets ranging from to 7 per cent,
than to lend 1t out on call here. With
time money rates in New York drop
ping down steadily, the incentive to
hold the 80 to 80 day maturities has
about gone.
A third consequence of the tre-
mendous depreciation In stocks is the
closing of the door for . considerable
period to rev financing through the
medium of common stocks or preferred
shares convertible into common. This
movement has been much overdone, as
in the first nine onthS of 1929 10 per
cent of all the new offerings were IN
stocks, as against so per cent in bonds.
In the three months to September 80
the great output of trading company
shares filled the market for securities
to overhowing. AS these same issues
have this month declined anywhere
from as per cent to 40 per cent, ana
in some instances to SO per cent Of
their original cost to the public, it 10
obvious that the appetite for more Sc
curities of this type has been anuh-
dainty satisfied.
Drift to Bonds.
Out Of this last situation there may
develop a market for bonds and pre-"
ferred stocks of broader proportions
than any witnessed since the early pare
of 1928, though it Is doubtful II the
public that has been strongest numerl-
cally In the stock market for the last
two years Is of the type to interest
itself very deeply in the hxed interest
securities encouragement, however, u
being given for the purchase OF SOUND
securities, and as an aftermath OF
Thursdays break advertisements ap-
isa thFnIlQhNlIe
the country today recommending the
buying of bonds and other good invest
ment issues. Since the early part OK
this month the bond average has al.
vanced nearly points during period
in which the stock market declined an
average of nearly IS points.
Conditions in markets outside OF New
York have given bankers here great
deal of anxiety whenever a major break
occurred, for it is recognized that many
local securities have q restricted mar.
ket and have been mainly financed ny
local banks and are generally In about
as frozen" o condition as real estate
mortgages. Practically every interior
market Thursday, a. well as every mar.
ket in Europe, vas demoraliEed when
the state of affairs in New York be-
came known.
Political Aspect.
On the political side of the collateral
effect of what has happened in Wall
Street this month will be an intensifea-
ton of the demand for an Investigation
of the Federal Reserve System end con-
ditionS that make possible the mount
ing up of brokers loans. This Is likely
to cause . further searching into the
relations between public utility holding
companies and their operating suhsidi-
aries, In view of the fact that in no
section of the market have the con-
Stitueney of the politicians suffered 50
greatly as in the shrinkage recently in
the shares of most of the new power
and light holding corporations. This
group has experienced declines ranging
from rs to $50 points. In some cases
they are today selling at only 40 per
cent of the prices of few months ago,
or soon after the most outstanding OF
the consultations were effected.