Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-12-21
RAILROAD SECURITIES
PROMINENT IN UPSWING
Economic Conditions Create impress
sion That Trade Decline
Is Near End.
BY CHARLES F. SPEARE.

gained their poise, with many members
in both groups much higher than last
Saturday.
It was apparent on Tuesday that the
decline was approaching a climax
Liquidation of common stocks and OF
Junior mortgages was OF the sort that
occurs when investors totally disregard
values and are eager to exchange their
securities for cash. An accompaniment
of all such situations is the sinister
rumor concerning the credit OF stock
exchange houses and financial nstltu,
lions which, though freely passed
around and most specific in its details,
never seems to be traced to its source
and bring proper punishment to It's
authors.
on wednesday. after total transac-
lions for the week had reached 10000
600 shares, a lull in the selling APP
peared, followed by one of those swift
advances that has occurred at the END
of every substantial decline since DC
tober. 1929 The Interpretation OF this
sudden reversal was that a bankers
pool had stepped into the breach. This
was subsequently denied.
Automatic Swing Upward.
Evidently the market had been forced
down to a point where 1t offered its
own natural resistance to further pres
sure and automatically swung back in
the direction opposite to that in which
1t has been moving for several weeks.
In Wall Street vernacular, it had been
sold to standstill." Before it rallied
points lower than that OF November
10 and was in a prize area about
equivalent to that Of four years ago.
A little thought and study OF financial
history might have prevented some OF
those who sacrificed strong dividend
paving stocks and well fortified bonds
from doing so during the recent de-
cline 1t was popular in 1929 to speak
of mob psychology as the impulse
which then prompted the purchase of
all kinds of securities at greatly IN
fated prices. In the nearby period the
owners of securities have acted with the
same lack of discrimination. If the
1929 public was too gullible, those who
have been active in disposing OF their
stocks and bonds recently have shown
an utter lack of faith in the stability
Of American corporations.
Reimbursement Goes Far.
1t must have been recognized by those
who were buying securities from fright
ened holders that there had been re-
adjustment in SO many ways to in
fiation and overproduction as TO justify
expectation of an early end to the de-
cline In the first part of this week
nearly SO per cent of the stocks daily
traded in on the New York Exchange
were quoted below $50 a share. There
was a long list of companies whose
stocks were selling at market values
less than the cash in their treasures;
others below their net quick assets. AS
an Illustration we may take Mack
Truck, a widely distributed issue, which
has been quoted this week at a price
$40 a share below its net current assets
and at only SO per cent of its book
value 1t yields IL per cent and Is
on basis less than 10 times estimated
1880 earnings.
In the group of standard railroad
shares, whose average price this week
has been the lowest in over five years,
we find the same disproportion between
earnings, prices and yields as in the
iIldustrialS. The average return on the
accepted investment rails reached the
unusual figure of about 8 per cent. In
a considerable number of issues it
ranged between and IL per cent.
Chicago & Northwestern common sold
at the lowest price in over 40 years. So
did Illinois Central common. Northern
Pacific had not been SO cheap in 80
years as 1t was a few days ago. New
York Central, Pennsylvania, Baltimore
g. Ohio and Chesapeake g. Ohio were
at this same time available at prices
well below those ruling when their
dividends we're / to per cent under
those now being paid.
Conditions Corrected.
On the commercial and banking side
of the situation there has been abundant
evidence in this weeks statistics that
many of the unfavorable conditions re-
acting on securities in the past Is
months have been corrected. For in
stance, the trade index figures for Mo-
vember just reported indicated a de-
cline of 80 per cent from the high point
in 1929. They also revealed the fact
that they were 5 points lower than at
the bottom of the depression in March,
1921. The most recent data on COM
modify prices establishes them lower
than at any time since 1915, and pig
iron prices this week were reported by
the trade journals to be lower than in
that year.
three-month continuous decline in
brokers' loans amounting to $1,214,00
600 has brought them to point 10 per
cent less than in October 1929, and over
so per cent smaller than at the end of
last April The Federal Reserve Board
reports that member bank borrowings
are at the SMALLEST GOCaI since 1911.
Cotton this week has sold under any
price quoted since 1915. And so on.
The time has come when all of these
effects of year of depression should be
considered in the light of an adjust
ment that was necessary but that is
gradually eliminating, not as material
for depressing prices further. The coun-
try has certainly not lost all of the
wealth which it has stored up in the
past 10 or is years.
/ Recovery in Rail Bonds.
So far as security markets are con-
cerned, the most important develop
ments have been the recovery in rail-
road bonds and in railroad stocks.
Liquidation in the former has been of
greater proportions than for years. 1t
Is estimated that between $50, 900 900
and 5000, 900 of first and second
grade mortgage obligations have come
into the Street in the last two months.
This selling appears to have been for
interior as well as for New York banks
and occasioned by the necessity or de-
sire to establish higher ratios Of reserve
either In cash or short-term securities.
(copyTighta 1eSoJ