Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-10-06
Legal Bond List
Shows Rapid Rise
I'm Recent Trading
Institutions Have Been
CompetingforHigh-G Grade
Investment Issues.
Dispatch to The Star.

Special Dispatch to The STAR.
NEW YORK, October Constitutional
buying of the so-called legal issues
for savings banks and trust funds has
driven these issues to very high levels.
But the highly selective nature of
the rest of the bond market was plainly
evidenced this week, when high yield
issues of companies whose earnings
have decreased, or been in doubt, or
where net earnings have been hardly
SUFFICIENT to cover fixed charges, broke
with stocks and went to new low levels
on the movement.
The leading group in this downturn
were the secondary obligations of Amer
lean railroads. The actual reporting of
September earnings revealed situation
that caused some alarm among in
vestors. and junior railroad securities
were heavily sold.
Forced Liquidation.
Some of this, it is true, was attribut-
able directly to forced liquidation be-
cause of the decline in stocks But the
width of the declines in most cases
measured the value of the bond. At no
time since the first faint beginnings of
the big bull market in stocks soon after
the war has the individual investor been
so carefully considered-the men be-
hind the bond, the nature of the COM
panys business, its capital structure, the
ratio of yield to capital value, ratio of
debt to share capital, ratio of assets to
liabilities and long-term growth or de-
cline on the industry in which the COM
pany is engaged.
For some time the American investor
has asked, What is the future of the
railroads?" The current depression in
railroad earnings has increased his
skepticism. Optimistic statements made
by railroad presidents and other func-
tionaries from time to time have had
little effect on the price of carrier Sc
curities Railroad common stocks have
been selling below their 1929 lows. Rail-
road bonds of a Junior nature have
dropped to their lowest levels in many
years.
A similar close study of industrial
bonds before purchase has resulted in
many soft spots in that part of the list.
Foreign dollar bonds forced down when
the Stock Market broke by necessitous
sales. we're closely analysed and, as
result, have failed to make any salts
factory comeback. Even DR.. Hjalmar
Schacht's confident optimism for Ger
many and other European nations did
not have more than a momentary
ket for foreign credits.
The net result of all this is that Stand
ard Statistics index of 80 bonds ended
the week at 1914, compared with the
high point of 101 g two weeks ago. Since
prime investment issues are still high
err than they were then, the width of
the drop In secondary and tertiary de-
scriptions can be realized.
High Grade Group.
In the high-grade group. values con-
tinued to mirror the cheapnesS of
money. Municipals, while offerings have
been heavy, are still reaching toward
new tops as the supply scarcely suffices
to meet the demand from. savings banks
and insurance companies alone.
Canadians have been in high favor of
late, even though they carry no tax
exempt features and are not legal for
savings banks except in one or two
States. The weakness of South Ameri-
cans this week was largely traceable
to the decline of stocks.
Copyright, 1900