Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-02-09
RECOVERY IN STOCK
PRICES CONTINUED
Market FORCES Ahead During
Week-Commodity Values
Show Further Drop.
BY CHARLES F. SPEARE.

NEW YORK, February 8.-Steady
from the ills that grew out of
the speculative excess of last year is
being made, It was most conspicuous
this week in q succession of reductions
in rediscount rates, starting with that
of the Bank of Germany on Monday,
from 61b to 6 per cent. and followed By
the action of the Bank of England on
Thursday in cutting its rate from to
AZ per cent, and later that of the
Federal Reserve Banks of New York
and Chicago from Az to per cent.
This brings money rates in the f1nan-
cia1 capitals of the world down to
basis where business may borrow to
advantage and where it is more profit
able to invest in securities than in
money.
Minimum rates for some time have
been established in the three centers
that attract most capital and from
which radiate the current sentiment
concerning domestic and foreign securi-
ties. New York, London and Paris have
been provided with discount rates suf-
ficiently low to permit them to embark
on long deferred programs of industrial
and foreign trade expansion. The way
has been paved for setting UP the bank
for international settlements, and for
the fioAt ting Of the first porCion of the
reparations loan, and then for the send
ing of additional American capital into
those parts of the world that have been
hungry for it since 1928 and can only
buy goods in America as America con-
tinues to provide funds for their internal
development A
Business Sentiment Helped.
Easy money In the United States, or
rather in New York-for there are still
a number of the Federal Reserve dis
trictS. whose rediScount rate IS Az or
per cent, and whose loaning rate is
per cent and higher-will help bust
ness sentimentally; actually only as 1t
permits of the easy flotation Of securt-
ties from whose proceeds industrial or
public utility expansion will proceed. 1t
is a restorative, but not a cure. Easy
money does not mean that business is
better. but that business has been poor
and that in the present situation the
combined deflation in securities and in
industry has released abnormally large
sums of capital to the open market,
which always attracts 1t when 1t has no
employment elsewhere.
Sentiment rather than fundamental
conditions upset business after the stock
market panic and an improvement in
sentiment growing out of stock mar
ket recovery has had already, and will
continue to have, the greatest influence
in restoring the business mans courage
and starting him to expand on the
guarantee Of easy money rates.
Commodities Continue Decline.
One feature of the business situation
that continues to disturb is the decline
in commodity prices, especially those OF
wheat and cotton. During January both
of the recognized commodity indices
showed a decrease of over l per cent.
More striking than this was the de-
cline in the IL months to February !.
amounting to nearly liz per cent, and
bringing the average to the lowest level
for that month since 1922. This har-
monies with various other measure
ments of commercial depression, which
indicate that the slump at the end of
1929 was the most severe since the de-
flation period following the war.
There is a special reason in nearly
every instance where a major COM
modify such as wheat, cotton, rubber,
coffee or a metal has shown a steady
decline. The fact that all commodities
have been on the down grade and have
moved quite sharply in this direction
in recent weeks suggests that there has
been q normal lag after the break in
securities and that the natural conServ-
atism Of bankers toward making new
loans has played a part in the COM
modify situation. In this connection II
Is of Importance to note that the bor-
rowings OF member banks of the Fed
eral Reserve this week are the lowest
since 1927 and that the item of bank
loans on securities is steadily though
not materially decreasing
Stocks Trend Upward.
The stock market has already done
much to recover ground lost last Au-
tumn and to recognize the beginnings
Of turn in business and the benefits
Of fairly long period of moderate
money rates. This week the average
OF industrial and public utility stocks
was 10 points higher than that reached
on December 8. This conclusively proved
that liquidation Of all of the distressed
stock taken by banking pools or other
agencies had been iquidated or placed
where 1t was not likely to come into
sight except at materially higher prices
AT the end Of this week the average
OF rails has also advanced above the
December 9 figure, and in spite of the
poor November and December returns
to the carriers and every indication that
they Will make an unfavorable showing
in the first two months of this year
there has been an increase in the de-
mand Tor them and a corresponding ad-
vance In their market value. Altogether
the stock market picture Is more at
tractive now than it has been in some
months. Compared with a SO per cent
depreciation in the market average be-
tween the middle of September anc
the middle Of November, or a decline
OF lab points, there is now only 9
Shrinkage shown of % per cent, anC
an average loss Of 81 points.
This amount of market recovery
ought for time to satisfy Wall Street
1t Is much greater In percentage thar
has occurred in any branch of business
except iron and steel. It has recog-
nized the prospect of easier money and
what this means as stimulant to in
symptoms of q speculative fever and
an inclination to buy stocks which were
obviously attractive investments two OF
three months ago.
Trusts Are Rescued.
The investment trusts and trading
corporations have in many cases been
rescued and their securities restored to
a more satisfactory price basis by the
general advances in stocks of all classes
since the end Of the calendar year. A
majority Of those that have reported
for 1929 show total market values much
below cost. This condition has been
materially improved in the past flve
weeks.
A typical case is that of a trust
whose portfolio in December 81 showed
an excess Of cost over market value on
group OF "a issues. representing 207.-
three exceptions all of the stocks owned
by the company have advanced since the
end Of 1929. so that the present excess
Of cost over market value Is only $1,000
600. In other words, what was Is per
cent shrinkage has been reduced to one
OF about 5 per cent. The stock of this
company has nearly doubled in price