Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-10-12
FEAR PSYCHOLOGY
PERVADES STREET
AS STOCKS DECLINE
DefIation of Market Durinq
Week Has Made Yields.
Attractive.
PANICKY LIQUIDATION
HITS FOREIGN EQUITIES
Free Offerings of Securities Follow
Political Disturbances
Abroad.
BY CHARLES F. SPEARE.

NEW YORK, october lit is diff
cult to say how much of the 45-point
average decline in stocks in the past
month should be charged against the
Fascist success in Germany and the
civil war that has broken out this week
in Brazil. Both episodes have empha-
sized the worldwide political and social
disturbances and have revealed their
intimate bearing on economic condi-
tons.
They have also added to the fear
that has for months possessed capital
istic interests which have, in succession,
witnessed an unprecedented shrinkage
in securities, a sharp drop in corpora
ton earnings, commodity prices the
lowest during the present century and
drought that has brought great dis
tress to considerable portion of the
normal wealth-producing population of
the country.
The chief sufferers In this latest
market decline are of different cali
Der from those who saw lir fortunes
the wealthy classes. The general pub
lie was so terribly hurt last october and
November that it Is still nursing its
injuries. 1t Is not an important market
factor today.
Fear Psychology.
On the other hand large operators in
stocks, trading corporations, private
capitalists who have in recent years
greatly increased their ratio OF "equi-
ties" over fixed interest securities and
concerns that have confused their func-
lions as brokers with those of under
writer's and promoters, are all affected,
either mentally or as to loan margins.
by the steady decline in the shares
which they own or have hypothecated.
Consequently, there Is prevalent a
fear psychology In Wall Street similar
to that from which business has SUI
fered in the past six months. Unfortu-
nately, Just as there were beginning to
be signs of breaking OF the clouds
over some portions Of the business
world, with purchases of commodities
when they had dropped below the cost
fill in exhausted supplies, the new I'M
settlement in securities, domestic and
foreign, has given trade another chill.
Stock exchange failures have disturbed
the confidence Of investors.
Investment Yields Attractive.
From the standpoint Of investment
return, which, though an old-fashioned
gauge of price. still has its followers.
tempting to those who have free
capital to employ. Taking ten stocks
whose dividends are amply secured
by current earnings or cash re-
serves, namely United States Steel,
American Telephone g. Telegraph. Con-
solidated Gas, Eastman Kodak, Stand
ard Oil Of New Jersey, Texas Corpor-
alton, General Motors, New York Cen
trail, Pennsylvania and Great Northern,
we find that against their average yleld
a year ago of about 3.l5 per cent
there Is now an average OF over $50
per cent.
In contrast with the orderly decline
in stocks this week has been the pan
icky liquidation of South American and
German dollar bonds. The American
public Is temperamentally unqualified to
hold foreign investments. With a
majority, either as individuals or as in
situations, these have been regarded
more as q gamble and a means Of
averaging up their income returns than
as permanent participations in the de-
velopment of overseas countries.
Germany's Credit Record.
Only a little less violent than the
drop In South Americans has been that
in German securities. Inc credlC OF
Germany has been temporarily shat
tered by the September elections. 1t
is foolish to compare Germany and
Brazil. The one has always met its
commitments and has will and ca
pacity to pay. The other has been a
poor debtor for years and has borrowed
against all of its resources. 1t is well
to remember that French dollar bonds,
in the crisis of 1925 and 1926, which
was more serious than that now facing
Germany, also dropped to startling
levels of return In the last four years
they have appreciated from 35 to nearly
so per cent.
In view Of this weeks events it is
worth repeating that world politics
embarrass the efforts of those who are
endeavoring to bring about constructive
policies in business and finance and
make 1t more difficult than in other
periods of crisis to forecast the future
The early reconvening of parliamentary
bodies in Great Britain and in Ger
many, as well as in France, will bring
to the front measures that may have
an important bearing on our own in
vestment and trade conditions.