Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-01-01

| 1n1erentlally 10 that OF Otner uClllt
| stocks. Now, of course, this decision
concerned only one company, and wa
of effect in only one State, but it sen
Shiver down the Wall Street spine
| The Massachusetts, commissioners hal
said no more about the market price o
| Boston Edison in comparison with 1t
earning power than had been said re
peatedly about other electric light AM
power stocks, but this time the unfavor
able Judgment had an official standing
and it contributed largely to the grow
ing uneaSineSS.
All this is matter of history, and il
well known. The point here is that i
was not any turn for the worse in thu
outlook for the public utility industr!
that alarmed spectators. 1t was no
the discounting by the market of an!
such turn for the worse in the future
1t was the realization, tardy, 1t Is true
but overwhelming when it came. tina
the eXtravagant appraisal of the ad
mittedly favorable situation in the pub.
lie utility field must be atoned fol
sooner or later.
More or less the same can be safe
about the electrical manufacturing
stocks and about various high-priced in.
dustrial shares, leaders in the bull spec
ulation. There was no untoward de-
velopments in the affairs of any of these
corporations, actual or potential, to &C
count for reversal of the market trend
All that happened was that the price
ran far ahead Of anything warranted
by the most favorable possibilities.
Business Situation Appraised.
On the other hand, all through the
year the market was discriminating in
its choice of speculative media. II
Nf
trade, of the coal industry. of the tex
tile situation, and it was never entirely
convinced that the problem of overpro-
duction of oil had been solved. 1t was
Skeptical of the ability of the copper
producers to hold the price of metal al
the level they had SET. Long before
the crash in the market the copper
stocks had been acting badly. They
plunged downward with the rest, as
was to have been expected, but at nc
time during the second half of the year
were they overvalued marketwise.
Not quite so good a case can be made
out for the market Judgment as to mer-
gers and split-ups. Repeatedly prices
were advanced for no other reason than
that two corporations were to be united
or because two or more pieces Of paper
were to be given to stockholders in place
Of one piece. Still, even this maneuver
was employed only In the case Of indus
tries otherwise favorably situated: II
all this be true-namely, that it was not
the foundation for the speculation
which was unsafe but simply that the
structure erected thereon had been car
ried too high-the break. sharp and de-
cisive as it was, did not and does not
preclude robust recovery.
Effect on Business.
Coming now to the effect on busi-
ness Of the loss in individual buying
power brought about by the crash in
the market and its reaction on stock
prices in the coming year, there are
several things to be said. One is that
the losses for the most part were not
losses OF income. They were losses of
paper profits and in some instances Of
capital, but salaries and wages were
unaffected. There will not be for a
while at least such free buying of lux
uries If anyone knows just what con-
stituteS luxury nowadays
Perhaps even more important, though
not so tangible, is the way in which the
losers accepted the situation No other
people on earth could have joked over
their predicament or taken a disaster
so nght-heartedly as did the average
American trader in stocks in the great
panic Of 1929. In one not large Wall
Street house a young man operating
in single high-priced volatile indus
trial issue had run up q paper profit
Of half million dollars. It was more
money than he had ever dreamed of
having. His wife begged him to take
his profit and he had arranged to take
European trip in January, but when
the market turned he was still long of
his stock and then he made the fatal
technical error OF a speculator in try
ing to average on the decline. He lost
every cent of his profit and something
more beside, but after 1t was all over
he laughed and said, I'll get it all
back
Some years ago a young professor in
an Eastern university married into the
family of Midwestern capitalist whose
name has figured in many a Wall
Street merger story during the last IL
months. The salary of a college pro-
fessor was too small for the wife he
had acquired and so his father in law
gave him a job in one Of the many
large industrial plants he controlled.
OF course the young man was in the
market and at the beginning of Sep
TENDER he had 100000 profit. After
the smash he had 10000 left and he
said. II feel as if were back in the
university"
Now spectators who can take losses
IN that spirit are not going to curtail
their scale OF living Importantly. They
may cut down temporarily, but their
misfcrtunes will not have any perma-
nent effect ON business.
Investment Argument Arises.
Whether or not the pronounced pub
nc preference for stocks over bonds as
investments will survive the lesson of
the market collapse is a question not
so easy to answer. For two or three
years now the theory has gained wide
acceptance that for permanent holding
with adequate diversification, common
stocks are just as safe as bonds and
much more profitable. Prior to the
break in the market the skeptic could
not gain hearing Was not the prop
ositIon convincingly demonstrated by
the market itself?
To this query there was but one
answer. Those who had bought stocks
IN sound companies and had held them
unoisturbed by minor fluctuations, had
large profits, whereas those who had put
their savings into orthodox conserya-
tive bonds had seen their capital de-
preclate in market price. The bond
market was deserted. New Rotations
diminished to the vanishing point and
foreign governments, which early in
the postwar era had come to this
country to finance themselves, had to
rely on their own resources.
Investment houses which since their
foundation had dealt only in bonds and
had eschewed stocks as fit only fol
reckless spectators were forced to re.
wise their programs. A horde of in.
vestment trusts, so-called, sprang ur
to capitalize this public appetite fol
the common stock
Then, when the market crashed ir
october and November, there were
plenty Of commentators ready to poin'
| the moral that from now on the Ole