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

heard on every ~
hand. Georr. r Huvhe.
Although the
facts are so recent as to be in every
ones mind, still a statistical pictur
will be helpful as a foundation TO
analysis. The downward readjustmen
in the Fall of 1929 cannot be described
as other than stupendous. On Septem
Der /, when the market was still around
its high of the year. the official com
pilation of the New York Stock Elk.
change shows that the number of listed
shares was I,006, 068 1898, with a market
valuation of $89, 1853, 276,854. On NO.
vember /, after the first break and be-
fore the secondary crash which cul-
minated on November Is, the market
valuation of all listed shares. which by
that time had increased to 1,110,419, los
was ST., 752 $50, 905. In other words
in so days almost eighteen billions oil
dollars of market value had been wiped
out.
Showing Quite Striking.
# we take individual stocks the show
ing is quite as striking. General Electric
sold at 403 on August 20. On Novem-
Der Is the price was 1885 and the diff
ference between the two, diSregardine
the fraction, is $235 a share. Now there
are 7,2l1 ,482 shares of General Electric
outstanding, and a Shrinkage of $235 a
share is 1.649, 693, 270, or a loss of al
most one billion seven hundred millions
Of dollars, and that in one stock.
General Motors made its high price
early in the year. on March 81 to be
exact, when it sold at $91.75 a share
On October 20 the price was $3.50 a
share, and similar calculation to that
made in the case of General Electric
reveals downward reappraisal of the
market value of General Motors of
$2,523 100000. The reason for the
larger loss in General Motors is that it
has outstanding AZ SOC, 900 shares, against
7,211,482 shares for General Electric
The price swings from the high to the
low in other leading stocks were sensa-
tional In the extreme. j. !. Case went
from a high of 467 to low of 100 in
less than two months The high was
made on September Is and the low on
November II. Columbian Carbon had a
range OF 239 points between October 8
and November Is. Westinghouse Elec-
trio went from 1925 on August % to
an even 100 on October 20. Other ex-
amples are given in an accompanying
table. They are without precedent in
the history Of the New York Stock Ex-
change.
And yet the fact stands out TODAY
almost as striking as the tumultuous de-
cline-which every competent observer
mad predicted would come sooner or
later, although none had expected it
on so large a scale-that the after-ef-
1ectS OF the crash have been far less
disastrous than on any previous oc-
caslon OF its kind. In less than a month
after the final break in November the
stock averages had regained third OF
tner loss, and while prices Sagged again
thereafter they did so on volume OF
business that showed forced liuuida-
ton was definitely over
The question is what this portends
toward the future of the market. to-
ward the reaction of the market on
business and vice versa, and toward the
status Of the theory that for long time
investment common stocks have the
advantage over bonds.
Two Theories on COLLAPSE,
These questions cannot be answered
without examination of the points in
which the 1929 market collapse re-
u embled other historic panics and the
points In which it differed. There are
Two theories about the fundamental
cause of the break-one that it was
brought about by signs Of business set
back and the other that the specula-
ton broke down under its own weight
ana would have done so regardless of
what had happened in the outside
world. Obviously it Is inadvisable to
be too dogmatic on the subject. but
the bulk Of the evidence goes to sup
port the second of these explanations.
IL Is true that there was some slack
ening OF the business pace in the Au-
tumn months, showing itself in steel
production, in automobile output and in
moderate drop in railroad car load
1ngs, but all this had followed a Sum-
mer OF abnormal activity. The facts
do not support the suggestion that the
market reacted to an unfavorable trade
outlook. That the speculation had
Deen carried To extravagant heights no
one denies, not even its most opti-
mistlc defenders. The huge absorp-
ton OF credit in brokers' loans testified
to an imitation never before equaled.
For months stocks sold on a Yield
basis lower than that afforded by con-
servative bonds. For a year or more
they did not carry themselves" This
lie utilities and of the electrical manu-
featuring stocks. The former sold
20, 80, so and more times earnings
per share annually. The return on the
latter was negligible from an invest
ment standpoint. All the stress was
placed on the opportunity for price APP
probation in the market and on the
DSLSllto SuppOSeQ 10 accrue ITOLu MeI-
gers OF one kind or another.
Utility Earnings High.
The point is that the first signs OF
the coming storm appeared in this
same market quarter. namely the public
utility field. And yet there was not
then nor Is there now any indication
Of an important recession in the pnb-
lie utility earnings. AS matter OF
fact, practically every monthly state.
ment of an electric light and power
corporation, holding or operating COM
pany, shows increases in both gross
and net over the same month q year
ago. There was nothing unfavorable in
the utility outlook for the market tc
discount, and when 1t broke, it broke
not because the trade was threatened
but because prices had been carried
to levels out of all proportion to values
The market gave the first indication
of trouble late in September, but il
was not until a fortnight later that
prices broke seriously. It was a rela.
lively unimportant incident which
started the list downward. The Edison
Electric Illuminating Co. of Boston haC
applied to the Massachusetts, Depart
ment of Public Utilities for permission
TO change the par value of its stool
from 500 to SIS and to give fou
shares Of new for one of old. Thi
permission the department CURLY re-
fused.
The Massachusetts, commissioners no
only disapproved the plan but handel
down an opinion in which they com
Ynented on the market price of the oil,
kEfocle 1infav0rn lalv The Aaniaiav, a11a0a.