Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-02-13
BOND PRICES HINGE
ON RESERVE POLICY
Lowering of Interest Rates
Has Direct Effect on Senior
Securities.
BY JOHN F. SINCLAIR.

Special Dispatch to The Star.
NEW YORK, February 13.-Does the
present low interest rate mean rising
market Tor bonds during 1880? Most
seasoned observers say yes.
But Mr.. David Friday Is not so sure.
"Tell me what the Federal Reserve pol
icy will be and I'll answer the question
easily" is a summary of his position.
The two-year decline in bond prices
that lasted up to october, 1923, was
largely the result of the Federal Reserve
policy in selling its own Government
bonds. which in turn was followed by
the liquidation of bonds by the member
banks, Mr.. Friday believes.
From December, 1927, to July, 1923,
the Federal Reserve portfolios OF Gov
eminent bonds Shrank from $500, OO0,OO
to $136,000,000 To Offset the Federal
Reserve, member banks were forced to
sell their bonds to take care Of the
tightening reserve situation. Between
June, 1928, md october, 1929, the
member bank portfolios of bonds shrank
$1,0lO,OO0,00O. So bond prices moved
down. How else under such condition
could they move?
Now, what of the future?
since November the Federal Reserve
banks have added $3.50, 000,000 to their
holdings Of Government bonds, and
bond prices have risen little over two
points from their low comments Mr..
friday. IF the Federal Reserve con-
tinues to hold the present volume OF
bonds and maintains its total holdings
of open market assets at their present
level, we shall develop real bond
market"
The Federal Reserve policy exercises
powerful influence over bond prices.
Are bonds yet good buy? 1t is more
than year ago since Secretary Mel
lon suggested to the investing public to
buy bonds"
Only this last week commercial paper
rates dropped a quarter Of l per cent
below high-grade bond returns. That
was a signal to many to begin buying
bonds.
When the rate on the firest CONNER
cial paper goes below the rate on high
grade, seasoned bonds many bond buy
ers take that situation as a cue to enter
the bond market.
After the November break bond prices
started up in fine style, then the ad-
vance stopped. Why? Banks in the
country have not been buying bonds
because they have been busy with col
lateral loan problems of their own. But
as soon as banks put themselves in bet
ter shape to purchase this class OF In
Vestment for their portfolios, undoubt-
edly they will do so.
Then, of course, the attitude of the
Federal reserve at present in easing
money conditions will be of real aid to
. rising bond price level.
When Vice President Frank J. Fahey
of the Gillette Safety Razor Co. stopped
the manufacturing of all Gillette razors
and blades In order to prepare their
manufacturing plants throughout the
world for a new razor, which will be an
nounced March fixing C. Gillette,
president and founder, was in China
a globe trotter in spite of his rs years.
1t was In 1895 that Mr.. Gillette, a
travelling salesman, living in Brookline, |
Mass, conceived the idea of a detach-
able razor blade cheap enough to be
thrown away when dull.
Always a big advertiser, not only in
the United States, but throughout the
world, Mr.. Gillette has sold In the %
years since he began more than 49,
100000 razors and over 5,318, 000, 900
When I asked Mr.. Fahey why he
made the change at this time, when
business was supposed to be slack, he
replied:
1.-THE year 1880 should be our great |
est year. Reports are so encouraging |
that we have not heS1tated TO bring out 4
our new products and to plan a SUBJ |
stantial expenditure for merchandising |
and advertising to support them. This |
Is our answer to any pessimtsts who re- !
gard 1880 with apprehension"
Backing this statement UP, the Gil !
lette Co. will spend 100000 600 this year |
in advertising, of which $7,500,00 will |
be spent in newspapers and magazines |
throughout the United States-an n
crease of $2,500,000 over last year in
the same territory.
One of the largest buildings In down.
town New York is the Equitable. Ris-
ing 40 stories at 100 Broadway, it con-
tai1s 1,250,000 net rentable square
feet, has 81 high-speed elevators to ham
die $4,000 occupants and was erected
between 1912 and 1915, when building
costs were much lower than they are
today. Besides, the present coming laws
had not gone into effect.
For these reasons they were able
to make $3.50 a share on their stock
outstanding, although the rental is
S474 per square foot, as compared with
81 for the newer buildings in the
financial district.
The scope and the importance of the
modern building are emphasized when
one sees that the profits for the last
II months of this building have aver
aged better than 100000 a month net.
The total for the year 1929 was 81, $780,
600 net profit.
Copyright. 1880. by North American News
paper Alliance.)
H0MRHEDHIhI nDEnIT m