Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-10-19
DECLINE IN STOCK
MARKET CONTINUES
|. ATLE|SURELY PACE
Poor Earnings, Reduced Divi-
dendS and Weak Commod-
ity Prices Cause Drop.
DOMESTIC CONDITIONS
FAVOR BEARISH ATTACK
Persistence of Fear Psychology
Among Business Men Is
Also Factor.
BY CHARLES F. SPEARE.

BY CHARLES F. SPEARE.
Special Dispatch to The Star.
NEW YORK, october 18.-The chief
difference between the stock market
since Columbus day holiday and that
of a week ago is the same as between
AN acute disorder and lingering dis
ease. Instead of heavy liquidation and
abrupt declines, with hundreds of is
sues quoted at new lows for the year"
we have had moderate selling, long
periods of suspended trading and a
two-day term of recuperation followed
by an increase in offerings at prices be-
low those previously quoted ana manly
In high-grade shares.
It Is clear that the market has not
been able to throw of the effects OF
poor earnings, reduced dividends, over
extended speculative commitments OF
individuals and corporations, foreign
political disturbances and falling COM
modify prices, all of which serve to keep
the investing public In q state OF fear.
The only reasonable explanation OF
the steady flow of investment stocks
into the market is that they are either
being forced out to correct over -amoi-
tious schemes of some Of the newer
NapoleonS of finance or are a part OF
a policy to correct one of the weakest
elements in the situation respecting
collateral loanS-namely, that OF securl-
ties held by the banks for the account
of their customers.
Bearish News Holds Sway.
Relieved of pressure from forced
LIQUIDATION of foreign dollar bonds, In
which there has been recovery almost
as pronounced as last weeks decline,
the stock market this week has been
affected primarily by domestic condl-
lions. Those that were good were over
balanced in number and importance py
those that were poor. 1t Is 1act tnat
while Wall Street has not been lncnneo
to respond to the Developments tnat
were constructive, 1t has, by It's re-
sponse to all sorts of legitimate and
illegitimate bearish news, gone long
WAYS in discounting their reaction on
prices.
The attitude toward security values
to-day Is as distorted as 1t was year
ago. No more reason now exists Iof
selling the stocks Of corporations that
are out of debt, have piled up large sur
plus reserves, are earning comfortaple
margin over current dividends, return
two or three times the money rate, ana
are on so per cent In market Price
than there was in buying them IN o 0epo
TENDER. 1929, when they were 100 10
zoo per cent higher than in 1927 and
In 1872 Band gave a yield one-nltn 70
one-tenth that on call loans.
Financiers Reverse Themselves.
Yet 1t Is surprising to know how now
MANY men have been selling STOCKS
shorf RECENTLY and with difficulty Dor
rowing then-men, who, even after the
first symptoms Of approaching disaster
appeared last october, still chung TO tne
opinion that they could hold any KIND
of equity" at rs to SO times earnings
and make their fortunes In Few years.
They were not all noyices in financial
matters. either. Some of the critical
situations that have developed recently
and others that are not yet repaired
represent engagements by supposedly
astute corporation managers VINO nave
been embarrassed by the capital they
employed in enterprises whose earning
power or strategic advantage were over
estimated when the contracts were
made.
AS It is q year since stocks first
broke badly and IA months from the
date when business activities began 10
decrease 1t may be worth while 70
indicate the favorable and unfavorable
features of the market and trade pic
CIfe.
First. on the asset side of the ac-
count: IA strong banking position
with respect to reserves, rediscounts.
and generally in secured loans; also
abundant short-term money at low rates
and increasing supplies of long-term
funds. "A decrease of so per cent in
brokers loans from the high figure Of
October, 1929, few weakly margined ac-
counts among brokers; so per cent de-
f1ation in prices of common stocks and
relative scarcity of stocks. 3.-An
income yield on common stocks
nearly double that of a year ago
and where the possibility Of reduced
dividend Is not involved. A decline
In commodity prices to nearly the
equivalent of 1921, and frequently, be-
low the cost Of production, with evi-
dence that consumption has overtaken
production in certain raw materials and
finished products. 5.-A slight revival
in the building trade. September per-
mits per cent over those in August,
although the seasonal trend is a de-
cline of 10 per cent between these
months. Reduction in costs by as much
as 10 to is per cent, stimulating resi-
dental building. Ga gain in employ
ment and in pay rolls In September for
the first time this year. IA steady
gain In saving bank accounts, satisfac
tory installment payments and the larg-
est volume of cash buying of securities
since last November.
Influence Of Foreign Situation.
Second, on the liability side: 1.-The
uncertain political and economic condi-
lions in Europe and South America,
with their bearing on American invest
mentS abroad and as reflected in cur
rent foreign trade figures. 1.-THE pros
pect of further reduction in dividends
of American corporations, which reduc-
lions have now reached a total of over
$50. 3.-AbSence of seasonal recovery
in business, as illustrated in September
corporation earnings compared with
those in August, in falling ratios OF iron
and steel production and in railroad car
loadings. 4.-PerSistent declines in agrt-
cultural products and In metals. s.
Frozen assets" in real estate and in
newly created corporation stocks and
bonds and bank loans on securities
much above those of a year ago, though
considered to be well margined. g.
insufficient readjustment OF retail prices
to wholesale prices, retarding consumer
purchases; also reduced purchasing
power from unemployment and lower
pay rolls. IA state OF mind on the
part of business men such as character
ICES the final months of depression,
destroying their initiative distorting
their judgment of all values, and pre-
venting them from accepting opportuni-
ties that would be to their future ad-
vantage
The first and last items on the debit
list are the strong deterrents to re-
2ovefy in an investment and trade sitla-
ton that IL steadily becoming stronger
from the technical point of view.