Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-12-28
MORE CHEER NOTED
IN 1881 OUTLOOK
Greater Market Freedom
Seen, With Major Weak
Spots Now Removed.
BY CHARLES F. SPEARE.

Special Dispatch to The Star.
NEW YORK, December 27-The ap-
proach to the new year Is being made
with a hesitation in business that is
seasonal, but with more confidence in
investment and speculative quarters,
where it is believed that, many of the
major causes of the 1880 decline having
been removed, markets in 1881 will re-
Spond more freely to normal conditions.
There is still some rough ground to
be covered before the goal of stability
in securities, commodities, corporation
earnings and banking conditions Is at
tanned.
Constructive events this week have
about paired with those of an unset
Ting character. Among the former were
the reduction in the rediScount rate of
the Federal Reserve Bank of New York
to per cent, the progress made in pro-
mitigating q four-part plan in the East
ern railroad territory, declaration of
regular dividends on stocks whose abil-
ity to continue these rates had been
questioned and the stronger statistical
position of copper metal. These togeth-
er have given a firmer tone to prices of
both stocks and bonds.
The adverse factors were the closing
of another New York bank and others
in the East and South, weakness in
agricultural commodities and the re-
ownership for one of the smaller trans
portatfon systems in the South.
Bank Rate Cut Unexpected.
The unexpected lowering of the New
York banks official rate was regarded
as means of tempering the effect of
the suspension of payments by an insti-
tuition that was not a member Of the
Federal Reserve System or of the New
York Clearing House Association. It
gave opportunity to emphasize the scope
of the resources behind the metropoli-
tan banks and the ability of those who
required funds to borrow at the lowest
rates since the Federal Reserve System
was established, also on the easiest
terms permitted in any money market
of the world.
The moral effect of the announce
ment is greater than its practical bene-
fits. The difference between a 2 per
cent rediscount rate and one of 215 per
cent will not stimulate business any
more than did the dropping of the
rate last June from per cent to pa
per cent. In period of lowest cali,
time and commercial paper rates in a
decade We have had six months of the
severest declines in securities and COM
modities and the sharpest falling off in
business profits that have occurred
within the memory of the present gen.
Grafton.
Indirectly the lower rate should slowly
revive industry and assist in the recov-
cry of business confidence. 1t gives
notice that money will be extremely
cheap for long time.
1t Is apparent that a change in senti-
ment toward railroad stocks has taken
place. They have reached a point of
resistance TO Iquidating and speculative
sales. Failure this week of the trunk
line executives to announce a complete
agreement and further evidence in the
November statements of the stress
under which the carriers in every sec
ton OF the country are operating did
not disturb prices. Nor did the receiver
ship of the Seaboard Air Line have any
effect on them. This might be ex-
planned by the fact that prices and
yields were the lowest in many cases
for periods ranging from 10 to 40 years.
Those who had taken the trouble to
study the Florida properties Of the Sea-
board in the field of their operations
have never had, during the past three
or four years, any doubt as to their
ultimate effects on the credit of the
parent system. 1t was another st. Paul
Puget Sound division experiment on a
smaller scale.
Appraising Business Outlook.
Wall Street several times this year
has scented a revival in industry that
was not apparent to industry itself
These false starts have made a public
that interests itself in securities ex-
tremely Skeptical. Although the ma
Jor1ty opinion among economists, and
that expressed by the various statistical
services, favors a definite recovery in
business in the first or second quarter
OF 1881, the stock market at the end
of this year has ignored such poSsibili-
ties. If they do not develop, the mar
ket has nothing to lose from discount
ing them. If they prove to be true,
stocks will be in the unusual position
Of trailing, instead of leading, business.
This they have never been willing to do
for any length of time.
1t will be more profitable to forecast
the trend of securities after the bust
ness adjustments postponed TO January
1st have been made and when it is
possible to estimate with some accu-
racy the effect on prices of securities
Of several months of selling to establish
tax losses. Undoubtedly this selling has
been greater than since 1920. Whether
or not its importance was not exag-
gerated and its volume confused with
liquidation forced out by embarrassed
security holders is a point that cannot
be established until the time for TAX
ing the 1880 losses has expired.
loan