Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-11-15
Irregular Downturn of Mid
week Directly Checks Ad-
vance in Securities.
SENTIMENT is IMPROVED
AS FAILUR DECREASE
German Debts and Railroad Prob.
lem Remain as Obstacles to
Business Recovery,
BY CHARLES F. SPEARE.

|
NEW YORK November l4.-Securitie!
have again this week moved in sym
pathy with commodities. Commoditie'
having been irregular and less re-
SponSive to manipulation after sub
stantial advance. there has occurred 6
tapering off in the prices and in the
volume of transactions in stocks. 1
looks like a hating period in both de-
partmentS of the market with tn,
public standing off and trying to OBJ
serve the effects of recent recoveries or
general business
The improvement in sentiment which
began and expanded with the forma-
ton of the National Credit Corporation
has been held There is no longer
hySteria in action or in utterance
(, Money is slowly returning TO the banks
| Week by week the number of bank
failures throughout the country is de-
| creasing Those that have not been
| prevented by the new relief agencies
and by the higher markets in railroad
bends and in foreign dollar obligations
are small in size and with limited in
f1uence The European raid on the
American gold supply has ended. Gradu-
ally the reserve ratio of the Federal
Reserve Banks is rising. Here and there
| signs appear on the industrial horizon
which indicate a moderate degree OF
confidence among those who, in October
were disposed to hold their hands and
prepare for the breaking up of the
| capitalistic system.
AS one commentator this week put it:
we have disrupted the continuity OF
| pessimism." In other words, conditions
! have stopped getting worse, even if they
are not a great deal better.
Resistance Level Reached.
October was the month of low records
in securities and in industrial activity.
Industrial production then was about
35 per cent below normal Wholesale
commodity prices were so per cent I'M
der those of 1920 and below any average
since 1908. If there had been some
way of charting the feelings of the
people 1t would have been found that
these reflected the deepest despair since
1898 When conditions of all kinds
became so bad simultaneously, it is
usually an evidence that the bottom has
been reached and that a turn is in
sight.
This is due to the fact that positions
in securities or in commodities have been
thoroughly liquidated and that instead
of being resistless. these are resisting.
It means also that there are bargains
in stocks and in bonds with respect
and that a level of commodities so
much below production costs as has
been the case for months will attract
speculative buyers Just as an inflated
set of quotation in commodities in
1920, provoked short selling. If one
of the primary troubles has been over
production, the correction of it in a
measure has taken place as result of
the inability of producers of raw ma
mr. fon 10
make profit, which brings us into
| that part of the business cycle char
acterlzed by interpretation. The
evidence from all investigation is that
inventories of merchandise are small
and that retailers have a limited sup
ply Of stocks of goods on hand
While there has been an improve
ment In public psychology and Secu-
rifles and commodities have been APP
preciating in value instead of depreciat-
; ing. the two great problems that over
| shadow the financial and business out
! look are those of the American rail-
roads and the debt Of Germany. 1t is
the continued weakness in railroad Sc
/ curitles that prevents the general mar
| ket price average from holding up
Railroad bonds were once more under
| pressure at the end of the week. 1t
| Is the seriousness of credit conditions
| IN Germany and in Central Europe
| that chokeS off any initiative in do
mestic affairs on the part of leading
! bankers and causes such rapid trans
! formations in the price scale of conti-
| mental issues. Today they are buoyant;
| tomorrow unstable. Such is their
| record this week
/ Some progress has been made in de-
veloping unity of action among rail-
road executives on the freight rate pro-
posal. They are now practically unani-
nous IN their acceptance of the Inter-
state commerce Commissions recon-
; mendatlon. 1t rests with the commits
sion whether 1t Will accept the terms of
! the carriers and distribute the proceeds
| OF the pool in the form of loan instead
! OF presenting 1t as a gift to the weaker
! systems. There has also been q Sympa-
thetlc reception by the representatives
| OF railroad labor organizations to the
suggestion Of voluntary reduction in
the pay OF railroad workers.
Inc measures now being advanced
however, are of temporary value Loans
compel repayment whether these loans
are by strong roads TO weak roads or by
railroad employees to railroad employers
something more fundamental than is
now being developed must take place
II American railroads are to be restored
10 an approximation of the credit
winch they enjoyed between 1925 anc
| 1880. The adventure into the national
lzation of railroads, which was under
taken some years ago by the Dominion
OF CANADA, Is placing a tremendous an
nual tax on our neighbor
1t promises soon to become a burning
question in Canadian politics. This
should cool the enthusiasm of those
who argue for government ownership
OF railroads in the United States as
| the only way out of the present diff
Guilty Unless, however. reasonable con.
solldatlons are permitted and a basis
OF rates Is granted that will allow the
| carriers to earn more satisfactory
return on their property investment
than the average in recent years, it vii
be difficult to control a sentiment in
favor OF the kind of ownership and
operation OF steam transportation lines
that now prevails in many parts of the
world.
The short-term German credit situa-
ton is now in the trading stage Amer
lean holders of these credits are trying
TO agree on the amount of reduction
OF this debt which they believe Germany
Will be willing and able to make next
month Involved in this is the broader
question OF long-term debts and repara'
lions whose determination will eventual
ly rest with France Within a short
time 1t Is expected that Germany viii
y proceed under the provisions of the
young plan and corlrel a study Of he
e-~-l' - = c~Cd-tCl e. ti.a firs5 step il