Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-09-13
STOCK LOSSES PUT
MARKET BACK NEAR
Low MARK OF JUNE
Reductions and Omissions of
Dividends Result in Heavy
Selling Attack.
PUBLIC is SACRIFICING
GOOD ISSUES FOR CASH
Evidence of Increased boarding
Seen ss Higher Tax Talk
Is Heard.
BY CHARLES F. SPEARE.

NEW YORK, September 12.-After
his experience with this weeks de-
moralized markets for stocks and
bonds, the American investor Is in a
state of mental confusion. for he has
lost his reckoning in the realm OF
values and does not know how to re-
cover 1t. Neither he nor the most
aStute economist or banker can ex-
plain why securities that were so high
in 1929 should be so low in 1881.
Perhaps as accurate an answer as
any is that during the bull market
which eliminated just two years ago,
mass opinion exploited stocks at the
expense of cash, while today cash has
high premium over securities.
The public was drawing out its
money from the banks and from mort
cages in 1929 and putting 1t into Wall
Street; now it is replacing equities"
and fixed obligations by cash. This Is
swelling the deposits Of the savings
banks and is reflected in the steady
increase in banknote circulation. More
boarding is taking place than since
1907. which means that confidence in
property values Is lower than 1t has
been in nearly a quarter of a century.
Public's Mood Changes.
The psychology of the moment Is
as irrational as that of the period of
market imitation. 1t is as impossible
now to make people believe that val
ues, measured by earnings, dividends.
prospects and management, are in
many instances low, as it would have
been to have won their support to a
policy Of liquidation of common stocks
in the Summer of 1929. Everyone is
doing, saying and thinking the same
things. The sum of them all is that
the situation is hopeless and prices
are too high.
Three widely distributed stocks that
have this week fallen to $50 or under
are General Motors, Electric Bond Il
Share and Northern Pacific. Each is
representative in its particular field.
The first sold in 1929 at about 90, the
second at 189 and the third at ll9. The
average of the three is now 80 per cent
lower than it was then, although earn
lngs per common share ON the group
are off less than half. AS for dividends,
they are approximately as high as they
were in the boom period, for Northern
Pacific still pays SIS a share, though
it will probably reduce this month to
81 a share; General Motors has con-
tinued its regular rate while dropping
its extra, and Electric Bond & Share
has maintained its record for dividends
in scrip. Both General Motors and
Electric Bond & Share have materially
increased their surplus since 1929, with
the former showing the strongest bal
ance sheet in its history at the end of
the June quarter At this weeks price
controlling interest in the Northern
Pacific Railroad. with a capital of ap-
proHimately S560.00o,003 and nearly
$500 miles of property in excellent con-
dition, might have been purchased for
$35 100000.
Buyers Await Bottom.
Such conditions as these. and they
might be many times duplicated. sup
port the Babson statement that we
are standing up to our knees in the
greatest list of values since 1892" But
as always happens in similar circum-
they want to get rid Of. They will not
risk buying before prices have reached
absolute bottom.
The narrowness of the market and
the unwillingness of those who have
been identified with different issues
and promoted them on a huge scale
two years ago to recognize them today
when they need support, gives occasion
for the abrupt declines that occur and
increases the alarm among security
holders. There is nc banking leader
ship worth the name in the present
crisis. There may be the power of
concentrated wealth and prestige, but
not the initiative or the constructive
program that has set things right when
an older generation-one that had been
through other panics and had a per-
spective-Was ct the helm. We are
handicapped now by the fact that those
who in 1923 and 1929 should have
been bankers were then SPECTATORS.
The confidence which they now need
is lacking.
In fairness it should be said that
none Of the older men had problems to
deal with as grave as those which now
face the younger generation, even
though the latter should have by their
experience in foreign financing gained
a better idea of conditions abroad than
they seem to have obtained. There has
never been a foreign situation Of such
ScoDe and seriousness imposed upon a
similar crisis in domestic affairs. The
United States and France are the only
two important countries in the West
ern world whose credit is unassailed
This makes the panic much more seri-
Gus than those of 1921. 1907 or 1898.
Security Holdings Widespread.
If prices of securities are not so low
as they were during the former depres-
sionS. 1t is because of the Improvement
in capital structures and the reserves
that were created during the seven
years between 1922 and 1929. On the
other hand, because such a large per-
centage of the people own securities
both domestic and foreign, pessimism
spreads over greater area and influ-
ences the daily mood and habits of a
larger portion Of the population than
ever before. It is also sensitive, as 1t
has never been at other times, to polit-
1cal and credit conditions abroad be-
cause Of the $4,000, 000, 900 investment
overseas, of which between rs and so
per cent has been made in the last
Is years. The recent statement that
the rest Of the world might sink into
the seven seas" and the affairs of the
United States be very little disturbed
could have been made with some degree
Of truth prior to the war. Today it is
It is not the bankers alone or the
statesmen in the United States who
have been reading with tense interest
this week the story of how the British
people are pulling themselves together
and making sacrifices or who followed
the daily reports of the July crisis in
Germany. These events and similar
ones In South America have been de-
termining the policies of importers and
exporters, manufacturers and the tens
of thousands of those who are actively
employed when there is q normal now
|ror%ins,oI ~, Uso,,~fI. No.