Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-08-09
Decline in Prices During
Week Laid to U. S. Bust
ness Situation.
RAIL STOCKS Debated
SHARPLY ON EXCHANGE
Prospects Are Frightened Some
what by Pickup in Few
Industries.
BY CHARLES F. SPEARE.

special Dispatch to The Star.
NEW YORK, August 8.-One might
have discovered satisfactory signs in
the foreign banking situation this week,
If in the mood to look for them; on the
other hand he would have been disap-
pointed in the reaction Of the American
markets to them
While in the acute stage Of the Ger
man and English financial crisis there
was little acknowledgement of It on the
part Of speculative Wall Street, there
has been disposition since the banks
in Germany reopened and the Bank of
England has been provided with a sub
stantial credit to dwell on the serious
ness of affairs abroad and make them
basis for further liquidation and the
i dissemination OF disturbing rumorS
We have again come to a period of
doubt and questioning, of despair and
cyntcism. of loss of faith In values and
an increasing amount of discussion of
! the outlook for the capitalistic system.
The pessimism of the moment grows
from the failure of the debt holiday"
to perform the service to the world that
its first reception indicated and from
Oh uhlCONcInB Oh COuQlClOnS IN Ger
many and in England more serious
than any of the numerous factors that
have disturbed business and securities
during the past % months.
Eyes on Domestic Scene.
The astonishing thing is that mar
ketS we're so calm during July. They
are now reacting more to domestic than
to international developments and have
gone froI1 the idling or drifting stage to
enter one where volumes are still insig-
ntf1cant when compared with normal,
but in which the increasing number of
new low prices for the year in both
stocks and bonds has an unSettling eff
feet on the minds of investors
Wall Street now speculates on the
possibility Of lower average prices than
those OF last June. This is not I'm
probable in the rail group as it is
all ready within a few points of the
years minimum. Half dozen carrier
shares, in tact, are below the prices of
two months ago. The diSintegration in
junior railroad bonds continues in q
degree that spreads alarm among the
institutions and individuals that own
them. Long-term issues of systems re-
Gently considered as in strong credit
are quoted at discounts from par of
from 20 to more than so per cent. The
bonds-namely, Chicago & Northwest
ern 4%s, Chicago, Rock Island 81 Pacific
414s. Illinois Central 4%s, New York,
Chicago & st. Louis AIS, Missouri Pa
cif1c SIS and st. Louis-San Francisco
4l2s, group exceedingly popular
among dealers-has been % points, The
Nickel Plate SIS due next year are cur
rently quoted at q discount of nearly IS
per cent.
Rail Earnings Outlook.
| Conditions in the railroad world are
| distressing. They do not, however. s,,g>
gest the passing out of the entire trans
| portation system and receiverships on
| the scale of 1898, as some commenta-
Uors would have it. In the six months
to June 80 approximately 40 per cent
of the permitted return on property in
vestment was earned. FrSm present
indications the 1891 yield on the cap
ital invested in American carriers will
be less than 3 per cent. This is Ear
from satisfactory. Still it is a better
| record than some groups Of industrials
are making and in which stockholders
and bondholders appear to maintain
their confidence.
Unfortunately the holder of railroad
securities has lost his nerve He has
also lost faith In railroad managements
that have diSsipated the proceeds Of
new capital issues in wild goose con-
solicitation schemes. He never has had
much respect for the Interstate Com
merce Commission and will be surprised
If 1t lends helping hand in the pres
ent crisis soon enough to have recon-
structive value. Either for reasons
of low cash reserves or to impress their
poverty on the commission, certain
railroads will undoubtedly make further
reductions in their dividends. This
probability railroad shares have over
discounted in the price level to which
they have descended this week
Dividends Sustain Confidence.
The dividend announcements recent
ly have been more encouraging. Gen.
eral Motors, with nearly loo, 900 more
shareholders than United States Steel,
has declared its regular quarterly
rate. This will be the policy of the
American Telephone & Telegraph Co.
later In the month and by so doing
1t will sustain the confidence Of its
600, 600 owners. The chairman of
Westinghouse Electric takes the rea-
sonable position that shareholders have
rights as partners in a business en-
fitting them to dividends when earned.
Dividends are portion Of the wages
OF those who have been thrifty.
tcopyrisht, lsSI)