Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-09-30
BY DIR. MAX wINKLER.


Special Dispatch to The Star.
NEW YORK, September 30.--The
securities market paid no attention
whatever to the report of the formation
of an economic alliance between France
and Germany, which, according to one
of Frances keenest observers, represents
the beginning of the victory of reason
and wisdom over the passions which
have SO long held sway. Under normal
circumstances this development would
have been hailed as most constructive
as 1t doubtless is-and would have found
ample reflection in quotations.
1t Is not likely that short selling was
entirely responsible for the renewed
wave of liquidation which resulted in
new lows being established through
out the list, especially the industrials.
The weakness must be attributed to
the continuance Of bank failures
throughout the country. Hardly day
passes by on which several banks are
not forced to close down.
Securities Quickly Sold.
The closings of these financial in
situations are followed Immediately by
the sale Of securities, at the order of
those charged with the liquidation of
the enterprises in question. This, in
turn, results in much lower levels being
established for various securities, due
principally to lack Of demand. The de-
cline is, in many cases, helped by pro-
fessional selling. 49, i
In this way solvent institutions find
their own holdings seriously impaired
as well as the loans of clients Such
conditions inevitably lead to the. en-
barrasSment of these institutions. We
thus have vicious circle, and the end
CT 1t should come as soon as some
thing is done to stop the distressing
situation obtaining in the banking field
as regards the smaller institutions.
Reverting again to the foreign situa-
ton, one cannot emphasize too strongly
the wisdom Of Germany and France in
buryihg the Ratchet. This should prove
of great value, not only to the two
neighboring republics, but to the rest
Ct the world. Franco-German diff1cul-
ties have long been an impediment to
a speedy rehabilitation of Europe,
which plays such an important part in
the economic life of the United States.
1t was difficult to undertake measures
CT a constructive and faf-reaching char
nctar 50 Ing as uncertainty remained
en- the political horizon or the old con-
tinent. This uncertainty Is In the proc
ess of being removed; it remains to be
seen whether it win receive all the at
tenticn which it deserves.
Short Selling.
Rumors are afioat to the effect that
the President feels very keenly the
necessity of determining whether the
facilities of the country's security and
commodity exchanges are not being used
to create illegitimate speculation and
intensity depreSsions 1t is believed that
some Of President Hoover's advisers are
in favor of approving legislation, which
would prevent short selling as such
during periods OF emergency.
Towards the end of last week, New
York bankers called upon the President
to take action In order to prevent de-
ffloralizatiof1 In the securities market!
Events within the past few days would
seem to indicate that nothing concrete
or effective has as yet been undertaken.
In this connection reference may be
made to letter by the president of the
New York Stock Exchange In which 1t
is pointed out that the role Of short
selling as cause of declining security
prices was usually exaggerated
Although, under normal circum-
stances, selling for short account has its
good points, in times like these short
selling has but one purpose, ana that is
to depress prices. In addition it tends
to destroy returning public confidence
Such matters, however, are ordinarily
regulated by the exchanges themselves,
thy will make whatever arrangements
they may find neressnrv in order to
assist the present situation.
Debt Reduction Urged.
Normal business conditions will not
prevail In the United States until there
is purchasing power in Europe, South
America and Asia, according to Albert
H. Wiggin on his return from Basel.
Reduction Of international debts and
reparations are regarded by Mr.. Virgin
as the first step necessary to return
to normal economic conditions through
cut the world.
Freight Rates.
Expectation of an early favorable de-
ciSion by the Interstate Commerce Com
mission in regard to the increase in
rates requested by the carriers is prob
ably the cause Of cetain degree of
flrmness in the railway shares as COM
pared with other divisions of the market.
Students of the technical side of securi-
ties markets are of the opinion that this
action on the part of railroad shares
may mark the turning point, because,
on previous occasions, bear markets have
almost invariably wound up when one
division failed to confirm the movements
of the others.
An announcement may be made as
the requested increase OF is per cent
is not likely to be granted in full, any
advance in rates should be a helpful
factor. Anticipating this development,
Impressive buying Is understood to be
going on In the so-called secondary
railroad bonds.
American q Foreign Power.
While the recession in the various
issues of American & Foreign Power is
due chiefly to the difflcult conditions |
obtaining abroad, careful analysis re-
veals that the decline has been over
done.
Operating revenue for the IL months
ending June 80, 1881, shows a decline
of less than per cent, as compared
with the preceding IL months. More |
over, the interest on the company's |
bonds we're covered more than five and |
one-quarter times, while the dividends |
on the two senior classes of preferred |
were covered about four times. Earn |
ings applicable to the second preferred, |
which Is entitled to 81 a share, the rate |
being cumulative, we're equivalent, to |
about one-fourth the current quota
ton.