Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-08-31
BY F. H. RICHARDSON.

Special Dispatch to The Star.
NEW YORK, August 3l.-Persistent
liquidation, at no time approaching
heavy volume, but drastic in effect be-
cause of the lack Of demand for any
thing but the most conservative of
bonds, characterized the past month in
the investment market. Measured by
the averages, the bond market was
driven to its lowest point since the
latter days of the 1920-192l depression;
but this is hardly a fair comparison.
because the dip in railroad securities
accounted for fully 30 per cent of the
depreciation in domestic bonds.
In the foreign department one crisis
after another brought liquidation into
virtually every group of dollar bonds
and the month ended with the list at
an average of approximately 10 for all
foreign bonds This indicated a mar
ket value of only $4,000, 600 900 for the
Sc, 500, 600, 900 par value Of dollar bonds
outstanding.
The British crisis came as a body
blow to a market that had not fully
recovered from the effect of the drastic
Germany's near collapse. 1t conceded
with extreme softness in South Amer
lean bonds as Chile declared complete
its partial moratorium, as Argentina
wavered in her determination TO repay
in gold the $4,000, 900 credit due Oc-
tober and doubts were cast on the
immediate outlook for service on the
debts of Uruguay, Colombia and Brazil.
Rail Bond Decline.
Bv far the mcst serious and signifi-
cant development of the month was the
rapid melting of market values Of do
nestle railroad securities. About $780,
600 900 was written off the values OF
carrier mortgages in August and the
market value of all rail bonds listed on
the New York Stock Exchange shrank
to a point nearly $4,000. 600, 900 below
the $40. ,045,56 value reached early
in 1928.
The liquidation which q month ago
was heaviest in the highly speculative
carrier bonds, such as st. Paul ADJUST
ments. Missouri-Pacific general As. In
ternational Great Northern adjustments
and the like, broadened near the month
end to include the better second-grade
issues. like Erie SIS. Baltimore & OHIO
41os of 1860, Southern Pacific 412s OF
1881 and the recently offered New York
Central 41as and Pennsylvania 4H4s.
Then the selling generated nervousness
among holders of high-grade railroad
bonds. and the market had q situation
unique since the start of the bear mar
ket in 1929. Railroad bonds. long re-
parded as the safest of investments,
such as Atchison general As, Great
Northern Is, Northern Pacific IS and
Chicago, Burlington & Quincy As. were
depressed 2 to points from their highs.
And this was at a time when public
utility issues of comparable quality were
still reaching new tops. :,
The heaviest liquidation OF railroad
securities came just after the closing
Of four important banks in Toledo, and
at that time the selling was attributable
to nervousness among other banks and
selling by investors needing cash as
result of the bank failures. The down.
turn gained impetus as the July re-
ports revealed no check in the slide OF
carrier earnings, and the operating IN
come of all class / roads for the first
half of 1881 was revealed as 81 per cent
under that OF the first half OF 1880.
One group of roads. for the year ending
July 3D. 1881. showed fixed charges
earned an average of ITO times, against
800 times in 1880, which was itself a
poor railroad year. 1t was only neces-
Sary to set this against the net income
of IS utilities that showed earnings of
$50 times fixed charges for the same
period, against 1852 the year before, to
gain some understanding of what the
market was d1Scountlng.
Rate Increase Demanded.
Some were counting on a quick and
favorable decision from the Interstate
Commerce Commission on the carriers
application for Is per cent horizontal
foreign rate increase. But as the hear
ings before the commission went on 1t
became more evident that the result
needs during the next two or three
months,
Silver-F'or those who have not al
ready covered remaining 1881 needs,
we advise such policy at present.
Steel--In the absence of indications
of price stability in most steel CLASH
fications, we see no reason for extern
sive forward buying at this time.
Steel-Scrap-In view of the weak
statistical position, we advise that only
immediate requirements be filled.
Sugar-We advise consumers to keep
comfortably covered on requirements
over the next few months.
Tin-Days of price weakness should
be utilized to cover remaining 1881 re-
quirements.
Turpentine-we advise the gradual
accumulation Of requirements up to the
next season on 1-cent breaks.
Wheat-Lack, of speculative support
viii tend to prevent sharp recovery
in prices until the termination of the
heavy marketing season. However,
consumers are now advised to gradu-
ally accumulate forward requirements
on 2-cent breaks -.
Wool-Only near-term requirements
should be covered at this time.
zinc-With a gradual improvement
in statistical position indicated, We be-
lieve coverage of requirements through
the first quarter Of 1882 IS Justified.