Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-09-07
BEARS ON STOCKS
ARE IN MAJORITY
Professional Traders Adopt
Cautious Attitude In View
of Dividend Situation.
BY GEORGE r. HUGHES.

Special Dispatch TO The star.
NEW YORK, September with the
stock market enjoying q three-day holi-
day, the attitude Of the average pro-
fessional trader in stocks at the week
end was one Of undisguised bearishness.
At the same time, there was a spirit
Of caution about translating this bear
iShness into action in the way Of SELL
ing stocks. With every encouragement
to operations for the decline, there is
an unusual timidity among the fra
ternity.
AS Justification for their theoretical
position, all sorts Of reasons were ad-
vanced-the unsettlement in Europe,
fresh outbreaks in South America, con-
tinued declines in commodities and,
most important Of all, the lack of any
sign Of definite seasonal improvement
at home. Another barrier to an advance
in stock prices that looms large In the
mind Of the Spectator is the number
Of dividend reductions and omissions
that he believes are yet to come.
Dividend Situation.
This dividend situation was brought
home this week by the omission of the
disbursements on Lehigh Valley and on
j. l. Case common stock. In both cases
the action seems to have taken Wall
Street by surprise, although it should
have been prepared. Any casual analy-
sis OF the earnings outlook for either
Of these corporations ought to have led
to the conclusion that the dividends to
the common share holders were in dan
ger. Nevertheless the market broke
badly for both stocks, and by its action
made deep impression. 1t led to short
selling on q large scale in stocks which
represent similar lines Of activity.
SO far as the dividends to be acted on
next week are concerned nothing that
can happen over the holiday can change
the data on which the directors will act
They may be influenced by some turn
for the better in their respective in
dustries. but the income accounts are
made up. This Is the argument which
appeals to the bear faction when they
look to the future. This is the reason
why they showed so little inclination to
cover their commitments in Fridays
market. After the violent break OF
Thursday technical rebound was in
order, but 1t did not come. The best
that could be said was that the decline
had been stopped, but that is easily ex-
planned by the natural evening UP of
accounts before holiday.
What can be said on the other side?
Only that there are no weak long ac-
counts left in the stock market. If liqui-
dalton Is to come in any large amount,
1t must come from the outside and
not from the inside. After Thursdays
sharp decline there were practically no
margin calls. Secondly. the market
shows that when a stock has good
story that the company rep
resented has been able either to hold
its own during the depression or to in
crease earnings ever so slightly-that
stock has been able TO resist the general
trend. That was not so in earlier stages
Of the bear market.
IndustriaIs Favored.
As to the various groups Of stocks, 1t
is the industrials which are regarded
with the greatest favor and the rails,
which have the fewest friends. The
utilities formerly had more adherents
than either of the other two, but APP
prehension rs to political hostility Is
fairly general. Besides the utilities SELL
ing as they do on so liberal an apprais-
al of earnings, do not look as well de-
dated as the industrials.
The real test, to the Wall Street
mind, although 1t may not be con-
elusive to the outsider, is the action
of the market itself A day or two
Of rising prices would produce q sudden
change Of speculative front. On this
account the action of the industrials
will be closely watched to see If they
confirm" the new low average made
this week by the rails. The theory
Is that II the bear market Is TO enter
another stage Of the decline the indus
taials must make their new low. To
date they are still we'll above the mini
mum prices of early June
Copyright. 1o3l)