Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-10-02
F|RMER BOND MART
WOULD AID STOCKS
Wall Street Believes Equities
Will Rise When Debentures
Are Stabilized.
spee,sl D,snateh 10 The Star.

Special Dispatch to The Star.
NEW YORK, october 2.-To the
question, When will the stock market
stop going DOWN." the most frequent
and logical answer given today in Wall
Street Is, mot until bonds are stabilized
in price"
This leads to the query, why are
holders of all classes of bonds, from
Governments and municipals down to
the poorest industrials and foreign dol
lar issues, selling them at their current
deprecated prices?"
Until England went off the gold basis
and her action was followed by the
Scandinavian countries the timidity of
owners of bonds was primarily exhibited
in their attitude toward railroad obliga-
tons and to those of European and
South American governments, munich
palitieS and corporations,
In the beginning, railroad bonds came
into question as to market value because
or the extreme losses in the net oper-
ating income of the carriers and the
sequel of an increasing number of rail-
road dividends reduced or omitted. This
has led to the prospect, at the end of
this year. OF high proportion of rail-
road mortgages, now legal for the In
Vestments of savings banks and trustees
ir New York and other States, being
withdrawn from this list, due to their
inability to meet the strict requirements
OF the law governing legal investments,
The momentum of this selling in these
issues was so great that 1t affected the
position of holdings in the portfolios of
institutions and compelled them to- sac
riflce a portion of such holdings In
market where bids were few and far be-
tween.
The default on SedSh American bonds
and suspension of sinking fund pay
ments made an obvious reason for the
liquidation OF the dollar issues of those
countries which, in the majority OF
cases, were bought without much dis
elimination and because they gave
large yields rather than from the stand
| point OF rating that in many cases
| dld not entltle them to appear IN the
| portfolio of a bank. The difficulties of
| Germany and OF Austria had already
produced heavy depreciation in the
bonds OF all Central American countries
prior to the gold suspension act by Great
| Britain 10 days ago.
The most violent declines in several
| groups OF bonds are those that have fol-
lowed the new status OF countries that
have gone off the gold basis. This has
not only affected the issues of govern
ments that formerly were on the gold
! standard, but it has injected a new
element OF unreasoning fear on the part
OF investors in the United States in
American securities payable in dollars.
1t has given rise to the question whether.
under the existing confusion and change
OF policy toward the gold standard, fixed
Understanding securities have the same
status in the investment world as they
had prior to the 10Th of September
This state of mind probably repre-
sents the low point in the fit of de-
spondency to which the American invest
or has descended from the summit of
| his groteSque optimism two years ago
But 1T has to be reckoned with, for 1t
has already been echoed in the unstable
markets this week in United States Gov
eminent bonds, for which there have
| been painfully small markets at times.
as well as in those Of the highest grade
of municipal issues When the Ameri-
can investor and institution begins to
trade out of Government bonds and into
common stocks it is a good bet that the
end Of the market depression is ap-
preaching.
More logical, but still unsupported by