Evening star., 1932-06-05
ADVANCE |NST0CK
LIST LAID TO BANK
|. BOND BUY|NGPOOL
Stabilized Security Prices
Are Expected to Restore
Public Confidence.
PROGRESS IN BALANCING
OF BUDGET AIDS MARKET
Foreigners Resume Purchases on
New York Exchange as Fiscal
Measure Is Speeded.
BY CHARLES F. SPEARE.

BY CHARLES F. SPEARE.
Special Dispatch to The Star.
NEW YORK, June 4-The markets
for securities early this week became
so demoralized that it was necessary to
give them the support that had SO
long been withheld.
Nearly three months of continuous
decline had undermined the strongest
accounts and started grave alarms
among those who had gone through
previous reactions with courage and
with ample resources. The market
value of 70 representative stocks from
the three major groups had deprecated
over 80 per cent, or in greater ratio
than during the spectacular collapse in
the Autumn of 1929. Even more ON
nous was the situation in listed and
unlisted bonds, whose markets we're
rapidly disintegrating, as were those
for preferred stocks. From the OPEN
ing Of the market after the holiday to
the turn in sentiment Thursday noon,
conditions ruled that were as critical
as any that have faced Wall Street
during the depression.
Whether by inference, as on Thurs
day, or by definite announcement, as
on Friday, the effect on the market of
arrangements to give banking support
to bonds had most salutary effect.
Both stocks and bonds recovered sharp
ly. They did not, however, weaken
their technical position by these vio-
lent uprusheS in prices that have char
acterized most of the sudden changes
in sentiment after each extended liqui-
dating period. This demonstration
proves the responsiveness of the pub
lie to any evidence of banking leader
ship as it also argues for cooperation
between those who control the money
supplies of the country in the interest
Of stabilizing values that now mean
most to at least rs per cent of the
banking institutions of the country.
Foreign Capital Reassured.
The two influences that threw mar
kets into a condition approaching col
lapse were the failure of the Senate to
act on the manufacturers sales tax and
the sudden fall Of the Bruening gov
ernment in Germany. The subsequent
improvement may be credited In part
to the changed mood of the conferees
in Congress on the tax bill, with indica-
tlons that this may shortly be passed
In spite of the high income tax sched-
ules and the disturbing 3 per cent tax
on the products of power and light
companies, Wall Street has shown a
disposition to approve the bill, believ-
ing that the main consideration at the
moment is to confirm to American busi-
ness men, as well as foreign bankers
the fact that the budget will be bal
anced and the credit of the United
States sustained.
1t is significant that when this as
surance appeared, probable liquidation
for foreign account Immediately ceased
and buying of American securities
abroad began. At the same time, rates
of exchange turned in favor of the dol
lar. Only about half as much gold has
been engaged for export this week as
IN the week previous. Nearly $685.
CCO,O00 Of the yellow metal has been
country across the Atlantic since the
middle of April
Bargain Hunters" Increase.
From the standpoint Of prices, there
mas been no more opportune time for
giving support to the market than the
present. The risks of purchases seem
to be comparatively small; the posi-
bilities for profit on what is now avail
able for the buyer of either bonds or
stocks are considerable. That this fact
is appreciated IS evidenced in the in
crease this week in the number of
bargain hunters" in Wall Street. They
were conspicuously absent when the
market touched its previous low level
in February.
Sound judgment of security values
and an acquaintance with financial his
tory does not permit one to subscribe
to the opinion that there is to be a
continued dissolution Of corporation re-
sources or that the securities of well
managed, low-mortgaged American COM
panies with high ratios of liquid assets
to liabilities will remain on a S to rs
cents to dollar basis
Prices this week for many securities
reached a level where it was far wiser
for those who own them outright to
assert their faith in an ultimate cor
recticn of the difficulties that confront
the world than to gamble on a world
collapse and transfer the proceeds into
those other forms of wealth that would
have no preferred position If the COL
lapse came
Trade at Low Level.
It was hardly to be expected that
industry or commodities could Isolate
themselves from the effect of that state
of mind reflected in the early prices of
securities this week Business, therefore,
has been more stagnant than ever 1t
is now at the lowest ebb of the depres-
SIGN period. Carloadings continue to
decrease. There has been a further
drop In the production Of iron and steel
and electric power, and new low prices
have been recorded in cotton, rubber,
scrap iron, some Of the provisions and
grain and In live stock.
All Of these influences have obviously
aggravated the credit position of cor
porations that have had small reserves
and led to an increase this month in
the number of important receiverships,
such as those In the Consolidation Coal
Co. and the Mobile & Ohio Railroad.
This has also meant a readjustment
in the dividend policies of many COM
panies and institutions that were for
years famous for their high earning
power and their ability to set up large
annual reserves. These facts have been
taken into account in the market prices
of their securities and frequently over
discounted.
Attitude Of Bankers.
Confidence must be restored through
the medium of the security market. This
is the one great visible day-to-day ex-
preston of the state Of mind Of large
proportion Of the public. The necessity
therefore, of lending legitimate aid te
it as one of the processes of recupera-
ton in business Is apparent. The effect
of a stabilized market on those who
S-s- 81 To-. sk- rkak tuat an1x
the bankers, is also important, for there
Is little doubt that their attitude towaro
the average commercial borrower has
been influenced primarily by the dis
turbing conditions In Wall Street.
One of the prominent trade agencies