Evening star., 1932-08-09
A Speculative Boom.

The present state Of the stock mar
ket is something to cause encourage
ment to those who believe that the
long-awaited corner has been reached
and turned and at the same time dis
may to those who fear that that point
has not been attained. A phenomenal
food of buying orders has occurred.
climaxing for the present movement
yesterday in market of nearly $780,
900 shares. From day to day since this
bull boom started the prevailing expec-
tation has been that reaction would
occur. but with a persistence that IN
the light Of the general economic condi-
tons passes understanding it continues
to send practically the entire list to
higher levels. Yet when analyzed, with
few exceptions, these advancing prices
are not justified by the present earn
ing power Of the corporations. Coirci-
dentally with the successive advances
in price quotations come reports of
monthly and quarterly operations
which show a continuing diminution in
volume of business and in net earn
lngs. Unless there Is an early reversal
In this tendency the stock market IS
almost certain to react, for, after ALL
the basis Of security prices is the earn
ing power Of the issuing organizations
In the light OF the business condi
tons at present this rapid advance in
the stock market is to be rated as
chiefly speculative, as perhaps the re-
suit Of manipulation. There Is always
danger in such a movement. 1t &c nee
essary only to look back to october
and November Of 1929 to perceive how
perilous is persistence in continued
stock advances beyond the point of in
trinsic values. When the market broke
then it had been carried up far beyond
The point justified by corporation earn
lngs. Stocks were greatly oyerpriced.
Even If commodity buying had con-
inued then a: the prevailing rate, the
security prices would not have been
justified from an investment view
point.
II the stock market moves in war
ranted prophecy Of business improve
ment-in the parlance Of the Street
In discount Of good news--the security
list today is perhaps justified. But not
at much higher points for the present.
Industry Is apparently reviving. Mills
that have been idle are being reopened
plants that have been running part
time are being speeded up to near
capacity production. Thousands OF
J hands are being re-engaged But the
volume Of unemployment still remains
great and 1t will take many weeks at
this present rate Of progress to Absorb
half of the now idle workers and re.
store them to the roll Of buyers to swell
the volume Of trade upon which
national prosperity depends.
In considering the condition in the
stock market 1t Is well to bear In mind
that the professional traders rely upon
an emotional public for the contin-
A0SAOAA "a N OIh AAASNCH1CAAbs 1C puDuS
the millions of small investors whose
ten, nifty and one hundred share orders
keep the tickers busy in the lively
market, now find their resources de-
pleted, their already owned securities
perhaps tied up as collateral for loans
made during the feverish buying days
Of 1921 they have not had their
loans called and their securities sold
is hardly in a position to participate in
this advance. Yet from some source
Is coming a great volume of buying
perhaps attracted by the bargain prices
which even with the recent advances
are to be found in the list, provided
dividends are resumed or maintained.