Evening star., 1932-08-07
Recovery Averages so Per
Cent Above Low Level of
One Month Ago.
WHOLE OUTLOOK SEEN
AS GREATLY IMPROVED
Writer Declares Recent Develop
ments Indicate Permanent Turn
in General Conditions.
BY CHARLES F. SPEARE.
Special Dispatch to the Star.

NEW YORK, August 6.-There is less
skepticism today over the genuineness
Of the recovery in securities, but much
inquiry as to the probable length and
extent of it. The recovery has now con-
tinued for month, during which there
has been an average gain in stocks of
so per cent from their low level of
July 8.
No other rally since 1929 has been
equivalent to it on a percentage basis.
It exceeds that which took place be-
tween November of the first panic year
and the following April. 1t has been
easier to promote it and to carry 1t
through than on other occasions be-
cause of the low average from which it
started.
The same Is true of bonds. which
have been moving upward over a longer
period than stocks but. except for in
dividual issues, have not experienced
the same degree of percentage gain as
a whole as that in equities"
Signs of New Confidence.
Again it may be stated thu the
| change in market conditions was effect
ed, first. from the strongest technical
position it had enjoyed since the de-
cline set in, supplemented by series OF
improved fundamental conditions affect
ing the political and economic outlook
in the United States and in Europe
Undoubtedly these have been more
than discounted in the rise of the past
month. However, the appreciation in
securities has developed a new influence
and one more powerful than the others.
This Is the creation of public confidence
NJ American credit and in American
! institutions
! Confidence was at low ebb through
out the first half Of this year. Lack of
1t was steadily leading to diSintegration
in the morale Of the country Now con-
| fldence is steadily growing. The effects
| OF it are apparent not only in Wall
Street. but in the larger industrial CEN
tiers and throughout the farming COM
| munitieS.
| Just as it was difficult to forecast the
ultimate depths to which the market
might decline when hope was being
abandoned in every quarter. 1t Is equally
difficult to appraise the effect on securi-
| ties Of the rebirth of an optimism that,
| for the first time in nearly three years,
! has substantial basis.
CneckS 10 Denat1On-
! In a degree securities are rejecting
| certain inf1ationary tendencies, at least
policies put in motion by the Govern
ment and its agencies to counteract
| the effects Of def1ation. This program
! OF many parts is now coming to a
head. 1t is centered in the banking
| system Of the country. The first phase
| Of it was that of making money avail
toI 70 i1ef i4,1f{
| distress. This relieved pressure on those
banks that were losing deposits and on
! those railroads whose unparalleled de-
| cline in gross and net earnings brought
| them to the verge of bankruptcy. The
| next step was to make credit abundant
and on easy terms to borrowers who
were timid about venturing into their
| different fields in period Of restricted
| demand for their products and while
| commodities were moving in the same
direction as securities.
Liberal opportunities are now avail
able to those who represent the pro-
, ducing branch Of the country's business
| affairs. II they are not willing to ac-
cept them, there is a certain amount
| of leverage being brought to bear on
| them to get busy and do their part in
| the work of reconstruction. This has
been indicated in the pressure being ex-
erted on railroad arrangements to re-
pair equipment, when equipment is al
ready Superabundant in order to in
crease employment. and on the normal
! buyers of commodities who will be fur
| nished with funds to take up different
classes of raw products that are rela-
| lively as much debated in price and as
good bargains from an investment
| standpoint as were stocks and bonds 80
| days ago.
Sixty Days for Test.
It has taken four months of patient
work to round out the mild inf1atlonary
| program of the Government, projected
| directly through loans from the Recon-
! struction Finance Corporation and in
directly through the creation of excess
reserves by means of the purchase OF
| 81. 900 900 900 of Treasury securities by
| the Federal Reserve Banks. This plan
was timed to reach its climax in Au-
| gust. 1t is on schedule. The next 60
| days will determine whether or not 1t
| is to be effective It's first results have
been satisfactory. 1t has checked de-
f1ation and been one Of the main lnf1u-
ences in building up more stable mar
ket for securities and for commodities.
There are those who feel that such
a program cannot permanently sue
ceed, as the situation compels num-
Der of radical changes in the entire
economic scheme. They argue that the
great mass of corporation debt with
which we have been struggling for sew
eral years is only being compromised
with: that errors of financing in the
past decade are not being corrected but
being prolonged; that most of the weak
| elements in the institutional and cor
poration world are being sustained tenn
porarily on Government credit Wnlcn
like all other credit, is not ineXhauStlble.
Permanent Turn Indicated.
1t Is the writer's opinion that we are
now witnessing the first phase OF
permanent turn in economic conditions.
This juStifieS the response to such a
change as has been given by markets
for securities. CIT is significant that
this week there has occurred the only
pronounced gain in real estate issues IN
two years. The road ahead, however,
is still rough one. Still to be solved
are many of the toughest problems OF
the times. such as unemployment. So
cial relief, foreign markets, war debts,
tariffs and the use to be made of those
excess facilities in industry, tranSporta =
tion and in the field of power produc-
ton that compel heavy carrying
charges.
The outlook for the investor is not
altogether clear. While there may be
additional appreciation in his securi-
ties, there Is bound to be further re-
duction in the income from them. II
Will take many months to translate the
spirit OF confidence into terms OF