Evening star. [volume] (Washington, D.C.) 1854-1972, 1932-01-18
TWO-YEAR DECLINE
HIT ALL OFFERINGS
No Class of Securities Has
Been Spared During
Long Pressure.
BY CHARLES F. SPEARE.

Special Dispatch to the Star
NEW YORK, January 18.-One OF
the conspicuous facts of the two-year
decline in securities is that it has not
spared any class of stocks or bonds.
The strongest have declined with the
weakest. Only in relative degree have
the aristocratS of the investment mar
ket come through it in better standing
than those issues whose inferior status
is reflected in the low ratings attached
to them.
This has left buyers of securities, and
especially institutional investors, in
confused state of mind. The issues
on which they have most depended in
the crisis deprecated nearly as much
as speculative common stocks. Bonds
that we're not legal for purchase by
savings banks or trustees in many in
stances enjoyed flrmer markets than
those that had been elevated by law to
a preferred rank. Frequently, the pre-
ferred stocks of a corporation were
found to be steadier in price than the
together due to the condition of mar
ket demand or supply.
Utility Preferred Stocks.
An illustration Of this anomaly may
be taken from the action of the high
grade public utility preferred stocks,
which went off last year an average of
about 20 points in comparison with
losses of from 20 to IS points in legal
railroad and public utility bonds. There
also are numerous cases of industrial
bonds that have declined less in the
past six months than United States
Government loans. The much berated
foreign issues have a representative in
French national and municipal dollar
obligations that have had a uniformly
steady market during the period of
greatest shrinkage in the top grade
contrast with the 10 to Is per cent
discount in Treasury obligations.
Out of its experience the public will
eventually be compelled to make its
choice Of investments as between stocks
and bonds. From 1924 to 1929 common
stocks held the center of the stage.
Comparatively few individuals pur-
chased bonds or preferred shares.
There has latterly been a more friendly
attitude on the part of the public to-
ward bonds. This is with a view to
their speculative prospects after selling
on such a deprecated basis rather than
with regard to them as a permanent
investment. The attitude of the aver
age buyer of securities today is that
bonds made sorry spectacle of them
selves last year and that they have
been found to be less vulnerable in a
depression than common stocks. There
fore the public is just as likely to con-
centrate on common stocks when busi-
ness conditions warrant entrance into
the market as tn on into hOnIc
Bank Position Puzzling,
The position of the banking institu-
lions not surrounded by restrictions as
to investment in legal bonds and per-
mitted to purchase both common and
preferred stocks is also one of beWilder-
ment. The Governor of an Eastern
State in his annual message to the
Legislature few days ago criticized
State banks and trust companies for
holding common and preferred stocks,
the implication being that If they had
limited their investment portfolios to
bonds their financial position would now
be superior to that existing. This fact
Is still to be proved. ANY one who has
made an analysis of the bond holdings
of the average interior bank knows that
its greatest losses and those that are
less likely to be recovered were in for
eign bonds and in the refunding, deben-
cure or collateral trust issues of the
newer public utility holding companies.
Few of their common stocks showed as
much percentage Of depreciation as did
the former classes of securities. AS for
their preferred stocks, which were main
ly those of stronger power and light
operating or holding corporations, they
have established record for relative
stability that should give them a future
status alongside many mortgage issues.
There are few arbitrary standards in
investment practice that can be set up
by banking authorities to prevent de-
probation on a substantial scale dur
ing a financial crisis. There are many
common stocks intrinsically of greater
value than bonds that day after day go
into the security accounts of private
investors and institutions. 1t is not
possible to buy either common stocks
or bonds as a group without diSCrimi-
nation between individual members of
the group. There should not be as
much stigma on a bank that legally
holds a common stock like American
Telephone & Telegraph, Atchison, To-
peka & Santa Fe, General Electric,
General Motors or United States Steel,
or such senior shares as Consolidated
Gas, Public Service Electric 81 Gas or
United Gas g. improvement, as for
carrying any one of dozen railroad or
public utility bonds that were brought
out under good sponsorship two or
three years ago and located primarily
in the portfolios of the regular buyers
Of new issues. The bad name which
common stocks always develop in times
ike the present could be cleared with
a little study Of what constitutes the
zeal elements of a sound investment
Copyright, 1920