Evening star., 1932-08-28
SECURITY MARKETS
HIT NEW HIGHS IN
SWEEPING ADVANCE
Spectators Have Become
More Active as Upward
Trend Is Continued.
INDUSTRY ENCOURAGED
BY RAPID PRICE GAINS
further Advances in Wheat and
Other Commodities Would Stim-
ulate Nations Business.
BY CHARLES F. SPEARE.

Special Dispatch to The Star.
NEW YORK, August 27.-When Sc
curity markets are swept by emotions
excited by the past masters OF Wal
Street manipulation, it behooves thos,
who may be eager to Jump into tn,
middle of the speculative whirlpool t.
think twice before taking the leap
This IS the lesson to be drawn from
this weeks excited movements in stock
and bonds, both of which penetrated
their previous high average price level
under circumstances that were reminis
cent of 1929
One heard it said, as then, that th'
less one knew about a particular is
sue the more money one would b.
likely to make in (which contrast.
with the philosophy OF investment ap'
piled most successfully a few month.
ago when investors who had studied
situations and could distinguish actua
from fictitious values bought these Sc
curities which panic-stricken holder!
were then selling.
SpcCuldtOTS are CONFUSED.
Temporarily, at least, the market ap,
pears to have gone from the hand:
of investors into those of SPECTATORS
While it is true that large percentage
of daily transactions is on cash basis
at the absence of brokers loans expan-
sion indicates, big and little operators
arc jumping from one stock to another
and frequently have but a vague idea
of the merits or the weakness CT what
they last bought. There Is the curious
spectacle of a Transformation within
80 days in large body of market fol-
lowers who appear TO have as little
judgment in their present speculative
operations as they exhibited In theil
willingness to go short Of stocks when
it was clear to any normal observer
that the entire credit and investment
outlook had permanently changed.
In the past two weeks we have gone
from the later stages of market accu-
mutation to one of the early phases oi
market distribution. The immediate
outlook depends on how far the public
feels 1t may proceed in discountine
what it believes to be an approaching
consideration of how far an expansion
in trade during the Autumn and next
Winter has already been discounted ir
the prices of securities. Since the
first week in July the average of SC
stocks has increased 100 per cent. This
has brought prices up from the ex.
tremity OF the depression period tc
levels which represent what may be
considered approximate values under
existing conditions of earnings and oi
dividends and the fulfllment of in
terest obligations.
Ten representative stocks are now
selling at the same average price as al
their lows last December Seven oi
the ten have reduced or omitted theil
dividends meanwhile. The earnings or
all have been going down while prices
have been going up. 1t is not sur
prising that issues selling at SIS share
or under In July have since appreciated
several hundred per cent.
Situation in Industry.
Full credit may be given to all oi
the actual and sentimental changes that
have taken place both in the domestic
and foreign situations since the end oi
June, and to which securities have
generously responded. At the same
time the fact cannot be overlooked
that the effects of def1ation and of dis
integration in the industrial world in
the past eight months make such re-
covery in business as would be reflected
on the credit side of corporation ac-
counts impossible for some time to
como.
Dividends are still being reduced OF
passed; one important reccivership was
announced this week and another was
threatened; the July reports of rail-
road earnings were for the most part
as unsatisfactory as they have been
at any time; iron and steel produc-
ton dropped off again to the lowest
percentage of the year, and the latest
figures on retail trade indicate a heavy
decline from year ago at the end OF
month of rapidly rising security
prices. The change in the average in
deX of commodities has been disap-
pointingly small. On the ether hand
the expansion in limited number OF
industries, with textiles the mcss con-
spicuous example, has proceeded
further. with some of the mills now
on a fulltime basis.
1t has long been insisted that Until
the market for securities strengthened
there could be no change in the busi-
ness outlook. Two months of rapidly
rising prices for stocks and bonds have
undoubtedly reversed the psychology OF
the merchant and manufacturer. He is
no longer looking exclusively at the
dark side OF the picture, but Is in q
mood where he is willing to be con-
virced that conditions have improved
He is not yet ready 10 go ahead and
stock up with commodities or mer-
chandise. Eventually he may be struck
&C I1Tr ha fon L.
needs IN his business is scarce ano
difficult 70 buy as was the investor WHO
had sold cat his securities. At The
moment, however, he is a passive OBJ
server Of what is going on in Wal
Street and in the markets for such
speculative commodities as cotton anC
wheat.
Eyes on Grain Market.
The relation of the price Of wheat ir
the next two months, not only to securi.
ties but to the trend of business, is g
vital one. For this reason close watch
Is likely to be given to the movement.
in the grain market, where this weeE
there have been indications of broad.
ening of speculation and of an effort tt
force this staple into higher ground
Wheat has advanced comparatively
little from its low price of the year. Il
is still about 10 cents bushel below it.
high figure. If it advanced Is cents g
bushel 1t would be at about the average
of the high and low prices of 1881. Suct
a gain is not improbable, even though
the so-called statistical position Of
wheat is less favorable than year ago
The economic benefits and the pos
sible political consequences of a revalu
alton Of wheat would be important IL
encouraging the second step forvart
along the path Of business recovery ant
would assist In justifying any furthel
advance in securities from their presen
level.
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