Evening star. [volume] (Washington, D.C.) 1854-1972, 1932-03-20
Difficulties in Four Situations
Cause Bearish Speculative
Outlook.
DIVIDEND CUTS PRESAGE
SLOW TRADE RECOVERY
Effects of Constructive Govern.
ment Action Not Reflected
in Stock Prices.
BY CHARLES F. SPEARE.

NEW YORK, March 19.-There are
four market or banking situations that
at present influence the speculative
mood of Wall Street. These relate to
the affairs of the Middle West Utilities
and Electric Bond & Share groups, the
Missouri Pacific Railroad and the
Kreuger a. Toll Co, whose involved
financial structure and necessary read
justment have been emphasized by the
tragic death of its promoter, Ivar
Kreuger.
Until a clearer idea is available of
what may or can be done to strengthen
the credit of these corporations it will
be impossible to obtain for the market
the support to which it is entitled from
the constructive measures taken since
the early part of February.
The shifting of attention from the
banking field to the speculative areas
has not been favorable to securities.
Stocks have been under greater pressure
lately than at any time since they be-
gan to advance after having touched a
triple bottom" Bonds have lost nearly
one-third of the total recovery from the
December low. Railroad shares .on
Thursday appropriated the bottom
level Of the depression. Moderate liqui-
dalton has reappeared after its absence
as a market factor for over month.
There has been discrimination against
favorable news and pending develop
ments and the same emphasis on bear
ish incidents or facts that has appeared
each time the market has enjoyed a
moderate period of advancing prices.
Financial Fabric Strengthened.
The situation sums up this way: The
crisis in the banking world has been
controlled through the agencies of the
National Credit Corporation and the
Reconstruction Finance Corporation
There are no more bank failures of
consequence. One seldom hears rumors
of banking trouble Currency circula-
ton is off again this week, having de-
creased 100000, 900 from its high point
Gold is coming in instead of going out
Bank deposits have begun to rise in the
Central reserve cities and among in
terror institutions Abroad another re-
duction in the Bank of England rate
of rediscount gives greater proof Of
soundness of the English credit posi-
ton, while the German election last
Sunday guarantees the maintenance of
a conservative government and one with
which France and Great Britain can
deal with respect at the June repara-
tons conferences.
The sore spot in the domestic corpo-
ration body, namely, the railroads, has
begun to heal, though slowly and in
spite of the nearneSS to infection from
one or two sources. The Railroad
Credit Corporation and the reconstruct
ton Finance Corporation are nursing
the weak members of this group and
expect to pull them through. There
fore, the railroad crisis, like the bank
ing crisis, appears to have ended. Both
were so severe that long period of
recuperation will be required to bring
about an approximation to normal
health.
We have been dealing for the past
three months with negative measures.
The entire effort at Washington and in
Wall Street has been to check the de-
cline in securities and to support the
credit of institutions and corporations.
The point has now been reached where
close watch is being made to discover
the presence of positive returns from
what has been done in the emergency.
Failure to find such evidence accounts
for much of the peSsimism reflected
this week in declining markets for both
stocks and bonds.
Outlook for Business.
There have even been some indica-
lions that business was going backward
instead of forward. The decline in
steel production of points to level
only IS per cent of capacity illustrates
conditions among the heavy industries
The railroads. with traffic still decreaS
ing: the automobile companies, uncer-
tain of the Ford program and OF their
consumer markets, and the building
construction interests are placing few
orders for materials. Retail and whole
sale trade are slow. With all other dis
couragements they have had to meet
the influence of unreasonable weather.
The first quarter OF the year. during
which there is usually an indication of
how business is to shape up IN the
Snrine is about over and gives little
encouragement for early Improvement.
In fact the trade outlook for the next
sin or nine months is unpromising. It
is too much to expect an immediate
revival after a crisis of such severity as
that which eliminated little over
month ago.
THE attitude now being taken by cor
y,orations and by banks toward their
dividends also suggests slow period OF
recovery and one during which the con-
sentative method is to maintain
strong cash position. Dividends have
been passed this week on Baltimore &
Ohio Railroad preferred, Pennroad Cor
poration, American Type Founders pre-
ferred, Glen Alden Coal, New England
public Service common, CRANKY Mining
and International Match common and
preferred. They have been reduced on
a large number of bank stocks in va
rious parts of the country as we'll as on
the shares of such prominent concerns
as r. H. Macy & Co, Otis Elevator,
Howe Sound, McAndrews & Forbes,
United Verde Mining and Marlin Rock
well.
Effect of Income Cuts.
The first two years of the depression
was a period of which investors were
more concerned over the depreciation in
their securities than in the income from
them. One may have entire confidence
in the belief that the market has been
thoroughly liquidated and. on the
average, may not go below its previous
low level. and at the same time realize
that there is likely to be steady de-
cline in the income production on both
common and preferred stocks during
the rest of this year. In many cases
issues still paying dividends, but likely
to pass them, are quoted at market
prices that discount the most that may
happen. It has been found that depre-
citation in securities causes greater I'M
settlement among investors than divi-
dend reductions, although it is obvious
that the steady whiting down of in
a,,,,ar opaonO tho thousands urh0 ora