Evening star., 1932-10-14
INVESTING PUBLIC
IS MORE CAUTIOUS
Bulls Have Failed to Hold
Support on Rising
Market.
BY CHARLES F. SPEARE.


Special Dispatch to The Star.
NEW YORK, october 14.-When the
markets for securities opened this week
there had been 10-point average de-
cline since the 1st Of october. Th1l
! was the largest loss that had occurred
since May. The average decline from
the high point in September in stocks
had amounted to 48 per cent and that
in bonds to 20 per cent.
1t has not been unusual in the past
when markets have been affected by
about the same general circumstances
as they were this year, for an initial
rally of good proportions to be followed
by a secondary reaction which erased
half Of the previous gain. In some years
the decline has been as high as 10 per
cent of the recovery. Consequently
what has recently been happening Iii
the stock market is in line with prec-
edent. For this reason it is not looked
upon as extraordinary or an indication
that securities will revert to the low
levels of last July.
The much smaller average decline In
bonds than in stocks is a point In favor
Of the latter. II the junior railroad
issues and some Of the third-grade
public utilities and industrials were
separated from the list of high-grade
mortgage issues, it would be found tnai
a large part of the decline had occurred
where speculative rather than invest
ment conditions have been the main
factor governing prices. High-grade
railroad and public utility bonds have
been able to maintain their markets
in contrast with the relative heaviness
of stocks in the upper rating. This Is
the opposite of the trend last Spring,
when bonds of the gilt edge character
were nearly as difficult to sell as those
in the lower ratings. Then the invest
ing public had little confidence IN any
type of securities and showed little dis
elimination between those that we're
good and those of an inferior quality.
It is an accepted fact that prices Tor
speculative securities were marked up
too rapidly last Summer and that, IN
the end, they fell into the hands OF
groups Of spectators who became as
reckless on the bullish side OF tne
market as they had been when tney
were leaders of the bear movement. the
result was that they accumulated laIge
amounts of stocks with the expectation
that the public would take them OH
their hands at advancing prices. !ne
public proved to be shrewder and a
better Judge of values in this instance
than the Wall Street operators.
In general average prices OF stocks now
correSnond to those in the middle OF
August. At that time there had oeen
comparatively little industrial recovery
Increasing market values were the re-
suit of a change in sentiment rather
than due to any growth in business. AS
a matter of fact the lowest business in
dex of the three-year period OF depres-
sion was reached when prices were reg
istering their best daily and weekly
gains. It was then that railroad earn
ings and car loadings were poorest, wnen
the low level of iron and steel produc-
ton was reported and electrical pro-
duction showed the largest decrease from
the year previous. All OF these 1actS
were ignored in the confident expecta-
ness situation had occurred and that
most of the banking troubles were be-
hind us.
Many concrete evidences OF improve
ment that can be translated into larger
net earnings and, therefore, are helpful
in maintaining the credit and the divi-
dends Of corporations, have taken place
since the middle of August. when stocks
were at levels approximating those OF
today. These run all through the field
of industry as well as in transportation
and in the areas taken up by public
utility activities. While none of them
is of pronounced character, they have
had the effect collectively Of incress-
ing the industrial momentum and In
actually adding to purchasing power
If securities were worth their average
prices Of mid-August they are Of even
greater value today, for the fundamen-
tails Of the situation have not changed
belief in the permanency of the recov-
cry Is as strong as ever, and, most i'm
portant of all. numerous corporation.
that last Summer were losing heavily art
now at least able to pay their expenses
(Copyright. 1897