Evening star., 1932-04-02
THE EVENING STAR WASHINGTON D. c. SATURDAY,
LAWS Do NOT FIX
VALUES OF STOCKS
Proposed Legislation Would
Not Alter Earning Power
of Corporations.
Special Dispatch to The Star.

NEW YORK, April 2.-The fact
should be made clear to investors that
the current peSSimiSm in Wall Street is
of quite a different character and arises
out of other causes than were RESPONSE
BILE for the state of mind of the finan-
cial district during the banking crisis
in the latter part of 1881 and in the
first six weeks of 1882
The country is now witnessing re-
action from the various measures by
the Government that seem to put a
crimp into the business of buying and
selling securities but which do not in
any way affect the fundamental sur
roundings of these securities. The Gov
ernment may tax stock exchange men,
bers to an extent that will be regarded
as prohibitive and perhaps curtail the
volume of daily transactions On the
other hand, this does not disturb the
earning capacity of securities dealt in
or in any way create conditions that
would influence corporation manage
ments to change their dividend policies.
Shrinkage in Business.
Professional Wall Street is bluer today
than it was two months ago. This may
be understood when 1t is realized that
the volume of the daily turnover has
been so small for weeks that Stock
Exchange houses have had to reduce
their organizations to a skeleton struc-
ture and live on their capital In March
the total sales we're only half as large
as those in the same month last year.
Stock Exchange seats have declined to
the lowest price in years Now comes a
tax proposal that will weigh heavily on
the trader and compel him to give up
\ n 10 0FNf tHct a M
ton of the commission he derives from
his 'in-and-out" operations.
1t is quite conceivable that the pes
sinism of the professional Wall Street
man, whose outlook has been prejudiced
by these conditions, may be communi-
Gated to the man who owns securities
outright. The latter, If he is in daily
or hourly touch with Wall Street, hears
nothing but direful predictions of what
is to come He is given little encourage
ment to hold those securities that, SC
far, he has not been compelled to sell
or has felt that by selling he could re-
purchase at lower prices. There is nc
place in the world where sentiment OF
psychology plays such part in de-
termining the actions of men as it does
in the surroundings of the market place
And when those whose business it is to
deal in securities feel that they are be-
ing robbed Of their birthright by the
Government they let it be known to all
who will listen. 1t Is quite necessary
therefore, to the investor just now to
separate the wheat from the chaff In
the daily gossip, use his head and keep
his balance.
From another point of view the bear
ishneSs of Wall Street is traceable to
the reaction against the Glass bill. Here
again it is the possibility Of crippling
of the present machinery of both ma
tional and State banks as we'll as private
bankers, if the radical provisions Of the
Glass measure should be adopted, that
has given expression to Wall Street
sentiment of an extremely diScouraging
character. What bankers say, and more
how they feel, has an influence on q
large mass of security holders. They
believe the Glass bill Is revolutionary
and destructive in character; that It's
enactment in the present form would be
a calamity.
Securities Value Unaffected.
However. it is for the investor to bear
in mind that once more the values OF
securities intrinsically would not be
affected If national banks we're COM
10 ulSpOSe VI lIlcH dlllld1CS, VI
certain shiftings of securities be neces-
sary in order to conform to the banking
principles set up in the Glass bill. This
bill might compel certain types of bank
ing to be abandoned. 1t would not,
however mean any less earnings on the
stocks of manufacturing companies or
those of railroads or on the shares OF
power and light companies. The banker
somewhat like the professional trader
in stocks, sees only a general calamity
growing out of any dispossession by the
Government of what he has long re-
garded as his proper business per-
quisites.
All of this does not overlook the ac-
tual conditions in the business and
credit situation that are unfavorable
and which, separately and in the ag-
gregate, are now inducing a certain
amount of liquidation. The point to
be stressed today is that for technical
or professional reasons the outlook for
securities is being made to look worse
than 1t is and that, even If what is
feared by bankers or brokers should
come to pass in maximum degree, this
could not have other than a technical
influence on securities, perhaps delaying
tn recovery in them, but not undermtn-
ing them or creating handicaps which
would be reflected in loss Of revenues
for them or a pairing down Of dividends
or of interest
(Copyright, 1922