Evening star., 1932-05-08

and paying interest of AZ or 434 per
cent, and in the case of one Missouri
Pacific bond of So per cent, would
certainly be no worse of, so far as the
permanent value of his investment Is
concerned. If ne took the income bond
OF a properly capitalized company. II
he accepted reduction in the interest
rate of as much as so per cent he
would still have a bond that had more
than discounted In its price such a
cut. In all probability there would be
an appreciation in his capital even
should he agree to a moratorium on
interest for period of years. What
ever concession he might make would
not be prejudicial to him in relation
to the present current values for his
bonds.
1t is contended that such methods Of
meeting the emergency as are proposed
should be Of temporary nature end that
1t is not fair TO the bondholder to COM
pei him to make sacrifices now hat
would not be required during 4 period
of what may be regarded as normal
railroad revenues The answer to this
Is that the railroad capital structure
generally Is based on the expectancy of
permanent revenues similar to those
Of. sey, the year 1928 Many maintain
that earnings of 1929 will return. This
is not likely. The railroads have lost
permanently great deal of their
passenger trafflc and quite a large
amount Of high revenue freight. They
cannot support the full debt structure
they were able to carry during recent
years. This is also one Of the real
tiles of tho situation that should be
understood and accepted
General Market Unsettled.
The general market situation this
week has been Influenced net onlv by
the serious declines in railroad securi-
ties. but by the more unsettling devel-
opments in Washington. These have
not only disturbed domestic bankers
and investors, but have had Ill effects
abroad and led to the renewal of heavy
shipments of gold. The delay in bring
the tax bill to head. evidence of the
power In Congress of minorities seek
ing to protect various favored groups of
constituents and the injection of addi-
tional banking measures of an inflation-
ary kind into the existing confused
state Of affairs. finally brought an ap-
peal from President Hoover for more
conservative action by Congress and a
recognition by it of the damage that
has been done to confidence bv its pro-
gram. This stimulated a rally in the
securities markets on Friday.
Account must also be taken of the
effect of further dividend reductions
and omissions and reports by corpora
tions for the March quarter and for
the month of April that emphasize the
stagnant condition of trade new
low level for securities has been accom-
panied by further fall in wholesale
prices to the lowest level since May,
1890, reaction that Is most discour-
aging in view Of the apparent stabiliza-
ton of such prices for period of about
six months.
When bonds that, until the past year,
have been earning their full interest
charges sell at 10 cents on the dollar
and common stocks Of some of the lead
ing American corporations are offered
at from $40 to SIS a share. it is not a
time to consider the sacrifice of such
securities; rather an opportunity for
accumulating them We have arrived
at a point in the security markets
where current quotations are only justi-
fed in the event of a general credit and
cc"!al collapse in this country.
TIE best Judgment is that we have
reached that phase of a depression
when conditions become SO bad that
they compel action to improve them
and develop an effective political and
industrial leadership such as inevitably
arises in all great national emergencies.
~(CcpyrfRht. 1922 !