Evening star., 1932-04-10
Deferred Hopes of Revival in
Business Cause Dis
couraged Selling.
VALUES ARE SACRIFICED
IN URGENT LIQUIDATION
Kreuger and insult Situations and
Confusion Over Taxes Becloud
Outlook.
BY CHARLES F. SPEARE.

NEW YORK, April 9.-It is useless
to conceal the seriousness of conditions
reflected in the most demoralized week
in securities since last December. What
| they indicate is a loss of confidence on
| the part of investors and the deferred
hope of business men in a revival in
| industry.
Liquidation has been on an ascending
| scale as to volume, with an utter lack
of recognition of the sound values of
many common and preferred stocks and
bonds that have been thrown into the
market. Even after shrinkage from
the 1929 levels in all listed stocks of
between 80 and IS per cent, it has been
difficult to prevent holders from turn
ing them into cash or into Govern
nent obligations
Fortunately there is no banking
crisis as there was a few months ago
to aggravate the mood of dependency
so widespread. While the statements
of those institutions that made their
reports for the March quarter show a
substantial loss in deposits, when COM
pared to the end of December. there
is no indicated decrease in their surplus
item, and in some instances an increase
in their undivided profits. The Recon-
struction Corporation has been success
full in stabilizing the banking position
and in quieting the fears of depositors.
1t has not yet, however, accomplished
as much in the way Of improving senti-
ment toward railroad securities. 1t has
a fresh problem in furnishing aid to
those real estate companies that have
issued large amounts of guaranteed
mortgages.
Factors in UnSettlement.
The changed mood in Wall Street
and of the investing public in the past
month is due to three separate circum-
stances The first of these, and the
one that has been most responsible for
loss of confidence, was the suicide
of Ivar Kreuger and the disclosures
that have followed, involving a huge
mass of securities in which Americans
had invested and whose value today is
questionable. This has been the great
est single shock the market has re-
ceived during two and one-half years
Of declining prices.
Nearly equal to it, in its effect on
the public, has been the rapid dis
integration in the issues of the So
called insult group, as illustrated by a
decline in the stock of an investment
about $3.50 share to a few cents. To
this latter situation may be charged a
great deal of the loss of faith among
investors in the shares of other pub
lie utility holding companies, as exem-
plifed in the collapse of prices in near
ly all of the members of the Electric
Bond & Share group, in spite of the
known fact that the earnings on both
Its holding and operating company
stocks and bonds are ample to pay in
terest and dividends and that there are
no insurmountable financial problems
facing these managements. The fact
that the consumption of electric power
IS recedlng at more rapid pace than
few months ago is of much less con-
Germ to the holder of public utility
securities than that pyramided struc-
lures, based on strong operating prop
critics, but tapered off with combina-
tions of little merit, have begun to
topple.
Taxable Securities Sold.
The second stage for the turnabout
IN the markets is the departure by Con-
gress from a co-ordinated and non
partisan body, which met the emergency
IN the banking world last Winter and
quickly passed the Reconstruction
Finance Corporation and Glass -Steagall
pllIS. TO one that was diSorganized and
leaderless during the debate on the
sales tax. This alarmed the capitalistic
elements here and abroad. 1t suggested
Two things: One that the Government
puoget would not be balanced, and that,
therefore, the United States might &c
OH the gold basis; the other that, il
hlgh Surtaxes were to be imposed, the
peSt policy would be to liquidate taxable
securities and reinvest in Federal OBJ
HgatlonS or those of municipalities that
are taX-eXempt. This has been done to
a considerable extent.
Ihe latest phase of alarm over the
intentions OF Congress is that in which
wan Street professionally has been at
IacKeo with the instrument of a pro-
posed stock tax. The Street has beaten
lts breast violently and spread the
alarm among its constituency. Figures
nave oeen presented this week to show
gTaphcally how many more times than
Cne total tax to be raised to cover the
aeIclt is the loss in the value of securi-
Cles since the stock tax was first pro-
poseo. ms Will not impress many out
H,So Mto lie oIle RANKS OF the propagandistS
Trade Status Unsatisfactory.
Inc third influence in dispelling the
commence that had been generated by
Control OF the banking crisis, and the
IlitilildCiohS that there would be no
LalIroad recelverships this year is the
more negative one of the failure of
business to improve after the various
WeightS had been lifted from the finan-
clal structure and greater credit facil-
tCieS had been provided through the
GlaSs-Steagan bill. Without doubt.
much OF the Encouragement and loss
oI commence created by the Kreuger
ana tne insult situations and sby the
CONFUSION over taxes would be modified
were there indications of even a sea-
Utlai sUnr ;, revlvai IN industry. This, how
All of the heavy trsdas orc duI,
Railroad car loadings. which exnanded
slightly during the cold weather last
month, have again Iapsed back into
tne. contracting phase that has pre-
valleo Tor over two years. Even in
tne automobile industry there is a
slgnlncant postponement from week td
"eeK OF contracts for materials. One
! OF the largest of the national distribu-
! torS showed loss of 20 per cent in its
March turnover. While the commodity
lnoex varies little from month to
month, 1t does not encourage the con-
Sumer to buy. His timidity is increased
oy tne reluctance with which the bank
er. whose policy is still one of maxi
| tiluin iquIolty, considers his application
Because of the delay in business re-
covery, more corporations and institu-
lions are adopting the policy of con-
serving 1neT cash resources. This Is