Evening star. [volume] (Washington, D.C.) 1854-1972, 1932-05-29
Prices Give No
Weight to Merit of Many
Issues.
REVIVAL OF SALES TAX
PLAN is HOPEFUL SIGN
Wall Street Considers Blanket
Levy as Best Way of Bal
ancing Budget.
BY GEORGE T. HUGHES.

Special Dispatch to The Star
NEW YORK. May 28.-If one were
to base his conclusions as to the finan-
cial situation this week end on the price
level for securities, he would certainly
be of the opinion that Wall Street was
in the depths Of despair. But he would
be mistaken.
Both the stock and the bond markets
are at new lows for the depression.
The decline in values this week-mean-
ing by values market prices-has
amounted to collapse. That is strong
word, but 1t is justified, particularly
with regard to fixed interest rate obliga-
tons and to senior classes Of capital
stock They have sold at prices which
gave no weight to intrinsic merit, pres
ent or prospective. All this comes after
two and one-half years of falling quota
tons and on the ninth wave of liquida-
ton.
Certainly on the basis Of stock and
bond tables there is no excuse for any
more cheerful feeling. and yet it exists.
in moderate degree. Of course. but it is
there. Now one explanation is that
those who make it their business to
trade in securities year in and year
out are thoroughly liquidated. They
have taken enormous losses, but they
have taken them.
Sources Of Selling.
The selling this week, as for some
time past, has not come from margin
is almost sure that it has not been the
result of speculative operations for the
decline, although that probably has fig
ured to a certain extent. In the main
it has been the closing out of collateral
fer bank loans which for one reason
or another the lender did not care to
continue and the borrower was unable
to replace elsewhere. It has been also
in less amount the result of selling by
holders frightened by the mere spectacle
of continuously declining prices
The market Is nearer a cash basis
than it has ever been since the brokers
loan statistics were available for publ
cation. The drop this week has been
only S2l 100000. but the total is now
under $500 100000, a negligible amount
to the total value OF listed
shares. There is not room for much
more liquidation here.
In the second place the street IS
becoming hardened to adversely. There
is saturation point beyond which no
more pessimism can be absorbed. Final
ly. for the first time in long while
the financial community is looking
toward Congress hopefully. 1t would
prefer sales tax as a solution to the
budget problem, and reports that there
was chance for such tax were re-
sponsible for Thursdays brief recovery
kn ctc bot h,if &c u-tl n
take any reasonable compromise pro-
viding it is reached quickly. What has
upset business, and so securities, more
than any other one thing is the un-
certainty about the tax program and
about unemployment relief.
Confusion in Industry.
The best illustration is the backing
and filling with regard to rubber First
the legislators were for an import ta:;
and then they shifted to the tax on
tires and tubes The rubber market was
upset and new lows for that hard
pressed commodity were established.
With the scene shifting so rapidly with
regard to tax proposals on various
other materials and activities, 1t is not
to be expected that industry can go
ahead nor that the security concerned
can even stabilize themselves at cur
rent low prices.
Now if this new-found hope-conf1-
dence is too strong word-that Con-
yress will work out an acceptable meas
ure proves unfounded. the effect VII!
be disastrous. The outcome is in the
hands of Washington.
The stock market has had to take
some hard blows during the week. Per-
reduction
in the General Electric dividend, an
nounced Friday afternoon. In view OF
the situation in the industry the cut
was not a surprise, but General Elec-
trio Is so strong corporation and It's
stock has been so long leader mar
ketwise that the decision Of the d.
rectors was something of shock. An
other cause of disquiet has been the
acute weakness in what were once
known as "depression-proof" stocks, OF
which tobaccos are the best illustra-
lions. In fact, it seemed as if the
forces back of the market, II one may
personify them, took malicious delight
in eliminating the notion that there
was any such thing as a depression
proof industry.
Trade Stimulus Lacking.
Most of the accepted business indexes
have emphasized the absence of recov-
cry. Car loadings continue their decline
and so does electric power output. Pub
lie utilities and rails have been leaders
in the downward movement, although
stocks have had relatively better sup
port than the corresponding bonds.
There has been much discussion about
the organizing of bond pool to sup
port that market, presumably under the
auspices of the committee Of bankers
and industrialists trying to find uses for
The credit that the Federal Reserve has
been so literally supplying. Such
pool might do much good, but the ad-
of organizing it is not unani-
indorsed
The trouble with the bond market
has been not the heavy supply offered
for sale, but the absence of bids, and
that in turn has been due to the stand
pat attitude Of the financial institutions
which are normally the largest buyers.
They are not buying now neither are
they selling. Probably when they be-
lieve the time ripe they will enter the
market. but they have not moved yet.
The relatively better showing made by
stocks has been due partly to the tech
meal position of that market and partly
to the fact that the general public Is
stock minded, even after all its losses
Aid for Home Owner.
Turning from the markets to de-
outside, 1t is doubtful
whether the public realizes the impor-
lance of the move to extend aid to
owner occupied homes under mortgages
that must be reflnanced. For the pres
emit, the plan is confined to New York
State, which has the machinery to op-
crate it, but in one form or another it
is likely II spread and its benefits go
right down to the forgotten man." to
borrow a phrase from statesman in
the public eye.
Another heartening thing was a COM
prehensive and reassuring statement as
to the way in which the life insurance
companies have demonstrated their in