Evening star., 1932-08-21
Returning Public Confidence
Shown by Purchases of
Stock for Cash.
COMMODITIES MARKET
HAS FIRMER TENDENCY
Formation of New Pool" Is Ex-
pected to Mark Strong Re-
covery in Prices.
BY CHARLES F. SPEARE.

BY CHARLES +. SPEARE.
Special Dispatch to The Star
NEW YORK, August 2o.-The per-
manent turn in the investment market
situation came early In June with the
beginning Of recovery in bonds, al
ed until a month later, when the liqui-
dation in stocks had obviously run its
course.
The change that has come over the
bond market finds its counterpart in
a six weeks rise in stocks. during which
the average of railroad shares has ad-
vanced $50 per cent and of industrials
about 10 per cent. The public is still
buying both classes of securities and
paying for them in cash. Again this
week the change in the brokers loan
account was negative one.
Confidence in Outlook.
Obviously this public has a strong
faith in the ultimate influence on trade
to come from the appreciation in the
market value of its securities and from
the manifold governmental and private
agencies that have been set up in the
past six months to supply credit in
obAAAdnAAIC W IllOoC WIlO may uSS IL 10
lubricate the rusty wheels of industry
1t Is confidence that spans the next
Few weeks or months, when distressing
statements OF earnings are inevitable
for the third quarter of the year from
the railroads, iron and steel and motor
companies, electrical concerns, public
utilities and those engaged in the field
OF national merchandising. In most
instances their exhibits of operating
profit will be as dismal as for the three
months ended June 80. Because of this
fact there are further dividend reduc-
tions and omissions in prospect
Already there are concrete signs that
the rise in securities and the difficulty
Of replacing stocks and bonds sold two
months ago are making an impression
dealers in cotton goods report a greater
volume of business than the entire six
months previous, with prices rising and
demand exceeding the increased produc-
tion of the mills. There Is activity in
the woolen industry, though not much
profit on current turnover. The silk
and shoe trades are expanding.
The public Is somewhat more respon-
sive to special scales, while the effect of
the great enhancement in security val
ues Is shown in more satisfactory COL
lections among local merchants Many
persons were reluctant to pay their bills
at the height of the crisis in the mar
ket and in the banking situation. Now
they are beginning to meet their obli-
cations. They are also withdrawing
currency that had been in hiding and
using 1t In the purchase of stocks and
Of bonds.
Imitation Process Continues.
The evidence is stronger week by
week that We are entering a period OF
initiation that may go on for some time
and, in the end be difficult to control
In this program the Federal Reserve
Board, the Bank of England the Lon
don Joint Stock Banks, the Bank of
France and four or five leading Paris
banking institutions are believed to be
working In harmony. All at one time or
another have openly,advocated degree
OF imitation that would counteract the
process OF disintegration and which,
unless quickly checked, would lead to
collapse from which recovery might
not be expected for five or ten years.
The United States and France both re-
FUSED to join Great Britain in a de-
valuation OF their currency as an ex-
pedlent toward adjusting the price level
ana Wlplng out large volume of 0ebt.
Inls lnfationary program is now un-
DER way. 1t must be recognized that
the success or failure of 1t in the next
two months will play a considerable
part in establishing the political trend
next autumn. Those who felt last win
yer tnat, because this was a presiden-
tlal year. business and markets might
Suffer the traditional disturbances of
such period now appreciate the fact
That, with the emphasis of both parties
on a better state of economic affairs.
tnere WILL be more gain than loss from
the usual explorations of a campaign.
Dividends Maintained.
The change in conditions has un-
queStlonably given more courage to
corporation managers in determining
their dividend policies. It was not so
easy for the directors of the United
States Steel Corporation on July 26 to
declare the regular quarterly payment
on their preferred stock, after a brief
period of improvement in sentiment,
as 1t was this week for the manage
ments OF the American Telephone &
Telegraph Co. and the Chesapeake &
Ohio Railway. following month and
half of upturn in prices and an en-
tire revision of public psychology. It
Is significant. too. that there have been
no mtimations lately that dividends
now being declared would be omitted
unless there Is an improvement in
business
The formation this week of the
$500, 100000 commodity pool Is ex-
pected to effect somewhat the same
change In the markets for primary sta
Piles as did the bond pool" in the
investment market In both instances
private capital, and not Government
funds, are being used. The direct pur-
pose of those Institutions supplying it
Is prof1t-making. The bond market
was in declining stage when the pool
began its operations. On the other
hand, there has been slow but steady
rise for the past six weeks in COM
modltles without any artificial stimu-
liant. With commodities still at a.
lower level than last Spring and the
same urge among merchants to replace
exhausted supplies as has been preva-
lent among security investors, a rea-
sonable amount of commodity advance
would be logical in the next few
The security holder may look with
on all that has been ac-
complished in his behalf and to the
immense betterment Of his financial
status and yet wonder whether 1t would
not be wise to consider a reduction in
the commitments of those stocks and
bonds which he had about decided to
write off as worthless two months ego
and which today show an enhance
ment from their low prices of from
200 to 500 per cent. IN all probability
he will cling to them as stubbornly
as he did when they were at their low
est figures and dream Of the days when
they will again approach their 1929