Evening star., 1933-05-14
Upturn in Commodity Quota
tions Provides Stimulus for
Advance in Securities.
BANKS ARE Benefited
BY GAIN IN. QUOTATIONS
Industrial and Railroad Groups
Show Greatest Appreciation
in Brisk Trading.
BY CHARLES F. SPEARE.
Special Dispatch to The Star.

NEW YORK, May l3.-The highest
average prices for industrial and rail-
road stocks in months, with the public
utilities tagging behind, and q buoyant
market for nearly all classes of bonds,
except municipals, have developed this
week out Of the expectancy of early
use Of the measures for lifting the price
level contained IN the newly enacted
farm bill.
The public has not accepted entirely
the injunction in President Roosevelt's 8
radio address that 1t should avoid ''the
foolish course Of letting this improve
ment come back on another specula-
tive wave" It has hastened, as it
always does, to anticipate events by
heavy purchases Of common stocks and
junior bonds, as well as of the most
volatile Of the farm products. No other
course could have been expected.
Meanwhile, the position of the dol
lar abroad has been uncertain from
day to day, but with indications that
the ultimate end OF the process Of de-
valuation will leave it at q discount
Of about IS per cent In relation to
foreign currencies.
Program Set In Motion.
The point has been reached in the
campaign to raise the price level where
debate has ended and bills are being
whipped into shape. progress in the
direction charted by the inf1ationists.
1t may be said that while there Is
deep anxiety in many quarters over
the possible effects OF imitation the
mood OF the general public is one Of
growing conviction that 1t has wit
messed the worst phases Of the de-
preston and that there will be steady
gain in the unemployment Of those
who have been without work for months
or years.
Emphasis has been placed this week
on the numerous corporations that
have added to their pay rolls or have
increased wages. There is nothing yet
in this to get excited about. Those
benefited represent an infinitesimal
fraction Of all who are identified with
industry In its manifold branches.
There have been . number OF signifi-
cant developments which. If continued
will tend to brighten up the general
business picture. Among them this
week are the advance in iron and steel
operations to above 81 per cent, with
some districts operating at 60 per cent,
and the first increase since last Octo-
ber in the untitled tonnage orders of
the United States Steel Corporation;
the gain in electric power output over
the same period Of 1882, the increase
in car loadings. which has prompted
several railroad executives to express
than for several years, and intense
activity in certain sections of the tex
tile trade. This has experienced q
record business at rising prices in the
last few days.
Living Costs Rising.
In the commodity markets specula-
tion has not been SO violent. 1t was
at first tempered by the disposition to
consolidate the gains of the last two
months and later moved swiftly ahead
on the bullish trade statistics. Whole
sale food prices are slowly rising and
are now IS per cent above those at the
end of February.
The current strength In all the
United States Government issues, In
spite OF the inf1ationary doctrine of
the day and the refusal Of the Treas
ury to maintain gold payments on its
obligations, is evidence that the pre-
liminary stages Of Federal Reserve
absorption of Government paper have
already been entered and that they
are being followed by astute insti-
tutional and private investors.
The degree to which the provisions
Of the imitation bill may be employed
to bring about the required recovery
in prices will depend upon the extent
Of public confidence in the business
and banking structures. Have these
been restored to. sound basis? Or
do they need to be propped up still
business Is available In some of the
Statistics 0f the Veek
A practical problem is raised by the
advance in securities. Banks have
loaned large amounts on stocks which
they accepted as collateral prior to
the break In 1929, and, subsequently,
when they took over loans Of their
customers from brokers. Stocks are
today at prices where many Of these
loans could be liquidated without loss
to the lender, as the loans have been
steadily reduced since they were first
negotiated. It would, therefore, so<m
to be a good time for banks to reduce
one form Of commitment which has
been an embarrassment to them for
several years.
Bond Policy.
Their policy respecting bonds which
they own, and whose serious depreci-
alton has been one Of the most dis
turbing factors in their situation, is not
SO simple While 1t is true that many
bonds have experienced q great recov-
cry, they are still at q large discount
from cost. To nquidate them even at
the present level would result In .
serious write-off In bank surplus and
reserve accounts. The only exception
is in that class of securities in de-
fault and which have already had an
enforced mark-down to nominal fig
ures, from which there has been q
substantial appreciation. Advantage Of
this condition might well be taken by
institutions. As to their other bonds,
they may as well enjoy the thrill OF
the rise In them and pray that 1t con-
tinues.
(Copyright. 1933J