Evening star., 1933-08-17
GRAIN HAS EFFECT
ON ALL MARKETS
Yesterdays Stagnation Is
Traced to Uncertainty
About Chicago Curb.
BY GEORGE T. HUGHES.

H6Oul NiIItoSO SUi Us
BY GEORGE T. HUGHES.
Special Dispatch to The Star.
NEW YORK, August 1.-THE break
in the New York stock market yesterday
was plainly a reflection of continuing
concern over the wheat crisis In
Chicago.
Trading in stocks on the big exchange
was at a standstill until the opening
quotations on grains were received from
the West AS expected, wheat sold or
was quoted at the minimum decline al
lowabe under the regulations. The re-
striction prohibiting sales below the
closing prices of July 20 had been re-
moved, but the daily limit of cents,
up or down, had been retained. When
the limit on the downside was reached,
trading stopped and that left every one
as much in the dark as before with re-
gard to how far wheat would have to
decline to meet effective support.
What will happen today is any ones
guess, but this much is certain-conf1-
dence in other speculative markets will
not be revived until that question Is
answered.
One of the rumors that was broad
cast after yesterdays close was that a
pool would be formed to take over the
distressed" wheat which is making all
the trouble. There was no confirmation
Of the story in the Street. and perhaps
''the wish was father to the thought" !"
but the pressure on all in authority to
take some action suggested that an
other crop of initiation reports was in
the making.
Initiation Fears Eased.
The consistently strong demand for
the highest grade of investment bonds
is commonly explained as indicative of
belief on the part Of the buyers that
no radical initiation is in prospect.
The accepted theory is that currency
depreciation is forecast by the substi-
tuition of equities for evidences of debt
in investment portfolios. and the fact
that bonds have held so we'll all through
the irregularity in the stock market is
pointed to as evidence Of confidence
that President Roosevelt will not resort
to the radical measures allowed under
the Thomas amendment. This is much
too simple an analysis. Too many COM
plicated influences are at work in the
bond market to permit the matter to
be disposed of SO easily.
Bonds reached their highs for the
year IN mid-July, about the same time
as stocks did, and they have reacted as
stocks have. but that is true of the
market as a whole. Government bonds
have been conspicuously strong and
there has been no yielding whatever in
the market for the best of corporate
issues. those selling to yield between 4
and AZ per cent. The new Treasury
IA S met very favorable reception and
SOLD yesterday at the highest since
issuance
The demand here represents the huge
supplies Of idle money. unable to find
employment in the call loan market
because OF the low rates obtaining there,
not now used commercially. as the
weekly statements Of the Federal Re-
serve member banks testify. and driven
out OF the commercial banks by the few
law forblddlng the payment of interest
on demand deposits. There is no Other
place for this capital to go except into
bonds, preferably Government bonds
ana preferably short dated descriptions.
Reserve Buying Lags.
There has been no important buying
oi government bonds by the Federal
reserve in the last few weeks. Pur-
cn5 onaseS @ nave been running around Sl0,-
ooOo a week, an unimportant amount
Tomorrow's report may show some
thing different. but it is doubtful that
tnere viii be any change in policy for
the present. In other words. there is
no artificial support 60 the market. AL
though the fact that .,le system could
BUY on large scale. and probably
WOULD II there should be any weakness
faS some psychological effect.
IL is sometimes said that although
government bonds have held through
out the imitation discussions, they have
deprecated IN gold vahe by the de-
pIecIatlon OF the dOllc =. Of course
that Is true as far as the foreign mar
ket goes. It has no bearing on the do
imeStlc situation. The dollars used tn
ouy United States obligations have sus-
Lalneo the same depreciation that the
oonds have if gold is to be the measure
Of value.
None OF this has any bearing on Ca
madam bonds and yet the Dominion
government issues traded in this mar
ket are at the highs of 1888, They
nave been creeping up a small fraction
at tlme for weeks and are now at the
best OF the year
Permission Expected.
Perhaps the fact that Canada Was
able to float loan in London with a 4
per cent coupon at par has helped the
market for Canadian securities in New
YORK, but there is another element to
De taken into account. The Canadian
government has now under considera-
ton the request of the gold mining
companies in the United States for Der
mission to ship ore and concentrates
INTO Canada for refining as allowed un-
der the new ruling by the Treasury De-
partment at Washington.
1t Is believed this permission will be
granted; If SO. there will be enough
shipments to affect the exchange rate.
bringing the Canadian dollar back close
70 parity with the United States dollar.
That would certainly strengthen the
market for Canadian bonds here.
AS for the gllt-edged domestic corpo-
ration bonds which have remained so
steady 1t is to be said that they are
beginning to command a scarcity value
For this the new securities act is re-
sponsible There are two questions of
intense interest awaiting answers.
When is the Attorney General actually
going to herd the gold hoarders into
court, and when is there to be a really
important piece Of new financing under
the act?
So far all new issues have been with
out market significance. The test will
come when major refunding opera
tlon is attempted or new capital is ap-
piled for publicly by one of the leading
industrial or utility units. Then we
shall see how the new regulations work
Meanwhile, the market for seasoned
bonds has no competition from new
offerings.
Copyright. 1888. by North American News
paper Alliance. 1ncl