Evening star., 1933-08-13
Speculative and Commercial
Commitments Now in !.
Suspended State. q
SIGNS LESS PROMINENT n
FOR INITIATION EFFORT
Trade Awaits New Buying Power
From Great Mass of Consumers
Due to Pay and Job Increases. %
BY CHARLES F. SPEARE.


Special Dispatch to The Star
NEW YORK, August 1.-THE phase
Of anticipation of the effects of in
dation and of q natural recovery in
industry and in banking conditions has
been completed. The net result is ex-
pressed in higher prices for securities
and commodities, in sharp advance
in the business index. accompanied by
more employment, higher wages, better
corporation reports and some increase
in dividends. -
We are now in the second, or inter-
mediate period, when speculative conf
mitments and commercial engagements
are in suspended state relative to
those Of July and the clue to future
operations must be the extent to which
the efforts at recovery are successful
and the hopes of the administration
IN this direction are realized.
During the first phase, which extend
ed from the first of May to the second
week Of July, there was much specula-
tive buying of securities and commodi-
ties, also CT manufactured goods This
carried prices to a point of correspond
ing more nearly than since 1880 to their
real values. 1t supplied consumers with
foodstuffs. clothing, furniture, automo-
biles and other articles now considered
essentials. but which previously they
had been unwilling to buy although
able to do so. The means to buy came
from the reserves which they had car
ried over the depression. To the eX-
tent that they had anticipated the rise
in prices and had been in a position
to discount it, they had reduced their
purchasing power for the immediate
future.
Slower to Respond.
However the larger body of consume
ers Is now, by reason of renewed en-
ployment and increased income prepar-
ing to give momentum to industry. It
IS from this class that the subsequent
gains in business are chiefly to come.
Obviously, they will be slower to re-
spond than the original group of buy
ers, as they had obligations to meet that
are long overdue
The rise in prices already is cutting
down the margin of savings available
to those in the lower income brackets.
They cannot at once respond to the
hysterical appeals to spend and not
save, or take advantage of the injunc-
tion to turn your money into things"
Va A1CCo VIC Wo11lAlk tIldt dlIIlOot pS-
fore you can draw a breath the things
you want will be worth more than the
money you can save by not buying"
This has much the same tenor as the
lingo OF the stock salesman in 1929
There. is not SO much doubt over
the success Of the recovery program as
about the date wien 1t may be ac-
cepted as success The signs of panic
in Washington lately appear to be due
to the time element. There is no
good reason why dead line" should
be set for early September for if a
program involving such tremendous up
heavals in business. so much accommo-
cation by labor and capital and such
vast amount of physical effort to
effect, functions even imperfectly in
November. more will have been accom-
plished than could have been expected,
Imitation Signs Diminish.
Although the stock market persists
in speculating on the effects of infla-
tion, there Is apparently less inclina-
ton on the part of the administration
to promote an aggressive imitation pol
icy.
In another direction the signs point
less prominently toward a major infla-
tion effort. This week many of the
have sold at prices comparable only
to those in the extended cheap money
period at the beginning of the century.
For illustration: Chesapeake & Ohio
equipment trust certificates are quoted
on a $50 per cent basis. This is the
best rate on such paper in 80 years.
The State of Maryland on Wednesday
sold an issue of bonds that were mar
keted at a higher price for the long
maturities than the recent offering Of
United States Treasury 3A per cent.
at premium of more than y point
so if additional long-term loans are
marketed in the Autumn they should
succeed at a lower coupon than the
last.
There is an unsatisfied demand for
bonds from institutions that have not
been buyers in months. Recently the
New England insurance companies have
begun to accumulate securities for their
portfolios. The change in their atti-
tude toward investments results from
loans, in itself proof that the handi-
caps Of the depression are rapidly
passing.
Again 1t may be remarked that the
reconstruction in industry and the
change in the public's mental state,
plus the superabundance of money
available for investment, have overbal-
anced the investors fear of imitation
or his first despair when contracts Of
the Government or their subdivisions
ceased to be paid in gold.
&c. C. Defends Rates.
It is easier to separate the movement
in second and third grade bonds from
any imitation effect than in those
which, by orthodox rules, should fall
rather than rise when the commodity
price level is scheduled to advance.
The former fluctuate with earnings.
These are now on the mend. Specif-
cally, railroad junior mortgages and
debentures benefit by each weeks evi-
dence that the carriers are closing the
gap between deficit and surplus.
To this has been added this week
one Of the most remarkable decisions
the Interstate Commerce Commission
has ever rendered
The gist of the commissions opinion
was that reduced rates would not ac-
complish what its advocates had
claimed, namely, an increase in traffic,
for it was shown that the country,s
volume Of business did not rise but
fell to low record totals when the aver
age Of commodity prices was at the
bottom recently. On the other hand
the commission stated that q 10 per
cent reduction in rates below the 1881
basis would result in failure by the
carriers this year to earn their fixed