Evening star., 1933-08-14
CURB SEEN
UNDER N. R. A. PLAN
Wall Street Begins to Realize
Result and Ponders Per-
manenCy.
BY GEORGE T. HUGHES.
II nicnotrh Ts11a GfoP


NEW YORK, August lit is be-
ginning to seep into the Wall Street
consciousness that the new deal in
wolves the limitation o: corporate profits
and that the only question is whether
the limitation Is to be temporary or
permanent.
Certainly there can be no doubt
about the immediate effect of raising
wages and shortening hours. Net in
come will be reduced and may or may
not be made up by larger turnover later
on. That is something for the future
to disclose. Large industrial units with
adequate reserve funds can bridge the
gap without difficulty. The small mer-
chant will not find it SO easy, but the
chances are that consideration will be
accorded him regardless of the strict
construction of the N. r. A. code sys-
tenn. But whether easy or not, larger
share of the gross earnings of business
is to go to employment.
That Is the situation now, and
theoretically 1t Is to continue for the
period OF the emergency" only but
the feeling is growing that this larger
distribution Of profits is not going to
end with the passing Of the depression.
From the social standpoint there Is
nothing to be concerned about in this
prospect, but it does not make for un-
restrained speculation for the rise in
stocks. Probably that Is a good thing,
too, socially.
Low Levels Stressed.
When the advance in the stock mar
ket began. after confidence had been
restored with the reopening Of the banks.
II was on the premise that prices were
ansurdly low. that quotations came no.
Wnere near measuring values of earning
power, actual or potential. On that
sound basis, with industrial recovery in
sight, the market pushed ahead SO
vigorously that the outside public was
lured back to speculation which sug-
gested the almost forgotten days Of
Ivy Then came the break. and now
tne iull. For besides the uncertainties
OF the Autumn business outlook. the
suspicion Is spreading that the partner
snip OF Government with industry is
gong to mean definite restriction of
the share OF the stockholder in the
monetary results
II this theory is correct. it has
bearing on the value of equities as
protection against currency initiation.
STOCKS do represent real property. as
ponds stand for the claim of creditors,
but stocks are desirable in the last
analysis for the income they give the
noloer in dividends or for the added
asset value that comes from the piling
up OF pronts over series of years. If
divldends are to be held down and II
the accumulations Of surpluses are to be
prevented, stocks lose a good deal of
their attraction. imitation or no inf1a-
tlon. or course that is looking a long
way ahead and the new deal NAV not
work out as per program. No ole can
oeny. however, that it has overwhelming
popular support now.
G. NJ. Report Studied.
Inc interesting feature of the Cen
eral MOTORS financial statement given
out today for the first six months of
the year is the balance sheet. The
earnings have already been published
ana the income account gives in detail
What was known before in summary.
AS usual the strongest of financial posi-
lions Is revealed in the matter of work.
ing capital and testifies to the efficient
management OF this great enterprise.
were 71,773 ,0O2 and against this there
was cash alone Of sl58,376. 100. to say
nothing of United States Government
securities Of $l5, ,925 $50 and other short
term marketable securities of S26,-
1888.
Even more striking Is the fact that
net working capital on June 80, 1888,
was larger than ON December 81, 1929,
when the depression was only begin
ming.
This improvement in working CAPT.
tai and liquidity." says President Sloan,
was reflected in the face of the pay
ment of dividends in excess of earnings
by approximately S70,00O,00O during
this three and one-half year period"
To those of us who may be lamenting
our own lack of foresight it may be
comforting to learn that General Mo-
tors had on June 80. last, $13837. .443
cash balances in closed banks That
sum is not included in current assets.
Also, General Motors is better able to
have money tied up In closed banks
than most Of us.
Just why the wheat market should
break the limit allowed by the new regu-
iations the day after the Government
issued the most sensationally bullish
crop report in years is one of those
mysteries which the experts are always
called on to explain. by which they
never do satisfactorily. Nevertheless,
taking a chance, the opinion may be
hazarded that the knowledge that the
pegs" would be removed on the Chi
cago Board Of Trade after the close to-
morrow had something to do with it.
copyright. 1889