The Washington times., 1934-07-30

After trying aS%'
to hold above ~. :,
80 on Tuesday Lewis nancy
and Wednesday, the industrial
average plunged through on
Thursday, marking new phase
of the recession. It meant the
clearing out of many small mar
gin accounts, especially in low
priced issues. There has been a
great deal of interest in shares
selling under IS during the past
few months, and evidently the
holders were not really investors,
for they were suddenly shaken
out.
The declines in some of the low
priced issues have exceeded SO
per cent.
In the face of all this, several
of the old leaders have had rela-
lively good support. While the
averages have broken new deal
level of the market, du POnt,
for example has held above the
critical level of 8O-81. Ameri-
can Can has held so far at its
critical low of 81, and AtchisOn
similarly at 81. This serves to
emphasize the general liquida-
ti0n throughout the list.
In fact the market lost most
of it's "selectivity" last week. All
sorts of stocks went down lnclud-
ing precious metals as well as Util-
tiles and Steel. 1 conclude that
this is no mere technical reac"
tion, furthermore, it is not due
to doubts that initiation will oc-
cur, nor to war Scares.
A good many stocks have, like
some bonds, been selling ridicu-
lousy high.
The railway stocks had an illog-
ical and unwarranted rise.
There had even been a recov-
cry in utilities on the assumption
that they were "low enough"
Some weak positions revived in
the liquor issues. which were
shaken out by poor earnings.
Then there was the indiScriminate
buying Of cheap" stocks.
All this made a situation that
put too heavy a load on such a
thin market.
Finally came several heavy
strawS to break the camePS
back. The immediate one was
the realization of poor earn
ings, largely due to NRA, AAA
and high taxes. The General
Motors situation was an eye
opener, and Consolidated Gas
an added blow.
Back of this was the obvious
intensification of the business re-
cession by drought and strikes,
while at the same time the fall
outlook because, more dubious,
and hopes of an artificial build
ing revival dimmed. It is fair
to add that growing diSillusion-
ment with the New Deals eco
nomic experiment is apparent.
Stock market regulations have
reduced the machinery of sup
port. Pools can now do less.
The banks fear the lessened
iquidity.
Under such circumstances, war
scare rumors added to the gen.
eral encouragement and touched
off selling, some of which was
quite illogical.
Uncertainty remains great. It
seems probable that some further
unSettlement will occur. Any
purchases should be moderate
and very selective.
But I am impressed with the
fact that some of the recent
selling has been indiScriminate
and illogical. The volume on
Thursday was Of climax pro-
portions for these days, and
the amount of decline unusu-
ally large. The averages are
now within o couple of points
Of the October, 1888 low, and
this liquidateS most of the New
Deal bull market. lin fact,
many stocks-including U. S.
Steel-are at new bear market
lows in terms of gOld.)
Mr.. Roosevelt can take action
which would prevent penetration
of the october lows.
So I would begin to look for
stocks to add to my holdings as
a hedge against initiation. The
New Dealers are caught in their
own machinery. If they don't
initiate, they will have to go
through deflation, which would
mean ronlitical daa tn To thn,,o