The Washington times., 1934-09-10

its movements
throw little
light on the ~
trend. 1a..,. q -
This week Lewis nancy
brought sharp declines in silver
and liquor stocks; and motor, tire
and steel issues were mostly weak.
The New York Traction issues,
however, Spurted at the end and
telephone was firm.
The prominence Of declines
represented the collapse OF the
Major Angas boomlet, the con-
tinued recession in basic indus
tries, strike developments and eX-
IRENE uncertainty as to govern
ment expedients. Then, too, the
administration is playing the gold
game of being conservative" dur
ing the period of important gov
eminent borrowing, and this, OF
course, puts temporary crimp in
q market which is so largely based
upon anticipation of further in
flation.
One has only to reflect upon
how high most stocks are as
Judged by the normal investment
standards based on earnings, and
considering nearby prospects, to
see that hedging against lin
flation" is still the main factor
in the situation. In fact, the
current fears as to what the
New Dealers may do to restrict
profits or to tax them away, are
mostly felt in terms of initiation,
the question being how can infla-
ton help company which has
no profits to initiate.
Technically, there seems to be
little the matter with the market
aside from a sense Of StalenesS
on the part of those who have
long held positions as a hedge
against the dollar. Important
resistance levels have not been
broken. The short interest,
though small, has increased. If
the market were free from abnor-
NAL monetary and political fact
-ors. I would expect at least a
technical rally soon.
. It must be admitted, however,
that the activity has recently
been mostly on weakness. And
not only has United States Steel
Registered a new low closing
price, but on Friday ten stocks
touched new lows for the year.
Demogoger prevails in politics,
and the demands of organized
labor are growing. The Maine
election is in doubt. The bust
ness outlook is cloudy. So eau
ton is plainly indicated 'for the
present." as Mr.. Morgenthau
would say. To be sure. the worse
things get, the more the New
Dealers will borrow and spend,
thus increasing the public deficit,
and eventually weakening both
Government credit and dollar.
The inflationary results, however,
may not come for some months
yet.
The nearby probability is that
existing uncertainties, including
strike developments, will keep the
market within narrow limits.
There is little to put it up, and
rallies have shown no follow
through. Any rise here would
soon run into resistance. On the
other hand. leading stocks have
been well supported, and the
sharp crack in U. S. Smelling did
not bring severe liquidation.
I would say that stocks on aver
age are trying to hold at the
August 1920 level-Say 80 for the
Dow, Jones industrials. While it
is not unlikely that they will break
this (aS steel, can. gas and others
have done), I doubt if they reach
the July low, barring now unfor-
seen bad news.
But unless the Maine election
shows a revulsion against the
New Deal experiments, I can see
no possibility of more than a little
technical rally, on which any
GRADERS who may be left should
probably do what is called taking
profits.
Meanwhile, I continue of the
opinion that it will be well to use
periods Of further weakness to
acquire, or average down" in
present holdings, the sounder
gold, food and mercantile shares
which are most reasonably priced
rs to earnings.