The Washington times., 1934-01-01

W1bI Uug AO" PbA oAASAS'
The twelve-months began with
trading on a fairly even keel.
throughout January there were
no startling fluctuations in senior
obligations. In the following
month, however. a definitely re-
dictionary tone developed, which
carried prices down quite sharply.
This pressure was explained by
liquidation on the part of closed
banks and institutions in a pre-
cariouS position and forced to OBJ
tain cash regardless Of prevailing
market conditions.
Banks Show Decline
In the interval between January
80 and the cessation Of trading on
March 3. prior to the bank hoh-
day, the Dow-Jones compilation
Of 40 representative bonds showed
q net decline of approximately 712
points. For a comparable period,
this easily ranks as one Of the
most drastic declines in the his
tory Of the Stock Exchange, and
portrays rather graphically the
widespread uncertainty existent in
financial circles at this time.
Following the Inauguration OF
President Roosevelt, and the re-
sumption Of trading following the
bank holiday, bon d S rallie d
sharply, and within the space Of
five trading sessions had retraced
almost half of the entire February
loss. Thereafter. there was an 1r-
regular downward drift, which
continued with minor interrupt
tions until the latter part Of April.
From April 20 to July 18, using
the Dow w-Jones index as a guide.
the market recorded its most Sus-
tained advance Of the year. In
this three months period. a gain
of approximately 151s points was
recorded with the mid-July high
representing generally the peak
levels of the year.
Psychology Explained
There was a more or less selec-
tive advancing phase in this in
terval, with sweeping price appre-
citation the rule in the run Of low
and edium grade bonds as
against a more studied pace OF
upturn in the better grade invest
ment obligations. This is readily
understood by the psychology ex-
istent at this time, for with the
signing of the initiation amend
ment to the Federal farm act on
May IL, there had been a general
rush Of buyers into those issues
which were expected to be in a
position to more fully reflect in
flationary action.
Thus, speculative rail and do
mestic corporation bonds in the
low-priced brackets enjoyed an
advance every bit on a par with
the sensational upturn of equities.
while ranking investment loans
hardly could be said to have dis
played any great exuberance, al
though maintaining general
uptrend.
A supporting influence for U. s.
Government bonds at this time
was the new Federal Reserve buy
ing program which began in the
week ended May IA, and which
generally proved to be sufficient
to absorb whatever offerings de-
veloped as a result Of switching
operations by investors.
Market in DOwntrend
Following the attainment of the
mid-July peaks, the market en-
tered into q doWntrend, colnc1-
dent with the elimination Of the
prolonged bull advance in COM
mon stocks, in which the specula-
tive issues which had pointed the
way forward in the preceding up
turn were once more the leaders
on the decline. Except for peri
odic rallying periods, this drift
toward lower levels has continued
to the year-end.
There has been a more clearly
outlined movement in U. S. Gov
ernment loans and investment
grade bonds in the closing months
Of the year which has made this
section of the investment field the
cynosure of financial attention.
The market in U. s. Governments
continued good through the sum-
mer months, aided as 1t was in
late August by an expansion in
buying operations of the Federal
Reserve System until a total OF
roughly $35,000.000 weekly was
added to portfolio holdings. The
market for Federal liens was fur
ther helped in early October by
the Treasury offer to refund a
portion Of the outstanding Liberty
Loan 4th 412s amounting to
$1.900.00O. 1000.
This action was taken as an in
dication that the Administration
had abandoned its inflationary
program for the time being, and
aggressive buying came into the
Federal list as well as investment
grade obligations.
Brings Heavy Selling
This apparent swing to a con.
Servstive viewpoint brought heavy
selling into commodities and eQui-
ties and thus forced the hand Of
the President anew. On October
23 the Administration embarked
On its new gold policy, with the
decision that the Reconstruction