Evening star., 1934-04-08
Belief in Early U. S. Move
Spurs Stocks and Fails
to Hurt Bonds.
CAPITAL SEEKS OUTLET:
CONFIDENCE APPARENT
Securities Act and Curb on For.
eign Loans Place Premium on
Outstanding Issues.
BY CHARLES F. SPEARE.

Special Dispatch to The Star.
NEW YORK, April THE i'm
preston has gained currency here
and abroad this week that another
advance in the price of gold is i'm
minent. This has been responsible
for the stronger market for stocks,
though it has had no unfavorable
effect on bonds. Both have advanced
In about the same relative degree.
The liquidation that had carried
stocks In March dozen points on the
average below February has ceased.
Confident buying Of the shares Of
corporations that are showing I'M
proved earnings has replaced it.
A compilation by the National City
Bank of New York, based on reports
of 1,475 manufacturing and trading
companies, shows that their profits in
1888 were S66l 900, 900 compared with
a deficit in 1892 of S97000.0OO. The
rate OF return on net worth was 26
per cent. This record has been fol-
lowed by further gains in the March
quarter of this year. That this i'm
provement has been recognized in
the level OF stock prices is admitted.
1t accounts for the hesitation by the
public to enter into new commitments
until the relation between earnings
and market quotations becomes more
favorable.
Investors Show Confidence.
At the same time there is a steady
absorption of high-grade and medium
rated bonds. PoSsessors of capital
are attempting to make it earn as
high a return as is consistent with
its safety. They are concerned less
with appreciation and more with
income. Never since dollar devalua-
ton began have they shown any great
fear OF imitation. Their confidence
has been strengthened recently by
the improved state of the Govern
ment finances, or, rather, by the
smaller deficit than had been pre-
dicted for this period of the fiscal
year.
There also is the belief that, out
OF the reforms pending in Wall Street,
investment securities will gain in the
respect of the public. Logically. the
first effect OF any recovery in busi-
ness should be reflected in those
obligations that command the first
charges against earnings.
1t must be apparent that the vari-
Gus ways by which capital is beng
locked into this country, as for in
stance by making it illegal to lend
ohrnod fnnlfhnr ufith tho nlncad dnCv
to the new securities market, tend
to place a premium on outstanding
securities. As wealth increases there
has to be an outlet for it in behalf
of institutions, insurance companies
and trustees. Their source of supply
is constantly being limited. Conse-
quently, the demand is more and
more concentrated and prices rise
beyond the level of intrinsic worth.
More Signs of Recovery.
Evidence accumulateS that the ma
terial affairs of the country are i'm
proving. The recognized indices of
business, such as iron and steel pro-
duction. electrical output. car load
ings, bank clearings, and, in
oAlAd4AC4 dCSACC. lAlC Va bOAAA-
ing construction, confirm this. The
wage advances recently made are es-
timated to have been spread over
million workers, which means that
purchasing power is steadily being
enlarged. The record of dividend
payments by corporations and institu-
tions in the March quarter shows a
gain of S40,OO0,OO0 over the same
period of 1888 and it would have
been considerably more had not there
been a sharp decrease in the disburse-
ments of the public utilities.
Two recognized authorities, Alfred
P. Sloan. president of the General
Motors Corporation, and Myron c.
Taylor, chairman of the United States
Steel Corporation, have gone on rec
ord this week with optimistic state
ments concerning the future of in
dustry. Mr.. Sloan is of the opinion
that its general trend is upward and
that it is moving with irresistible
force" 1t ought not now to be sub
jected to the strain of another gold
price change. Sterilization for a
longer period is required.
Wholesale commodity prices have
been reacting slightly, although the
factor of imitation has again entered
into speculative consideration in the
more volatile items. The wage in
creases in the iron and steel and
motor trades have been followed, as
might be expected, by advances in
prices of finished steel and in num-
ber of the popular motor cars. 1t is
obvious that where there are such
wage changes toward a higher level
there will be adopted the policy of
passing on the new cost to the con-
Sumer.
This creates situation that means
much to the business world, for it
raises the question whether the con-
sumner will buy at the higher prices,
and, if not. how far his withdrawal
from the market is likely to retard
recovery. So far the higher costs
have been absorbed in the larger in
comes both of the farm population
ard of industrial workers, but the
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