Evening star., 1935-06-16
STOCKS FORGE UP
AS CHEAP MONEY
DEMANDS OUTLET
Recovery in Bonds Spreads
+ to Common Equities.
|. SeIeCtivity Persists.
PURCHASES OF FOREIGN
INTERESTS ALSO FACTOR
Currency Troubles Abroad Start
Flight of Timid Capital
Back to America.
BY CHARLES r. SPEARE.

BY CHARLES r. SPEARE.
Special Dispatch to The Star.
NEW YORK. June 15.-The per-
sistent rise In common stocks, which
has proceeded with brief interruptions
since the end Of March and has ap-
proximated an average Of Is points,
placing the general average at the
highest in over a year and industrial
shares at the peak Of three-year
period, has several explanations.
Those who believe we are steadily
running into initiation will say 1t Is
fear of monetary conditions depress-
ing fixed interest securities that
prompts investors and spectators
alike to discount this era by increaS-
ing their commitments In equities.
Undoubtedly, this reasoning is re-
sponsible for a considerable portion
of the demand for stocks that origi-
mates in professional quarters. This
demand might be said to include
those who have the responsibility for
guardianship of trustee funds. 1t has
prevailed for months, subject to con-
slant ebb and flow of sentiment as
currency expansion has been empha-
sized or has been thwarted by the
attitudes or acts of the administra-
ton at Washington or by Congress.
Outlet for Cheap Money.
The second explanation for the up
ward movement in equities Is more
logical and traditional one. When
money is cheap and superabundant,
as it has been for nearly two years,
it finds its outlet first in high-grade
bonds, as Treasury obligations, those
of States and municipalities and
prime issues of corporations. This
has again, as it does invariably, lifted
the prices OF all such securities to a
level where they become the sole
medium Of investment for institutions
and seekers after the maximum OF
safety and tax-exempt privileges.
The next stage in this movement
deals with bonds of q slightly lower
rating than those previously popular.
They. too, rise to unusual heights
Finally. they become too rich" for
the average investor. So he seeks his
fortune in securities that have once
held a good rank, If price is the equa-
ton to be considered, but are OBJ
viously speculative and involve a risk
to the buyer both as to principal and
permanency Of income.
This last stage includes the re-
newal of interest in common stocks.
The best of them-those that have q
long dividend record and are related
to industries that have been able to
weather the business storm-hAve
been rising along with bonds. Others
have had long interval, since 1929
or 1880 and 1882. Of lost prestige.
Capital of certain type, however,
does not forever remain static. 1t
has the itch for action, for profitable
employment. So every period of easy
money which begins with buoyant
bond markets finally ends with
booming market in speculative stocks.
This is the phase now being wit
messed. The floods of capital are be-
ginning to break over the dikes.
Foreign Buying Increases.
There is still another source Of de-
mand for common stocks that must
not be ignored. The currency crisis
in the gold countries has produced the
same flight of capital that finally re-
suited In our abandonment of gold.
1t is now recognized that the best
money in the world today is thsN of
the United States. The dollar is the
cheapest of the international cur
rencies and, whether o section of the
American public believes it or not, 1t
is nearest to the point Of final stabili-
zation.
1t is not surprising, therefore, that
the foreigner, with capital boarded or
sterile, should have been enlarging his
investments in sound American eQui-
ties for safety's sake, and. quite prob
ably, because he believes q certain
amount of appreciation in them will
result from imitation.
The particular group Of common
stocks in demand this week has been
the rails. Actually there is little i'm
provement in the railroad outlook.
An exception to this statement might
be made with respect to the carriers
in the Northwest. Their traffic pros
poets are frightened by the rains that
have fallen in portion of the coun-
try scared by hot winds and robbed
of its fertility by an exceptional
drought.
What might be described as a senti-
mental study of price statistics, or
records, plays q larger part in develop
ing markets than one might suppose.
Take, for illustration, the railroad list.
1t has offered so little announcement
to investors or spectators for so long
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