Evening star., 1935-04-28
STOCKS KEEPSTEP
WITH STEADY RISE
IN TRADE ACTIVITY
More Cheerful Sentiment
Among Business Chiefs
Felt by Market.
Low YIELDS ON BONDS
HELP TO SHIFT FUNDS
Refunding Forces Many Holders
Into Lower Investment Strata,
Such as Preferred Shares.
BY CHARLES F. SPEARE.

NEW YORK, April ~ CN.A.N.A).
1T is difficult to say whether the
improved sentiment in the business
world and the statistical evidence
there Of an increase in volume is due
to the rise In investment and specu-
lative securities or whether bonds
and stocks are rejecting the change
in the mood of industrial leaders.
The important fact Is that busi-
ness is better and is admitted to be
by those who have, for months, re-
fused to recognize any but the ad-
verse elements in the outlook.
One Of the quickest roads to in
dustrial recovery has frequently been
that leading out of Wall Street. The
most recent illustration Of this was
two years ago this month when the
sharp rise in security prices, follow
ing the bank holiday, played an i'm
portant part in stimulating trade.
Those who hold stocks, more so
than the owners Of bonds, are quick
to respond to appreciation on their
investments. When it comes they
opCho AioiC lICCly, DOtll lOI tllC Illili6o
they need and for the luxurieS that
have become necessities in the pres
ent standard of living. Therefore, an
advance in the stock average to the
highest level of the year has developed
a new psychology among thousands
who have been repressive in their at
titude as buyers for a considerable
period of time.
Sequel TO Bonds Rise.
The expansion in stock trading and
IN the degree of equity revaluation is
a logical and somewhat belated sequel
to what has been going on for over
a year in high-grade corporation
bonds and in United States Treasury
issues. 1t has also been influenced
by the extreme ease of money. The
fixed interest obligations had reached
a agure that reduced their return to
q point where they no longer at
tracted the private investor.
Furthermore, many choice bonds
with fairly high coupons have been
refunded OF are about to 60 through
this process. The yields on the new
securities do not satisfy. Under these
circumstances the holder of such
loans, or the person with money to
invest, buys into lower investment
strata, as. for instance, preferred
stocks. But here again the demand
exceeding the supply and interest
rates continuing to fall, the buyer
soon faces situation in which the
prime members of this stock group
are quoted at a price parity with
bonds. The most pronounced move
ments in the investment market in
recent weeks have been in 4 and S
per cent public utility and railroad
preferred stocks and In the uncallable
6 and per cent industrials.
Naturally enough. this condition en-
courages demand for the common or
capital stocks of the strongest of
Americas corporations. Even among
these the return on capital is steadily
diminishing as an eager public con-
centrates its buying power on this
limited group, as 1t did this week on
the metais after silver was advanced.
The result Is further departure from
the original line of investment into
a field where the only promises are
those Of capital appreciation under
the stimulus OF better business, more
confidence in the national economy
and cheap money.
At today's renewal rates for loans
1t is possible to borrow 100000 for
IL months at cost of $3.50. This
sort Of bait Is not likely to be long
refused by a speculatively hungry
public.
Inflow OF Foreign Money.
Another reason for the increase in
speculative interest and the growth
of buying power is the part that for
eign capital Is playing in the Amer
ican market. After many months of
experience with the shifting cur
rencies abroad, our capitalists are
beginning to realize that the United
States is the safest place in which
to have their money. Certainly the
investors of Europe believe this to
be true, as they see one country
after another compelled to devalue,
while those still on gold are likely
to be forced of it this year.
AS q bearish argument on corpora
ton bonds and Government obliga-
tions, the protracted talk of imitation
has not been profitable to those who
have acted on 1t. It does not hold
any place in the current play of
stock speculation.
There comes q time in every long
drawn-out depression when the nat
ural forces of recovery outweigh those
that have been holding recovery in
check. This is probably one Of those
periods. It comedies with the season
of natural expansion of commercial
life, and this year, with the arrival,
finally, of a Government program for
public works that should progressively
absorb the unemployed and increase
thereby the public's buying power.
The effect on sentiment Of the re-
funding by the Government Of most
of its high coupon bonds Is an ele-
ment In the situation not to be over
looked, though the saving effected Is
small relative to that Of other coun-
tries that have made use Of easy
money or of dictatorial powers to re-
duce the annual service Of their debts.
Perhaps too much has been said Of
the awakening Of the capital market,
for q large portion Of the new issues
publicly noated since February have
been to replace one piece Of paper
at q certain coupon rate with another
at q lower rate. Very little new money
has been involved, except in munich
pal financing.
(Copyright. tfe35. by the North, American
Newspaper Alliance. Inc0