Evening star., 1935-12-22
POLITICS TO GUIDE
SECURITY TRADING
INCOMING MONTHS
Conditions Abroad and at
Home Lead to More Cau-
tiouS Attitude.
CLEARER VIEW LIKELY
AFTER TURN OF YEAR
Congressional Plans, Court Deci-
sions and Developments in Eu.
rope to Be Watched Closely.
BY CHARLES F. SPEARE.

Special Dispatch to The Star.
NEW YORK, December 21.-The
markets this week have been under
the influence of political conditions
at home and abroad. These have
a significance in their bearing on
future events that may well have
caused hesitation among those who
have been expanding their speculative
for months. They have
led to caution and inaction.
Along with them is the seasonal
tendency to slow down, to balance
accounts and to look for leads in
the financial policies Of the admin
istration.
These will be indicated after the
turn Of the year, in the legislative
slate of Congress, the decisions OF
the United tSates Supreme Court and
the effect that the explosion in the
British cabinet and the delicate hold
on authority of the Laval government
in France may have on the Italo-
Ethiopian War.
From now on to the election next
November politics will play an i'm
portant part in determining the ebb
and flow of security prices. For, to
every financial or social program ad-
vanced in Washington, there will be
suggested a political angle.
The severe break this week in silver
is being treated politically, as well as
The purchase plan was
doomed to failure, but Congress COM
PEELED the Treasury to carry it into
effect.
Townsend Plan implications.
The implications Of the election
in Michigan of a member of Con-
gress supporting the Townsend old
age scheme are political, as possibly
causing a split in the two leading
parties. though the financial aspect
of this strange situation is the more
serious Of the two.
The question OF relief, as 1t Is to
be administered In 1886 and how
budgeted, offers great opportunity for
political debate. In this ex-President
Hoover has the better Of the argu-
ment, though his assertion that the
banking panic in 1888 was brought
en- by fear of the Roosevelt philoso.
ply will not stand up under inn
partial analysis. Between December,
1929. and June. 1882, before the
nominations, 4,400 banks
in the United States had failed and
/ 100 more failed prior to the inaugu-
ration in March, 1888. A banking
holiday was inevitable. So was the
departure from the gold standard
that followed.
1t is proof Of the soundness of
the business recovery that it pre-
ceeds in the midst of so much that
seems to threaten it politically. In
dustry has developed a momentum
carrying it each week to higher lev
els. Retail trade is 10 to Is per cent
above the great expansion occurring
in the holidays last year. Bank clear
ings register gain of 20 per cent.
Electric power output is at another
'all-time" peak. Rilroad car load
ings continue to show increases over
the corresponding period in Decem-
Der, 1894. The iron and steel ratio
is up fractionally and holding near
the best of the year, though it ira
should now decline sharply.
Sees Signs Of Recovery.
In his remarkable letter this week
to New York newspaper, S. Parker
Gilbert, partner of ]. P. Morgan &
Co. and former Undersecretary Of
the Treasury with Andrew j. Mellon.
speaks of recovery as manifested in
the gradual reopening of the capital
the improvement in the
mortgage situation, with consequent
better hopes for the revival of build
ing, and the prevailing low cost of
money for refunding purposes and
even for new enterprises"
The r. F. G. has offered to re-
the $100,000,000 of Great
Northern Railway 2 per cent bonds
on per cent basis. The Jones &
Laughlin Steel Co. and the Pennsyl-
vania Railroad are borrowing fresh
capital for expansion purposes.
The Board of Governors of the Fed
eral Reserve Banks, after their Wash
ington conference on the excess re.
serve problem, issued statement, in
which they spoke of the continued
in business and financial
but added that the coun-
try sis still short of full recovery"
Taking 100 as normal Q929 was
abnormal at 115), the present business
index stands about 20 per cent under
the level that would indicate "ful
recovery" In June, 1882, held by
many to have been the low point of
the depression, it was less than SO
Der cent of normal and nearly as low
again in October, 1884. The uplift
of the past IA months has been con-
slant and quite sensational since Sep
tember.
Imitation Fears Gone.
One truth established by the open
of the excess banking re-
serves is that there is not today any
alarm felt in high banking quarters. or
in administration circles, over infia-
tion.
There will be deep disappointment
if the Forthcoming budget, to be pre-
sented to Congress next month, does
not reveal definite and substantial
correction of the present borrowing
and spending policy in washington,
however.
The attitude of the controlling bank
ing interests to bank credit-and this
agrees fully with that recently pro-
claimed by Gov. Mariner S. Eccles
Of the Federal Reserve Boards i'm
portant in It's implications both to
stocks and to bonds.
To the former 1t means that, from
q speculative standpoint, the factor
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