Evening star., 1935-05-05
Lack of Outlet in Trade Ac.
counts Maintains Flow
Into Market.
RISING TIDE EXPECTED
TO SEEK OTHER FIELDS
Common Stocks and Real Estate
Likely to Benefit in Time,
Observer Declares.
BY CHARLES r. SPEARE.

BY CHARLES F. SPEARE.
Special Dispatch to The Star.
NEW YORK, May 4 (N.A.NA).-
The lack Of an outlet for money in
business accounts for the constant
flow Of it into the market for Govern
ment paper.
All the lcng-term Treasury bonds
this week touched new high prices.
This may be accepted as assurance on
the part Of institutions and wealthy
individuals that they regard United
State obligations as the safest and
most attractive medium for their
funds, however much they may dis
agree with the economic and social
policies Of the administration. While
capital is timid, it Is also canny and
self-centered.
There will come a day when cap
ital will grow tired Of its nominal
earnings and become venturesome, or
the levees that have held back the
rising tide of money will break. The
new attractions may be comon stocks,
or real estate, or what now appear to
be extreme risks in the shape of de-
faulted railroad bonds or those in the
twilight zone Of safety. OF the three,
real estate and junior railroad bonds
appear to be most debated and out Of
line with their true merit, and, there
lore. most likely to appreciate in value.
The constant liquidation of small
lots Of these Junior railroad bonds re-
nects the disbursement Of private
investors and institutions over the
railroad outlook. 1t gives an exag-
gerated color to a condition that is
not so bad generally as it seems. It
also reflects the delay in bringing to
close, through proper type of re-
organization, the receiverships that
have been long drawn out and which
weigh heavily on the districts through
which the bankrupt roads run.
Wreckage Must BE Cleared.
There is a strong feeling that more
progress toward recovery in the
transportation industry would develop
II some OF the wreckage could be
cleared up. Whether this will be
early or late depends on the liberality
Of view Of the various committees OF
bondholders which, 50 far, have shown
little disposition to work in harmony.
Each has an exalted opinion of what
its own securities are worth, relative
to other classes of bonds. In the
meantime interest payments on q
large mass Of securities are deferred
and Improvements Of a capital nature
are suspended. which stunts the
growth Of the industries most In need
Of orders and limits the size of nav
rolls for the normal operating staff.
1t Is obvious that there has been q
permanent change in the status of q
junior bond that, before the depres-
sion and prior to the inroads of earn
ings made by motor competition, could
cover its fixed charges, and that hold
ers Of such securities must recognize
this fact. The sooner they do this,
the quicker will be the recovery in
their income and in the possession
OF new stocks or bonds with a decent
market and one not unlikely to be
higher than for existing issues.
The life Insurance companies are an
important element in the reorganiza-
tion process. Two of them have in
their portfolios over $1,000, 900 900 of
railroad mortgages, of which a fair
percentage are now in default. BY q
determined leadership they could,
through compromise and concession
OF reasonable sort, bring reorganiza-
tion plans that have long been stalled
into q stage approaching settlement.
Perhaps 1t may be necessary to modify
the bankruptcy act covering railroad
receiverships before this occurs.
Recent decisions of the courts indicate
the degree to which they are en-
deavoring to terminate receiverships
and prevent others.
Gold Bloc's Problem.
The most important contribution
this week to the controversy over de-
valuation Of foreign currencies came
from the chief economic adviser of
the British government. He suggests
to the remaining members of the
gold bloc that they adjust their cur
rencies to point where the level of
their money will no longer strangle
their trade.
IL APiA, 11ouauo SIuppcQ nearly
$85 0,000 gold to the United States
which it could not afford to lose, and
about $9.500,000 has already arrived
this month. The $4,000, 900 shipped
here in April by France will not, on
the other hand, affect the Bank of
Frances status.
The next mile-post in the foreign
situation will be reached In
June with the referendum In Switzer-
land on devaluation. This, in. antici-
patton Of q change In the worth of
the Swiss franc, has caused heavy
Withdrawals from the Swiss banks.
Copyright. 1895. by the North American
Ma t1io nea YnN