Evening star., 1935-12-29
SECURITIES PUT
ON BETTER BASIS
TO MEET SHOCKS
Months Reaction Also
Paves Way for Response
to Business Gains.
WALL STREET CENTERS
ATTENTION ON BUDGET
Evidence of Spending Curb and
Hopes for Balancing in 1878
Would Stimulate Confidence.
BY CHARLES F. SPEARE.
niaI nirnafch tn Tie Star

Special Dispatch to Tie Star.
NEW YORK, December 28.-Tech-
nically, the condition of both stock
and bond markets has been strength
ened by this months reaction. They
will be in a sounder position to meet
any shocks that may come from
Washington when Congress meets, or
to respond to favorable developments
as they turn up in the early part OF
1886.
Liquidation for the purpose Of es-
tablishing losses for income tax state
ments has been completed. 1t was at
no time heavy during December. Re-
Gently there has been considerable
volume of buying to replace stocks
showing profits.
The immediate concern of Wall
Street IS with the national budget,
which President Roosevelt will present
to Congress when that body convenes
next month. The expectation Is that
the emergency appropriations for the
fiscal year 1867 will be sharply re-
duced and that beginning will be
made in bringing down Government
expenses to a point justified by antici-
pating income.
1t is too much to hope, with unem-
ployment at the present scale, that
a deficit can be avoided this year.
Evidence that it is under control and
that a balanced budget may be real
lied in the fiscal year 1878 will
do much to stimulate business conn.
dence and remove the present con-
Germ. over Government credit.
In a week when business activities
come to q dead halt during the most
widely observed holiday of the year,
and when there is a rapid slowing up
of production with the approach OF
inventory time, numerous proofs were
given of the growing momentum Of
trade. %
In the record of this period is the
IS per cent gain in bank clearings
over last year, the rise in electric power
output to above the 1000 600. .o0o- kilo-
watt-hour mark for the first time, an
advance in the early part Of the week
in the business index Of the country to
the best level since 1880, with some
reaction from this later, and less of
a decline in the iron and steel produc-
ton than seasonal. While this last
registered q drop Of points to 48l2
per cent of capacity, it compared with
35.2 per cent in the same week OF
1884 and with 31.6 per cent in 1888.
The steel trade journals refer to the
dictated inventories" of finished steel
products and predict resumption OF
buying after the turn of the year.
Included in the weeks grist Of
| favorable facts is a list of remarkable
railroad statements for the month Of
November. In October, it will be re-
membered, the carriers turned the
corner with respect to earnings ap-
plicable to fixed charges. While their
gross revenues were about 1872 per
cent greater than in the same month
last wear. they were able to show an
increase of SGT ,645 in net, or about
"a per cent more than in the previous
period. Many of them did even bet
| ter last month.
A group of Is systems report oper-
ating income 65 per cent ahead OF last
wear. The Union Pacific had q gain
of l25 per cent, the Norfolk & West
ern enjoyed the most profitable month
in six years, and two bankrupt lines,
the Cotton Belt and the Missouri Pa
cific, made an amazing recovery. This
is pertinent to the scheme OF reor-
ganization that must before long De
discussed in connection with these and
other lines now in default.
On the reverse side of this picture
of blossoming domestic trade is the
possible effect on it Of the delicate
political situation abroad. Gold I'M
uorts have been resumed this week;
foreign currencies have declined
against the dollar. italy is beginning
to realize that she has no easy job in
conquering Ethiopia and that her re-
sources are running low.
The flight of capital from European
money centers has been constant since
May. The December bulletin OF the
Federal Reserve Board mentions one
important aspect of it, namely, the
purchase of American securities. This
it states, ais attributable in some de-
gree to disturbed political conditions
abroad, but the movement as a whole
appears to reflect q feeling among
foreign investors that an opportunity
for profitable investment of their
funds is offered by the American
market" &c..
British investors turned to this mar
ket when their home loans advanced
to such level that the yield on them
was cut to az per cent. They have
been buying stocks and low-priceo
bonds. The Dutch, as always, have
been accommodating stocks in the lower
price ranges and also second-grade
and defauIted bonds. :, Swiss partici-
patton in the market has been heavy
since the Summer and in securities
whose appreciation, rather than re-
turn, was the prime factor in their
selection. French interest in the
American market has been relatively
less important than that Of British
Dutch and Swiss investors, as the
high money rates at home and the
attractive yields on internal loans
have offered an outlet for their sur
plus funds. Should France devalue
her currency next year there would
undoubtedly be partial liquidation Of
| this large sum of European invest
ment in the American market.