Evening star., 1935-08-04
Markets Anticipate Still
Greater Recovery as
Autumn Nears.
INDUSTRIES PUSH AHEAD
IN USUALLY DULL PERIOD
Business World More Inclined to
Make Commitments Despite
Legislative Projects.
BY CHARLES C. SPEARE.

which was distinct in July and
promises to gain momentum in Au-
gust, and TO the inevitable quest OF
the possessor of idle money for O
satisfactory outlet for his funds.
In each week of July the ratio OF
iron and steel production to capacity
rose until it has reached 4S per cent
the highest since April. Associated
with this is a sharp advance in
scrap steel. As the steel manufac-
turers estimate they can make a
profit with production at or near the
present rate of output, iron and steel
stocks have been buoyant.
Last month, also, the production
and sale of electric power expanded
constantly and have now reached the
highest levels since the Summer OF
1929. This has renewed confidence in
power and light shares and overbal-
anced the effect of legislation to cur
tail the activities of the holding
companies. If the utilities some years
ago could have throttled the acquisi-
tive and elusive Mr.. Hopson, they
might have had less annoyance from
Congress.
The index Of construction opera
tions points upward. This fact has
been noted by those who have a
preference for the securities of con-
Germs manufacturing building sup
plies. These have joined the list
now quoted at the highest prices OF
the year.
AS the evidence points to a revival
in the durable goods trade, after a
long period in which consumers
goods have produced most of the &C.
tivity in business, the promise is fol-
an Autumn gain in railroad car load
ingS, which will help to offset the
poor showing of the first half OF
the year, when the class one carriers
had net loss of 100000 900. Con-
sequently. we have seen this week
considerable strength in rail stocks
that have lain dormant for months
Many Industries Busy.
The automobile and electrical in
dustries have been pushing ahead
and are active in spite of the ira
dition of dull Summer days. Westing-
house Electric has just declared the
first dividend on its common stocks
since April. 1882. The chemical
trade is employing a substantial part
OF its plant capacity and making
steady inroads into the field of for
elgn competitors. For the first time
in several months the value of June
exports from the United States ex-
ceeded imports.
In all, it appears that the natural
forces of recovery have taken hold
and that the business world is more
inclined to make commitments. al
though still disturbed by the main
legislative projects in Washington and
by the unsettled political and ex-
change conditions abroad.
From the low level reached by
stocks in March, the market has ad-
vanced an average of nearly Is points
1t is also about that much higher
than 1t was a year ago. Therefore
it has met 12-month period, full of
alarms and of dire predictions, with
only an occasional show of weakness.
While it has been rising since March,
the average level of bond prices has
remained stationary.
Obviously, some portion of the CAPT.
tai now going into stocks represents
the release of funds formerly invested
in bonds. While it has not been
found profitable to substitute the one
for the other as a protection against
imitation, it became necessary for
those who required income to re-
place interest obligations of low yield
with either preferred or common
stocks on which the return ranged
from S to per cent. The subsequent
rise in both classes of these securities
compels a caution in buying issues
that previously stood at level con-
spicuously low. 1t invariably hap
pens, however. that when money is
abundant and the investment markets
have little to offer that will attract
the man seeking return, an era of in
discriminate and reckless buying of
stocks develops.
Differing From 1929.
The psychology of the present situ-
alton has points of resemblance with
that of 1928 and 1929. The main
differences are in the condition of the
money market, whose unprecedented
ease excites speculation, and in the
volume Of capital that is on deposit
in commercial banks, earning moth
ing, or in savings accounts on which
the average interest rate throughout
the country will soon be Q per cent.
1t is not improbable that one of
the waves Of an approaching specu-
lation will catch up the dividend
railroad stocks, as well as the shares
Of receivership systems. The market
sets the lowest appraisal on them of
any group Of major securities. They
can be bought in quantity for little
money. This makes them popular
with a certain speculative element.
There is, however, a new set of
conditions that has attracted atten-
ton to these rails, though it Is based
on principle unjust to railroad bond
holders. The elements of it are to
be found in the proposed reorganiza-
ton plan Of the Missouri Pacific.
This essentially favors the stock
holder and continues his control over
the property. AS the size Of the
funded debt Is decreased and, with
it, the annual fixed charges, the posi-
ton Of the stockholder. even with his
sacrifice of total shares, is improved.
As the different railroad properties
In receivership are reorganized, II
will be found that the r. F. c., which
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