Evening star., 1935-12-08
RAILS ATTRACTIVE
TO BIC INVESTORS
AS TRAFFIC GAINS
Speeding of Reorganiza-
tions and Technical Posi-
ton Are Factors Also.
PROFIT-TAKING CURBS
GAIN OF INDUSTRIALS
Much Greater Improvement Held
Necessary Before Public Joins
Shift to Carriers.
BY CHARLES F. SPEARE.
rial nisnatch tn The Star.

Special Dispatch to The Star.
NEW YORK, December 7.-During
the eight months from March to No
vember, when the average price OF
industrial stocks advanced over so
points, the net gain in the railroad
share list was 10 points. This Is the
third week during which the trend
of the industrials has been affected
by profit-taking and shifting to other
sections of the market.
In the meantime new attitude
on the part of large investors. In
cluding individuals and institutions,
toward the securitieA Of the steam
carriers, has developed. 1t has been
created out Of, first, the improvement
in car loadings; second. the october
showing of net operating income;
third, the indications of earlier re-
organizations of bankrupt systems
than had seemed possible few months
ago, and, fourth, the technical con-
dition within the market which ap-
peared to suggest an oyerbought and
overpriced group of manufacturing
stocks and an undervalued list of rails.
It will require many months OF i'm
provement in the traffic and revenue
position of the railroads to overcome
the prejudices Of the general invest
ing public toward their securities.
Those who are now accommodating rail
stocks are not the small traders and
investors. Their faith in the recovery
of the transportation industry, TO a
point where there will be a safe mar
gin over fixed charges and some re-
turn to a dividend basis by at least
a score of companies that have paid
nothing to their shareholders since
1881, has yet to be born.
United States Ownership Predicted.
There is a general opinion that the
outcome of the railroad problem in
this country will be Government own
ership. Only this week the editor of
the leading railway publication con-
feSSed that he had finally reached this
point of view. 1t is also held by the
representatives of the Government
who have most to do today with the
operation and the financing OF the
carriers. They do not believe it IS
imminent. Obviously, such change
in control would be to the advantage
of railroad bondholders; not to the
owners of the stocks of systems that
today have a high ratio of capital
stock and junior bonds to their prob
able earning power during the next
decade.
The unfortunate fact is that so high
a percentage of railroad mileage Is
clouded by bankruptcy. Another small
system this week has announced de-
fault. Encouraging developments in
the way of the consolidation of roads
in the Northwest and in the South
west, as preliminary to reorganiza-
ton, are under way, in which real
istic attitude toward the question Of
duplication of mileage and of facilities
Is being taken.
With so much new competition fac
ing them, the salvation of most Of
those lines that have broken down
financially since 1882 lies in their
ability to reduce their operating ex-
penses to a minimum and to raise
their unit of net return by manifold
economies.
Recovery Helps Roads.
Naturally, the railroads will steadily
improve their position as the breadth
of the business recovery extends.
Therefore, the continuing evidences
of activity in many lines of trade
helps to maintain a car-loading rec
ord that is well in advance of one
and two years ago. The various
phases of recovery expressed in iron
and steel production, electrical out
put, building construction, automobile
manufacture and sale, retail trade and
bank clearings may be consolidated
try which, this week, is the highest
in five years.
Rejecting it Is a steady flow of
announcements of dividends resumed
or increased, making for the largest
volume Of funds available for reinvest-
ment on Jaunary l since 1882. Along
with this is the higher collection of
AlIcIcSG OH TOd4 SSGdGe mortgages ana
the Is per cent average rise in rents,
all expanding the national income
and providing greater purchasing
power for an army of consumers.
Some of this rteurn on investments
is now giving momentum to what
promises to be the most active Christ
mas trade since 1929.
The bankers of the country this
week rejected the advice of the newly
elected vice president of the A. B. A.
and eagerly sought allotments to the
$500, 100000 of the IL per cent
treasury notes and 1912 year bonds
bearing a coupon rate of az per cent.
These are expected to provide for
Federal requirements through next
March. The issues were five times
oversubscribed.
A significant item In the combined
investment portfolio of the insurance
companies, published this week, is
81, 500 100000 of u. S. Government
obligations. During the last year these
trustees, responsible to $4,000, 900