Evening star., 1936-01-19
Bearish Technical Status of
Stocks and Other Fac.
tors Studied.
INITIATION TALK SPURS
FOREIGN LIQUIDATION
Readjustments in Prices of Con.
sumer Goods Forced by Courts
A. A. A. Decision.
BY CHARLES F. SPEARE.

a rather confused state that business
finds itself this week, after the steady
recovery since october.
This is not surprising. The A. A. A.
decision of the United States Supreme
Court has upset the Governments
budget calculations and compelled re-
adjustments in prices Of consumers
goods. The bonus bill has made
necessary further commitments by the
Treasury that remove the budget fur
ther from balance than the earlier
forecasts had indicated.
There has been much talk Of dollar
6evaluat!on as sequel Of lost process
ing taxes This has affected the foreign
exchange and caused certain
amount of European liquidation of
American securities. The rapid ad-
vance In common stocks has created
a technical situation in the market
that, temporarily at least, is bearish.
Pending more certainty as to the
effects of these changed conditions,
business. sensitive to Wall Street and
Washington developments. has become
quieter. Iron and steel production has
not had the improvement anticipated
this month. For the first time in
weeks bank clearings show decline.
Reports from number of the Federal
Reserve districts are to the effect that
trade has been reduced by the un.
known quantities resting in the A. A. A.
opinion of the highest court and in
other cases that are now before 1t.
Food Prices Decline.
Consumers are demanding what
they believe to be their right propor-
ton of the refunded processing taxes.
Concessions have already been made
to them by bakers and butchers, and
lower schedule of prices is expected
on other food supplies.
At the end of December, the retail
food price index stood at 82.5, COM
pared with 745 for the year previous.
Since then it has dropped sharply and
is now the lowest in five months.
Whether what has been lost by the
producer will be compensated in the
national economy by the advantage
gained by the consumer remains to
be seen.
Not all of the trade statistics this
week were unfavorable. The electric
industry showed an output 11.2 per
cent greater than year ago A SINH
lar rate of gain was recorded IN rail-
road car loadings Production OF coal
was higher. Retail sales in portions
of the East ran ahead of the same
period in 1885. Corporation reports
for that year included earnings Of 81
share on American Telephone &
Telegraph stock. against less than s6
in 1884, an increase of l6 per cent in
the orders of the General Electric Co.,
and the largest sales by mail distribu-
ton houses since 1929. A number OF
increased dividends, growing out of
1885 profits, were declared.
Buying Power Greater.
In spite of the decision of the United
States Supreme Court invalidating the
A. A. A., it is the opinion OF the
agricultural implement manufacturers
that they will have another good year.
Their judgment is that recovery In
the farm States since 1882 has given
the farming industry solid basis on
which to expand. and that. while its
problem has not been solved and must
be by one political party or the other
(Mr. Hoover offers the solution OF a
subsidy for special crops, its present
purchasing power insures good mer.
chandise movement into the North
west. Central West, Southwest and
South next Spring.
From this. the national distributors.
the chain stores, automobile and furni-
ture manufacturers and the railroads
are expected to benefit.
The results from the 1885 crops, In
respect to size and value. will de-
ternnine the business trend in these
sections in the second half OF the
year.
Spectators Turn to Rails.
Because the average of industrial
common stocks is so high and the
income return on them so low-some
of this weeks active issues yielding
only 1l4 to 12i per cent-the specu-
lative movement has been toward rail-
road shares and the lower grades OF
railroad bonds.
There has been an obvious gamble
in the cheapest members of this
group. with much favor shown to the
securities of systems in bankruptcy.
Even here, there is sharp dividing
line between those with future, as,
for instance, bonds that have a prior
claim on earnings and are selling at
one-fifth to one-third their par and
will probably be paying interest within
the next two years, but at rate much
lower than the original. and income
bonds, adjustment bonds and deben-
lures far removed from earnings, as
we'll as common stocks, in which there
is to be little salvage in reorganiza-
ton.
In the first group there are oppor-
tunities for attractive investment; in
the other. few and high-loss risk.
Municipal Issues Up.
The low rate of money and the
scarcity of supply of high-grade
municipal and corporation bonds has
pushed up this group again this week.
A large volume of city and State
issues has come on the market at
prices exceeding those of last year.
The premiums on the new low coupon
public utility issues suggest close to
a 1925 per cent basis for some of the
refunding bonds now under negotia-
tion. The needs of the railroads in
cars and locomotives are heavy and
must soon be met.
This is bound to reopen the markeA
for equipment trust certificates. OF
lCoutiuued on Fourth PaRe.l