Evening star., 1937-10-10
BY CLAUDE A. JAEGER,

Street mas erased ABOUT Sl0 0,00O,OOO,OOU
in stock values in the last two months,
and provoked some of the liveliest
controversy in recent years over the
course of business recovery.
No such abrupt shrinkage in share
values has been experienced since 1881.
The total quoted value of listed shares
as calculated by the stock exchange
as of october l at s49,034. 100000
showed cancellation only of the gains
since May of 1886, yet the drop has
been sharp enough to renew the dis
pute over the stock markets ability
to forecast economic trends.
Jesse Jones, chairman OF the r. r.
c., speaking in New York this week,
said: THE stock market may have
been too high. But there seems no
good reason for its going so low as
it has. Business trends are frequently
reflected by the trend of the stock
market. but it Is not an invariable
barometer"
Stocks Guess on Business Wronx.
One of the Nations leading corpora
ton heads said informally the other
day: Fall business is about what busi-
ness men expected 1t to be. but it fell
below the representations Of the
stock market"
Wall Streets explanations for the
slump in stocks are many and various.
Among them may be hstedy
/. While business volumes in the az
gregate remain large there has been
pronounced falling OF in such lines
as steel, cotton textile production. and
residential building, to levels we'll un-
der a year ago.
2. Although corporate earnings for
the first nine months Of the years are
estimated at the largest since 1929,
profit margins lately have shown a
tendency to narrow, what with higher
wage and material costs.
Washington Stems Advance.
3. Washington's efforts over the past
year to shut OF inhationary steam
through higher bank reserve and stock
market margin requirements, and cur
tailment of pump printing" expendi-
lures, have doubtless cooled some of
the rampant bullishness so evident
earlier this year.
4. S. E. c. restrictions upon specu-
lation have curtailed the activity of
professional traders. so that the
market was able to absorb selling less
readily than in the past. In other
words, stocks would drop several
points on comparatively light selling.
Whether this had any fundamental
effect. other than to make the declius
rather pfecipitous is q moot point.
5. War scares probably contributed
to the general uneasiness, althou7h
the markets response to war talk ap-
pears to be subject to the state Of
sentiment at the time. Not infre-
quently in the past it has promoted
buying of metals and other issues
which might benefit from demand for
war materials.
In addition to these outstanding
points, good deal is being said as
to whether the market did not get
too high last Spring.
Buying Power Base Stronx.
Any consideration of the meaning of
the slump, experts say, should take
into consideration that big crops,
higher wages and large business
volumes of the past year have pro-
vided the biggest base of public buy.
ing power in years
A tabulation of September sales of
80 large chain store and mail order
houses shows a gain Of rs per cent
over that month Of last year, COM
pared with only 81 per cent in Au-
gust. This gain is, of course, Offset
to a considerable extent by higher
prices.
A decline in commodity prices. such
as has taken place in many staples
In the past few months, notably cot
ton and copper. tends to slow business
I time as buyers wait to see how
lar the decline will 60 before buying.
This is just the opposite of the ten
dency when prices are rising. for buy
ers then rush to buy before prices 60
higher.
Sales Prospects Seem Good.
whether the adjustments now tax
ing place will be accomplished with
out serious effect upon general busi-
ness volumes remains to be seen. but
preparations are steadily going for
ward for active sales in coming
months.
While there has been something
OF a lull In building, analyses indi-
cate huge accumulated demand for
durable goods which has not yet been
| filled in a recovery program chiefly
designed to rebuild purchasing power
for everyday requirements.
Replenishing of durable goods such
as homes, industrial plants and build
ings, will require growing use of credit
and capital by industry. Withdrawal
of the Government from the CAPITAL
markets, where it has been borrow
ing billions, may help, if>present dis
cussions Of balancing the budget bv
the 1889 fiscal year bear fruit.
In the last five years little moro
than $4,000. 1000 In new cornora.
ton capital has been raised, compared
with $4,000, 100000 in the five wear,
ending with 1929. While industry has
gone into the capital market in this
period for only about $4,000. 600 ooo.
the Treasury has borrowed close to
$40 900, ,o00,0 900.
Balanced Budget Urged.
Bankers have been urging a hal
anced budget to restore "confidence"
in long-term investments and thus
make good capital market for busi.
ness. Transition to a balanced budget
stage is something of an undertaking,
tending to remove stimulating effects
OF Government spending and to cur.
tail national income through increased
taxes. Yet it has been hoped this
could be accomplished in period
OF expanding business without i'm.
portant repercuSsions.
How much progress will be made
toward budget balancing will depend
upon what Congress does next yeat
with taxes and appropriations.