Evening star., 1937-01-17
RISE Of UTILITIES
REVEALS SHIFT IN
MARKET OPINION
Railroad Issues Also Win
Spotlight After l Lagging
for Long Period.
CLIMB HELD JUSTIFIED
BY POWER EARNINGS
Electric Production Again Moves
Sharply Forward-Fears of
Far.0f Trouble Fade.
BY CHARLES r. SPEARE.
Special Dispatch to The Star.

D1 NNhkSALo r . Oh EAksEs
Special Dispatch to The Star.
NEW YORK, January 16.-f there
Is sign of q change of position on the
part Of buyers of stocks, it will be
found this week in the larger per-
centage Of gain in public utility and
railroad issues than in industrials.
This is q natural and a healthy shift.
For the shares of manufacturing COM
panies have long been in the van OF
the movement upward while the other
two groups have Jagged behind.
The public has been slow to divorce
itself from the sentiment that securi-
ties Of the power and light compa-
nies could not improve SO long as they
were facing the threat OF Federal
competition as well as litigation that
might eliminate some of the holding
companies.
Recently this same public has ar
rived at the sensible conclusion that
the factor that makes for values Is ac-
tual earnings plus prospects for still
more earnings: not some far OF, an
ticipated trouble.
Consequently. 1t has shaken OF its
fears and entered boldly into the
market for utility common stocks.
The graph Of power production has
taken another perpendicular rise since
the first Of the year.
Position of Rails Improving.
As for railroad equities" the sur
roundings have become increasingly
favorable in the last four months.
Those roads that. in 1885. did not
cover their fixed charges, ended 1886
with a margin to spare. They have
every prospect of doing even better
in 1887.
The motor strike has not so far af-
fected the lines that recover most
quickly when the durable goods indus
tries are active. The reason for this
is the high ratio Of production in iron
and steel again this week, though sew
eral Of the largest plants Of the Cen
eral Motors Corporation are shut
down. Obviously, the carriers will be-
gin to feel the effect soon II there IL no
break in the strike.
It is significant Of q changed point
Of view toward this group Of stocks
that 4 vigorous buying campaign in
it should have started after the emer-
gency rates had been cancelled and
the most serious labor war since 1922
had begun.
Liquidation Thorough.
The truth is that the railroad finan-
cial situation has been quite thorough
ly nquidated and control Of trafic has,
for the first time in seven years, in q
considerable degree, been won back
from the motor trucks and busses.
These two competitive agencies are
now beginning to face the financial
realities OF their business. One of the
most important Of the trucking COM
panies has just ended a year of heavy
losses.
It will, however, require time to
erase from the public's mind such
railroad exploits as the Van Swerin-
gems engaged in and the accompany
ing looseness Of procedure by their
bankers in the distribution of their
securities. No wise speculator will
enter into q railroad commitment
such as those in which risks were
formerly accepted and expected until
he is certain that, under Federal
laws, no repetition may be possible of
inexact financial statements Ito be
charitable in termsl, or where in
siders take their profits while they
are urging the public to buy what
they find it advisable to sell. When
the Van Sweringens are characterized
as empire builders" one recalls the
era of Jay Gould and Jim Fiske.
The truce in the motor strike an
nounced Friday stimulated more buy
ing Of rails, while stabilizing other
sections Of the market that had shown
nervousness over the possibility Of q
long and costly warfare.
Higher Money Rates Expected.
Much besides the proportions of q
building boom are tied in with the
question Of money rates. A slight
suggestion Of q hardening In short
term loans was given this week in the
acceptance market. This affected the
list Of United States Treasury loans.
1t did not, however, prevent munich
pal and corporation financing at low
cost to the borrower, as witness New
York City's 3 per cent loan for
$50,000,000 bringing q premium of
81 per cent. This refunded q 6 per
cent issue placed in 1892.
There is . distinct idea in banking
circles, and among some of the mem
bers Of the Federal Reserve Board,
that higher rates for money are not
improbable this year, as business
recovery proceeds, commodities rise
and the costs of labor in all directions
increase with shorter hours in effect.
It Is also believed that q definite
trend has begun away from high-pre-
MUM, low-yield, long term bonds and
into either common stocks or specula-
tive mortgages and debentures. The
fact that it appears possible to bal
ance the budget for the fiscal year
1898 and to keep the Nations debt
at $35,000, ,000, 900 reduces the need
for maintaining an abnormally low
rate of interest, even though there is
80 per cent Of the debt maturing in
the next 5 years.
(Copyrisht. 1887, By the North American
Newspaper Alliance, 1ne.)