Henderson daily dispatch. (Henderson, N.C.) 1914-1995, 1938-11-18

been narrowed or virtually closed UNI
der. new legislative set-ups. A good
example of this is the mortgage paper
field. Only few years ago conser-
Na(tive Investors could always buy
good mortgages to yield six per cent
return. The Home Loan first and then
the F. H. A. killed this class of in
vestment. Utilities are another exam
ple-they are still unattractive to-
many investors because of political
saber rafting.
Pension Funds Growing.
(2) The Social Security program of
the government, plus pension policies
of individual companies, call for big
reserve funds. These reserves must be
invested. So far, government Sc
curities have been getting the call for
this purpose. Sooner or later, how
ever, the demand from this source
will spill over into corporation Sc
curities.
CD Bond investors are having a
hard job to pick up good new issues.
Many a company needing capital is
selling its new securities directly to
insurance companies. This practice
provides. detour around some of the
governments restrictions and require
ments on capital offerings Moreover
l believe that the direct sales of new
securities to institutional investors
will increase rather than diminish.
a. Banks may also buy direct. A
to make two or three per cent on their
49, 4 4-1
tire issue of securities. This, of course
would further restrict the supply of
desirable investments available to the
public.
60 This trend toward the private
sale of securities is now limited to
bonds. However, the same thing could
happen to new stock offerings. Fire
insurance companies and investment
trusts are big buyers of stocks. They
are just as eager to get good stocks
as life insurance companies are to get
good bonds. They could easily suck a
hole in new stock offerings if they
should also decide to short-circuit the
S. E. c..
Huge Demand For Securities.
Then there are also basic reasons
why the potential demand for Sc
curities is greater than ever before:
Cd Money available for investment
is the most abundant in history.
Banks, insurance companies, and in
dividual investors have huge wads of
cash ready for investment. Credit re-
serves are very large.
(2) Tax laws are forcing money into
existing securities for there are few
brand new issues. Such financing as
has been done in recent years is al
most entirely refunding of existing
securities. New promotions are being
discouraged by tight financing regula-
tons, while heavy taxes on capital
gains make big investors leery of put
ting funds into new enterprises.
End of Tax-ExemptS.
CD Elimination of tax exempt bonds
will be one of the biggest factors in
pushing up corporation security prices
over the next few months. 1 think
that tax-exemption on new govern
ment bonds will be stopped. Many peo-
pie who buy such bonds, because of
the elimination feature alone, will
prefer choice bonds and stocks of
private companies
"a Interest rates are very low. The
low rates paid at savings banks and
on life insurance premiums and an
nulties, and the fact that no interest
IS now paid on commercial accounts,
make many persons seek choice Sc
curities selling to yield three to four
per cent. Some of these people were
never bfor interested in stocks or
bonds.
90 Forign funds are constantly
drifting into American investments.
The United States and Canada are
haven for distressed capital from all
parts of a frightened world.
Conclusion.
The combination of the huge de-
mand for good securities and the dim
inishing supply of such issues should
push prices of well-selected stocks and
bonds higher. Although prices have
already advanced sharply, am con-
WINGED that medium-grade bonds or
choice stocks will move higher
p. S. have received so many let
ters from friends and critics of Dr.
Townsend regarding my statements
of two weeks ago in this column that
it is physically impossible for me to
answer them. Therefore, 1 take this
means of thanking both those who
criticize and those who approve. I
shall try to be guided by all this cor
-eSpOndence r. W. 3.