Evening star. [volume] (Washington, D.C.) 1854-1972, 1939-06-09
Market Observers
Believe Liquidation
Has Played Out
Owners of Stocks
Appear to Prefer
To Stond Pot
erecial Dispatch to The Star.

sreclsl Dispatch to The Star.
NEW YORK, June 9.-The test of
a speculative market is its response
to the news. When unfavorable
outside developments are ignored
and produce no important liquida-
ton, the inference is that they have
been discounted. Similarly, when
good news fails to stimulate fresh
buying, warning signal has been
given.
These rules are the product of
long years of experience and they
are still valid, although the difficulty
of applying them is greatly in
creased by the excessive "thinness"
of the present market under string
ent Government regulation. Now
adays, it takes only a little selling
to put prices down, and as little
to put them up.
Closer analysis, however, leads
to the belief that liquidation is
about played out as things stand
at present. Doubtless, if another
crisis develops abroad, the list would
give way, but, in the absence of any
turn for the worse in the foreign
situation, it is evident that owners
of stocks prefer to stand pat. They
may not relish the political or eco
nomic outlook, but they seem to
feel that they are about as well
off with their stocks as they would
be without them. In other words,
there is no case for the superiority
Of cash to investment in securities.
Is Negative Assurance.
Obviously, this reasoning is far
from pointing to the probability of
bull market 1t is negative as
surance. however On the positive
side, there are some encouraging,
but indecisive, indications.
Good earnings reports are fol-
lowed, although after a considerable
lapse of time. by moderate demand
for the stocks represented. This is
true particularly of the merchandise
ing shares, both chain store and
mail order issues. 1t is true of Sc
lected stocks of the consumer in
dustries. AS a matter of fact, the
heavy industry type has too few
good income statements TO offer.
The point, however, is that, with
income from high grade fixed-in-
terest obligations down almost to
zero, there seems to be little more
attention paid to semi-speculative
commitments. That would be logi-
cal in any event.
The average yield on the latest
issue of 9l-day Treasury bills is
00O4 per cent. or 4 cents on 81 ,O0O
This equals the record. The re-
turn on two-year Government OBJ
legations is nothing to brag about.
On these, Mackay e. Co. has fig
ured out that the amount neces-
sary to invest to buy a morning
paper daily is $4,000 a year, and,
to buy package of cigarettes daily,
is 1858 900. 1t is something of a
stunt to live on ones income from
investments in Government securi-
ties these days.
Demands for Bonds.
Meanwhile. short term notes of
municipalities with good credit are
eagerly snapped up. The bond
statesmen cannot get enough to
supply the demand of their GUS
toners. Nevertheless. the statesmen
are not exactly happy about the Sit
uation. A bank that buys a two
year obligation at this rate is going
to hold 1t to muturity There is
no chance of switch into some
thing better during that time. as
the bond men see it. Investments
OF that nature, if they fiuctuate in
market price at all, have only one
way to move, which is down.
The weekly bank statements re-
veal no change of trend. Demand
deposits continue to rise. They are
now S2,376, 900, 900 above where they
were year ago. Commercial and
agricultural loans are lower or sta
tionary. They are off $4,000, 900
from this time in 1888. Brokers
loans are up modest $4,000. 900,
but a good deal of that represents
borrowings by dealers in connection
with Government financing. The
stock exchange compilation, which
covers Slightly different field from
that of the reporting Federal Re-
serve member banks. shows that
these loans in May had declined to
within $4,000, 900 of the lowest since
400