Detroit evening times. (Detroit, Mich) 1921-1958, 1942-05-25
War Prediction
FdiIs 10 Affect
6tolks but Little
Indicates Recent Rally
Mixed Affair Partly
Based on Peace Scare
BY LEWIS HANEY


Professor Of Economics. N. Y. University,
The action of the market
Friday, following the Presi-
dents statement about the
length of the war, suggests that
the recent rally was really a
mixed affair, only partly based
on peace scare" II the rally
had been entirely based on the
early-peace notion. there would
have been a more considerable
shake out. Actually. there was
little change-not much more
than the usual Friday even
ing up" might have caused.
Perhaps the general war psy-
chology may best be described
as now showing relief from any
fear of defeat. Certainly there
Is more confidence as to the
ultimate outcome than there
was a month or two ago. This
alone would help the market.
Logically. moreover. this leads
TO the conclusion that we need
hardly fear as long a war as we
did while back. This, too.
should help the market. But
these points are far from war
ranting a peace scare" or con-
fidence of an early" victory.
More significant just now are
occurrences on the domestic
front, where taxes and the labor
Aroblem are the chief factors.
AS TO the former, IL is clear
That those companies which, as
a result OF war business. are
for the first time in recent
years making large profits, will
be taxed very heavily. The ex-
cess profits tax will get the
bulk of their net earnings This
alone is sufficient TO depress
part OF the so-called armament
stocks.
On the other hand, there is
evidence of fairer and more
sensible counscls prevailing in
general taxation. which tends TO
aid many companies not solely
dependent upon excess war
profits.
As TO labor. there Is plain
evidence that Mr.. Roosevelt is
trying 10 make turn in his
nro-labor policy, and to put
ome sort OF a partial ceiling
Yer wages.
Clearly the peace" rally last
1ck was not well conceived.
obably il was based chiefly
7 technical conditions. This is
iggested by the way IL reacted
il hit the 100 level of the
ow-Jones irdustrials. where re-
stance had been anticipated.
w the technical position has
'cn weakened, as by short
,vering" in such stocks as
nerican Teleph one and
'hrysler.
1t should be noted that the
new lows" made have been in
the majority compared with new
highs.
There Is a possibility that
before long business will be
somewhat more backward. The
"syphoning" of pure h ing
power. rationing. price fixing
squeezes and roll backs" and
Apther government war controls.
hre bound 10 have increased
effect.
Thus some further small re-
action and irregularity in the
stock market seem likely.
But I would emphasize the
fact that the action OF several
stocks following dividend cuts,
shows that the market has al
ready discounted most of the
bad news.
The increased breadth and
volume shown on the rally seem
10 show an underlying tendency
that is upward.
There has been an increase
In the number of new highs"
and a decline in new lows"
The maintenance Of the Tele-
phone and General Electric divi-
dends is a favorable symptom.
And don't forget the chang
ing presidential attitude toward
wages.
On the whole, IL looks as IL
the stock market may have seen
the worst, and that the next