Detroit evening times. (Detroit, Mich) 1921-1958, 1942-03-30
Tax Worries
BringLiquiddtion
Of 'B|ueChips'
OWar News Big Factor
as Investors Hold
for The Long Pull
BY LEWIS HANEY

Professor OF Economics, n. y. University
Obviously a critical position
IS now occupied by the stock
market. The market has been
driven back to the line of the
preceding low, which is also
about the December low. More
than that, even some of the
broader averages are not so very
far above the four-year low.
Wors' still. there is no evil
dence either in the markets
action or in the fundamental con-
ditions, that these lines of re-
Slstance may not be broken.
Any one who holds stocks as an
investment must do so. in part.
on the basis of faith in the eco
nomic system in which stocks
are equities" the system OF
individual initiative and private
enterprise. He must be holding
for the long pull"
Just now. the uncertainty at
tending the approach OF spring
military drives IS doubtless a
factor. The Russian machine
has been making little progress.
The Japs are threatening in
Burma IS here the danger
lies rather than in Australia,
according 10 my guess
Oh 10 CO
does not lie in these things. The
war that threatens the stock
market IS the war on business.
This has little 10 do with the
war economy" as such. II is
war that existed before the
Arld War as a military con-
-. II is the var OF radical
labor organization on capital. II
Is The attempt 10 cure business
depressions by destroying bust
ness.
Immediately. the tax question
seems TO be worrying investors
most. II is this which seems 10
be causing the liquidation in
hleh-priced "blHe chips This
factor. however. should pass.
High taxes. If nondiscrimlnatory
and not designed 10 destroy. can
be borne.
The testimony Of Mr.. Paul.
the reasurys TAX expert,
against narrow profits restrlc-
tons. is hopeful. So is the serious
consideration by Congress OF a
sales tax.
II this were all there were 10
fear. the delayed recognition by
holders Of high-priced telephone
and chemical stocks that their
dividends will be reduced by the
war, would be a temporary fac
tor. II might be the last phase
Of the markets adjustment 10
a war economy.
But the question remains. Is
laborlsm going 10 replace capt.
ialism? Is the political alliance
between the administration and
the leaders of organized labor.
going 10 prevail and carry
through its uneconomic policies?
Something like this. IS the issue
10 be watched.
At the moment, the previous
lows in the averages are threat
cncd. The rally was diSappolnt-
ing. and mostly short covering.
The active stocks are down. The
large majority show declines.
New lows are predominant A
good many issues are at new
rs since 1888.
Oigh-grade investment issues
sfill reflect liquidation by those
who fear reduced dividends. The
indications are that earnings
and dividends have passed the
turning point. Holders Of utility
preferred stocks have become
demoraliZed.
But great dullneSS continues
10 prevail during most Of the
decline. The belated liquidation
of the old investment favorites
may clean up the last weak
spots and "straighten the line
OF market resistance.
Above all, il seems that radi-
cal labor demands for manag-
erlal powers are not 10 be
granted, and that taxes 10 de-
stroy profits are not 10 be
adopted.
So l remain somewhat hope
full that the decline will go little
further. and / recommend hold
ing good high-yield stocks as
being as good as any property