Detroit evening times. (Detroit, Mich) 1921-1958, 1942-05-04
Market Shows
Life in Issues Of
GoodConnpdnies
Careful Investors Pick
Select Stocks; Bottom
May Not Be Here Yet
By LEWIS HANEY

Professor of Economics, N. Y. GnsssFsssy
While the action Of the stock
market gives no definite evidence
that the bottom has been
touched, it is good enough to
prove that the bottom has not
fallen out.
Clearly there is life left, and
IL has been demonstrated that
buying can and will come into
good stocks when conditions are
at all favorable. Witness the
sharp rebound in telephone last
week. on a good volume q
trading in the stock.
I do not recommend unload-
ing here any stocks OF well-man-
aged sound companies. l think
that the careful investor may
well select the issues in which
he would like to increase his
position, and adopt scheme OF
scale-down buying.
Briefly, the case in favor OF
stocks is as follows:
There is a considerable short
interest which may be driven to
cover, and at least cause rallies.
The seasonal factor Is now be-
coming favorable. The decline
during the last three weeks In
April was exactly as seasonal
variation called for. Similarly
there is a tendency for the mar
ket to get turned around in May
and rise in June. Something OF
this sort is usual.
Signs of Good Buying" are
reported by competent observ-
ers. Some careful and successful
investors are buying stocks mod
erately and on the scale down.
Most of the bad news is out.
In the first place, the worst Ii
probably being confronted in the
way of a war tax program.
Then. too, the Japanese victory
in Burma Is known.
The pessimism of m rk ct
traders is great - perhaps the
greatest since 1882. The general
idea seems to be that stocks Will
go down for another month or
two, which is a good sign that
no such thing will happen.
In fact, the market has now
had so long and considerable a
decline that one should begin to
look for bottom. There is good
evidence that recent lows dis
count worse declines in earnings
than now seem at all probable.
The rise in public utility
stocks is a notable change, and
suggests less pessimism concern
the governments policies.
Corporation bonds have
worked a little higher.
Congress continues to show
independence.
Schemes for taxing corpora
ton profits are tending toward
the conservative side. They all
show drastic increases. but they
do not show a tendency to de-
stroy private enterprise. It seems
probable that normal and sur
tax rates will be reduced, and
be figured first. Then the "ex-
cess" profits will be figured on
some basis that makes them
reflect war business" and be
largely taken by the government.
This general approach is essenti-
ally sound. The action of the
market Friday showed either
that the worst in the way of
taxes had been discounted, or
that Congress is expected to be
less radical than the administra-
ton: This helped the utility
stocks.
So. while the rally has been
partly short covering. and has
been attended by little activity,
it has some significance. The
number of new lows" remains
considerable. War news is none
too good. The administrator
attempts to control the whole
economy under the pretext of
fighting imitation" is a menace.
But believe that individual
freedom will win in the end.