The Ypsilanti daily press. (Ypsilanti, Mich.) 1928-1962, 1944-07-28
BY Roger w. 6abson

Babson Park, Mass. July Is
While the war continues and cash
piles up, interest rates will con-
tinue low. For all practical pur-
poses, bold fotations consist al
most wholly of governments and re-
funding issues. There is no neces-
sity for Mr.. Morgenthau now offer
ing more of a return for the use of
funds for government purposes.
Lack OF competition in the bond
market makes higher interest rates
for government money unneces-
sary.
However, when the war is over
and industr seeks funds, the situa-
ton will change. The Law of Sup
ply and Demand will then bring
about a rise in interest rates with
a decline in bond prices. Hence,
there is little reason for large in
vestors now TO reach for high-grade
bonds except for the tax-exempt
group. Most investors are better
off in governments than they are
In prime corporate bonds. There
fore, there is little point today in
discussing high-grade bonds. Let
us look at certain other issues.
Foreign Bonds
There has been considerable int.
crest in foreign issues for some
time past. Even Russian bonds
Of the old Kerensky Regime have
had a large percentage rise. Any
anticipation that Stain will ulti-
mately recognize these bonds is
extremely remote. Bonds of Nazi-
occupied countries. such as Gee
choslovakia and Denmark. may
continue their present show of
strength as Germany's defeat draws
nearer. Because of the almost con-
slant political upsets. Characters
tic OF the Latin-American coun-
tries, South American bonds have
never appealed to me. There are far
better opportunities in our own
domestic securities than in foreign
governments or industrials.
Medium-erade Bonds
With continued heavy calling Of
top-grade corporate bonds. the
dwindling supply of these issues,
plus their low yield. resulted
some two years ago in attention be-
ing focused upon medium-grade
industrial, utility and rail bonds.
All of these groups have had sub
stantial rises since the middle OF
1912; but the prices of many me-
dium-grade industrials are now
flattening out. This is also true
of medium grade rail bonds, while
medium-grade utilities have actu-
ally turned slightly downward in
the past two months.
or all the medium-grade groups,
perhaps the utilities offer the best
opportunity at the moment. En-
tirely aside from the cleaning up
OF the balance sheets of many uti-
lily companies, 1t must be remem-
bered that we are in an Election
Year. If the war ends prior TO
November and the Dewey-Bricker
ticket has a resulting good chance
OF being elected, then utility
bonds, let alone stocks. should en-
joy great popularity. In fact, from
a psychological point of view, utili-
ty bonds may rise anyway.
Railroad Bonds
Disregarding top-grade railroad
bonds, second-grade rail issues
may show further strength insofar
as we'll placed issues are concern.
ed. UnqueJtionably, the financial
position of most railroad companies
has been greatly improved. Many
short maturity issues have been
brought in by the railroad COM
panies and interest charges after
the war may be considerably less
for many roads than was true in
pre-war days. On the other hand,
traffic is bound to fall off and many
second.grade rail bonds should
sell for less than at present.
Defaulted Rail Bonds
Since the earlier months OF the
year, defaulted rail bonds have
not shown the activity that was
characteristic of them in 1943. In
fact, for the past several months,
they have moved in distinct side.
wise direction. Some OF these