Evening Star Newspaper, December 31, 1928, Page 20

REPORTS REVEAL GAINS | . FOR MANY INSTITUTIONS Banks, Clearing House, Stock Exchange and Numerous Business Ventures Forge BY EDWARD C. STONE. {INGTON banks are to- rounding out the mo sperous year in their hi ashington Clear- ‘Association has s than in any pre- | gton ons increase in bank aeposits he 12 months. The last call of | awvas dated October 3. On that date the local banks reported total deposits amounting to $274,232, «1831.27 against a total of $264,578,8 oon June 30, the date of the last previous call, and smashing all former records | for deposits in the banks in this city, | moved up to 523. Ahead. yand 3 points. But their fluctuations | | have been so slight that it can easily be scen how they stand with the in- | vestment public. | A glance backward shows that Wash- ington Gas Light led the stock division in total share turnover among the pub- lic utilities. Next came Capital Trac- | tion, the Potomac Electric Power issues and Washington Railway & Electric preferred. One of the striking. features of the | ar on the exchange was the change | | in popularity of some of the old-time {1 ders to issues in the miscellaneous t. Mergenthaler again stood out and Lanston was very active, while Peoples | Drug, Sanitary Grocery, Chestnut | Farms Dairy and Barber & Ross com- | mon forced their way into the lime- light. Federal-American Co. common, Commercial National preferred and strict National Securities saw a grow- ing amount of trading. Bank Stocks Command Attention. Bank stocks were strong all the year and some were active. Riggs National scored a high for the year of 57714, National Savings & Trust sold up to 521 and Washington Loan & Trust Security Savings & Commercial figured in a very light turnover, but climbed to 501. American Security & Trust got up to 462, while | the lower-priced bank stocks main- tained notable strength during the year. # Some Amazing Bank Figures. { Further comparative figures reveal an | fmazing increase during the present | gear of more than $24,000,000 over the | call issued on the last day of 1927.| #Since December 31, 1927, this increase | has been steady. The first call in 1928 | came on February 28 and brought to light a gain of $10,554,396.50 over the D 31, 1927, call, while the call une 30, 1928, showed an increase over the February figures of $4,261,- 870.97. In these splendid advances all three anking groups shared in the prosperity, mational banks, savings banks and trust !companies. But while bank deposits have revealed such gratifying increases in the past year, bank officials say they “have encountered some disappointing | handicaps in making profits. The main “drawback has been the high rediscount .prevailing at the Richmond Federal Re- ~serve Bank during most of the year. This rate has been so high that borrow- ing from Richmond has left the banks :seeking such loans a pretty narrow argin of profit. ~* Bankers do not expect quite such a ~’good showing following the call fo come from Controller Pole's office in a few days. Yet most of the banks expect to | Teport some gain over the surprising figures of the October call. And the jmany extra dividends declared during he past few days indicate that profits “have been well maintained in this last _ quarter. s Once again the Christmas savings ‘clubs have played an important role in the banks of Washington. The banks (distributed between ~ $7,000,000 and ,$8,000,000 in Christmas savings Decem- ber 1. Much of this commendable sum as returned to the banks in permanent savings, far more was turned over to ‘the merchants during the yuletide shop- ip! while the remainder was used to ‘meet instalment payments and in - ‘countless other ways. Thrift Spreads Over Capital. ., This Christmas fund.was saved by 183,178 Washington residents. The num- ““ber represented a gain of 6 per cent in “felub depositors over 1927 and of 11 per cent in the amount subscribed, com- with 1827. A glance back over he last four years shows the Christmas ‘savings club idea has spread like wild- “fire all over the Capital. The Nation, as a whole, saved $550,000,000 in this ‘way in 1928. " Of equal interest are the figures -“Showing the number of checks passing ".through the Washington , Clearing House Association in 1928. These fig- | ““yres are supposed to indicate in a more Jor less accurate manner the business tspulse of the community. Bank clearings in this city this year iavill doubtless eclipse all former records, 2%and that by a generous margin. Octo- ber was the banner month, all previ- sous monthly records in the history of | "“ithe Washington Clearing House being | ‘smashed to splinters. Judging by the | clearings for the first 11 months of | Hhe present year, clearings for the full | !wear should make a long trail into new igh ground. At this writing the December sum- maries have not yet been announced, +but the clearing house totals for the | st 11 months of 1928, compared with hose of the corresponding period in 927, are as follows: 1928 nuary 114,408,832 03 14,273,663 107.049.845 113.117.412 In reviewing the business prosperity ©of 1928, the above summaries paint a picture of pleasing activity. Active Year on D. C. Exchange. Transactions on the Washington E ige have been uniformly | in the past, the total| far exceeding that | ears. One official it had been sur- of margin trad- , among the bonds -Vanderbilt Hotel 655 | rington Consolidated Title 6s. k ington Consolidated Title Co. o listed an issue of preferred stock oard-—7,090 shares, now important_stock listing was rred stock of the wt Farms Dairy Co. There are 500 shares of the common, the stock nt and selling at 190. pays 7 per cent and sells One of the most active d this year is Peoples Drug . preferred, which took the ac higher-paying issue that was cdeen 1t is now sclling around 125, Local Bonds Remain Popular. The heaviest trading in local bonds ~ during the year recorded in Capi= tal Traction first ch have figured N a turnover of more than $345,000. Second in importance have been Wash- ington Railway & Electric Consolidated 4s and Washington Ralway & Electric General 6s. " Washington Gas Light Serles A and Series B bonds have been decidedly in “"demand in_the past 12 months. Poto- mac Electric Power Consolidated 55 and /the same corporation’s General 6s have ““received their full share of attention. “* In the miscellaneous list, Barber & Ro: ™'%61,s and Wardman Park Hotel 53s have figured in a large turnover during the year. Most of these local bonds are selling t the end of the vear a bit under their ,hcax prices, Some are off between 2 ned. The annual meeting of the local ex- change witnessed the retirement of C. C. Glover, jr, from the presidency at his own request and the election of | George O. Walson, president of the | Liberty National Bank, as his succes- sor. More rigid listing rules were adopted, giving local investors added in- formation and protection. Financial History Written. { One of the outstanding events in local banking circles during the year | now_ending was the consolidation of the Riggs National Bank and the Farm- ers & Mechanics National, of George- town. This merger brought together the largest bank in the Capital and one of the oldest—one that years ago passed the century mark. ‘The merger gave the Riggs National added prestige by assuming operation of the Georgetown institution as a branch and also adding the latter bank’s Friendship branch. This impor- tant move increased the number of Riggs Bank branches to six. The mer- ger become effective on December 15. It has also been a remarkable year for the enlarging and beautifying of many of Washington's banking homes. The Washington Loan & Trust Co. completed an addition that doubled the size of the building and the banking quarters. The Union Trust Co. had practically the same distinction. The Second National erected a handsome uptown building as the permanent home for its branch. The Security Savings & Commercial completed a fine building for its branch on I street and did still more than that. The officials extended the main bank at Ninth and G streets until its space had been doubled and its facilities brought up to date in every way. Near the end of the year the Columbia Na- tional Bank moved back into its old home which had been almost entirely rebuilt during the 12 months, enlarged and made vastly more convenient for the conducting of banking operations. Other banks, including the Merchants Bank & Trust Co., made many interior changes of importance during the year. New Bank Presidents Elected, During the year Corcoran Thom was elected president of the American Se- curity . & Trust Co., when Charles J. Ball asked to be retired. Mr. Bell be- came chairman of the board and re- mains active in the banking field. Fernando Cuniberti was elected presi- dent of the International Exchange Bank when Joseph Schiavone ex- pressed a desire to retire. Mr. Cuni- berti, a former Washington resident, returned from several years’ business activity in New York to assume his duties here. August witnessed a change in presi- dents of the Park Savings Bank, Presi- dent Somerville rinl relieved by George W. Walker, ‘after many years of splendid service. The bank also de- clared a 100 per cent stock dividend during the year, this action making a particularly important event in the bank’s history. There were many other changes and promotions in personnel during 1928, several banks adding new names to their directorates. Perhaps the most prominent national figure added to eny board during the year was the election of Gen. John J. Pershing to assist in guiding the destinies of Riggs National. As the 1928 motion picture film moves backward it throws on the screen an- nouncement of the election of H. H. | McKee president of the National Capi- tal Bank, as chairman of the Washing- ton Clearing House Association. Mr. McKee has been an outstanding figure in the American Bankers' Association zglra :'nany yhe‘ars and}slshfielecuoa for the rmans! Was, atifyh local bankel'g b Bertram Chesterman, long vice presi- dent of the Washington Morris Plan Bank was advanced to the presidency early in the year, Appointment of John W. Pole as con- troller of the currency was a matter of great interest to Washington banks. The former chief national bank exami- ner was named to filll the vacancy caused by the resignation of J. W. McIntosh., D. C. Bankers' Association Expands. The District of Columbia Bankers Association held one of its most suc- | cessful annual conventions last June | at Montauk Beach, Long Island, fin. ishing the administration of W. W, Spaid, many constructive steps being: taken. # ‘This year's program is in charge of | President Robert V. Fleming, the work | of the many standing committees being [cnrrled on with marked enthusiasm. | Recent organization of fiduclary, safe deposit and auditors’ sections will great- | Iy enlarge the scope of the association | in_the future. ‘Winning of a court decision relieving | the local banks from paying taxes on interest received from tax-exempt Lib- | erty and other Government obligations complishments of 1928, The Washington Bond Club has been enjoying an extra good year, 25 new members having added zest to the for- um luncheons. The club is being guided by Kenneth S. Wales as president. In the brokerage fleld during the year two new offices have been opened in the city. Westheimer Co. was one, locat- ing in the Woodward Buliding, while Clark, Childs & Co., another New York house, opened a Washington office at 1508 H street. Harriman & Co. took over another floor in the Securities Building, adding a board room, and W. B. Hibbs & Co. are now in the midst of extensive alter- ations in their bullding. The Hibbs company also added two new partners during the year, Karl W, Corby and J. T. Hendrick. All the brokerage houses report an ex- | weather at times in the Summer ham- has been one of the most important ac- | turning their money THE EVENING [ WASHINGTON'S BANKS AND MERCHANTS ENJOY PROSPEROUS YEAR l Financial Leader Heads D. C. Bankers RIS S ‘g}vm& | | | ROBERT V. FLEM! Head of the Riggs National Bank, is president of the District Bankers’ Asso- ciation. Many important steps in the interest of local banking have been taken under his guidance during the year. cellent year, the ballooning of stocks on the New York Exchange having pro- duced many new customers. Last Quarter Business Good. Merchants report business as about normal for the year as a whole. The last_quarter, aided by Christmas trade, made a strong finish. Retail trade in October was the high- est ever known in the city except in De- cember, 1927. The index number was 145.7, a gain of 39.5 points higher than in September. The city as a whole has enjoyed wide prosperity. Business has been uneven, | however, as is always the case. Cool pered the sale of hot-weather goods. ‘Warm weather in the Fall delayed the sale of such garments as overcoats. The Federal Reserve Bank of Rich- mond has recorded many small com- mercial failures in Washington and in the other cities in the fifth district. But the board’s last report revealed many impertant gains in trade and a highly satisfactory Christmas business regardless of whether it shatters all former records. The latest Richmond bank report re- vealed retail sales as more than 15 per cent ahead of the average for the same period during the three year: 1923-1925. The reports are based on in- formation furnished by 30 representa- tive department stores in this locality and are more favorable to Washington than to almost any other city in the fifth district. Complete figures for the year, which will soon be available, are expected to show that Washington has enjoyed a degree of mercantile prosperity which is highly satisfactory. Bank clearings, as previously noted, indicate a record business year, one that will hang up some new marks in the hall of sta- tistics. And what of 19297 The bulls of Washington’s Wall Street declare it will be a repetition of 1928, while the bears say “Watch your step, especially during the last six months.” NEW YEAR PROSPERITY FOR FARMERS FORECAST| Head of Chicago Trade Board An- ticipates Profitable Outlet for Nearly All Food Products, By the Associated Press. CHICAGO, December 31.—Farmer prosperity is greatly enhanced and the world in general is prosperous enough fc anticipation of profitable outlet for practically all food products, Samuel P, Arnot, president of the Chicago Board of Trade, found in an annual review made public today. Mr. Arnot also finds the live stock farmer better off than he has been at any time since 1920, the cotton grower prospering, grain prices good in the light of bumper crops and the prospect of farm purchasing power beinz greater than at any time since the war. “‘Gross income of the American farmer for the year will be greater than that of the preceding year and net returns, after deducting costs of production, will exceed those of last year,” he said. He added that the increased purchasing power will be more uniformly distributed than in the past. Abandoned Ship Is Salvaged. MEXICO CITY, December 31 (#).— Tampico dispatches to Excelsior last night say that the American steamer Mabel Gale, abandoned by its crew during a recent hurricane, was found afloat and towed to that port by the Mexican steamer Dos Equals. Its cargo was salvaged. The crew of the Mabel Gale had been taken off by the Mexi- can steamer Coahuila, When the storm was encountered they were bound from Houston Tex., to Soto la Marina, STAR, HIGHLIGHTS IN WASHINGTON FINANCE REVEAL PROSPERITY DURING 1928 ‘Banks report gain of more than 24,- 000,000 in total deposits over last call in 1927. Clearing House cancels largest num- ber of checks in history of local asso- ciation. Volume of Washington Stock Ex- change sales larger than any total es- tablished in recent years. Mercantile business brought to highly satisfactory point by very heavy Christ- mas sales. More than $7,000,000 distributed on December 1 by banks maintaining Christmas savings clubs. Four new bank presidents elected by Capital institutions during year now ending. One important merger in 1928 and many sweeping improvements made in banking facilities. MONEY MARKET AT ODDS WITH SPECULATIVE GROUP |Industrial Consolidations Follow in Wake of Keen Competition—Inflation Process Strongly Opposed. BY CHARLES F. SPEARE. Special Dispatch to The Star. EW YORK, December 31.—The topsy-turvy year of 1928 has been distinct in that the money market and the market for speculative securities have been at discord instead of in harmony; also in the separation of real from imaginary stock values and in the degree to which the future growth and earnings of American corporations have been antici- fl:tefl and discounted in the year's price t. Conditions parallel to those that have obtained in the stock market may be found in the period of 30 years ago when the first great movement toward industrial consolidation in this country occurred and again between 1905 and 1908, when similar tendencies were at work among the railroads. They were duplicated in 1916 and 1917 in the days of the “war brides.” In none of these times of excessive public speculation, however, was there the flerce opposition to inflation in stocks by the money powers that has persisted for the past nine months and has_but recently made its impression on Wall Street. Represented in this conflict were two schools of economic thought, the one conservative and the other liberal. Obviously the first was composed of the men whose judgment was largely based on the traditions of business and who were inclined to follow precedents. They were the gray-haired men. The second school was made up of a more buoyant and imaginative class who looked for- ward for their leads instead of back- ward, who rebelled against all restric- tive measures and saw nothing ahead but indefinite prosperity for the United States, with sufficient credit to carry on their operations a year or two longer. Wealth Well Distributed. ‘The constituency of this school in- cluded many who had been made rich by the war or whose wealth had come from the new industrial developments and inventions, or out of the new meth- ods of distribution and merchandising that are the product of the past decade. One significant contrast in this picture is that between the Easterner and the Westerner. In all other periods of great specu- lative or investment markets the liquid capital of the industrial East—New England, New York and Pennsylvania— has been the supporting and stimulating factor. In this instance it has been fully as much supplied by the West— Michigan, Illinois, Minnesota, Wiscon- sin, Colorado, California, Oregon, Wash- ington—and by some of the Southern and Southwestern States, as Kentucky, Missouri, Oklahoma and Texas, and by Virginia and Georgia in the Southeast. ‘This is one of the strongest evidences available of the financial stabilization of the country and of the distrbution of wealth. It may be that just as the West has been more liberal politi- cally and socially than the East and has fashioned many of the policies that are part of our Government to- day, so may it have a clearer con- ception than the East of the meaning of twentieth century science in business —mass production, installment buying, chain stores, aerlal communications, motor transportation, transportation by air, group banking, investment trusts, superpower systems, low cost produc- tion, high average wages and a nation- al credit position that is the envy of the world and promises to increase rather than to diminish. With the East and the West, the North and the South, concentrating their attention and their capital on the stock market, there has developed the largest volume of transactions and the highest average of industrial prices ever recorded, and, with this, the em- ployment of the greatest ratio of American bank funds in speculation ever before known. “Wall Street” is now familiar to every center of popula- tion in the country. Its operations have been, and still are, a problem of the banks, & threat to business and a subject for legislative inquiry. It must frankly be admitted that those who were “bearish” on stocks before the break of March, 1926, and the beginning of the Federal Reserve policy of disciplining the speculative market late last Winter, were wrong in their judgment. They had net recognized the changes that had taken place in the industrial life of the coun- try, in its new methods of business, Mexico. BY GEORGE SCHNACKEL. Speclal Dispatch to The Star. CHICAGO, December 31.—The grain business during the past year has not been generally profitable either for growers or for speculators. Crops were so large, both in this country and other producing areas, that they weighed on the market, particu- larly in wheat, and discouraged specu- lative activity. Prices, except for corn, were rather unsatisfactory to producers, leaving cash interests to profit most from the big increase in Pproduction. Speculation was light the year through. The boom in stocks had much to do with this situation. Specu- lators count on over quickly, and this was hardly possible on the 3 Board of Trade in view of the large amount of grain avail- able, which had to be digested before any important price movement could be put under way. It was significant that the prices of memberships on the board, after holding under $12,000 through most of the year, suddenly shot up above $40,000 on the mere announce- ment that trade in stocks would be inaugurated. Because of the big crops, prices for the principal commodities naturally were lower. Wheat values have been George Schnackel. or given sufficient credit to the effect ‘The United States on July 1 had ap- ximately 1,018,000,000 bushels on and, including an indicated crop of 904,000,000 bushels, the largest since 1919, and a carry-over of 114,000,000 bushels. In addition world supplies were large. The world carry-over was 245,000,000 bushels, and indicated sup- pliss were 3,910,000,000, compared with 3,657,000,000 on July 1, 1927. Import- ing countries raised a crop of 1,145,000,~ 000 bushels, compared with 1,129,000,- 000 the year before, and exporting countries harvested 2,520,000,000 bush- els, against 3,345,000,000 last year. ‘These figures would suggest a much lower market in the future when the welght of world supplies falls on the markets, but all authorities and the Government officials seem to feel that lowest prices already have been reached. This impression is based on the fact that bread grains the world over are in no greater supply than a year ago, largely owing to the big reduction in Europe's harvest of rye, Europe is ex- pected to take much more wheat than a year ago, and this belief gained credence from the fact that from July 1 to December 1 importing nations ab- sorbed 350,000,000 bushels of wheat, compared with 320,000,000 for the same time a year ago. ‘Wheat At Less Than a ollar. The Bureau of Agricultural Economics says that although the wheat crop, ex- clusive of Russla and China, will be the largest on record, the American wheat grower should obtain good prices crop comes on the market. Yet prices have been lower throughout the marketing season than at any time in the past four years. Growers in many sections have had to take somewhat from 10 to 30 cents under last year, corn from 3 to about 15 cents lower and oats from 6 to nearly 15 cents under. Production tells the story in wheaty less than §1 a bushel. Canada has come to be the chief factor in the world situation. Her crop this year is estimated to be a record preaker in total yolume of mand, until the new Southern Hemisphere | be of Increasing national wealth in forc- ing an outlet for part of this wealth into the market for securities. Neither had they realized how fully the Ameri- can public had adopted the Buropean policy of buying “equities,” regmsdless of their income return, although these returns were still high, compared with those on similar shares abroad. So we have in the first place a fundamental change in the basis of reckoning values, and with it the aban- donment of the old idea that the worth of a stock should be measured by the return it yields and that this return should accord closely with the going rates for money. The present genera- tion of stock buyers has been con- cerned primarily with an appreciation in their capital, rather than with in- come on this capital. New Yardsticks of Value. Along with this has come another theory, which, in effect, is that a stock should sell at a certain number of times earnings per share. The difference in the viewpoints of the bull or the bear on securities in 1928 has been expressed frequently in the conviction of the one that a stock should sell from 15 to 25, and sometimes as much as 40° times earnings, while the other has limited the safe ratio to from 8 to 10 times. Between these two extremes lie the flelds of speculation and investment. And between March and December the investment or semi-speculative era in stocks passed into an era of stock gambling. Another point of controversy between the two elements has had to do with the future of business; whether this was to continue on the scale of the second half of 1928 for another two or three years or whether the country was to run into an industrial reaction sufficient to affect business profits and, thereby, the prices of all classes of securities. To a greater extent than ever before, stocks have been anticipating the far off future and prices for them have been freely paid on the expectation of a progressive rate of earnings and of dividends, although among many of the popular shares were those that have re- peatedly passed through the ‘“prince end pauper” stages within an interval of two or three years. Montgomery-Ward illustrates the new theories of price-making as well as any stock before the puhlic this year. Some months ago it was selling at about $115 a share, This was 10 times its earnings per share. Later the old stock reached approximately $440, or 25 times earn- ings per share. The management of the company, by careful analysis of the probable return from the new stores opened and the regular increase in its original form of operation, estimated that by 1931 the stock should be worth $400 a share. It has, however, antici- pated by two years the calculations of those who are in the best position to know what is going on, The same extravagant calculations by the public have occurred in numerous other shares. This leaves one with the feeling that there is not a great deal of slack for the market to take up from now on, for it has anticipated the maxi- mum results as far ahead as it is rea- sonable to judge them. ‘The issue between those who believed that the prices of stocks had not dis- counted all of the elements in the busi- ness situation and those who were of a contrary mind and felt primarily that speculation was sapping the strength of the banks, developed in March. The leading representative of the latter group was the Federal Reserve. If there had been previously any doubt as to the meaning of the higher discount rates imposed by the system in that month, it was dispelled by Secretary of the ‘Treasury Mellon in his annual report to Congress a few weeks ago. On February 1, when the first ad- vance was made in rediscounts by the Federal Reserve, following the 3!z per cent rate established the previous Au- gust in the interest of credit stabiliza- tion in Europe, the average price of a list of 75 railroad, public utility and in- dustrial stocks selected for this article, was 94. On July 10, when the maxi- mum strictures of the Federal Reserve on speculation were reached in a 5 per cent rediscount rate, the average price of these 75. issues was 105. It will be noticed that during the interval of over five months, which included the madly ascending markets of March and May and the collapse of June, there had been an increase in the average of only 11 points. It might appear, therefore, that Wall Grain Business Beset With Many Ob: around 550,000,000 bushels. But the quality of the crop was impaired by frost so that the millable wheat in Canada, on the basis of the November estimate, should be about 30,000,000 to 60,000,000 bushels smaller than in 1927. Exports from that country from August 1 to October 31 were nearly 54,000,000 bushels larger than last year. This leaves a supply of millable wheat in Canada, exclusive of durum, at from 55,000,000 to 85,000,000 bushels smaller than at the same time last year, as- suming that domestic consumption will be as large. ‘This is something of a bullish facior and is strengthened by the estimate that supplies of old wheat in Argentina are 20,000,000 to 25,000,000 under this time a year ago, while the new crop is expected to be about the same size. Russia, too, may be a bull factor. While the wheat crop in that country is somewhat larger than last year, there will be no wheat to export be- cause of the near failure of the rye crop. In fact Russia may have to do some importing again early next year. Secretary Jardine Optimistic. These developments cause Willlam M. Jardine, Secretary of Agriculture, to be optimistic over the outlook. “Our production of wheat exceeded 900,000,000 bushels for the first time since 1919,” he said in his annual re- port. “The increase was mostly in hard Winter and durum wheat. Indi- cations are that the world supply for 1928 and 1929 marketing season wil 5 per cent greater than during the 1927-28 season. “Canada, our most important com- petitor in wheat, has a record crop, although a part has been reduced in quality by frost. Europe, outside of Russia, had a crop somewhat larger and better quality than last year, but the increase in world supplies was con- siderably offset by an increase in de- In Europe ’u consumption H. H. McKEE, President of the National Capital Bank, was elected chairman of the Washing- ton Clearing House Association during the present year. The organization has handled a record amount of business in 1928, Street had given heed to the voice of bankers raised against _inorrdinate speculation and concretely hindered by an advance in discounts from 312 to 5 per cent. But it is to be remembered that this was a period not altogether favorable to the promotion of specu- lation, for trade was dull in the first quarter of the year, there was a great deal of unemployment, gold was going out rapidly and election uncertainties were looming on the horizon. The size of brokers’ loans then was more seri- ously considered than it was some months later when they were 40 per cent higher. If the governors of the Federal Re- serve had had the power to reverse their policy they would probably have made their discount rate in March 41> per cent instead of 4 per cent and that of July at least 5!, per cent and pos- sibly 6 per cent, Some of them freely admit today that they were too timid and too_ fearful of the effect on com- mercial loans when they established the July figure. There is, however, serious doubt, in view of subsequent manifes- tations of speculative insanity on the part of the American public, whether a 6 per cent discount rate last Summer would have been effective in curbing the market excesses of October and November. “Coolidge” and “Hoover” Markets. What happened was that following the 5 per cent rate in July and within a period of the most stringent money conditions that the country had wit- nessed since 1920—call money 12 per cent, time loans 8 per cent—the aver- age price of stocks, which was 94 in February and 105 in July, had risen to 145 at the end of November. It was then higher than ever before with a sheer rise of 125 per cent since the “Coolidge market” began to be later absorbed and overshadowed by the “Hoover market.” From the middle of August to the end of November there was a stock average advance of 37, points, with & 353,000,000-share turnover. It is doubtful if this record will be dupli- cated for some time to come. At the end of 1927 brokers” loans were $3,717,000. In the second week of July they had risen to $4,242,000,000. From then to the first week of De- cember there was a steady rise, growing more rapid as the movement culminat- ed. until loans reached approximately $5,400,000,000, an increase in five morths of nearly 30 per cent. The importance of the year's expansion was that it occurred mainly in the loans of those whose operations the Federal Reserve could not control, the increase from these sources amounting to $1,382,000,000, or 145 per cent. This was an entirely new situation. It reflected the strong financial posi- tion of numerous corporations as well as lenders from every important finan- clal center in Europe and the with- drawal of large buyers of securities, as banks, investment trusts and estates, from the market in order to obtain the alluring rates which the money market offered. But it created a con- dition that fed the fires of speculation and remains one of the problems for 1929 to solve. Every effort has been made to mini- mize the importance of this ascending scale of credit placed at the disposal of the stock market. It nevertheless is the nub of the situation. Fortunately there has been no serious handicap to business from the use of superabundant funds in stock speculation. The Fed- eral Reserve has been able to maintain a moderate rate for commercial loans and to use its various methods for eas- ing the strain when business demanded its maximum seasonal requirements. There is the same danger, however, from easy access to credit by operators in stocks as developed in the past from turning this same credit into the pur- chase of unimpreved land, b commodities. 5 & Sy stacles will P“’b“bl’ be stimulated by the rel- atively low price and the fact that the corn crop in Southern Europe was short. Russia’s rye crop is short and that country will probably import more wheat than it did in 1927-28. The prospect is for the consumption of this year's large wheat production to an extent which should lead to a relatively increase in the world's carry- over.” Temperature Changes Disastrous. There is some prospect of a smaller vield of Winter wheat next year than this, although very doubtful, because of the poor condition of this year's full planted crop. Sharp changes in tem- perature this past Spring destroyed fully 10,000,000 acres of Winter wheat and thinned the stand on another large arca. But the acreage scwn this Fall is set at between 5 and 6 per cent smaller than a year ago. This was due to the unfavorable, dry weather over a wide section of the country. And, al- though the acreage is materially less than a year ago, it still is larger than the 43,553,000 sown in the Fall of 1926. ‘With favorable conditions next Spring the yield may easily pass that of the present year, because the condition of the Winter crop now is above average, at about 86 per cent, compared with 84.6, the 10-year average. Despite the fact that Government officlals had advised farmers to hold wheat, marketing up to December 1 1 | averaged 69 per cent of the market- able supplies, compared with 72.7 per cent & year ago and 67.1 normally. Ap- plying these percentages to Govern- ment estimates of production and as- suming that 125,000,000 bushels re- main on farms, it would indicate that 538,000,000 bushels have been marketed, compared with 543,000.000 up to this time a year ago, and 241,000,000 bushels remain to be marketed, against 205,- 000,000 last year, BABSON IS OPTIMISTIC ON FINANCIAL OUTLOOK Economist Says America for First Time Is Really Being Sold to Americans. ABSON PARK, Mass., December B 31.—In a special interview Roger political situation is encourag- ing to good business, which should that 1929 will be no time for indis- should, however, be opportunities for Spectal Digpatch to The Star. ‘W. Babson says the country fundamentally all right; the continue at favor- able levels; but criminate buying of securities. There carefully selected purchases. His complete statement b | try as a whole is going ahead. follows: “Well, we have had a ‘Hoover elec~ tion’ and a ‘Hoov- er stock boom' and a wild stock crash. That ought to be enough for any ex- citable American in a few months time. That the business outlook is good is pretty generally agreed, but that the outlook is as satisfactory as the November stock boom suggested is ri- lous to assert. dic“‘icuii an axiom that a fair degree of prosperity under one administration will be more easily followed by con- tinved prosperity if the political com- plexion_ of the governing body is un- changed. The Coolidge regime has been on the whole successful, and I believe Mr. Hoover will bring forward very pro- gressive ideas and build solidly on the foundation of his predecessor. place in the White House next March an engineer and not a politician. We will bring to the administration of the Nation’s business for the next four years the scientific knowledge of one of the best administrative experts in the world. Roger Babson Every section of the country will receive | equal consideration and all groups fair treatment. “I am convinced that Herbert Hoov- er will make a strenuous effort to help agriculture during 1929. He has a bril- liant mind and is a very hard worker. He will take his job very seriously—es- pecially so, knowing that he is coming into office during the flood tide of pros- perity and cannot depend upon the law of act! cat President. He must make a place B imself in history, even against this great law. But he knows all this, and forewarned should be forearmed.. An- other thing, he knows that the farmers of the country will not forever trust the promises of Republican politicians. “It has always been said that a party platform is much like a street car plat- form—of use only to get inon!” Whether or not this has been the case in the past, Herbert Hoover will not so con- sider it. He will make a serious and sane effort to make 1929 a year of real prosperity. Moreover, Wwith the good party majorities which he will have in both the House and the Senate, he will have support for his plans and appro- | riations. L “I am especially optimistic for the West and the South during 1929. Other Republican administrations have not worried much about the South because of its 100 per cent Democratic lean- ings; but owing to what the South has done for Mr. Hoover he would be both ungrateful and very unwise not to make a very great effort to give the South- land some real prosperity. Commodity Prices. “As I have stated, the present condi- tion of the country, except for an in- flated stock market, is fundamentally healthy, and I look to see the first half of 1929 reflect business which will com- pare favorably with the first half of 1928. This generally good buslners; es for a temporary move upwar mnenl commodity prices during the early months of 1929. Later, the gen- eral trend should bring prices down to 1928 levels. I look for no marked inflation—only & short upswing. This would come from the reluctance on the part of manufacturers and mer- chants to order goods last Fall because of presidential fears. The probabilities are, however, that after this buytng‘ has spent its force, we will get back to | about the same prices as have ruled throughout 1928. "Sa%es territories in 1929 should have | a more even distribution of prosperity than heretofore. Optimism in the im- | portant farming sections should make itself felt as actual conditions improve upon_the fulfillment of Mr. Hoover’s pre-election. promises. Certain indus- trial sections will also be good pros-| pects as long as business continues active. Specific. lines of activity will be assured of support by the new ad- ministration and should offer good sales possibilities. That is, some industrials will benefit especially and will be looked upon with particular favor by | the Republican party. I advise mer- | chandisers to keep in touch with| Washington policles and shape their | sales campaigns with an eye to the trends which prevail from that quarter. Employment Prospects. “Good business rests primarily on the fact that our millions of workers are well employed, although workers are constantly being released as auto- matic machines and efficiency projects enter. I do not, however, fear for the employment situation in 1929. There is reason to anticipate that in 1929 ag- gregate pay rolls will reach a somewhat higher level than at the present rate. I do not believe that wages per worker are due for much increase and there may be some sagging in rates during the year, although severe readjust- ments are not likely to occur. “The announcement of President- elect Hoover's tentative plan for a $3.- 000,000,000 unemployment reserve, which would serve as a buffer against times of overproduction and surplus labor sup- ply, has stirred up considerable interest. The proposal was first brought up at the conference of governors which was héld in New Orleans while the Ameri- can Federation of Labor convention was in session. It émbodies principles for which the federation has been fighting for years, and consequently the plan | was received by the delegates with' en- thusiasm. “It is one thing, of course, to indorse a general plan such as is embraced by this unemployment reserve. It is an entirely different proposition to carry the project out in a detalled and scien- tific manner. I do not believe, how- ever, that Mr. Hoover permitted the public announcement of the proposi- tion unless he has determined to act definitely to promote industrial stability and relieve unemployment by accumu- lating a reserve of funds for public construction. Automobile Outlook. “The first part of 1929 should see the automobile industry speeding along in high gear. iThe leaders in 1928 will not necessarily be the leaders in 1929. Ford is coming in for a big volume of business, which means that to a cer- tain extent he must take it away from other companies. With Chevrolet climb- ing a peg to the six-cylinder class, Ford has virtual control over the whole four- cylinder field. The problems of the industry, however, will be greatly mag- nified next year. Competition has been We will | fon and reaction to make him a| 1 of manufacturers than at any time in the past. | “The early prospects, I s motor industry are bright car market is not clogged 8.\ export | trade should continue in gosd volume, | Still, as 1929 advances, the supply of used cars may become quite burden- some. As I see it, a still larger pro- portion of sales will be concentrated in the hands of the biggest units. This trend may force more mergers or squeeze out some of the independents Sooner or later profit margins, except for the favored few, must dwindle. Too | many have concluded that a company | is in a good position because the indus- Perhaps only a few automobile companies out of the total will make good profits in 19291 y. for the The used- Building Outlook. hat about the building industry, which in the last few years has played such a vital part in our economic life? I believe this industry should continue | at fairly high levels through the first | part of 1929. However, many sections are facing an overbuilt situation which | will act as a definite check upon ex- tensive speculative building. New build- ing started in the Spring of 1929 is ex pected to show a decline, with some slowing up in building operations later n the year. Further marked expansion will be delayed until building wages and other factors are more favorably ad- Justed. “The outlook, however, is by no means identical for all classes of building and construction. Residential building, in the moderate price and the non-specu- lative field, should show considerable activity. There are few indications of curtailment in public works. In fact, if there should develop a marked fall- ing off in the building industry as a whole, there is the probability that public projects could be released in sub- | stantial volume. Mr. Hoover, as I have said, is thought to favor an effort to use public building programs as an eco- | nomic stabilizer. The recent proposals looking toward this end have given new significance to the building and con- struction activities of Federal, State | and municipal governments. We can | undoubtedly turn to this quarter with | increased assurance if there should | come a need for taking up the slack in | other branches of the industry. Metals Outlook. “The outlook for the metals is mixed. The iron and steel industry is in a much more favorable position than a year ago. True, demand factors are shifting somewhat, but a steady level of production is indicated at least through the first part of 1929. In this | connection it is important to follow the automobile industry most closely. Am- bitious production plans are under way and the demand from automoblle man- ufacturers for steel should be heavy. “Large amounts of steel will be re- quired by the agricultural implement, building and machinery industries. De- | mand from the oil industry is expected to improve, and some day the railroads | are going to buy equipment on a larger scale. Copper, after its sharp rise, is expected to hold steady near present prices for a while. Production is on the increase and in time should catch up with demand. Undoubtedly copper producers will endeavor to keep the market steady, as present prices givé them a satisfactory margin of profit Low-cost copper companies will surely make money this year, and I believe stocks of such companies may well “e retained. Trend Toward Easier Money. “A survey of all these factors §.8- gests that as the year goes on there will be a trend toward easier money. Although rates later in 1929 will prob- ably not subside to the levels experi- enced in the Summer of 1927, never- theless there is the prospect that rates will become somewhat easier. Looking at the near future, it appears hardly probably that money rates will be greatly affected by gold movements, as these will probably be of relatively mod- erate volume. On the other hand, some observers _anticipate that the Federal Reserve Board will tend to become an increasing factor in the financial situa- tion and will more aggressively seek to exercise control. At all events, during 1929 there will be a tendency to favor business loans at lower rates and to discountenance excessive stock markes loans. Bond Market Should Improve. “Because of the prospects for some« what more ease in money in 1929, the sentiment in favor of bonds is likely to improve during the coming months. The downward tendency in prices that has been experienced should give way to a sidewise trend for the list as & whole. The prospect is for an improve- ment over current conditions. This does not mean that there will not be need for most discriminating care in choosing issues. In fact, never before in financial history has there been such necessity for carefulness. The present is an ‘open season’ for inferior pre- ferred stocks and bonds. Diligent search will reveal some attractive purchases in the bond lists, but the unwary are very apt to go wrong in this present period. Stock Market Outloek. “As to stocks, the one who presumes to give an opinion on the market is considered ‘crazy,’ like the market it- self. We must, however, remember that action of the few volatile leaders in the market has been entirely differ- ent from the balance of the 1,000 oz more issues on the exchange. The ace tion of these leaders has been more & ‘state of mind’ than anything elsa America is for the first time being really sold to Americans, and there were not enough shares of the populay issues to go around. “Under these influences the small floating supply of the leaders creates a situation where they skyrocket up- ward. As soon, however, as buying for any reason slackens they drop faster than they went up—a fact which in- vestment amateurs very emphatically discovered about a month ago. I be- lieve this process will be repeated from now on as fasé as stocks are over- boomed. “It 18 a.- open question, however, whether the so-called Dow-Jones aver- ages will soon soar to the hights of the ‘Hoover election boom.” It is safe to say that Congress is not pleased with such insane speculation. Neither are the wisest and most influential finan- clal men. I know it is popular to say that we are in a new era, that yields on stocks are going to be much lower than we have been accustomed to, and that the coming years are going to be a golden age for the United States. Still, you cannot make'a stock go up forever without proper earnings, and even granting that the United States is a great success, there is ample oppor- tunity for some disappointing periods before this ‘golden age’ is completed. “What I wish to emphasize is that there is no excuse for some of the crazy speculation we have seen, and it_is to be hoped that it will not be réPeated in 1929. The country itself is all right. The political situation is encouraging. If the people will stop trying to make a gigantic soap buhble out of the stock market, legitimate in- stepped up now to include the small six-cylinder lines, of which there are | many. A serious price war is in the group agd will involve & larger vestment will be good this coming year and general business will continue at favorable levels.” \Copyriaat, 1938